<PAGE>
As filed with the Securities and Exchange Commission on July 27, 1999
Registration No. 333-78093
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
To
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Global Imaging Systems, Inc.
(Exact name of registrant as specified in its charter)
Delaware 5995
(Primary S.I.C. Code Number) 59-3247752
(IRS Employer
(State of Identification No.)
Incorporation)
GLOBAL IMAGING SYSTEMS, INC.
3820 Northdale Boulevard, Suite 200A
Tampa, Florida 33624
(813) 960-5508
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Thomas S. Johnson
President and Chief Executive Officer
GLOBAL IMAGING SYSTEMS, INC.
3820 Northdale Boulevard, Suite 200A
Tampa, Florida 33624
(813) 960-5508
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
For information regarding additional registrants, see "Information Regarding
Additional Registrants."
Copy to:
Alan L. Dye, Esq.HOGAN & HARTSON L.L.P.555 Thirteenth Street, N.W. Washington,
DC 20004-1109 (202) 637-5600
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
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<PAGE>
INFORMATION REGARDING ADDITIONAL REGISTRANTS
The following additional registrants are wholly owned, direct and indirect
subsidiaries of Global Imaging Systems, Inc. and guarantors of the senior
subordinated notes.
<TABLE>
<CAPTION>
Jurisdiction IRS Employer
of Primary S.I.C. Identification
Name Organization Code Number Number
---- -------------- -------------- --------------
<S> <C> <C> <C>
American Photocopy Equipment Delaware 5995 25-1333970
Company of Pittsburgh
d/b/a AMCOM Office Systems
Berney, Inc. Alabama 5995 63-0872797
Business Equipment Unlimited Maine 5995 01-0332262
Cameron Office Products, Inc. Massachusetts 5995 04-2943281
Capitol Copy Products, Inc. Delaware 5995
Capitol Office Solutions, Inc. Delaware 5995 52-1058303
Carr Business Machines of Great New York 5995 11-2382276
Neck Inc. d/b/a Carr
Business Systems
Centre Business Products, Inc. Pennsylvania 5995 25-1402615
Connecticut Business Systems, Connecticut 5995 06-1164954
Inc.
Conway Office Products, Inc. New Hampshire 5995 02-0326832
Copy Service and Supply, Inc. North Carolina 5995 56-1405771
COS Financial, Inc. Maryland 5995
Daniel Communications, Inc. Alabama 5995 63-0957776
Distinctive Business Products, Illinois 5995 36-3206780
Inc.
Duplicating Specialties, Inc. Oregon 5995 93-0557407
d/b/a Copytronix
Eastern Copy Products, Inc. New York 5995 16-1060031
Electronic Systems, Inc. Virginia 5995 54-1145980
Electronic Systems of Richmond, Virginia 5995 54-1221626
Inc.
Global Imaging Finance Company Delaware 5995 59-3423296
Global Imaging Operations, Inc. Delaware 5995 04-3340313
Global Operations Texas, L.P. Texas 5995 Applied For
Lewan & Associates, Inc. Colorado 5995 84-0623459
ProView, Inc. North Carolina 5995 56-1879665
Quality Business Systems, Inc. Washington 5995 91-1332069
Southern Business Communications, Georgia 5995 58-1428621
Inc.
Southern Copy Systems, Inc. Alabama 5995 63-0895357
</TABLE>
The address and telephone number of the principal executive offices and the
agent for service for each of the additional registrants are the same as for
Global Imaging Systems, Inc., as set forth on the facing page of this
Registration Statement.
<PAGE>
PROSPECTUS
[LOGO OF GLOBAL
IMAGING SYSTEMS,
INC. APPEARS HERE]
$100,000,000
Global Imaging Systems, Inc.
Offer To Exchange All Outstanding
$100,000,000 10 3/4% Senior Subordinated Notes Due 2007
For $100,000,000 10 3/4% Senior Subordinated Exchange Notes Due 2007
Interest Payable February 15 and August 15, Beginning on August 15, 1999
Material Terms of the Exchange Offer
. We are offering to exchange all validly tendered and not validly withdrawn
outstanding notes for an equal amount of a new series of notes that are
registered under the Securities Act of 1933.
. The exchange offer will expire at 5:00 P. M., New York City Time, on
August 30, 1999, unless extended.
. You may withdraw tenders of outstanding notes at any time before the
expiration of the exchange offer.
. We will not receive any proceeds from the exchange offer.
. The terms of the exchange notes will be substantially identical to the terms
of the outstanding notes, except for special transfer restrictions and
registration rights relating to the outstanding notes.
. We do not intend to list the exchange notes on any national securities
exchange or Nasdaq.
. The exchange of notes should not be a taxable exchange for U.S. federal
income tax purposes.
. The exchange offer is subject to certain customary conditions, which we may
waive.
. Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes that it acquired as a result of market-making
activities or other trading activities must acknowledge that it will deliver
a prospectus in connection with any resale of the exchange notes. See "Plan
of Distribution."
You should carefully consider the risk factors beginning on page 12 of this
prospectus before investing in the exchange notes issued in the exchange offer.
We are not making this exchange offer in any state or jurisdiction where it
is not permitted.
Neither the U.S. Securities and Exchange Commission nor any other federal or
state securities commission has approved or disapproved the notes to be
distributed in the exchange offer, nor have any of these organizations
determined that this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The date of this prospectus is , 1999.
<PAGE>
WHERE YOU CAN GET MORE INFORMATION
This prospectus is part of a registration statement on Form S-4 that we have
filed with the SEC. This prospectus does not contain all of the information
set forth in the registration statement. For further information about us and
the exchange notes, you should refer to the registration statement. This
prospectus summarizes material provisions of contracts and other documents.
Since these summaries may not contain all of the information that you may find
important, you should review the full text of these documents. We have filed
certain of these documents as exhibits to our registration statement.
You should direct any request for information to our Chief Financial Officer
at least 10 business days before you tender your outstanding notes in the
exchange offer. Our mailing address and telephone number are
Global Imaging Systems, Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
(813) 960-5508
Since June 1998 Global has been subject to the information requirements of
the Securities Exchange Act of 1934, which means that we are required to file
annual, quarterly and special reports, proxy statements and other information
with the SEC. Investors may read and copy materials Global has filed with the
SEC at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
DC 20549. Please call the SEC at 1-800-SEC-0330 for further information about
its public reference room. Global's SEC filings also are available without
charge on the SEC's internet site at http://www.sec.gov.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, including statements
about our acquisition and business strategy, our expected financial position
and operating results, and our financing plans and similar matters. We have
based these forward-looking statements largely on our current expectations and
projections about future events and financial trends affecting the financial
condition of our business. These forward-looking statements are subject to
risks, uncertainties and assumptions about Global, including, among other
things:
. General economic and business conditions, both nationally and in our
markets.
. Our acquisition opportunities.
. Our expectations and estimates concerning future financial performance,
financing plans and the impact of competition.
. Anticipated trends in our business, including those described in
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
. Existing and future regulations affecting our business.
. Other risk factors set forth in "Risk Factors."
In addition, in those and other portions of this prospectus, the words
"believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" "project" and similar expressions, as they relate to Global or its
management, are intended to identify forward-looking statements. All forward-
looking statements attributable to us or to persons acting on our behalf are
expressly qualified in their entirety by this cautionary statement.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise. In light of these risks and uncertainties, the forward-looking
events and circumstances discussed in this prospectus might not transpire.
USE OF CERTAIN TERMS
Unless the context otherwise requires, as used in this prospectus, the terms
"Global," "Company," "our," or "we" refer to Global Imaging Systems, Inc. and
its subsidiaries. The term "exchange notes" refers to the 10 3/4% Senior
Subordinated Notes due 2007 that we have registered under the Securities Act
and that we are offering in exchange for the outstanding 10 3/4% Senior
Subordinated Notes due 2007 that we issued on March 8, 1999. The term "notes"
refers to the exchange notes and the outstanding notes.
(i)
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information that you should consider
before participating in the exchange offer or investing in the exchange notes.
To understand the exchange offer fully, you should read this entire prospectus
carefully.
Global Imaging Systems, Inc.
Global Imaging Systems, Inc. is a consolidator in the highly fragmented
office imaging solutions industry. Global provides a broad line of office
imaging solutions, including the sale and service of automated office
equipment, network integration services, electronic presentation systems and
document imaging management systems. Since its founding in June 1994, Global
has acquired 34 businesses in the United States. Thirteen of these businesses
are "core" companies, where Global concentrates administrative functions within
a region. The remaining 21 acquired businesses are "satellite" companies, which
means their administrative functions are transferred to, and their operations
are integrated into, a core company. Global's operating philosophy is to "think
globally, act locally." Under its decentralized management system, Global
typically continues to operate its acquired companies under their pre-
acquisition names and management in order to preserve existing client
relationships and motivate local management.
Global believes its emphasis on superior customer service and the contractual
nature of its service business can generate significant recurring revenue.
Senior management largely attributes Global's solid historical operating
performance to: (1) employing a strict performance-based benchmarking model,
(2) pursuing a disciplined acquisition strategy and (3) integrating
acquisitions as they are made. For the fiscal year ended March 31, 1999, Global
had pro forma revenues of $427.4 million and pro forma EBITDA of $61.1 million.
Global seeks to become the provider of choice for all of its customers'
office imaging needs by offering a full range of products and services and
superior customer service. While Global's clientele includes large, Fortune 500
companies, its growth has been, and is expected to be, largely driven by
serving middle market businesses. Global sells and services a variety of office
imaging solutions, including copiers, facsimile machines, printers, LCD
projectors, overhead projectors, video teleconferencing equipment, optical
scanning equipment, micrographics equipment, and the design and installation of
equipment related to computer networks. In addition, Global offers a variety of
ongoing services, including supply and service contracts, network management
contracts, technical support and training.
Global's strategic objective is to continue to grow profitably in existing
markets and new markets through internal growth and by acquiring additional
businesses. Global's strategy for stimulating internal growth is to offer new
products and services, to take advantage of cross-selling opportunities, and to
market aggressively to existing and new customers. Global enters new geographic
markets by acquiring additional core companies and expanding its core markets
through acquisitions of additional satellite companies.
Currently, Global's thirteen core companies operate in 87 locations in 20
states, plus the District of Columbia. Global targets for acquisition as core
companies businesses that are leading competitors in the markets they serve.
Global's goal is to acquire core and satellite companies throughout the United
States and Canada.
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The Industry
The office imaging solutions industry is highly fragmented. Global estimates
that there are approximately 3,700 dealer and distributor outlets in the United
States primarily engaged in the sale of copiers and other automated office
equipment and related service, parts, and supplies, and that approximately
3,100 of these dealer outlets are unaffiliated. Global believes the current and
projected sizes of the office imaging markets Global serves are as set forth in
the following table:
<TABLE>
<CAPTION>
Domestic Sales
-----------------------
(in billions)
1997 2002
Market (estimated) (projected)
- ------ ----------- -----------
<S> <C> <C>
Analog black and white copier and related service and
supplies ............................................ $21.1 $17.1
Digital black and white copier and related service and
supplies............................................. 3.4 16.7
Digital color copier and related service and sup-
plies................................................ 1.9 5.9
Network consulting and integration services........... 6.5 13.9
Network management services........................... 1.8 4.2
Electronic presentation systems....................... 1.0 1.8
Document technology systems........................... 6.4 18.6
----- -----
Total............................................... $42.1 $78.2
===== =====
</TABLE>
Growth Strategy
Global believes it is well positioned to benefit from industry trends and
continued consolidation in the office imaging solutions industry. Global's goal
is to become the provider of choice for all of its customers' office imaging
needs by offering a full range of products and services and superior customer
service. The key elements of Global's growth strategy include:
Serve as a Single Source Provider of Office Imaging Solutions. Global
believes that offering a full spectrum of products and services will give it a
competitive advantage and enable it to capitalize on its customer relationships
by cross-selling products and services. As the technology that drives copiers,
facsimiles, printers, electronic presentation equipment and document imaging
management ("DIM") equipment converges, customers increasingly need computers
and networks to use these products. Accordingly, customers are demanding more
integrated office imaging solutions. Global plans to expand its product lines
so that, within each geographic region it serves, Global can offer automated
office equipment, network integration services, electronic presentation systems
and DIM systems. As Global's operations in these last three markets expand,
Global expects an increasing percentage of its revenues and gross profits will
be generated by sales of equipment and supplies, which typically have lower
gross profit margins than sales of service and rentals. Global is also
considering leveraging its infrastructure, customer base, and expertise by
offering outsourced facilities management services.
Provide Timely and Reliable Service. Global seeks to achieve the highest
level of service. Effective and responsive service is essential to obtaining
repeat business and developing market recognition. Providing timely and high
quality service also allows Global to maintain its profit margins, engage in
cross-selling, and enjoy a source of recurring revenue.
Make Strategic Acquisitions. Global plans to continue acquiring core
companies in targeted geographic markets and to expand these core acquisitions
through internal growth and satellite acquisitions. Global looks
2
<PAGE>
for core acquisition candidates that are led by an experienced management team
that will continue to manage the company after Global acquires it, that have a
strong regional market share, and that can grow internally and through the
acquisition of satellite companies. Global's senior management team has
substantial experience in making acquisitions. Since its founding in June 1994,
Global has acquired thirteen core companies in the United States and an
additional 21 satellite companies which have been integrated into the core
companies. Global's goal is to acquire core and satellite companies throughout
the United States and Canada.
A key component of Global's growth strategy is to acquire satellite companies
in or near its core companies' markets. Core company management frequently
identifies appropriate satellite acquisition candidates. In evaluating
potential satellite acquisitions Global considers, among other factors, the
potential satellite's proximity to a core company, the fit between its product
lines and those of the nearby core company, and the potential satellite's
management, employee base and service base under contract.
Stimulate Internal Growth. Global's strategy for stimulating internal growth
in its core companies is to increase sales force productivity through
performance benchmarks; expand product and service offerings; increase sales
force size; and aggressively cross-sell products and services.
Optimize Profitability Using Global's Benchmark Model. Global's senior
management has developed an industry management model composed of a
comprehensive set of performance benchmarks. These benchmarks, which are the
focus of internal reporting from the core companies to headquarters, allow
Global's senior and local management to monitor and improve the operations of
each core company. Using these criteria, Global trains its core and satellite
company managers to optimize their business mix and improve performance.
Global strives to reduce costs by consolidating the back-office functions of
its satellite acquisitions into core operations, enabling its core companies to
decrease technician driving time and increase the productivity of sales
personnel and administrators. Global also works to reduce costs by
standardizing financial reporting, cash and inventory management, payroll,
billing, collections, insurance and employee benefit programs, and by
negotiating advantageous relationships with equipment manufacturers, other
suppliers and lessors.
Operate with a Decentralized Management Structure. Global believes that its
core companies' experienced local management possess valuable understanding of
their markets and customers. Therefore, Global gives its core company managers
responsibility for day-to-day operating decisions. Core companies and, in some
cases, satellite companies retain their local name and management after Global
acquires them. This decentralized approach permits local management to maintain
focus and motivation and optimizes customer relationships. Local management is
supported by a senior management team that focuses on Global's growth strategy
as well as corporate planning and financial reporting and analysis.
Recent Developments. On July 20, 1999, Global acquired Daniel Communications,
Inc., an electronic presentation dealer with annual revenues of approximately
$5.6 million that serves Alabama, the Florida Panhandle, and parts of
Mississippi. This acquisition has not been included in any pro forma financial
information contained in this prospectus. Global is also continually evaluating
and having discussions with other acquisition candidates as part of its growth
strategy.
Mailing Address and Telephone Number
Our mailing address and telephone number are
Global Imaging Systems, Inc.
P.O. Box 273478
Tampa, Florida 33688-3478
(813) 960-5508
3
<PAGE>
Summary of the Exchange Offer
The Exchange Offer.......... We are offering to exchange $1,000 principal
amount of our 10 3/4% Senior Subordinated Notes
due 2007, which have been registered under the
Securities Act, for each $1,000 principal amount
of our outstanding unregistered 10 3/4% Senior
Subordinated Notes due 2007 which were issued by
us on March 8, 1999 in a private offering.
In order for your outstanding notes to be
exchanged, you must properly tender them prior to
the expiration of the exchange offer. All
outstanding notes that are validly tendered and
not validly withdrawn will be exchanged. We will
issue the exchange notes on or promptly after the
expiration of the exchange offer.
Outstanding notes may be tendered for exchange in
whole or in part in integral multiples of $1,000
principal amount.
Registration Rights
Agreement................... We sold the outstanding notes on March 8, 1999 to
the initial purchasers of the outstanding notes.
Simultaneously with that sale we signed a
registration rights agreement with the initial
purchasers which requires us to conduct this
exchange offer.
You have the right pursuant to the registration
rights agreement to exchange your outstanding
notes for exchange notes with substantially
identical terms. This exchange offer is intended
to satisfy these rights. After the exchange offer
is complete, you will no longer be entitled to
any exchange or registration rights with respect
to your outstanding notes.
For a description of the procedures for tendering
outstanding notes, see "The Exchange Offer--
Procedures for Tendering Outstanding Notes."
Consequences of Failure to
Exchange Your Outstanding
Notes...................... If you do not exchange your outstanding notes for
exchange notes pursuant to the exchange offer,
you will continue to be subject to the
restrictions on transfer provided in the
outstanding notes and the indenture. In general,
the outstanding notes may not be offered or sold
unless registered under the Securities Act,
except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act
and applicable state securities laws. We do not
currently plan to register the outstanding notes
under the Securities Act. To the extent that
outstanding notes are tendered and accepted in
the exchange offer, the trading market for
untendered and tendered but unaccepted
outstanding notes will be adversely affected.
Expiration Date............. The exchange offer will expire at 5:00 p.m., New
York City time, on August 30, 1999 unless
extended by us, in which case the
4
<PAGE>
term "expiration date" shall mean the latest date
and time to which the exchange offer is extended.
See "The Exchange Offer--Expiration Date;
Extensions; Amendments."
Conditions to the Exchange
Offer....................... The exchange offer is subject to certain
conditions which we may waive at our sole
discretion. The exchange offer is not conditioned
upon any minimum principal amount of outstanding
notes being tendered for exchange. See "The
Exchange Offer--Conditions to the Exchange
Offer."
We reserve the right in our sole and absolute
discretion, subject to applicable law, at any
time and from time to time:
. to delay the acceptance of the outstanding
notes;
. to terminate the exchange offer if certain
specified conditions have not been satisfied;
. to extend the expiration date of the exchange
offer and retain all tendered outstanding notes
subject, however, to the right of tendering
holders to withdraw their tender of outstanding
notes; and
. to waive any condition or otherwise amend the
terms of the exchange offer in any respect.
See "The Exchange Offer--Expiration Date;
Extensions; Amendments."
Procedures for Tendering
Outstanding Notes.......... If you wish to tender outstanding notes for
exchange, you must:
. complete and sign a Letter of Transmittal in
accordance with the instructions contained in
the Letter of Transmittal; and
. forward the Letter of Transmittal by mail,
facsimile transmission or hand delivery,
together with any other required documents, to
the exchange agent, either with the outstanding
notes to be tendered or in compliance with the
specified procedures for guaranteed delivery of
such outstanding notes.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer.
Please do not send your Letter of Transmittal or
certificates representing your outstanding notes
to us. Those documents should only be sent to the
exchange agent. Questions regarding how to tender
and requests for information should be directed
to the exchange agent. See "The Exchange Offer--
Exchange Agent."
Special Procedures for
Beneficial Owners.......... If your outstanding notes are registered in the
name of a broker, dealer, commercial bank, trust
company or other nominee, we urge you to contact
such person promptly if you wish to tender your
outstanding notes pursuant to the exchange offer.
See "The Exchange Offer--Procedures for Tendering
Outstanding Notes."
5
<PAGE>
Withdrawal Rights........... You may withdraw the tender of your outstanding
notes at any time prior to the expiration date by
delivering a written notice of your withdrawal to
the exchange agent in accordance with the
withdrawal procedures as described under the
heading "The Exchange Offer--Withdrawal Rights."
Consequences of Not
Complying with Exchange
Offer Procedures........... You are responsible for complying with all
exchange offer procedures. You will only receive
exchange notes in exchange for your outstanding
notes if, prior to the expiration date, you
(1) deliver to the exchange agent the Letter of
Transmittal, properly completed and duly
executed, along with any other documents or
signature guarantees required by the Letter of
Transmittal, as well as certificates for the
outstanding notes or a book-entry confirmation of
a book-entry transfer of the outstanding notes
into the exchange agent's account at the
Depository Trust Company (DTC) or (2) comply with
the guaranteed delivery procedures described in
"The Exchange Offer--Procedures for Tendering
Outstanding Notes."
Any outstanding notes you hold and do not tender,
or which you tender but which are not accepted
for exchange, will remain outstanding. You will
not have any appraisal or dissenters' rights in
connection with the exchange offer.
You should allow sufficient time to ensure that
the exchange agent receives all required
documents before the expiration of the exchange
offer. Neither we nor the exchange agent has any
duty to inform you of defects or irregularities
with respect to the tender of your outstanding
notes for exchange. See "The Exchange Offer."
Resales of Exchange Notes... We believe that you will be able to offer for
resale, resell or otherwise transfer exchange
notes issued in the exchange offer without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that:
. you are acquiring the exchange notes in the
ordinary course of your business;
. you are not participating, and have no
arrangement or understanding with any person to
participate, in the distribution of the
exchange notes; and
. you are not an affiliate of Global under the
definition of "affiliate" contained in Rule 405
under the Securities Act.
Our belief is based on interpretations by the
staff of the SEC, as set forth in no-action
letters issued to third parties unrelated to us.
The staff of the SEC has not considered the
exchange offer in the context of a no-action
letter, and we cannot assure you that the staff
of the SEC would make a similar determination
with respect to this exchange offer.
6
<PAGE>
If our belief is not accurate and you transfer an
exchange note without delivering a prospectus
meeting the requirements of the Securities Act or
without an exemption from such requirements, you
may incur liability under the Securities Act. We
do not and will not assume or indemnify you
against such liability.
Each broker-dealer that receives exchange notes
for its own account in the exchange offer must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resale of those exchange
notes. The Letter of Transmittal states that by
so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the
Securities Act. This prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with
resales of exchange notes received in exchange
for outstanding notes that the broker-dealer
acquired as a result of market-making activities
or other trading activities. We have agreed that
we will make this prospectus and any amendment or
supplement to this prospectus available to any
broker-dealer to use for resales for a period of
180 days beginning on the expiration date. See
"Plan of Distribution."
The exchange offer is not being made to, nor will
we accept surrenders for exchange from, holders
of outstanding notes in any jurisdiction in which
this exchange offer or the acceptance thereof
would not be in compliance with the securities or
blue sky laws of such jurisdiction.
Exchange Agent.............. The exchange agent for the exchange offer is
United States Trust Company of New York. The
address, telephone number and facsimile number of
the exchange agent are set forth in "The Exchange
Offer--Exchange Agent" and in the Letter of
Transmittal.
Use of Proceeds............. We will not receive any cash proceeds from the
issuance of the exchange notes offered hereby.
See "Use of Proceeds."
Certain United States
Federal Income Tax
Consequences............... Your acceptance of the exchange offer and the
related exchange of your outstanding notes for
exchange notes will not be a taxable exchange for
United States federal income tax purposes. You
should not recognize any taxable gain or loss or
any interest income as a result of the exchange.
See "The Exchange Offer--Certain United States
Federal Income Tax Consequences."
See "The Exchange Offer" for more detailed
information concerning the exchange offer.
7
<PAGE>
Summary of Terms of the Exchange Notes
The exchange offer relates to the exchange of up to $100 million principal
amount of exchange notes for an equal principal amount of outstanding notes.
The form and terms of the exchange notes are substantially identical to the
form and terms of the outstanding notes, except the exchange notes will be
registered under the Securities Act. Therefore, the exchange notes will not
bear legends restricting their transfer and will not be entitled to
registration under the Securities Act. The exchange notes will evidence the
same debt as the outstanding notes (which they replace) and both the
outstanding notes and the exchange notes are governed by the same indenture.
Securities Offered.......... $100 million principal amount of 10 3/4% senior
subordinated exchange notes due 2007.
Issuer...................... The exchange notes will be the obligations of
Global Imaging Systems, Inc.
Maturity Date............... February 15, 2007.
Interest Payment Dates...... February 15 and August 15, beginning on August
15, 1999.
Optional Redemption......... We may redeem:
. all or part of the notes beginning on February
15, 2003, at the redemption prices described in
the section "Description of Exchange Notes--
Redemption--Optional Redemption"; and
. up to 35% of the outstanding notes and exchange
notes originally issued at any time on or prior
to February 15, 2002 at the price of 110.750%
of their face amount, plus accrued and unpaid
interest, with money we raise in certain public
equity offerings.
Ranking..................... The notes are senior subordinated debts. They
rank behind all of our current and future
indebtedness (other than trade payables), except
indebtedness that expressly provides that it is
not senior to the notes. The notes will
effectively rank behind any of our future
indebtedness that is secured by any of our assets
to the extent of the value of such assets, even
if such indebtedness expressly provides that it
is not senior to the notes.
Exchange Note Guarantees.... Our current subsidiaries, as well as our future
domestic restricted subsidiaries, other than
certain financing subsidiaries, will guarantee
the exchange notes on an unsecured, senior
subordinated basis. The guarantee of each
subsidiary guarantor (1) will rank behind all of
such subsidiary's current and future indebtedness
(other than trade payables), except indebtedness
that expressly provides that it is not senior to
such guarantee and (2) will effectively rank
behind any indebtedness secured by any of such
subsidiary's assets to the extent of the value of
such assets, even if such indebtedness expressly
provides that it is not senior to such guarantee.
Mandatory Offer to
Purchase.................... If we sell certain assets or experience certain
changes of control, we must offer to purchase the
notes at the prices listed in "Description of
Exchange Notes."
Basic Covenants of
Indenture................... We will issue the exchange notes under the
indenture that governs the outstanding notes. The
indenture contains covenants for your
8
<PAGE>
benefit. Such covenants, among other things,
restrict our ability and the ability of certain
of our subsidiaries to:
. incur additional debt;
. pay dividends and make distributions;
. repurchase securities;
. make certain investments;
. create liens;
. transfer or sell assets;
. enter into transactions with affiliates;
. issue or sell stock of subsidiaries; or
. merge or consolidate.
However, these restrictions are subject to a
number of important qualifications and
exceptions. For more details, see "Description of
Exchange Notes--Certain Covenants."
Risk Factors
You should read the "Risk Factors" section of this prospectus as well as the
other cautionary statements throughout this prospectus before making an
investment in the exchange notes or tendering your outstanding notes for
exchange notes.
9
<PAGE>
Summary Consolidated Historical and Pro Forma Financial Information
The following table presents (1) summary consolidated historical financial
information of Global, as of the dates and for the periods indicated and (2)
summary consolidated pro forma financial information of Global, as of the date
and for the period indicated, after giving effect to Global's acquisition of 9
businesses on operations data during the period from April 1, 1998 to June 30,
1999 as if such acquisitions had occurred on April 1, 1998. The consolidated
historical financial information for each of the four years in the period ended
March 31, 1999 has been derived from Global's financial statements, which have
been audited by Ernst & Young LLP. The previous three years financial
statements are contained in this prospectus. The summary unaudited consolidated
pro forma financial information does not claim to represent what Global's
financial position or results of operations would actually have been had the
transactions referred to above been completed on April 1, 1998, or to project
Global's financial position or results of operations for any future period. The
summary financial information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Global's financial statements and the notes thereto included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended March 31,
--------------------------------------------------
Pro
Forma(1)
1996 1997 1998 1999 1999
-------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Equipment and supplies
sales................... $ 20,561 $ 41,200 $121,316 $218,653 $314,853
Service and rentals...... 16,405 22,893 43,059 69,542 112,590
-------- -------- -------- -------- --------
Total revenues............ 36,966 64,093 164,375 288,195 427,443
Costs and operating
expenses:
Cost of equipment and
supplies sales.......... 13,456 27,087 85,972 154,083 218,660
Service and rental
costs................... 8,303 11,467 21,594 34,434 57,053
Selling, general and ad-
ministrative expenses... 11,687 18,280 38,619 63,133 99,273
Intangible asset
amortization............ 1,396 1,939 3,076 4,627 7,975
-------- -------- -------- -------- --------
Total costs and operating
expenses................. 34,842 58,773 149,261 256,277 382,961
-------- -------- -------- -------- --------
Income from operations.... $ 2,124 $ 5,320 $ 15,114 $ 31,918 $ 44,482
======== ======== ======== ======== ========
Interest expense.......... $ 2,041 $ 3,190 $ 6,713 $ 8,427 $ 17,060
======== ======== ======== ======== ========
Net income (loss) ........ $ (192) $ 1,123 $ 4,453 $ 11,284 $ 14,521
======== ======== ======== ======== ========
Other Data:
EBITDA(2)................. $ 5,758 $ 9,799 $ 21,806 $ 41,139(3) $ 61,090
Depreciation &
amortization............. 3,634 4,479 6,692 9,221 16,608
Ratio of earnings to fixed
charges(4)............... 1.04x 1.62x 2.13x 3.45x 2.46x
Cash interest expense..... 20,475
Ratio of total debt to
annualized EBITDA(5)..... 3.6x
Ratio of EBITDA to cash
interest expense(5)...... 3.0x
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1999
----------------------
Pro
Actual Forma(6)
---------- -----------
(in thousands)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............................... $ 5,175 $ 9,047
Working capital......................................... 44,922 49,955
Total assets............................................ 310,419 377,812
Total debt.............................................. 168,277 218,277
Total stockholders' equity.............................. 94,899 99,499
</TABLE>
10
<PAGE>
- --------
(1) Gives effect to our acquisitions of eight businesses during the twelve
months ended March 31, 1999 and one business in June 1999, as if they had
been completed on April 1, 1998. See the Unaudited Pro Forma Consolidated
Statements of Operations for the year ended March 31, 1999 for a
description of the adjustments. The pro forma results exclude adjustments
relating to: (1) certain identifiable personnel cost savings resulting from
the elimination of certain service, sales and administrative positions, net
of additional expenses related to positions added in connection with
Global's acquisition of the acquired businesses, (2) reduced expenses to
reflect the current compensation levels of former owners of the businesses
Global has acquired, (3) improved purchasing terms and (4) reduced
administrative expenses. Management believes that the cost efficiencies
achieved are sustainable and expects they will continue. Global's
incremental costs to assimilate the businesses it acquires are usually
incurred within several months of the acquisition date and are not
significant.
(2) Represents earnings before interest, taxes, depreciation and amortization
("EBITDA"). We believe that EBITDA provides useful information regarding
our ability to service debt. Lenders use EBITDA as a criterion in
evaluating companies, and our financing arrangements contain covenants in
which EBITDA is used as a measure of financial performance. The EBITDA
measure for us may not be consistent with similarly titled measures for
other companies. EBITDA should not be considered as an alternative to
operating or net income (as determined in accordance with generally
accepted accounting principles) as an indicator of our performance or to
cash flow from operations (as determined in accordance with GAAP) as a
measure of liquidity.
(3) Includes an extraordinary charge of $3.1 million ($1.8 million net of
income taxes) to recognize a $0.2 million pre-payment penalty and the
write-off of deferred financing costs of $2.9 million related to the
retirement of Global's prior credit facility from Jackson National Life
Insurance Company.
(4) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before taxes plus fixed charges. Fixed charges consist of
interest expense, amortization of debt issuance cost and that portion of
rental expenses representative of the interest factor.
(5) As adjusted for Global's acquisition of one business after March 31, 1999.
(6) Gives effect to Global's acquisition of one business in June, 1999.
11
<PAGE>
RISK FACTORS
Before you tender your outstanding notes for exchange notes or invest in the
exchange notes, you should be aware that there are various risks involved in
your investment, including those we identify below. You should consider these
risks carefully, together with all of the other information in this
prospectus.
Our Indebtedness Results in Significant Debt Service Obligations and
Limitations
Because we financed our acquisitions primarily with debt, we incurred
substantial debt and, as a result, we have significant debt service
obligations. As of June 30, 1999, our total indebtedness was $215.2 million,
which represented 67.6% of our total capitalization. We also had $135.0
million of additional borrowing availability under our senior credit facility.
In addition, our senior credit facilities and the indenture governing the
notes allow us to incur additional indebtedness under certain circumstances.
Our indebtedness poses important consequences to you, including the risks
that:
. we will use a substantial portion of our cash flow from operations to
pay principal and interest on our debt, thereby reducing the funds
available for acquisitions, working capital, capital expenditures and
other general corporate purposes;
. we may be unable to obtain additional financing on satisfactory terms or
to otherwise fund working capital, capital expenditures, acquisitions,
and other general corporate requirements;
. our borrowings under our senior credit facility will bear interest at
variable rates, which would create higher debt service requirements if
market interest rates increase; and
. our degree of leverage may hinder our ability to adjust rapidly to
changing market conditions and could make us more vulnerable to
downturns in the economy generally or in our industry.
If we cannot generate sufficient cash flow from operations to meet our
obligations, we may be forced to reduce or delay acquisitions and other
capital expenditures, sell assets, restructure or refinance our debt, or seek
additional equity capital. We cannot assure you that these remedies would be
available or satisfactory. Our ability to pay principal and interest on the
notes and to satisfy our other debt obligations will depend on our future
operating performance. Our operating performance will be affected by
prevailing economic conditions and financial, business and other factors which
may be beyond our control. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Description of Senior Credit Facilities" and "Description of
Exchange Notes."
The Exchange Notes and Guarantees Will Be Unsecured and Subordinated to Our
Senior Debt
The exchange notes and the guarantees to be provided by our subsidiaries
will be unsecured, which means that you will have no recourse to specific
assets of Global or Global's subsidiaries if a default occurs under the
exchange notes and indenture. In addition, before we can pay principal and
interest on the exchange notes, we must first make payments on any of our
existing and future senior debt that is in default, including all senior debt
of our subsidiaries, if any, and all outstanding amounts under our senior
credit facility.
As of June 30, 1999, we had $215.2 million of senior indebtedness
outstanding. Substantially all of our real and personal property used in our
business operations secures our obligations under our senior credit facility.
If we default on any payments required under any of our senior debt, or if we
fail to comply with other provisions governing our senior debt such as meeting
required financial ratios, the senior lenders could declare all amounts
outstanding, together with accrued and unpaid interest, immediately due and
payable. If we are unable to repay amounts due, the lenders could proceed
against the collateral securing the debt. If the lenders proceed against any
of the collateral, we may not have enough assets left to pay you or other
noteholders. Moreover, if we become bankrupt or similarly reorganize, we may
not be able to use our assets to pay you or other noteholders until after we
pay all of our senior debt. In addition, the senior credit facility may
prohibit us
12
<PAGE>
from paying amounts due on the exchange notes, or from purchasing, redeeming or
otherwise acquiring the exchange notes if a default exists under our senior
debt. See "Description of Exchange Notes--Subordination of the Notes and the
Note Guarantees."
We May Be Unable to Integrate Our Acquired Businesses into Our Operations
Profitably
Integrating our acquired businesses may involve unanticipated delays, costs
or other operational or financial problems. Successful integration of the
businesses we acquire depends on a number of factors, including our ability to
transition acquired companies to our management information systems and the
ability of our core businesses to integrate acquired satellites into their
operations. In integrating our acquired businesses, we may not achieve expected
economies of scale or profitability or realize sufficient revenues to justify
our investment. For example, if we are unable to increase the sales force
productivity at our acquired businesses as quickly as we expect, our revenues
may not justify our investment. We also face the risk that an unexpected
problem at one of our acquired companies will require substantial time and
attention from senior management, distracting management's attention away from
other aspects of our business. We cannot be certain that our management and
financial reporting systems, procedures and controls will be able to support us
as we grow.
We Need Substantial Additional Funds to Finance Our Acquisitions
We intend to finance our future acquisitions primarily by incurring
additional indebtedness, which will be substantial in relation to our equity
capital. We cannot be certain that we will be able to borrow money for future
acquisitions on favorable terms. Also, the restrictions imposed on us under our
senior credit facility and the indenture governing the notes may limit our
ability to borrow additional funds to purchase acquisitions. See "Description
of Senior Credit Facilities" and "Description of Exchange Notes." We may also
pay some of the price of future acquisitions by issuing common stock or other
equity securities to the sellers of the businesses we acquire or in public or
private offerings. Depending on the market value of our common stock, either we
or the sellers of the businesses we acquire may not be willing to use common
stock for part of the consideration we pay. To the extent we do not have access
to additional debt and do not issue equity to pay for future acquisitions, we
would need to use more of our cash resources to continue our acquisition
program. We cannot be certain that we will be able to obtain debt or equity
financing or that we will have enough cash resources available to pay for
future acquisitions.
Our Combined Operating History is Limited
Although a number of the companies we have acquired have been in operation
for some time, Global itself has a limited history of operations and
profitability. Consequently, the financial information in this prospectus may
not be indicative of our financial condition and future performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We Have Limited Operating Experience in Some of Our Target Markets
A key element of our expansion strategy is to acquire companies in each of
our geographic markets that sell and service electronic presentation systems or
document imaging management systems or that provide network integration or
facilities management services. Our limited experience in offering these
products and services may impair our ability to identify, acquire and integrate
appropriate companies. In addition, we may not be able to cross-sell these
products and services to our different customer bases. These markets also
present us with new challenges. For example, none of our companies currently
operates in the facilities management market. Success in this market would
require that we adapt our operations expertise to running labor-intensive
businesses.
13
<PAGE>
We Depend on Our Chief Executive Officer
Our success substantially depends on the efforts and ability of Thomas S.
Johnson, Global's President and Chief Executive Officer. Mr. Johnson has
developed and implemented Global's industry management model, and has many
years of experience in the office imaging industry and in the acquisition and
integration of office imaging solutions dealers. Mr. Johnson is employed under
an executive agreement that renews automatically each July for a one-year
period unless otherwise terminated by either party upon 30 days notice. The
loss or interruption of his services could have an adverse effect on Global.
We Need to Attract and Retain Skilled Employees
Many of our markets are experiencing low levels of unemployment. As a result,
we must compete to attract, motivate and retain skilled employees, particularly
systems integrators, service technicians, sales personnel and managers. We need
qualified service technicians to fulfill our service contracts and enter into
new ones. We need talented sales personnel to generate both sales and service
revenues. We need effective managers to integrate and operate our acquired
businesses profitably. As a result, if we cannot hire and keep skilled
employees, our business could be adversely affected.
Technological Developments Will Affect Our Business
The office imaging solutions industry is moving toward digital technology in
a multi-functional office environment. We must be able to respond to this
rapidly changing environment. Our business will be adversely affected if (1) we
or our suppliers fail to anticipate which products or technologies will gain
market acceptance or (2) we cannot sell these products at competitive prices.
We cannot be certain that manufacturers of popular products will permit us to
market their newly developed equipment. In addition, new products containing
new technology may be sold through other channels of distribution.
Technological advancements may result in lowered per unit costs that may reduce
our sales revenues and reliability improvements that may reduce our service
revenues. We will also incur increased expenses to train our sales and service
personnel on any new technologies. See "Business--The Industry--Consolidation--
Technological Change."
We May Not Have Sufficient Funds to Repay the Notes Upon a Change of Control
If we experience certain changes of control, you will have the right to
require us to purchase your notes at a purchase price equal to 101% of the
principal amount of your notes plus accrued and unpaid interest. In such
circumstances, we may also be required to (1) repay our outstanding senior debt
or (2) obtain our lenders' consent to our purchase of the notes. If we cannot
repay our debt or cannot obtain the needed consents, we may be unable to
purchase the notes. Upon a change of control, we cannot guarantee that we will
have sufficient funds to make any debt payment, including purchases of the
notes. The failure to purchase the notes would be an event of default under the
indenture governing the notes. To avoid default, we may try to refinance our
debt. We cannot guarantee, however, that such refinancing would be available or
would be on favorable terms. See "Description of Exchange Notes--Change of
Control."
The events that qualify as a change of control under the indenture may also
be events of default under the senior credit facility or other indebtedness. An
event of default under the senior credit facility would permit our lenders to
accelerate our indebtedness. If we cannot repay such borrowings when due, the
lenders could proceed against the collateral securing the debt.
We Depend on Our Suppliers
A majority of our revenues come from the sale of equipment and from service
and supply contracts for this equipment. As a result, our success depends on
our access to reliable sources of equipment, parts and supplies at competitive
prices. During the fiscal year ended March 31, 1999, on a pro forma basis to
give effect
14
<PAGE>
to Global's acquisition of 8 companies in the fiscal year ended March 31, 1999
as though such acquisitions had occurred on April 1, 1998, Global purchased 14%
of its equipment, parts and supplies from Konica Business Technologies, Inc.
and 10% from Sharp Electronics Corporation. No other supplier represented in
excess of 7% of such purchases, on a pro forma basis to give effect to Global's
acquisition of 8 companies in the fiscal year ended March 31, 1999 as though
such acquisitions had occurred on April 1, 1998. There is no guarantee that
Konica, Sharp or any of our other suppliers will continue to sell their
products to us, or that they will do so at competitive prices. Finally, other
factors, including reduced access to credit resulting from economic conditions
in Asia, may impair our suppliers' ability to provide products in a timely
manner or at competitive prices. See "Business--Suppliers."
Our Markets are Highly Competitive
We operate in highly competitive markets, which forces us to compete for
customers and sometimes for acquisition candidates. Competitors in the
automated office equipment market, the electronic presentation systems market
and the DIM systems market include Xerox Corporation, Danka Business Systems
PLC, IKON Office Solutions, Inc. and other large, independent dealers, as well
as manufacturers' sales and service divisions, office superstores and consumer
electronics chains. In the network integration services market we compete with
large providers, smaller competitors with regional or local operations, and the
in-house capabilities of our customers. See "Business--Competition."
Some competitors have greater financial and personnel resources than we do.
Competition from large, nationwide competitors is likely to increase as we seek
to attract additional customers, expand our markets geographically and broaden
our product and service offerings. Competition from large, nationwide
competitors will also increase if our industry continues to consolidate.
Finally, as digital and other new technologies develop, we may face competition
from new distribution channels, including computer distributors and value added
resellers, for products containing new technology.
Year 2000 Issues May Affect Our Operations
The year 2000 issue exists because many computer systems and applications use
two-digit fields to designate a year. Date-sensitive computer systems and
programs may fail to recognize or correctly process the year 2000 as the
century date change approaches or occurs. This inability to properly recognize
or treat the year 2000 may cause systems errors or failures that could
seriously disrupt or prevent our normal business operations or could result in
liability or unanticipated costs as a result of disruptions in our customers'
business operations. The full extent of any adverse impact is impossible to
determine.
We are evaluating all of our internal computers, computer equipment and other
equipment with embedded technology against year 2000 concerns. We have
identified five mission-critical aspects of our business: sales, billing,
service, delivery and accounting information systems. Should any of these
functions fail due to year 2000 issues, a material disruption in our business
could result. All of these systems except for sales may depend on the year 2000
readiness of software we purchase from the OMD Corporation. If this software is
not year 2000 ready on time, multiple mission-critical aspects of our business
could be disrupted. Our operations may also be negatively affected by the
inability of third parties with whom we deal to manage this problem in a timely
manner. In particular, if our equipment vendors' products are not year 2000
ready or if year 2000 problems impair our suppliers' ability to provide
products timely and at competitive prices, we could be adversely affected.
Finally, we may also face risks relating to potential costs or liability
resulting from the year 2000 issue. Given the breadth of different products and
services we offer, we could face expenses or claims arising from the effect of
the year 2000 issue on the products we sell and service. The year 2000
readiness of these products depends on the efforts of our suppliers. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition--Year 2000 Issues."
15
<PAGE>
The Failure of a Market to Develop Could Affect the Liquidity and Price of
Your Exchange Notes
The exchange notes will be a new issue of securities for which there is no
existing trading market. We cannot assure you as to the liquidity of markets
that may develop for the exchange notes, your ability to sell the exchange
notes or the price at which you would be able to sell the exchange notes. If
such markets were to develop, the exchange notes could trade at prices that
may be lower than their principal amount or purchase price depending on many
factors, including prevailing interest rates and the markets for similar
securities. In addition, any market-making by the initial purchasers of the
outstanding notes may be limited during the exchange offer or the pendency of
any resale registration statement and may be discontinued at any time without
notice. We do not intend to apply for listing of the exchange notes on any
national securities exchange or on Nasdaq. The liquidity of, and trading
market for, the exchange notes also may be adversely affected by changes in
the market for high yield securities and by changes in our financial
performance or prospects or in the prospects for companies in our industry
generally. As a result, you cannot be sure that an active trading market will
develop for the exchange notes.
Issuance of the Exchange Notes and Any Subsidiary Guarantee May Be Subject to
Fraudulent Conveyance Laws
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if we, at the time
we issue the exchange notes:
(1) incur the indebtedness with the intent to hinder, delay or defraud
creditors; or
(2) receive less than reasonably equivalent value or fair consideration for
incurring such indebtedness, and
. are insolvent at the time of incurrence,
. are rendered insolvent by reason of such incurrence (and the
application of the proceeds thereof),
. are engaged or are about to engage in a business or transaction for
which our remaining assets constitute unreasonably small capital to
carry on our businesses, or
. intend to incur, or believe that we would incur, debts beyond our
ability to pay such debts as they matured,
then, in each case, a court could (1) void, in whole or in part, the exchange
notes, and direct the repayment of any amounts paid under the exchange notes
to our creditors, (2) subordinate the exchange notes to our obligations to our
existing and future creditors, or (3) take other actions detrimental to the
noteholders. The measure of insolvency for these purposes will vary depending
upon the law applied in such case. Generally, however, we would be considered
insolvent (1) if the sum of our debts, including contingent liabilities, was
greater than all of our assets at fair valuation or (2) if the present fair
saleable value of our assets was less than the amount that would be required
to pay the probable liability on our existing debts, including contingent
liabilities, as they become absolute and mature. A subsidiary guarantee, at
the time it is issued by one of our subsidiaries, would be subject to the same
fraudulent transfer or conveyance laws as the notes.
Golder, Thoma, Cressey, Rauner, Inc. is a Significant Stockholder
Golder, Thoma, Cressey, Rauner, Inc., through its affiliation with Golder,
Thoma, Cressey, Rauner Fund IV, L.P. owns and controls approximately 38.9% of
our outstanding common stock. In addition, two of our directors, Carl Thoma
and William Kessinger, are Principals of Golder, Thoma, Cressey, Rauner, Inc.
As a result, Golder, Thoma, Cressey, Rauner, Inc. has significant influence
over the election of our directors and over corporate actions, such as
mergers, acquisitions and asset sales, that require stockholder approval. In
some cases, Golder, Thoma, Cressey, Rauner, Inc.'s interests as a stockholder
could conflict with your interests as a noteholder. For example, Golder,
Thoma, Cressey, Rauner, Inc. may have an interest in pursuing acquisitions,
divestitures or other transactions that, in its judgment, could enhance its
equity investment, even though such transactions might involve risks to
holders of the notes. See "Principal Stockholders."
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<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange offer
In connection with the sale of the outstanding notes, we agreed to register
the exchange notes. The exchange offer is being made to satisfy this
contractual obligation.
By tendering outstanding notes in exchange for exchange notes, each holder
represents to us that
. any exchange notes to be received by such holder are being acquired in
the ordinary course of such holder's business;
. such holder has no arrangement or understanding with any person to
participate in a "distribution" of exchange notes under the Securities
Act;
. such holder is not an "affiliate" of Global, as defined in Rule 405
under the Securities Act, or, if such holder is an affiliate, that such
holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable;
. such holder has full power and authority to tender, exchange, sell,
assign and transfer the tendered outstanding notes;
. Global will acquire good, marketable and unencumbered title to the
tendered outstanding notes, free and clear of all liens, restrictions,
charges and encumbrances; and
. the outstanding notes tendered for exchange are not subject to any
adverse claims or proxies.
Each tendering holder also will warrant and agree that such holder will, upon
request, execute and deliver any additional documents that Global or the
exchange agent deems to be necessary or desirable to complete the exchange,
sale, assignment, and transfer of the outstanding notes tendered pursuant to
the exchange offer.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes pursuant to the exchange offer, where such
outstanding notes were acquired by such broker-dealer as a result of market-
making or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. See "Plan of
Distribution."
The exchange offer is not being made to, nor will Global accept tenders for
exchange from, holders of outstanding notes in any jurisdiction in which the
exchange offer or the acceptance of the exchange notes would be in violation of
the securities or blue sky laws of that jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to the
exchange offer means any person in whose name the outstanding notes are
registered on the books of Global or any other person who has obtained a
properly completed bond power from the registered holder, or any participant in
DTC whose name appears on a security position listing as a holder of
outstanding notes (which, for purposes of the exchange offer, include
beneficial interests in the outstanding notes held by direct or indirect
participants in DTC and outstanding notes held in definitive form).
Terms of the Exchange Offer
Global hereby offers, upon the terms and subject to the conditions shown in
this prospectus and in the accompanying Letter of Transmittal, to exchange
$1,000 principal amount of 10 3/4% Senior Subordinated Exchange Notes due 2007
for each $1,000 principal amount of outstanding 10 3/4% Senior Subordinated
Notes due 2007 properly tendered before the expiration date and not properly
withdrawn according to the procedures described below. Holders may tender their
outstanding notes in whole or in part in integral multiples of $1,000 principal
amount.
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<PAGE>
The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes except that (1) the exchange notes have been
registered under the Securities Act and therefore are not subject to the
restrictions on transfer applicable to the outstanding notes and (2) holders of
the exchange notes will not be
entitled to some of the rights of holders of the outstanding notes under the
registration rights agreement. The exchange notes evidence the same
indebtedness as the outstanding notes (which they replace) and will be issued
pursuant to and entitled to the benefits of the indenture that governs the
outstanding notes.
The exchange offer is not conditioned upon any minimum principal amount of
outstanding notes being tendered for exchange. Global reserves the right in its
sole discretion to purchase or make offers for any outstanding notes that
remain outstanding after the expiration date or, as shown under "--Conditions
to the Exchange Offer," to terminate the exchange offer and, to the extent
permitted by applicable law, purchase outstanding notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers could differ from the terms of the exchange offer. As of the date of
this prospectus, $100 million principal amount of 10 3/4% Senior Subordinated
Notes due 2007 is outstanding.
Holders of outstanding notes do not have any appraisal or dissenters' rights
in connection with the exchange offer. Outstanding notes which are not tendered
for, or are tendered but not accepted in connection with, the exchange offer
will remain outstanding. See "Summary of the Exchange Offer--Consequences of
Not Complying with Exchange Offer Procedures."
If any tendered outstanding notes are not accepted for exchange because of an
invalid tender, the occurrence of particular other events shown herein or
otherwise, certificates for any such unaccepted outstanding notes will be
returned, without expense, to the tendering holder thereof promptly after the
expiration date.
Holders who tender outstanding notes in connection with the exchange offer
will not be required to pay brokerage commissions or fees or, subject to the
instructions in the Letter of Transmittal, transfer taxes with respect to the
exchange of the outstanding notes in connection with the exchange offer. Global
will pay all charges and expenses, other than specified applicable taxes. See
"--Fees and Expenses"
NEITHER GLOBAL NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO HOLDERS
OF THE OUTSTANDING NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL
OR ANY PORTION OF THEIR OUTSTANDING NOTES IN THE EXCHANGE OFFER. IN ADDITION,
NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF THE
OUTSTANDING NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO
THE EXCHANGE OFFER, AND, IF SO, THE AGGREGATE AMOUNT OF OUTSTANDING NOTES TO
TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND
CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR FINANCIAL POSITION AND
REQUIREMENTS.
Expiration Date; Extensions; Amendments
The expiration date for the exchange offer is 5:00 p.m., New York City time,
on August 30, 1999 unless the exchange offer is extended by Global. If Global
does extend the exchange offer, the expiration date will be the latest date and
time to which the exchange offer is extended.
Global expressly reserves the right in its sole and absolute discretion,
subject to applicable law, at any time and from time to time, (1) to delay the
acceptance of the outstanding notes for exchange, (2) to terminate the exchange
offer, whether or not any outstanding notes have already been accepted for
exchange, if Global determines, in its sole and absolute discretion, that any
of the events or conditions referred to under "--Conditions to the Exchange
Offer" has occurred or exists or has not been satisfied with respect to the
exchange offer, (3) to extend the expiration date of the exchange offer and
retain all outstanding notes tendered pursuant to the exchange offer, subject,
however, to the right of holders of outstanding notes to withdraw their
18
<PAGE>
tendered outstanding notes as described under "--Withdrawal Rights," and (4) to
waive any condition or otherwise amend the terms of the exchange offer in any
respect. If the exchange offer is amended in a manner determined by Global to
constitute a material change, or if Global waives a material condition of the
exchange offer, Global will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders of the
affected outstanding notes, and Global will extend the exchange offer to the
extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, termination, extension or amendment will be
followed promptly by oral or written notice thereof to the exchange agent for
the exchange offer (any such oral notice to be promptly confirmed in writing)
and by making a public announcement, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. Without limiting
the manner in which Global may choose to make any public announcement, and
subject to applicable laws, Global shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to an appropriate news agency.
Acceptance for Exchange and Issuance of Exchange Notes
Upon the terms and subject to the conditions of the exchange offer, promptly
after the expiration date Global will exchange, and will issue to the exchange
agent, exchange notes for outstanding notes validly tendered and not withdrawn
pursuant to the withdrawal rights described under "--Withdrawal Rights."
In all cases, delivery of exchange notes in exchange for outstanding notes
tendered and accepted for exchange pursuant to the exchange offer will be made
only after timely receipt by the exchange agent of (1) outstanding notes or a
book-entry confirmation of a book-entry transfer of outstanding notes into the
exchange agent's account at DTC, (2) the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, and (3) any other documents required by the Letter of Transmittal.
Accordingly, the delivery of exchange notes might not be made to all tendering
holders at the same time, and will depend upon when outstanding notes, book-
entry confirmations with respect to outstanding notes and other required
documents are received by the exchange agent.
The term "book-entry confirmation" means a timely confirmation of a book-
entry transfer of outstanding notes into the exchange agent's account at DTC.
Subject to the terms and conditions of the exchange offer, Global will be
deemed to have accepted for exchange, and thereby exchanged, outstanding notes
validly tendered and not withdrawn as, if and when Global gives oral or written
notice to the exchange agent (any such oral notice to be promptly confirmed in
writing) of Global's acceptance of such outstanding notes for exchange pursuant
to the exchange offer. Global's acceptance for exchange of outstanding notes
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering holder and Global upon the terms and
subject to the conditions of the exchange offer. The exchange agent will act as
agent for Global for the purpose of receiving tenders of outstanding notes,
Letters of Transmittal and related documents, and as agent for tendering
holders for the purpose of receiving outstanding notes, Letters of Transmittal
and related documents and transmitting exchange notes to holders who validly
tendered outstanding notes. Such exchange will be made promptly after the
expiration date of the exchange offer. If for any reason the acceptance for
exchange or the exchange of any outstanding notes tendered pursuant to the
exchange offer is delayed (whether before or after Global's acceptance for
exchange of outstanding notes), or Global extends the exchange offer or is
unable to accept for exchange or exchange outstanding notes tendered pursuant
to the exchange offer, then, without prejudice to Global's rights set forth
herein, the exchange agent may, nevertheless, on behalf of Global and subject
to Rule 14e-1(c) under the Exchange Act, retain tendered outstanding notes and
such outstanding notes may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "--Withdrawal
Rights."
19
<PAGE>
Procedures for Tendering Outstanding Notes
Valid Tender
Except as set forth below, in order for outstanding notes to be validly
tendered pursuant to the exchange offer, either (1) (a) a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees and any other required documents, must be
received by the exchange agent at the address set forth under "--Exchange
Agent" prior to the expiration date and (b) tendered outstanding notes must be
received by the exchange agent, or such outstanding notes must be tendered
pursuant to the procedures for book-entry transfer set forth below and a book-
entry confirmation must be received by the exchange agent, in each case prior
to the expiration date, or (2) the guaranteed delivery procedures described
below must be complied with.
If less than all of the outstanding notes are tendered, a tendering holder
should fill in the amount of outstanding notes being tendered in the
appropriate box on the Letter of Transmittal. The entire amount of outstanding
notes delivered to the exchange agent will be deemed to have been tendered
unless otherwise indicated.
If any Letter of Transmittal, endorsement, bond power, power of attorney, or
any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing. Unless waived by Global, evidence
satisfactory to Global of such person's authority to so act must also be
submitted.
Any beneficial owner of outstanding notes that are held by or registered in
the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the exchange offer.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES, THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER. DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY AND PROPER INSURANCE SHOULD BE OBTAINED. NO
LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD BE SENT TO GLOBAL. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THESE TRANSACTIONS FOR THEM.
Book-Entry Transfer
The exchange agent will request to establish an account with respect to the
outstanding notes at DTC for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in DTC's book-entry transfer facility system may make a book-entry
delivery of the outstanding notes by causing DTC to transfer such outstanding
notes into the exchange agent's account at DTC in accordance with DTC's
procedures for transfers. However, although delivery of outstanding notes may
be effected through book-entry transfer into the exchange agent's account at
DTC, the Letter of Transmittal (or facsimile thereof), properly completed and
duly executed, with any required signature guarantees and any other required
documents, must in any case be delivered to and received by the exchange agent
at its address set forth under "--Exchange Agent" prior to the expiration date,
or the guaranteed delivery procedure set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
Signature Guarantees
Certificates for outstanding notes need not be endorsed and signature
guarantees on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are unnecessary unless (a) a certificate for outstanding notes is
20
<PAGE>
registered in a name other than that of the person surrendering the certificate
or (b) a registered holder completes the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" in the Letter of Transmittal.
In the case of (a) or (b) above, such certificates for outstanding notes must
be duly endorsed or
accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal or the notice of
withdrawal, as the case may be, guaranteed by a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution,"
including (as such terms are defined therein) (1) a bank, (2) a broker, dealer,
municipal securities broker or dealer or government securities broker or
dealer, (3) a credit union, (4) a national securities exchange, registered
securities association or clearing agency, or (5) a savings association that is
a participant in a Securities Transfer Association (each an "Eligible
Institution"), unless surrendered on behalf of such Eligible Institution. See
Instruction 1 to the Letter of Transmittal.
Guaranteed Delivery
If a holder desires to tender outstanding notes pursuant to the exchange
offer and the certificates for such outstanding notes are not immediately
available or time will not permit all required documents to reach the exchange
agent before the expiration date, or the procedures for book-entry transfer
cannot be completed on a timely basis, such outstanding notes may nevertheless
be tendered, provided that all of the following guaranteed delivery procedures
are complied with
(1) such tenders are made by or through an Eligible Institution;
(2) prior to the expiration date, the exchange agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form accompanying the Letter of
Transmittal, setting forth the name and address of the holder of
outstanding notes and the amount of outstanding notes tendered, stating
that the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of the
Notice of Guaranteed Delivery, the certificates for all physically tendered
outstanding notes, in proper form for transfer, or a book-entry
confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the exchange agent. The Notice of Guaranteed Delivery may be delivered by
hand, or transmitted by facsimile or mail to the exchange agent and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery; and
(3) the certificates (or book-entry confirmation) representing all
tendered outstanding notes, in proper form for transfer, together with a
properly completed and duly executed Letter of Transmittal, with any
required signature guarantees and any other documents required by the
Letter of Transmittal, are received by the exchange agent within three New
York Stock Exchange trading days after the date of execution of the Notice
of Guaranteed Delivery.
Determination of Validity
All questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tendered outstanding notes
will be determined by Global, in its sole discretion, which determination shall
be final and binding on all parties. Global reserves the absolute right, in its
sole and absolute discretion, to reject any and all tenders it determines not
to be in proper form or the acceptance for exchange of which may, in the view
of counsel to Global, be unlawful. Global also reserves the absolute right,
subject to applicable law, to waive any of the conditions of the exchange offer
as set forth under "--Conditions to the Exchange Offer" or any defect or
irregularity in any tender of outstanding notes of any particular holder
whether or not similar defects or irregularities are waived in the case of
other holders.
Global's interpretation of the terms and conditions of the exchange offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding on all parties. No tender of outstanding notes will be deemed
to have been validly made until all defects or irregularities with respect to
such tender have been cured or waived. None of Global, any affiliates of
Global, the exchange agent or any other person shall be
21
<PAGE>
under any duty to give any notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Resales of Exchange Notes
Based on interpretations by the staff of the SEC, as set forth in no-action
letters issued to third parties unrelated to Global, Global believes that
holders of outstanding notes who exchange their outstanding notes for exchange
notes may offer for resale, resell and otherwise transfer such exchange notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act. This would not apply, however, to any holder that is a
broker-dealer that acquired outstanding notes as a result of market-making
activities or other trading activities or directly from Global for resale under
an available exemption under the Securities Act. Also, resale would only be
permitted for exchange notes that are acquired in the ordinary course of a
holder's business, where such holder has no arrangement or understanding with
any person to participate in the distribution of such exchange notes and such
holder is not an "affiliate" of Global. The staff of the SEC has not considered
the exchange offer in the context of a no-action letter, and there can be no
assurance that the staff of the SEC would make a similar determination with
respect to the exchange offer. Each broker-dealer that receives exchange notes
for its own account in exchange for outstanding notes under the exchange offer,
where such outstanding notes were acquired by such broker-dealer as a result of
market-making or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such exchange notes. See
"Plan of Distribution."
Withdrawal Rights
Except as otherwise provided herein, tenders of outstanding notes may be
withdrawn at any time prior to the expiration date of the exchange offer. In
order for a withdrawal to be effective, such withdrawal must be in writing and
timely received by the exchange agent at its address set forth under "--
Exchange Agent" prior to the expiration date. Any such notice of withdrawal
must specify the name of the person who tendered the outstanding notes to be
withdrawn, the principal amount of outstanding notes to be withdrawn, and (if
certificates for such outstanding notes have been tendered) the name of the
registered holder of the outstanding notes as set forth on the outstanding
notes, if different from that of the person who tendered such outstanding
notes. If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, the notice of withdrawal must specify the
serial numbers on the particular certificates for the outstanding notes to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, except in the case of outstanding notes tendered for
the account of an Eligible Institution. If outstanding notes have been tendered
pursuant to the procedures for book-entry transfer set forth in "--Procedures
for Tendering Outstanding Notes," the notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawal of
outstanding notes and must otherwise comply with the procedures of DTC.
Withdrawals of tenders of outstanding notes may not be rescinded. Outstanding
notes properly withdrawn will not be deemed validly tendered for purposes of
the exchange offer, but may be retendered at any subsequent time prior to the
expiration date of the exchange offer by following any of the procedures
described above under "--Procedures for Tendering Outstanding Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by Global, in its sole
discretion, which determination shall be final and binding on all parties. None
of Global, any affiliates of Global, the exchange agent or any other person
shall be under any duty to give any notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure
to give any such notification. Any outstanding notes which have been tendered
but which are withdrawn will be returned to the holder promptly after
withdrawal.
Interest on the Exchange Notes
Interest on the exchange notes will be payable every six months on February
15 and August 15 of each year at a rate of 10 3/4% per annum, commencing August
15, 1999. The exchange notes will mature on February 15, 2007.
22
<PAGE>
Conditions to the Exchange Offer
If any of the following conditions has occurred or exists or has not been
satisfied prior to the expiration date, Global will not be required to accept
for exchange any outstanding notes and will not be required to issue exchange
notes in exchange for any outstanding notes. In addition, Global may, at any
time and from time to time, terminate or amend the exchange offer, whether or
not any outstanding notes have already been accepted for exchange, or may waive
any conditions to or amend the exchange offer.
. A change in the current interpretation by the staff of the SEC which
permits resales of exchange notes as described above under "--Resales of
Exchange Notes";
. The institution or threat of an action or proceeding in any court or by
or before any governmental agency or body with respect to the exchange
offer which, in Global's judgment, would reasonably be expected to
impair the ability of Global to proceed with the exchange offer;
. The adoption or enactment of any law, statute, rule or regulation which,
in Global's judgment, would reasonably be expected to impair the ability
of Global to proceed with the exchange offer;
. The issuance of a stop order by the SEC or any state securities
authority suspending the effectiveness of the registration statement
relating to the exchange offer, or proceedings for that purpose;
. Failure to obtain any governmental approval that Global considers
necessary for the consummation of the exchange offer as contemplated
hereby; or
. Any change or development involving a prospective change in the business
or financial affairs of Global which Global thinks might materially
impair its ability to proceed with the exchange offer.
If Global determines in its sole and absolute discretion that any of the
foregoing events or conditions has occurred or exists or has not been satisfied
at any time prior to the expiration date, Global may, subject to applicable
law, terminate the exchange offer, whether or not any outstanding notes have
already been accepted for exchange, or may waive any such condition or
otherwise amend the terms of the exchange offer in any respect. If such waiver
or amendment constitutes a material change to the exchange offer, Global will
promptly disclose such waiver or amendment by means of a prospectus supplement
that will be distributed to the registered holders of the outstanding notes. In
this case, Global will extend the exchange offer to the extent required by Rule
14e-1 under the Exchange Act.
Certain United States Federal Income Tax Consequences
The exchange of the outstanding notes for the exchange notes will not be a
taxable exchange for federal income tax purposes, and holders of outstanding
notes should not recognize any taxable gain or loss or any interest income as a
result of such exchange.
Exchange Agent
United States Trust Company of New York has been appointed as the exchange
agent for the exchange offer. Delivery of the Letters of Transmittal and any
other required documents, questions, requests for assistance, and requests for
additional copies of this prospectus or of the Letter of Transmittal should be
directed to the exchange agent as follows:
By Mail
United States Trust Company of New York
P.O. Box 843
Cooper Station
New York, New York 10276
Attention: Corporate Trust Services
By Hand before 4:30 p.m.
United States Trust Company of New York
111 Broadway
New York, New York 10006
Attention: Lower Level Corporate Trust Window
23
<PAGE>
By Overnight Courier and By Hand after 4:30 p.m.
United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
By Facsimile
(212) 780-0592
Attention: Customer Service
Confirm by telephone: (800) 548-6565
DELIVERY TO OTHER THAN THE ABOVE ADDRESSES OR FACSIMILE NUMBER WILL NOT
CONSTITUTE A VALID DELIVERY.
Fees and Expenses
The expenses of soliciting tenders will be borne by Global. The principal
solicitation is being made by mail. Additional solicitation may be made
personally or by telephone or other means by officers, directors or employees
of Global.
Global has not retained any dealer-manager or similar agent in connection
with the exchange offer and will not make any payments to brokers, dealers or
others soliciting acceptances of the exchange offer. Global has agreed to pay
the exchange agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
Global will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this prospectus and related documents to the beneficial
owners of outstanding notes, and in handling or tendering for their customers.
Holders who tender their outstanding notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that if exchange
notes are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the outstanding notes tendered, or if a
transfer tax is imposed for any reason other than the exchange of outstanding
notes in connection with the exchange offer, then the amount of any such
transfer tax (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such transfer tax or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer tax will be billed directly to such
tendering holder.
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<PAGE>
USE OF PROCEEDS
We are making the exchange offer to satisfy our obligation under the
registration rights agreement we entered into with the initial purchasers when
we first issued the outstanding notes. We will not receive any cash proceeds
from the issuance of the exchange notes. In consideration for issuing the
exchange notes, we will receive an equal principal amount of outstanding notes.
The outstanding notes surrendered in exchange for the exchange notes will be
retired and canceled. The proceeds from the offering of the outstanding notes
was used to repay a portion of the amount outstanding under our prior senior
credit facility.
CAPITALIZATION
The following table sets forth as of March 31, 1999 the capitalization of
Global (1) on an actual basis and (2) on a pro forma basis to give effect to
Global's acquisition of one company after March 31, 1999. This table should be
read in conjunction with "Summary Consolidated Historical and Pro Forma
Financial Information," "Use of Proceeds," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
As of March 31, 1999
---------------------
Actual Pro Forma
---------- ----------
(in thousands)
<S> <C> <C>
Long-term debt (including current portion):
Senior credit facility.............................. $ 68,000 $ 118,000
Senior subordinated notes........................... 100,000 100,000
Various notes payable............................... 277 277
---------- ----------
Total debt........................................ 168,277 218,277
Total stockholders equity............................. 94,899 99,499
---------- ----------
Total capitalization.............................. $ 263,176 $ 317,776
========== ==========
</TABLE>
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<PAGE>
SELECTED FINANCIAL DATA
The selected financial data as of and for the indicated periods ended March
31, 1995 through March 31, 1999 are derived from our audited consolidated
financial statements. Since the information presented below is only a summary
and does not provide all of the information in our financial statements,
including the related notes, you should read "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements.
<TABLE>
<CAPTION>
Inception
(June 3,
1994)
to
March 31, Fiscal Year Ended March 31,
--------- --------------------------------------
1995 1996 1997 1998 1999
--------- -------- -------- -------- --------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
Equipment and supplies
sales................... $ 6,541 $ 20,561 $ 41,200 $121,316 $218,653
Service and rentals...... 3,735 16,405 22,893 43,059 69,542
-------- -------- -------- -------- --------
Total revenues............ 10,276 36,966 64,093 164,375 288,195
Costs and operating
expenses:
Cost of equipment and
supplies sales.......... 4,193 13,456 27,087 85,972 154,083
Service and rental
costs................... 1,885 8,303 11,467 21,594 34,434
Selling, general and
administrative
expenses................ 4,123 11,687 18,280 38,619 63,133
Intangible asset
amortization............ 329 1,396 1,939 3,076 4,627
-------- -------- -------- -------- --------
Total costs and operating
expenses................. 10,530 34,842 58,773 149,261 256,277
-------- -------- -------- -------- --------
Income (loss) from
operations............... (254) 2,124 5,320 15,114 31,918
Interest expense.......... 375 2,041 3,190 6,713 8,427
-------- -------- -------- -------- --------
Income (loss) before
income taxes and
extraordinary charge..... (629) 83 2,130 8,401 23,491
Income taxes.............. -- 275 1,007 3,948 10,390
-------- -------- -------- -------- --------
Income (loss) before
extraordinary charge..... (629) (192) 1,123 4,453 13,101
Extraordinary charge for
early retirement of
debt..................... -- -- -- -- (1,817)
-------- -------- -------- -------- --------
Net income (loss)......... (629) (192) 1,123 4,453 11,284
Yield adjustment on Class
A common stock(1)........ (190) (1,023) (1,402) (2,442) (901)
-------- -------- -------- -------- --------
Net income (loss) avail-
able to holders of common
stock.................... $ (819) $ (1,215) $ (279) $ 2,011 $ 10,383
======== ======== ======== ======== ========
Basic earnings (loss) per
share.................... $ (0.15) $ (0.15) $ (0.03) $ 0.21 $ 0.63
======== ======== ======== ======== ========
Diluted earnings (loss)
per share................ $ (0.15) $ (0.15) $ (0.03) $ 0.21 $ 0.62
======== ======== ======== ======== ========
Basic weighted average
shares outstanding(2).... 5,331 8,018 8,729 9,805 16,478
======== ======== ======== ======== ========
Diluted weighted average
shares outstanding(2).... 5,331 8,018 8,729 9,805 16,811
======== ======== ======== ======== ========
Other Data:
EBITDA(3)................. $ 498 $ 5,758 $ 9,799 $ 21,806 $ 41,139(4)
Depreciation &
amortization............. 752 3,634 4,479 6,692 9,221
Ratio of earnings to fixed
charges(5)............... -- 1.04x 1.62x 2.13x 3.45x
Balance Sheet Data (at
period end):
Working capital........... $ 2,901 $ 5,038 $ 9,655 $ 24,255 $ 44,922
Total assets.............. 32,229 43,675 68,990 164,342 310,419
Total debt................ 22,836 21,831 36,873 97,485 168,277
Total stockholders'
equity................... 4,344 15,232 19,796 38,248 94,899
</TABLE>
26
<PAGE>
- --------
(1) Reflects adjustments for amounts payable to holders of Global's Class A
common stock upon a sale of Global or its initial public offering. These
amounts equal 8.0% annual yield on the original cost per share of $90.00
and, for 1998, the accretion of the difference between the redemption value
of the Class A common stock and the value allocated to the stock, accreted
from April 1998 to June 1998.
(2) Assumes, for periods prior to the initial public offering, the conversion
of outstanding shares of Class C common stock into common stock.
(3) Represents earnings before interest, taxes, depreciation and amortization
("EBITDA"). Global believes that EBITDA provides useful information
regarding its ability to service debt. Lenders use EBITDA as a criterion in
evaluating companies, and Global's financing arrangements contain covenants
in which EBITDA is used as a measure of financial performance. The EBITDA
measure for Global may not be consistent with similarly titled measures for
other companies. EBITDA should not be considered as an alternative to
operating or net income (as determined in accordance with generally
accepted accounting principles) as an indicator of Global's performance or
to cash flow from operations (as determined in accordance with GAAP) as a
measure of liquidity.
(4) Includes an extraordinary charge of $3.1 million ($1.8 million net of
income taxes) to recognize a $0.2 million pre-payment penalty and the
write-off of deferred financing costs of $2.9 million related to the
retirement of Global's prior credit facility from Jackson National Life
Insurance Company.
(5) For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes plus fixed charges. Fixed charges
consist of interest expense, amortization of debt issuance cost and that
portion of rental expenses representative of the interest factor. For the
period ended March 31, 1995, earnings were insufficient to cover fixed
charges by $0.6 million.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
accompanying financial statements and related notes included elsewhere in this
prospectus. Much of the discussion in this section involves forward-looking
information. Global's actual results may differ significantly from the results
suggested by these forward-looking statements.
Overview
Global was founded in June 1994 with the goal of becoming a leading
consolidator in the highly fragmented office imaging solutions industry. Global
is a rapidly growing provider of a number of office imaging solutions. This
includes the sale and service of automated office equipment such as copiers,
facsimile machines, printers and duplicators, network integration services,
electronic presentation equipment and document imaging management systems ("DIM
systems"). From its founding through June 30, 1999, Global acquired 13 core
companies in the United States, and 21 additional satellite companies that have
been integrated into the core companies. The first acquisition was completed in
August 1994. Management believes that the businesses that have been acquired by
Global and other businesses that Global plans to acquire will benefit from
various Global programs and operating strategies. These benefits include
increased operating efficiencies, the support of experienced and professional
senior management, expansion of the types of office imaging products and
services offered, increased access to capital, and increased emphasis on
financial management. Global's revenues come from two sources: (1) sales of
equipment and supplies and (2) sales of complementary services and equipment
rentals. The growth of equipment revenues and the complementary supplies, parts
and service revenues depends on several factors, including the demand for
equipment, Global's reputation for providing timely and reliable service, and
general economic conditions. Revenues generated from the sale of equipment and
complementary supplies, parts and services are affected 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.
Gross profit as a percentage of revenues varies from period to period
depending on a number of variables. Those variables include the mix of revenues
from equipment, supplies, service and rentals; the mix of revenues among the
markets served by Global; and the mix of revenues of the businesses acquired.
As Global acquires businesses, the percentage of its revenues that come from
sales of equipment and supplies, as opposed to service and rentals, fluctuates
according to whether the businesses acquired are automated office equipment
dealers or are network integrators or electronic presentation systems or DIM
systems dealers. Automated office equipment dealers typically derive a higher
percentage of their revenues from service and rentals, and a lower percentage
from sales of equipment and supplies, than do network integrators, electronic
presentation or DIM systems dealers. Generally, sales of equipment and supplies
have lower gross profit margins than sales of service and rentals. In addition,
equipment sales in the automated office equipment market generally have higher
gross profit margins than equipment sales in the network integration,
electronic presentation systems or DIM systems markets. Management expects that
over time, Global will become more involved in the network integration,
electronic presentation systems and DIM systems markets, as these markets are
growing faster than the automated office equipment market. Therefore, over time
a larger percentage of Global's revenues and gross profits may be derived from
sales that have lower gross profit margins than Global's current gross profit
margins.
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. Global depreciates its rental
equipment primarily over a three-year period on a straight-line basis.
Recent Developments
On July 20, 1999, Global acquired Daniel Communications, Inc., an electronic
presentation dealer with annual revenues of approximately $5.6 million that
serves Alabama, the Florida Panhandle, and parts of
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<PAGE>
Mississippi. This acquisition has not been included in any pro forma financial
information contained in this prospectus. Global is also continually evaluating
and having discussions with other acquisition candidates as part of its growth
strategy.
Results of Operations
The following table sets forth, for the periods indicated, information
derived from the consolidated statements of operations of Global expressed as a
percentage of total revenues.
<TABLE>
<CAPTION>
Fiscal Year Ended
March 31,
---------------------
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Revenues:
Equipment and supplies sales........................... 64.3 % 73.8 % 75.9 %
Service and rentals.................................... 35.7 26.2 24.1
----- ----- -----
Total revenues.......................................... 100.0 100.0 100.0
Cost of goods sold...................................... 60.2 65.4 65.4
----- ----- -----
Gross profit............................................ 39.8 34.6 34.6
Selling, general, and administrative expenses........... 28.5 23.5 21.9
Intangible asset amortization........................... 3.0 1.9 1.6
----- ----- -----
Income from operations.................................. 8.3 9.2 11.1
Interest expense........................................ 5.0 4.1 3.0
----- ----- -----
Income before income taxes and extraordinary charge..... 3.3 5.1 8.1
Income taxes............................................ 1.5 2.4 3.6
----- ----- -----
Income before extraordinary charge...................... 1.8 2.7 4.5
Extraordinary charge for early retirement of debt....... -- -- (.6)
----- ----- -----
Net income.............................................. 1.8 % 2.7 % 3.9 %
===== ===== =====
</TABLE>
Fiscal Year Ended March 31, 1999 Compared to Fiscal Year Ended March 31, 1998
Revenues
Total revenues for the fiscal year ended March 31, 1999, were $288.2 million,
an increase of 75.3% over the same period in 1998. The majority of the revenue
growth was due to the acquisition of businesses during 1999 and 1998, with the
remainder coming from internal growth.
Sales of equipment and supplies increased to $218.7 million in fiscal year
1999, an increase of 80.2% over 1998. This represented 75.9% of total revenues
compared to 73.8% for the prior year. Throughout 1999 and 1998, Global acquired
businesses that added proportionately more equipment sales than Global had in
its existing businesses.
Service and rental revenues for the fiscal year ended March 31, 1999
increased to $69.5 million, an increase of 61.5% from the same period the prior
year. This represented 24.1% of total revenues for the fiscal year ended 1999
compared to 26.2% for the same period in 1998.
Gross Profit
Gross profit of $99.7 million for the fiscal year ended March 31, 1999
reflected a 75.5% increase over the same period in 1998. Expressed as a percent
of total revenue, gross profit was 34.6% for fiscal year 1999 compared to 34.6%
for fiscal year 1998. Office equipment dealers typically derive a higher
percentage of total revenues from service and rentals, while network
integration and electronic presentation systems and DIM
29
<PAGE>
systems dealers derive a higher percentage of total revenues from sales of
equipment and supplies. The equipment component of sales of the businesses
acquired in 1999 and 1998 accounted for a larger portion of total revenues than
Global'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 50.5% for the fiscal year ended
March 31, 1999 and 49.9% for the fiscal year ended March 31, 1998.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 63.5% to $63.1 million
for the fiscal year ended March 31, 1999. This amount was 21.9% of total
revenues compared to 23.5% of total revenues for the same period in 1998. These
expenses increased principally due to the acquisitions Global made in 1999 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 Global's
businesses, and revenues increasing by 75.3% without a proportionate increase
in selling, general, and administrative expenses.
Intangible Asset Amortization
Intangible asset amortization was $4.6 million for the fiscal year ended
March 31, 1999 compared to $3.1 million for the same period the prior year.
Intangible asset amortization includes the amortization of goodwill and
noncompete agreements from acquisitions.
Income From Operations
Income from operations was $31.9 million, or 11.1% of total revenues for the
fiscal year ended March 31, 1999, which was a 111.2% increase over the same
period in 1998.
Interest Expense
Interest expense was $8.4 million for the fiscal year ended March 31, 1999,
an increase of 25.5% from the same period in 1998. The increase was primarily
due to the increase in Global's borrowings. The proceeds from the additional
borrowings were used to fund the cost of the businesses acquired in 1999 and
1998. Interest expense includes the amortization of financing fees incurred in
connection with Global's current credit facility with First Union and the prior
credit facility with Jackson National Life Insurance Company.
Income Taxes
The provision for income taxes was $10.4 million for the fiscal year ended
March 31, 1999 compared to $3.9 million for the same period in 1998. The
increase in income taxes was primarily due to increased pre-tax income because
of businesses Global acquired during 1999 and 1998. The effective income tax
rate decreased from 47.0% for the fiscal year ended March 31, 1998 to 44.2% for
the same period in 1999. The effective income tax rate for 1999 and 1998 was
higher than the federal statutory rates of 35.0% and 34.0%, respectively, plus
state and local taxes, primarily due to non-deductible goodwill amortization
relating to the businesses acquired during the fiscal years ended March 31,
1999 and March 31, 1998.
Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997
Revenues
Total revenues for the fiscal year ended March 31, 1998, were $164.4 million,
an increase of 156.5% over the same period in 1997. The majority of the revenue
growth was due to the acquisition of businesses during 1998 and 1997, with the
remainder coming from internal growth.
30
<PAGE>
Sales of equipment and supplies increased to $121.3 million in fiscal year
1998, an increase of 194.5% over 1997. This represented 73.8% of total revenues
compared to 64.3% for the prior year. Throughout 1998 and 1997, Global acquired
businesses that added more equipment sales than Global had in its existing
businesses.
Service and rental revenues for the fiscal year ended March 31, 1998
increased to $43.1 million, an increase of 88.1% from the same period the prior
year. This represented 26.2% of total revenues for the fiscal year ended 1998
compared to 35.7% for the same period in 1997.
Gross Profit
Gross profit of $56.8 million for the fiscal year ended March 31, 1998
reflected a 122.4% increase over the same period in 1997. Expressed as a
percent of total revenue, gross profit was 34.6% for fiscal year 1998 compared
to 39.8% for fiscal year 1997. Office equipment dealers typically receive a
higher percentage of total revenues from service and rentals, while network
integration and electronic presentation systems and DIM systems dealers derive
a higher percentage of total revenues from sales of equipment and supplies. The
equipment component of sales of the businesses acquired in 1998 and 1997
accounted for a larger portion of total revenues than Global's existing
businesses. Sales of equipment and supplies generally generate lower gross
profit margins than service and rental revenues. Combined service and rental
gross profit margins were 49.9% for the fiscal year ended March 31, 1998 and
for the fiscal year ended March 31, 1997.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 111.3% to $38.6
million for the fiscal year ended March 31, 1998. This amount was 23.5% of
total revenues compared to 28.5% of total revenues for the same period in 1997.
These expenses increased principally due to the acquisitions Global made in
1998 and 1997. The decline in expenses as a percentage of revenues was the
result of the acquisition of profitable businesses, the change in the
composition of Global's businesses, and revenues increasing by 156.5% without a
proportionate increase in selling, general, and administrative expenses.
Intangible Asset Amortization
Intangible asset amortization was $3.1 million for the fiscal year ended
March 31, 1998 compared to $1.9 million for the same period the prior year.
Intangible asset amortization includes the amortization of goodwill and non-
compete agreements from acquisitions.
Income From Operations
Income from operations was $15.1 million, or 9.2% of total revenues for the
fiscal year ended March 31, 1998, which was a 184.1% increase over the same
period in 1997.
Interest Expense
Interest expense was $6.7 million for the fiscal year ended March 31, 1998,
an increase of 110.4% from the same period in 1997. The increase was primarily
due to the increase in Global's borrowings. The proceeds from the additional
borrowings were used to fund the cost of the businesses acquired in 1998 and
1997. Interest expense includes the amortization of financing fees incurred in
connection with Global's current credit facility with First Union and the prior
credit facility with Jackson National Life Insurance Company.
Income Taxes
The provision for income taxes was $3.9 million for the fiscal year ended
March 31, 1998 compared to $1.0 million for the same period in 1997. The
increase in income taxes was primarily due to increased pre-tax
31
<PAGE>
income because of businesses Global acquired during 1998 and 1997. The
effective income tax rate decreased from 47.3% for the fiscal year ended March
31, 1997 to 47.0% for the same period in 1998. The effective income tax rate
for 1998 and 1997 was higher than the federal statutory rate of 34.0% plus
state and local taxes, primarily due to non-deductible goodwill amortization
relating to the businesses acquired during the fiscal years ended March 31,
1998 and March 31, 1997.
Quarterly Results of Operations
The following table presents selected consolidated financial information for
each of Global's six fiscal quarters in the period ended March 31, 1999. The
information has been derived from unaudited consolidated financial statements
that in the opinion of management reflect all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of such quarterly
information.
<TABLE>
<CAPTION>
Quarters Ended
---------------------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1997 1998 1998 1998 1998 1999
-------- -------- -------- --------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equipment and supplies
sales................. $34,790 $40,801 $43,334 $51,958 $58,028 $65,333
Service and rentals.... 11,925 13,544 14,868 15,048 17,625 22,001
------- ------- ------- ------- ------- -------
Total revenues.......... 46,715 54,345 58,202 67,006 75,653 87,334
Costs and operating
expenses:
Cost of equipment and
supplies sales........ 24,851 28,485 30,887 37,922 40,616 44,658
Service and rental
costs................. 5,973 7,101 7,006 7,549 8,940 10,939
Selling, general, and
administrative
expenses.............. 10,856 12,802 13,289 14,004 16,368 19,472
Intangible asset
amortization.......... 843 917 901 943 1,195 1,588
------- ------- ------- ------- ------- -------
Total costs and
operating expenses..... 42,523 49,305 52,083 60,418 67,119 76,657
------- ------- ------- ------- ------- -------
Income from operations.. 4,192 5,040 6,119 6,588 8,534 10,677
Interest expense........ 1,980 2,178 2,230 1,456 1,757 2,984
------- ------- ------- ------- ------- -------
Income before income
taxes and extraordinary
item................... 2,212 2,862 3,889 5,132 6,777 7,693
Income taxes............ 1,099 1,198 1,801 2,295 2,948 3,346
------- ------- ------- ------- ------- -------
Income before
extraordinary charge... 1,113 1,664 2,088 2,837 3,829 4,347
Extraordinary charge for
early retirement of
debt................... -- -- (684) (1,133) -- --
------- ------- ------- ------- ------- -------
Net income.............. $ 1,113 $ 1,664 $ 1,404 $ 1,704 $ 3,829 $ 4,347
------- ------- ------- ------- ------- -------
Yield adjustment to
Class A common
stock(1)............... (533) (1,093) (901) -- -- --
------- ------- ------- ------- ------- -------
Net income available to
holders of common
stock.................. $ 580 $ 571 $ 503 $ 1,704 $ 3,829 $ 4,347
======= ======= ======= ======= ======= =======
Basic earnings per
share.................. $ 0.06 $ 0.06 $ 0.04 $ 0.10 $ 0.21 $ 0.23
======= ======= ======= ======= ======= =======
Diluted earnings per
share.................. $ 0.06 $ 0.06 $ 0.04 $ 0.10 $ 0.21 $ 0.23
======= ======= ======= ======= ======= =======
Basic weighted average
number of shares....... 9,959 10,404 11,527 17,642 18,054 18,682
======= ======= ======= ======= ======= =======
Diluted weighted average
number of shares....... 9,959 10,404 12,511 17,700 18,176 18,851
======= ======= ======= ======= ======= =======
</TABLE>
- --------
(1) Reflects adjustments for amounts payable upon a sale of the Company or an
initial public offering to holders of Class A Common Stock equivalent to an
8.0% annual yield on the original per share amount of $90, and for 1998,
the accretion of the difference between the redemption value of the Class A
Common Stock and the value allocated to the stock, accreted from January
1998 to the date of the initial public offering.
32
<PAGE>
The following table sets forth selected consolidated financial information as
a percentage of total revenues for each of Global's last six fiscal quarters.
<TABLE>
<CAPTION>
Quarters Ended
------------------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1997 1998 1998 1998 1998 1999
-------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Equipment and supplies
sales................. 74.5% 75.1% 74.5% 77.5% 76.7% 74.8%
Service and rentals.... 25.5 24.9 25.5 22.5 23.3 25.2
----- ----- ----- ----- ----- -----
Total revenues.......... 100.0 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== ===== =====
Costs and operating
expenses:
Cost of equipment and
supplies sales........ 53.2 52.4 53.1 56.6 53.7 51.2
Service and rental
costs................. 12.8 13.1 12.1 11.3 11.8 12.5
Selling, general, and
administrative
expenses.............. 23.2 23.5 22.8 20.9 21.6 22.3
Intangible asset
amortization.......... 1.8 1.7 1.5 1.4 1.6 1.8
----- ----- ----- ----- ----- -----
Total costs and oper-
ating expenses....... 91.0 90.7 89.5 90.2 88.7 87.8
===== ===== ===== ===== ===== =====
Income from operations.. 9.0 9.3 10.5 9.8 11.3 12.2
Interest expense........ 4.2 4.0 3.8 2.2 2.3 3.4
----- ----- ----- ----- ----- -----
Income before income
taxes and extraordinary
item................... 4.8 5.3 6.7 7.6 9.0 8.8
Income taxes............ 2.4 2.2 3.1 3.4 3.9 3.8
----- ----- ----- ----- ----- -----
Income before
extraordinary charge... 2.4 3.1 3.6 4.2 5.1 5.0
Extraordinary charge for
early retirement of
debt................... -- -- (1.2) (1.7) -- --
----- ----- ----- ----- ----- -----
Net income.............. 2.4% 3.1% 2.4% 2.5% 5.1% 5.0%
===== ===== ===== ===== ===== =====
</TABLE>
Liquidity and Capital Resources
Historically, Global has financed its operations primarily through internal
cash flow, sales of stock and bank financing, including the financing
facilities described below. These sources of funds have been used to fund
Global's growth both internally and through acquisitions. Global is pursuing an
acquisition strategy and expects to acquire more businesses. As Global
continues to acquire more businesses it is likely that Global will incur
additional debt and seek additional equity capital.
As of June 30, 1999, Global's senior credit facilities with First Union
National Bank and a syndicate of lenders consist of a $150.0 million five-year
senior secured revolving line of credit (including access to a $15.0 million
swingline line of credit), a $25.0 million five-year senior term loan, and a
$75.0 million seven-year senior term loan.
The revolving line of credit and the five-year term loan bear interest at
rates ranging from 2.00% to 3.00% over LIBOR or from .75% to 1.75% over a base
rate related to the higher of First Union's prime rate or the federal funds
rate plus 50 basis points and varying according to Global's ratio of its total
funded debt to earnings before interest, taxes, depreciation and amortization.
The seven-year term loan bears interest at a rate equal to 3.25% over LIBOR or
2.00% over a base rate equal to the higher of First Union's prime rate or the
federal funds rate plus 50 basis points. The senior credit facilities provide
for an unused commitment fee payable to the lenders and certain other fees
payable by Global and its Material Subsidiaries (the "borrowers"). Amounts
borrowed under the revolving line of credit may be repaid and reborrowed over
the life of the revolving line of credit, with a final maturity date of June
23, 2004, unless terminated earlier pursuant to the terms of the senior credit
facilities. The terms of the senior credit facilities require strict compliance
with numerous affirmative, negative and financial covenants. Amounts borrowed
under the senior credit facilities may be used to fund working capital and
general corporate purposes, including acquisitions, subject to First Union
National Bank's approval in the case of certain acquisitions, including
acquisitions with a cash purchase price of over $25.0 million or an aggregate
price (in cash, stock or other consideration) of over $50.0 million. See
"Description of Senior Credit Facilities."
33
<PAGE>
In March 1999, Global issued $100.0 million in aggregate principal amount of
Senior Subordinated Notes due March 8, 2007. The net proceeds of approximately
$96.0 million were used to reduce Global's credit facility from First Union.
The notes bear interest at 10.75%, payable semiannually. The notes may be
redeemed at Global's option beginning on February 15, 2003 at the following
redemption prices, expressed as percentages of the principal amount:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.............................. 105.375%
2004.............................. 102.688%
2005 and thereafter............... 100.000%
</TABLE>
At any time on or prior to February 15, 2002, Global may, at its option, use
the net cash proceeds from a public equity offering to redeem in the aggregate
up to 35% of the aggregate principal amount of the notes at a redemption price
equal to 110.75% of the principal amount, provided that at least 65% of the
aggregate principal amount of the notes originally issued remains outstanding
and the redemption occurs within 60 days after the consummation of the public
equity offering. The notes are guaranteed by Global's current subsidiaries and
will be guaranteed by all of Global's future subsidiaries, except certain
financing subsidiaries, on an unsecured senior subordinated basis. The terms of
the notes require strict compliance with numerous affirmative, negative and
financial covenants. Under the terms of the notes, Global is prohibited from
paying cash dividends. See "Description of the Exchange Notes."
Under the terms of three of its acquisition agreements, Global may be
required to make cash payments of up to an aggregate of $18.6 million and
payments in common stock valued at up to $5.0 million over the next five years
to certain former owners of businesses it has acquired based on the
profitability of those businesses during these time periods. Shares of common
stock to be issued under these provisions will be valued based on the market
value of Global's common stock prior to issuance.
For the fiscal year ended March 31, 1999 the net cash provided by operations
was $12.5 million and for the fiscal year ended March 31, 1998 the net cash
provided by operations was $5.8 million. For the fiscal years ended March 31,
1999 and 1998, Global's net cash used in investing activities was $108.5
million and $71.9 million, respectively, primarily for the purchase of
businesses. For the fiscal years ended March 31, 1999 and 1998, Global's net
cash provided by financing activities was $96.7 million and $69.6 million,
respectively. Net cash provided by financing activities consists of equity
capital provided by the initial public offering, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., Jackson National Life Insurance Company, and certain members of
management of Global and its acquired businesses, and net borrowings.
Year 2000 Issues
With the exception of historical information such as Global'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.
Global's success in addressing year 2000 issues, and the impact of year 2000
issues on Global's business, results of operations or financial condition,
could differ materially from the description that follows. One reason Global's
evaluation of and progress in addressing Year 2000 risks may differ from the
following description is that businesses Global acquires in the future may not
be as prepared for Year 2000 issues as Global and its current subsidiaries.
Other factors that could cause or contribute to such differences include, but
are not limited to, those discussed below.
In 1998, Global began formulating a plan to address risks associated with the
"year 2000 issue," which relates to the possible inability of computer systems
and equipment to function properly as a result of their inability to recognize
or process dates occurring after 1999. Global's year 2000 plan addresses the
following areas: (1) information technology systems, or IT systems, used in
Global's internal operations, including accounting, data processing and
telephone systems, (2) non-IT systems used in Global's internal operations,
including alarm systems and fax machines, (3) the state and impact of year 2000
readiness of products sold by
34
<PAGE>
Global (which Global primarily purchases from third party vendors) and (4)
certain operational systems of Global's critical suppliers and customers that
may affect Global. As discussed below, Global's year 2000 plan involves
identifying and assessing the potential year 2000 risks faced by Global;
remediating any year 2000 noncompliance identified by Global's assessment;
testing the year 2000 readiness of Global's systems; and planning for year 2000
contingencies.
State of Year 2000 Readiness
Global is reviewing its overall exposure to year 2000 risks. Global's plan to
address the impact of the year 2000 issue on its IT and non-IT systems involves
(1) making an inventory of potentially date sensitive devices and software, (2)
assessing the systems affected by these devices and software, (3) remediating
or replacing these systems as necessary and (4) testing its systems to confirm
year 2000 readiness. Both IT and non-IT systems contain embedded technology,
which complicates Global's year 2000 assessment and remediation efforts.
Global estimates that it has completed approximately 80% (in terms of time
spent) of the inventory and assessment phases of this process for its existing
companies. Global expects to complete these phases for its existing companies
by September 1999. Due to Global's acquisition activity, Global expects to be
continually modifying its year 2000 remediation efforts to address the year
2000 readiness of businesses Global may acquire throughout the coming year and
beyond January 1, 2000. Although Global has a preliminary indication of the
scale of affected systems and software in its existing companies, future
acquisitions could present additional year 2000 problems. Global began
remediating its systems in November 1998 and expects to complete this phase by
October 1999. Global began the testing phase of its year 2000 plan in January
1999 and expects to complete testing of existing systems by November 1999. The
expected timing of these phases is based on management's best estimates, which
were derived using numerous assumptions regarding future events, including the
results of Global'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
Global's ability to identify, assess, remediate and test all relevant systems
and technology embedded in those systems.
To the extent that Global has completed its year 2000 assessment of its IT
systems, Global's assessment has not revealed substantial year 2000
noncompliance. Specifically, for most of Global's functions, Global utilizes
Optimizing Management Decisions ("OMD") software. The OMD Corporation has
released its year 2000 compliant software and Global began testing it in April
1999. Global uses nationally known software providers for both its general
accounting and industry-specific systems and has been assured by the
manufacturers or vendors of such products that these applications will be year
2000 compliant by July 1999. Global's assessment of its non-IT systems is still
at a preliminary stage.
The risk to Global'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. Global has analyzed its
existing product line and identified potential year 2000 issues with the
products Global 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. Global is not aware of any potentially major
disruptions in connection with the equipment and services currently or
previously sold. Global 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 Global's
suppliers and customers.
Global derives a majority of its revenues from the sale of equipment and from
service and supply contracts for such equipment. Accordingly, Global'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 Global's
suppliers to provide products timely and at competitive prices, Global's
business, results of operations and financial condition could be materially and
adversely affected. Global does not rely upon any one customer for the majority
of its sales,
35
<PAGE>
or one product vendor for the bulk of its purchases. No individual supplier
represents more than 14% of equipment purchases and Global's top ten customers
combined represent less than 8% of Global's total sales for the twelve month
period ending March 31, 1999. Global believes that its large customer base will
minimize the effect on Global of any year 2000 business disruption experienced
by any of its customers.
Costs to Address Year 2000 Issue
Global has not incurred material historical costs associated with year 2000
remediation. Global operates most of its systems on third party software that
it believes or has been informed is already year 2000 compliant. Global
estimates its costs of remediation will be approximately $500,000 (not
including costs to remediate systems of businesses that may be acquired in the
future) and does not expect these costs to be material in any year to Global'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.
Global's estimate of remediation costs is based on numerous assumptions
regarding future events, including the results of Global'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 Global, Global 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.
Sales: Should Global's telecommunications system fail as a result of year
2000 issues, Global's sales could be adversely affected. Global is currently in
the process of confirming year 2000 compliance by its third party
telecommunications providers. Global believes its sales division could remain
fully operational if it experienced a disruption in telecommunications service.
Although Global expects confirmation of year 2000 compliance from its third
party telecommunications providers, Global is preparing a contingency plan to
continue sales operations without telecommunication support.
Billing: Global is dependent upon computerized billing systems. A breakdown
in IT billing systems could result in delayed or missed customer payments. By
the end of September 1999, Global 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 Global anticipates a possible problem.
Service: Global utilizes a combination of manual and computerized service
dispatch systems. A disruption in Global's computerized dispatch system could
result in delayed customer service. By the end of September 1999, Global
expects to have completed the inventory and assessment of all potentially
affected existing 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: Global 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.
Global is making every effort to ensure its suppliers and delivery channels are
adequately prepared to transition to the year 2000. If Global 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 Global's accounting
information systems are computerized and susceptible to year 2000 problems.
Failure to convert all affected systems could result in
36
<PAGE>
delayed or lost financial data. Global is evaluating these systems and expects
to make remediations to affected systems by the second quarter of 1999.
Liability or Litigation Relating to Year 2000 Issues
In addition to the risk of failure of a function critical to Global's
operations, Global 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 Global and uncertainty relating to
the meaning of the term "year 2000 compliant" could result in Global 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 Global sells depends on
the implementation and success of efforts by the suppliers from whom Global
purchases these products in making them year 2000 compliant. Global cannot
currently estimate the risks it faces from such potential liability or
litigation.
Although Global's year 2000 efforts and the contingency plans described above
are intended to minimize the adverse effects of the year 2000 issue on Global's
business and operations, the actual effects of the issue and the success or
failure of Global's efforts described above cannot be known until the year
2000. Failure by Global, major suppliers of computer systems and equipment used
in Global's operations, and major vendors and customers of products or services
sold by Global to address adequately their respective year 2000 issues in a
timely manner could have a material adverse effect on Global's business,
results of operations and financial condition.
Contingency Plans
Global 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 Global's identification and evaluation of the risks it faces
progresses, Global will develop plans to handle these scenarios. Global expects
to continually revise its contingency planning as it receives information
regarding third party year 2000 readiness, and as it integrates future
acquisitions.
37
<PAGE>
BUSINESS
Global Imaging Systems is a consolidator in the highly fragmented office
imaging solutions industry. Global provides a broad line of office imaging
solutions, including the sale and service of automated office equipment,
network integration services, electronic presentation systems and document
imaging management systems. Since its founding in June 1994, Global has
acquired 34 businesses in the United States. Thirteen of these businesses are
"core" companies, where Global concentrates administrative functions within a
region. The remaining 21 acquired businesses are "satellite" companies, which
means their administrative functions have been transferred to, and their
operations have been integrated into, a core company. Global's operating
philosophy is to "think globally, act locally." Under its decentralized
management system, Global typically continues to operate its acquired companies
under their pre-acquisition names and management in order to preserve client
relationships and motivate management.
Global believes its emphasis on superior customer service and the contractual
nature of its service business can generate significant recurring revenue.
Senior management largely attributes Global's solid historical operating
performance to: (1) employing a strict performance-based benchmarking model,
(2) pursuing a disciplined acquisition strategy and (3) integrating
acquisitions as they are made. For the year ended March 31, 1999, Global had
pro forma revenues of $427.4 million and pro forma EBITDA of $61.1 million.
Global seeks to become the provider of choice for all of its customers'
office imaging needs by offering a full range of products and services and
superior customer service. While Global's clientele includes large, Fortune 500
companies, its growth has been, and is expected to be, largely driven by
serving middle market businesses. Global sells and services a variety of office
imaging solutions, including copiers, facsimile machines, printers, LCD
projectors, overhead projectors, video teleconferencing equipment, optical
scanning equipment, micrographics equipment, and the design and installation of
equipment related to computer networks. In addition, Global offers a variety of
ongoing services, including supply and service contracts, network management
contracts, technical support and training.
Global's strategic objective is to continue to grow profitably in existing
markets and new markets through internal growth and by acquiring additional
businesses. Global's strategy for stimulating internal growth is to offer new
products and services, to take advantage of cross-selling opportunities, and to
market aggressively to existing and new customers. Global enters new geographic
markets by acquiring additional core companies and expanding its core markets
through acquisitions of additional satellite companies.
Currently, Global's thirteen core companies operate in 87 locations in 20
states, plus the District of Columbia. Global targets for acquisition as core
companies businesses that are leading competitors in the markets they serve.
Global's goal is to acquire core and satellite companies throughout the United
States and Canada.
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<PAGE>
Certain information regarding Global's core and satellite companies,
including pro forma revenues for the fiscal year ended March 31, 1999, is
summarized in the following table. The pro forma revenues in this table give
effect to acquisitions made during the twelve months ended March 31, 1999 and
one acquisition made in June 1999 as if such acquisitions had occurred on April
1, 1998.
<TABLE>
<CAPTION>
Pro Forma No. of Years in Date
Core Company Region Revenues Satellites Business Acquired
(in millions)
<S> <C> <C> <C> <C> <C>
Global Operations Texas,
L.P. Texas $34.7 2 14 Jul. 1994
Conway Office Products Northeast 45.2 4 22 Jan. 1995
Berney Southeast 16.3 3 34 Feb. 1995
Amcom Office Systems Western Pennsylvania 14.0 2 21 Feb. 1996
Copy Service & Supply Southeast 7.6 -- 15 Jul. 1996
Southern Business
Communications Southeast 48.2 3 18 Nov. 1996
Electronic Systems Mid-Atlantic 76.9 2 18 Jul. 1997
Quality Business Systems Pacific Northwest 22.6 3 13 Sep. 1997
Connecticut Business
Systems Northeast 22.4 1 10 Jan. 1998
Carr Business Systems Northeast 21.3 -- 52 Sep. 1998
Distinctive Business
Products Chicago Metro Area 18.0 -- 22 Dec. 1998
Capitol Office Solutions Mid-Atlantic 29.3 -- 17 Dec. 1998
Lewan & Associates Colorado/Southern Wyoming 73.0 -- 27 Jun. 1999
</TABLE>
The Industry
The office imaging solutions industry is highly fragmented. Global estimates
that there are approximately 3,700 dealer and distributor outlets in the United
States primarily engaged in the sale of copiers and other automated office
equipment and related service, parts, and supplies, and that approximately
3,100 of these dealer outlets are unaffiliated. Global believes the current and
projected sizes of the office imaging markets Global serves are as set forth in
the following table:
<TABLE>
<CAPTION>
Domestic Sales
-----------------------
(in billions)
1997 2002
Market (estimated) (projected)
- ------ ----------- -----------
<S> <C> <C>
Analog black and white copier and related service and
supplies............................................. $21.1 $17.1
Digital black and white copier and related service and
supplies............................................. 3.4 16.7
Digital color copier and related service and
supplies............................................. 1.9 5.9
Network consulting and integration services........... 6.5 13.9
Network management services........................... 1.8 4.2
Electronic presentation systems....................... 1.0 1.8
Document technology systems........................... 6.4 18.6
----- -----
Total............................................... $42.1 $78.2
===== =====
</TABLE>
Consolidation
Independent distributors and service providers are consolidating throughout
the office imaging solutions industry. A number of factors are driving this
consolidation, including the following:
Technological Change. The technology of office imaging solutions is changing
rapidly. Digital technology, which allows images to be captured, transmitted,
reproduced and stored over wide geographic areas through networks of personal
computers, has in recent years been incorporated into copiers, electronic
presentation equipment and document imaging management ("DIM") technology. As a
result, copiers, facsimile machines
39
<PAGE>
and printers are gradually converging in function and computers and networks
are becoming an increasingly important component of office imaging systems.
This has led larger companies to demand more centralized network integration
services over a broader geographic area. The rapid pace of technological
change, including the resulting expansion of product offerings and increase in
product support costs, have outpaced the technical, managerial and financial
resources of many smaller distributors and service providers, causing them to
seek larger partners. Further, the blurring of the distinction among office
imaging technologies and the increased role for computers has led dealers
without network integration expertise to partner with companies that have such
expertise.
Dealer Consolidation by Suppliers. The cost of new product development and
fierce competition among equipment manufacturers have led manufacturers to seek
efficiencies. As a result, manufacturers are consolidating their dealer
networks, concentrating their business with a smaller number of dealers that
possess leading service capabilities, wide geographic coverage and sufficient
financial resources.
Distribution Channel Changes. Changes in distribution channels are also
leading to consolidation in the automated office equipment market. Office
superstores and consumer electronics chains now sell lower-end office products
at prices that are forcing smaller dealers out of the market. Smaller dealers
also face difficulty competing in the market for mid- and high-range office
equipment, because they are not well equipped to provide the sophisticated
support services required by businesses that purchase these products.
Typically, office superstores and consumer electronics chains also do not offer
the support services required by purchasers of mid- and high-range office
equipment.
Office Imaging Products and Services
Automated Office Equipment. Dealers in the automated office equipment market
sell and service some or all of the following: black and white copiers (digital
and analog), color copiers, duplicators, facsimile equipment, printers and
multi-function equipment.
Network Integration Services. With the rise of digital technology, customers
increasingly need network integration services as part of their office imaging
solutions. Network integrators provide outsourced management and support to
organizations' computer network infrastructures. As organizations seek to take
advantage of productivity-enhancing computer network technology, they face
complex and costly issues relating to network design, selection, implementation
and management. Among other challenges, organizations must (1) select from an
expanding number of product options with shortening life cycles, (2) integrate
diverse and often incompatible hardware and software environments and (3) deal
with a shortage of qualified information technology service personnel. As a
result, many smaller businesses seek to outsource installation, upgrade and
support and many large organizations seek to outsource network improvement
functions and the evaluation of new products.
Electronic Presentation Systems. Dealers in the electronic presentation
systems market sell and service LCD projectors and panels, smartboards,
overhead projectors and video conferencing equipment. As in the automated
office equipment market, products in this market increasingly use digital
technology, and many customers for these products have designated a single
buyer to address their needs in both markets. Competition among manufacturers
in this market is strong, leading manufacturers to introduce new products
frequently.
DIM Systems. Like automated office equipment and electronic presentation
systems, DIM systems also involve digital technology and are ultimately used by
the same end-users as other types of office imaging equipment. Dealers in this
market sell and service optical disk storage equipment, write once read many
("WORM") disks and CD-ROM optical storage products, as well as micrographic
equipment (microfilm and microfiche). DIM systems capture and store large
volumes of visual data. Key customers for these products include banks,
educational institutions, government institutions, libraries and insurance
companies.
40
<PAGE>
Growth Strategy
Global believes it is well positioned to benefit from industry trends and
continued consolidation in the office imaging solutions industry. Global's goal
is to become the provider of choice for all of its customers' office imaging
needs by offering a full range of products and services and superior customer
service. The key elements of Global's strategy include:
Serve as a Single Source Provider of Office Imaging Solutions. Global
believes that offering a full spectrum of products and services will give it a
competitive advantage and enable it to capitalize on its customer relationships
by cross-selling products and services. As the technology that drives copiers,
facsimiles, printers, electronic presentation equipment and DIM equipment
converges, customers increasingly need computers and networks to use these
products. Accordingly, customers are demanding more integrated office imaging
solutions. Global plans to expand its product lines so that, within each
geographic region it serves, Global can offer automated office equipment,
network integration services, electronic presentation systems and DIM systems.
As Global's operations in these last three markets expand, Global expects an
increasing percentage of its revenues and gross profits will be generated by
sales of equipment and supplies, which typically have lower gross profit
margins than sales of service and rentals. Global is also considering
leveraging its infrastructure, customer base, and expertise by offering
outsourced facilities management services.
Provide Timely and Reliable Service. Global seeks to achieve the highest
level of service. Effective and responsive service is essential to obtaining
repeat business and developing market recognition. Providing timely and high
quality service also allows Global to maintain its profit margins, engage in
cross-selling, and enjoy a source of recurring revenue.
Make Strategic Acquisitions. Global plans to continue acquiring core
companies in targeted geographic markets and to expand these core acquisitions
through internal growth and satellite acquisitions. Global looks for core
acquisition candidates that are led by an experienced management team that will
continue to manage the company after Global acquires it, that have a strong
regional market share, and that can grow internally and through the acquisition
of satellite companies. Global's senior management team has substantial
experience in making acquisitions. Since its founding in June 1994, Global has
acquired thirteen core companies in the United States, and an additional 21
satellite companies which have been integrated into the core companies.
Global's goal is to acquire core and satellite companies throughout the United
States and Canada.
A key component of Global's growth strategy is to acquire satellite companies
in or near its core companies' markets. Core company management frequently
identifies appropriate satellite acquisition candidates. In evaluating
potential satellite acquisitions Global considers, among other factors, the
potential satellite's proximity to a core company, the fit between its product
lines and those of the nearby core company, and the potential satellite's
management, employee base and service base under contract.
Stimulate Internal Growth. Global's strategy for stimulating internal growth
in its core companies is to increase sales force productivity through
performance benchmarks; expand product and service offerings; increase sales
force size; and aggressively cross-sell products and services.
Optimize Profitability Using Global's Benchmark Model. Global's senior
management has developed an industry management model composed of a
comprehensive set of performance benchmarks. These benchmarks, which are the
focus of internal reporting from the core companies to headquarters, allow
Global's senior and local management to monitor and improve the operations of
each core company. Using these criteria, Global trains its core and satellite
company managers to optimize their business mix and improve performance.
Global strives to reduce costs by consolidating the back-office functions of
its satellite acquisitions into core operations, enabling its core companies to
decrease technician driving time and increase the productivity of sales
personnel and administrators. Global also works to reduce costs by
standardizing financial reporting, cash and inventory management, payroll,
billing, collections, insurance and employee benefit programs, and by
negotiating advantageous relationships with equipment manufacturers, other
suppliers and lessors.
41
<PAGE>
Operate with a Decentralized Management Structure. Global believes that its
core companies' experienced local management possess valuable understanding of
their markets and customers. Therefore, Global gives its core company managers
responsibility for day-to-day operating decisions. Core companies and, in some
cases, satellite companies retain their local name and management after Global
acquires them. This decentralized approach permits local management to maintain
focus and motivation and optimizes customer relationships. Local management is
supported by a senior management team that focuses on Global's growth strategy
as well as corporate planning and financial reporting and analysis.
Products and Services
Global currently sells and services the following: (1) automated office
equipment, (2) network integration services, (3) electronic presentation
systems and (4) document imaging management systems ("DIM" systems). In each of
these markets, Global provides a number of office imaging solutions, including
the following:
Automated Network Electronic
Office Equipment Integration Presentation DIM Systems
Services Systems
. Black and white . Network design . LCD projectors . Microfiche and
copiers and and panels, microfilm
(digital and installation, smartboards and equipment
analog) and related overhead
software and projectors . CD-ROM optical
. Color copiers hardware storage
(digital) . Video products
. Technical conferencing
. Duplicators support equipment . Write once read
(digital and contracts many ("WORM")
analog) . Color printers disks and
. Network related
. Facsimile maintenance . Audio visual equipment
machines contracts equipment
. Related
. Printers . Training and . Related supplies
(including support supplies
color) . Related service
. Internet . Related service contracts
. Multi-function services contracts
equipment . Training and
. Training and support
. Related supply support
and service
contracts
Set forth below are Global's pro forma revenues for each of these markets as
a percentage of total pro forma revenue for the fiscal year ended March 31,
1999, and to give effect to Global's acquisition of 8 companies in the fiscal
year ended March 31, 1999 as though such acquisitions had occurred on April 1,
1998.
<TABLE>
<CAPTION>
Fiscal
Year Ended
March 31,
Markets Served 1999
-------------- ----------
<S> <C>
Automated Office Equipment........................................ 66%
Network Integration Services...................................... 21%
Electronic Presentation Systems................................... 12%
DIM Systems....................................................... 1%
</TABLE>
Taking advantage of the "after market" opportunities generated by its sales
of office imaging equipment, Global derives a substantial amount of its
revenues from service activities. Service activities generally provide Global
with a recurring source of revenue. Global's copier service and supply
contracts, for example, provide it with a predictable source of revenue, since
payment is typically based on the number of copies customers make. In the
network integration market, Global focuses on contracts to provide ongoing
maintenance and technical support, since these types of contracts generate a
more steady revenue stream than project-based contracts.
Global believes effective and responsive service is essential for it to
obtain repeat business and to develop the market recognition it needs in order
to grow. Most of Global's copier sales, on a pro forma basis and as
42
<PAGE>
measured by revenue generated, are accompanied by service and supply contracts.
These generally continue for a one year term but, in some cases, continue from
month to month. As part of Global's commitment to quality customer service,
Global works to provide its customers with speedy, reliable service. For
example, Global tries to respond to service calls from its automated office
equipment customers within two to four hours if the call comes in during
business hours. For network integration customers, Global offers a 24 hour
technical assistance "hotline." In addition, Global's service technicians are
generally manufacturer- or vendor-certified to service the equipment Global
sells.
Customers, Sales and Marketing
Global believes its customers decide to purchase products and services from
Global based on a variety of factors, the most important of which are the
strength of the relationship with Global, quality of service provided, and
price.
Global's growth has been largely driven by serving middle market businesses.
Global also serves a number of large, Fortune 500 companies, as well as
educational institutions, government entities and other non-profit groups.
Global estimates that over 60,000 customers purchased equipment or services
from Global in the past twelve months, on a pro forma basis. During the fiscal
year ended March 31, 1999, on a pro forma basis to give effect to Global's
acquisition of 8 companies in the fiscal year ended March 31, 1999 as though
such acquisitions had occurred on April 1, 1998, none of Global's customers
accounted for more than 3% of total revenues and its top five customers
collectively accounted for less than 5% of total revenues.
Because the management teams at Global's core companies understand their
markets and customer relationships, Global's core company managers make local
marketing decisions, including decisions regarding product offering mix,
promotional programs, advertising, and trade show attendance. Global employs
approximately 775 people in sales and marketing. All of Global's sales
personnel are compensated at least partly on a commission basis, with local
management determining the structure of sales compensation and commissions
within the parameters of Global's industry management model. Global generates
sales from within its existing customer base by tracking lease expirations,
cross-selling its products and services, and giving incentives to service
personnel for creating sales leads. Each of Global's core companies also
generates sales leads through telemarketing and door-to-door marketing.
Training
Global provides its sales and service employees extensive, ongoing training.
Each core company has its own technical trainer and training is scheduled on a
regular basis. Core company technical trainers are typically certified by
Global's suppliers, which makes Global's service technicians manufacturer- or
vendor-certified technicians. Global also provides formalized product and
general sales training to its sales and marketing personnel.
43
<PAGE>
Suppliers
The following table lists the products Global sells and their manufacturers
in each of the office imaging markets Global serves:
Automated Office Equipment
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
Copiers: Canon Inc., Konica, Mita Copystar
America, Ricoh Corporation, Savin
Corporation, Sharp, Toshiba America, Inc.
Facsimile machines: Muratec America, Inc., Panasonic
Communications and Systems Company,
Savin, Toshiba, Xerox
Duplicators: Riso, Inc.
Printers: Hewlett-Packard Company, Tektronix, Inc.
Network Integration Services
- -------------------------------------------------------------------------------
Personal and laptop computers: AST Research, Inc., Compaq Computer
Corporation, Dell Computer Corporation,
IBM, Intel Corporation, NEC America,
Inc., Toshiba
Networking software: Banyan Systems Incorporated, Microsoft
Corporation, Novell, Inc., Raptor
Systems, Inc.
Electronic Presentation Systems
- -------------------------------------------------------------------------------
Overhead projectors: Apollo International of Delaware, Inc.,
DuKane Corporation, 3M
LCD projectors: Epson America, Inc., In Focus Systems,
Inc., Lightware, Inc., Proxima
Corporation, Sharp, Sony Electronics Inc.
Video conferencing equipment: Intel
Smart Boards: Smart Technologies, Inc.
DIM Systems
- -------------------------------------------------------------------------------
Microfilm and microfiche equipment: Canon
Optical data storage equipment: Canon, Compaq
Document management software: Westbrook Technologies, Inc.
</TABLE>
During the fiscal year ended March 31, 1999, on a pro forma basis to give
effect to Global's acquisition of 8 companies in the fiscal year ended March
31,1999 as though such acquisitions had occurred on April 1, 1998, Global
purchased 14% of its equipment, parts and supplies from Konica and 10% from
Sharp. No other supplier represented in excess of 7% of such purchases, on a
pro forma basis.
Global's agreements with suppliers generally permit Global to sell particular
products on a nonexclusive basis in particular geographic areas. In most cases,
Global's agreements extend for one-year renewable terms, which the supplier can
choose not to renew with 30 days' notice. In addition, Global's suppliers can
terminate Global's agreements upon notice (1) if Global does not meet minimum
purchase quotas or other requirements or (2) under certain other conditions,
including a change in Global's ownership.
Leasing and Rentals
A majority of the copiers Global sells are financed by third-party leasing
companies. Under Global's "Preferred Vendor Leasing Program," Global has
granted three nationwide equipment lease vendors-General Electric Capital
Corporation, Copelco Capital, Inc., and De Lage Landen Financial Services,
Inc.-preferential
44
<PAGE>
rights to lease copiers to Global's customers in exchange for their agreement
to (1) offer Global's customers better leasing rates and terms than are
generally available through individual copier dealers, (2) provide Global with
control over what happens to leased equipment at the end of the lease term and
(3) use a standardized leasing application. Under these arrangements, Global
has the option to purchase the leased equipment, under already negotiated
terms, at the end of the lease term. This gives Global the flexibility to sell
the equipment to its customers at the end of the lease term or to provide for
such a sale at the time of original purchase. Global plans to increase the use
of third party leases in the electronic presentation and DIM systems markets
where, Global believes, high equipment costs make leasing an attractive
financing alternative for many customers.
In some cases, Global's automated office equipment dealers also rent
equipment. Rental arrangements provide Global with a steady, monthly revenue
stream and, like its leasing arrangements, give Global control over disposition
of the equipment at the end of the rental term.
Competition
Global operates in highly competitive markets, which forces it to compete for
customers and sometimes for acquisition candidates. Competitors in the
automated office equipment market, the electronic presentation systems market
and the DIM systems market include large dealers, including Danka, IKON and
independent dealers, as well as manufacturers' sales and service divisions,
including those of Canon, Eastman Kodak Company, Konica, Minolta Co., Ltd.,
Pitney Bowes, Inc., Wang Laboratories, Inc. and Xerox. Global also competes
with office superstores and consumer electronics chains in these markets.
Principal areas of competition in these markets include price and product
capabilities; quality and speed of post-sales service support; availability of
equipment, parts and supplies; speed of delivery; financing terms and
availability of financing, leasing, or rental programs.
Competition from large, nationwide competitors is likely to increase as
Global seeks to attract additional customers, expand its markets geographically
and broaden its product and service offerings. Competition from large,
nationwide competitors will also increase if Global's industry continues to
consolidate. Finally, as digital and other new technologies develop, Global may
face competition from new distribution channels, including computer
distributors and value added resellers, for products containing new technology.
Some competitors have greater financial and personnel resources than Global.
In the network integration services market Global competes with the large
providers, including GE Capital Information Technology Solutions, Inacom Corp.
and Vanstar Corporation; smaller competitors with regional or local operations;
and the in-house capabilities of its customers. Principal areas of competition
in this market include reputation, quality and speed of support, and price.
Global also faces competition for core and satellite acquisitions from
consolidators such as IKON, Danka, and a number of other independent dealers.
Employees
Global employs approximately 2,225 people, most of whom work at Global's core
companies. Of these, approximately 775 employees work in sales and marketing,
980 in service, and 440 in operations and administration. Thirty employees work
at Global's corporate headquarters in Tampa, Florida. None of Global's
employees is covered by collective bargaining agreements. Global believes it
has good relations with its employees.
Government and Environmental Regulation
Global is subject to regulation under various federal, state and local laws
relating to employee safety and health and environmental protection. Global is
not aware of any material non-compliance with any of these laws.
Legal Proceedings
Global is not currently involved in any legal proceeding or investigation
that it expects to have a material adverse effect on it.
45
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of Global are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Carl D. Thoma........... 50 Chairman of the Board of Directors
Thomas S. Johnson....... 53 Director, President and Chief Executive Officer
L. Neal Berney.......... 47 Director
Bruce D. Gorchow........ 41 Director
William C. Kessinger.... 33 Director
Edward N. Patrone....... 64 Director
Mark M. Lloyd........... 55 Nominee for Director
Raymond Schilling....... 45 Senior Vice President, Chief Financial Officer, Secretary and Treasurer
Michael Mueller......... 47 Senior Vice President, Chief Operating Officer
Alfred N. Vieira........ 51 Vice President--Service
Todd S. Johnson......... 32 Vice President--Acquisitions
</TABLE>
Carl D. Thoma has served as a director since Global's founding in June 1994.
Mr. Thoma is the Managing Partner of Thoma Cressey Equity Partners, a private
equity investment company in Chicago, Illinois, Denver, Colorado and San
Francisco, California formed in December 1997 as a successor entity to Golder,
Thoma, Cressey, Rauner, Inc. Mr. Thoma co-founded and has been a Principal and
General Partner with Golder, Thoma, Cressey, Rauner, Inc. in Chicago, Illinois,
since 1980 and has been a Managing Partner of Golder, Thoma, Cressey, Rauner,
Inc. since 1993. Mr. Thoma is also a director of National Equipment Services,
Inc., Paging Network, Inc. and several private companies.
Thomas S. Johnson has served as a director and as President and Chief
Executive Officer since Global's founding in June 1994. From 1991 to 1994, Mr.
Johnson was an office imaging industry consultant. From 1989 to 1990, Mr.
Johnson served as Chief Operating Officer for Danka. From 1975 to 1989, Mr.
Johnson worked at IKON (formerly known as Alco Standard Corporation) in various
staff and operating roles. When he left there in 1989, he was Vice President--
Operations of the Office Products group and was responsible for acquisitions
and turning around under-performing operations. Mr. Johnson has been involved
in the acquisition of over 60 office equipment dealers since 1985, and has over
23 years of experience in acquiring and integrating businesses. Mr. Johnson
graduated with a B.S. degree from the University of Florida in 1972, and
received his MBA from Harvard Business School in 1976.
L. Neal Berney has served as a director since October 1996. Since 1980, Mr.
Berney has served as President of Berney, Inc., which Global acquired in
February 1995. Mr. Berney has been active in the office products industry for
over 28 years.
Bruce D. Gorchow has served as a director since October 1996. Since 1991, Mr.
Gorchow has served as Executive Vice President and head of the Private Finance
Group of PPM America, Inc. Prior to joining PPM America, Inc., Mr. Gorchow was
a Vice President at Equitable Capital Management, Inc. Mr. Gorchow received his
B.A. in Economics from Haverford College in 1980 and received his MBA in
Finance from the Wharton School of the University of Pennsylvania in 1982. Mr.
Gorchow is also a director of Leiner Health Products, Inc., Tomah Products,
Inc., Burke Industries, Inc., Elgar Electronics, Inc., Applied Process
Solutions Inc., Corvest, Inc. and EMSI Holdings, Inc.
William C. Kessinger has served as a director of Global since December 1995.
Mr. Kessinger is a Principal in GTCR Golder Rauner, LLC, a private equity
investment company in Chicago, Illinois formed in January 1998 as a successor
entity to Golder, Thoma, Cressey, Rauner, Inc. Mr. Kessinger joined Golder,
Thoma, Cressey, Rauner, Inc. in May 1995 and became a Principal in September
1997. From July 1994 to May
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<PAGE>
1995, Mr. Kessinger was a Principal with The Parthenon Group. From August 1992
to June 1994, Mr. Kessinger attended Harvard Business School, where he received
his MBA. Prior to that time, Mr. Kessinger served as an Associate with
Prudential Asset Management Asia from August 1988 to June 1992. Mr. Kessinger
is also a director of AnswerThink Consulting Group, Inc. and National Equipment
Services, Inc.
Edward N. Patrone has served as a director since August 1998. Currently
retired, Mr. Patrone served as senior consultant to IKON from 1991 to 1997, and
in various executive positions with IKON prior to that time, including as
President and Chief Executive Officer of Paper Corporation of America, a
subsidiary of IKON, from 1988 to 1991, and as Executive Vice President from
1983 to 1988. Mr. Patrone has been active in the office products industry for
over 17 years. Mr. Patrone is also a director of Primesource Corporation and
CompuCom Systems, Inc.
Mark M. Lloyd has been nominated for election to Global's Board of Directors
at Global's 1999 Annual Stockholders Meeting in August 16, 1999. Mr. Lloyd has
served as President of Southern Business Communications, Inc. since its
founding in 1981. In October 1996, Southern Business Communications, Inc. was
acquired by Global. Mr. Lloyd has also served as a director of two subsidiaries
of Southern Business Communications, Inc.--Centre Business Products, Inc. and
Proview, Inc., since they were acquired by Global in August 1998, and September
1998, respectively. Mr. Lloyd has been active in the office products industry
for over 35 years. Mr. Lloyd joined 3M in 1964 in sales, and served there in a
variety of managerial capacities until his departure in 1981, at which time he
was National Sales Manager of the Visual Systems Division in St. Paul,
Minnesota.
Raymond Schilling has served as Senior Vice President of Global since April
1999 and as Vice President, Chief Financial Officer, Secretary and Treasurer of
Global since its inception in June 1994. From 1988 to 1994, Mr. Schilling was
Vice President--Finance of the California/Nevada region of McCaw Communications
and responsible for all of its finance and administrative functions. From 1980
to 1988, Mr. Schilling worked with Mr. Johnson at IKON in various accounting
and financial reporting functions, including as controller of Alco Office
Products, where his responsibilities included acquisitions and evaluation,
integration, development and installation of financial systems. From 1986 to
1988, Mr. Schilling also was Vice President of Finance and Administration of
San Sierra Business Systems (an Alco Office Products dealer). From 1976 to
1980, Mr. Schilling was employed by Price Waterhouse as a CPA. In total, Mr.
Schilling has been involved in the acquisition of over 35 businesses and has
over 16 years of experience in acquiring and integrating businesses. Mr.
Schilling graduated with a B.A. in Economics and Accounting from Muhlenberg
College in 1976.
Michael Mueller has served as Senior Vice President of Global since April
1999 and as Vice President and Chief Operating Officer of Global since January
1, 1995. From 1986 to December 1994, Mr. Mueller was employed as Vice President
by Global Services Inc., a copier and office product sales and service company
in Houston, Texas, and served as its Chief Financial Officer from 1988 to 1994.
Mr. Mueller obtained his B.B.A. from the University of Houston in 1974.
Alfred N. Vieira has served as a Vice President--Service of Global since
March 1997. From May 1996 to March 1997, Mr. Vieira served as Vice President
and General Manager of Felco Office Systems, Inc.'s four branch locations in
South Texas. From 1979 to May 1996, Mr. Vieira was employed by Global Services
Inc., and served as its Vice President of Operations from May 1988 to May 1996.
Mr. Vieira studied electrical engineering at City University of New York.
Todd S. Johnson has served as Vice President--Acquisitions since May 1999 and
has been employed by Global since July 1994 in various roles, including as
Acquisition Team Manager. From 1993 to 1994, Mr. Johnson was employed as an
office imaging industry consultant. From 1989 to 1993, Mr. Johnson was an
officer in the United States Marine Corps. Mr Johnson graduated from the
Pennsylvania State University with a B.S. in business management in 1989.
47
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Board Composition
Global's board of directors is currently composed of six directors. Global's
directors are divided into three classes: Class I directors, whose term will
expire at the 1999 annual meeting of stockholders, Class II directors, whose
term will expire at the 2000 annual meeting of stockholders, and Class III
directors, whose term will expire at the 2001 annual meeting of stockholders.
The current Class I directors are Neal Berney and Edward Patrone; the Class II
directors are Bruce Gorchow and William Kessinger; and the Class III directors
are Thomas Johnson and Carl Thoma. At each annual meeting, the successors to
the directors whose terms expire will be elected to serve until the third
annual meeting following their election. Global's authorized number of
directors may be changed only by resolution of the board. Global's directors
may be removed without cause only upon the affirmative vote of the holders of
75% of the outstanding common stock, or for cause only upon the affirmative
vote of the holders of a majority of the outstanding common stock.
It is Global's policy to nominate for election to the board, for rotating
terms, one of the presidents of Global's core companies. Mr. Berney, who is the
president of Berney, Inc., is currently serving as a director pursuant to this
policy and Mr. Lloyd has been nominated to succeed Mr. Berney as a director
under this policy. Prior to Global's initial public offering, Global's
stockholders entered into a stockholders agreement with Global which provided
that Global's stockholders would vote for the following nominees in board
elections: Thomas Johnson, three people to be designated by Golder, Thoma,
Cressey, Rauner Fund IV, L.P., and one person to be designated by Jackson
National Life Insurance Company. The Stockholders Agreement terminated at the
time of Global's initial public offering. Carl Thoma, William Kessinger and
Neal Berney were elected to Global's board as the designees of Golder, Thoma,
Cressey, Rauner Fund IV, L.P. and Bruce Gorchow as the designee of Jackson
National Life Insurance Company. See "Certain Transactions."
All officers serve at the discretion of the board. Todd S. Johnson, Global's
Vice President--Acquisitions, is the son of Thomas S. Johnson, Global's
President and Chief Executive Officer. There are no other family relationships
among any of Global's directors or executive officers.
Committees of the Board
Global's board of directors has established two committees, a compensation
committee and an audit committee. The compensation committee is responsible for
determining executive officers' compensation and for administering Global's
1998 Stock Option and Incentive Plan. The audit committee is responsible for
(1) making recommendations about Global's independent public accountants, (2)
reviewing audit plans and results with Global's independent public accountants,
(3) reviewing the independence of the independent public accountants, (4)
considering the range of audit and non-audit fees and (5) reviewing Global's
internal accounting controls. Carl Thoma, William Kessinger, Bruce Gorchow and
Edward Patrone, all of whom are non-employee directors, are the members of both
the compensation committee and the audit committee.
Compensation of Directors
All of Global's directors are entitled to be reimbursed for certain expenses
in connection with their attendance at board and committee meetings. Except for
Carl Thoma, William Kessinger, and Bruce Gorchow, directors who are not Global
employees also receive a $1,500 fee for each board meeting they attend. In
addition, directors are eligible to receive awards under Global's stock option
plan. Upon the closing of Global's initial public offering, Thomas Johnson
received an option to purchase 250 shares of Global's common stock and Neal
Berney received an option to purchase 20,250 shares of Global's common stock.
Upon joining Global's board of directors, Ed Patrone received an option to
purchase 10,000 shares of common stock. All of these options are exercisable at
a per share price of $12.00, Global's initial public offering price, have a
term of ten years and vest in five equal annual installments. Global
anticipates that future directors who are not employees will each receive an
option to purchase 10,000 shares of common stock when they are first elected to
the board, and that each non-employee director other than Carl Thoma, William
Kessinger and Bruce Gorchow will receive an option to purchase 2,000 shares of
common stock for each of the following years during which he or she serves as a
director. Each of these options is expected to be exercisable for a purchase
48
<PAGE>
price equal to the market value of the underlying stock on the date of grant,
to have a term of ten years and to vest in five equal annual installments
beginning on the first anniversary of the date of grant. See "Management--1998
Stock Option and Incentive Plan."
Executive Compensation
Summary Compensation Table. The following table sets forth the compensation
paid to or earned by Global's Chief Executive Officer and all other executive
officers of Global whose salary and bonus for services rendered in all
capacities to Global during the year ended March 31, 1999 exceeded $100,000
(the "named executive officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation Awards
----------------- ---------------------
Restricted Securities
Stock Underlying All Other
Name and Principal Fiscal Salary Bonus Awards Options Compensation
Position Year ($) ($) ($)(1) (#) ($)(2)
- ------------------ ------ -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas S. Johnson
President and Chief
Executive Officer..... 1999 $250,000 $125,000 $ -- 250 $4,563
1998 225,000 112,500 34,465 -- 4,125
1997 210,120 105,060 -- -- 1,831
Raymond Schilling
Senior Vice President,
Chief
Financial Officer,
Secretary and
Treasurer............. 1999 135,000 67,500 -- 10,250 2,739
1998 118,962 47,585 -- -- 1,168
1997 113,550 45,320 -- -- 336
Michael Mueller
Senior Vice President,
Chief Operating
Officer............... 1999 135,000 67,500 -- 10,250 5,120
1998 118,962 47,585 -- -- 3,505
1997 113,300 45,320 -- -- 1,332
Alfred N. Vieira
Vice President
of Service............ 1999 115,000 57,500 -- 5,250 2,499
1998 105,000 42,000 -- -- 984
</TABLE>
- --------
(1) At March 31, 1999, Mr. Johnson held 104,975 shares of restricted stock
worth $1,340,304; Mr. Schilling held 43,138 shares of restricted stock
worth $571,320; Mr. Mueller held 34,510 shares of restricted stock worth
$457,053 and Mr. Vieira held 103,529 shares of restricted stock worth
$1,375,171. Valuations are based on the difference between the price paid
by the named executive officer for the restricted shares and the closing
price per share of $13.3125 on March 31, 1999.
(2) Consists of matching contributions to Global's 401(k) plan.
49
<PAGE>
Option Grants Table. The following table shows information relating to
options to purchase common stock granted to the named executive officers during
the year ended March 31, 1999:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------
Potential
Realizable Value
at Assumed
Number of Annual Rates of
Securities Share Price
Underlying Percent of Total Appreciation for
Options Options Granted Exercise Option Term
Granted to Employees in Price Expiration ----------------
Name (#) Fiscal Year ($/Sh) Date 5% 10%
- ---- ---------- ---------------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas S. Johnson....... 250 0.04% $12 6/21/08 $ 1,887 $ 4,781
Raymond Schilling....... 10,250 1.78% 12 6/21/08 77,354 196,030
Michael Mueller......... 10,250 1.78% 12 6/21/08 77,354 196,030
Alfred N. Vieira........ 5,250 0.91% 12 6/21/08 39,620 100,406
</TABLE>
The options described in the table above become exercisable in five equal
annual installments beginning on June 22, 1999 and have a term of ten years.
These options were approved for grant prior to completion of Global's initial
public offering. The value of the common stock underlying these options at the
date of grant is based on the initial public offering price of $12 per share.
Aggregated Option Exercises and Fiscal Year-End Option Values Table. The
following table shows information concerning options held by the named
executive officers at March 31, 1999:
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised In-
Acquired Underlying Unexercised the-Money Options at
on Value Options at March 31, 1999 (#) March 31, 1999 ($)(1)
Exercise Realized ------------------------------- -------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ------------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas S. Johnson....... -- -- -- 250 -- $ 328
Raymond Schilling....... -- -- -- 10,250 -- 13,453
Michael Mueller......... -- -- -- 10,250 -- 13,453
Alfred N. Vieira........ -- -- -- 5,250 -- 6,891
</TABLE>
- --------
(1) Based on the closing price of $13.3125 per share of common stock on March
31, 1999, as reported by the Nasdaq National Market.
Executive Employment Agreements
Mr. Johnson, Mr. Schilling, Mr. Mueller and Mr. Vieira have each entered into
an executive employment agreement with Global and Golder, Thoma, Cressey,
Rauner Fund IV, L.P. Under these agreements, each executive receives an annual
base salary. These annual base salaries are currently set at $300,000 for
Mr. Johnson, $180,000 for Mr. Schilling, $180,000 for Mr. Mueller and $130,000
for Mr. Vieira. The executives' annual base salaries are subject to periodic
increases at the discretion of the board. Each executive officer is also
eligible for an annual bonus of up to 50% of his annual base salary upon
attaining certain defined objectives. Each of the executives is entitled to all
other benefits approved by the board and made available to Global's senior
management. Mr. Johnson is also entitled to receive reimbursement of up to
$12,000 annually for certain perquisites. Mr. Johnson's employment under his
executive employment agreement renews each year automatically for a one-year
period unless otherwise terminated by either party upon 30 days notice. The
term of employment under Mr. Schilling, Mr. Mueller, and Mr. Vieira's executive
agreements continues at the pleasure of the board or until resignation,
removal, death or disability. In the event Global terminates Mr. Johnson's
employment without cause, or Mr. Johnson terminates his employment for good
reason (including as a result of a change in control of Global), Mr. Johnson is
entitled to receive severance pay equal
50
<PAGE>
to his current base salary plus all fringe benefits to which he otherwise would
be entitled for approximately one year. Each of Mr. Johnson, Mr. Schilling, Mr.
Mueller, and Mr. Vieira is entitled to a pro rata share of his annual bonus if
Global terminates his employment without cause or if he voluntarily terminates
his employment. The executive employment agreements contain confidentiality
covenants and a covenant not to compete with Global for a period of one year
following termination of employment.
Global expects to enter into new executive employment agreements with each of
Mr. Johnson, Mr. Schilling, Mr. Mueller and Mr. Vieira. These agreements are
expected to provide for a three-year term, severance payments to Mr. Johnson,
Mr. Schilling and Mr. Mueller equal to approximately two years' salary and to
Mr. Vieira equal to approximately one year's salary and a covenant not to
compete for a two year period following termination of employment. In addition,
Mr. Johnson's executive agreement is expected to provide for annual grants to
purchase 100,000 shares of Global's common stock at a price equal to the
stock's fair market value on the date of grant. These options are expected to
vest in five equal annual installments beginning one year after the date of
grant. Global also expects to enter into an executive agreement with Mr. Todd
Johnson.
Under their executive employment agreements, Mr. Johnson, Mr. Schilling, Mr.
Mueller and Mr. Vieira each received the right to purchase shares of Global's
common stock at a price of $0.07 per share. Accordingly, at the time of
entering into their executive employment agreements, Mr. Johnson purchased
647,059 shares of common stock; Mr. Schilling purchased 215,685 shares; Mr.
Mueller purchased 172,548 shares; and Mr. Vieira purchased 172,548 shares of
common stock. Under his executive employment agreement, Mr. Johnson also
received the right to purchase, for $0.07 per share, certain shares of common
stock that were reserved for issuance to senior management in June 1994 and
that remained unissued at the time of Global's initial public offering. In
March 1998, Mr. Johnson exercised this right in full and purchased 9,026 shares
of Global's common stock. Each executive employment agreement gives Global the
right to repurchase some of the Global common stock purchased by the executive
under the agreement under certain circumstances relating to the
termination of his employment. The repurchase price Global would pay equals the
executive's purchase price. Global's right of repurchase under the executive
agreements generally terminates with respect to 20% of the shares subject to
vesting for each year of service since the date of the agreement.
Compensation Committee Interlocks and Insider Participation
None of the four members of the compensation committee is an employee of
Global. Each member of the compensation committee other than Mr. Patrone is
affiliated with an entity that has purchased Global's securities. See "Certain
Transactions" and "Principal Stockholders."
Retirement Savings Plan
Global maintains a 401(k) savings plan that is intended to be a qualified
retirement plan under the Internal Revenue Code. Generally, all of Global's
employees who work at least 1,000 hours per year and are at least 21 years of
age are eligible to participate in the plan. They may enter the plan at the
first calendar quarter following their original employment date; at this point
participants may make salary deferral contributions to the savings plan,
subject to the limitations imposed by the Internal Revenue Code, with no
company match. Global may make discretionary matching contributions after
participants have completed one year of service, beginning at the next calendar
quarter after a participant's one year anniversary. Participants' contributions
may be invested in any of several investment alternatives including a fund that
invests solely in shares of Global's common stock. Participants become vested
in Global's contributions according to a graduated vesting schedule based upon
length of service with Global.
1998 Stock Option and Incentive Plan
Global has adopted the 1998 Stock Option and Incentive Plan, which authorizes
the issuance of up to 1,820,000 shares of Global's common stock pursuant to
stock options, restricted stock or restricted stock units
51
<PAGE>
granted to directors, officers and employees of and consultants and advisors to
Global. No more than 600,000 shares may be issued under the stock plan as
restricted stock or as restricted stock units, and the maximum number of
options that may be granted, and the maximum number of shares of restricted
stock or shares represented by restricted stock units that may be awarded,
under the stock plan to any eligible employee or consultant during any calendar
year is 400,000.
The stock option and incentive plan is administered by the compensation
committee of the board of directors. Subject to limitations set forth in the
plan, the compensation committee determines to whom options, restricted stock
and restricted stock units are granted, the term, exercise price (which may not
be less than the fair market value of underlying shares on the date of grant),
and vesting schedules of options, the rate at which options may be exercised,
and the conditions to vesting of awards of restricted stock and restricted
stock units. The maximum term of options granted under the stock plan is ten
years and the exercise price may be payable in cash or, if permitted by the
applicable option agreement, in common stock or a combination of cash and
common stock or by cashless exercise using a broker acceptable to Global.
As of June 30, 1999, 1,369,400 shares of Global's common stock were subject
to options outstanding under the stock option and incentive plan, at exercise
prices ranging from $12.00 to $18.125 per share. All of these options are
subject to vesting requirements based on continued employment, at a rate of 20%
per year. In addition to options outstanding under the plan, 10,000 shares of
Global's common stock are issuable upon the exercise of an option granted to
Mr. Patrone outside the plan. This option is exercisable at a price of $12.00
per share and vests at a rate of 20% per year.
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law, Global's certificate of
incorporation provides that Global's directors shall not be personally liable
to Global or its stockholders for monetary damages for breach of their
fiduciary duty as a director, unless they are liable (1) for breach of their
duty of loyalty, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) for dividends,
distributions or stock repurchases or redemptions prohibited by Delaware law or
(4) for any transaction from which the director derives an improper personal
benefit. As a result, Global and its stockholders may be unable to obtain
monetary damages from a director for breach of his or her duty of care.
Additionally, Global's certificate of incorporation and bylaws provide for
Global to indemnify its directors and officers to the fullest extent permitted
by law. Global has entered into indemnification agreements with its directors
and executive officers which may, in certain cases, be broader than the
specific indemnification provisions of applicable law. The indemnification
agreements may require Global, among other things, to indemnify its directors
or executive officers against liabilities that arise because of their status or
service as directors or executive officers, to advance the expenses they
incurred as a result of threatened claims or proceedings brought against them,
and to cover them under Global's directors' and officers' liability insurance
policies to the maximum extent that insurance coverage is maintained.
There is no pending litigation or proceeding involving any director, officer
or employee of Global as to which indemnification is being sought, nor is
Global aware of any pending or threatened litigation that may result in claims
for indemnification by any such person.
52
<PAGE>
CERTAIN TRANSACTIONS
Acquisition of Capitol Office Solutions, Inc.
On December 21, 1998, and effective as of December 1, 1998, Global purchased
all of the issued and outstanding stock of Capitol Office Solutions, Inc., a
dealer in the office imaging solutions industry in the metropolitan Washington,
D.C. area. As described below, prior to its acquisition by Global, Capitol was
two-thirds owned by Global's principal stockholders and members of Global's
management. Global paid the sellers a total purchase price of $46.4 million in
cash, plus 612,455 shares of Global's common stock. The terms of the
acquisition and purchase price were reviewed by outside financial and legal
advisors retained by Mr. Patrone, Global's sole disinterested director. The
board of directors approved the transaction after receiving a fairness opinion
on the purchase price issued by the outside financial advisor.
The table below sets forth the cash and common stock that certain Global
directors, officers and principal stockholders received in connection with the
acquisition.
<TABLE>
<CAPTION>
Name Affiliation with Global Cash Payment Shares
---- ----------------------- ------------ -------
<C> <S> <C> <C>
Golder, Thoma, Cressey, Principal stockholder and $13,335,478 537,611
Rauner Fund IV majority holder prior to the
initial public offering
Jackson National Life Principal stockholder 2,448,889 --
Insurance Company
Thomas Johnson President, Chief Executive 560,509 22,596
Officer and Director
Raymond Schilling Senior Vice President, Chief 323,207 13,029
Financial Officer, Secretary
and Treasurer
Michael Mueller Senior Vice President, Chief 261,115 10,526
Operating Officer
Alfred Vieira Vice President--Service 256,461 10,338
Todd S. Johnson Vice President--Acquisitions 4,552 --
Neal Berney Director 104,732 4,222
</TABLE>
Carl Thoma, William Kessinger and Bruce Gorchow did not participate directly
in the Capitol acquisition, but they are associated with the two principal
stockholders. Carl Thoma and William Kessinger are Principals of Golder, Thoma,
Cressey, Rauner, Inc., the general partner of Golder, Thoma, Cressey, Rauner
Fund IV's general partner. Bruce Gorchow is Executive Vice President of PPM
America, Inc., the exclusive investment advisor to Jackson National Life
Insurance Company.
Golder, Thoma, Cressey, Rauner Fund IV, certain other Global stockholders and
other members of Global's management initially acquired two thirds of the
outstanding stock of Capitol in June 1997. Golder, Thoma, Cressey, Rauner, Inc.
paid $4,758,393 for its Capitol stock; Jackson National Life Insurance Company
paid $495,486 for its Capitol stock; Mr. Berney, a director of Global, paid
$37,370 for his Capitol stock and Todd S. Johnson, an executive officer of
Global, paid $921 for his Capitol stock. In addition, Mr. Thomas Johnson,
Global's President and Chief Executive Officer and a director of Global, and
Raymond Schilling, Michael Mueller, and Alfred Vieira, executive officers of
Global, borrowed from Global on competitive terms $200,000, $115,324, $93,169
and $91,507, respectively, to finance their acquisition of Capitol stock. The
loans were evidenced by promissory notes, which bore interest at an annual rate
of 8.0% payable at maturity and were designated to mature on June 30, 2000. All
of the Global executives subsequently repaid their promissory notes with
proceeds from Global's acquisition of Capitol. Jackson National Life Insurance
Company also extended a $30 million line of credit in connection with the
purchase of Capitol stock by Golder, Thoma, Cressey, Rauner Fund IV, which
Capitol paid off and retired as part of Global's subsequent acquisition of
Capitol stock.
Global and Capitol entered into a consulting agreement dated as of June 30,
1997 pursuant to which Global provided management consulting and advisory
services to Capitol. Under the Capitol consulting
53
<PAGE>
agreement, Global received an annual management fee of $150,000, plus
reimbursement of reasonable out-of-pocket expenses and interest on accrued but
unpaid fees. From July 1, 1997 through March 31, 1998, $112,500 in management
fees had accrued pursuant to the Capitol Consulting Agreement. From April 1,
1998 through November 30, 1998, $100,000 in management fees had accrued
pursuant to the Capitol consulting agreement. Global received a one-time fee of
$270,000 for Global's assistance arranging the Capitol transaction and the
Jackson National Life Insurance Company loan to Capitol. By agreement of Global
and Capitol, this agreement terminated upon Global's acquisition of Capitol.
Founding Agreements
Global was founded in June 1994 by Thomas Johnson and Golder, Thoma, Cressey,
Rauner Fund IV. In connection with the formation of Global, Thomas Johnson,
Raymond Schilling, the Golder, Thoma, Cressey, Rauner Fund IV and Global
entered into various agreements relating to the management and ownership of
Global. These agreements include an equity purchase agreement, a registration
agreement, a stockholders agreement, and a consulting agreement. A number of
these agreements were amended subsequent to June 1994 to, among other things,
add additional stockholders as parties and to reflect the transactions
described below. Substantially all of the provisions of these agreements, with
the exception of the registration agreement, terminated upon completion of
Global's initial public offering. In connection with Global's formation, Global
and Golder, Thoma, Cressey, Rauner Fund IV also entered into executive
employment agreements with Thomas Johnson and Raymond Schilling and,
subsequently, with Michael Mueller and Alfred Vieira. See "Management--
Executive Employment Agreements."
Under the equity purchase agreement among Global, Golder, Thoma, Cressey,
Rauner Fund IV, Mr. Johnson, and certain additional purchasers dated as of June
9, 1994, as subsequently amended, Global sold 6,312,766 shares of common stock
to Golder, Thoma, Cressey, Rauner Fund IV and 157,819 shares of common stock to
Mr. Johnson at a per share purchase price of $0.08. In addition, Golder, Thoma,
Cressey, Rauner Fund IV and Mr. Johnson agreed to purchase, upon Global's
meeting certain criteria, and subsequently purchased, 216,666.674 and 5,416.697
shares of Global's Class A common stock, respectively, at a per share purchase
price of $90.00. Mr. Johnson paid for his purchases with the proceeds of a loan
from Golder, Thoma, Cressey, Rauner, Inc.
Global and its pre-initial public offering stockholders entered into a
stockholders agreement, dated as of June 9, 1994, which, as amended, (1)
provided for the designation of three directors of Global by Golder, Thoma,
Cressey, Rauner Fund IV, one director by Jackson National Life Insurance
Company and for the remainder of the board to consist of Global's chief
executive officer, (2) imposed certain restrictions on the transfer of Global's
stock, (3) required Global's stockholders to take all necessary or desirable
actions in connection with an initial public offering of Global approved by
Golder, Thoma, Cressey, Rauner Fund IV, including approving any amendment to
Global's certificate of incorporation to provide for conversion of shares of
Class A common stock into common stock in the event that not all shares of
Class A common stock would be redeemed for cash, or any other recapitalization
advised by the underwriters and consistent with the terms of Global's
certificate of incorporation, (4) required Global to offer to sell shares to
the stockholders under certain circumstances upon authorization of an issuance
or sale of additional shares and (5) granted certain stockholders certain
participation rights in connection with a sale of shares by other stockholders.
The stockholders agreement terminated prior to the closing of Global's initial
public offering.
Global and its stockholders entered into a registration rights agreement,
dated as of June 9, 1994, pursuant to which, as amended, the stockholders have
the right in certain circumstances, subject to certain conditions, to require
Global to register their shares of Global's common stock for resale under the
Securities Act of 1933. Under this agreement, except in limited circumstances,
Global is obligated to pay all expenses in connection with such registration.
Global and Golder, Thoma, Cressey, Rauner, Inc. entered into a consulting
agreement, dated as of June 9, 1994, pursuant to which Golder, Thoma, Cressey,
Rauner, Inc. provided financial and management consulting services to Global.
Under the Consulting Agreement, Golder, Thoma, Cressey, Rauner, Inc. received
an annual management fee of $200,000, plus reimbursement of reasonable out-of-
pocket expenses and interest on accrued but unpaid fees, and a placement fee of
1% of the amount of debt or equity capital raised by Global, excluding
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<PAGE>
the net proceeds of the initial public offering, for Golder, Thoma, Cressey,
Rauner, Inc.'s assistance in obtaining such capital. In fiscal years 1997, 1998
and 1999, Global paid Golder, Thoma, Cressey, Rauner, Inc. management fees of
$200,000, $200,000 and $0, respectively, and no placement fees. The Consulting
Agreement terminated upon the closing of Global's initial public offering.
Transactions with Jackson National Life Insurance Company
In August 1996, Global and its subsidiaries entered into a secured credit
agreement with Jackson National Life Insurance Company and its affiliate PPM
America, Inc. pursuant to which Global had a $6.0 million revolving credit
facility and a term credit facility under which it could borrow up to $114.0
million. The term and revolving loans bore interest at 3.25% and 3.00% over
LIBOR, respectively. Principal under the term loan component of this credit
facility was repayable in installments over the life of the credit facility,
with the final payment due and payable on August 14, 2004. In connection with
Global's obtaining the credit facility in August 1996, Jackson National Life
Insurance Company received a financing fee of $1.6 million. Golder, Thoma,
Cressey, Rauner, Inc. agreed to waive its 1.0% placement fee on the August 1996
debt capital raised by Global, because the majority of the work to obtain the
financing was performed by another party, which charged a 1.0% placement fee.
In November 1997 this credit agreement was amended and restated to increase the
amount of funds available under the credit facility to $120.0 million. In
connection with the amendment, Global paid Jackson National Life Insurance
Company a financing fee of $800,000. Global believes that the terms of the
November 1997 Credit Agreement amendment and placement fee it paid were on
terms no less favorable to it than it could have obtained from unaffiliated
third parties.
In June 1998, Global paid down the outstanding balance of its credit facility
from Jackson National Life Insurance Company by approximately $31.5 million
principally with proceeds from Global's initial public offering. In July 1998,
Global paid off the remaining balance of $65.8 million under the Jackson
National Life Insurance Company credit facility with funds borrowed under a
replacement senior credit facility from First Union National Bank.
In connection with the Jackson National Life credit facility, Global and
Jackson National Life Insurance Company entered into an investor purchase
agreement, dated as of August 14, 1996, pursuant to which Global sold to
Jackson National Life Insurance Company 27,083.33 shares of Class A common
stock at a per share price of $90.00, and 633,933 shares of Class C common
stock at a per share price of $0.10. As a result of its purchase, Jackson
National Life Insurance Company became a holder of more than 5% of Global's
outstanding stock. Jackson National Life Insurance Company, Global, Golder,
Thoma, Cressey, Rauner Fund IV and certain other stockholders of Global also
entered into amendments to Global's equity purchase agreement, stockholders
agreement and registration rights agreement which, as amended (1) added Jackson
National Life Insurance Company as a party thereto, (2) granted Global certain
rights to redeem shares of common stock held by Mr. Johnson and Golder, Thoma,
Cressey, Rauner Fund IV in the event that Mr. Johnson and Golder, Thoma,
Cressey, Rauner Fund IV failed to purchase certain shares of Class A common
stock pursuant to the equity purchase agreement, (3) granted Jackson National
Life Insurance Company certain rights to require Global to register under the
Securities Act shares of common stock held by Jackson National Life Insurance
Company, (4) granted Jackson National Life Insurance Company the right to
designate one director of Global and one observer with rights to attend all
meetings of Global's board of directors, (5) required Global to amend its
certificate of incorporation to provide for conversion of Class A common stock
into common stock at a discount to market rates under certain circumstances and
(6) granted Jackson National Life Insurance Company preemptive rights to
purchase additional shares of Class A common stock and Class C common stock
under certain circumstances. Of these rights, only Jackson National Life
Insurance Company's rights to require the registration of shares held by it
under the Securities Act survived Global's initial public offering. Bruce
Gorchow, an executive vice president of PPM America and a director of Global,
was elected to Global's board of directors pursuant to Jackson National Life
Insurance Company's board designation rights under the stockholders agreement.
In November 1997, pursuant to Jackson National Life Insurance Company's
rights under the stockholders agreement, Global sold Jackson National Life
Insurance Company an additional 11,136.268 shares of Class A
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common stock at a per share price of $90.00, and an additional 260,663 shares
of Class C common stock at a per share price of $0.10. Shares of Class C common
stock, which were non-voting, converted into shares of common stock upon the
closing of Global's initial public offering at a rate of one share of common
stock for each share of Class C common stock.
Additional Loans to Management
In connection with Mr. Schilling's relocation to Tampa, Global loaned Mr.
Schilling $35,000 pursuant to a promissory note, dated September 28, 1995,
which replaced a promissory note dated October 18, 1994, for $30,000, which
bore interest at 6.28% per annum. Under the terms of the note, interest and
principal on Mr. Schilling's note were forgiven on September 28, 1998. Global
also loaned to Mr. Mueller $11,793 in connection with his relocation to Tampa.
Mr. Mueller's loan was evidenced by a promissory note dated April 17, 1995,
which contained terms similar to those of Mr. Schilling's note. Interest and
principal due under Mr. Mueller's note were forgiven, in accordance with the
note's terms, on April 17, 1998.
Acquisition of Berney, Inc.
In connection with Global's acquisition of Berney, Inc. in February 1995,
Global entered into a lease with an entity partly owned by Mr. Berney pursuant
to which Global rents space from the entity at rates Global believes are
commercially competitive. This lease expires on February 29, 2000 and may be
extended at the option of Global for an additional five year term. In fiscal
years 1997, 1998 and 1999, Berney, Inc. paid $141,000, $169,000 and $156,000,
respectively, in rent pursuant to this lease. In addition, Global leases space
in another building from an entity in which Mr. Berney has a financial
interest, pursuant to a lease that became effective January 1, 1999. Under this
lease, Global paid approximately $13,000 in rent in fiscal year 1999.
Other Transactions
In April 1996, Global facilitated the sale of 2,210 shares of Class A common
stock and 64,390 shares of common stock by a departing employee, at per share
purchase prices of $102.13 and $0.08, respectively, to certain investors, all
of whom were employees of Global. In connection with their participation in the
transaction, Neal Berney, Raymond Schilling, Michael Mueller and Todd Johnson
paid approximately $99,000, $5,600, $10,000 and $5,000, respectively, and
received 946.381, 54.167, 95.749 and 47.875 shares of Class A common stock and
27,573, 1,578, 2,789 and 1,394 shares of common stock, respectively.
In November 1997, Global facilitated the sale of 1,083.333 shares of Class A
common stock and 31,563 shares of common stock by a departing employee, at a
per share purchase price of $102.17 and $0.08, respectively, to certain
investors, all of whom were employees of or service providers to Global. As
part of Global's termination agreement with the departing employee, Global paid
the employee an aggregate of approximately $1,400 to compensate for the
difference between the sale price for the common stock and the then-determined
fair market value of such common stock. In connection with the transaction,
Raymond Schilling paid approximately $5,700 and received 54.167 shares of Class
A common stock and 1,578 shares of common stock, and Michael Mueller, Alfred
Vieira, Todd Johnson each paid approximately $11,300 and received 108.333
shares of Class A common stock and 3,156 shares of common stock.
Todd S. Johnson, Thomas S. Johnson's son, is employed by Global. Todd S.
Johnson received approximately $69,000 in salary and bonus for the fiscal year
ended March 31, 1998 and approximately $75,000 in salary and bonus for the
fiscal year ended March 31, 1999.
In March 1998, Global sold 67,594 shares of common stock to Golder, Thoma,
Cressey, Rauner Fund IV, and 9,656 shares of common stock to Jackson National
Life Insurance Company, for a per share purchase price of $0.07 in accordance
with the terms of Thomas Johnson's executive agreement and the stockholders
agreement.
Global has entered into indemnification agreements with its directors and
executive officers for the indemnification of and advancement of expenses to
such persons to the full extent permitted by law. See "Management--Limitation
of Liability and Indemnification Matters."
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Global's common stock as of June 30, 1999, by (1) each of Global's
directors and executive officers, (2) all directors and executive officers of
Global as a group, and (3) each person (or group of affiliated persons) known
by Global to beneficially own more than 5% of Global's outstanding common
stock.
<TABLE>
<CAPTION>
Shares Beneficially
Owned(1)
-----------------------
Name and Address of Beneficial Owner(1) Number Percent
- --------------------------------------- ------------ ----------
<S> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV, L.P.(2).......... 7,404,525 38.9%
Jackson National Life Insurance Company(3)............... 1,006,898 5.3%
Thomas S. Johnson(4)..................................... 793,664 4.2%
Raymond Schilling(5)..................................... 233,158 1.2%
Michael Mueller(6)....................................... 196,164 1.0%
Alfred N. Vieira(7)...................................... 191,126 1.0%
Carl D. Thoma(2)......................................... 7,404,525 38.9%
Bruce D. Gorchow(3)...................................... 1,006,898 5.3%
William C. Kessinger(2).................................. 7,404,525 38.9%
Neal Berney(8)........................................... 153,404 *
Todd S. Johnson(9)....................................... 39,371 *
Edward N. Patrone(10).................................... 2,000 *
All directors and executive officers as a group (10
persons)(11)............................................ 10,020,310 52.7%
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to shares shown as beneficially owned by such person.
For purposes of calculating the number and percentage of shares
beneficially owned, the number of shares of common stock deemed outstanding
consists of 19,014,545 shares outstanding on June 30, 1999, plus the number
of shares of common stock underlying stock options held by the named person
that are exercisable within 60 days. Except as otherwise specified below,
the address of each of the beneficial owners identified is 3820 Northdale
Boulevard, Suite 200A, Tampa, Florida 33624.
(2) Golder, Thoma, Cressey, Rauner, Inc. is the general partner of GTCR IV,
L.P., which in turn is the general partner of Golder, Thoma, Cressey,
Rauner Fund IV, L.P. As a result, all three of these entities may be deemed
to share voting and investment power over, and therefore to be the
beneficial owners of, the shares held by Golder, Thoma, Cressey, Rauner
Fund IV, L.P. Their address is 233 South Wacker Drive, Suite 6100, Chicago,
Illinois 60606. Carl Thoma and William Kessinger, both of whom are
directors of Global, are each Principals of Golder, Thoma, Cressey, Rauner,
Inc. and may therefore also be deemed to beneficially own these shares by
virtue of their shared voting and investment power over them. Mr. Thoma's
address is c/o Thoma Cressey Equity Partners, 233 South Wacker Drive, Suite
4460, Chicago, Illinois 60606. Mr. Kessinger's address is c/o GTCR Golder,
Rauner, LLC, 233 South Wacker Drive, Suite 6100, Chicago, Illinois 60606.
(3) As the exclusive investment advisor to Jackson National Life Insurance
Company, PPM America, Inc. shares voting and investment power over, and
therefore may be deemed to be the beneficial owner of, the shares held by
Jackson National Life Insurance Company. Bruce Gorchow, a director of
Global, is Executive Vice President of PPM America, Inc. and a member of
its underwriting committee. Accordingly, Mr. Gorchow may be deemed to share
voting and investment power over, and therefore beneficial ownership of,
Jackson National Life Insurance Company's shares. The address for Jackson
National Life Insurance Company, PPM America, Inc. and Mr. Gorchow is c/o
PPM America, Inc., 225 West Wacker Drive, Suite 1200, Chicago, Illinois
60606.
(4) Includes 27,600 shares of common stock held of record by members of Mr.
Johnson's immediate family over which Mr. Johnson has shared dispositive
and sole voting power and 50 shares of common stock subject to options
exercisable within 60 days.
(5) Includes 2,050 shares of common stock subject to options exercisable within
60 days.
(6) Includes 2,050 shares of common stock subject to options exercisable within
60 days.
(7) Includes 2,765 shares held by Mr. Vieira's wife over which Mr. Vieira may
be deemed to share voting and investment power. Also includes 1,050 shares
of common stock subject to options exercisable within 60 days.
(8) Includes 28,306 shares held by a trustee for the benefit of members of Mr.
Berney's immediate family over which Mr. Berney, as co-trustee with his
wife, shares voting and investing power and 8,500 shares held by the estate
of Mr. Berney's father, over which Mr. Berney, as executor, has sole voting
and investing power. Also includes 4,050 shares of common stock subject to
options exercisable within 60 days.
(9) Includes 5,200 shares of common stock held of record by members of Mr. Todd
Johnson's immediate family and 1,250 shares of common stock subject to
options exercisable within 60 days.
(10) Includes 2,000 shares of common stock subject to options exercisable
within 60 days. Mr. Patrone's address is 101 South Nineteenth Avenue,
Longport, New Jersey 08403.
(11) See notes (2) through (10).
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DESCRIPTION OF SENIOR CREDIT FACILITIES
Global's senior credit facilities with First Union National Bank and a
syndicate of lenders consist of a $150.0 million five-year senior secured
revolving line of credit (including access to a $15.0 million swingline line of
credit), a $25.0 million five-year senior term loan, and a $75.0 million seven-
year senior term loan. The senior credit facilities are available for
acquisitions and for working capital purposes.
Security
The senior credit facilities are secured by a first priority lien on
substantially all of the properties and assets of the Global and its material
subsidiaries (the "borrowers"), now owned or acquired thereafter, including,
without limitation, a pledge of the stock or partnership interest of each of
Global's material subsidiaries.
Interest and Fees
The revolving line of credit and the five-year term loan bear interest at
rates ranging from 2.00% to 3.00% over LIBOR or from .75% to 1.75% over a base
rate related to the higher of First Union's prime rate or the federal funds
rate plus 50 basis points and varying according to Global's ratio of its total
funded debt to earnings before interest, taxes, depreciation and amortization.
The seven-year term loan bears bear interest at a rate equal to 3.25% over
LIBOR or 2.00% over a base rate equal to the higher of First Union's prime rate
or the federal funds rate plus 50 basis points. The senior credit facilities
provide for an unused commitment fee payable to the lenders and certain other
fees payable by the borrowers.
Events of Default and Covenants
The senior credit facilities contain affirmative and negative covenants
customary for agreements of this type, including, among others, covenants
restricting the borrowers with respect to the incurrence of debt (including
guarantees); the creation of liens; substantially changing the nature of
Global's or its subsidiaries' business; the consummation of certain
transactions such as disposition of substantial assets, mergers, acquisitions,
reorganizations and recapitalizations; the making of certain investments and
loans, non-ordinary assets sales and capital expenditures; the paying of
dividends and other distributions; the upstream transfer or distribution of
assets from subsidiaries of Global to Global or other subsidiaries of Global,
other than in the context of the transferring subsidiary's liquidation;
transactions with affiliates; and the borrowers' ability to repay certain debt.
The senior credit facilities also require the borrowers to comply with certain
financial tests and maintain certain financial ratios. Under these financial
ratios the borrowers shall (1) not exceed a maximum leverage ratio, (2) not
exceed a maximum debt to capitalization ratio, (3) maintain a minimum interest
coverage ratio, (4) maintain a minimum EBITDA and (5) not exceed annual capital
expenditure limitations.
The senior credit facilities contain customary events of default. An event of
default under the senior credit facilities will also allow the lenders to
accelerate, or, in certain cases, will automatically cause the acceleration of,
the maturity of the debt under the senior credit facilities and will also
restrict the ability of the borrowers to meet their obligations to the holders
of the notes.
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DESCRIPTION OF EXCHANGE NOTES
We issued the outstanding notes and will issue the exchange notes under the
Indenture, dated March 8, 1999, among Global, its subsidiaries (the "Note
Guarantors") and United States Trust Company of New York, as Trustee (the
"Trustee"). The terms of the exchange notes include those stated in the
Indenture and those made a part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "TIA").
We summarize below certain provisions of the Indenture, but do not restate
the Indenture in its entirety. We urge you to read the Indenture because it,
and not this description, defines your rights as a Holder of the Notes. You can
obtain a copy of the Indenture from the Company.
Key terms used in this section are defined under "--Certain Definitions."
When we refer to the "Company" in this section, we mean Global Imaging Systems,
Inc. and not its subsidiaries. When we refer to "Notes" in this section, we
mean the exchange notes and also, where the context requires, the outstanding
notes and Additional Notes.
General
The exchange notes will be issued solely in exchange for an equal principal
amount of outstanding notes pursuant to the exchange offer. The form and terms
of the exchange notes will be identical in all material respects to the form
and terms of the outstanding notes except that (i) the exchange notes will have
been registered under the Securities Act and (ii) the registration rights and
contingent liquidated damages provisions applicable to the outstanding notes
are not applicable to the exchange notes. The Notes are general unsecured
senior subordinated obligations of the Company. This means that the Notes are
subordinate to Senior Indebtedness of the Company and rank equal or prior to
other Indebtedness of the Company. In addition, the Notes are effectively
subordinated to secured Indebtedness of the Company and its Subsidiaries, in
each case, to the extent of the assets securing such Indebtedness.
The Notes are unconditionally guaranteed on a general unsecured senior
subordinated basis by all of the Company's existing Subsidiaries. This means
that the Note Guarantee of each Note Guarantor is subordinated to Senior
Indebtedness of that Note Guarantor and ranks equal or prior to other
Indebtedness of that Note Guarantor. In addition, the Note Guarantee of each
Note Guarantor is effectively subordinated to secured Indebtedness of such Note
Guarantor to the extent of the assets securing such Indebtedness. All future
direct and indirect Domestic Restricted Subsidiaries of the Company, other than
special purpose financing vehicles, will also guarantee the Notes on the same
basis.
Additional Notes
Subject to the limitations set forth under "Certain Covenants--Limitation on
Incurrence of Additional Indebtedness," the Company may incur additional
Indebtedness. At the Company's option, this additional Indebtedness may consist
of additional Notes ("Additional Notes"), in one or more transactions, which
have the same terms as outstanding notes and exchange notes. Holders of
Additional Notes would have the right to vote together with holders of the
outstanding notes and the exchange notes as one class.
Principal, Maturity and Interest
The Company will issue exchange notes in denominations of $1,000 and integral
multiples of $1,000. The Notes will mature on February 15, 2007. The Notes will
not be entitled to the benefit of any mandatory sinking fund.
Interest on the Notes will accrue at the rate of 10 3/4% per annum and will
be payable semi-annually in arrears on each February 15 and August 15,
commencing on August 15, 1999. Payments will be made to the persons who are
registered Holders at the close of business on the February 1 and August 1,
respectively, immediately preceding the applicable interest payment date.
Interest on the Notes will accrue from the most
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<PAGE>
recent date to which interest has been paid or, if no interest has been paid,
from and including the date of issuance. The redemption of Notes with unpaid
and accrued interest to the date of redemption will not affect the right of
Holders of record on a record date to receive interest due on an interest
payment date.
Initially, the Trustee will act as Paying Agent and Registrar for the Notes.
The Company may change the Paying Agent and Registrar without notice to
holders. If a holder has given wire transfer instructions to the Paying Agent,
the Paying Agent will make all principal, premium and interest payments on
those Notes in accordance with those instructions. All other payments on the
Notes will be made at the office or agency of the Paying Agent and Registrar in
New York City unless the Company elects to cause the Paying Agent to make
interest payments by check mailed to the registered holders at their registered
addresses.
Book-Entry; Delivery And Form
The exchange notes will be issued in the form of a global note (the "Global
Note"). The Global Note will be deposited with, or on behalf of, DTC and
registered in the name of DTC or its nominee. Except as set forth below, the
Global Note may be transferred in whole and not in part, only to DTC or another
nominee of DTC. Investors may hold their beneficial interests in the Global
Note directly through DTC if they have an account with DTC or indirectly
through organizations which have accounts with DTC.
Exchange notes that are issued as described below under "--Certificated
Exchange Notes" will be issued in definitive form. Upon the transfer of an
exchange note in definitive form, such exchange note will, unless the Global
Note has previously been exchanged for exchange notes in definitive form, be
exchanged for an interest in the Global Note representing the principal amount
of exchange notes being transferred.
Certain Book-Entry Procedures for the Global Note
The descriptions of the operations and procedures of DTC, Euroclear and Cedel
Bank set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. The
Company takes no responsibility for these operations or procedures, and
investors are urged to contact the relevant system or its participants directly
to discuss these matters.
DTC has advised the Company that it is:
. a limited purpose trust company organized under the laws of the State of
New York,
. a "banking organization" within the meaning of the New York Banking Law,
. a member of the Federal Reserve System,
. a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended and
. a "clearing agency" registered pursuant to Section 17A of the Exchange
Act.
DTC was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. DTC's Participants include securities
brokers and dealers (including the initial purchasers of the outstanding
notes), banks and trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Investors who
are not Participants may beneficially own securities held by or on behalf of
DTC only through Participants or Indirect Participants.
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The Company expects that pursuant to procedures established by DTC
. upon deposit of the Global Note, DTC will credit the accounts of
Participants with an interest in the Global Note, and
. ownership of the exchange notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by
DTC (with respect to the interests of Participants) and the records of
Participants and the Indirect Participants (with respect to the
interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in exchange notes represented by a Global Note to pledge or transfer such
interest to persons or entities that do not participate in DTC's system, or to
otherwise take actions in respect of such interest, may be affected by the lack
of a physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of the Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or
holder of the exchange notes represented by the Global Note for all purposes
under the Indenture. Except as provided below, owners of beneficial interests
in the Global Note will not be entitled to have exchange notes represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery of certificated notes, and will not be considered the
owners or holders thereof under the Indenture for any purpose, including with
respect to the giving of any direction, instruction or approval to the Trustee
thereunder. Accordingly, each holder owning a beneficial interest in the Global
Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such holder owns its interest, to exercise any rights of a holder
of exchange notes under the Indenture or such Global Note. The Company
understands that under existing industry practice, in the event that the
Company requests any action of holders of exchange notes, or a holder that is
an owner of a beneficial interest in the Global Note desires to take any action
that DTC, as the holder of such Global Note, is entitled to take, DTC would
authorize the Participants to take such action and the Participants would
authorize holders owning through such Participants to take such action or would
otherwise act upon the instruction of such holders. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of exchange notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such
exchange notes.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal of or interest on the Global Note, will credit participants' accounts
with payments in amounts proportionate to their respective beneficial interests
in the principal amount of the Global Note as shown on the records of DTC or
its nominee. The Company also expects that payments by participants to owners
of beneficial interests in the Global Note held through such participants will
be governed by standing instructions and customary practices and will be the
responsibility of such participants. The Company will not have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, beneficial ownership interests in the Global Note
for any Note or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests or for any other aspect of the
relationship between DTC and its participants or the relationship between such
participants and the owners of beneficial interests in the Global Note owning
through such participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel Bank will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
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Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel Bank participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel
Bank, as the case may be, by its respective depositary; however, such cross-
market transactions will require delivery of instructions to Euroclear or Cedel
Bank, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time)
of such system. Euroclear or Cedel Bank, as the case may be, will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to effect final settlement on its behalf
by delivering or receiving interests in the relevant Global Notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel Bank
participants may not deliver instructions directly to the depositaries for
Euroclear or Cedel Bank.
Because of time zone differences, the securities account of a Euroclear or
Cedel Bank participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such crediting will be reported to
the relevant Euroclear or Cedel Bank participant, during the securities
settlement processing day (which must be a business day for Euroclear and Cedel
Bank) immediately following the settlement date of DTC. Cash received in
Euroclear or Cedel Bank as a result of sales of interest in a Global Security
by or through a Euroclear or Cedel Bank participant to a Participant in DTC
will be received with value on the settlement date of DTC but will be available
in the relevant Euroclear or Cedel Bank cash account only as of the business
day for Euroclear or Cedel Bank following DTC's settlement date.
DTC, Euroclear and Cedel Bank are under no obligation to perform or to
continue to perform the foregoing procedures to facilitate transfers of
interests in the Global Note among participants in DTC, Euroclear and Cedel,
and such procedures may be discontinued at any time. Neither the Company nor
the Trustee will have any responsibility for the performance by DTC, Euroclear
or Cedel Bank or their respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
The information in this prospectus concerning DTC, Euroclear and Cedel and
their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Certificated Exchange Notes
If
. the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as
a clearing agency under the Exchange Act and a successor depositary is
not appointed within 90 days of such notice or cessation,
. the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of exchange notes in definitive form under
the Indenture, or
. upon the occurrence of certain other events as provided in the
Indenture,
then, upon surrender by DTC of the Global Note, certificated exchange notes
in definitive form in denominations of U.S. $1,000 and integral multiples
thereof will be issued to each person that DTC identifies as the beneficial
owner of the Notes represented by the Global Note. Upon any such issuance,
the Trustee is required to register such certificated exchange notes in the
name of such person or persons (or the nominee of any thereof) and cause
the same to be delivered thereto. Subject to the foregoing, the Global Note
is not exchangeable, except for a Global Note of the same aggregate
denomination to be registered in the name of DTC or its nominee.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related exchange notes and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from DTC for all
purposes, including with respect to the registration and delivery, and the
respective principal amounts, of the exchange notes to be issued.
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Note Guarantees
Each Note Guarantor will unconditionally guarantee the performance of all
obligations of the Company under the Indenture and the Notes. Each Note
Guarantee will be subordinate to the payment in full of all Senior Indebtedness
of the relevant Note Guarantor. The Guaranteed Obligations of each Note
Guarantor will be limited to the maximum amount as will result in the
Guaranteed Obligations of that Note Guarantor not constituting a fraudulent
conveyance or fraudulent transfer under federal or state law. See "Risk
Factors--Issuance of the Exchange Notes and Any Subsidiary Guarantee May Be
Subject to Fraudulent Conveyance Laws."
A Note Guarantor will be released and relieved of its obligations under its
Note Guarantee in the event:
(1) there is a Legal Defeasance of the Notes as described under "Legal
Defeasance and Covenant Defeasance";
(2) the Note Guarantor ceases to exist as a result of its merger into
the Company or another Note Guarantor or as a result of its liquidation in
a manner not giving rise to a Default or Event of Default;
(3) there is a sale or other disposition of all or a portion of the
Capital Stock of such Note Guarantor to a Person other than the Company or
one of its Subsidiaries such that such Note Guarantor is no longer a
Subsidiary of the Company; or
(4) a Note Guarantor is designated as an Unrestricted Subsidiary in
accordance with "Certain Covenants--Designation of Unrestricted
Subsidiaries";
provided that, in each case, the transaction is carried out pursuant to and in
accordance with, as applicable, "Certain Covenants--Limitation on Asset Sales",
"--Merger, Consolidation and Sale of Assets" and "--Limitation on Restricted
Payments".
If any Person becomes a Domestic Restricted Subsidiary (including, without
limitation, upon a Revocation of the Designation of a Subsidiary as an
Unrestricted Subsidiary), other than a special purpose financing vehicle, the
Company will cause that Domestic Restricted Subsidiary concurrently to become a
Note Guarantor by executing a supplemental indenture and providing the Trustee
with an Officers' Certificate and Opinion of Counsel.
Subordination of the Notes and the Note Guarantees
The payment of principal, premium and interest, if any, on the Notes and the
Note Guarantees will be subordinated to the prior payment in full of all Senior
Indebtedness of the Company and/or the Note Guarantors, as the case may be.
The holders of Senior Indebtedness will be entitled to receive payment in
full in cash of all Obligations due in respect thereof before the Holders of
Notes will be entitled to receive any payment with respect to the Notes or any
Note Guarantee, as the case may be (except that Holders of Notes may receive
and retain Permitted Junior Securities and payments made from the trust
described under "--Legal Defeasance and Covenant Defeasance"), in the event of
any distribution to creditors of the Company or the relevant Note Guarantor, as
the case may be:
(1) in a liquidation or dissolution of the Company or such Note
Guarantor;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or such Note Guarantor or its property;
(3) in an assignment for the benefit of its creditors; or
(4) in any marshalling of the assets and liabilities of the Company or
such Note Guarantor.
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The Company also may not make any payment in respect of the Notes, and any
Note Guarantor may not make any payment in respect of its Note Guarantee
(except in Permitted Junior Securities or from the trust described under "--
Legal Defeasance and Covenant Defeasance"), if:
(1) a payment default on Designated Senior Indebtedness of the Company
or such Note Guarantor, as the case may be, occurs and is continuing beyond
any applicable grace period; or
(2) any other default occurs and is continuing on Designated Senior
Indebtedness of the Company or such Note Guarantor, as the case may be,
that permits holders of the Designated Senior Indebtedness to accelerate
its maturity and the Trustee receives a notice of that default (a "Payment
Blockage Notice") from the Company or the holders of any Designated Senior
Indebtedness.
Payments on the Notes or any Note Guarantee, as the case may be, may and
shall be resumed:
(1) in the case of a payment default, upon the date on which it is cured
or waived; and
(2) in case of a nonpayment default, the earlier of the date on which it
is cured or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Senior Indebtedness of the Company or such Note Guarantor, as the case may
be, has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice; and
(2) all scheduled payments of principal, premium and interest on the
Notes that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the Trustee shall be, or be made, the basis
for a subsequent Payment Blockage Notice unless that default shall have been
cured or waived for a period of not less than 180 days.
The Company must promptly notify holders of Senior Indebtedness if payment of
the Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or reorganization of the Company or any Note
Guarantor, Holders of these Notes may recover less than creditors of the
Company or a Note Guarantor that are holders of Senior Indebtedness. See "Risk
Factors--The Notes and Guarantees Will Be Unsecured and Subordinated to Our
Senior Debt." As of June 30, 1999, the Company and the Note Guarantors had
approximately $215.2 million in Senior Indebtedness outstanding. The Indenture
will permit us and the Note Guarantors to incur Senior Indebtedness.
Redemption
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after February 15,
2003, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof),
plus, in each case, accrued interest to the date of redemption if redeemed
during the twelve-month period commencing on February 15 of any year set forth
below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............................................................ 105.375%
2004............................................................ 102.688%
2005 and thereafter............................................. 100.000%
</TABLE>
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Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to February 15, 2002, the Company may, at its option, use
the net cash proceeds of one or more Public Equity Offerings (as defined below)
to redeem in the aggregate up to 35% of the aggregate principal amount of the
Notes originally issued at a redemption price equal to 110.750% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of redemption; provided, that:
(1) after giving effect to any such redemption at least 65% of the
aggregate principal amount of the Notes originally issued remains
outstanding; and
(2) the Company shall make such redemption not more than 60 days after
the consummation of such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of the Company pursuant
to a registration statement filed with the Commission in accordance with the
Securities Act.
In the event that less than all of the Notes are to be redeemed at any time,
selection of Notes for redemption will be made by the Trustee in compliance
with the requirements of the principal national securities exchange, if any, on
which Notes are listed or, if Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or by any method as the
Trustee shall deem fair and appropriate. No Notes of a principal amount of
$1,000 or less shall be redeemed in part and Notes of a principal amount in
excess of $1,000 may be redeemed in part in multiples of $1,000 only. If a
partial redemption is made with the proceeds of a Public Equity Offering,
selection of the Notes or portions thereof for redemption shall, subject to the
preceding proviso, be made by the Trustee only on a pro rata basis or on as
nearly a pro rata basis as is practicable (subject to the procedures of DTC),
unless the method is otherwise prohibited.
Notice of redemption shall be mailed by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of Notes to be
redeemed at its registered address. If Notes are to be redeemed in part only,
the notice of redemption shall state the portion of the principal amount
thereof to be redeemed. A new Note in a principal amount equal to the
unredeemed portion thereof will be issued in the name of the holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company had deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
Change of Control
Upon the occurrence of a Change of Control, each holder will have the right
to require that the Company purchase all or a portion (in integral multiples of
$1,000) of the holder's Notes pursuant to the Change of Control Offer described
below, at a purchase price equal to 101% of the principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first-class mail, a notice to each holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. The notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 60 days from the date the
notice is mailed, other than as may be required by law (the "Change of Control
Payment Date").
On the Change of Control Payment Date, the Company will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
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(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for the holder's Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each new Note will be in principal amount of
$1,000 or an integral multiple thereof.
The Senior Credit Facility contains, and future Senior Indebtedness of the
Company may contain, prohibitions on the occurrence of certain events that
would constitute a Change of Control or require that Senior Indebtedness be
repurchased upon a Change of Control. Moreover, the exercise by the Holders of
their right to require the Company to repurchase the Notes would cause a
default under the Senior Credit Facility and could cause a default under other
Senior Indebtedness even if the Change of Control itself does not. Any failure
to purchase tendered Notes would constitute an Event of Default under the
Indenture which would, in turn, constitute an Event of Default under Senior
Indebtedness.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third-party financing to the extent it does not have
available funds to meet its purchase obligations and any other obligations in
respect of Senior Indebtedness. However, there can be no assurance that the
Company would be able to obtain necessary financing.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the Indenture applicable to a Change of Control Offer made by the
Company and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
Holders will not be entitled to require the Company to repurchase Notes in
the event of a takeover, recapitalization, leveraged buyout or similar
transaction which is not a Change of Control.
The Company will comply with the requirements of Rule 14e-1 and any other
applicable securities laws and regulations under the Exchange Act in connection
with the purchase of Notes pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
"Change of Control" provisions of the Indenture, the Company will comply with
the applicable securities laws and regulations and will not be deemed to have
breached its obligations under these provisions of the Indenture by virtue
thereof.
Certain Covenants
The Indenture will contain, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness.
(1) The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness;
provided, that the Company and any Note Guarantor may Incur Indebtedness
(including Acquired Indebtedness) if, at the time of and immediately after
giving pro forma effect to the Incurrence thereof and the application of
the proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.0 to 1.0.
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(2) For purposes of determining compliance with, and the outstanding
principal amount of any particular Indebtedness Incurred pursuant to and in
compliance with, this covenant, the amount of Indebtedness issued at a
price that is less than the principal amount thereof will be equal to the
amount of the liability in respect thereof determined in accordance with
GAAP. Accrual of interest, the accretion or amortization of original issue
discount, the payment of regularly scheduled interest in the form of
additional Indebtedness of the same instrument or the payment of regularly
scheduled dividends on Disqualified Stock in the form of additional
Disqualified Stock with the same terms will not be deemed to be an
Incurrence of Indebtedness for purposes of this covenant.
Limitation on Restricted Payments.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, take any of the following actions
(each, a "Restricted Payment"):
(a) declare or pay any dividend or return of capital or make any
distribution on or in respect of shares of Capital Stock of the Company or
any Restricted Subsidiary to holders of such Capital Stock, other than:
. dividends or distributions payable in Qualified Capital Stock of
the Company or in warrants, rights or options to purchase or
acquire shares of Qualified Capital Stock of the Company,
. dividends or distributions payable to the Company and/or a
Restricted Subsidiary, or
. pro rata dividends or distributions to the Company and/or a
Restricted Subsidiary and minority holders of Capital Stock of a
Restricted Subsidiary;
(b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Restricted Subsidiary (except for
Permitted Investments) or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock, other than purchases,
redemptions, acquisitions or retirements for value of any such Capital
Stock, warrants, rights or options owned by the Company and/or any
Restricted Subsidiary or on a pro rata basis from the Company and/or any
Restricted Subsidiaries, on the one hand, and minority holders of Capital
Stock of a Restricted Subsidiary, on the other hand;
(c) make any principal payment on, purchase, defease, redeem, prepay,
decrease or otherwise acquire or retire for value, prior to any scheduled
final maturity, scheduled repayment or scheduled sinking fund payment, as
the case may be, any Subordinated Indebtedness; or
(d) make any Investment (other than Permitted Investments);
if at the time of the Restricted Payment immediately after giving effect
thereto:
(1) a Default or an Event of Default shall have occurred and be
continuing;
(2) the Company is not able to Incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with "--
Limitation on Incurrence of Additional Indebtedness"; or
(3) the aggregate amount (the amount expended for these purposes, if
other than in cash, being the Fair Market Value of the relevant property)
of Restricted Payments, including the proposed Restricted Payment, made
subsequent to the Issue Date to the date of such proposed Restricted
Payment shall exceed the sum of:
(A) 50% of cumulative Consolidated Net Income or, if cumulative
Consolidated Net Income shall be a loss, minus 100% of the loss, accrued
during the period, treated as one accounting period, beginning on the first
day of the fiscal quarter that includes the Issue Date to the end of the
most recent fiscal quarter for which consolidated financial information of
the Company is available; plus
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(B) 100% of the aggregate net cash proceeds received by the Company or
any Restricted Subsidiary from any Person from any:
. contribution to the equity capital of the Company not representing
an interest in Disqualified Capital Stock or issuance and sale
(other than to a Restricted Subsidiary) of Qualified Capital Stock
of the company, in each case, subsequent to the Issue Date, and
. issuance and sale (other than to a Restricted Subsidiary) subsequent
to the Issue Date of any Indebtedness for borrowed money of the
Company or any Restricted Subsidiary that has been converted into or
exchanged for Qualified Capital Stock of the Company (excluding any
net cash proceeds applied in accordance with clause (3) of the
following paragraph); plus
(C) without duplication of any amounts included in clause (A) above or
(D) or (E) below, in the case of any of the following Investments made
after the Issue Date:
. the disposition of such Investment by, or repayment of such
Investment to, the Company or a Restricted Subsidiary, or
. the receipt by the Company or any Restricted Subsidiary of any
dividends, distributions or interest payments from such Investment,
or
. if such Investment was a guaranty, the release of the guaranty,
an amount equal to the lesser of:
. the amount of such Investment treated as a Restricted Payment
pursuant to clause (d) above, and
. the amount in cash received by the Company or any Restricted
Subsidiary upon such disposition, repayment, dividend or
distribution or, in the case of a released guaranty, the amount of
such guaranty less any payments made in respect thereof; plus
(D) without duplication of any amounts included in clause (C) above and
excluding any amounts covered by (E) below, in the event the Company or any
Restricted Subsidiary makes any Investment in a Person that, as a result of
or in connection with such Investment, becomes a Restricted Subsidiary, an
amount equal to the Company's or any Restricted Subsidiary's existing
Investment in such Person that was previously treated as a Restricted
Payment pursuant to clause (d) above; plus
(E) so long as the Designation of such Unrestricted Subsidiary was
treated as a Restricted Payment made after the Issue Date, in the case of a
Revocation with respect to any Unrestricted Subsidiary after the Issue Date
in accordance with "--Limitation on Designation of Unrestricted
Subsidiaries," an amount equal to the lesser of:
. the Company's Investment in such Unrestricted Subsidiary at the time
of such Revocation; and
. that portion of the Fair Market Value of the net assets of such
Unrestricted Subsidiary at the time of such Revocation that is
proportionate to the Company's equity interest in such Unrestricted
Subsidiary; and
. the Designation Amount with respect to such Unrestricted Subsidiary
upon its Designation which was treated as a Restricted Payment plus
any Investment made after Designation and prior to Revocation that
was treated as a Restricted Payment, in each case less any amounts
included in clause (A) or (C) above; plus
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(F) $15 million.
Notwithstanding the preceding, this covenant does not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration of such dividend if the dividend would have been permitted on
the date of declaration;
(2) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any shares of Capital Stock of the Company
or any warrants, rights or options to purchase or acquire shares of Capital
Stock of the Company,
(a) in exchange for Qualified Capital Stock of the Company or
(b) through the application of the net cash proceeds received by the
Company from a substantially concurrent sale of Qualified Capital Stock of
the Company or a contribution to the equity capital of the Company not
representing an interest in Disqualified Capital Stock, in each case not
received from a Restricted Subsidiary; provided, that the value of any such
Qualified Capital Stock, issued in exchange for such acquired Capital
Stock, warrants, rights or options and any such net cash proceeds shall be
excluded from clause (3)(B) of the first paragraph of this covenant (and
were not included therein at any time);
(3) if no Default or Event of Default shall have occurred and be
continuing, the voluntary prepayment, purchase, defeasance, redemption or
other acquisition or retirement for value of any Subordinated Indebtedness:
(a) solely in exchange for shares of Qualified Capital Stock of the
Company, or
(b) through the application of net cash proceeds of a substantially
concurrent sale, other than to a Restricted Subsidiary of the Company, of:
. Qualified Capital Stock of the Company or
. Refinancing Indebtedness for such Subordinated Indebtedness;
provided, that the value of such Capital Stock or warrants, rights or
options issued in exchange for such Subordinated Indebtedness and any
such net case proceeds shall be excluded from clause (3)(B) of the
first paragraph of this covenant (and were not included therein at any
time);
(4) if no Default or Event of Default shall have occurred and be
continuing, repurchases by the Company of Common Stock of the Company or
options, warrants or other securities exercisable or convertible in Common
Stock of the Company from employees or directors of the Company or any of
its Subsidiaries or their authorized representatives upon the death,
disability or termination of employment or directorship of such employees
or directors, in an aggregate amount not to exceed $2.5 million in any
calendar year and $7 million in the aggregate; and
(5) making payments to dissenting shareholders pursuant to applicable
law in connection with a consolidation, merger or transfer of assets
permitted under "--Merger, Consolidation or Sale of Assets."
In determining the aggregate amount of Restricted Payments made subsequent
to the Issue Date, amounts expended pursuant to clauses (1) (without
duplication for the declaration of the relevant dividend), (4) and (5)
shall be included in such calculation and amounts expended pursuant to
clauses (2) and (3) shall not be included in such calculation.
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Limitation on Asset Sales.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
(a) the Company or the applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the assets sold or otherwise disposed of, and
(b) at least 75% of the consideration received for the assets sold by
the Company or the Restricted Subsidiary, as the case may be, in such Asset
Sale shall be in the form of:
(1) cash or Cash Equivalents or
(2) (A) tangible assets to be used by the Company or any Restricted
Subsidiary in a Permitted Business or
(B) Capital Stock of a Person principally engaged in a Permitted
Business that will become, upon such purchase, a Restricted
Subsidiary (collectively, "Replacement Assets"), in each case,
received at the time of such Asset Sale.
The amount of any (a) Indebtedness for borrowed money (other than Subordinated
Indebtedness) of the Company or such Restricted Subsidiary (other than
Subordinated Indebtedness) that is actually assumed by the transferee in such
Asset Sale and from which the Company or such Restricted Subsidiary is fully
and unconditionally released and (b) any securities, notes or other obligations
received by the Company or such Restricted Subsidiary from a transferee that
are converted by the Company or such Restricted Subsidiary into cash (to the
extent of cash received) within 30 days of receipt thereof, shall be deemed to
be cash for purposes of determining the percentage of cash consideration
received by the Company or such Restricted Subsidiary.
The Company or such Restricted Subsidiary, as the case may be, may apply the
Net Cash Proceeds of any such Asset Sale within 270 days thereof to:
(a) repay any Indebtedness that is not Subordinated Indebtedness and
permanently reduce the commitments, if any, with respect thereto;
(b) to purchase Replacement Assets from a Person other than the Company
and its Restricted Subsidiaries; or
(c) any combination of (a) and (b).
To the extent all or a portion of the Net Cash Proceeds of any Asset Sale are
not applied within 270 days of the Asset Sale as described in clause (a) or (b)
of the immediately preceding paragraph, the Company will make an offer to
purchase (the "Net Proceeds Offer"), at a price equal to 100% of the principal
amount of the Notes to be purchased, plus accrued and unpaid interest thereon,
to the date of purchase. Pursuant to a Net Proceeds Offer, the Company shall
purchase from all tendering holders on a pro rata basis (and on a pro rata
basis with the holders of any other Senior Subordinated Indebtedness with
similar provisions requiring the Company to offer to purchase such Senior
Subordinated Indebtedness with the proceeds of Asset Sales), that principal
amount of Notes and such other Senior Subordinated Indebtedness to be purchased
equal to such unapplied Net Cash Proceeds. The purchase of Notes pursuant to a
Net Proceeds Offer shall occur not less than 20 business days following the
date thereof (or any longer period as may be required by law) nor more than 60
days following the 270th day following the Asset Sale. The Company may,
however, defer a Net Proceeds Offer until there is an aggregate amount of
unapplied Net Cash Proceeds equal to or in excess of $10 million resulting from
one or more Asset Sales (at which time, the entire amount of unapplied Net Cash
Proceeds, and not just the amount in excess of $10 million, shall be applied as
required pursuant to this paragraph).
Each Net Proceeds Offer will be mailed to the record holders as shown on the
register of Holders within 20 days following such 270th day, with a copy to the
Trustee. It shall comply with the procedures set forth in
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the Indenture. Upon receiving notice of the Net Proceeds Offer, holders may
elect to tender their Notes in whole or in part in integral multiples of
$1,000 in exchange for cash. To the extent holders of Notes and holders of
other Senior Subordinated Indebtedness, if any, which are the subject of a Net
Proceeds Offer properly tender Notes or such other Senior Subordinated
Indebtedness in an aggregate amount exceeding the amount of unapplied Net Cash
Proceeds, the Company will purchase the Notes and such other Senior
Subordinated Indebtedness on a pro rata basis (based on amounts tendered).
The Company will comply with the requirements of Rule 14e-1 and any other
applicable securities laws and regulations under the Exchange Act in
connection with the purchase of Notes pursuant to a Net Proceeds Offer. To the
extent that the provisions of any securities laws, or regulations conflict
with the "Asset Sale" provisions of the Indenture, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under the "Asset Sale" provisions of the
Indenture by virtue thereof.
Upon completion of a Net Proceeds Offer, the amount of Net Cash Proceeds
will be reset at zero. Accordingly, to the extent that the aggregate amount of
Notes and other Indebtedness tendered pursuant to a Net Proceeds Offer is less
than the aggregate amount of unapplied Net Cash Proceeds, the Company may use
any remaining Net Cash Proceeds for any purpose not otherwise prohibited by
the Indenture.
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the Surviving Entity shall be deemed to have sold the
properties and assets of the Company and its Restricted Subsidiaries not so
transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to the deemed sale as if it were an
Asset Sale. In addition, the Fair Market Value of properties and assets of the
Company or its Restricted Subsidiaries so deemed to be sold shall be deemed to
be Net Cash Proceeds for purposes of this covenant.
If at any time any non-cash consideration received by the Company or any
Restricted Subsidiary, as the case may be, in connection with any Asset Sale
is converted into or sold or otherwise disposed of for cash (other than
interest received with respect to any non-cash consideration), the conversion
or disposition shall be deemed to constitute an Asset Sale hereunder and the
Net Cash Proceeds thereof shall be applied in accordance with this covenant.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.
(a) Except as provided in clause (b) below, the Company will not, and will
not cause or permit any of its Restricted Subsidiaries to, directly or
indirectly, create or otherwise cause or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on or in respect of
its Capital Stock to the Company or any other Restricted Subsidiary or pay
any Indebtedness owed to the Company or any other Restricted Subsidiary;
(2) make loans or advances to, or guarantee any Indebtedness or other
obligations of, or make any Investment in, the Company or any other
Restricted Subsidiary; or
(3) transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
(b) Clause (a) will not apply to encumbrances or restrictions existing
under or by reason of:
(1) applicable law;
(2) the Indenture;
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(3) any encumbrances or restrictions existing as of the Issue Date or
pursuant to any agreement governing Indebtedness in existence on the Issue
Date, in each case as in effect on the Issue Date;
(4) the Senior Credit Facility as in effect on the Issue Date, and any
amendments, restatements, renewals, replacements or refinancings thereof,
including to increase the availability thereunder; provided, that any
amendment, restatement, renewal, replacement or refinancing is not
materially more restrictive with respect to such encumbrances or
restrictions than those in existence on the Issue Date;
(5) customary non-assignment provisions of any contract and customary
provisions restricting assignment or subletting in any lease governing a
leasehold interest of any Restricted Subsidiary, or any customary
restriction on the ability of a Restricted Subsidiary to dividend,
distribute or otherwise transfer any asset which secures Indebtedness
secured by a Lien permitted to be Incurred under the Indenture of such
Restricted Subsidiary;
(6) Liens filed in favor of trade vendors;
(7) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person or the properties or assets of the Person
so acquired;
(8) restrictions with respect to a Restricted Subsidiary of the Company
imposed pursuant to a binding agreement which has been entered into for the
sale or disposition of Capital Stock or assets of such Restricted
Subsidiary; provided, that such restrictions apply solely to the Capital
Stock or assets of such Restricted Subsidiary being sold;
(9) customary restrictions imposed on the transfer of copyrighted or
patented materials, including as a result of the Royalty Agreement; or
(10) an agreement governing Indebtedness Incurred to Refinance
Indebtedness issued, assumed or Incurred pursuant to an agreement referred
to in clause (3), (4) or (5) above; provided, that such refinancing
agreement is not materially more restrictive with respect to such
encumbrances or restrictions than those contained in the agreement referred
to in such clause (3), (4) or (5).
Limitation on the Ownership of Capital Stock of Restricted Subsidiaries.
(a) The Company will not sell or dispose of any Capital Stock of any
Restricted Subsidiary and will not permit any Restricted Subsidiary to issue
any Capital Stock;
(b) Clause (a) will not apply to:
(1) Capital Stock held by the Company or a Restricted Subsidiary or
directors' qualifying shares or shares held by foreign Persons pursuant to
local laws governing the formation and ownership of foreign Persons;
(2) the sale of 100% of the shares of the Capital Stock of any
Restricted Subsidiary owned by the Company or any Restricted Subsidiary to
any Person other than the Company or effected in accordance with the
covenants described under "--Limitation on Asset Sales" and "--Merger,
Consolidation and Sale of Assets";
(3) Preferred Stock, other than Disqualified Capital Stock, of a special
purpose financing vehicle;
(4) in the case of Restricted Subsidiaries other than Wholly Owned
Restricted Subsidiaries, issuance of Capital Stock on a pro rata basis to
the Company and its Restricted Subsidiaries and minority
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shareholders of such Restricted Subsidiary (or on less than a pro rata
basis to any such minority holder if such minority holder does not acquire
its pro rata amount); and
(5) the sale of Capital Stock of a Restricted Subsidiary or issuance by
a Restricted Subsidiary of Capital Stock if following such sale or
issuance:
(A) such Restricted Subsidiary is no longer a Subsidiary,
(B) the Company's continuing Investment in such former Restricted
Subsidiary is in compliance with "--Limitations on Restricted Payments" and
(C) any sale of Capital Stock by the Company or any Restricted
Subsidiary is made in compliance with the covenant described under "--
Limitation of Asset Sales".
Limitation on Designation of Unrestricted Subsidiaries.
The Company may designate after the Issue Date any Subsidiary of the Company
as an "Unrestricted Subsidiary" under the Indenture (a "Designation") only if:
(1) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation;
(2) at the time of and after giving effect to such Designation, the
Company could Incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) pursuant to the covenant described under "-- Limitation on
Incurrence of Additional Indebtedness"; and
(3) the Company would be permitted to make an Investment at the time of
Designation (assuming the effectiveness of such Designation and treating
such Designation as an Investment at the time of Designation) pursuant to
the first paragraph of "--Limitation on Restricted Payments" in an amount
(the "Designation Amount") equal to the amount of the Company's Investment
in such Subsidiary on such date.
Neither the Company nor any Restricted Subsidiary will at any time:
(1) provide credit support for, subject any of its property or assets
(other than the Capital Stock of any Unrestricted Subsidiary) to the
satisfaction of, or guarantee, any Indebtedness of any Unrestricted
Subsidiary (including any undertaking, agreement or instrument evidencing
such Indebtedness); or
(2) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary,
except, in the case of (1) or (2), to the extent treated and permitted as a
Restricted Payment or Permitted Investment in accordance with "--Limitation on
Restricted Payments" and permitted under "--Limitation on Indebtedness".
The Company may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") only if:
(1) No Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation; and
(2) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if Incurred at
such time, have been permitted to be Incurred for all purposes of the
Indenture.
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The Designation of a Subsidiary of the Company as an Unrestricted Subsidiary
shall be deemed to include the Designation of all of the Subsidiaries of such
Subsidiary. All Designations and Revocations must be evidenced by resolutions
of the Board of Directors of the Company, delivered to the Trustee certifying
compliance with the preceding provisions.
Limitation on Layered Indebtedness.
The Company will not, and will not permit any Note Guarantor to, directly or
indirectly, Incur any Indebtedness that is subordinate in right of payment to
any other Indebtedness, unless such Indebtedness is subordinate in right of
payment to, or ranks equally with, the Notes or, in the case of a Note
Guarantor, its Note Guarantee.
Limitation on Liens.
The Company will not, and will not cause or permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Liens of any kind (except
for Liens securing Senior Indebtedness and Permitted Liens) against or upon any
of their respective properties or assets, whether owned on the Issue Date or
acquired after the Issue Date, or any proceeds therefrom, to secure any
Indebtedness unless contemporaneously therewith effective provision is made:
(1) in the case of the Company to secure the Notes and all other amounts
due under the Indenture; and
(2) in the case of a Note Guarantor, to secure such Note Guarantor's
Note Guarantee and all other amounts due under the Indenture,
in each case, equally and ratably with such Indebtedness (or, in the event that
such Indebtedness is subordinated in right of payment to the Notes or such Note
Guarantee, as the case may be, prior to such Indebtedness) with a Lien on the
same properties and assets securing such Indebtedness for so long as such
Indebtedness is secured by such Lien.
Merger, Consolidation and Sale of Assets.
The Company will not, in a single transaction or series of related
transactions, consolidate or merge with or into any Person (whether or not the
Company is the surviving Person), or sell, assign, transfer, lease, convey or
otherwise dispose of (or cause or permit any Restricted Subsidiary to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's and its Restricted Subsidiaries' properties and assets
(determined on a consolidated basis for the Company and its Restricted
Subsidiaries) to any Person unless:
(a) either:
(1) the Company shall be the surviving or continuing corporation or
(2) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and of the
Company's Restricted Subsidiaries substantially as an entirety (the
"Surviving Entity"):
(A) shall be a corporation, limited liability company,
partnership, trust or similar entity organized and validly existing
under the laws of the United States or any State thereof or the
District of Columbia and
(B) shall expressly assume, by supplemental indenture (in form
and substance satisfactory to the Trustee), executed and delivered
to the Trustee, the due and punctual payment of the
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principal of, and premium, if any, and interest on all of the Notes
and the performance and observance of every covenant of the Notes
and the Indenture on the part of the Company to be performed or
observed;
(b) immediately after giving effect to such transaction and the assumption
contemplated by clause (a)(2)(B) above (including giving effect on a pro forma
basis to any Indebtedness, including any Acquired Indebtedness, Incurred or
anticipated to be Incurred in connection with or in respect of such
transaction), the Company or such Surviving Entity, as the case may be:
(1) shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such
transaction; and
(2) shall be able to Incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to "--Limitation on Incurrence
of Additional Indebtedness";
(c) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (a)(2)(B) above
(including, without limitation, giving effect on a pro forma basis to any
Indebtedness, including any Acquired Indebtedness, Incurred or anticipated to
be Incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing;
(d) each Note Guarantor (including Persons which become Note Guarantors as a
result of the transaction) shall have confirmed by Supplemental Indenture that
its Note Guarantee shall apply for such Person's Obligations in respect of the
Indenture and the Notes; and
(e) the Company or the Surviving Entity shall have delivered to the Trustee
an Officers' Certificate and an Opinion of Counsel, each stating that the
consolidation, merger, sale, assignment, transfer, lease, conveyance or other
disposition and, if required in connection with such transaction, the
supplemental indenture, comply with the applicable provisions of the Indenture
and that all conditions precedent in the Indenture relating to the transaction
have been satisfied.
For purposes of the preceding, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The provisions of clauses (a) through (d) above shall not apply to:
(1) any transfer of the properties or assets of a Restricted Subsidiary
of the Company to the Company or to a Restricted Subsidiary, or
(2) any merger of a Restricted Subsidiary into the Company.
The provisions of clause (b) above shall not apply to any merger of the
Company into a Restricted Subsidiary.
Upon any consolidation, combination or merger or any transfer of all or
substantially all of the properties and assets of the Company and its
Restricted Subsidiaries in accordance with the preceding, in which the Company
is not the continuing corporation, the Surviving Entity formed by such
consolidation or into which the Company is merged or to which such conveyance,
lease or transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture and the
Notes with the same effect as if such Surviving Entity had been named as such.
For the avoidance of doubt, compliance with this covenant shall not affect the
obligation of the Company (including a Surviving Entity, if applicable) under
"--Change of Control," if applicable.
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Limitations on Transactions with Affiliates.
(1) The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into any transaction or series
of related transactions (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with, or for
the benefit of, any of its Affiliates (each an "Affiliate Transaction"),
unless:
(a) the terms of such Affiliate Transaction are no less favorable than
those that could reasonably be expected to be obtained in a comparable
transaction at such time on an arm's-length basis from a Person that is not
an Affiliate of the Company;
(b) in the event that such Affiliate Transaction involves aggregate
payments, or transfers of property or services with a Fair Market Value in
excess of $5 million, the terms of such Affiliate Transaction shall be
approved by a majority of the members of the Board of Directors of the
Company (including a majority of the disinterested members thereof), the
approval to be evidenced by a Board Resolution stating that the Board of
Directors has determined that such transaction complies with the preceding
provisions; and
(c) in the event that such Affiliate Transaction involves aggregate
payments, or transfer of property or services with a fair market value, in
excess of $10 million, the Company shall, prior to the consummation
thereof, obtain a favorable opinion as to the fairness of such transaction
or series of related transactions to the Company and the relevant
Restricted Subsidiary (if any) from a financial point of view from an
Independent Financial Advisor and file the same with the Trustee.
(2) Clause (1) shall not apply to:
(a) transactions with or among the Company and any Restricted Subsidiary
or between or among Restricted Subsidiaries;
(b) reasonable fees and compensation paid to, and any indemnity provided
on behalf of, and any customary employment arrangement with, officers,
directors, employees, consultants or agents of the Company or any
Restricted Subsidiary as approved in good faith by the Company's Board of
Directors;
(c) any transactions undertaken pursuant to any contractual obligations
or rights as in existence on the Issue Date and as they may be modified or
extended so long as any such modification is not materially adverse to the
Holders;
(d) any Restricted Payments or Permitted Investments made in compliance
with "Limitation on Restricted Payments";
(e) loans and advances to officers, directors and employees of the
Company or any Restricted Subsidiary for travel, entertainment, moving and
other relocation expenses, in each case made in the ordinary course of
business and not exceeding $5 million outstanding at any one time;
(f) leasing transactions with Unrestricted Subsidiaries entered into in
the ordinary course of business; and
(g) transactions between the Company and any Unrestricted Subsidiary all
of the Voting Stock of which is owned by the Company and substantially all
of the assets of which consist of Indebtedness of the Company Incurred in
accordance with "--Limitation on Incurrence of Additional Indebtedness".
Reports to Holders.
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, so long as any Notes
remain outstanding, the Company will:
(1) provide the Trustee and the noteholders with the annual reports and
information, documents and other reports as are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a U.S.
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corporation subject to such Sections within 15 days after the times
specified for the filing of the information, documents and reports under
such Sections; and
(2) file with the Commission, to the extent permitted, the information,
documents and reports referred to in clause (1) within the periods
specified under such Sections.
In addition, at any time when the Company is subject to or is not current in
its reporting obligations under clause (2) of the preceding sentence, the
Company will make available, upon request, to any holder and any prospective
purchaser of Notes the information required pursuant to Rule 144A(d)(4) under
the Securities Act.
Events of Default
The following are "Events of Default":
(1) default in the payment when due of the principal of or premium, if
any, on any Notes, including the failure to make a required payment to
purchase Notes tendered pursuant to an optional redemption, Change of
Control Offer or a Net Proceeds Offer and whether or not prohibited by the
provisions of the Indenture described under "Subordination of the Notes and
the Note Guarantees";
(2) default for 30 days or more in the payment when due of interest on
any Notes when due, whether or not prohibited by the provisions of the
Indenture described under "Subordination of the Notes and the Note
Guarantees";
(3) the failure to perform or comply with any of the provisions
described under "Certain Covenants--Merger, Consolidation and Sales of
Assets";
(4) the failure by the Company or any Restricted Subsidiary to comply
with any other covenant or agreement contained in the Indenture or in the
Notes for 45 days or more after written notice to the Company from the
Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding Notes;
(5) default by the Company or any Restricted Subsidiary under any
Indebtedness which:
(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of any applicable
grace period provided in such Indebtedness on the date of such default; or
(b) results in the acceleration of such Indebtedness prior to its stated
maturity;
and the principal amount of any Indebtedness covered by (a) or (b) at the
relevant time aggregates $10 million or more.
(6) failure by the Company or any of its Restricted Subsidiaries to pay
final nonappealable judgments against any of them (to the extent not
covered by third-party insurance as to which the insurer has not disclaimed
coverage or to the extent not adequately reserved for in accordance with
GAAP) aggregating $10 million or more, which judgments are not paid,
discharged, waived, bonded or stayed for a period of 60 days or more;
(7) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries or group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary; or
(8) except as permitted by the Indenture, the Note Guarantee of a Note
Guarantor constituting a Significant Subsidiary, or the Note Guarantees of
a group of Note Guarantors that, taken together, would constitute a
Significant Subsidiary, are held to be unenforceable or invalid in a
judicial proceeding or ceases for any reason to be in full force and effect
or any Note Guarantor, or any Person acting on behalf of any Note
Guarantor, denies or disaffirms such Note Guarantor's obligations under its
Note.
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If an Event of Default (other than an Event of Default specified in clause
(7) above) shall occur and be continuing, the Trustee or the Holders of at
least 25% in principal amount of outstanding Notes may declare the principal of
(and premium, if any) and accrued and unpaid interest on all the Notes to be
immediately due and payable by notice in writing to the Company and the Trustee
specifying the Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"). If an Event of Default specified in clause (7) above
occurs and is continuing, then all unpaid principal of, and premium, if any,
and accrued and unpaid interest on all of the outstanding Notes will become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder.
At any time after a declaration of acceleration with respect to the Notes as
described in the preceding paragraph, the holders of a majority in principal
amount of the Notes may rescind and cancel such declaration and its
consequences:
(1) if the rescission would not conflict with any judgment or decree;
(2) if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of
the acceleration;
(3) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become
due otherwise than by such declaration of acceleration, has been paid; and
(4) if the Company has paid the Trustee its reasonable compensation and
reimbursed the Trustee for its reasonable expenses, disbursements and
advances.
No rescission shall affect any subsequent Default or impair any rights relating
thereto.
The holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its consequences,
except a default in the payment of the principal of, premium, if any, or
interest on any Notes.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request, order or direction of any of the
holders, unless such holders have offered to the Trustee reasonable indemnity.
Subject to all provisions of the Indenture and applicable law, the holders of a
majority in aggregate principal amount of the then outstanding Notes have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee.
No holder of any Notes will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless:
(1) such holder gives to the Trustee written notice of a continuing
Event of Default;
(2) holders of at least 25% in principal amount of the then outstanding
Notes make a written request to pursue the remedy;
(3) such holders of the Notes provide to the Trustee satisfactory
indemnity;
(4) the Trustee does not comply within 60 days; and
(5) during such 60 day period the holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a written direction
which, in the opinion of the Trustee, is inconsistent with the request.
Otherwise, no holder of any Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, except:
(1) a holder of a Note may institute suit for enforcement of payment of
the principal of andpremium, if any, or interest on such Note on or after
the respective due dates expressed in such Note or
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(2) the institution of any proceeding with respect to the Indenture or
any remedy thereunder, including, without limitation, acceleration, by the
holders of a majority in principal amount of the outstanding Notes;
provided, that upon institution of any proceeding or exercise of any
remedy, such holder or holders provide the Trustee with prompt notice
thereof.
The Company is required to deliver to the Trustee written notice of any event
which would constitute certain Defaults, their status and what action the
Company is taking or proposes to take in respect thereof. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous fiscal year. The Indenture
provides that if a Default occurs, is continuing and is known to the Trustee,
the Trustee must mail to each holder notice of the Default within five days
after it is known to a trust officer or written notice of it is received by the
Trustee. Except in the case of a Default in the payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold notice if
and so long as it in good faith determines that withholding notice is not
opposed to the interest of the noteholders.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have its obligations
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Notes, except
for:
(1) the rights of holders to receive payments in respect of the
principal of, premium, if any, and interest on the Notes when such payments
are due;
(2) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payments;
(3) the rights, powers, trust, duties and immunities of the Trustee and
the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company released with respect to certain covenants that
are described in the Indenture ("Covenant Defeasance") and thereafter any
omission to comply with such obligations shall not constitute a Default or
Event of Default with respect to the Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
reorganization and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders cash in U.S. dollars, certain direct non-
callable obligations of, or guaranteed by, the United States, or a
combination thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public accountants, to pay
the principal of, premium, if any, and interest on the Notes on the stated
date for payment thereof or on the applicable redemption date, as the case
may be;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee to the effect that:
(a) the Company has received from, or there has been published by,
the Internal Revenue Service a ruling; or
(b) since the Issue Date, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall state that, the Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of such Legal
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Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee to the effect that the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit, other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit;
(5) the Trustee shall have received an Officers' Certificate stating
that such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under the Indenture or any
other material agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
any Subsidiary of the Company or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Company or others;
(7) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(8) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for, in the case of the Officers' Certificate, in
clauses (1) through (7) and, in the case of the Opinion of Counsel, in
clauses (1) (with respect to the validity and perfection of a security
interest), (2), (3) and (5) of this paragraph relating to the Legal
Defeasance or the Covenant Defeasance, as applicable, have been complied
with; and
(9) certain other customary conditions precedent are satisfied.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when:
(1) either:
(a) all the Notes theretofor authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofor been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust) have been delivered to the
Trustee for cancellation; or
(b) all Notes not theretofor delivered to the Trustee for
cancellation have become due and payable, or will be due and payable
within one year or are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice
of redemption, and the Company has irrevocably deposited or caused to
be deposited with the Trustee funds or certain direct, non-callable
obligations of, or guaranteed by, the United States sufficient to pay
and discharge the entire Indebtedness on the Notes not theretofor
delivered to the Trustee for cancellation, for principal of, premium,
if any, and interest on the Notes to the earlier of the Stated Maturity
or the redemption date together with irrevocable instructions from the
Company directing the Trustee to apply such
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funds and/or the proceeds of such direct, non-callable obligations to
the payment thereof at maturity or redemption, as the case may be;
(2) the Company has paid all other sums payable under the Indenture by
the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel stating that all conditions precedent under the
Indenture relating to the satisfaction and discharge of the Indenture have
been complied with.
Modification of the Indenture
From time to time, the Company, the Note Guarantors and the Trustee, without
the consent of the holders, may amend the Indenture or the Notes for certain
specified purposes, including curing ambiguities, defects or inconsistencies,
adding Note Guarantees and making other changes which do not, in the opinion of
the Trustee, adversely affect the rights of any of the holders in any material
respect. In formulating its opinion on such matters, the Trustee will be
entitled to rely on such evidence as it deems appropriate, including, without
limitation, solely on an Opinion of Counsel. Other modifications and amendments
of the Indenture or the Notes may be made with the consent of the holders of a
majority in principal amount of the then outstanding Notes issued under the
Indenture, except that,
(1) any modification of the subordination provisions of the Indenture with
respect to the Company or any Note Guarantor in a manner that materially
adversely affects the rights of any holder will require the consent of at least
75% in principal amount of the then outstanding Notes issued under the
Indenture, and
(2) without the consent of each holder affected thereby, no amendment may:
(a) reduce the amount of Notes whose Holders must consent to an
amendment or waiver;
(b) reduce the rate of or change or have the effect of changing the time
for payment of interest, including defaulted interest, on any Notes;
(c) reduce the principal of or change or have the effect of changing the
fixed maturity of any Notes, or change the date on which any Notes may be
subject to redemption, or reduce the redemption price therefor;
(d) make any Notes payable in money other than that stated in the Notes;
(e) make any change in provisions of the Indenture entitling each holder
to receive payment of principal of, premium, if any, and interest on such
Note on or after the due date thereof or to bring suit to enforce such
payment, or permitting holders of a majority in principal amount of Notes
to waive Defaults or Events of Default;
(f) amend, change or modify in any material respect the obligation of
the Company to make and consummate a Change of Control Offer in respect of
a Change of Control that has occurred or make and consummate a Net Proceeds
Offer with respect to any Asset Sale that has been consummated; or
(g) eliminate or modify in any manner a Note Guarantor's obligations
with respect to its Note Guarantee which adversely affects holders in any
material respect (except as contemplated in the Indenture).
Governing Law
The Indenture provides that the Indenture and the Notes will be governed by,
and construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
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The Trustee
The Indenture will provide that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture, and
use the same degree of care and skill in its exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided,
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
Certain Definitions
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for a full definition of all such
terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with the Company or any of its
Restricted Subsidiaries or is assumed in connection with the acquisition of
assets from such Person.
"Affiliate" means, with respect to any specified Person, any other Person who
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; provided,
that beneficial ownership of 10% or more of the Voting Stock of a Person shall
be deemed to be control. For purposes of this definition, the terms
"controlling", "controlled by" and "under common control with" have correlative
meanings.
"Asset Acquisition" means:
(1) an Investment by the Company or any Restricted Subsidiary in any
other Person pursuant to which such Person shall become a Restricted
Subsidiary, or shall be merged with or into the Company or any Restricted
Subsidiary; or
(2) the acquisition by the Company or any Restricted Subsidiary of the
assets of any Person (other than a Subsidiary of the Company) which
constitute all or substantially all of the assets of such Person or
comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease, assignment or other transfer for value by the Company or any
of its Restricted Subsidiaries (including any Sale and Leaseback Transaction)
to any Person other than the Company or a Restricted Subsidiary (including a
Person that is or will become a Restricted Subsidiary immediately after such
sale, issuance, conveyance, transfer, lease, assignment or other transfer for
value) of:
(a) any Capital Stock of any Restricted Subsidiary; or
(b) any property or assets (other than cash, Cash Equivalents or Capital
Stock) of the Company or any Restricted Subsidiary;
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Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries as permitted under "Certain Covenant--Merger, Consolidation
and Sale of Assets";
(2) a disposition of inventory, receivables or other current assets in
the ordinary course of business;
(3) dispositions of assets in any fiscal year with a Fair Market Value
not to exceed $5 million in the aggregate;
(4) for purposes of "Certain Covenants--Limitation on Asset Sales" only,
the making of a Permitted Investment or Restricted Payment;
(5) a disposition in the ordinary course of business of obsolete or
worn-out equipment;
(6) rental equipment sales made in the ordinary course of business; and
(7) any sale of Capital Stock or other securities or Indebtedness of an
Unrestricted Subsidiary.
"Asset Sale Transaction" means Asset Sales and, whether or not constituting
an Asset Sale, (1) any sale or other disposition of Capital Stock and (2) any
sale or other disposition of property or assets excluded from the definition
of Asset Sale by clause (1) or (4) of such definition.
"Blockage Notice" has the meaning set forth under "--Subordination of the
Notes and the Note Guarantees."
"Board of Directors" means, (i) in the case of a Person that is a
corporation, the board of directors of such Person or any committee authorized
to act therefor and (ii) in the case of any other Person, the board of
directors, management committee or similar governing body or any authorized
committee thereof responsible for the management of the business and affairs
of such Person.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
"Capitalized Lease Obligations" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP. For purposes of this definition, the
amount of such obligations at any date shall be the capitalized amount of such
obligations at such date, determined in accordance with GAAP.
"Capital Stock" means:
(1) with respect to any Person that is a corporation, any and all
shares, interests, participations or other equivalents (however designated
and whether or not voting) of corporate stock, including each class of
Common Stock and Preferred Stock of such Person; and
(2) with respect to any Person that is not a corporation, any and all
partnership, membership or other equity or ownership interests of such
Person.
"Cash Equivalents" means:
(1) marketable direct obligations issued by, or unconditionally
guaranteed by, the United States government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(2) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within one year from the date
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of acquisition thereof and, at the time of acquisition, having one of the
two highest ratings obtainable from either S&P or Moody's;
(3) commercial paper maturing no more than one year from the date of
creation thereof and, at the time of acquisition, having a rating of at
least A-1 from S&P or at least P-1 from Moody's;
(4) certificates of deposit or bankers' acceptances maturing within one
year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$500 million;
(5) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (1) above entered
into with any bank meeting the qualifications specified in clause (4)
above; and
(6) investments in money market funds which invest substantially all
their assets in securities of the types described in clauses (1) through
(5) above.
"Change of Control" means the occurrence of one or more of the following
events:
(1) (A) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than one or more Permitted Holders, is or
becomes the beneficial owner (as defined in Rule 13d-3 and 13d-5 under the
Exchange Act, except that for purposes of this clause (1) such person shall
be deemed to have "beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable immediately or
only after the passage of time), directly or indirectly, of more than 35%
of the total voting power of the Voting Stock of the Company and (B) the
Permitted Holders "beneficially own" (as so defined), directly or
indirectly, in the aggregate a lesser percentage of the total voting power
of the Voting Stock of the Company than such other person (for the purposes
of this clause (1), such other person shall be deemed to beneficially own
any Voting Stock of a specified corporation held by a parent corporation,
if such other person is the beneficial owner (as defined in this clause
(1)), directly or indirectly, of more than 35% of the voting power of the
Voting Stock of such parent corporation and the Permitted Holders
"beneficially own" (as defined in this clause (1)), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the Voting
Stock of such parent corporation);
(2) during any period of two consecutive years (or, in the case this
event occurs within the first two years after the Issue Date, such shorter
period as shall have begun on the Issue Date), individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors
or whose nomination for election by the shareholders of the Company was
approved by a vote of a majority of the directors of the Company then still
in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors of the
Company then in office; or
(3) the Company consolidates with, or merges with or into, another
Person (other than the Company or a Wholly Owned Restricted Subsidiary) or
the Company or any of its Restricted Subsidiaries sells, conveys, assigns,
transfers, leases or otherwise disposes of all or substantially all of the
assets of the Company and its Restricted Subsidiaries (determined on a
consolidated basis for the Company and its Restricted Subsidiaries) to any
Person (other than the Company or any Wholly Owned Restricted Subsidiary),
other than any such transaction where immediately after such transaction
the Person or Persons that "beneficially owned" (as defined in Rules 13d-3
and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have "beneficial ownership" of all securities that such Person has the
right to acquire, whether such right is exercisable immediately or only
after the passage of time) immediately prior to such transaction, directly
or indirectly, all of the total voting power of the then outstanding Voting
Stock of the Company "beneficially own" (as so determined), directly or
indirectly, a majority of the total voting power of the then outstanding
Voting Stock of the surviving or transferee Person.
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"Change of Control Offer" has the meaning set forth under "Change of
Control."
"Change of Control Payment Date" has the meaning set forth under "Change of
Control."
"Commission" means the Securities and Exchange Commission, or any successor
agency thereto with respect to the regulation or registration of securities.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without limitation, all
series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income:
(1) Consolidated Income Tax Expense for such period; plus
(2) Consolidated Interest Expense for such period; plus
(3) Consolidated Non-cash Charges for such period; plus
(4) net after-tax losses from Asset Sale Transactions or abandonments or
reserves relating thereto, less
(5)to the extent that the aggregate of all such items exceeds $1.0
million (a) all non-cash credits and gains increasing Consolidated Net
Income for such period and (b) all cash payments during such period
relating to non-cash charges that were added back in determining
Consolidated EBITDA in any prior period.
"Consolidated Fixed Charge Coverage Ratio" means, as of any date of
determination, the ratio of the aggregate amount of Consolidated EBITDA for the
four most recent full fiscal quarters for which financial statements are
available ending prior to the date of such determination (the "Four Quarter
Period") to Consolidated Fixed Charges for such Four Quarter Period. For
purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed
Charges" shall be calculated after giving effect on a pro forma basis for the
period of such calculation to:
(1) the Incurrence or repayment (excluding revolving credit borrowings
Incurred or repaid in the ordinary course of business for working capital
purposes) of any Indebtedness or Preferred Stock of the Company or any of its
Restricted Subsidiaries (and the application of the proceeds thereof),
including the Incurrence of any Indebtedness or Preferred Stock (and the
application of the proceeds thereof) giving rise to the need to make such
determination, occurring during such Four Quarter Period or at any time
subsequent to the last day of such Four Quarter Period and on or prior to
such date of determination, as if such Incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first
day of such Four Quarter Period; and
(2) any Asset Sale Transactions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
determination as a result of the Company or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) Incurring Acquired Indebtedness and
including, without limitation, by giving pro forma effect to any Consolidated
EBITDA (provided that such pro forma Consolidated EBITDA shall be calculated
in a manner consistent with the exclusions in the definition of "Consolidated
Net Income") attributable to the assets which are the subject of the Asset
Sale Transaction or Asset Acquisition during the Four Quarter Period)
occurring during the Four Quarter Period or at any time subsequent to the
last day of the Four Quarter Period and on or prior to such date of
determination, as if such Asset Sale Transaction or Asset Acquisition
(including the Incurrence of any such Acquired Indebtedness) occurred on the
first day of the Four Quarter Period.
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Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio,"
(a) interest on outstanding Indebtedness determined on a fluctuating basis
as of the date of determination and which will continue to be so determined
thereafter shall be deemed to have accrued at a fixed rate per annum equal to
the rate of interest on such Indebtedness in effect on such date of
determination;
(b) if interest on any Indebtedness actually Incurred on such date of
determination may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate in effect on such date of determination
will be deemed to have been in effect during the Four Quarter Period; and
(c) notwithstanding clause (a) above, interest on Indebtedness determined
on a fluctuating basis, to the extent such interest is covered by Hedging
Obligations, shall be deemed to accrue at the rate per annum resulting after
giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, for any period, the sum, without
duplication, of:
(1) Consolidated Interest Expense, plus
(2) the product of:
(a) the amount of all cash and non-cash dividend payments on any series
of Preferred Stock or Disqualified Capital Stock of the Company (other than
dividends paid in Qualified Capital Stock) paid, accrued or scheduled to be
paid or accrued during such period times
(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current effective consolidated federal, state
and local tax rate of the Company, expressed as a decimal.
"Consolidated Income Tax Expense" means, with respect to the Company for any
period, the provision for Federal, state, local and foreign income taxes
payable by the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, the sum of, without
duplication determined on a consolidated basis in accordance with GAAP:
(1) the aggregate of cash and non-cash interest expense of the Company and
its Restricted Subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, including, without limitation (whether or not
interest expense in accordance with GAAP):
(a) any amortization or accretion of debt discount or any interest paid
on Indebtedness of the Company in the form of additional Indebtedness,
(b) any amortization of deferred financing costs,
(c) the net costs under Currency Agreements related to Indebtedness and
Interest Rate Agreements (including amortization of fees),
(d) all capitalized interest,
(e) the interest portion of any deferred payment obligation,
(f) commissions, discounts and other fees and charges Incurred in
respect of letters of credit or bankers' acceptances, and
(g) any interest expense on Indebtedness of another Person that is
guaranteed by the Company or one of its Restricted Subsidiaries or secured
by a Lien on the assets of the Company or one of its Restricted
Subsidiaries (whether or not such guarantee or Lien is called upon); and
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(2) the interest component of Capitalized Lease Obligations paid, accrued
and/or scheduled to be paid or accrued by the Company and its Restricted
Subsidiaries during such period.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate net income (or loss) of the Company and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided, that there shall be excluded therefrom:
(1) net after-tax gains from Asset Sale Transactions or abandonments or
reserves relating thereto;
(2) net after-tax items classified as extraordinary gains or losses;
(3) for purposes of calculating Consolidated Net Income pursuant to clause
(3) of the first paragraph of "Certain Covenants--Limitation on Restricted
Payments" only, the net income of any Person acquired in a "pooling of
interests" transaction accrued prior to the date it becomes a Restricted
Subsidiary or is merged or consolidated with the Company or any Restricted
Subsidiary;
(4) the net income (but not loss) of any Restricted Subsidiary to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by contract, operation of
law or otherwise;
(5) the net income of any Person, other than a Restricted Subsidiary,
except to the extent of cash dividends or distributions paid to the Company
or to a Restricted Subsidiary by such Person;
(6) any increase (but not decrease) in net income attributable to minority
interests in any Restricted Subsidiary;
(7) any restoration to income of any contingency reserve in excess of $1.0
million, except to the extent that provision for such reserve was made out of
Consolidated Net Income accrued at any time following the Issue Date; and
(8) the cumulative effect of changes in accounting principles.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Capital
Stock of such Person.
"Consolidated Non-cash Charges" means, for any period, the aggregate
depreciation, amortization and other non-cash expenses or losses of the Company
and its Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding any such charge which constitutes an
accrual of or a reserve for cash charges for any future period).
"Covenant Defeasance" has the meaning set forth under "Legal Defeasance and
Covenant Defeasance."
"Currency Agreement" means, in respect of any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party.
"Debt Rating" shall mean the rating assigned to the Notes by Moody's or S&P,
as the case may be.
"Default" means an event or condition the occurrence of which is, or with the
lapse of time or the giving of notice or both would be, an Event of Default.
"Designated Senior Indebtedness" means:
(1) in respect of the Company, the Senior Credit Facility and any other
Senior Indebtedness of the Company which, at the date of determination, has
an aggregate principal amount outstanding of, or under which, at the date
of determination, the holders thereof are committed to lend up to, at least
$15 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness;" and
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(2) in respect of any Note Guarantor, the Senior Credit Facility and any
other Senior Indebtedness of any Note Guarantor which, at the date of
determination, has an aggregate principal amount outstanding of, or under
which, at the date of determination, the holders thereof are committed to
lend up to, at least $15 million and is specifically designated by such
Note Guarantor in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness."
"Designation" and "Designation Amount" have the meanings set forth under
"Certain Covenants--Designation of Unrestricted Subsidiaries" above.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the sole option of
the holder thereof, in any case, on or prior to the 91st day after the final
maturity date of the Notes; provided, however, that any Capital Stock that
would not constitute Disqualified Capital Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the 91st day following the Stated Maturity of the
Notes shall not constitute Disqualified Capital Stock if (x) the "asset sale"
or "change of control" provisions applicable to such Capital Stock are not more
favorable to the holders of such Capital Stock than the provisions described
under "--Change of Control" and "--Certain Covenants--Limitation on Asset
Sales" and (y) any such requirement only becomes operative after compliance
with such terms applicable to the Notes, including the purchase of any Notes
tendered pursuant thereto.
"Domestic Restricted Subsidiary" means any direct or indirect Restricted
Subsidiary that is organized under the laws of the United States, any state
thereof or the District of Columbia.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"Exchange Notes" has the meaning set forth under "Exchange Offer;
Registration Rights."
"Fair Market Value" means, with respect to any asset, the price (after taking
into account any liabilities relating to such assets) which could be negotiated
in an arm's-length free market transaction, for cash, between a willing seller
and a willing and able buyer, neither of which is under any compulsion to
complete the transaction; provided, that the Fair Market Value of any such
asset or assets shall be determined conclusively by the Board of Directors of
the Company acting in good faith, and shall be evidenced by a Board Resolution.
"Four Quarter Period" has the meaning set forth in the definition of
"Consolidated Fixed Charge Coverage Ratio" above.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the date of
determination; provided, however, that all calculations made for purposes of
determining compliance with the financial covenants contained herein shall
utilize GAAP as in effect on the Issue Date.
"Hedging obligations" means the obligations of any Person pursuant to any
Interest Rate Agreement or Currency Agreement.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the
preceding). Indebtedness of any Person or any of its
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Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
or at the time it merges or consolidates with the Company or any of its
Restricted Subsidiaries or at the time its assets are acquired and Indebtedness
assumed in connection therewith by the Company or any of its Restricted
Subsidiaries, whether or not such Indebtedness was Incurred in connection with,
as a result of, or in contemplation of, such Person becoming a Restricted
Subsidiary or being merged or consolidated with the Company or any of its
Restricted Subsidiaries or the acquisition of such Person's assets, shall be
deemed Incurred at that time.
"Indebtedness" means with respect to any Person, without duplication:
(1) the principal amount (or, if less, the accreted value) of all
obligations of such Person for borrowed money;
(2) the principal amount (or, if less, the accreted value) of all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement (but excluding trade
accounts payable and other accrued liabilities arising in the ordinary
course of business that are not overdue by 90 days or more or are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted);
(5) all obligations of such Person for the reimbursement of any obligor
on any letter of credit, banker's acceptance or similar credit transaction;
(6) guarantees and other contingent obligations of such Person in
respect of Indebtedness referred to in clauses (1) through (5) above and
clause (8) below;
(7) all Indebtedness of any other Person of the type referred to in
clauses (1) through (6) which are secured by any lien on any property or
asset of such Person, the amount of such Indebtedness being deemed to be
the lesser of the fair market value of such property or asset or the amount
of the Indebtedness so secured;
(8) all obligations under Hedging Obligations of such Person; and
(9) all Disqualified Capital Stock issued by such Person with the amount
of Indebtedness represented by such Disqualified Capital Stock being equal
to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if
any; provided that if the "maximum fixed repurchase price" of any
Disqualified Capital Stock:
(a) does not have a fixed repurchase price, such price shall be
calculated in accordance with the terms of such Disqualified Capital
Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to
the Indenture, and
(b) is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value shall be the Fair
Market Value thereof.
"Independent Financial Advisor" means an accounting firm, appraisal firm,
investment banking firm or consultant to Persons engaged in a Permitted
Business, in each case, of nationally recognized standing that is, in the
judgement of the Company's Board of Directors, qualified to perform the task
for which it has been engaged and which is independent in connection with the
relevant transaction.
"Interest Rate Agreement" of any Person means any interest rate protection
agreement (including, without limitation, interest rate swaps, caps, floors,
collars, derivative instruments and similar agreements) and/or other types of
interest hedging agreements.
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"Investment" means, with respect to any Person, any:
(1) direct or indirect loan or other extension of credit (including,
without limitation, a guarantee),
(2) capital contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for the account
or use of others), or
(3) any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any other Person.
"Investment" shall exclude accounts receivable or deposits arising in the
ordinary course of business. For purposes of the "Limitation on Restricted
Payments" covenant, the Company shall be deemed to have made an "Investment"
in an Unrestricted Subsidiary at the time of its Designation, which shall be
valued at the Fair Market Value of the sum of the net assets of any such
Unrestricted Subsidiary at the time of its Designation and the amount of any
Indebtedness of such Unrestricted Subsidiary guaranteed by the Company or any
Restricted Subsidiary or owed to the Company or any Restricted Subsidiary
immediately following such Designation.
Any property transferred to or from an Unrestricted Subsidiary will be
valued at its Fair Market Value at the time of such transfer. If the Company
or any Restricted Subsidiary sells or otherwise disposes of any Capital Stock
of a Restricted Subsidiary (including any issuance and sale of Capital Stock
by a Restricted Subsidiary) such that, after giving effect to any such sale or
disposition, such Restricted Subsidiary would cease to be a Subsidiary of the
Company, the Company shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the sum of the Fair Market Value of the
Capital Stock of such former Restricted Subsidiary held by the Company or any
Restricted Subsidiary immediately following such sale or other disposition and
the amount of any Indebtedness of such former Restricted Subsidiary guaranteed
by the Company or any Restricted Subsidiary or owed to the Company or any
Restricted Subsidiary immediately following such sale or other disposition.
"Investment Grade Status" exists as of any date on which (i) the Debt Rating
of Moody's is at least Baa3 (or the equivalent) or higher and (ii) the Debt
Rating of S&P is at least BBB- (or the equivalent) or higher.
"Issue Date" means the first date of issuance of Notes under the Indenture.
"Legal Defeasance" has the meaning set forth under "Legal Defeasance and
Covenant Defeasance."
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"Moody's" means Moody's Investors Service, Inc. or any successor to the
business of such corporation.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents, including payments in respect of
deferred payment obligations when received in the form of cash or Cash
Equivalents received by the Company or any of its Restricted Subsidiaries from
such Asset Sale, net of the direct costs relating to such Asset Sale,
including:
(1) out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and investment banking
fees and sales commissions);
(2) taxes paid or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or deductions and
any tax sharing arrangements;
(3) repayment or Indebtedness secured by a Lien permitted under the
Indenture that is required to be repaid in connection with such Asset Sale;
and
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(4) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP,
against any liabilities associated with such Asset Sale and retained by the
Company or any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such
Asset Sale.
"Net Proceeds Offer" has the meaning set forth under "Certain Covenants--
Limitation on Asset Sales."
"Obligations" means, with respect to any Indebtedness, any principal,
interest (including, without limitation, Post-Petition Interest), penalties,
fees, indemnifications, reimbursements, including, in the case of the Notes and
the Note Guarantees in respect thereof, damages, and other liabilities payable
under the documentation governing such Indebtedness.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"Payment Blockage Period" has the meaning set forth under "Subordination of
the Notes and the Note Guarantees."
"Permitted Business" means the business or businesses conducted by the
Company and its Restricted Subsidiaries as of the Issue Date and any business
ancillary, complementary or related thereto.
"Permitted Holders" means
(1) Thoma Cressey Equity Partners LLC and its Affiliates and
(2) (a) Thomas S. Johnson; (b) the spouse, parents, siblings,
descendants of Thomas S. Johnson or of such spouse or siblings; (c) in the
event of incompetence or death of Thomas S. Johnson or any of the Persons
described in (b) above, such Person's estate, executor, administrator,
committee or other personal representative in each case who at any
particular date shall beneficially own or have the right to acquire,
directly or indirectly, Voting Stock of the Company; (d) any trusts created
for the sole benefit of Thomas S. Johnson or any of the Persons described
in clauses (b) or (c) above; (e) any Person of which Thomas S. Johnson or
any of the Persons described in clauses (b) or (c) above (x) "beneficially
owns" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) on a
fully diluted basis at least 51% of the voting power of the Voting Stock of
such Person or (y) is the sole trustee or general partner, or otherwise has
the sole power to manage the business and affairs of such Person.
"Permitted Indebtedness" means, without duplication, each of the following:
(1) Indebtedness in respect of the Notes issued on the Issue Date and
Exchange Notes and replacement Notes issued therefor pursuant to the
Indenture;
(2) guarantees by the Company of Indebtedness of any Note Guarantor
permitted under the Indenture and guarantees by any Note Guarantor of
Indebtedness of the Company or any other Note Guarantor permitted under the
Indenture provided, that if any such guarantee is of Subordinated
Indebtedness, then the Notes, in the case of guarantee by the Company, or
the Note Guarantee, in the case of a guarantee by a Note Guarantor, shall
be senior to the Company's or such Note Guarantor's guarantee of such
Subordinated Indebtedness;
(3) Indebtedness Incurred pursuant to the Senior Credit Facility in an
aggregate principal amount at any time outstanding not to exceed
$250,000,000, less the amount of any permanent prepayments or reductions of
commitments in respect of such Indebtedness made with the Net Cash Proceeds
of an Asset Sale in order to comply with "Certain Covenants--Limitation on
Asset Sales";
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(4) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date other than Indebtedness specified under any
of the other clauses of this definition of Permitted Indebtedness;
(5) Hedging Obligations Incurred for the purpose of fixing or hedging
interest rate risk and not for speculative purposes;
(6) intercompany Indebtedness among the Company and any of its
Restricted Subsidiaries; provided that:
(a) if the Company or any Note Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to the
prior payment in full of all obligations under the Notes and the
Indenture, in the case of the Company, or such Subsidiary's Note
Guarantee, in the case of any such Subsidiary Guarantor, and
(b) in the event that at any time any such Indebtedness ceases to be
held by the Company or a Restricted Subsidiary, such Indebtedness shall
be deemed to be Incurred and not permitted by this clause (6) at the
time such event occurs;
(7) Indebtedness of the Company or any of its Restricted Subsidiaries
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary
course of business; provided, that such Indebtedness is extinguished within
five business days of Incurrence;
(8) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or any
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance or similar requirements in the ordinary course of business;
(9) Refinancing Indebtedness in respect of:
(a) Indebtedness (other than Permitted Indebtedness and Indebtedness
owed to the Company or any Subsidiary) Incurred pursuant to paragraph
(1) of "Certain Covenants--Limitation on Incurrence of Additional
Indebtedness" or
(b) Indebtedness Incurred pursuant to clause (1) or (4) of this
definition of Permitted Indebtedness;
(10) Capitalized Lease Obligations and Purchase Money Indebtedness that
do not exceed $10 million in the aggregate at any one time outstanding; and
(11) Additional Indebtedness of the Company or any Note Guarantor in an
aggregate principal amount not to exceed $25 million at any one time
outstanding (which amount may, but need not, be Incurred in whole or in
part under the Senior Credit Facility).
For purposes of determining compliance with the covenant "Limitation on
Incurrence of Additional Indebtedness", in the event that an item of
Indebtedness meets the criteria of more than one of the categories described
above in this definition or is entitled to be Incurred pursuant to such
covenant, the Company shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with such covenant.
"Permitted Investments" means:
(1) Investments by the Company or any Restricted Subsidiary in any
Person that is, or that result in any Person becoming, immediately after
such Investment, a Restricted Subsidiary or constituting a merger or
consolidation of such Person into the Company or with or into a Restricted
Subsidiary;
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(2) Investments by any Restricted Subsidiary in the Company;
(3) Investments in cash and Cash Equivalents;
(4) any extension, modification or renewal of any Investments existing
as of the Issue Date (but not Investments involving additional advances,
contributions or other investments of cash or property or other increases
thereof, other than as a result of the accrual or accretion of interest or
original issue discount or payment-in-kind pursuant to the terms of such
Investment as of the Issue Date);
(5) Investments permitted pursuant to clause (2)(b) or (e) of "Certain
Covenants--Limitations on Transactions with Affiliates";
(6) Investments received as a result of the bankruptcy or reorganization
of any Person or taken in settlement of or other resolution of claims or
disputes, and, in each case, extensions, modifications and renewals
thereof;
(7) Investments made by the Company or its Restricted Subsidiaries as a
result of non-cash consideration permitted to be received in connection
with an Asset Sale made in compliance with the covenant described under
"Certain Covenants--Limitation on Asset Sales";
(8) Investments made solely in the form of common shares of the Company
constituting Qualified Capital Stock;
(9) Investments received by the Company in the form of promissory notes
received from employees of the Company as consideration for the issuance of
Capital Stock, other than Disqualified Capital Stock;
(10) Investments, including guarantees, by the Company in any special
purpose financing vehicle; and
(11) other Investments not to exceed $20 million at any one time
outstanding.
"Permitted Junior Securities" means any securities of the Company or any
other Person that are:
(1) equity securities without special covenants; or
(2) debt securities expressly subordinated in right of payment to all
Senior Indebtedness that may at the time be outstanding, to substantially
the same extent as, or to a greater extent than, the Notes are subordinated
as provided in the Indenture, in any event pursuant to a court order so
providing and as to which
(a) the rate of interest on such securities shall not exceed the
effective rate of interest on the Notes on the Issue Date,
(b) such securities shall not be entitled to the benefits of
covenants or defaults materially more beneficial to the holders of such
securities than those in effect with respect to the Notes on the Issue
Date and
(c) such securities shall not provide for amortization (including
sinking fund and mandatory prepayment provisions) commencing prior to
the date six months following the final scheduled maturity date of the
Senior Indebtedness (as modified by the plan of reorganization pursuant
to which such securities are issued).
"Permitted Liens" means any of the following:
(1) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for
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sums not yet delinquent or being contested in good faith, if such reserve
or other appropriate provision, if any, as shall be required by GAAP shall
have been made in respect thereof;
(2) Liens Incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, regulatory obligations, surety and appeal bonds, bids, leases,
warranties, government performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(3) any interest or title of a lessor under any Capitalized Lease
Obligation; provided, that such Liens do not extend to any property which
is not leased property subject to such Capitalized Lease Obligation;
(4) purchase money Liens to finance property of the Company or a
Restricted Subsidiary acquired in the ordinary course of business;
provided, that:
(a) the related purchase money Indebtedness shall not exceed the
cost of such property and shall not be secured by any property of the
Company or any Restricted Subsidiary other than the property so
acquired and
(b) the Lien securing such Indebtedness shall be created within 90
days of such acquisition;
(5) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(6) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(7) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or a Restricted Subsidiary, including rights of offset and set-off;
(8) Liens securing Hedging Obligations that relate to Indebtedness that
is Incurred in accordance with "Certain Covenants--Limitation on Incurrence
of Additional Indebtedness" and that are secured by the same assets as
secure such Hedging Obligations;
(9) Liens existing on the Issue Date and Liens to secure any Refinancing
Indebtedness which is Incurred to Refinance any Indebtedness which has been
secured by a Lien permitted under "Certain Covenants--Limitation on Liens"
and which Indebtedness has been Incurred in accordance with "Certain
Covenants--Limitation on Incurrence of Additional Indebtedness"; provided,
that such new Liens:
(a) are no less favorable to the Holders of Notes and are not more
favorable to the lienholders with respect to such Liens than the Liens in
respect of the Indebtedness being Refinanced and
(b) do not extend to any property or assets other than the property or
assets securing the Indebtedness Refinanced by such Refinancing
Indebtedness;
(10) Liens securing Acquired Indebtedness Incurred in accordance with
"Certain Covenants--Limitation on Incurrence of Additional Indebtedness",
provided, that
(a) such Liens secured such Acquired Indebtedness at the time of and
prior to the Incurrence of such Acquired Indebtedness by the Company or
a Restricted Subsidiary and were not granted in
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connection with, or in anticipation or contemplation of the Incurrence
of such Acquired Indebtedness by the Company or a Restricted Subsidiary
and
(b) such Liens do not extend to or cover any property of the Company
or any Restricted Subsidiary other than the property that secured the
Acquired Indebtedness prior to the time such Indebtedness became
Acquired Indebtedness of the Company or a Restricted Subsidiary and are
no more favorable to the lienholders than the Liens securing the
Acquired Indebtedness prior to the Incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary;
(11) Liens in favor of the Company or the Note Guarantors; and
(12) Liens not otherwise permitted by clauses (1) through (11) with
respect to obligations that do not, in the aggregate, exceed $5 million at
any one time outstanding.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Post-Petition Interest" means all interest accrued or accruing after the
commencement of any insolvency or liquidation proceeding (and interest that
would accrue but for the commencement of any insolvency or liquidation
proceeding) in accordance with and at the contract rate (including, without
limitation, any rate applicable upon default) specified in the agreement or
instrument creating, evidencing or governing any Indebtedness, whether or not,
pursuant to applicable law or otherwise, the claim for such interest is allowed
as a claim in such insolvency or liquidation proceeding.
"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights over any other Capital Stock of such Person with
respect to dividends or redemptions or upon liquidation.
"Public Equity Offering" has the meaning set forth under "--Redemption."
"Purchase Money Indebtedness" means Indebtedness of the Company or any
Restricted Subsidiary Incurred for the purpose of financing all or any part of
the purchase price, or other cost of construction or improvement of any
property; provided, that the aggregate principal amount of such Indebtedness
does not exceed the lesser of the Fair Market Value of such property or such
purchase price or cost, including any Refinancing of such Indebtedness that
does not increase the aggregate principal amount (or accreted amount, if less)
thereof as of the date of Refinancing.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock and any warrants, rights or options to purchase or acquire
Capital Stock that is not Disqualified Capital Stock that are not convertible
into or exchangeable into Disqualified Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary, to the extent that such Refinancing does not:
(1) result in an increase in the aggregate principal amount of the
Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company in connection with such Refinancing); or
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(2) create Indebtedness with:
(a) a Weighted Average Life to Maturity that is less than the
Weighted Average Life to Maturity of the indebtedness being Refinanced
or
(b) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced;
provided, that:
. if such Indebtedness being Refinanced is Indebtedness of the
Company, then such Refinancing Indebtedness shall be Indebtedness
of the Company;
. if such Indebtedness being Refinanced is Indebtedness of a Note
Guarantor, then such Indebtedness shall be Indebtedness of the
Company and/or such Note Guarantor;
. if such Indebtedness being Refinanced is subordinate or junior to
the Notes or any Note Guarantee, then such Refinancing
Indebtedness shall be subordinate to the Notes or such Note
Guarantee at least to the same extent and in the same manner as
the Indebtedness being Refinanced; and
. if such Indebtedness being Refinanced has an original maturity
date after the Stated Maturity of the Notes, then such
Refinancing Indebtedness need only have a maturity date that is
after the Stated Maturity of the Notes.
"Replacement Assets" has the meaning set forth under "Certain Covenants--
Limitation on Asset Sales."
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"Restricted Payment" has the meaning set forth under "Certain Covenants--
Limitation on Restricted Payments."
"Restricted Subsidiary" of the Company means any Subsidiary of the Company
which at the time of determination is not an Unrestricted Subsidiary.
"Revocation" has the meaning set forth under "Certain Covenants--Limitation
on the Designation of Unrestricted Subsidiaries."
"Royalty Agreement" means the Royalty Agreement dated March 29, 1996, as
amended, among Global Imaging Operations, Inc. and each of the Subsidiaries of
the Company.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
with any Person or to which any such Person is a party providing for the
leasing to the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary to such Person or to any other Person by whom funds
have been or are to be advanced on the security of such Property.
"S&P" means Standard & Poor's Corporation or any successor to the business
of such corporation.
"Senior Credit Facility" means the credit agreement dated as of July 31,
1998 among the Company and the Subsidiaries thereof party thereto as
Borrowers, First Union National Bank, as Administrative Agent and as Lender,
and the other agents and lenders from time to time named therein and all
amendments thereto, together with the related documents thereto (including,
without limitation, any guarantee agreements and security documents), in each
case as such agreements may be amended (including any amendment and
restatement thereof), supplemented or otherwise modified from time to time by
one or more credit agreements, including
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any agreement adding or deleting Subsidiaries of the Company as additional
borrowers or guarantors thereunder or extending the maturity of, refinancing,
replacing, increasing or otherwise restructuring all or any portion of the
Indebtedness under such agreement(s) or any successor or replacement
agreement(s) and whether by the same or any other agent, lender or group of
lenders.
"Senior Indebtedness" means, at any date, with respect to any Company or any
Note Guarantor, as the case may be:
(1) all Obligations of the Company or such Note Guarantor, as the case
may be, under the Senior Credit Facility, including all Hedging Obligations
with respect thereto;
(2) all Obligations in respect of Indebtedness of the Company or such
Note Guarantor, as the case may be, for borrowed money.
Notwithstanding the preceding, Senior Indebtedness shall not include:
(1) any liability for Federal, state, local or other taxes owing by the
Company or such Note Guarantor, as the case may be;
(2) any Indebtedness among or between the Company and any Subsidiary or
Affiliate of the Company;
(3) that portion of any Indebtedness that is Incurred in violation of
the Indenture;
(4) any Indebtedness represented by Disqualified Capital Stock;
(5) any Indebtedness that, when Incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company or such Note Guarantor, as the case may be;
(6) any Indebtedness that is, by its express terms, not senior in right
of payment to the Notes or the Exchange Notes, in the case of the Company,
or the relevant Note Guarantee, in the case of such Note Guarantor; or
(7) any Indebtedness that is, by its express terms, subordinated in
right of payment to any other Indebtedness of the Company or such Note
Guarantor, as the case may be.
"Senior Subordinated Indebtedness" means, with respect to the Company, the
Notes and, with respect to any Note Guarantor, such Note Guarantor's Note
Guarantee and any other Indebtedness of the Company or such Note Guarantor that
specifically provides that such Indebtedness is to rank equal in right of
payment with the Notes or such Note Guarantee, as the case may be, and is not
subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company or such Note Guarantor which is not Senior
Indebtedness.
"Significant Subsidiary" shall mean a Subsidiary of the Company constituting
a "Significant Subsidiary" in accordance with Rule 1-02(w) of Regulation S-X
under the Securities Act.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
"Subordinated Indebtedness" means, with respect to the Company or any Note
Guarantor, any Indebtedness of the Company or such Note Guarantor, as the case
may be, which is expressly subordinated in right of payment to the Notes or
such Note Guarantor's Note Guarantee, as the case may be.
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"Subsidiary," with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock having at
least a majority of the votes entitled to be cast in the election of
directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by such Person; or
(2) any other Person of which at least a majority of the voting interest
under ordinary circumstances is at the time, directly or indirectly, owned
by such Person.
"Surviving Entity" has the meaning set forth under "Certain Covenants--
Merger, Consolidation and Sale of Assets."
"Unrestricted Subsidiary" means any Subsidiary of the Company designated as
such pursuant to "Certain Covenants--Designation of Unrestricted Subsidiaries."
Any such designation may be revoked by a Board Resolution of the Company,
subject to the provisions of such covenant.
"Voting Stock" with respect to any Person, means securities of any class of
Capital Stock of such Person entitling the holders thereof (whether at all
times or only so long as no senior class of stock has voting power by reason of
any contingency) to vote in the election of members of the Board of Directors
(or equivalent governing body) of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing
(1) the then outstanding aggregate principal amount of such Indebtedness
into
(2) the sum of the total of the products obtained by multiplying:
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest one-twelfth) that
will elapse between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of the Company means any Restricted
Subsidiary of which all the outstanding Capital Stock (other than in the case
of a foreign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Persons pursuant to
applicable law) are owned by the Company or any Wholly Owned Restricted
Subsidiary.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such exchange notes. This prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of exchange notes received in exchange for outstanding
notes where such outstanding notes were acquired as a result of market-making
activities or other trading activities. Global has agreed that, starting on the
expiration date and ending on the close of business 180 days after the
expiration date, it will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until September 3, 1999, all dealers effecting transactions in the
exchange notes may be required to deliver a prospectus.
Global will not receive any proceeds from the issuance of the exchange notes
offered hereby or any sale of exchange notes by broker-dealers. Exchange notes
received by broker-dealers for their own account pursuant to the exchange offer
may be sold from time to time in one or more transactions in the over-the-
counter market, in negotiated transactions, through the writing of options on
the exchange notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such exchange notes. Any broker-dealer that resells exchange notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such exchange notes may
be deemed to be an "underwriter" within the meaning of the Securities Act and
any profit from any such resale of exchange notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that by
acknowledging that it will deliver and by delivering a prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For a period of 180 days after the expiration date, Global will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. Global has agreed to pay all expenses incident to the exchange
offer (including the expenses of one counsel for the holders of the outstanding
notes) other than dealers' and brokers' discounts, commissions and counsel fees
and will indemnify the holders of the outstanding notes (including any broker-
dealers) against certain liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
Hogan & Hartson, L.L.P. of Washington, D.C. will pass upon the legality of
the exchange notes for Global. Tidewater Partners, LLC ("Tidewater"), a limited
liability company whose managing members are J. Hovey Kemp and Christopher J.
Hagan, partners of Hogan & Hartson L.L.P., and whose additional members consist
of two attorneys and one legal assistant of Hogan & Hartson L.L.P., owns 18,048
shares of Global's common stock. J. Hovey Kemp and Christopher J. Hagan each
serve as Assistant Secretary to Global.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule at March 31, 1999 and 1998, and for each of
the three years in the period ended March 31, 1999, as set forth in their
report. We've included our financial statements and schedule in the prospectus
and elsewhere in the registration statement in reliance on Ernst & Young LLP's
report, given on their authority as experts in accounting and auditing.
Ernst & Young LLP, independent auditors, have audited the financial
statements of Electronics Systems, Inc. for each of the two years in the period
ended December 31, 1996, and for the six month period ended June 30, 1997, as
set forth in their report. We've included these financial statements in the
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
The financial statements of Eastern Copy Products, Inc. and Subsidiaries for
each of the three years in the period ended July 31, 1997, appearing in this
prospectus and registration statement have been audited by Pasquale & Bowers,
LLP, independent auditors, as indicated in their report, and are included in
this prospectus and registration statement in reliance on their authority as
experts in giving their report.
The financial statements of Duplicating Specialties, Inc. d/b/a Copytronix
for the ten-month period ended August 31, 1997, appearing in this prospectus
and registration statement have been audited by Moss Adams LLP, independent
auditors, as indicated in their report, and are included in this prospectus and
registration statement in reliance on their authority as experts in giving
their report.
The financial statements of Electronic Systems of Richmond, Inc. for the year
ended December 31, 1996 and for the eleven-month period ended November 30,
1997, appearing in this prospectus and registration statement have been audited
by Edmondson, LedBetter & Ballard, L.L.P., independent auditors, as indicated
in their report, and are included in this prospectus and registration statement
in reliance on their authority as experts in giving their report.
The financial statements of Connecticut Business Systems, Inc. for each of
the two years in the period ended September 30, 1997, and for the three-month
period ended December 31, 1997, appearing in this prospectus and registration
statement have been audited by Arthur Andersen LLP, independent auditors, as
indicated in their report, and are included in this prospectus and registration
statement in reliance on their authority as experts in giving their report.
The financial statements of the Business Systems Division of Bloom's Inc.,
for the year ended January 31, 1997, and for the eleven-month period ended
December 31, 1997, appearing in this prospectus and registration statement have
been audited by Joseph D. Kalicka & Company, LLP, independent auditors, as
indicated in their report, and are included in this prospectus and registration
statement in reliance on their authority as experts in giving their report.
The financial statements of Carr Business Machines of Great Neck, Inc. d/b/a
Carr Business Systems, as of December 31, 1997 and for the year then ended,
appearing in this prospectus and registration statement have
100
<PAGE>
been audited by Margolin, Winer & Evens LLP, independent auditors, as indicated
in their report, and are included in this prospectus and registration statement
in reliance on their authority as experts in giving their report.
The consolidated financial statements of Capital Office Solutions, Inc. as of
June 30, 1998 and 1997 and for each of the three years in the period ended June
30, 1998, included in this Prospectus, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report appearing herein, and have
been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Lewan & Associates, Inc. as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998, included in this Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report appearing herein,
and have been so included in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
101
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Financial Statements of Global Imaging Systems, Inc.
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-3
Consolidated Balance Sheets as of March 31, 1999 and 1998................. F-4
Consolidated Statements of Operations for the Years Ended March 31, 1999,
1998 and 1997............................................................ F-6
Consolidated Statements of Stockholders' Equity for the Years Ended March
31, 1999,
1998 and 1997............................................................ F-7
Consolidated Statements of Cash Flows for the Years Ended March 31, 1999,
1998 and 1997............................................................ F-8
Notes to Consolidated Financial Statements................................ F-9
Unaudited Pro Forma Consolidated Financial Data
Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal
Year Ended March 31, 1999................................................ F-23
Notes to Unaudited Pro Forma Consolidated Statement of Operations for the
Fiscal Year Ended March 31, 1999......................................... F-24
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 1999....... F-25
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of March 31,
1999..................................................................... F-26
Financial Statements of Electronic Systems, Inc.
Report of Independent Auditors............................................ F-27
Statements of Income and Retained Earnings for the Years Ended December
31, 1995 and 1996 and the Six-Months Ended June 30, 1997................. F-28
Statements of Cash Flows for the Years Ended December 31, 1995 and 1996
and the Six-Months Ended June 30, 1997................................... F-29
Notes to Financial Statements............................................. F-30
Financial Statements of Eastern Copy Products, Inc. and Subsidiaries
Independent Auditors' Report.............................................. F-33
Consolidated Statements of Income and Retained Earnings for the Years
Ended July 31, 1997, 1996 and 1995....................................... F-34
Consolidated Statements of Cash Flows for the Years Ended July 31, 1997,
1996 and 1995............................................................ F-35
Notes to the Consolidated Financial Statements............................ F-36
Financial Statements of Duplicating Specialties, Inc. (Copytronix)
Independent Auditor's Report.............................................. F-40
Statement of Income and Retained Earnings for the Ten Months Ended August
31, 1997................................................................. F-41
Statement of Cash Flows for the Ten Months Ended August 31, 1997.......... F-42
Notes to Financial Statements............................................. F-43
Financial Statements of Electronic Systems of Richmond, Inc.
Independent Auditor's Report.............................................. F-46
Statements of Income and Retained Earnings for the Eleven-Month and
Twelve-Month Periods Ended
November 30, 1997 and December 31, 1996.................................. F-47
Statements of Cash Flows for the Eleven-Month and Twelve-Month Periods
Ended November 30, 1997 and December 31, 1996............................ F-48
Notes to Financial Statements............................................. F-49
</TABLE>
F-1
<PAGE>
Financial Statements of Connecticut Business Systems, Inc.
<TABLE>
<S> <C>
Report of Independent Public Accountants................................. F-51
Statements of Income (Loss) and Retained Earnings (Deficit) for the Years
Ended September 30, 1996 and 1997 and Three Months Ended December 31,
1997.................................................................... F-52
Statements of Cash Flows for the Years Ended September 30, 1996 and 1997
and the Three Months Ended December 31, 1997............................ F-53
Notes to Financial Statements............................................ F-54
Financial Statements of Business Systems Division (Bloom's)
Report of Independent Certified Public Accountants....................... F-58
Statements of Divisional Net Assets as of December 31, 1997 and January
31, 1997................................................................ F-59
Statements of Divisional Operations for the Eleven Months Ended December
31, 1997 and the Year Ended January 31, 1997............................ F-60
Statements of Changes in Divisional Net Assets for the Eleven Months
Ended December 31, 1997 and the Year Ended January 31, 1997............. F-61
Statements of Divisional Cash Flows for the Eleven Months Ended December
31, 1997 and the Year Ended January 31, 1997............................ F-62
Notes to Financial Statements............................................ F-63
Financial Statements of Carr Business Machines of Great Neck Inc.
Report of Independent Accountants........................................ F-68
Balance Sheet as of December 31, 1997.................................... F-69
Statement of Operations for the Year Ended December 31, 1997............. F-71
Statement of Retained Earnings for the Year Ended December 31, 1997...... F-72
Statement of Cash Flows for the Year Ended December 31, 1997............. F-73
Notes to Financial Statements............................................ F-75
Financial Statements of Capitol Office Solutions, Inc.
Report of Independent Auditors........................................... F-79
Consolidated Balance Sheets as of June 30, 1998 and 1997................. F-80
Consolidated Statements of Earnings for the Years Ended June 30, 1998,
1997 and 1996........................................................... F-82
Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended June 30, 1998, 1997 and 1996...................................... F-83
Consolidated Statements of Cash Flows for the Years Ended June 30, 1998,
1997 and 1996........................................................... F-84
Notes to Consolidated Financial Statements............................... F-85
Financial Statements of Lewan & Associates, Inc.
Independent Auditors' Report............................................. F-90
Consolidated Balance Sheets as of December 31, 1998 and 1997............. F-91
Consolidated Statements of Income for the Years Ended December 31, 1998,
1997 and 1996........................................................... F-92
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1998, 1997 and 1996........................................ F-93
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996..................................................... F-94
Notes to Consolidated Financial Statements............................... F-95
Unaudited Balance Sheet as of March 31, 1999............................. F-100
Unaudited Statements of Income for the Three Months Ended March 31, 1999
and 1998................................................................ F-101
Unaudited Statements of Cash Flows for the Three Months Ended March 31,
1999 and 1998........................................................... F-102
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Global Imaging Systems, Inc.
We have audited the accompanying consolidated balance sheets of Global
Imaging Systems, Inc. as of March 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Global Imaging Systems, Inc. at March 31, 1999 and 1998, and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended March 31, 1999, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
Tampa, Florida
May 12, 1999
F-3
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
---------------------
1999 1998
---------- ----------
(In thousands, except
share amounts)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 5,175 $ 4,496
Accounts receivable, net of allowance for doubtful
accounts ($1,353 and $871 at March 31, 1999 and 1998,
respectively)......................................... 45,700 27,572
Inventories............................................ 36,793 19,061
Deferred income taxes.................................. 2,591 1,543
Prepaid expenses and other current assets.............. 1,940 425
---------- ----------
Total current assets................................. 92,199 53,097
Rental equipment, net.................................... 4,377 4,655
Property and equipment, net.............................. 6,409 4,419
Other assets............................................. 782 2,147
Deferred income taxes.................................... -- 571
Related party notes receivable........................... 47 547
Intangible assets, net:
Goodwill............................................... 201,307 94,685
Noncompete agreements.................................. 1,207 1,336
Financing fees......................................... 4,091 2,885
---------- ----------
Total assets......................................... $ 310,419 $ 164,342
========== ==========
</TABLE>
See accompanying notes.
F-4
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS--(Continued)
<TABLE>
<CAPTION>
March 31,
----------------------
1999 1998
---------- ----------
(In thousands, except
per share amounts)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 16,718 $ 10,556
Accrued liabilities.................................. 7,583 3,878
Accrued compensation and benefits.................... 5,221 3,543
Current maturities of long-term debt................. 176 233
Deferred revenue..................................... 16,196 10,632
Income taxes payable................................. 1,383 --
---------- ----------
Total current liabilities.......................... 47,277 28,842
Deferred income taxes................................ 142 --
Long-term debt, less current maturities................ 168,101 97,252
---------- ----------
Total liabilities.................................. 215,520 126,094
Stockholders' equity:
Preferred stock, $.01 par value: 10,000,000 shares
authorized: no shares issued........................ -- --
Class A common stock, $.01 par value: 0 shares
authorized, issued and outstanding at March 31,
1999; 400,000 shares authorized and 339,945 shares
issued and outstanding at March 31, 1998............ -- 3
Class B common stock, $.01 par value: 0 shares
authorized, issued and outstanding at March 31,
1999; 50,000,000 shares authorized: 9,521,058 shares
issued and outstanding at March 31, 1998............ -- 95
Class C common stock, $.01 par value: 0 shares
authorized, issued and outstanding at March 31,
1999; 905,000 shares authorized and 904,252 shares
issued and outstanding at March 31, 1998............ -- 9
Common stock, $.01 par value: 50,000,000 shares
authorized: 18,727,436 shares issued and 18,725,841
shares outstanding at March 31, 1999................ 187 --
Common stock held in treasury, at cost............... (35) --
Additional paid-in capital........................... 83,817 33,618
Retained earnings.................................... 10,930 4,754
---------- ----------
94,899 38,479
Less stockholder receivables......................... -- (231)
---------- ----------
Total stockholders' equity......................... 94,899 38,248
---------- ----------
Total liabilities and stockholders' equity......... $ 310,419 $ 164,342
========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended March 31,
---------------------------
1999 1998 1997
-------- -------- -------
(In thousands, except per
share amounts)
<S> <C> <C> <C>
Revenues:
Equipment and supplies sales................... $218,653 $121,316 $41,200
Service and rentals............................ 69,542 43,059 22,893
-------- -------- -------
Total revenues............................... 288,195 164,375 64,093
Costs and operating expenses:
Cost of equipment and supplies sales........... 154,083 85,972 27,087
Service and rental costs....................... 34,434 21,594 11,467
Selling, general and administrative expenses... 63,133 38,619 18,280
Intangible asset amortization.................. 4,627 3,076 1,939
-------- -------- -------
Total costs and operating expenses........... 256,277 149,261 58,773
-------- -------- -------
Income from operations........................... 31,918 15,114 5,320
Interest expense................................. 8,427 6,713 3,190
-------- -------- -------
Income before income taxes and extraordinary
item............................................ 23,491 8,401 2,130
Income taxes..................................... 10,390 3,948 1,007
-------- -------- -------
Income before extraordinary item................. 13,101 4,453 1,123
Extraordinary charge for early retirement of
debt, net of tax benefit of $1,241.............. (1,817) -- --
-------- -------- -------
Net income....................................... 11,284 4,453 1,123
-------- -------- -------
Yield adjustment on Class A common stock and
accretions...................................... (901) (2,442) (1,402)
-------- -------- -------
Net income (loss) available to common
stockholders.................................... $ 10,383 $ 2,011 $ (279)
======== ======== =======
Basic earnings per share:
Income (loss) before extraordinary item,
including yield adjustment and accretions....... $ .74 $ .21 $ (.03)
Extraordinary charge for early retirement of
debt, net of tax benefit of $1,241.............. (.11) -- --
-------- -------- -------
Basic earnings (loss) per share.................. $ .63 $ .21 $ (.03)
======== ======== =======
Diluted earnings per share:
Income (loss) before extraordinary item,
including yield adjustment and accretions....... $ .73 $ .21 $ (.03)
Extraordinary charge for early retirement of
debt, net of tax benefit of $1,241.............. (.11) -- --
-------- -------- -------
Diluted earnings (loss) per share................ $ .62 $ .21 $ (.03)
======== ======== =======
Weighted average number of shares outstanding:
Basic.......................................... 16,478 9,805 8,729
Diluted........................................ 16,811 9,805 8,729
======== ======== =======
</TABLE>
See accompanying notes.
F-6
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock*
----------------- Additional
Par Paid-in Treasury Stockholder Retained
Shares Value Capital Stock Receivables Earnings Total
---------- ----- ---------- -------- ----------- -------- --------
(In thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at March 31,
1996................... 8,287,353 $ 83 $ 15,971 $ (822) $ 15,232
Common stock issued..... 1,120,434 11 3,529 $(100) 3,440
Net income.............. 1,123 1,123
---------- ---- -------- ---- ----- ------- --------
Balances at March 31,
1997................... 9,407,787 94 19,500 (100) 301 19,795
Common stock issued..... 1,357,468 13 14,118 (131) 14,000
Net income.............. 4,453 4,453
---------- ---- -------- ---- ----- ------- --------
Balances at March 31,
1998................... 10,765,255 107 33,618 (231) 4,754 38,248
Common stock issued in
initial public
offering.............. 6,000,000 60 66,900 66,960
Common stock issued in
conjunction with
acquisitions.......... 1,143,797 11 16,377 16,388
Common stock retired... (339,945) (3) (30,459) 231 (133) (30,364)
Stock repurchased--
Treasury.............. (1,595) $(35) (35)
Dividend--Class A
common stock.......... (4,975) (4,975)
Common stock
reclassified.......... 1,158,329 12 (12)
Cost of initial public
offering.............. (2,607) (2,607)
Net income............. 11,284 11,284
---------- ---- -------- ---- ----- ------- --------
Balances at March 31,
1999................... 18,725,841 $187 $ 83,817 $(35) $ -- $10,930 $ 94,899
========== ==== ======== ==== ===== ======= ========
</TABLE>
* COMMON STOCK ROLL FORWARD
<TABLE>
<CAPTION>
Class A Class B Class C Total
Common Stock Common Stock Common Stock Common Stock Common Stock
--------------- ----------------- --------------- ----------------- -----------------
Par Par Par Par Par
Shares Value Shares Value Shares Value Shares Value Shares Value
-------- ----- ---------- ----- -------- ----- ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at March 31,
1996................... 172,917 $ 2 8,114,436 $ 81 8,287,353 $ 83
Common stock issued.... 38,229 -- 448,272 5 633,933 $ 6 1,120,434 11
-------- ---- ---------- ---- -------- ---- ---------- ---- ---------- ----
Balances at March 31,
1997................... 211,146 2 8,562,708 86 633,933 6 9,407,787 94
Common stock issued.... 128,799 1 958,350 9 270,319 3 1,357,468 13
-------- ---- ---------- ---- -------- ---- ---------- ---- ---------- ----
Balances at March 31,
1998................... 339,945 3 9,521,058 95 904,252 9 10,765,255 107
Common stock issued in
initial
public offering....... 6,000,000 $ 60 6,000,000 60
Common stock issued in
conjunction with
acquisitions.......... 1,143,797 11 1,143,797 11
Common stock retired... (339,945) (3) (339,945) (3)
Stock repurchased--
Treasury.............. (1,595) (1,595)
Common stock
reclassified.......... (9,521,058) (95) (904,252) (9) 11,583,639 116 1,158,329 12
-------- ---- ---------- ---- -------- ---- ---------- ---- ---------- ----
Balances at March 31,
1999................... -- $-- -- $-- -- $-- 18,725,841 $187 18,725,841 $187
======== ==== ========== ==== ======== ==== ========== ==== ========== ====
</TABLE>
See accompanying notes.
F-7
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------------
1999 1998 1997
--------- -------- --------
(In thousands)
<S> <C> <C> <C>
Operating activities:
Net income...................................... $ 11,284 $ 4,453 $ 1,123
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.................................. 4,593 3,593 2,534
Amortization.................................. 4,954 3,630 2,576
Extraordinary charge for early retirement of
debt......................................... 1,817 -- --
Deferred income taxes......................... 519 278 (528)
Changes in operating assets and liabilities,
net of amounts acquired in purchase business
combinations:
Accounts receivable......................... (7,329) (2,341) (2,106)
Inventories................................. (5,511) (1,034) (1,279)
Prepaid expenses and other current assets... (1,337) 48 131
Other assets................................ (41) (202) 72
Accounts payable............................ 2,014 (1,565) 616
Accrued liabilities, compensation and
benefits................................... 1,100 (545) 1,011
Deferred revenue............................ (483) (72) 269
Income taxes payable........................ 919 (440) (105)
--------- -------- --------
Net cash provided by operating activities....... 12,499 5,803 4,314
Investing activities:
Related party notes receivable.................. 500 (500) (47)
Purchase of property, equipment and rental
equipment...................................... (5,208) (3,424) (2,940)
Payment for purchase of businesses, net of cash
acquired....................................... (103,764) (67,975) (16,008)
--------- -------- --------
Net cash used in investing activities........... (108,472) (71,899) (18,995)
Financing activities:
Net draws under line of credit.................. 70,610 60,560 14,565
Financing fees.................................. (4,584) (884) (2,762)
Cost of initial public offering................. (960) (1,647) --
Common stock retired and repurchased............ (35,374) -- --
Common stock issued for cash.................... 66,960 11,602 3,441
--------- -------- --------
Net cash provided by financing activities....... 96,652 69,631 15,244
--------- -------- --------
Net increase in cash and cash equivalents....... 679 3,535 563
Cash and cash equivalents, beginning of year.... 4,496 961 398
--------- -------- --------
Cash and cash equivalents, end of year.......... $ 5,175 $ 4,496 $ 961
========= ======== ========
</TABLE>
See accompanying notes.
F-8
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Basis of Consolidation
Global Imaging Systems, Inc. was formed on June 3, 1994. The Company's
principal operating subsidiaries are located in the United States and are in
the business of supplying photocopiers, facsimile equipment, automated office
equipment, network integration services, electronic presentation and document
imaging equipment, and related service, parts, and supplies. The consolidated
financial statements include the financial statements of Global Imaging
Systems, Inc. and its subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized as follows:
Supplies sales to customers are recognized at the time of shipment. Equipment
sales are recognized at the time of customer acceptance, or in the case of
equipment sales financed by third-party leasing companies, at the time of
acceptance by the leasing company and the customer.
Maintenance contract service revenues are recognized ratably over the term of
the underlying maintenance contract. Other service revenues are recognized as
earned. Deferred revenue consists of unearned maintenance contract revenue that
is recognized over the life of the related contract, generally 12 months.
Rental equipment revenue is recognized ratably over the lives of the underlying
cancelable operating leases, principally one to three years.
Financial Instruments
The Company's financial instruments include cash, accounts receivable,
accounts payable, and long-term debt. The carrying amount of these financial
instruments approximate their fair market value.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less when acquired to be cash equivalents.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents, and trade
receivables. Concentrations of credit risk with respect to trade receivables
are limited due to the large number of customers comprising the Company's
customer base and their dispersion across different industries and geographical
areas. As of March 31, 1999, the Company had no significant concentrations of
credit risk.
F-9
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Inventories
Inventories consist of photocopiers, facsimile equipment, automated office
equipment, electronic presentation equipment, document imaging equipment,
computers and related software, and related parts and supplies and are valued
at the lower of cost (specific identification and/or average cost for equipment
and average cost for related parts and supplies) or market value. Inventories
are stated net of reserves of $2,211 and $1,295 at March 31, 1999 and 1998,
respectively, for excess and slow-moving inventories.
Long-Lived Assets
The recoverability of long-lived assets (including related intangibles) is
evaluated at the operating unit level by an analysis of operating results and
consideration of other significant events or changes in the business
environment. If an operating unit has current operating losses and there is a
likelihood that such operating losses will continue, the Company will determine
if impairment exists based on the undiscounted expected future cash flows from
operations before interest. Impairment losses would be measured based on the
amount by which the carrying amount exceeds the fair value.
Rental Equipment
Rental equipment is stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the assets'
estimated economic lives, principally three years.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are principally provided using the
straight-line method over the assets' estimated economic lives, which range
from three to 10 years.
Intangibles
Goodwill (excess of purchase price over fair value of net assets acquired)
recognized in business combinations accounted for as purchases is amortized
over periods of between 20 and 40 years on the straight-line basis. Accumulated
amortization was approximately $7,100 and $3,200 at March 31, 1999 and 1998,
respectively.
Noncompete agreements are amortized over the lives of the agreements, which
range from two to four years, using the straight-line basis. Accumulated
amortization was approximately $4,300 and $3,500 at March 31, 1999 and 1998,
respectively.
Financing fees are amortized over the terms of the underlying debt agreements
using the straight-line method, which approximates the effective interest rate
method. Accumulated amortization at March 31, 1999 and 1998 was approximately
$206 and $760, respectively. In July 1998, the Company refinanced its existing
lines of credit. Unamortized financing fees of $3,058 that related to the
existing lines of credit were charged to operations as an extraordinary item.
2. Acquisitions
During the year ended March 31, 1999, the Company acquired eight businesses
that provide office imaging solutions and related services for an aggregate
purchase price of approximately $124,800, primarily for cash, including direct
costs of acquisitions of approximately $1,000. Liabilities assumed in
connection with these acquisitions totaled approximately $14,800. The Company
also sold stock at its fair market value of approximately $16,400 in connection
with these acquisitions.
F-10
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Significant acquisitions during the year ended March 31, 1999, include Carr
Business Systems (CAR), Capitol Office Solutions, Inc. (COS), Distinctive
Business Products, Inc. (DBP) and Dahill Industries, Inc. (DAH).
The following summarizes these acquisitions:
<TABLE>
<CAPTION>
Acquisition Total Assets Goodwill
Acquired Company Date Acquired Acquired
---------------- -------------- ------------ --------
<S> <C> <C> <C>
CAR................................... September 1998 $ 19,100 $ 15,300
COS................................... December 1998 60,000 54,100
DBP................................... December 1998 21,200 17,200
DAH................................... February 1999 28,400 17,100
-------- --------
$128,700 $103,700
======== ========
</TABLE>
Total assets related to the remaining four acquisitions were approximately
$10,900, including goodwill of approximately $6,100.
During the year ended March 31, 1998, the Company acquired 12 businesses that
provide office imaging solutions and related services for an aggregate purchase
price of approximately $72,300 primarily for cash, including the direct costs
of acquisitions of approximately $600. Liabilities assumed in connection with
these acquisitions totaled approximately $21,400. The Company also sold stock
in connection with these acquisitions. The Class B common stock was valued from
$3.30 to $8.20 per share and the Class A common stock from $65.00 to $80.00 per
share. Stock valued at approximately $6,100 was sold in connection with these
acquisitions. The excess of the fair value of the stock over the sales price
was approximately $2,400 and has been considered additional purchase price.
Significant acquisitions during the year ended March 31, 1998, include
Electronic Systems, Inc. (ESI), Eastern Copy Products, Inc. (ECP), Electronic
Systems of Richmond, Inc. (ESR), and Connecticut Business Systems, Inc. (CBS).
The following summarizes these acquisitions:
<TABLE>
<CAPTION>
Acquisition Total Assets Goodwill
Acquired Company Date Acquired Acquired
---------------- ------------- ------------ --------
<S> <C> <C> <C>
ESI.................................... July 1997 $34,700 $24,800
ECP.................................... August 1997 9,100 5,300
ESR.................................... December 1997 15,700 8,600
CBS.................................... December 1997 12,800 9,300
------- -------
$72,300 $48,000
======= =======
</TABLE>
Total assets related to the remaining eight acquisitions were $19,700,
including goodwill of approximately $11,300.
During the year ended March 31, 1997, the Company acquired four businesses
that provide office imaging solutions and related services for an aggregate
purchase price of approximately $17,000 primarily for cash, including the
direct costs of acquisitions of approximately $500. The Company assumed
approximately $4,100 in liabilities in connection with these acquisitions. The
Company also sold stock at its fair market value of approximately $900 in
connection with these acquisitions. Total assets related to these four
acquisitions were approximately $21,100, including goodwill of approximately
$12,000.
F-11
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
All acquisitions have been accounted for as purchases and accordingly are
included in the results of operations from their dates of acquisitions. In
connection with the allocation of purchase price, there were no significant
adjustments to fair value.
Under the terms of two of its purchase agreements, the Company is committed
to make contingent payments ("the Earn-outs") of up to $3,600 to the former
owners of the acquired companies on or before June 30, 2002. The contingent
payments are based on the future profitability, specifically earnings before
interest and taxes, of the acquired companies. The former owners may receive a
portion of the Earn-outs equal to $250 for the fiscal year ending March 31,
1999, and $350 for the fiscal years ending March 31, 2000 and 2001. The former
owners shall be entitled to receive, on or before June 30, 2002, the balance of
the Earn-outs if applicable, minus any portion of the Earn-outs previously
paid. The Earn-outs, if paid, will be recorded as goodwill related to the
acquired companies. The Company has accrued $250 at March 31, 1999 related to
the Earn-outs.
The unaudited pro forma results presented below include the effects of the
acquisitions as if they had been consummated at the beginning of the year prior
to acquisition. The unaudited proforma financial information below is not
necessarily indicative of either future results of operations or results that
might have been achieved had the acquisitions been consummated at the beginning
of the year prior to acquisition.
<TABLE>
<CAPTION>
Unaudited Pro Forma
Year ended March 31,
---------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues................................... $356,526 $313,963 $196,843
Net income (loss) before extraordinary
item...................................... 14,756 4,628 (90)
Less extraordinary item.................... (1,817) -- --
-------- -------- --------
Net income (loss).......................... 12,939 4,628 (90)
Net income (loss) available to common
stockholders.............................. 12,038 1,689 (2,535)
Basic earnings (loss) per share............ .64 .09 (.22)
Diluted earnings (loss) per share.......... .63 .09 (.22)
</TABLE>
3. Rental Equipment
The Company's rental equipment consists of the following:
<TABLE>
<CAPTION>
March 31,
----------------
1999 1998
------- -------
<S> <C> <C>
Rental equipment on operating leases.................. $14,204 $11,594
Less accumulated depreciation......................... (9,827) (6,939)
------- -------
Rental equipment, net................................. $ 4,377 $ 4,655
======= =======
4. Property And Equipment
The Company's property and equipment consists of the following:
<CAPTION>
March 31,
----------------
1999 1998
------- -------
<S> <C> <C>
Office furniture, equipment and leasehold
improvements......................................... $ 9,984 $ 6,289
Less accumulated depreciation and amortization........ (3,575) (1,870)
------- -------
Property and equipment, net........................... $ 6,409 $ 4,419
======= =======
</TABLE>
F-12
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31,
-----------------
1999 1998
-------- -------
<S> <C> <C>
Term and revolving loans............................... $ 68,000 $97,252
Senior Subordinated Notes, 10 3/4% due 2007............ 100,000 --
Various notes payable.................................. 277 233
-------- -------
168,277 97,485
Less current maturities................................ (176) (233)
-------- -------
Total.................................................. $168,101 $97,252
======== =======
</TABLE>
In June 1998, the Company repaid $31,500 of long-term debt outstanding to
Jackson National Life Insurance Company ("JNL"), principally with proceeds from
the initial public offering. Recognition of a prepayment penalty of $250 and
deferred financing costs of $901 related to the JNL debt repayment resulted in
an extraordinary charge of $684 ($.06 per share), net of the related income tax
benefit of $467. In July 1998, the Company repaid the remaining $65,800 balance
of the JNL loan with proceeds from a replacement credit agreement ("The Credit
Agreement") with First Union National Bank ("First Union"). The Company
recognized the remaining prorata deferred financing costs of $1,907 from the
JNL loan, resulting in an extraordinary charge of $1,133 ($.06 per share), net
of the related income tax benefit of $774.
The Credit Agreement with First Union consists of a $5,000 swingline of
credit and a $170,000 revolving line of credit. As of March 31, 1999 the
Company had no amounts outstanding on the swingline of credit and $68,000 on
the revolving line of credit. The Credit Agreement bears interest at rates
ranging from 0.75% to 1.5% over LIBOR (6.19% at March 31, 1999) 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. The terms
of the credit facility require strict compliance with numerous affirmative,
negative and financial covenants. 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. Amounts borrowed under the Credit
Agreement may be used to fund working capital and general corporate purposes,
including acquisitions.
In March 1999, the Company issued $100,000 Senior Subordinated Notes ("the
Notes") due March 8, 2007. The net proceeds of approximately $96,000 were used
to reduce First Union's revolving credit facility. The Notes bear interest at
10.75%, payable semi-annually. The Notes may be redeemed at the option of the
Company beginning on February 15, 2003 at the following redemption prices,
expressed as percentages of the principal amount:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003.......................................................... 105.375%
2004.......................................................... 102.688%
2005 and thereafter........................................... 100.000%
</TABLE>
At any time on or prior to February 15, 2002, the Company may, at its option,
use the net cash proceeds from certain public equity offerings to redeem in the
aggregate up to 35% of the aggregate principal amount of the Notes at a
redemption price equal to 110.75% of the principal amount, provided that at
least 65% of the
F-13
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
aggregate principal amount of the Notes originally issued remain outstanding,
and the redemption occurs within 60 days after the consummation of the public
equity offering. The Notes are guaranteed by all current subsidiaries of the
Company, and must be guaranteed by all future subsidiaries of the Company,
other than certain future financing subsidiaries, on an unsecured senior
subordinated basis. Upon the occurrence of future change of control of the
Company, the holders of the Notes have the right to require that the Company
purchase all or a portion of the Notes at a price equal to 101% of the
principal amount. The covenants of the Notes require strict compliance with
certain affirmative, negative and financial covenants.
On May 7, 1999, the Company filed a registration statement with the
Securities and Exchange Commission to register its offer to exchange the Notes
for exchange notes with identical terms, except the exchange notes will not
contain transfer restrictions.
In September 1996, the Company purchased an interest rate cap from a bank on
$23,500 of the term loan debt outstanding. In January 1998, the Company
purchased an additional rate cap on an additional $26,475 of the term loan. The
interest rate caps are for three-year terms and provide for the Company to be
reimbursed by the bank if the annual average of the LIBOR rate exceeds 8%. The
cost of the interest rate caps ($150) is amortized over the three-year term of
the agreement and is included in interest expense.
Aggregate annual maturities of long-term debt at March 31, 1999 are as
follows:
<TABLE>
<S> <C>
2000............................................................ $ 176
2001............................................................ 34
2002............................................................ 32
2003............................................................ 35
2004............................................................ 68,000
Thereafter...................................................... 100,000
--------
Total........................................................... $168,277
========
</TABLE>
Interest paid was approximately $7,000, $6,000 and $2,700 for the years ended
March 31, 1999, 1998 and 1997, respectively.
6. Stockholders' Equity
During the year ended March 31, 1999, the Company issued stock in connection
with business combinations totaling 1,143,797 shares. The Company received
1,595 shares in settlement of an escrow claim in January 1999.
Under the terms of the Senior Subordinated Notes, the Company is restricted
from paying any cash dividends.
Effective May 28, 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 retirement 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 reclassified its Class B
common stock (Common Stock).
F-14
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. After deducting expenses, the
Company received $64,400 in proceeds from the initial public offering. Of the
approximately $64,400 in net proceeds to the Company, approximately $28,800 was
used to repay amounts due Jackson National Life Insurance Company. The
remaining approximately $35,600 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.
In fiscal 1997, the Company sold 633,933 shares of Class C common stock and
37,083 shares of Class A common stock at their fair value for an aggregate
amount of $2,500 to its lender. During the year ended March 31, 1998, the
Company sold 270,319 shares of Class C common stock and 11,136 shares of Class
A common stock in connection with certain antidilution provisions. Of such
shares of Class C common stock, 260,600 shares were sold at the same per share
price as the fiscal 1997 shares were sold to the Company's lender, and 9,656
shares were sold at a par share price of $.07, resulting in aggregate proceeds
of $1,030 to the Company. Upon consummation of the Company's initial public
offering, each share of Class C common stock converted into a share of common
stock, and each share of Class A common stock converted into approximately 3.41
shares of common stock and $90 plus a cash yield equal to 8% per annum from the
time of purchase through May 31, 1998. Additionally, in 1997, the Company paid
a financing fee of 2% to the lender to increase the JNL loan by $40,000 to
$120,000.
7. Earnings Per Share
Basic earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of shares outstanding for
the period. Diluted earnings per share reflects the potential dilution from the
exercise of stock options or the conversion of securities into stock.
The following table reconciles the numerators and denominators of the basic
and diluted EPS computations:
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Numerator:
Income before extraordinary item............... $13,101 $ 4,453 $ 1,123
Extraordinary charge for early retirement of
debt, net of tax benefit of $1,241............ (1,817) -- --
------- ------- -------
Net income..................................... 11,284 4,453 1,123
Yield adjustment on Class A common stock and
accretions.................................... (901) (2,442) (1,402)
------- ------- -------
Numerator for basic/diluted earnings per
share--net income (loss) available to common
stockholders.................................. $10,383 $ 2,011 $ (279)
======= ======= =======
<CAPTION>
Year ended March 31,
-------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Denominator:
Denominator for basic earnings per share: 16,478 9,805 8,729
Effect of dilutive securities:
Contingent stock-redemption of A shares in
June 1998................................... 88 -- --
Employee stock options....................... 245 -- --
------- ------- -------
Dilutive potential common shares............... 333 -- --
------- ------- -------
Denominator for diluted earnings per share..... 16,811 9,805 8,729
======= ======= =======
</TABLE>
F-15
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Income Taxes
Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
The components of the income tax provision are as follows:
<TABLE>
<CAPTION>
Year ended March 31,
---------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Current:
Federal............................................. $ 8,420 $2,807 $1,160
State............................................... 1,451 863 375
------- ------ ------
9,871 3,670 1,535
Deferred:
Federal............................................. 454 213 (449)
State............................................... 65 65 (79)
------- ------ ------
519 278 (528)
------- ------ ------
$10,390 $3,948 $1,007
======= ====== ======
</TABLE>
A reconciliation of the differences between the effective income tax rate and
the statutory federal tax rate are as follows:
<TABLE>
<CAPTION>
March 31,
---------------------
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Tax at U.S. statutory rate (35%)...................... $ 8,222 $2,856 $ 724
State taxes, net of federal benefit................... 1,322 616 187
Goodwill amortization................................. 529 289 216
Valuation allowance................................... -- -- (175)
Other permanent differences........................... 317 187 55
------- ------ ------
$10,390 $3,948 $1,007
======= ====== ======
</TABLE>
F-16
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
March 31,
--------------
1999 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Noncompete agreements...................................... $1,271 $1,091
Inventory related.......................................... 1,529 688
Various accrued expenses................................... 524 239
Deferred revenue........................................... 213 403
Depreciation............................................... 260 199
Accounts receivable related................................ 325 213
Other items................................................ 126 --
------ ------
Gross deferred tax asset..................................... 4,248 2,833
Deferred tax liabilities:
Goodwill................................................... 1,799 654
Other items................................................ -- 65
------ ------
Net deferred tax asset....................................... $2,449 $2,114
------ ------
Classified as follows:
Current asset.............................................. 2,591 1,543
Noncurrent asset........................................... -- 571
Noncurrent liability....................................... (142) --
------ ------
$2,449 $2,114
====== ======
</TABLE>
A valuation allowance is required to reduce the deferred tax assets reported
if, based on the weight of the evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. A portion of
the reduction of the valuation allowance during the year ended March 31, 1997
was credited to goodwill since it related to basis differences from previous
business combinations not previously recognized. After consideration of all the
evidence, both positive and negative, management has determined that a
valuation allowance is not necessary as of March 31, 1999. Cash paid for income
taxes was $6,948, $3,468 and $1,581 for the years ended March 31, 1999, 1998
and 1997, respectively.
9. Employee Benefit Plans
The majority of the employees of the Company are eligible to participate in
defined contribution plans (the Plans) established under Section 401(k) of the
U.S. Internal Revenue Code. Employees are generally eligible to contribute
voluntarily to the Plans after one year of service. The Company may contribute
a discretionary amount of the employee contribution up to specified limits.
Employees are always vested in their contributed balance and generally become
fully vested in the Company's contributions after seven years of service. The
expense related to the Company's contributions to the Plans for the years ended
March 31, 1999, 1998 and 1997 was approximately $1,117, $519 and $302,
respectively.
10. Stock Option Plan
In 1998, the Board of Directors adopted a stock option plan and approved a
number of stock option grants to be 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
F-17
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
restricted stock to directors, officers, employees, and consultants to the
Company. As of March 31, 1999 the Board had granted options to purchase a total
of 549,750 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. These options have an exercise price of $12 per
share, except for 30,000 shares with an exercise price of $12.875. All of these
options are subject to vesting requirements based on length of service.
The following table summarizes the stock option activity for the year ended
March 31, 1999:
<TABLE>
<CAPTION>
Number of Per Share
Shares Option Price
--------- --------------
<S> <C> <C>
Outstanding at March 31, 1998...................... -- --
Granted.......................................... 559,750 $12.00 - 12.88
Exercised........................................ -- --
Canceled......................................... (33,650) $12.00 - 12.00
------- --------------
Outstanding at March 31, 1999...................... 526,100 $12.00 - 12.88
======= ==============
Exercisable at March 31, 1999...................... 1,000 $12.00 - 12.00
======= ==============
</TABLE>
Pro forma information regarding net income and earnings per share is required
by SFAS 123, "Accounting for Stock-Based Compensation", which also requires
that the information be determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the Black-
Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
1999
----
<S> <C>
Risk-free interest rate.............................................. 5.0%
Volatility factor of the expected market price of the Company's
common stock........................................................ 75.0%
Dividend yield....................................................... --
Weighted average expected life of options (in years)................. 5.0
</TABLE>
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information is as follows:
<TABLE>
<CAPTION>
1999
------
<S> <C>
Pro forma net income available to common stockholders................ $9,925
Pro forma earnings per share:
Basic.............................................................. 0.60
Diluted............................................................ 0.59
</TABLE>
F-18
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes the weighted average exercise prices of option
activity for the year ended:
<TABLE>
<CAPTION>
1999
------
<S> <C>
Balance at beginning of period....................................... $ --
Granted............................................................ 12.05
Exercised.......................................................... --
Canceled........................................................... 12.00
Balance at end of period............................................. 12.05
</TABLE>
As of March 31, 1999, the weighted average exercise price of exercisable
options was $12.00. Outstanding options as of March 31, 1999 had a weighted
average remaining contractual life of 9.2 years. The per share weighted average
fair value of options granted during the year ended March 31, 1999 was $8.19.
11. Leases
The Company is obligated under various noncancelable operating leases for its
office facilities, office equipment and vehicles. Certain of the leases for its
office facilities are with various employee stockholders. Future noncancelable
lease commitments as of March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Related-Party Other
Leases Leases Total
------------- ------- -------
<S> <C> <C> <C>
2000........................................... $1,254 $ 3,125 $ 4,379
2001........................................... 1,165 2,878 4,043
2002........................................... 1,011 2,184 3,195
2003........................................... 739 1,707 2,446
2004........................................... 606 1,271 1,877
Thereafter..................................... -- 1,216 1,216
------ ------- -------
Total........................................ $4,775 $12,381 $17,156
====== ======= =======
</TABLE>
Rental expense related to the above leases was as follows:
<TABLE>
<CAPTION>
Related-Party Other
Lease Expense Leases Total
------------- ------ ------
<S> <C> <C> <C>
Year ended March 31, 1999....................... $1,042 $2,487 $3,529
Year ended March 31, 1998....................... 862 1,236 2,098
Year ended March 31, 1997....................... 530 262 792
</TABLE>
12. Related-Party Transactions
During 1994, the Company entered into a seven-year consulting agreement with
its majority stockholder, Golder, Thoma, Cressey, Rauner, Inc. ("the Majority
Stockholder"). Under the terms of this agreement, the Company was obligated to
pay the Majority Stockholder an annual management fee of $200. The Company was
also obligated to pay a 1% placement fee to the Majority Stockholder for all
debt and equity raised by the Company during the term of the agreement. The
agreement terminated upon the closing of the initial public offering ("IPO") of
the Company's common stock in June 1998.
The Majority Stockholder agreed to waive their 1% placement fee related to
debt refinancing completed in August 1996, because the majority of the work to
obtain the financing was performed by another related party, Green, Manning &
Bunch, which charged a 1% fee.
F-19
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Golder, Thoma, Cressey, Rauner, Inc. management fees were waived in 1999 due
to the completion of the IPO in June, 1998. In connection with the
aforementioned agreements, the Company incurred management fees and placement
fees. The following shows the fees paid in each period:
<TABLE>
<CAPTION>
Year ended
March 31
--------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Management fees............................................... $-- $200 $200
Placement fees................................................ -- 800 --
</TABLE>
The Company entered into a consulting agreement with Capitol Office Solutions
("Capitol") in July 1997, whereby the Company provided certain human resources,
administration, financial, accounting, and consulting services to Capitol for
an annual fee of $150. Additionally, the Company received a one-time fee of
$270 from Capitol related to assisting Capitol in obtaining financing. The
consulting agreement ended in November 1998 with the purchase of Capitol in
December 1998. The majority stockholders of the Company also owned the majority
of the outstanding stock of Capitol.
Related party notes receivable at March 31, 1998 primarily related to amounts
loaned to officers of the Company to purchase stock in Capitol. These notes,
which bore interest of 8% per annum, were due and payable, with interest, on
June 30, 2000, and were collateralized by the shares purchased with the
proceeds of the notes. The notes were paid off in December 1998, concurrently
with the purchase of Capitol by the Company.
13. Segments
In fiscal 1999, the Company adopted the provisions of Statement of Financial
Accounting Standards 131, "Disclosures About Segments of an Enterprise and
Related Information" (SFAS No. 131). This statement establishes new standards
for reporting information about operating segments and related disclosures.
As an integrated office imaging solutions provider, the Company is organized
into 12 geographical operating segments (core dealers). These individual
segments have been aggregated into one reportable segment given the
similarities of economic characteristics between the operations represented by
the core dealers and the common nature of the products and services, classes of
customers and distribution channels.
The revenues of these aggregated segments are derived from the two principal
categories of revenues as reported in the Company's consolidated statements of
operations. Substantially all of the Company's revenue is attributable to
customers in the United States. Additionally, all of the Company's assets are
located in the United States.
14. Supplemental Guarantor Financial Information
The Company has issued $100,000 of 10 3/4% Senior Subordinated Notes (the
Notes), that are fully and unconditionally guaranteed on a joint and several
basis by all the Company's existing subsidiaries (the Guarantors), each of
which is wholly owned, directly or indirectly, by the Company. All of the
operations of the Company are conducted by the Guarantors and the Company has
no operations or assets separate from its investment in its subsidiaries. The
aggregate assets, liabilities, earnings and equity of the Guarantors are
substantially equivalent to the aggregate assets, liabilities, earnings and
equity of the Company, on a consolidated basis. Therefore, separate financial
statements of the Guarantors have not been presented. Separate financial
statements and other disclosures concerning the Guarantors and the Parent are
not presented because management believes that such information would not be
material to investors.
F-20
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Subsequent Event (Unaudited)
The Company has signed a commitment letter with First Union for a $250,000
credit facility. The letter was signed in April 1999. The new credit facility
is expected to replace the current senior credit facility and is expected to
consist of a $150,000 five-year senior secured revolving line of credit, a
$25,000 five-year senior term loan, and a $75,000 seven-year senior term loan.
The new revolving credit line of the senior credit facility is expected to bear
interest at rates ranging from a 2.00% to 3.00% over LIBOR or from .75% to
1.75% over a base rate related to prime rate, and will vary according to
Global's ratio of its total funded debt to earnings before interest, taxes,
depreciation and amortization. The term loans are expected to bear interest at
a rate 3.25% over LIBOR or 2.00% over a base rate related to prime rate. The
terms of the new senior credit facility are expected to require strict
compliance with numerous affirmative, negative and financial covenants.
Amounts borrowed under the senior credit facility may be used to fund working
capital and general corporate purposes, including acquisitions, subject to
First Union's approval in the case of certain acquisitions.
In March 1999, the Company signed a non-binding letter of intent to acquire a
company with total annual revenues of approximately $70 million. If acquired,
the company will serve as a core company for the Company in the Front Range of
the Rocky Mountains.
F-21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations is
based on the historical financial statements of the Company, and the businesses
acquired during fiscal 1999 and 2000, which are more fully described below. The
unaudited pro forma consolidated statement of operations for the fiscal year
ended March 31, 1999 gives effect to acquisitions consummated during fiscal
year 1999 and 2000, as if those acquisitions occurred on April 1, 1998. The
unaudited pro forma consolidated balance sheet at March 31, 1999 gives effect
to the acquisition of Lewan & Associates, Inc. as if it had occurred on March
31, 1999.
During the fiscal year ended March 31, 1999, the Company acquired the
following eight businesses: Capitol Office Solutions, Inc., Carr Business
Machines of Great Neck, Inc. d/b/a Carr Business Systems, Centre Business
Products, Dahill Industries, Inc., Distinctive Business Products, Inc., GE
Capital IT Solutions' Tidewater Operation, ProView, Inc., and Stephen C. Fuller
d/b/a Henderson's Office Systems. In June 1999, the Company acquired Lewan &
Associates, Inc.
The pro forma adjustments are based upon currently available information, as
well as upon certain assumptions that management believes are reasonable. Each
of the acquisitions was accounted for under the purchase method of accounting.
The unaudited pro forma consolidated financial statements are not necessarily
indicative of either future results of operations or results that might have
been achieved had the foregoing transactions been consummated as of the
indicated dates. The unaudited pro forma consolidated financial statements
should be read in conjunction with the notes thereto and the historical
consolidated financial statements of the Company, together with the related
notes thereto, included in this prospectus.
F-22
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For The Fiscal Year Ended March 31, 1999
<TABLE>
<CAPTION>
Historical Acquired Pro Forma Pro Forma
Company(f) Businesses(a) Adjustments(b) Consolidated
------------ ------------- -------------- ------------
<S> <C> <C> <C> <C>
Revenues:
Equipment and supplies
sales................ $218,652,901 $ 96,200,338 $ -- $314,853,239
Service and rental
revenue.............. 69,542,646 43,047,217 -- 112,589,863
------------ ------------ ------------ ------------
Total revenues...... 288,195,547 139,247,555 -- 427,443,102
Costs and operating
expenses:
Cost of equipment and
supplies sales....... 154,082,316 64,577,802 -- 218,660,118
Service and rental
costs................ 34,434,167 22,618,994 -- 57,053,161
Selling, general, and
administrative
expenses............. 63,133,297 36,140,010 -- 99,273,307
Intangible asset
amortization......... 4,627,229 391,279 2,956,310 (c) 7,974,818
------------ ------------ ------------ ------------
Total costs and
operating
expenses........... 256,277,009 123,728,085 2,956,310 382,961,404
------------ ------------ ------------ ------------
Income from operations.. 31,918,538 15,519,470 (2,956,310) 44,481,698
Interest expense, net... 8,427,364 879,260 7,753,678 (d) 17,060,302
------------ ------------ ------------ ------------
Income (loss) before
income taxes .......... 23,491,174 14,640,210 (10,709,988) 27,421,396
Income taxes............ 10,390,640 5,346,458 (2,836,965)(e) 12,900,133
------------ ------------ ------------ ------------
Net income.............. $ 13,100,534 $ 9,293,752 $ (7,873,023) $ 14,521,263
============ ============ ============ ============
Earnings per common
share--basic........... $ 0.80 $ 0.76
============ ============
Earnings per common
share--diluted......... $ 0.78 $ 0.75
============ ============
Weighted average number
of shares used in the
calculation:
Basic................. 16,477,812 19,014,545
============ ============
Diluted............... 16,810,973 19,347,706
============ ============
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
F-23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended March 31, 1999
(a) Represents historical operating results of the following nine businesses
prior to acquisition of their stock or certain of their assets and
liabilities by the Company: Capitol Office Solutions, Inc., Carr Business
Machines of Great Neck, Inc. d/b/a Carr Business Systems, Centre Business
Products, Dahill Industries, Inc., Distinctive Business Products, Inc., GE
Capital IT Solutions' Tidewater Operation, ProView, Inc., Lewan &
Associates, Inc., and Stephen C. Fuller d/b/a Henderson's Office Systems.
(b) Includes adjustments to reflect: (1) amortization expense for financing
fees, goodwill and non-compete agreements recorded as a result of purchase
accounting, (2) interest expense resulting from increased borrowings to
fund the cash portion of the purchase price for the businesses acquired,
and (3) income tax expense that would have resulted if the businesses
acquired by Global during the period from April 1, 1998 to June 30, 1999
had been combined and subject to an assumed federal income tax statutory
rate and the applicable state statutory rate for each of these businesses
for the periods presented. Excludes adjustments resulting from the
elimination of certain sales, service, and administrative positions net of
additional expenses related to positions added in connection with the
Company's acquisitions of the Acquired Businesses; decreases in former
owners' salaries and perquisites; improved purchasing terms; and decreases
in certain other general and administrative expenses. Prior to completing
an acquisition, the Company formulates a formal integration plan which
clearly identifies employees to be terminated, their job classifications or
functions, and their locations. Staff reductions are typically completed
within several months of the acquisition date. Former owners that remain
with the Company post-acquisition are compensated according to the terms of
an employment contract executed at the time of the acquisition.
(c) Reflects additional goodwill amortization expense of $2,874,673 and non-
compete covenant amortization expense of $472,916, offset by an adjustment
to eliminate amortization expense of ($391,279), that was recorded by the
acquired companies. The goodwill amortization periods range from 25 to 40
years; goodwill is amortized using the straight-line method. The non-
compete covenant amortization periods range from 2 to 3 years; non-compete
covenants are amortized using the straight-line method.
(d) Reflects additional interest expense related to borrowings that would have
been incurred by the Company to finance the acquisitions, had all of the
acquisitions been consummated at April 1, 1998. An average interest rate of
7.25% was used for this calculation which approximates the Company's
average borrowing rate during such period.
(e) Represents the income tax impact on purchase accounting adjustments, based
on an effective rate of 40.0%.
(f) This column represents the historical consolidated results of operations
and excludes an extraordinary charge of $3.1 million ($1.8 million net of
income taxes) to recognize a $0.2 million prepayment penalty and the write-
off of deferred financing costs of $2.9 million related to the retirement
of Global's prior credit facility with Jackson National Life Insurance
Company.
F-24
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1999
<TABLE>
<CAPTION>
Historical
--------------------------------------
Global Imaging Lewan & Pro Forma
Systems, Inc. (a) Associates, Inc. (b) Adjustments Pro Forma
----------------- -------------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 5,175,408 $ 3,871,380 $ -- $ 9,046,788
Accounts receivable,
net of allowance for
doubtful accounts.... 45,699,910 8,353,347 (115,000)(c) 53,938,257
Inventories........... 36,793,273 4,892,856 (410,000)(d) 41,276,129
Deferred income
taxes................ 2,591,000 369,143 390,000 (e) 3,350,143
Prepaid expenses and
other current
assets............... 1,939,683 864,167 -- 2,803,850
------------ ----------- ------------ ------------
Total current
assets............. 92,199,274 18,350,893 (135,000) 110,415,167
Rental equipment, net... 4,377,144 5,552,270 (100,000)(f) 9,829,414
Property and equipment,
net.................... 6,409,271 1,512,794 -- 7,922,065
Other assets............ 781,348 118,134 -- 899,482
Related party notes
receivable............. 46,793 -- -- 46,793
Intangible assets, net:
Goodwill.............. 201,307,326 -- 41,093,570 (g) 242,400,896
Noncompete
agreements........... 1,207,250 -- 1,000,000 (h) 2,207,250
Financing fees........ 4,090,602 -- -- 4,090,602
------------ ----------- ------------ ------------ ---
Total assets........ $310,419,008 $25,534,091 $ 41,858,570 $377,811,669
============ =========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 16,718,313 $ 5,849,251 $ -- $ 22,567,564
Accrued liabilities... 7,584,276 947,919 250,000 (i) 8,782,195
Accrued compensation
and benefits......... 5,220,607 2,695,451 -- 7,916,058
Current maturities of
long-term debt....... 176,210 -- -- 176,210
Deferred revenue...... 16,195,488 2,950,040 100,000 (j) 19,245,528
Income taxes payable.. 1,382,526 -- -- 1,382,526
------------ ----------- ------------ ------------
Total current
liabilities........ 47,277,420 12,442,661 350,000 60,070,081
Long-term debt, less
current maturities..... 168,101,028 -- 50,000,000 (k) 218,101,028
Deferred income taxes... 142,000 -- -- 142,000
------------ ----------- ------------ ------------
Total liabilities... 215,520,448 12,442,661 50,350,000 278,313,109
Stockholders' equity:
Common stock.......... 187,258 -- 2,887 (l) 190,145
Common stock held in
treasury, at cost.... (35,086) -- -- (35,086)
Additional paid-in
capital.............. 83,816,636 1,203,970 3,393,143 (m) 88,413,749
Retained earnings..... 10,929,752 11,887,460 (11,887,460)(n) 10,929,752
------------ ----------- ------------ ------------
Total stockholders'
equity............. 94,898,560 13,091,430 (8,491,430) 99,498,560
------------ ----------- ------------ ------------
Total liabilities
and stockholders'
equity............. $310,419,008 $25,534,091 $ 41,858,570 $377,811,669
============ =========== ============ ============
</TABLE>
See accompanying notes to the unaudited pro forma consolidated financial
statements.
F-25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
March 31, 1999
(a) This column represents the historical consolidated balance sheet of the
Company as of March 31, 1999.
(b) This column represents the historical balance sheet of Lewan as of March
31, 1999.
(c) This represents an adjustment to record accounts receivable at estimated
fair value.
(d) This represents an adjustment to record inventory at estimated fair value.
(e) This represents the tax impact of recording purchase accounting
adjustments.
(f) This represents an adjustment to record rental equipment at estimated fair
value.
(g) This represents the portion of the purchase price allocated to goodwill as
a result of the acquisition of Lewan.
(h) This represents the portion of the purchase price allocated to the non-
compete covenant as a result of the acquisition of Lewan.
(i) This represents an adjustment to record accrued liabilities at estimated
fair value.
(j) This represents an adjustment to record deferred revenues at estimated fair
value.
(k) This represents cash borrowed to fund the acquisition.
(l) Represents the par value of 288,704 shares of Global common stock issued to
the sellers of Lewan in the amount of $2,887 in connection with the
acquisition.
(m) Represents additional paid-in capital on Global's common stock issued to
the sellers of Lewan in connection with the acquisition, of $4,597,113 and
offset by the elimination of additional paid-in capital on Lewan common
stock of $1,203,970.
(n) This represents the elimination of Lewan's retained earnings.
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Stockholders
Electronic Systems, Inc.
We have audited the accompanying statements of income and retained earnings
and cash flows of Electronic Systems, Inc. for the years ended December 31,
1995 and 1996 and the six months ended June 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Electronic
Systems, Inc. for the years ended December 31, 1995 and 1996 and the six months
ended June 30, 1997 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young
Richmond, Virginia
January 23, 1998
F-27
<PAGE>
ELECTRONIC SYSTEMS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
Six months
Year ended December 31 ended
------------------------ June 30
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Equipment, supplies and parts........ $24,096,319 $35,903,314 $20,373,983
Service and training................. 4,013,939 6,304,117 3,899,523
Rental............................... 758,271 802,465 422,963
----------- ----------- -----------
Total revenue...................... 28,868,529 43,009,896 24,696,469
Cost of goods and services sold:
Equipment, supplies and parts........ 20,478,529 31,008,200 17,294,908
Service and training................. 1,883,456 3,115,095 1,804,993
Rental............................... 470,729 513,096 282,111
----------- ----------- -----------
Total cost of goods and services
sold.............................. 22,832,714 34,636,391 19,382,012
----------- ----------- -----------
6,035,815 8,373,505 5,314,457
Selling, general, and administrative
expenses.............................. 4,824,892 5,961,952 4,482,983
----------- ----------- -----------
1,210,923 2,411,553 831,474
Other income (expense):
Interest expense..................... (78,207) (87,713) (17,250)
Interest income...................... 16,498 21,850 34,135
Management fee....................... 15,000 25,000 14,000
Other, net........................... 100,008 32,740 90,031
----------- ----------- -----------
53,299 (8,123) 120,916
----------- ----------- -----------
Net income............................. 1,264,222 2,403,430 952,390
Retained earnings at beginning of
year.................................. 1,958,487 2,877,594 4,682,982
Distributions to shareholders.......... (345,115) (598,042) (1,174,346)
----------- ----------- -----------
Retained earnings at end of year....... $ 2,877,594 $ 4,682,982 $ 4,461,026
=========== =========== ===========
</TABLE>
See accompanying notes.
F-28
<PAGE>
ELECTRONIC SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months
Year ended December 31 ended
------------------------ June 30
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities
Net income............................. $ 1,264,222 $ 2,403,430 $ 952,390
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 398,866 521,799 250,726
(Gain) loss on sale of assets........ 1,610 8,243 (26,620)
Provision for doubtful accounts...... 20,776 -- 108,000
Changes in operating assets and lia-
bilities:
Accounts receivable................. (1,725,911) 35,132 (691,819)
Inventories......................... (617,253) (463,747) 248,873
Prepaid expenses and other.......... 42,368 (336) (44,952)
Accounts payable.................... 801,781 2,032,101 (1,301,766)
Accrued expenses and other liabili-
ties............................... 162,239 371,848 554,626
----------- ----------- -----------
Net cash provided by operating activi-
ties.................................. 348,698 4,908,470 49,458
Investing activities
Purchases of property and equipment.... (659,254) (444,200) (339,048)
Proceeds on sale of property and equip-
ment.................................. 39,176 101,242 45,043
Proceeds on notes receivable from
shareholders.......................... -- -- 166,980
----------- ----------- -----------
Net cash used in investing activities.. (620,078) (342,958) (127,025)
Financing activities
Borrowings on revolving credit loan.... 1,792,325 200,000 --
Repayments on revolving credit loan.... (1,026,630) (1,178,705) --
Principal payments on long-term debt... (149,200) (236,700) (20,000)
Distributions to shareholders.......... (345,115) (598,042) (1,174,346)
----------- ----------- -----------
Net cash (used) provided by financing
activities............................ 271,380 (1,813,447) (1,194,346)
(Decrease) increase in cash............ -- 2,752,065 (1,271,913)
Cash at beginning of year.............. 10,450 10,450 2,762,515
----------- ----------- -----------
Cash at end of year.................... $ 10,450 $ 2,762,515 $ 1,490,602
=========== =========== ===========
</TABLE>
See accompanying notes.
F-29
<PAGE>
ELECTRONIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
1. Significant Accounting Policies
Electronic Systems, Inc. (the Company) is an office technology supplier
incorporated in Virginia. The Company sells and services computer hardware,
software and copiers and provides consulting and training services for various
office systems. The following is a description of the Company's significant
accounting policies:
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market, primarily using
specific identification.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
both straight-line and accelerated methods over the estimated useful lives of
the related assets.
Rental Equipment
Equipment is rented to customers under operating leases. Rental equipment is
stated at cost. Depreciation is computed using the straight-line method over
the estimated useful life of the related asset. Future minimum rentals as of
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending June 30 Amount
------------------- --------
<S> <C>
1998................................................................ $426,258
1999................................................................ 261,103
2000................................................................ 105,828
--------
$793,189
========
</TABLE>
Revenue Recognition
Revenues are recognized as follows:
Equipment and supply sales revenues are recognized when shipped or delivered
and title and risk of loss pass to the customer.
Maintenance contract service revenues are recognized ratably over the term of
the underlying maintenance contract. Other service revenues are recognized as
earned.
Rental revenue is recognized ratably over the term of the underlying leases,
typically one to three years.
Advertising
The costs of advertising the Company's products and services are generally
expensed as incurred. Total advertising costs amounted to $176,910, $197,525
and $47,392 in 1995, 1996 and 1997, respectively.
Income Taxes
The Company is organized to be taxed under the provisions of Subchapter S of
the Internal Revenue Code. Under these provisions, the Company does not pay
federal or state income taxes on its corporate income. Instead the Company's
income is included in the income of its stockholders for federal and state
income tax purposes.
F-30
<PAGE>
ELECTRONIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management make estimates and assumptions which
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Long Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, which requires impairment losses be recorded on long-
lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The Company adopted
Statement 121 in 1996 and such adoption had no effect on the financial
statements.
2. Borrowings
The Company has a term loan collateralized by its headquarters land and
building. The loan bears interest at 90.2778% of prime and principal payments
are $40,000 for each of the next five years.
Interest paid on all indebtedness was $78,207, $87,713 and $17,256 in 1995,
1996 and 1997, respectively.
3. Employee Benefit Plans
The Company has a 401(k) plan which covers all full-time employees meeting
certain eligibility requirements. Participants may elect to contribute up to
15% of their compensation on a pre-tax basis, as defined in the plan. The
Company contributes an amount equal to 50% of the participant's contribution
not to exceed 5% of each participant's base compensation. Participants are
fully vested in the Company contributions. The Company made contributions of
$68,404, $93,390 and $62,766 in 1995, 1996 and 1997, respectively.
The Company also maintains a profit sharing plan which covers all full time
employees meeting certain eligibility requirements. Contributions to the plan
are at the discretion of the Board of Directors. The Company contributed
$92,000, $120,000 and $60,000 in 1995, 1996 and 1997, respectively.
4. Leases
The Company is obligated under various noncancelable operating leases for
facilities, warehouse space and training centers.
Future minimum lease payments under the noncancelable operating leases as of
June 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year ending June 30 Amount
------------------- --------
<S> <C>
1998................................................................ $113,449
1999................................................................ 74,339
2000................................................................ 65,570
2001................................................................ 68,849
2002................................................................ 41,309
--------
$363,516
========
</TABLE>
Rent expense amounted to $57,914, $77,126 and $61,658 in 1995, 1996 and 1997,
respectively.
F-31
<PAGE>
ELECTRONIC SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Related Party Transactions
The Company provides certain administrative and accounting services to
Electronic Systems of Richmond, Inc., a corporation owned by certain
shareholders of Electronic Systems, Inc. Management fees of $15,000, $25,000
and $14,000 were received by the Company in 1995, 1996 and 1997, respectively.
6. Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of cash equivalents and accounts receivable.
The Company's temporary cash is invested in short-term money market accounts.
The Company markets its products and services to customers located primarily
in Virginia. The Company performs credit evaluations of its customers prior to
delivery or commencement of services and normally does not require collateral.
Payments for equipment are typically due within thirty days of billing and
supplies and services are typically due upon receipt. The Company maintains an
allowance for potential credit losses and losses have historically been within
management's expectations. Credit losses have historically been insignificant.
The carrying values of amounts classified as current assets and current
liabilities approximate fair values due to the short-term nature of these
instruments. The carrying value of long-term debt approximates fair value as
current borrowing rates approximately market rates for loans with similar
rates.
Two customers accounted for 11%, 20% and 8% of the Company's sales in 1995,
1996 and 1997, respectively.
7. Subsequent Events
Effective July 7, 1997, all outstanding stock of the Company was acquired by
Global Imaging Systems, Inc. In connection with the acquisition, the Company's
S Corporation election was terminated and from the date of acquisition forward
the earnings of the Company will be taxed at the corporate level.
Immediately prior to the acquisition, the headquarters building and land and
related term debt were transferred in the form of a shareholder distribution to
an entity owned by the shareholders of the Company. The Company has entered
into an agreement to lease these facilities for five years, with initial rent
of $185,082 per year, escalating 2% annually.
F-32
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Eastern Copy Products, Inc. and Subsidiaries
We have audited the accompanying consolidated statements of income and
retained earnings and cash flows of EASTERN COPY PRODUCTS, INC. AND
SUBSIDIARIES for the years ended July 31, 1997, 1996, and 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the results of operations and cash
flows of EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES as of July 31, 1997,
1996, and 1995 in conformity with generally accepted accounting principles.
/s/ Pasquale & Bowers, LLP
Syracuse, New York
December 17, 1997
F-33
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Years Ended July 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Sales and service
Equipment sales....................... $ 8,389,297 $ 5,838,732 $ 4,691,487
Service............................... 5,897,324 5,281,391 4,640,232
Rental income......................... 737,113 761,268 733,635
Other................................. 230,241 163,977 203,475
----------- ----------- -----------
15,253,975 12,045,368 10,268,829
----------- ----------- -----------
Cost of sales and service
Cost of equipment sales............... 5,549,634 3,914,590 2,822,924
Cost of service....................... 3,982,670 3,645,680 3,142,454
Depreciation on rental equipment...... 254,990 170,193 182,768
Other................................. 126,740 104,937 96,405
----------- ----------- -----------
9,914,034 7,835,400 6,244,551
----------- ----------- -----------
Gross profit............................ 5,339,941 4,209,968 4,024,278
Selling, general and administrative
expenses............................... 4,971,142 4,087,298 3,689,948
----------- ----------- -----------
Income from operations.................. 368,799 122,670 334,330
Other expense--net, including interest
expense of $108,879, $111,947, and
$123,441............................... 76,090 54,537 78,732
----------- ----------- -----------
Income before provision for income
taxes.................................. 292,709 68,133 255,598
Provision for income taxes (Note 5)..... 110, 000 12,400 99,800
----------- ----------- -----------
Net income.............................. 182,709 55,733 155,798
Retained earnings (accumulated
deficit)--beginning of year............ 55,645 (88) (155,886)
----------- ----------- -----------
Retained earnings (accumulated
deficit)--end of year.................. $ 238,354 $ 55,645 $ (88)
=========== =========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F-34
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended July 31, 1997, 1996, and 1995
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.................................. $ 182,709 $ 55,733 $ 155,798
--------- --------- ---------
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Deferred tax expense (benefit)............ (29,000) (138,000) 65,000
Depreciation.............................. 283,640 210,788 232,672
Bad debt expense.......................... 124,242 40,236 38,889
Loss on disposal of assets................ 0 0 3,355
Changes in assets and liabilities
affecting cash flow from operating
activities:
Accounts receivable..................... (263,488) (317,460) (129,802)
Inventory............................... 677,796 34,657 (456,844)
Other current assets.................... 17,179 (52,319) 66,530
Other assets............................ 0 800 0
Accounts payable........................ (111,511) (439,855) 36,831
Notes payable........................... (231,243) 424,747 85,940
Accrued expenses........................ 12,309 115,168 (65,573)
Deferred revenue........................ 8,419 195,200 (79,325)
Income taxes payable.................... 126,000 86,964 14,688
Other current liabilities............... (29,028) 2,802 (5,512)
--------- --------- ---------
Total adjustments..................... 585,315 163,728 (193,151)
--------- --------- ---------
Net cash provided by (used in) operat-
ing activities....................... 768,024 219,461 (37,353)
--------- --------- ---------
Cash flows from investing activities
Capital expenditures--Net................... (559,067) (102,409) (70,609)
--------- --------- ---------
Net cash used in investing activi-
ties................................. (559,067) (102,409) (70,609)
--------- --------- ---------
Cash flows from financing activities
Proceeds from long-term debt................ 131,219 93,611 55,472
Payments on long-term debt.................. (202,168) (180,436) (161,000)
Payments on capital lease obligations....... 0 (5,426) (57,887)
(Advances) Repayments on shareholder loan--
Net........................................ (10,925) (39,985) 41,415
--------- --------- ---------
Net cash used in financing activi-
ties................................. (81,874) (132,236) (122,000)
--------- --------- ---------
Net increase (decrease) in cash............... 127,083 (15,184) (229,962)
Cash--Beginning of year....................... 112,274 127,458 357,420
--------- --------- ---------
Cash--End of year............................. $ 239,357 $ 112,274 $ 127,458
========= ========= =========
</TABLE>
See Accompanying Notes to the Consolidated Financial Statements.
F-35
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
The parent company is primarily involved in the selling, leasing and
servicing of Konica office copiers. Eastern Copy Credit Corporation, Inc., a
wholly-owned subsidiary, was formerly involved in the leasing of office copiers
and is now inactive. Eastern Copy Products Vend-A-Copy Division, Inc., a
wholly-owned subsidiary, is engaged in providing copy vending services to the
general public.
Principles of Consolidation
The consolidated financial statements include the accounts of Eastern Copy
Products, Inc., and both of its wholly-owned subsidiaries. All intercompany
accounts and transactions have been eliminated. "Company" as used herein refers
to the consolidated group.
Concentrations of Credit Risk
The Company, in the normal course of business, grants credit to customers,
essentially all of whom are located in central or western New York State. The
Company uses the direct write-off method to provide for bad debts. Management
considers any allowance necessary for uncollectible accounts receivable at July
31, 1997, 1996, and 1995 as not material to the financial statements.
At July 31, 1997, the Company had approximately $92,000 in bank deposits in
excess of federally insured levels.
Inventory
Inventory represents copiers, parts and supplies held for sale or lease.
Inventory is stated at the lower of average cost or market.
Revenue Recognition
Revenue is recognized when earned. The Company recognizes revenue on
maintenance contracts primarily on a straight-line basis over the term of the
related agreements. Lengths of the maintenance agreements generally range from
one to three years.
The three year agreements generally involve the Company providing a copier
and the related maintenance under one installment contract. Essentially all of
these contracts, and the conditional title to the associated equipment, are
subsequently sold to a third party financing company in exchange for cash
proceeds. A portion of the proceeds are allocated to machine sales and
recognized currently, while the remainder is deferred and recognized as service
income on a straight-line basis over the term of the related agreement.
Revenue is recorded on equipment sales upon delivery to a customer. Service
revenue is recorded at the time service is performed.
Depreciation
Fixed assets are recorded at cost.
The cost of fixed assets is depreciated over the estimated useful lives of
the related assets using the straight-line method for financial statement
purposes.
F-36
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related primarily to differences between the basis of deferred revenue and
fixed assets for financial and income tax reporting. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Supplemental Disclosures of Cash Flow Information
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash paid during the year for--Interest.......... $108,879 $111,947 $123,441
--Income taxes................................... $ 2,093 $ 69,747 $ 20,460
</TABLE>
Capital expenditures reflected in the statements of cash flows includes the
net increase in vending copiers in service and the net increase in copiers on
operating lease.
Non-Cash Financing Activities
During fiscal 1996, the Company issued 10 shares of common stock at its fair
market value to Konica Business Machines, Inc. In consideration for the shares,
Konica transferred all of the assets and liabilities of Konica's Buffalo, New
York branch to the Company. The assets and liabilities transferred consisted of
computer parts and equipment inventory, and obligations under customer
maintenance agreements. Following is a summary of the transaction:
<TABLE>
<S> <C>
Copier inventory transferred.................................... $ 261,024
Liabilities under maintenance agreements assumed................ (110,400)
---------
Value assigned to common stock issued........................... $ 150,624
=========
</TABLE>
2. Notes Payable
The Company has various notes payable owed to financing companies under
inventory financing arrangements. The arrangements call for the respective
financing company to pay the invoice cost, less available discounts, on
inventory purchases. The Company then remits payment for the full invoiced cost
to the financing company; if payment to the finance company is made within 30
days, the Company retains a portion of the discount. Interest is charged on any
late payments.
F-37
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Long-Term Debt
Scheduled maturities of long-term debt for the next four years and in the
aggregate are as follows:
<TABLE>
<CAPTION>
Years Ending
July 31,
------------
<S> <C>
1998............................... $732,017
1999............................... 70,438
2000............................... 49,528
2001............................... 19,411
--------
$871,394
========
</TABLE>
4. Commitments
The Company leases vehicles, office equipment, office and warehouse
facilities under various noncancelable operating leases. Lease expense under
these arrangements for the years ended July 31, 1997, 1996, and 1995,
approximated $234,000, $96,000, and $63,000, respectively. Minimum future
rental payments due under the agreements for the next five years and in the
aggregate are as follows:
<TABLE>
<CAPTION>
Years Ending
July 31,
------------
<S> <C>
1998............................. $ 287,868
1999............................. 239,428
2000............................. 241,615
2001............................. 205,865
2002............................. 171,990
Thereafter....................... 79,464
----------
$1,226,230
==========
</TABLE>
The Company also leases certain other office and warehouse facilities on a
month-to-month basis, and accounts for the agreements as operating leases.
5. Income Taxes
The components of the provision for income taxes at July 31, 1997, 1996, and
1995, are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- --------
<S> <C> <C> <C>
Current expense--Federal..................... $129,000 $ 133,000 $ 50,600
--State...................................... 10,000 17,400 6,200
Current benefit from utilization of operating
loss carryforward--Federal.................. 0 0 (22,000)
Deferred tax expense (benefit)--Federal...... (23,000) (110,000) 47,000
--State...................................... (6,000) (28,000) 18,000
-------- --------- --------
$110,000 $ 12,400 $ 99,800
======== ========= ========
</TABLE>
F-38
<PAGE>
EASTERN COPY PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The net deferred tax asset at July 31, 1997, 1996, and 1995, is comprised of
the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets.......................... $796,000 $ 787,000 $ 703,000
Deferred tax liabilities..................... (94,000) (114,000) (168,000)
-------- --------- ---------
Net deferred tax asset....................... $702,000 $ 673,000 $ 535,000
======== ========= =========
</TABLE>
The reconciliation of the effective income tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal income tax rate....................................... 34% 15% 34%
State taxes, net of federal income tax benefit................ 6 6 6
Other, net.................................................... (2) (3) (1)
--- --- ---
38% 18% 39%
=== === ===
</TABLE>
Deferred tax assets result primarily from different methods of revenue
recognition on certain maintenance contracts for book and tax purposes.
Deferred tax liabilities result mainly from the use of accelerated depreciation
methods for tax purposes.
At July 31, 1997, the Company has a state operating loss carryforward of
approximately $146,000 available to offset future state taxable income expiring
through the year 2011.
6. Related Party Transactions
The Company leases office and warehouse space from its shareholder on a
month-to-month basis. Rent expense incurred under the arrangements amounted to
$150,000 for fiscal years 1997, 1996, and 1995, and is included in selling,
general and administrative expenses.
7. Major Supplier
The Company buys substantially all of its equipment, parts, and supplies held
for resale from Konica. Net amounts due Konica at July 31, 1997, 1996, and
1995, approximated $724,000, $780,000, and $1,398,000, respectively, and are
included in accounts payable.
8. Pension Plan
The Company maintains a 401(k) profit sharing plan covering substantially all
employees meeting certain age and length of service requirements. Employer
contributions are at the discretion of the Board of Directors. No contributions
were made for the years ended July 31, 1997, 1996, and 1995.
9. Subsequent Events
Stock Purchase Agreement
Effective August 1, 1997, the Company entered into a Stock Purchase Agreement
with Conway Office Products, Inc. ("Conway"), a wholly-owned subsidiary of
Global Imaging Systems, Inc. for all the capital stock of the Company. The
total purchase price for the stock of the Company was approximately $6,750,000.
Merger
Effective September 1, 1997, Eastern Copy Products Vend-A-Copy Division, Inc.
and Eastern Copy Credit Corporation, Inc., merged into Eastern Copy Products,
Inc.
F-39
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Duplicating Specialties, Inc.
We have audited the accompanying statements of income and retained earnings
and cash flows of Duplicating Specialties, Inc. for the ten months ended August
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Duplicating
Specialties, Inc. for the ten months ended August 31, 1997 in conformity with
generally accepted accounting principles.
/s/ Moss Adams LLP
Vancouver, Washington
December 19, 1997
F-40
<PAGE>
DUPLICATING SPECIALTIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Ten Months Ended August 31, 1997
<TABLE>
<S> <C>
Revenue
Equipment and supplies............................................ $4,240,383
Service agreement revenue......................................... 2,006,268
Rental income..................................................... 72,736
----------
6,319,387
Cost of sales
Cost of equipment and supplies sales.............................. 2,642,715
Cost of service agreement revenue................................. 927,691
Cost of rental income............................................. 22,184
----------
3,592,590
Gross profit........................................................ 2,726,797
Selling, general and administrative expenses........................ 2,493,602
Provision for doubtful accounts..................................... 25,201
----------
Operating income.................................................... 207,994
----------
Other income (expense)
Miscellaneous income.............................................. 10,556
Interest expense.................................................. (7,470)
----------
3,086
----------
Net income before income taxes...................................... 211,080
Income taxes........................................................ 93,361
----------
Net income.......................................................... 117,719
Retained earnings, beginning of period.............................. 625,249
----------
Retained earnings, end of period.................................... $ 742,968
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
DUPLICATING SPECIALTIES, INC.
STATEMENT OF CASH FLOWS
For the Ten Months Ended August 31, 1997
<TABLE>
<S> <C>
Cash flows from operating activities
Net income........................................................ $ 117,719
Adjustments to reconcile net income to net cash flows from
operating activities
Depreciation.................................................... 57,560
Net deferred taxes.............................................. (94,687)
Gain on sale of assets.......................................... (456)
Increase (decrease) in cash due to changes in assets and
liabilities
Accounts receivable, net........................................ (24,421)
Inventory....................................................... 141,727
Prepaid expense................................................. 24,110
Cash surrender value of life insurance.......................... 9,473
Deposits........................................................ 1,317
Accounts payable................................................ (188,859)
Accrued expenses................................................ 413,033
Deferred service contract revenue............................... 40,921
---------
Net cash flows from operating activities...................... 497,437
Cash flows from investing activities
Purchase of equipment............................................. (112,570)
Proceeds from sale of assets...................................... 17,040
---------
Net cash flows from investing activities...................... (95,530)
Cash flows from financing activities
Net change in short-term note payable............................. (202,000)
Proceeds from long-term borrowings................................ 25,000
Payments on long-term borrowings.................................. (18,774)
Increase in due from stockholder.................................. (10,686)
---------
Net cash flows from financing activities...................... (206,460)
---------
Net increase in cash................................................ 195,447
Cash, beginning of period........................................... 46,930
---------
Cash, end of period................................................. $ 242,377
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-42
<PAGE>
DUPLICATING SPECIALITIES, INC.
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
Note 1--Nature of Business
The Company is an Oregon corporation engaged in the business of selling and
providing maintenance and supplies for reproduction equipment and facsimile
machines. Customers are primarily located in Oregon and Southwest Washington.
Note 2--Significant Accounting Policies
Cash and cash equivalents--For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents. The Company maintains its cash
in bank deposit accounts which, at times, may exceed federally insured limits.
The Company has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk on cash and cash equivalents.
Accounts receivable--Management periodically assesses the collectability of
accounts receivable. This assessment provides the basis for the allowance for
doubtful accounts and related bad debt expense. The allowance for doubtful
accounts was $30,000 as of August 31, 1997. Credit is generally extended to
customers without collateral requirements.
Inventory--Inventory is stated at the lower of cost (first-in first-out
method) or market.
Equipment and vehicles--Expenditures for maintenance and repairs are charged
to expense as incurred, whereas major betterments and equipment additions are
capitalized. The Company has provided for depreciation of equipment using
straight-line and accelerated methods over estimated useful lives ranging from
three to ten years.
Revenue recognition--Revenues are recorded at the time of shipment of
products or performance of services. Deferred service contract revenue is
recognized over the estimated service period, based upon copier usage.
Contracts are billed in increments of preventive maintenance cycles.
Income taxes--Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the bases of the
equipment and vehicles for financial and income tax reporting. The deferred tax
assets and liabilities represent future tax return consequences of these
differences which will either be taxable or deductible when the assets and
liabilities are recovered or settled.
Use of estimates--The preparation of the financial statements in conformity
with generally accepted accounting principles require management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Note 3--Inventory
Inventory as of August 31, 1997 consists of:
<TABLE>
<S> <C>
Duplicating equipment............................................ $330,520
Supplies......................................................... 118,651
Service parts and accessories.................................... 309,955
--------
$759,126
========
</TABLE>
F-43
<PAGE>
DUPLICATING SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Note 4--Long-Term Debt
Long-term debt as of August 31, 1997 consists of:
<TABLE>
<S> <C>
Notes payable collateralized by automotive equipment. Interest
rates from 3.9% to 8.58%. Due in monthly payments totaling
$1,792, including interest. Maturing from October 1998 to March
2002. Paid in full during September 1997......................... $41,925
Less current portion.............................................. 16,087
-------
$25,838
=======
</TABLE>
The following is a schedule of required principal payments on long-term debt
during the succeeding five years:
<TABLE>
<CAPTION>
Year Ending
August
31,
-----------
<S> <C>
1998............................................................ $16,087
1999............................................................ 12,286
2000............................................................ 5,081
2001............................................................ 5,283
2002............................................................ 3,188
-------
$41,925
=======
</TABLE>
Note 5--Leases
The Company leases office and warehouse space under a long-term operating
lease. The lease agreement provides for monthly payments of $6,500 (increasing
to $7,850 effective September 1, 1997), plus property taxes. The lease expires
November 30, 2003. Lease expense for the ten months ended August 31, 1997 was
$73,990. The following is a schedule of future minimum facility lease payments,
required for the next 5 years, under the operating lease as of August 31, 1997.
<TABLE>
<CAPTION>
Year Ending
August 31,
-----------
<S> <C>
1998 ......................................................... $ 94,200
1999 .......................................................... 94,200
2000 .......................................................... 94,200
2001 .......................................................... 94,200
2002 .......................................................... 94,200
--------
$471,000
========
</TABLE>
Note 6--Profit Sharing and 401(k) Plan
The Company adopted a profit sharing plan effective November 1, 1969. The
plan provides for contributions to be determined annually by the board of
directors of up to 15% of eligible compensation. The Company approved a
contribution of $116,027 for the ten months ended August 31, 1997.
In addition, the Company provides a 401(k) plan benefit whereby eligible
employee contributions are matched by the Company. The Company contribution for
the 401(k) plan was $32,071 for the ten months ended August 31, 1997.
F-44
<PAGE>
DUPLICATING SPECIALTIES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
As more fully described in Note 10, the Company was acquired subsequent to
period end and these plans were terminated and replaced by plans of the new
parent company.
Note 7--Income Taxes
The deferred tax asset and liability as of August 31, 1997 consist of the
following:
<TABLE>
<S> <C>
Current deferred tax asset
Allowance for doubtful accounts................................ $ 11,700
Accrued officer salaries....................................... 86,171
Accrued vacation............................................... 9,849
--------
$107,720
========
Noncurrent deferred tax liability
Depreciation................................................... $ 23,584
========
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<S> <C>
Current.......................................................... $188,048
Deferred......................................................... (94,687)
--------
$ 93,361
========
</TABLE>
The Company's income tax expense differed from the statutory Federal rate as
follows:
<TABLE>
<S> <C>
Statutory rate applied to net income before income taxes.......... $65,571
Increase in income taxes resulting from
Effect of non-deductible expenses under federal tax code........ 4,049
State and local taxes, net of federal tax benefit............... 25,051
Other........................................................... (1,310)
-------
$93,361
=======
</TABLE>
Note 8--Supplemental Disclosure of Cash Flow Information
<TABLE>
<S> <C>
Cash paid for interest............................................ $ 7,470
=======
Cash paid for income taxes........................................ $81,688
=======
</TABLE>
Note 9--Concentration
Approximately 80% of all inventory purchases of the Company were from one
vendor during the ten months ended August 31, 1997.
Note 10--Subsequent Event
Subsequent to, but effective as of, August 31, 1997 all outstanding stock of
the Company was purchased by Global Imaging Systems, Inc., a Delaware
corporation.
F-45
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors Global Imaging Systems, Inc. Tampa, Florida
We have audited the accompanying statements of income and retained earnings
and statements of cash flow of Electronic Systems of Richmond, Inc. for the
eleven-month and twelve-month periods ended November 30, 1997 and December 31,
1996, respectively. These financial statements are the responsibility of
Electronic Systems of Richmond, Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the statements of income and retained earnings and statements
of cash flows referred to above present fairly, in all material respects, the
results of operations and cash flows of Electronic Systems of Richmond, Inc.
for the eleven-month and twelve-month periods ended November 30, 1997 and
December 31, 1996, respectively, in conformity with generally accepted
accounting principles.
/s/ EDMONDSON, LEDBETTER & BALLARD,
L.L.P.
Norfolk, Virginia
January 27, 1998
F-46
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Eleven-month and Twelve-month Periods Ended
November 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Revenue
Net sales of products............................. $ 9,337,430 $ 20,075,135
Service and rental................................ 1,635,354 1,474,899
----------- ------------
Total revenue................................... 10,972,784 21,550,034
----------- ------------
Costs and expenses
Cost of goods sold................................ 6,260,046 16,973,045
Service and rental costs.......................... 676,726 686,579
Selling, general and administrative............... 1,939,057 2,190,345
----------- ------------
Total costs and expenses........................ 8,875,829 19,849,969
----------- ------------
Net profit...................................... 2,096,955 1,700,065
----------- ------------
Other income
Interest income................................... 152,943 110,746
Other income...................................... 78,178 7,755
----------- ------------
Total other income.............................. 231,121 118,501
----------- ------------
Net income...................................... 2,328,076 1,818,566
Retained earnings, beginning of period.......... 2,783,057 1,606,491
Dividends declared................................ (3,956,262) (642,000)
----------- ------------
Retained earnings, end of period................ $ 1,154,871 $ 2,783,057
=========== ============
</TABLE>
See Independent Auditor's Report
and Accompanying Notes to Financial Statements
F-47
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
STATEMENTS OF CASH FLOWS
For the Eleven-month and Twelve-month Periods Ended
November 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
November 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income......................................... $ 2,328,076 $1,818,566
Adjustments to reconcile net income to net cash
from operating activities
Depreciation...................................... 17,074 19,213
Uncollectible accounts expense.................... -- 37,747
Loss on disposition of assets..................... -- 84
(Increase) decrease in operating assets
Accounts receivable.............................. (1,531,626) 1,611,357
Inventories of machines, parts and supplies...... (155,670) 453,519
Prepaid expense.................................. 2,054 (1,396)
Increase (decrease) in operating liabilities
Accounts payable................................. (3,277,819) 1,941,085
Accrued commissions.............................. 701,623 33,855
Sales tax payable................................ (4,080) 650
Deferred income.................................. 67,315 113,321
Other............................................ 1,169 342
----------- ----------
Net cash provided (used) by operating activities... (1,851,884) 6,028,343
----------- ----------
Cash flows from investing activities
Acquisition of equipment........................... (12,431) (19,557)
----------- ----------
Net cash used by investing activities.............. (12,431) (19,557)
----------- ----------
Cash flows from financing activities
Proceeds from issuance of common stock............. 110,670 --
Dividends paid..................................... (1,120,440) (642,000)
----------- ----------
Net cash used by financing activities.............. (1,009,770) (642,000)
----------- ----------
Increase in cash and cash equivalents................ (2,874,085) 5,366,786
Cash and cash equivalents, beginning of period....... 6,844,570 1,477,784
----------- ----------
Cash and cash equivalents, end of period............. $ 3,970,485 $6,844,570
=========== ==========
Supplemental disclosure of cash flow information
Cash paid during the period for interest........... $ 2,721 $ 4,075
=========== ==========
Supplemental schedule of noncash investing and fi-
nancing activities
Increase in dividends payable...................... $ 2,835,822 $ --
=========== ==========
</TABLE>
See Independent Auditor's Report
and Accompanying Notes to Financial Statements
F-48
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
NOTES TO FINANCIAL STATEMENTS
Nature of business
The Company is engaged in the sale of technologies and related services,
primarily as a systems integrator with a focus on computer networking,
networking security, data systems security, migration services and Internet
access and connectivity. The Company serves its customers from locations in
Richmond and Arlington, Virginia.
Effective December 1, 1997, Electronic Systems of Richmond, Inc. became a
subsidiary of Electronic Systems, Inc. and adopted a March 31 year-end.
Significant accounting policies
Estimates Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported assets and
liabilities and the reported revenues and expenses. Actual results could vary
from the estimates that were used.
Revenue Recognition Income is recognized at point of sale except for income
from maintenance agreements and training which is recognized over individual
contract terms and as training is provided.
Cash Equivalents The Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash
equivalents.
Accounts Receivable The Company routinely extends its customers trade credit,
most of which is not collateralized or otherwise secured. Uncollectible
accounts receivable are charged to operations in the period in which an account
is determined to be uncollectible.
Inventory Inventories are valued at the lower of cost or market, using the
specific identification method.
Equipment All equipment is recorded at cost and depreciated using the
straight-line method. Depreciable lives are from five to seven years.
Advertising Advertising costs are charged to operations when incurred.
Income Taxes The Corporation is not subject to corporate income tax because
its shareholders have elected to be taxed according to Subchapter S of the
Internal Revenue Code. As such, net income or loss; certain items of income and
expense; and credits, if any, are passed through to the shareholders for
inclusion in their tax returns.
Uncollectible accounts
Included in expense for the period ended December 31, 1996 are $37,747 of
uncollectible acccounts. There were no uncollectible accounts charged to
expense for the period ended November 30, 1997.
Advertising
Advertising expenses were $30,788 and $71,822 for the periods ended November
30, 1997 and December 31, 1996, respectively.
Depreciation
Depreciation charges of $17,074 and $19,213 were expensed for the periods
ended November 30, 1997 and December 31, 1996, respectively.
F-49
<PAGE>
ELECTRONIC SYSTEMS OF RICHMOND, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Related party transactions
The Company receives administrative and accounting personnel assistance from
Electronic Systems, Inc., an affiliated corporation with in excess of 50% of
its stock owned by several of the stockholders of Electronic Systems of
Richmond, Inc. Included in administrative expense are management fees of
$33,750 and $25,000 paid to Electronic Systems, Inc., for the periods ended
November 30, 1997 and December 31, 1996, respectively.
Operating leases
The Company leases its Richmond facilities through a non-cancelable operating
lease which expires November 30, 2000. The Company leases its Arlington
facilities through a non-cancelable operating lease which expires May 31, 2000.
These leases provide for annual operating expense adjustments. Occupancy
expense attributable to operating leases was $103,813 and $95,554,
respectively, for the periods ended November 30, 1997 and December 31, 1996,
respectively.
Minimum future rent commitments under these leases for the four months ending
March 31, 1998, and for each of the next four years ending March 31, are:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 Total
------- -------- -------- -------- ----- --------
<S> <C> <C> <C> <C> <C>
$37,428 $114,610 $119,464 $ 55,492 $ -- $326,994
</TABLE>
Employee benefit plans
Effective July 1, 1996, the Company began to offer a profit sharing plan with
a 401(k) deferral feature covering substantially all employees who have
attained age 21, have been employed for at least one year, and who work a
minimum of 1,000 hours annually. Contributions to the plan are an employer-
matching contribution of 50% of employee elective deferrals up to 5% of salary.
The Company's policy is to fund the contributions as accrued. Employer
contributions to this plan were $16,772 and $7,454 for the periods ended
November 30, 1997 and December 31, 1996, respectively, exclusive of plan
administration costs.
Concentration of credit risk
At November 30, 1997 and at various times during the periods ended November
30, 1997 and December 31, 1996, the Company had on deposit with a single
financial institution, more than $100,000, which is the limit currently insured
by the Federal Deposit Insurance Corporation.
Dividends
The Company declared dividends of $3,693.99 and $629.41 per share for the
periods ended November 30, 1997 and December 31, 1996, respectively.
Subsequent event
Effective December 1, 1997, shareholders of record November 30, 1997 were
redeemed by a new shareholder, Electronic Systems, Inc.
Reclassifications
Certain amounts in the December 31, 1996 financial statements have been
reclassified to conform with the current year financial statement presentation.
These reclassifications had no effect on operating results as previously
reported.
F-50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Connecticut Business Systems, Inc.:
We have audited the accompanying statements of income (loss) and retained
earnings (deficit) and cash flows of Connecticut Business Systems, Inc. for the
years ended September 30, 1996 and September 30, 1997 and for the three months
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Connecticut
Business System, Inc. for the years ended September 30, 1996 and September 30,
1997 and for the three months ended December 31, 1997 in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Hartford, Connecticut
February 16, 1998
F-51
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
STATEMENTS OF INCOME (LOSS) AND RETAINED EARNINGS (DEFICIT)
For the Years Ended September 30, 1996 and 1997
and the Three Months Ended December 31, 1997
<TABLE>
<CAPTION>
Year Ended
------------------------------------- Three Months Ended
September 30, 1996 September 30, 1997 December 31, 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Net sales:
Equipment............. $ 5,608,784 $ 6,577,866 $1,592,616
Supplies.............. 2,083,713 2,241,317 601,013
Service............... 3,995,009 4,330,964 1,154,604
Other................. 113,613 139,469 34,507
----------- ----------- ----------
Total net sales..... 11,801,119 13,289,616 3,382,740
----------- ----------- ----------
Costs and operating
expenses:
Equipment............. 3,505,491 4,113,684 934,930
Supplies.............. 1,230,029 1,314,995 343,953
Service............... 2,279,942 2,207,399 558,607
Selling, general and
administrative....... 4,545,790 5,227,111 1,261,578
Other................. 166,414 193,563 38,562
----------- ----------- ----------
11,727,666 13,056,752 3,137,630
----------- ----------- ----------
Income from opera-
tions.............. 73,453 232,864 245,110
Interest expense........ 122,405 123,402 38,352
----------- ----------- ----------
Income (loss) before
provision for income
taxes................ (48,952) 109,462 206,758
Provision (benefit) for
state income taxes..... -- (18,000) 20,000
----------- ----------- ----------
Net income (loss)... (48,952) 127,462 186,758
Retained earnings
(deficit), beginning of
period................. (112,471) (161,423) (33,961)
Distribution to
shareholders........... -- -- 32,000
----------- ----------- ----------
Retained earnings
(deficit), end of
period................. $ (161,423) $ (33,961) $ 120,797
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 1996 and 1997
and the Three Months Ended December 31, 1997
<TABLE>
<CAPTION>
Year Ended
---------------------------
September 30, September 30, Three Months Ended
1996 1997 December 31, 1997
------------- ------------- ------------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............. $ (48,952) $ 127,462 $ 186,758
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation................ 192,147 275,788 82,191
Changes in operating assets
and liabilities--
Accounts receivable....... 2,622 (57,816) 47,680
Inventories............... 81,146 99,995 (31,621)
Other receivables......... (44,529) 29,785 12,580
Deposits.................. 28,770 (25,995) (3,172)
Accounts payable.......... (99,723) (158,858) 53,425
Accrued expenses.......... 65,956 201,445 (82,069)
Unearned income........... (68,118) (188,668) 74,477
Deferred tax asset........ -- (18,000) 12,000
--------- --------- ---------
Net cash provided by
operating activities..... 109,319 285,138 352,249
--------- --------- ---------
Cash flows from investing
activities:
Acquisition of property and
equipment.................... (483,194) (701,678) (120,335)
Disposition of property and
equipment.................... 268,384 281,497 25,907
--------- --------- ---------
Net cash used for invest-
ing activities........... (214,810) (420,181) (94,428)
--------- --------- ---------
Cash flows from financing
activities:
Net proceeds from notes
payable to stockholders...... 216,776 566,697 --
Repayments of revolving and
other note payable, net...... (59,284) (439,433) (165,000)
(Decrease) increase of long-
term liabilities............. (64,207) 10,912 13,994
--------- --------- ---------
Net cash provided by (used
for) financing
activities............... 93,285 138,176 (151,006)
--------- --------- ---------
Net (decrease) increase in
cash........................... (12,206) 3,133 106,815
Cash, beginning of period....... 28,073 15,867 19,000
--------- --------- ---------
Cash, end of period............. $ 15,867 $ 19,000 $ 125,815
========= ========= =========
Supplemental disclosure of cash
flow information:
Cash paid for interest........ $ 122,883 $ 127,892 $ 38,252
========= ========= =========
Cash paid for state income
taxes........................ $ 3,529 $ 4,508 $ --
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996 and 1997 and December 31, 1997
1. Summary of Significant Accounting Policies:
Organization--
Connecticut Business Systems, Inc. (the Company) commenced operations on
April 18, 1986 when it purchased property, equipment and inventory from
Columbia Business Systems, Inc. The Company sells, rents and services photocopy
machines, facsimile machines and duplicators and distributes related supplies.
Use of estimates--
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Inventories--
Inventories are stated at the lower of cost (average cost and specific
identification) or market. The inventory value at September 30, 1996, September
30, 1997 and December 31, 1997 are net of reserves for excess/obsolete
inventory of approximately $-0-, $170,000 and $58,000, respectively.
Property and equipment--
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Demo and showroom equipment...................................... 2-5 years
Furniture and fixtures........................................... 5 years
Warehouse equipment.............................................. 5 years
Vehicles......................................................... 3 years
Leasehold improvements........................................... 7 years
</TABLE>
Revenue recognition and unearned income--
Revenue on the sale of machines and supplies is recorded when the machines
and supplies are shipped. Revenue for services is recorded when the services
are provided. Maintenance contract service revenues are recognized ratably over
the term of the applicable maintenance contract.
Amounts billed under maintenance agreements are reflected in unearned income
and recognized as income on a straight-line basis over the term of the related
contract. Contract terms range from one to three years, but primarily are for a
one year term.
Concentration of credit risk--
Financial instruments which may subject the Company to concentrations of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base. The Company purchases a
majority of its machines for resale from one vendor. Purchases from this vendor
are based on inventory requirements and no purchase commitments or blanket
purchase orders existed at September 30, 1996, September 30, 1997 or December
31, 1997.
F-54
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. Revolving and Other Note Payable:
At September 30, 1996, September 30, 1997 and December 31, 1997, the Company
had the following notes payable:
<TABLE>
<CAPTION>
September 30, September 30, December 31,
1996 1997 1997
------------- ------------- ------------
<S> <C> <C> <C>
Revolving note payable, with
interest at bank's prime (8.50% at
September 30, 1997) plus 1%,
payable monthly................... $600,000 $165,000 $--
Note payable with interest at
14.123% payable monthly........... 4,433 -- --
-------- -------- ----
604,433 165,000 --
Less--current maturities........... (604,433) (165,000) --
-------- -------- ----
Long-term debt..................... $ -- $ -- $--
======== ======== ====
</TABLE>
Under the terms of the revolving note payable (the Note), the Company may
borrow up to $1,250,000, not to exceed 80% of eligible accounts receivable, as
defined, and 45% of eligible inventory, as defined. As of September 30, 1996,
September 30, 1997 and December 31, 1997, the Company had $650,000, $1,085,000
and $1,250,000, respectively, of available borrowing under the Note.
The Note is collateralized by substantially all assets of the Company and
personally guaranteed by the stockholders.
The Note also contains certain restrictive financial covenants including
minimum tangible net worth of $500,000 (which considers amounts due
stockholders as capital), a current ratio greater than 1.1, minimum working
capital of $450,000 (as defined) and a debt service ratio greater than 1.2. As
of September 30, 1996, September 30, 1997 and December 31, 1997, the Company
was in compliance with these covenants.
3. Notes Payable to Stockholders:
The Company has entered into note agreements with its two stockholders. These
notes are due upon demand and bear interest at 10%, payable quarterly. These
notes are classified as long-term as the stockholders do not intend to request
repayment until after December 31, 1998. A portion of these notes payable is
subordinated to the Company's bank debt and is classified as Subordinated Notes
Payable to Stockholders in the accompanying financial statements (see Note 8
for Subsequent Event).
4. Income Taxes:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
standard requires that a deferred tax asset or liability be recognized for the
estimated future tax effects attributable to temporary differences.
The Company has elected to be taxed as an S corporation for Federal income
tax purposes. As such, the Company is not subject to Federal income taxes as
the taxable income of the Company is included in the individual income tax
returns of the stockholders of the Company.
F-55
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The provision (benefit) for state income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended
---------------------------
September 30, September 30, Three Months Ended
1996 1997 December 31, 1997
------------- ------------- ------------------
<S> <C> <C> <C>
Current....................... $-- $ -- $ 8,000
Deferred...................... -- (18,000) 12,000
---- -------- -------
$-- $(18,000) $20,000
==== ======== =======
</TABLE>
Deferred tax assets and liability are comprised of the following:
<TABLE>
<CAPTION>
Current Asset Long-Term Liability
---------------------------------------- ----------------------------------------
September 30, September 30, December 31, September 30, September 30, December 31,
1996 1997 1997 1996 1997 1997
------------- ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Depreciation............ $ -- $ -- $ -- $28,600 $18,000 $18,000
Inventory reserves...... -- 18,000 6,000 -- -- --
Deferred income......... 15,000 15,000 15,000 -- -- --
------- ------- ------- ------- ------- -------
$15,000 $33,000 $21,000 $28,600 $18,000 $18,000
======= ======= ======= ======= ======= =======
</TABLE>
5. Employee Benefit Plan:
Effective January 1, 1992, the Company established a salary deferral plan
under Section 401(k) of the Internal Revenue Code. Substantially all full-time
salaried employees are eligible to participate in the plan which provides for
salary deferrals from 1% to 15% of gross wages, up to a maximum deferral of
$9,500. The Company's annual contribution to the plan is discretionary.
Approximately $17,000, $20,000 and $3,000 are included in general and
administrative expenses on the accompanying Statements of Income and Retained
Earnings (Deficit) for the years ended September 30, 1996, September 30, 1997
and for the three months ended December 31, 1997, respectively, relating to
the Company's discretionary contribution.
6. Other Long-Term Liabilities:
As of September 30, 1996, September 30, 1997 and December 31, 1997 other
long-term liabilities consisted of the following:
<TABLE>
<CAPTION>
September 30, September 30, December 31,
1996 1997 1997
------------- ------------- ------------
<S> <C> <C> <C>
Unearned income..................... $29,924 $51,436 $65,430
Deferred state income taxes......... 28,600 18,000 18,000
------- ------- -------
$58,524 $69,436 $83,430
======= ======= =======
</TABLE>
7. Commitments:
The Company leased its Rocky Hill facility from CBS Realty Associates (CBS
Realty), a partnership related through common ownership through March, 1997.
In March, 1997, CBS Realty sold the building to an unrelated third party. The
Company has entered into a seven year triple net lease for this space at
approximately $140,000 per year. The Company also leases office space in
Norwalk, CT. (expires September, 1998) and Westchester, NY. (expires August,
1998) and office equipment and vehicles under operating leases expiring in
various years. Total lease expense resulting from the agreements noted above
approximated $277,000, $293,000 and $82,000 for the years ended September 30,
1996, September 30, 1997 and the three months ended December 31, 1997,
respectively.
F-56
<PAGE>
CONNECTICUT BUSINESS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Minimum future annual rental payments under noncancellable operating leases,
as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998 (nine months).............................................. $ 246,044
1999............................................................ 222,789
2000............................................................ 214,562
2001............................................................ 192,443
2002............................................................ 168,068
Thereafter...................................................... 230,554
----------
$1,274,460
==========
</TABLE>
8. Subsequent Event:
As of the close of business on December 31, 1997, the stockholders of the
Company sold their stock to Global Imaging Systems, Inc. (Global) for
$8,700,000 in cash and $650,000 in stock. In addition, the Company, through
funding provided by Global, repaid the notes due the former stockholders of
approximately $1,405,000.
F-57
<PAGE>
To the Stockholder and To the Stockholders and
Board of Directors Board of Directors
Bloom's, Incorporated Global Imaging Systems, Inc.
Enfield, Connecticut Tampa, Florida
We have audited the accompanying statement of divisional net assets of
Business Systems Division ("BSD"), an operating division of Bloom's,
Incorporated (which is a Massachusetts S Corporation) as of December 31, 1997
and January 31, 1997, and the related statements of divisional operations,
changes in divisional net assets, and divisional cash flows for the eleven
months ended December 31, 1997 and the year ended January 31, 1997. These
financial statements are the responsibility of the management of Bloom's,
Incorporated. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provides a reasonable basis
for our opinion.
The accompanying financial statements were prepared on the basis of
presentation as described in Note 1, and are not intended to be a complete
presentation of all of the assets and liabilities of Business Systems Division
as if it were a standalone entity.
In our opinion, the accompanying financial statements as of December 31, 1997
and January 31, 1997 and for the periods then ended, present fairly, in all
material respects, the net assets of Business Systems Division and its
divisional operations, cash flows and changes in net assets in accordance with
the basis of accounting described in Note 1 in conformity with generally
accepted accounting principles.
/s/ Joseph D. Kalicka & Company, LLP
JOSEPH D. KALICKA & COMPANY, LLP
Certified Public Accountants
Holyoke, Massachusetts
February 6, 1998 (for the period ended December 31, 1997)
February 20, 1998 (for the period ended January 31, 1997)
F-58
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
STATEMENTS OF DIVISIONAL NET ASSETS
December 31, 1997 and January 31, 1997
<TABLE>
<CAPTION>
December 31, January 31,
1997 1997
------------ -----------
A S S E T S
<S> <C> <C>
Current assets:
Cash funds.......................................... $ 50 $ 50
Accounts receivable--trade.......................... 1,327,584 1,324,137
Other receivables................................... 2,074 3,555
Inventory........................................... 820,921 659,316
----------- -----------
Total current assets.............................. 2,150,629 1,987,058
----------- -----------
Property and equipment:
Equipment rental fleet.............................. 2,117,793 2,146,233
Vehicles............................................ 238,871 249,177
Furniture and equipment............................. 80,815 70,207
----------- -----------
2,437,479 2,465,617
Accumulated depreciation............................ (2,052,535) (1,776,567)
----------- -----------
Total property and equipment...................... 384,944 689,050
----------- -----------
Other assets:
Deposits............................................ 450 450
Accounts receivable--trade--noncurrent.............. 480,260 306,799
----------- -----------
Total other assets................................ 480,710 307,249
----------- -----------
Total assets...................................... $ 3,016,283 $ 2,983,357
=========== ===========
L I A B I L I T I E S A N D D I V I S I O N A L N E T A S S E T S
Current liabilities:
Accounts payable.................................... $ 45,493 $ 44,859
Accrued expenses.................................... 137,634 195,501
Deferred revenues................................... 726,703 817,128
----------- -----------
Total current liabilities......................... 909,830 1,057,488
----------- -----------
Other liabilities:
Deferred revenues--noncurrent....................... 132,345 67,494
Accounts payable--noncurrent........................ 119,970 --
----------- -----------
Total other liabilities........................... 252,315 67,494
----------- -----------
Total liabilities................................. 1,162,145 1,124,982
----------- -----------
Divisional net assets............................... 1,854,138 1,858,375
----------- -----------
Total liabilities and divisional net assets....... $ 3,016,283 $ 2,983,357
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
STATEMENTS OF DIVISIONAL OPERATIONS
For the Eleven Months Ended December 31, 1997 and Year Ended January 31, 1997
<TABLE>
<CAPTION>
December 31, January 31,
1997 1997
------------ -----------
<S> <C> <C>
Net sales:
Equipment........................................... $3,173,138 $2,399,948
Supplies............................................ 1,205,492 1,152,446
Service............................................. 2,320,161 2,481,687
Rental.............................................. 718,711 795,731
Other............................................... 600,623 522,216
---------- ----------
Total net sales................................... 8,018,125 7,352,028
---------- ----------
Costs and operating expenses:
Equipment........................................... 2,470,845 1,911,202
Supplies............................................ 862,645 804,788
Service............................................. 1,046,690 1,081,357
Rental.............................................. 91,196 85,157
Selling, general and administrative................. 3,578,078 3,822,870
---------- ----------
Total costs and operating expenses................ 8,049,454 7,705,374
---------- ----------
Loss from operations.................................. (31,329) (353,346)
Other income (expense):
Interest expense.................................... (41,553) (62,184)
Interest income..................................... 21,283 22,750
---------- ----------
(20,270) (39,434)
---------- ----------
Loss before provision for income taxes................ (51,599) (392,780)
(Provision) benefit for state income taxes.......... 5,000 31,000
---------- ----------
Divisional net loss................................... $ (46,599) $ (361,780)
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
STATEMENTS OF CHANGES IN DIVISIONAL NET ASSETS
For the Eleven Months Ended December 31, 1997 and Year Ended January 31, 1997
<TABLE>
<S> <C>
Divisional net assets, February 1, 1996............................ $1,693,200
Activity--year ended January 31, 1997:
Net assets provided by Bloom's, Incorporated to Business Systems
Division........................................................ 526,955
Net loss for year................................................ (361,780)
----------
Divisional net assets, January 31, 1997............................ 1,858,375
Activity--eleven months ended December 31, 1997:
Net assets provided by Bloom's, Incorporated to Business System's
Division........................................................ 42,362
Net loss for period.............................................. (46,599)
----------
Divisional net assets--December 31, 1997........................... $1,854,138
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
STATEMENTS OF DIVISIONAL CASH FLOWS
For the Eleven Months Ended December 31, 1997 and Year Ended January 31, 1997
<TABLE>
<CAPTION>
December 31, January 31,
1997 1997
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $ (46,599) $(361,780)
Adjustment to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation...................................... 359,567 464,128
Changes in operating assets and liabilities:
Accounts receivable--trade...................... (176,908) (487,440)
Other receivables............................... 1,481 (3,555)
Inventories..................................... (161,605) 130,741
Accounts payable................................ 120,604 (70,924)
Accrued expenses................................ (57,867) 104,818
Deferred income................................. (25,574) (14,735)
--------- ---------
Net cash provided (used) by operating
activities..................................... 13,099 (238,747)
--------- ---------
Cash flows from investing activities:
Acquisition of equipment............................ (55,461) (287,758)
Deposits made....................................... -- (450)
--------- ---------
Net cash used by investing activities........... (55,461) (288,208)
--------- ---------
Cash flows from financing activities:
Cash provided by Bloom's Incorporated............... 42,362 526,955
--------- ---------
Net cash provided by financing activities....... 42,362 526,955
--------- ---------
Net change in cash.................................... -- --
Divisional cash, beginning of period.................. 50 50
--------- ---------
Divisional cash, end of period........................ $ 50 $ 50
========= =========
Supplemental cash flow information:
Interest paid during period......................... $ 41,553 $ 62,184
========= =========
Taxes paid during period............................ None None
========= =========
</TABLE>
Additional cash flow disclosures:
During the eleven months ended December 31, 1997 the Division disposed of
$84,977 of fully depreciated equipment through retirement or sale and $220,557
was disposed of during the earlier period.
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and January 31, 1997
1. Organization and basis of presentation:
Business Systems Division ("BSD", the "Division") is an operating division of
Bloom's, Incorporated, (the "Company", "Bloom's"). Bloom's was organized under
the laws of the Commonwealth of Massachusetts in 1948 and maintains its
corporate offices in Enfield, Connecticut with sales and service locations in
Massachusetts and Connecticut. Bloom's, Incorporated is a Massachusetts S
corporation, and closes its fiscal year on January 31, of each year.
The Company is engaged in retail sales, service, and lease of graphic arts
equipment, photocopiers and fax machines. The Printed Products Division
provides graphic arts equipment and supplies to the printing trade. Business
Systems Division provides copiers and fax machines to the general business and
educational community.
In January, 1998, the Company agreed to sell substantially all of the direct
operating assets of the Business Systems Division (exclusive of cash and
prepaids), subject to certain direct liabilities and obligations, to Global
Imaging System's, Inc. ("Global") through its Connecticut subsidiary,
Connecticut Business Systems, Inc. to be effective, February 1, 1998.
These divisional financial statements have been prepared using the historical
basis of accounting but include only the net assets and resulting cash flows
directly attributable to the BSD division along with the related revenues and
expenses for the Division including certain corporate allocations, all of which
are included in Bloom's financial statements. Net assets, as used in these
financial statements, may also include certain liabilities which are not to be
assumed by Global.
In accordance with Securities and Exchange Commission Staff Accounting
Bulletin No. 55, these statements have been adjusted to include certain
corporate expenses incurred by Bloom's on the Division's behalf. The financial
statements may not necessarily present BSD's net assets, results of operations,
changes in net assets and cash flows if the Division was a standalone entity.
2. Summary of significant accounting policies:
A. Corporate allocation:
Bloom's, Incorporated provides services to BSD, including management,
accounting, working capital financing, tax, financial accounting and reporting,
benefits administration, occupancy, shipping/receiving, insurance, information
systems management, accounts receivable and credit, and accounts payable
functions. For purposes of these financial statements, the above corporate
costs have been allocated based upon the percentage of time corporate
administrative personnel were estimated to spend on the BSD division along with
an estimated percentage of common occupancy costs deemed incurred by BSD. Such
allocations and corporate charges totalled approximately $1,170,000 for the
eleven months ended December 31, 1997, of which approximately $568,000 was for
remuneration paid to the majority stockholder/officer.
Corporate allocations for the year ended January 31, 1997 amounted to
approximately $1,435,000, of which approximately $684,000 was for remuneration
to the same stockholder/officer.
Management believes that the basis used for allocating corporate
administrative services is reasonable. However, the amounts included in these
allocations may differ from those that would result from transactions among
unrelated parties. In addition, these allocations were not based on specific
costs attributable to BSD
F-63
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
NOTES TO FINANCIAL STATEMENTS--(Continued)
division and may not be representative of actual costs that would have been
incurred if BSD division had been operating independently.
B. Revenue recognition:
Assets, liabilities, revenues and expenses are recognized on the accrual
method of accounting. Revenues from the sale of machines and supplies is
recognized when the product is shipped to the customer through a regular sale
or a direct-sales type lease. Revenues for service are recorded at the time the
service is provided. Maintenance contract service revenues are recognized
ratably over the term of the applicable maintenance contract or on a per copy
basis, where the contract stipulates a minimum number of copies.
Unearned revenues at December 31, 1997 of $859,048 are the result of billings
to customers under maintenance service agreements which are scheduled to be
earned after December 31, 1997. Contract terms range from one month to three
years, but are generally for periods of one year. Unearned revenues at January
31, 1997 amounted to $884,622.
C. Accounts receivable:
The Company uses the direct write-off method to provide for bad debts.
Management considers an allowance for uncollectible accounts at December 31,
1997 and January 31, 1997 unnecessary and not material to the financial
statements.
Accounts receivable at December 31, 1997 and January 31, 1997 include
billings for product sales, service, contracts, and equipment sold under
Company financed sales type leases. When the Company directly finances the sale
of equipment through direct leasing arrangement and the economic risks of
ownership are effectively borne by the customer, the arrangement is recognized
as a sale upon shipment of the equipment. Customer payments under these
arrangements are to be received over the life of the lease and give rise to
deferred receivables.
D. Inventories:
Inventories, which consist of equipment, supplies and parts are stated at the
lower of average cost or market. Inventory at December 31, 1997 is stated net
of reserves for excess/obsolete inventory of approximately $41,000 ($31,500 at
January 31, 1997).
E. Concentrations of credit risk:
Financial instruments which may subject the Company (and BSD) to
concentrations of credit risk consist principally of cash and cash equivalents
and trade receivables. Concentrations of credit risk relating to cash and cash
equivalents arose when from time to time during the period cash deposited in
one financial institution exceeded the FDIC insured limits of $100,000. Credit
risks relating to concentrations from accounts receivable are mitigated due to
the large number of customers within the Company's customer base, all of whom
are located in the New England region.
In addition, BSD purchases substantially all of its equipment inventory for
resale and a majority of its resale supplies and parts from one vendor.
Purchases from this vendor are based upon inventory requirements and no
purchase commitments or blanket purchase orders exist at December 31, 1997. The
Company's formal agreement with that vendor expired in 1996 and continues on an
informal basis.
F-64
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
NOTES TO FINANCIAL STATEMENTS--(Continued)
F. Equipment and depreciation:
Equipment is recorded at cost. Depreciation is provided using straight line
and accelerated methods over estimated useful lives (for furniture, fixtures,
and motor vehicles) and the rental period for depreciation of the equipment
rental fleet. Components of accumulated depreciation at December 31, 1997 and
January 31, 1997 are as follows:
<TABLE>
<CAPTION>
Accumulated Accumulated
Depreciation Depreciation Life
12/31/97 1/31/97 (Years)
------------ ------------ -------
<S> <C> <C> <C>
Equipment Rental Fleet................... $1,787,124 $1,540,013 1-5
Motor vehicles........................... 222,335 206,158 5
Furniture & equipment.................... 43,076 30,396 5
---------- ----------
Totals................................. $2,052,535 $1,776,567
========== ==========
</TABLE>
Depreciation charged to expense for the eleven months ended December 31, 1997
amounted to $359,567 ($464,128 for the year ended January 31, 1997).
Expenditures for maintenance and repairs are charged against income as
incurred. Company policy is to charge or credit to income any loss or gain
resulting from disposal or retirements of vehicles or furniture and equipment.
Gains or losses on disposition of equipment rental fleet are included in net
sales on the statement of operations.
G. Leases:
The Company is the lessor of equipment under operating leases expiring in
various years. The cost and accumulated depreciation of leased assets are
included in equipment as rental (Note 1F).
H. Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. One significant estimate is
the amounts of corporate expenses allocable to BSD as more fully described in
Note 2A.
I. Advertising costs:
The Company expenses production costs of advertising the first time
advertising takes place. Advertising costs for the eleven months ended December
31, 1997 amounted to approximately $147,000, ($176,000 for the year ended
January 31, 1997) which is stated net of manufacturers' reimbursement.
3. Income taxes:
Bloom's has elected and the stockholders have consented to be taxed under the
provisions of Subchapter S of the Internal Revenue Code effective for tax years
after January 31, 1987. In lieu of federal corporation income taxes, the
stockholders of an S corporation are taxed on their proportionate share of the
corporation's taxable income. Therefore, no provisions or liabilities for
federal income taxes has been included in these financial statements.
F-65
<PAGE>
BUSINESS SYSTEMS DIVISION
(an Operating Division of Bloom's, Incorporated)
NOTES TO FINANCIAL STATEMENTS--(Continued)
As a Massachusetts S corporation, the Company is subject to corporate income
taxes on its net income because total receipts aggregate $6 million or more.
The Company is also subject to Connecticut corporate income taxes.
Statement of Financial Accounting Standards No. 109 requires that deferred
income taxes be computed using the liability method under which deferred income
tax assets and liabilities are computed based on differences between the
financial statement and tax basis of assets and liabilities which will result
in taxable or deductible amounts on future tax returns. These financial
statements do not include any provisions for deferred state income taxes since
they are not considered material.
State income tax benefits of $5,000 and $31,000, respectively, included on
the statement of operations for the period ended December 31, 1997 and January
31, 1997 result from the tax savings inuring to the Company each year, when
taxes are computed on all operations.
4. Working capital and allocated interest:
The working capital employed by BSD is provided directly by Bloom's,
Incorporated and by an unsecured revolver note payable to a commercial bank
held in the name of Bloom's, Incorporated. The note, currently limited to
$2,500,000, was amended in August, 1997 and is scheduled to expire on July 31,
1998 unless renewed. This note is not included as those liabilities to be
assumed by Global. However, interest, at the prime rate, of approximately
$42,000 for the eleven months ended December 31, 1997, has been allocated to
these financial statements on the basis of direct employable assets of each of
the operating divisions of Bloom's, Incorporated. Amounts for the year ended
January 31, 1997 approximated $62,000.
5. Related party transactions--lease:
In March 1981, the Company entered into a 25 year lease agreement with the
Company's majority stockholder (lessor) covering its general offices and
warehouse in Enfield, Connecticut.
During the eleven months ended December 31, 1997, the Company made rental
payments under the lease of $107,000. Of this amount, approximately $58,000 has
been allocated to BSD on the basis of the occupancy formula discussed in Note
2A ($63,000 for the earlier period). Aggregate future annual minimum rentals to
Bloom's, Incorporated (excluding payment for real estate taxes, maintenance,
utilities and insurance) are estimated as follows:
<TABLE>
<CAPTION>
Thru December 31,
-----------------
<S> <C>
1998............................................................ $107,000
1999............................................................ 107,000
2000............................................................ 107,000
2001............................................................ 107,000
2002............................................................ 107,000
Thereafter...................................................... 330,000
--------
$865,000
========
</TABLE>
Obligations under this lease will not be assumed by Global.
F-66
<PAGE>
BUSINESS SYSTEMS DIVISION
(An Operating Division of Bloom's, Incorporated)
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. Commitments:
The Company is obligated under three leases at December 31, 1997 which are
used exclusively by BSD division for outside sales offices. The terms of these
arrangements are summarized below:
East Hartford, CT:
The facility lease is dated March 15, 1996 which calls for minimum
monthly payments of $2,500 per month through September 30, 1998, plus a
share of operating expenses.
Pittsfield, MA:
The facility is rented on a month to month basis and currently calls
for monthly rents of $700 per month plus common expenses.
Fairfield, CT:
The facility arrangement calls for monthly rents of $750 plus common
expenses on a month to month basis. In January, 1998, monthly rents were
increased to $1,000.
The Company is also committed under three (3) vehicle leases which will
expire during 1998 and 1999. Minimum monthly rents aggregate $646 per month,
with two leases expiring in May, 1998 ($406 per month) and the third lease
expiring in October, 1999 for $240 per month. All vehicles are used in BSD
operations.
Future minimum monthly payments under facility and vehicle leases (all of
which are to be transferred to Global) are as follows at December 31, 1997:
<TABLE>
<CAPTION>
Aggregate
Minimum
Payments
---------
<S> <C>
1998............................................................. $29,910
1999............................................................. 2,400
-------
Total.......................................................... $32,310
=======
</TABLE>
7. Employee benefit plan:
The Company maintains a salary deferral plan under section 401(k) of the
Internal Revenue Code which covers substantially all employees. Company
contributions to the plan are at the discretion of the Board of Directors.
There were no employer contributions to the plan for the eleven months ended
December 31, 1997. Employer contributions amounted to approximately $110,000
for the year ended January 31, 1997, of which approximately $65,000 was charged
to BSD Division.
8. Subsequent event:
Effective February 1, 1998, one of BSD's larger customers decided not to
renew a portion of their rental arrangement and returned approximately 90
copiers out of a total of approximately 250 under lease during 1997.
Financially, this may result in a reduction in future annual rental (and total
annual sales) of approximately $200,000 to $250,000.
F-67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Carr Business Machines of Great Neck Inc.
Farmingdale, New York
We have audited the accompanying balance sheet of Carr Business Machines of
Great Neck Inc. as of December 31, 1997 and the related statements of
operations, retained earnings, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Carr Business Machines of
Great Neck Inc. as of December 31, 1997, and the results of its operations and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ Margolin, Winer & Evens LLP
_____________________________________
November 13, 1998
F-68
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
BALANCE SHEET
December 31, 1997
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents (Note 1)................................ $ 554,878
Marketable securities (Notes 1, 2 and 4).......................... 550,860
Accounts receivable, net of allowance for doubtful accounts of
$35,000.......................................................... 1,235,916
Merchandise inventory (Notes 1 and 4)............................. 858,547
Prepaid expenses and other receivables............................ 257,803
----------
Total Current Assets................................................ 3,458,004
----------
Equipment and Improvements (Notes 1, 3 and 4):
Real property under capital lease................................. 980,000
Improvements...................................................... 563,122
Office equipment and fixtures..................................... 1,117,703
Equipment leased to customers..................................... 180,255
Automobiles and trucks............................................ 63,005
----------
2,904,085
Less accumulated depreciation..................................... 1,458,699
----------
Equipment and Improvements net.................................... 1,445,386
----------
Other Assets:
Security deposits (Note 4)........................................ 96,277
Parts for long term contracts..................................... 234,924
----------
331,201
----------
Total Assets........................................................ $5,234,591
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-69
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
BALANCE SHEET
December 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
Current Liabilities:
Current portion of long-term debt (Note 3)................... $ 50,216
Accounts payable and accrued expenses........................ 433,136
Payroll and sales tax payable................................ 35,246
Corporate income taxes payable............................... 2,629
Current portion of capital lease obligation (Note 4)......... 86,740
Deferred maintenance contract revenue (Note 1)............... 769,790
----------
Total Current Liabilities...................................... 1,377,757
----------
Noncurrent Liabilities:
Long-term debt (less current portion) (Note 3)............... 127,540
Long-term portion of capital lease obligation (Note 4)....... 641,494
Deferred maintenance contract revenue........................ 198,822
----------
Total Noncurrent Liabilities................................... 967,856
----------
Total Liabilities.............................................. 2,345,613
----------
Commitments and Contingencies (Note 4)......................... --
Stockholders' Equity:
Common stock, no par value; 200 shares authorized, 110 shares
issued and outstanding
(Note 5).................................................... 315,000
Stock subscription receivable (Note 5)....................... (211,394)
Retained earnings............................................ 2,634,522
Unrealized gains from securities available for sale (Notes 1
and 2)...................................................... 150,850
----------
Total Stockholders' Equity..................................... 2,888,978
----------
Total Liabilities and Stockholders' Equity..................... $5,234,591
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-70
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
STATEMENT OF OPERATIONS
Year Ended December 31, 1997
<TABLE>
<S> <C>
Net Sales and Service Revenue Earned (Note 1)...................... $17,301,451
Cost of Sales...................................................... 8,398,427
-----------
Gross Profit....................................................... 8,903,024
-----------
Operating Expenses:
Selling expense.................................................. 2,882,855
Service expense.................................................. 1,994,298
General and administrative expense............................... 1,782,900
Shipping and warehouse........................................... 246,513
Depreciation and amortization (Note 1)........................... 255,423
-----------
Total Operating Expenses......................................... 7,161,989
-----------
Income from Operations............................................. 1,741,035
-----------
Other Income and Expenses:
Interest and dividend income..................................... 60,473
Miscellaneous income............................................. 14,887
Realized gain from sale of marketable securities (Note 2)........ 99,428
Gain on sale of automobiles...................................... 6,250
Interest expense................................................. (97,103)
-----------
Total Other Income and Expenses.................................. 83,935
-----------
Income Before Provision for Income Taxes........................... 1,824,970
Provision for Income Taxes (Note 1)................................ 61,859
-----------
Net Income......................................................... $ 1,763,111
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-71
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
STATEMENT OF RETAINED EARNINGS
Year Ended December 31, 1997
<TABLE>
<S> <C>
Retained Earnings January 1, 1997, as previously reported......... $2,747,634
Adjustments to Correct Inventory Pricing and Stockholder Advance
(Note 7)......................................................... (23,807)
----------
Retained Earnings January 1, 1997, as restated.................... 2,723,827
Net Income........................................................ 1,763,111
Dividends to Stockholders......................................... (1,852,416)
----------
Retained Earnings December 31, 1997............................... $2,634,522
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-72
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
<TABLE>
<S> <C>
Cash Flows from Operating Activities:
Net income....................................................... $1,763,111
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 255,423
Realized gain on sale of marketable securities................. (99,428)
Gain on sale of vehicles....................................... (6,250)
(Increase) decrease in:
Accounts receivable.......................................... 164,931
Merchandise inventory........................................ (89,632)
Prepaid expenses and other receivables....................... 29,831
Security deposits............................................ (14,149)
Parts used in long term contracts............................ (314)
Decrease in:
Accounts payable and accrued expenses........................ (42,432)
Payroll, sales and corporate taxes payable................... (33,070)
Deferred maintenance contract revenue........................ (175,952)
----------
Total adjustments.............................................. (11,042)
----------
Net Cash Provided by Operating Activities........................ 1,752,069
----------
Cash Flows from Investing Activities:
Matured certificate of deposit................................... 218,511
Purchase of marketable securities................................ (336,863)
Sales proceeds from marketable securities........................ 746,733
Acquisition of equipment and leasehold improvements.............. (226,956)
Proceeds from sale of automobile................................. 11,380
Advance to stockholder........................................... 34,028
----------
Net Cash Provided by Investing Activities........................ 446,833
----------
Cash Flows from Financing Activities:
Note payable borrowings.......................................... 36,400
Repayments of notes payable...................................... (257,696)
Principal payments on obligation under capital lease............. (78,969)
Proceeds from sale of common stock............................... 22,684
Dividends to stockholders........................................ (1,852,416)
----------
Net Cash Used in Financing Activities............................ (2,129,997)
----------
Net Increase in Cash and Cash Equivalents.......................... 68,905
Cash and Cash Equivalents beginning of year........................ 485,973
----------
Cash and Cash Equivalents end of year.............................. $ 554,878
==========
</TABLE>
The accompanying notes are an integral part of this statement.
F-73
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
<TABLE>
<S> <C>
Supplemental Disclosure of Cash Flow Information -Cash paid during the
year for:
Interest............................................................ $ 97,103
Income taxes........................................................ 58,765
Supplemental Schedule of Noncash Investing Activities:
Transfer of inventory which was rented to a customer to depreciable
equipment.......................................................... $119,649
Transfer of depreciable equipment to inventory upon lease expira-
tion............................................................... 13,448
</TABLE>
The accompanying notes are an integral part of this statement.
F-74
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
NOTES TO FINANCIAL STATEMENTS
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS--Carr Business Machines of Great Neck Inc., doing business
as Carr Business Systems ("the Company"), sells, rents and services copiers,
facsimile machines, typewriters and other business machines, primarily to
customers located in the New York Metropolitan area. The majority of the
Company's sales are equipment sales and servicing income. Rentals are only a
small portion of the Company's business.
INVESTMENT IN SECURITIES--The Company's debt and equity securities have been
classified as available for sale securities and are reported at their fair
values. Unrealized holding gains and losses are included as a separate
component of stockholders' equity.
CASH EQUIVALENTS--The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
MERCHANDISE INVENTORY--Merchandise inventory, consisting solely of finished
goods, is stated at the lower of cost (specific identification and moving
average FIFO method) or market.
EQUIPMENT AND IMPROVEMENTS--Real property under capital lease is recorded at
the net present value of the related lease obligation. Real property under
capital lease together with the cost of related improvements are amortized over
the ten year term of the lease using the straight-line method. At December 31,
1997, accumulated amortization attributable to real property under capital
lease totaled $363,417.
Equipment is recorded at cost and depreciated over the estimated useful lives
of the assets using the straight-line method as follows:
Office equipment and fixtures 5 - 7 years
Automobiles and trucks 5 years
Equipment leased to customers 5 years
INCOME TAXES--The Company does not provide for Federal income taxes as the
stockholders have elected to have the income of the Company taxed directly to
them in accordance with the S Corporation provisions of the Internal Revenue
Code and New York State. The Company has provided for New York City Corporation
taxes as New York City does not recognize S Corporation status. In addition,
the Company provides for New York State S Corporation taxes.
ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
DEFERRED MAINTENANCE CONTRACT REVENUE--Deferred maintenance contract revenue
is recognized over the contract period (which ranges from three months to five
years) and represents billings in advance of the maintenance period.
Incremental direct costs resulting from the sale of such contracts are not
material and are expensed currently.
ADVERTISING COSTS--Advertising costs are expensed currently as the benefits
and placements of such advertising do not extend beyond the current period.
Advertising costs aggregated $163,743 during 1997.
F-75
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2.MARKETABLE SECURITIES
Marketable securities available for sale at December 31, 1997 consist of the
following:
<TABLE>
<CAPTION>
Gross Gross
Cost or Unrealized Unrealized
Fair Amortized Holding Holding
Value Cost Losses Gains Maturities
-------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Equity securities....... $330,606 $182,478 $ -- $148,128
Debt securities:
State and local obli-
gations.............. 52,414 49,692 -- 2,722 6-7 years
U.S. obligations...... 167,840 167,840 -- -- within 1 year
-------- -------- ----- --------
$550,860 $400,010 $ -- $150,850
======== ======== ===== ========
</TABLE>
Realized gains and losses are determined on the basis of sales price less
original cost determined on a FIFO basis. During 1997, sales proceeds and gross
realized gains and losses on securities available for sale were as follows:
<TABLE>
<CAPTION>
Realized Realized
Gains Losses Total
-------- -------- --------
<S> <C> <C> <C>
Sales proceeds....................................... $746,733 $ -- $746,733
Cost................................................. 647,305 -- 647,305
-------- ----- --------
Realized Gain........................................ $ 99,428 $ -- $ 99,428
======== ===== ========
</TABLE>
During 1997, unrealized holding gains aggregated $38,529 and are included as
a separate component of stockholders' equity.
3.DEBT OBLIGATIONS
The Company is obligated to a bank on various notes and loans as follows:
SHORT-TERM DEBT--A $150,000 demand note at December 31, 1996 required
monthly payments of interest only at 1% over a one year certificate of
deposit interest rate and was paid in December 1997. The loan was secured
by a one year certificate of deposit in the amount of $218,511 which
matured in December 1997.
The Company had a $300,000 secured line of credit which was increased to
$1,500,000 in June 1997. Borrowings bear interest at the prime rate and are
due in June 1998. The line of credit is secured by personal property and
fixtures and guaranteed by an affiliated company and the Company's majority
stockholder. There was no outstanding balance at December 31, 1997.
LONG-TERM DEBT--The Company is obligated on a note with an outstanding
balance of $143,176 at December 31, 1997. The note requires monthly
principal payments of $3,578 plus interest at prime and matures on November
12, 2001. The note is secured by personal property and fixtures now
existing or acquired thereafter and is guaranteed by an affiliated company
and the Company's majority stockholder. This loan and the loan described
below contain cross default provisions with the obligations of an entity
owned by the stockholders which owns the Company's warehouse and office
facility.
A secured note dated November 18, 1994 for $121,000, which was self
liquidating, required monthly payments of $3,492 and bore interest at 2.5%
per annum, matured on November 18, 1997. The loan was secured by
improvements to the real property under capital lease now existing or
acquired thereafter and was guaranteed by an affiliated company and the
Company's majority stockholder.
F-76
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
In October of 1997, the Company became obligated on a secured note in
the amount of $36,400 for the purchase of a truck. The note requires
monthly principal payments of $606 plus interest at prime plus 3% and
matures on September 30, 2002. The amount outstanding at December 31, 1997
is $34,580.
Principal repayments of long-term debt are as follows:
Years ending December 31,
<TABLE>
<S> <C>
1998............................................................. $ 50,216
1999............................................................. 50,216
2000............................................................. 50,216
2001............................................................. 21,648
2002............................................................. 5,460
--------
$177,756
========
</TABLE>
4. COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company's office and warehouse facilities are leased from an entity owned
by the stockholders and require a $60,000 security deposit. The lease, which is
for ten years expiring in 2004, is classified as a capital lease.
Future minimum lease payments under the capital lease together with the
present value of the net minimum lease payments as of December 31, 1997 are as
follows:
Years ending December 31,
<TABLE>
<S> <C>
1998.......................................................... $ 209,688
1999.......................................................... 212,009
2000.......................................................... 214,423
2001.......................................................... 216,934
2002.......................................................... 219,545
Thereafter.................................................... $ 307,477
----------
Total minimum payments........................................ $1,380,076
Less amounts representing estimated executory costs (such as
real estate taxes and insurance) which are included in
minimum lease payments....................................... 406,943
----------
Net minimum lease payments.................................... 973,133
Less amounts representing interest............................ 244,899
----------
Present value of net minimum lease payments................... 728,234
Less current portion of obligation under capital lease........ 86,740
----------
Long-term portion of obligation under capital lease........... $ 641,494
==========
</TABLE>
The Company guaranteed obligations of the entity owned by the stockholders
aggregating $694,000 at December 31, 1997, incurred in connection with
financing the facility, and assigned $100,000 of its marketable securities as
additional collateral. As of September 1, 1998, the Company is no longer a
guarantor. (See Note 5.)
F-77
<PAGE>
CARR BUSINESS MACHINES OF GREAT NECK, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
In December 1995 the Company entered into a five year, seven month operating
lease beginning February 1, 1996 for office space in New York City. Rent
expense, including escalations, during 1997 was approximately $81,650. The
future minimum payments under the lease are as follows:
Years ending December 31,
<TABLE>
<S> <C>
1998............................................................. $ 50,864
1999............................................................. 54,520
2000............................................................. 54,520
2001............................................................. 36,347
--------
$196,251
========
</TABLE>
A major supplier of the Company has a lien on certain inventory as collateral
for amounts outstanding to them aggregating $62,807 at December 31, 1997.
5.COMMON STOCK
On July 1, 1994, the Company admitted a new stockholder and issued 10 shares
of no par value common stock in exchange for $30,000 and a $275,000 note. The
note is payable in annual installments of $39,444 including interest at 7.16%
per annum and will self-liquidate on December 22, 2004. Interest income from
the note receivable for the year ended December 31, 1997 is $16,760. On
September 16, 1998, effective September 1, 1998, the stockholders sold all the
issued and outstanding shares of common stock to a public company for
$17,500,000. In connection with the purchase agreement, the $177,756 of long-
term debt was repaid and the $211,394 stock subscription receivable was
collected.
6.PROFIT SHARING
The Company has a defined contribution profit sharing plan for the benefit of
its employees. Contributions PLAN are at the discretion of the Company.
Contributions for the year ended December 31, 1997 totaled $103,406.
7.RESTATEMENTS
The Company's previously issued 1997 financial statements have been restated
to correct overstatements in inventory pricing of $58,000 at January 1, 1997
and $223,000 at December 31, 1997, and an overstatement of previously reported
net income aggregating $165,000. The effect of these errors on previously
reported 1996 net income is not significant.
Retained earnings at January 1, 1997 has also been restated from the amount
previously reported to record $34,193 paid to a stockholder in 1996 as an
advance rather than as a dividend. The restatement does not effect previously
reported net income for 1996.
In addition, $104,616 of equipment leased to customers has been reclassified
from merchandise inventory to equipment and improvements.
F-78
<PAGE>
Report of Independent Auditors
To the Board of Directors and Stockholders
of Capitol Office Solutions, Inc.
Beltsville, Maryland
We have audited the accompanying consolidated balance sheets of Capitol
Office Solutions, Inc., formerly Capitol Copy Products, Inc., and subsidiary as
of June 30, 1998 and 1997, and the related consolidated statements of earnings,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Capitol Office Solutions, Inc.,
and subsidiary as of June 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1998, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Washington, D.C.
August 28, 1998, except for Note 13, as to which the date is December 21, 1998.
F-79
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS 1998 1997
------ ----------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................... $ 3,671,371 $1,790,230
Accounts receivable................................. 2,825,868 2,024,542
Inventories......................................... 1,946,903 1,853,098
Refundable income taxes............................. 159,509 153,709
Deferred income taxes............................... 105,000 57,000
Prepaid expenses and other.......................... 82,991 69,454
----------- ----------
Total current assets.............................. 8,791,642 5,948,033
----------- ----------
PROPERTY AND EQUIPMENT:
Office furniture and equipment...................... 412,818 430,124
Property under capital leases....................... 130,662 112,155
Leasehold improvements.............................. 177,015 232,135
Rental equipment.................................... 120,340 109,231
----------- ----------
840,835 883,645
Less accumulated depreciation and amortization...... (609,928) (654,541)
----------- ----------
Total property and equipment...................... 230,907 229,104
----------- ----------
OTHER ASSETS:
Excess of acquisition cost over value of net assets
acquired--net...................................... 2,089,409 2,160,847
Deferred financing and other deferred costs--net.... 710,000 895,000
Deferred income taxes............................... 119,000 41,000
Deposits and other.................................. 75,488 72,988
----------- ----------
Total other assets................................ 2,993,897 3,169,835
----------- ----------
TOTAL ASSETS........................................ $12,016,446 $9,346,972
=========== ==========
</TABLE>
See notes to consolidated financial statements.
F-80
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) 1998 1997
---------------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Loan payable..................................... $ -- $ 1,450,000
Accounts payable and accrued liabilities......... 1,527,084 1,141,885
Deferred revenue................................. 582,836 504,845
Current portion of long-term debt................ 3,904,000 --
Current portion of capital lease obligations..... 12,228 14,538
------------ ------------
Total current liabilities...................... 6,026,148 3,111,268
------------ ------------
LONG-TERM LIABILITIES:
Long-term debt (less current portion shown
above).......................................... 14,961,000 18,865,000
Capital lease obligations (less current portion
shown above).................................... 68,867 31,881
------------ ------------
Total long-term liabilities.................... 15,029,867 18,896,881
------------ ------------
Total liabilities.............................. 21,056,015 22,008,149
------------ ------------
<CAPTION>
COMMITMENTS
<S> <C> <C>
STOCKHOLDERS' EQUITY (DEFICIT):
Class A common stock, $.01 par value--authorized,
200,000 shares; issued and outstanding, 59,400
shares.......................................... 594 594
Class B common stock, $.01 par value--authorized,
100,000 shares; issued and outstanding, 29,700
shares.......................................... 297 297
Class C common stock, $.01 par value--authorized;
40,000, shares; issued and outstanding, 9,000
shares.......................................... 90 90
Additional paid-in capital....................... 999,891 999,891
Retained earnings (deficit)...................... (10,040,441) (13,662,049)
------------ ------------
Total stockholders' equity (deficit)........... (9,039,569) (12,661,177)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)......................................... $ 12,016,446 $ 9,346,972
============ ============
</TABLE>
See notes to consolidated financial statements.
F-81
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
SALES:
Sales of equipment................... $14,459,555 $11,192,343 $ 9,267,028
Sales of services and supplies....... 13,709,553 12,360,411 10,942,168
----------- ----------- -----------
Total sales........................ 28,169,108 23,552,754 20,209,196
----------- ----------- -----------
COST OF SALES:
Cost of equipment sold............... 9,575,547 8,278,146 6,433,208
Cost of services and supplies sold... 6,041,436 5,906,491 5,603,351
----------- ----------- -----------
Total cost of sales................ 15,616,983 14,184,637 12,036,559
----------- ----------- -----------
GROSS PROFIT........................... 12,552,125 9,368,117 8,172,637
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.............................. 5,103,664 4,497,166 3,781,559
----------- ----------- -----------
OPERATING INCOME....................... 7,448,461 4,870,951 4,391,078
INTEREST EXPENSE....................... (1,735,245) (8,201) (11,330)
OTHER INCOME........................... 81,392 257,591 112,360
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES........... 5,794,608 5,120,341 4,492,108
PROVISION FOR INCOME TAXES............. 2,173,000 1,870,000 1,780,000
----------- ----------- -----------
NET EARNINGS........................... $ 3,621,608 $ 3,250,341 $ 2,712,108
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-82
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Class Class Class Total
A B C Additional Retained Stockholders'
Common Common Common Class B Paid-in Earnings Equity
Stock Stock Stock Stock Capital (Deficit) (Deficit)
------ ------ ------ ------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1995... $ -- $ -- $ -- $120 $749,880 $ 5,503,737 $ 6,253,737
Dividends declared.... -- -- -- -- -- (240,000) (240,000)
Net earnings.......... -- -- -- -- -- 2,712,108 2,712,108
---- ---- ---- ---- -------- ------------- ------------
BALANCE, JUNE 30, 1996.. -- -- -- 120 749,880 7,975,845 8,725,845
Dividends declared.... -- -- -- -- -- (5,834,390) (5,834,390)
Recapitalization...... 7 4 1 (120) 108 -- --
Net earnings.......... -- -- -- -- -- 3,250,341 3,250,341
Purchase and
retirement of common
stock, including
transaction costs.... (5) (3) -- -- (749,988) (19,052,977) (19,802,973)
Stock split........... 493 296 79 -- -- (868) --
Sale of common stock.. 99 -- 10 -- 999,891 -- 1,000,000
---- ---- ---- ---- -------- ------------- ------------
BALANCE, JUNE 30, 1997.. 594 297 90 -- 999,891 (13,662,049) (12,661,177)
Net earnings.......... -- -- -- -- -- 3,621,608 3,621,608
---- ---- ---- ---- -------- ------------- ------------
BALANCE, JUNE 30, 1998.. $594 $297 $ 90 $ -- $999,891 $ (10,040,441) $ (9,039,569)
==== ==== ==== ==== ======== ============= ============
</TABLE>
See notes to consolidated financial statements.
F-83
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings............................. $3,621,608 $ 3,250,341 $2,712,108
Adjustments to reconcile net earnings to
net cash provided by operations:
Depreciation and amortization........... 379,387 194,960 221,476
Deferred income taxes................... (126,000) 76,000 (65,000)
Loss on disposal of equipment........... 6,871 13,179 --
Changes in operating assets and
liabilities:
Accounts receivable.................... (801,326) 26,700 (319,496)
Inventories............................ (93,805) 323,422 (425,730)
Refundable income taxes................ (5,800) (153,709) --
Prepaid expenses and other assets...... (16,037) (14,953) 21,359
Accounts payable and accrued
liabilities........................... 385,199 277,972 179,027
Deferred revenue....................... 77,991 4,202 20,785
---------- ----------- ----------
Net cash provided by operating
activities........................... 3,428,088 3,998,114 2,344,529
---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment--net............... (78,633) (141,361) (55,189)
Increase in other assets................ -- (300,000) --
---------- ----------- ----------
Net cash used in investing
activities........................... (78,633) (441,361) (55,189)
---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term notes............ -- 18,865,000 --
Proceeds from bank line of credit........ -- 1,450,000 --
Proceeds from sale of common stock....... -- 1,000,000 --
Acquisition and retirement of common
stock................................... -- (19,802,973) --
Debt issuance costs...................... -- (595,000) --
Principal payments on long-term notes.... -- (5,104) (19,015)
Principal payments on bank line of
credit.................................. (1,450,000) -- --
Principal payments on capital lease
obligations............................. (18,314) (27,750) (34,156)
Dividends paid........................... -- (5,834,390) (240,000)
---------- ----------- ----------
Net cash used in financing
activities........................... (1,468,314) (4,950,217) (293,171)
---------- ----------- ----------
NET INCREASE (DECREASE) IN CASH........... 1,881,141 (1,393,464) 1,996,169
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR..................................... 1,790,230 3,183,694 1,187,525
---------- ----------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR.... $3,671,371 $ 1,790,230 $3,183,694
========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid............................ $1,754,125 $ 8,135 $ 10,730
========== =========== ==========
Income taxes paid........................ $2,122,500 $ 2,157,100 $1,633,107
========== =========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Capital leases........................... $ 52,900 $ 37,040 $ --
========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-84
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Operations--Capitol Office Solutions, Inc., formerly Capitol Copy
Products, Inc. ("COS" or "the Company"), a majority-owned subsidiary of Golder,
Thoma, Cressey, Rauner Fund IV, L.P., is in the business of selling, leasing,
and servicing copier and facsimile equipment, and selling related supply
products. The Company's principal business territory comprises the greater
Metropolitan Washington, D.C., and Baltimore areas. The Company operates
pursuant to certain dealer agreements, primarily with Canon, USA, Inc.
Principles of Consolidation--The consolidated financial statements include
the accounts of COS and its wholly owned subsidiary, General Service Leasing,
Inc. All significant intercompany balances and transactions have been
eliminated in consolidation.
Revenue Recognition--The Company recognizes revenue from the sale of
equipment, maintenance contracts, and month-to-month equipment rental
agreements. Sales of equipment are recorded as revenue on the date the
equipment is shipped. Revenue from maintenance contracts and month-to-month
equipment rental agreements is recognized ratably over the terms of the
agreements.
Cash and Cash Equivalents--Cash and cash equivalents consist of checking
accounts and temporary investments in repurchase agreements. For purposes of
the consolidated statements of cash flows, the Company considers only highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Inventories--Inventories are stated at the lower of average cost or market.
Property and Equipment--Property and equipment are stated at cost.
Depreciation is computed using straight-line methods based on the estimated
useful lives of the related equipment. Leasehold improvements are amortized
over the lives of the respective leases or service lives of the improvements,
whichever is shorter.
Repairs and maintenance are charged directly to expense as incurred.
Betterments or improvements that increase the estimated useful life of an asset
are capitalized.
Goodwill--The excess of cost over fair values of the net tangible assets
acquired (goodwill) is amortized using the straight-line method over forty
years. The Company annually reviews its goodwill recoverability by assessing
historical profitability and expectations as to future nondiscounted cash flows
and net income as well as the Company's success in meeting its commitments
under its dealer agreements. Based upon its most recent analysis, the Company
believes that no material impairment of goodwill exists at June 30, 1998.
Deferred Financing and Other Deferred Costs--Deferred financing costs consist
of financing fees paid by the Company to obtain its line of credit and loan
payable (see Notes 5 and 7). The fees are amortized using the straight-line
method over the life of the loan payable. Other deferred costs relate to costs
associated with an agreement entered into upon the Company's recapitalization,
stock redemption, and stock purchase (see Note 2). These costs are amortized
using the straight-line method over three years, the term of the agreement.
Income Taxes--The Company records its provision for income taxes in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109).
SFAS 109 requires the Company to record a provision for deferred income taxes
for differences between the basis of certain assets and liabilities for income
tax and financial statement reporting purposes, and between reporting methods
for income tax return and financial statement reporting purposes, which will
create taxable income or deductions in future periods.
Deferred income taxes result primarily from temporary differences in the
recognition of revenue from maintenance contracts, certain inventory costs, bad
debt expense, and depreciation for tax and financial reporting purposes.
F-85
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and accompanying notes.
Reclassifications--Certain 1997 amounts have been reclassified for
comparative purposes. Actual results could differ from those estimates.
2. RECAPITALIZATION, STOCK REDEMPTION, AND STOCK PURCHASE
Prior to June 30, 1997, the Company was a majority owned subsidiary (66
2/3%) of CERBCO, Inc., with the remaining 33 1/3% owned by the President of
the Company. Effective June 30, 1997, the following transactions took place:
. A $5,684,390 dividend was paid to the existing shareholders representing
cash held by the Company in excess of $800,000.
. The Company recapitalized itself by amending its Certificate of
Incorporation to authorize three classes of common stock. Class A Common
Stock, $.01 par value (the "Class A Common"); Class B Common Stock, $.01
par value (the "Class B Common"); and Class C Common Stock, $.01 par
value (the "Class C Common"). Each share of the Company's then currently
issued and outstanding Class B stock was exchanged for .61875 shares of
Class A Common, .37125 shares of Class B Common, and .01 shares of Class
C Common.
. The Company entered into credit agreements with a financial institution
that provided for loans to the Company in the principal amount of up to
approximately $30,000,000.
. Following the above transactions, all of the shares of Class A Common,
Class B Common, and Class C Common of the Company held by CERBCO, Inc.,
were redeemed by the Company for an aggregate purchase price of
$19,000,000, subject to adjustment and escrow holdbacks.
. Immediately after the redemption, the Company effected a 200-to-1 stock
split of the Class A Common, which resulted in 200,000 shares of Class A
Common being authorized and 49,500 shares being issued and outstanding; a
200-to-1 stock split of the Class B Common, which resulted in 100,000
shares of Class B Common being authorized and 29,700 shares being issued
and outstanding; and a 2,000-to-1 stock split of the Class C Common,
which resulted in 40,000 shares of Class C Common being authorized and
8,000 shares being issued and outstanding.
. Immediately after the stock split, new investors purchased from the
Company 9,900 shares of Class A common and 1,000 shares of Class C Common
for a purchase price of $100 per share of Class A Common and $10 per
share of Class C Common, an aggregate purchase price of $1,000,000.
. Contemporaneously with the above investment, the new investors purchased
all 49,500 shares of Class A Common and 62.5% of Class C Common (5,000
shares) held by the President of the Company.
. In connection with the transactions, the President, the new investors,
and the Company entered into various stockholder agreements, registration
rights agreements, and employment agreements.
3. ACCOUNTS RECEIVABLE
The allowance for doubtful accounts was $35,000 and $30,000 at June 30, 1998
and 1997, respectively. The provisions for doubtful accounts included in
selling, general, and administrative expense for the years ended June 30,
1998, 1997, and 1996, were $51,345, $35,585 and $26,226 respectively.
F-86
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. INVENTORIES
Inventories at June 30, 1998 and 1997, consist of:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Equipment........................................... $1,452,109 $1,288,937
Supplies............................................ 197,181 192,578
Parts............................................... 297,613 371,583
---------- ----------
$1,946,903 $1,853,098
========== ==========
</TABLE>
5. LOAN PAYABLE
The Company has available a line of credit as part of a credit agreement with
a life insurance company (see Note 7) that enables the Company to borrow up to
$2,500,000, subject to a borrowing base, at an interest rate equal to the LIBOR
rate plus 3.0% (8.6445% and 8.6875% at June 30, 1998 and 1997, respectively).
The agreement expires in June 2004 and is collateralized by all personal and
real property. The agreement requires the Company to meet certain financial
covenants quarterly. As of June 30, 1998, the Company is in compliance with the
required financial covenants.
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at June 30, 1998 and 1997, consist
of:
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Accounts payable................................... $ 328,450 $ 177,537
Accrued expenses and other......................... 929,856 873,759
Income taxes payable............................... 268,778 77,945
Other.............................................. -- 12,644
---------- ----------
$1,527,084 $1,141,885
========== ==========
</TABLE>
7. LONG-TERM DEBT
Long-term debt at June 30, 1998 and 1997, consists of:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Term loan payable that matures in June 2004, with
a percentage of principal payable every six
months beginning in January 2000 and interest due
monthly at LIBOR plus 3.25%...................... $18,865,000 $18,865,000
Less: Current portion............................. 3,904,000 --
----------- -----------
$14,961,000 $18,865,000
=========== ===========
</TABLE>
The total term loan commitment is $27,500,000. In addition to the percentage
of principal payments required, the Company is required to prepay the term loan
and related revolving loan (Note 5) in an amount equal to 70% of excess cash
flow as defined in the credit agreement for each fiscal year beginning with
year fiscal 1998. This prepayment of excess cash flows is classified as current
portion of long-term debt at June 30, 1998. The Company is required to meet
certain financial covenants quarterly. As of June 30, 1998, the Company is in
compliance with the required financial covenants.
F-87
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. COMMITMENTS
The Company leases warehouse, store, and office facilities under operating
leases that expire on various dates through 2008. Some of the facility leases
provide for renewal options. Rental expense was approximately $165,000,
$148,000 and $139,000 for the years ended June 30, 1998, 1997 and 1996,
respectively. In addition, the Company leases equipment under capital leases
that expire on various dates through 1999. Accumulated amortization for
property under capital leases was $52,947 and $70,557 as of June 30, 1998 and
1997, respectively. Minimum future rental commitments under long-term capital
and operating leases in effect at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
-------- ----------
<S> <C> <C>
1999................................................. $ 24,000 $ 335,000
2000................................................. 24,000 308,000
2001................................................. 24,000 289,000
2002................................................. 17,000 260,000
2003................................................. 12,000 237,000
Thereafter........................................... 16,000 1,080,000
-------- ----------
Total minimum payments............................... 117,000 $2,509,000
==========
Less: Interest....................................... 36,000
--------
Present value of minimum payments.................... $ 81,000
========
</TABLE>
9. INCOME TAXES
The provision for taxes for the years ended June 30, 1998, 1997, and 1996, is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Current:
Federal.......................................... $1,849 $1,534 $1,580
State............................................ 450 260 265
------ ------ ------
Total current.................................. 2,299 1,794 1,845
------ ------ ------
Deferred:
Federal.......................................... (102) 66 (55)
State............................................ (24) 10 (10)
------ ------ ------
Total deferred................................. (126) 76 (65)
------ ------ ------
Total provision for taxes.......................... $2,173 $1,870 $1,780
====== ====== ======
</TABLE>
F-88
<PAGE>
CAPITOL OFFICE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The provision for income taxes is different from that computed using the
statutory federal income tax rate of 34% for the years ended June 30, 1998,
1997, and 1996, for the following reasons (in thousands except percentages):
<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- ------------
Amounts % Amounts % Amounts %
------- ---- ------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Taxes computed at statutory rate..... $1,970 34.0% $1,741 34.0% $1,527 34.0%
Increase in taxes resulting from:
State income taxes, net of federal
income tax benefit................ 281 4.8 179 3.5 176 3.9
Nondeductible items................ 27 0.5 29 0.6 29 0.6
Other.............................. (105) (1.8) (79) (1.6) 48 1.1
------ ---- ------ ---- ------ ----
Total provision for taxes.......... $2,173 37.5% $1,870 36.5% $1,780 39.6%
====== ==== ====== ==== ====== ====
</TABLE>
The approximate tax effect of each type of temporary difference that gave
rise to the Company's deferred tax asset amount (in thousands) at June 30, 1998
and 1997, is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Bad debt reserves............................................. $ 14 $12
Vacation expenses............................................. 23 19
Depreciation.................................................. 49 41
Inventory costs............................................... 67 35
Deferred revenue.............................................. 21 --
Deferred rent allowance....................................... 37 --
Section 197 intangible........................................ 33 --
Other......................................................... (20) (9)
---- ---
$224 $98
==== ===
</TABLE>
10. PROFIT SHARING AND 401(K) PLAN
The Company has a profit sharing and 401(k) retirement plan for all of its
employees meeting certain minimum eligibility requirements. Contributions are
determined annually by the Company's Board of Directors. The Company
contributed $151,552, $147,438, and $120,713 to the plan through the 401(k)
matching provision in fiscal years 1998, 1997 and 1996, respectively.
11. STOCKHOLDER'S EQUITY
The Company has three classes of Common Stock, which are designated as Class
A, B, and C Common Stock. Shares of Class C Common Stock have one vote per
share on all matters to be voted on by the Company's stockholders. Shares of
Classes A and B Common Stock are not entitled to vote on any matter submitted
to a vote of the Company's stockholders.
12. RELATED PARTY TRANSACTIONS
On June 30, 1997, the Company entered into a consulting agreement with an
affiliated company, Global Imaging Systems, Inc., whereby the Company will pay
Global an annual management fee of $150,000. Global will provide human
resources, administration, financial, accounting, and consulting services.
13. SUBSEQUENT EVENT
On December 21, 1998, all of the issued and outstanding stock of the Company
was acquired by Global Imaging Systems, Inc.
F-89
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Lewan & Associates, Inc.:
We have audited the accompanying consolidated balance sheets of Lewan &
Associates, Inc. (the Company) and subsidiary as of December 31, 1998 and 1997,
and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and subsidiary as of
December 31, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
March 5, 1999, except for Note 8, as to which the
date is June 24, 1999
F-90
<PAGE>
LEWAN & ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 3,288,137 $ 2,788,038
Trade accounts receivable, net of allowance:
1998 - $138,000; 1997 - $125,000..................... 9,451,065 8,882,515
Other receivables.................................... 207,568 289,245
Inventories.......................................... 4,826,233 4,953,319
Prepaid expenses..................................... 4,177 354
Deferred income taxes................................ 369,143 476,616
----------- -----------
Total current assets............................... 18,146,323 17,390,087
----------- -----------
Rental Equipment, net of accumulated depreciation:
1998 - $6,050,422; 1997 - $5,293,384.................. 5,356,894 5,403,819
Property and Equipment, net............................ 2,071,986 1,840,867
Other assets........................................... 88,661 93,099
----------- -----------
$25,663,864 $24,727,872
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable............................... $ 4,966,608 $ 5,554,352
Accrued salaries, wages and benefits................. 3,226,221 4,185,669
Other accrued expenses............................... 637,386 1,002,717
Deferred revenue..................................... 2,884,349 3,420,958
Current portion of long term debt.................... 430,492 492,216
----------- -----------
Total current liabilities.......................... 12,145,056 14,655,912
----------- -----------
Long-Term debt......................................... 237,071 291,722
----------- -----------
Deferred income taxes.................................. 371,559 392,069
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, no par value: 399,200,000 shares
authorized; 1,010,000 issued and outstanding........ 613,570 613,570
Retained earnings.................................... 12,296,608 8,774,599
----------- -----------
Total stockholders' equity......................... 12,910,178 9,388,169
----------- -----------
$25,663,864 $24,727,872
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-91
<PAGE>
LEWAN & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Equipment and supplies sales.......... $46,266,314 $43,331,634 $43,489,491
Service and rentals................... 24,650,925 23,994,826 19,493,965
----------- ----------- -----------
Total revenues...................... 70,917,239 67,326,460 62,983,456
----------- ----------- -----------
Costs and operating expenses:
Cost of equipment and supplies sales.. 34,643,962 30,923,791 32,912,008
Service and rentals cost.............. 12,334,546 12,268,035 8,687,108
Selling, general and administrative
expense.............................. 18,413,989 19,119,519 17,926,423
----------- ----------- -----------
Total costs and operating expenses.. 65,392,497 62,311,345 59,525,539
----------- ----------- -----------
Income from operations.................. 5,524,742 5,015,115 3,457,917
Other income (expense):
Interest income....................... 181,283 90,376 81,022
Interest expense...................... (46,180) (223,755) (375,191)
----------- ----------- -----------
Income before provision for income
taxes.................................. 5,659,845 4,881,736 3,163,748
Provision for income taxes.............. 2,137,836 1,813,758 1,165,101
----------- ----------- -----------
Net income.............................. $ 3,522,009 $ 3,067,978 $ 1,998,647
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-92
<PAGE>
LEWAN & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock Total
------------------ Retained Stockholder's
Shares Amount Earnings Equity
--------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996........... 966,000 $378,830 $ 3,707,974 $ 4,086,804
Stock issued for compensation.... 22,000 97,020 97,020
Net income....................... 1,998,647 1,998,647
--------- -------- ----------- -----------
Balance, December 31, 1996......... 988,000 475,850 5,706,621 6,182,471
Stock issued for compensation.... 22,000 137,720 137,720
Net income....................... 3,067,978 3,067,978
--------- -------- ----------- -----------
Balance, December 31, 1997......... 1,010,000 613,570 8,774,599 9,388,169
Net income....................... 3,522,009 3,522,009
--------- -------- ----------- -----------
Balance, December 31, 1998......... 1,010,000 $613,570 $12,296,608 $12,910,178
========= ======== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-93
<PAGE>
LEWAN & ASSOCIATES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Operating activities:
Net income............................. $ 3,522,009 $ 3,067,978 $ 1,998,647
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization......... 3,480,932 2,548,949 2,397,081
Allowance for doubtful accounts
receivable........................... (39,955) (21,522) 61,418
(Gain) loss on sale of property and
equipment............................ 23,111 (25,362) 33,136
Stock issued for compensation......... 137,720 97,020
Deferred tax provision (benefit)...... 86,963 (61,862) (12,995)
Other................................. 25,596 45,068 30,515
Changes in operating assets and
liabilities:
Trade accounts receivable............ (528,595) (1,376,218) 19,811
Other receivables.................... 81,677 (113,231) (517,578)
Inventories.......................... (3,917,115) (4,334,092) (3,913,475)
Prepaid expenses..................... (3,823) 45,504 (33,587)
Rental equipment..................... 1,224,413 687,058 1,056,693
Other assets......................... 4,438 (60,251) 5,541
Trade accounts payable............... (587,744) 825,695 (524,609)
Other accrued expenses............... (1,380,625) 919,137 680,105
Deferred revenue..................... (536,609) 124,181 308,351
----------- ----------- -----------
Net cash provided by operating
activities......................... 1,454,673 2,408,752 1,686,074
----------- ----------- -----------
Investing activities:
Purchase of property and equipment..... (871,499) (683,433) (927,552)
Proceeds from sale of property and
equipment............................. 3,050 91,882 152,443
Distributions from joint venture....... 30,250 23,375 13,750
----------- ----------- -----------
Net cash used in investing
activities......................... (838,199) (568,176) (761,359)
----------- ----------- -----------
Financing activities:
Proceeds from long-term debt........... 725,041 1,816,353 1,953,410
Principal payments on long-term debt... (841,416) (2,687,364) (1,570,232)
----------- ----------- -----------
Net cash used in financing
activities......................... (116,375) (871,011) 383,178
----------- ----------- -----------
Increase in cash and cash equivalents... 500,099 969,565 1,307,893
Cash and cash equivalents, beginning of
year................................... 2,788,038 1,818,473 510,580
----------- ----------- -----------
Cash and cash equivalents, end of year.. $ 3,288,137 $ 2,788,038 $ 1,818,473
=========== =========== ===========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest.............................. $ 49,556 $ 231,742 $ 391,344
=========== =========== ===========
Taxes................................. $ 2,070,614 $ 1,935,131 $ 1,278,727
=========== =========== ===========
</TABLE>
During the years ended December 31, 1998, 1997 and 1996 the Company transferred
inventory totalling $4,044,201, $3,700,327 and $4,078,886, respectively, to
rental equipment.
See notes to consolidated financial statements.
F-94
<PAGE>
LEWAN & ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1998, 1997 and 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of Business--Lewan & Associates, Inc. sells, leases, services and
provides training and support of office technology equipment to businesses,
schools and municipalities from several locations throughout Colorado and
Wyoming.
Consolidation--The consolidated financial statements include the accounts of
Lewan & Associates, Inc. and its 55% owned subsidiary, Colorado Boulevard
Partners (collectively, the "Company"). Colorado Boulevard Partner's only
significant assets are a 50% interest in a corporate joint venture (the "Joint
Venture") and a leasehold interest. The Joint Venture's only significant asset
is a 100% interest in a partnership that owns an office building which the
Company leases for its corporate headquarters. Colorado Boulevard Partners
accounts for its investment in the Joint Venture utilizing the equity method
and accordingly recognizes 50% of the net income (loss) of the Joint Venture as
equity in earnings (loss) of Joint Venture. All intercompany balances and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents--The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
Inventories--Inventories consist of finished goods available for sale and are
stated at the lower of cost or market value using the average cost method.
Inventories supplied by certain vendors are subject to priority claim rights on
specific product lines.
Rental Equipment--The Company rents equipment to its customers under
cancelable operating leases requiring certain minimum rentals, ranging in
length from month-to-month to 60 months. Rental equipment is recorded at cost
and depreciated to its estimated residual value using accelerated methods based
upon the estimated useful life of the respective assets, which is five years.
In accordance with industry practice, depreciation expense associated with
rental equipment is included in cost of sales in the accompanying consolidated
statements of income.
Property and Equipment--Depreciation and amortization on property and
equipment is computed using accelerated and straight-line methods over the
shorter of the estimated useful lives or the terms of the underlying leases of
the related assets.
The Company evaluates the potential impairment of long-lived assets and long-
lived assets to be disposed of in accordance with Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of. There were no impairments
of the Company's long-lived assets in 1998, 1997 or 1996.
Income Taxes--The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. Deferred
income tax assets and liabilities are determined based upon differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws. In the event this difference results in a
deferred tax asset, the Company evaluates the probability of being able to
realize the future benefits indicated by such asset. A valuation allowance
related to a deferred tax asset is recorded when it is more likely than not
that some portion or all of the deferred tax asset will not be realized.
Revenue Recognition--Equipment sales are recognized at the time of customer
acceptance. Supply sales to customers are recognized at the time of shipment.
Customer service and support contract revenues are
F-95
<PAGE>
LEWAN & ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1998, 1997 and 1996
recognized ratably over the term of the underlying customer service or support
contract. Other service revenues are recognized as earned. Deferred revenue
consists of unearned customer service and support contract revenue, and
payments collected in advance under cancelable operating leases and for
supplies. Rental equipment revenues are recognized ratably over the lives of
the underlying cancelable operating leases.
The Company has arrangements with several non-affiliated entities under which
the Company receives commissions on certain sales of products by the entities
to the Company's customers. Commission revenues are recognized upon shipment of
the product to the customer.
Concentrations--Financial instruments which may subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and trade receivables. Credit risks relating to concentrations from accounts
receivable are mitigated due to the large number of customers.
In 1998, 1997 and 1996, the Company purchased 26%, 26% and 27, respectively,
of its equipment inventory for resale and resale supplies and parts from one
vendor. Purchases from this vendor are based upon inventory requirements and no
purchase commitments or blanket purchase orders exist at December 31, 1998.
Stock Issued for Services--Common stock was issued to certain officers of the
Company in 1997 and 1996 for services and was valued at fair value as of the
award date as determined by the Company's Board of Directors. No common stock
was issued for services during 1998.
Use of Estimates--The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows at December 31:
<TABLE>
<CAPTION>
Estimated Lives 1998 1997
----------------------------- ----------- -----------
<S> <C> <C> <C>
Leasehold improvements
....................... shorter of lease term or life $ 959,286 $ 933,392
Furniture, fixtures and
equipment.............. 3 to 7 years 2,308,601 2,138,002
Vehicles................ 5 years 134,950 57,916
Computer equipment...... 3 to 5 years 485,034 517,304
Leasehold interest...... 600,089 600,089
----------- -----------
4,487,960 4,246,703
Accumulated depreciation
and amortization....... (2,415,974) (2,405,836)
----------- -----------
$ 2,071,986 $ 1,840,867
=========== ===========
</TABLE>
F-96
<PAGE>
LEWAN & ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1998, 1997 and 1996
3. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Notes payable to bank, bearing interest at 7.75%, payable
in monthly principal and interest installments of
$26,031 through April 2000.............................. $392,571
Notes payable to bank, bearing interest at 7.75%, payable
in monthly principal and interest installments of
$12,898 through November 2000........................... 274,992
Notes payable to bank, bearing interest at 8.75% to
10.25%, payable in monthly principal and interest
installments of $39,375; repaid in February 1998........ $303,348
Notes payable to bank, bearing interest at 8.48% to
8.85%, payable in monthly principal and interest
installments of $32,995 through July 1999; repaid in
February 1998........................................... 430,590
Other--repaid in February 1998........................... 50,000
-------- --------
Total long-term debt..................................... 667,563 783,938
Less current portion..................................... 430,492 492,216
-------- --------
Long-term debt, net of current maturities................ $237,071 $291,722
======== ========
</TABLE>
The notes payable to bank are collateralized by accounts receivable,
equipment and inventories, to the extent not subject to priority claims. In
March 1999, all outstanding debt was repaid.
4. INCOME TAXES
The components of the income tax provision are as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Federal................................. $1,786,940 $1,634,445 $1,028,557
State................................... 263,933 241,175 149,539
---------- ---------- ----------
2,050,873 1,875,620 1,178,096
---------- ---------- ----------
Deferred:
Federal................................. 79,269 (53,570) (11,253)
State................................... 7,694 (8,292) (1,742)
---------- ---------- ----------
86,963 (61,862) (12,995)
---------- ---------- ----------
$2,137,836 $1,813,758 $1,165,101
========== ========== ==========
</TABLE>
The effective tax rate differs from the statutory federal tax rate primarily
due to state income taxes.
The Company's current deferred tax assets relate primarily to temporary
differences associated with accrued liabilities and inventories. The noncurrent
deferred tax liabilities primarily relate to temporary differences associated
with property and equipment and its investment in the Joint Venture.
F-97
<PAGE>
LEWAN & ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1998, 1997 and 1996
5. COMMITMENTS AND CONTINGENCIES
The Company leases office, retail and warehouse space under long-term lease
agreements which are classified as operating leases. The Company subleases a
portion of the office space under noncancelable operating leases. Future
minimum lease commitments under all operating leases as of December 31, 1998
are as follows:
<TABLE>
<CAPTION>
Lease
Commitment
----------
<S> <C>
1999............................................................ $1,113,208
2000............................................................ 1,122,235
2001............................................................ 1,052,573
2002............................................................ 1,013,472
2003............................................................ 858,586
----------
Total minimum lease payments.................................... $5,160,074
==========
</TABLE>
Minimum rental expense and sublease rental income related to land and
building leases are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
Minimum rental expense................... $1,127,533 $1,045,091 $997,279
Sublease rental income................... (137,435) (78,095) (58,843)
---------- ---------- --------
Net rent expense......................... $ 990,098 $ 966,996 $938,436
========== ========== ========
</TABLE>
In connection with the Company's investment in the Joint Venture (Note 1),
the Company has guaranteed debt of the Joint Venture aggregating $1,246,088 as
of December 31, 1998.
6. RELATED PARTIES
Lewan & Associates, Inc. leases office machines and furniture from a
partnership whose general partner is a significant shareholder of the Company.
The leases have various expiration dates ranging from twenty four months to
sixty months. These machines are used by the Company as rental machines for its
customers. During 1998, 1997 and 1996, the Company paid rental fees to the
partnership of $456,031, $363,481 and $363,905 respectively. In addition, the
Company received $12,000, $12,000 and $11,000 in 1998, 1997 and 1996,
respectively, from the partnership in payment for administrative services under
the rental program.
Four of the properties leased by the Company for office, retail and warehouse
space are owned partially or totally by shareholders of the Company. Lease
payments for these properties amounted to approximately $783,096, $741,680 and
$646,998, in 1998, 1997 and 1996, respectively.
Future minimum lease payments to related parties totaling $3,851,502 are
included in Note 5.
7. EMPLOYEE BENEFITS
The Company has established a profit sharing plan (Plan) for qualified
employees as well as an employees' thrift savings plan established under the
provisions of Internal Revenue Code Section 401(k). Contributions to the profit
sharing plan are made annually at the discretion of the Company's Board of
Directors. In 1998, 1997 and 1996, contributions totaling $700,000, $1,000,000
and $850,000, respectively, were made to the Plan.
F-98
<PAGE>
LEWAN & ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Years Ended December 31, 1998, 1997 and 1996
Additionally, the Company made a matching contribution of one dollar in 1998,
1997 and 1996, for every dollar the employees contributed to the 401(k) plan
with a limit of $600 per employee in 1998, and $500 per employee in 1997 and
1996. Matching contributions to the 401(k) totaled $189,500, $153,000, and
$144,740 in 1998, 1997 and 1996, respectively.
While the Company expects to continue the Plan indefinitely, it has reserved
the right to modify, amend, or terminate the Plan. In the event of termination,
the entire amount contributed under the Plan must be applied to the payment of
benefits to the participants or their beneficiaries.
8. SUBSEQUENT EVENTS
In March 1999, the Company issued 40,000 shares of its common stock to an
employee/officer/ shareholder as stock based compensation and recognized
related expense of $590,400.
In March 1999, the Company sold its interest in its subsidiary Colorado
Boulevard Partners to certain of the other partners in the partnership for a
total of $200,000. The sale resulted in a loss of approximately $241,000.
The Company terminated its profit sharing plan effective May 31, 1999 and, in
connection therewith, all participant accounts became 100% vested. The Company
contributed $503,813 to the Plan during the period ended May 31, 1999.
On June 24, 1999, all outstanding common stock of the Company was acquired by
Global Imaging Systems, Inc.
F-99
<PAGE>
LEWAN & ASSOCIATES, INC.
UNAUDITED BALANCE SHEET
As of March 31, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................ $ 3,871,380
Trade accounts receivable........................................ 8,353,347
Other receivables................................................ 832,519
Inventories...................................................... 4,892,856
Prepaid expenses................................................. 31,648
Deferred income tax asset........................................ 369,143
-----------
Total current assets........................................... 18,350,893
RENTAL AND LEASED EQUIPMENT, net................................... 5,552,270
PROPERTY AND EQUIPMENT, net........................................ 1,512,794
OTHER NON-CURRENT ASSETS........................................... 118,134
-----------
TOTAL ASSETS................................................... $25,534,091
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable........................................... $ 5,849,251
Accrued salaries, wages and benefits............................. 2,695,451
Accrued expenses................................................. 731,085
Deferred revenue................................................. 2,950,040
-----------
Total current liabilities...................................... 12,225,827
STOCKHOLDERS' EQUITY:
Common Stock..................................................... 1,203,970
Retained earnings................................................ 12,104,294
-----------
Total stockholders' equity..................................... 13,308,264
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................... $25,534,091
===========
</TABLE>
F-100
<PAGE>
LEWAN & ASSOCIATES, INC.
UNAUDITED STATEMENTS OF INCOME
For the Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
REVENUES
Equipment and supplies sales........................ $13,127,928 $ 9,533,498
Service and rentals................................. 6,270,762 5,963,924
----------- -----------
Total Revenues.................................... 19,398,690 15,497,422
----------- -----------
COST AND OPERATING EXPENSES:
Cost of equipment and supplies sales................ 10,234,230 6,360,076
Service and rentals cost............................ 2,917,721 3,016,620
Selling, general and administrative expense......... 6,318,582 4,460,921
----------- -----------
Total costs and operating expenses................ 19,470,533 13,837,617
----------- -----------
INCOME (LOSS) FROM OPERATIONS......................... (71,843) 1,659,805
OTHER INCOME (EXPENSE):
Interest income....................................... 23,726 21,454
Interest expense...................................... (23,197) (15,895)
Loss on sale of partnership........................... (241,000) 0
----------- -----------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES....... (312,314) 1,665,364
PROVISION FOR INCOME TAXES............................ (120,000) 619,515
----------- -----------
NET INCOME (LOSS)..................................... $ (192,314) $ 1,045,849
=========== ===========
</TABLE>
F-101
<PAGE>
LEWAN & ASSOCIATES, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................... $ (192,314) $1,045,849
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 738,984 820,859
Allowance for doubtful accounts receivable........ 71,747 1,850
(Gain) loss on sale of property and equipment..... 561,205 (204,153)
Stock issued for compensation..................... 590,400 0
Deferred tax (benefit)............................ (371,559) 0
Changes in operating assets and liabilities:
Trade accounts receivable....................... 1,025,971 2,353,376
Other receivables............................... (624,951) 4,603
Inventories..................................... (66,623) (848,832)
Prepaid expenses................................ (27,471) (24,516)
Rental equipment................................ (810,780) (636,193)
Other assets.................................... (29,473) (2,822)
Trade accounts payable.......................... 882,643 (1,158,233)
Accrued salaries, wages and benefits............ (530,770) (233,938)
Other accrued expenses.......................... 93,699 (6,092)
Deferred revenue................................ 65,691 (304,934)
---------- -----------
Net cash provided by operating activities............. 1,376,399 806,824
INVESTING ACTIVITIES:
Purchase of property and equipment.................. (812,916) (383,229)
Proceeds from sale of property and equipment........ 687,323 444,886
---------- -----------
Net cash provided by (used in) investing activities... (125,593) 61,657
FINANCING ACTIVITIES:
Principal payments on long term debt................ (667,563) (783,938)
---------- -----------
Net cash used in financing activities................. (667,563) (783,938)
INCREASE IN CASH AND CASH EQUIVALENTS................. 583,243 84,543
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........ 3,288,137 2,788,038
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............. $3,871,380 $ 2,872,581
========== ===========
</TABLE>
F-102
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
We have not authorized any person to make a statement that differs from what
is in this prospectus. If any person makes a statement that differs from what
is in this prospectus, you should not rely on it. This prospectus is not an
offer to sell, nor is it seeking an offer to buy, the notes in any state where
such offer or sale is not permitted. The information in this prospectus is
complete and accurate as of its date, but the information may change after
that date.
----------------
TABLE OF CONTENTS
----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Get More Information....................................... i
Cautionary Statement Regarding
Forward-Looking Statements.............................................. i
Use of Certain Terms..................................................... i
Prospectus Summary....................................................... 1
Risk Factors............................................................. 12
The Exchange Offer....................................................... 17
Use of Proceeds.......................................................... 25
Capitalization........................................................... 25
Selected Financial Data.................................................. 26
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 28
Business................................................................. 38
Management............................................................... 46
Certain Transactions..................................................... 53
Principal Stockholders................................................... 57
Description of Senior Credit Facilities.................................. 58
Description of Exchange Notes............................................ 59
Plan of Distribution..................................................... 99
Legal Matters............................................................ 100
Experts.................................................................. 100
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
----------------
PROSPECTUS
----------------
$100,000,000
[LOGO OF GLOBAL IMAGING SYSTEMS APPEARS HERE]
10 3/4% Senior Subordinated Exchange Notes Due 2007
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification Of Directors And Officers
The Amended and Restated Certificate of Incorporation (the "Charter") and
Amended and Restated Bylaws of Global provide for the indemnification of
Global's directors and officers to the fullest extent permitted by law. Insofar
as indemnification for liabilities under the Securities Act may be permitted to
directors, officers or controlling persons of Global pursuant to Global's
Charter, Bylaws and the Delaware General Corporation Law, Global has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is
therefore unenforceable.
As permitted by the Delaware General Corporation Law, the Charter provides
that directors of Global shall not be personally liable to Global or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
Global or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, relating to prohibited
dividends or distributions or the repurchase or redemption of stock or (iv) for
any transaction from which the director derives an improper personal benefit.
As a result of this provision, Global and its stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Additionally, Global has entered into indemnification agreements with certain
of its directors and officers, which may, in certain cases, be broader than the
specific indemnification provisions contained under applicable law. The
indemnification agreements may require Global, among other things, to indemnify
such officers and directors against certain liabilities that may arise by
reason of their status or service as directors, officers or employees of
Global, to advance the expenses incurred by such parties as a result of any
threatened claims or proceedings brought against them as to which they could be
indemnified, and to cover such officers and directors under Global's directors'
and officers' liability insurance policies to the maximum extent that insurance
coverage is maintained.
The directors, officers and general partner of each additional registrant
listed below may be insured and/or indemnified against liability incurred in
their capacity as officers and/or directors and/or general partner pursuant to
provisions in the certificate of incorporation, articles of incorporation or
certificate of limited partnership (any, the charter) of such additional
registrant. The provision(s) of each such additional registrant's charter
providing for insurance or indemnification or a limitation of liability are
identified in the table below; are set forth in the exhibits, identified below,
to this registration statement; and are incorporated herein by reference.
<TABLE>
<CAPTION>
Article(s) of Charter
Containing
Indemnification
and/or Limit of
Name of Registrant Liability Provisions Exhibit No.
------------------ --------------------- -----------
<S> <C> <C>
Capitol Copy Products, Inc............... 9 3.6a
Capitol Office Solutions, Inc............ 9 3.7a
Daniel Communications, Inc. ............. 12th 3.27a
Duplicating Specialties, Inc. d/b/a
Copytronix.............................. III 3.15a
Electronic Systems of Richmond, Inc...... 9 3.17a
Global Imaging Finance Company........... X, XI 3.20a
Global Imaging Operations, Inc........... X, XI 3.21a
ProView, Inc............................. V 3.22a
Southern Business Communications, Inc.... 11, 12 3.24a
</TABLE>
II-1
<PAGE>
The directors, officers and general partner of each additional registrant
listed below may be insured and/or indemnified against liability incurred in
their capacity as such pursuant to provisions in the bylaws of such additional
registrants. The provisions of each such additional registrant's bylaws
providing insurance or indemnification or a limitation of liability are
identified in the table below; are set forth in the exhibits, identified below,
to this registration statement and are incorporated herein by reference.
<TABLE>
<CAPTION>
Article(s) of Bylaws
or Limited
Partnership Agreement
Containing
Indemnification
and/or Limit of
Name of Registrant Liability Provisions Exhibit No.
------------------ --------------------- -----------
<S> <C> <C>
Business Equipment Unlimited............... VII 3.4b
Capitol Copy Products, Inc................. IX, X 3.6b
Conway Office Products, Inc................ II 3.11b
Daniel Communications, Inc................. X 3.27b
Distinctive Business Products, Inc......... IX 3.14b
Global Imaging Finance Company............. IX, X 3.20b
Global Imaging Operations, Inc............. 6 3.21b
Global Operations Texas, L.P............... 7.3 3.26b
Lewan & Associates, Inc.................... IX 3.26b
ProView, Inc............................... VIII 3.22b
Southern Copy Systems, Inc................. VIII 3.25b
</TABLE>
Directors, officers and the general partner of each additional registrant may
also be insured and/or indemnified against liability incurred in their capacity
as such pursuant to the provisions of state law identified below. These
provisions are set forth in the exhibits, identified below, to this
registration statement and are incorporated herein by reference.
<TABLE>
<CAPTION>
Statutory Provisions Regarding
Indemnification and/or Limitations of
Name of Registrant Liability Exhibit No.
------------------ ------------------------------------- -----------
<S> <C> <C>
American Photocopy Section 145 of the Delaware General 99.5
Equipment Company of Corporation Law
Pittsburgh d/b/a AMCOM
Office Systems
Capitol Copy Products,
Inc.
Capitol Office
Solutions, Inc.
Global Imaging Finance
Company
Global Imaging
Operations, Inc.
Berney, Inc. Sections 10-2B-8.51 to 8.58 of the Alabama 99.6
Daniel Communications, Business Corporation Act
Inc.
Southern Copy Systems,
Inc.
Business Equipment Section 719 of the Maine Business 99.7
Unlimited Corporation Act
Cameron Office Products, Section 67 of the Massachusetts Business 99.8
Inc. Corporation Law
Carr Business Machines Sections 402(b) and 721 to 726 of the 99.9
of Great Neck Inc. d/b/a Business Corporation Code of the State of
Carr New York
Eastern Copy Products,
Inc.
Centre Business Sections 1741 to 1750 of the Pennsylvania 99.10
Products, Inc. Business Corporation Law
Connecticut Business Sections 33-771 to 33-778 of the of the 99.11
Systems, Inc. Connecticut Business Corporations Act
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Statutory Provisions Regarding
Name of Registrant Indemnification and/or Limitations of Liability Exhibit No.
------------------ ----------------------------------------------- -----------
<S> <C> <C>
Conway Office Products, Sections 293-A:8.50 to 293-A:8.58 of the New 99.12
Inc. Hampshire Business Corporation Act
Copy Service and Supply, Sections 55-8-50 to 55-8-58 of the North 99.13
Inc. Carolina Business Corporation Act
ProView, Inc.
COS Financial, Inc. Section 2-418 of the General Corporation Law 99.14
of the State of Maryland
Distinctive Business Section 8.75 of the Illinois Business 99.15
Products, Inc. Corporation Act
Duplicating Specialties, Section 60.047(2)(d) and 60.367 to 60.414 of 99.16
Inc. d/b/a the Oregon Business Corporation Act
Copytronix
Electronic Systems, Inc. Sections 13.1-692 and 13.1-696 to 99.17
Electronic Systems of 13.1-704 of the Virginia Stock Corporation Act
Richmond, Inc.
Global Operations Texas, Article 11 of the Texas Revised Limited Partnership 99.22
L.P. Act
Lewan & Associates, Inc. Sections 7-108-401 to 7-108-402 and 7-109-101 to 99.21
7-109-110 of the Colorado Business Corporation Act
Quality Business Sections 23B.08.500 to 23B.08.600 of the 99.19
Systems, Inc. Washington Business Corporation Act
Southern Business Sections 14-2-202(b)(4) and 14-2-850 99.20
Communications, Inc. to 14-2-859 of the Code of Georgia
Business Corporation Act
</TABLE>
Item 21. Exhibits And Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1 Note Purchase Agreement, dated March 3, 1999, by and among Global, the
subsidiary guarantors, First Union Capital Markets Corp., Prudential
Securities Incorporated, Raymond James & Associates, Inc. and Scotia
Capital Markets (USA) Inc.*
3.1a Amended and Restated Certificate of Incorporation of Global Imaging
Systems, Inc. (1)
3.1b Amended and Restated Bylaws of Global Imaging Systems, Inc.(1)
3.2a Certificate of Incorporation of American Photocopy Equipment Company of
Pittsburgh.*
3.2b Bylaws, as amended, of American Photocopy Equipment Company of
Pittsburgh.*
3.3a Certificate of Incorporation, as amended of Berney, Inc.*
3.3b Bylaws, as amended, of Berney, Inc., as amended.*
3.4a Articles of Incorporation of Business Equipment Unlimited.*
3.4b Bylaws, as amended, of Business Equipment Unlimited.*
3.5a Articles of Organization of Cameron Office Products, Inc.*
3.5b Bylaws, as amended, of Cameron Office Products, Inc.*
3.6a Certificate of Incorporation of Capitol Copy Products, Inc.*
3.6b Bylaws, as amended, of Capitol Copy Products, Inc.*
3.7a Certificate of Incorporation of Capitol Office Solutions, Inc.*
3.7b Bylaws, as amended, of Capitol Office Solutions, Inc.*
3.8a Certificate of Incorporation of Carr Business Machines of Great Neck
Inc.*
3.8b Bylaws, as amended, of Carr Business Machines of Great Neck Inc.*
3.9a Articles of Incorporation of Centre Business Products, Inc.*
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
3.9b Bylaws, as amended, of Centre Business Products, Inc.*
3.10a Certificate of Incorporation of Connecticut Business Systems, Inc.*
3.10b Bylaws of Connecticut Business Systems, Inc.*
3.11a Record of Organization, as amended, of Conway Office Products, Inc.*
3.11b Bylaws, as amended, of Conway Office Products, Inc.*
3.12a Articles of Incorporation of Copy Service and Supply, Inc.*
3.12b Bylaws, as amended, of Copy Service and Supply, Inc.*
3.13a Articles of Incorporation of COS Financial, Inc.*
3.13b Bylaws, as amended, of COS Financial, Inc.
3.14a Articles of Incorporation of Distinctive Business Products, Inc.*
3.14b Bylaws, as amended, of Distinctive Business Products, Inc.*
3.15a Restated Articles of Incorporation of Duplicating Specialties, Inc.
d/b/a Copytronix.*
3.15b Bylaws, as amended, of Duplicating Specialties, Inc. d/b/a Copytronix.*
3.16a Certificate of Incorporation, as amended, of Eastern Copy Products,
Inc.*
3.16b Bylaws, as amended of Eastern Copy Products, Inc.*
3.17a Articles of Incorporation of Electronic Systems, Inc.*
3.17b Bylaws, as amended, of Electronic Systems, Inc.*
3.18a Articles of Incorporation of Electronic Systems of Richmond, Inc.*
3.18b Bylaws of Electronic Systems of Richmond, Inc.*
3.19a Certificate of Limited Partnership of Global Operations Texas, L.P.
3.19b Agreement of Limited Partnership of Global Operations Texas, L.P.
3.20a Certificate of Incorporation of Global Imaging Finance Company.*
3.20b Bylaws, as amended, of Global Imaging Finance Company.*
3.21a Certificate of Incorporation of Global Imaging Operations, Inc.*
3.21b Bylaws, as amended, of Global Imaging Operations, Inc.*
3.22a Articles of Incorporation of ProView, Inc.*
3.22b Bylaws, as amended, of ProView, Inc.*
3.23a Articles of Incorporation of Quality Business Systems, Inc.*
3.23b Bylaws, as amended, of Quality Business Systems, Inc.*
3.24a Restated Articles of Incorporation of Southern Business Communications,
Inc.*
3.24b Bylaws, as amended, of Southern Business Communications, Inc.*
3.25a Articles of Incorporation of Southern Copy Systems, Inc.
3.25b Bylaws, as amended, of Southern Copy Systems, Inc.*
3.26a Articles of Incorporation, as amended, of Lewan & Associates, Inc.
3.26b Bylaws, as amended, of Lewan & Associates, Inc.
3.27a Certificate of Incorporation of Daniel Communications, Inc.
3.27b Bylaws of Daniel Communications, Inc.
4.1 Indenture dated as of March 8, 1999 between Global, the subsidiary
guarantors and United States Trust Company of New York, as Trustee,
relating to the 10 3/4% Senior Subordinated Notes Due 2007.*
4.1a Schedule of Supplemental Indentures adding additional subsidiary
guarantors. (Form of Supplemental Indenture is included in Indenture
filed as Exhibit 4.1.)
4.2 Form of Exchange Note. (Included in Indenture filed as Exhibit 4.1.)
4.3 Credit Agreement, dated as of June 23, 1999, by and among the Company
and certain of its subsidiaries, as Borrowers, the Lenders referred to
therein, First Union National Bank, as Administrative Agent, Key
Corporate Capital Inc., as Syndication Agent, and ScotiaBanc, Inc., as
Documentation Agent.
5.1 Opinion of Hogan & Hartson L.L.P.
10.1 Registration Agreement, dated as of June 9, 1994, as amended, by and
among Global and the stockholders identified therein. (Incorporated by
reference to Global's Registration Statement on Form S-1, No. 333-48103,
as filed on March 17, 1998.)
10.2 Termination Agreement, dated as of May 27, 1998, by and among Global;
FUND IV; Golder, Thoma, Cressey, Rauner, Inc. and the stockholders
identified therein. (2)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.3 Executive Agreement, dated as of June 9, 1994, as amended, by and among
Global, Thomas S. Johnson and FUND IV. (2)**
10.4 Executive Agreement, dated as of June 9, 1994, as amended, by and among
Global, Raymond Schilling and FUND IV. (2)**
10.5 Executive Agreement, dated as of January 1, 1995, as amended, by and
among Global, H. Michael Mueller and FUND IV. (2)**
10.6 Executive Agreement, dated as of March 31, 1997, by and among Global,
Alfred N. Vieira and FUND IV. (2)**
10.7 1998 Stock Option and Incentive Plan. (2)**
10.7a Form of Incentive Stock Option Agreement.**
10.7b Form of Non-Qualified Stock Option Agreement.**
10.7c Form of Director's Stock Option Agreement.**
10.7d Director Non-Incentive Stock Option Agreement. (5)**
10.7e Amendments to Global Imaging Systems, Inc. 1998 Stock Option and
Incentive Plan and forms of stock option agreements. (5)**
10.8 Form of Supply Agreement between the Company and Konica. (3)***
10.9 Non-Exclusive Third Party Lessor Agreement, dated July 16, 1996, as
amended, by and between Global and General Electric Capital Corporation.
(3)***
10.10 License Agreement, dated as of July 31, 1996, as amended, between Global
and Copelco Capital, Inc. (3)***
10.11 Non-Exclusive Third Party Lessor Agreement, dated July 26, 1996, as
amended, by and between Global and Tokai Financial Services, Inc. (3)***
10.12 Stock Purchase Agreement, dated as of June 27, 1996 by and among Global
as Buyer, Copy Service & Supply, Inc., Office Furniture Concepts, Inc.,
CSS Leasing, LLC and Terry K. Smith and Crystal E. Smith as Sellers. (2)
10.13 Stock Purchase Agreement, dated as of November 13, 1996 by and among
Global as Buyer and Southern Business Communications, Inc. and Mark M.
Lloyd and Arthur E. Kreps as Sellers. (2)***
10.14 Asset Purchase Agreement, dated as of November 13, 1996 by and among
ATS-Atlanta One, LLC as Seller, ATS-Atlanta One, Inc. as Purchaser, and
ATS-Atlanta, Inc., Mark M. Lloyd and Arthur E. Kreps. (2)
10.15 Stock Purchase Agreement, dated as of August 7, 1997 by and among
Global, ESI Acquisition Corporation as Buyer, Electronic Systems, Inc.
("ESI") and the Shareholders of ESI as Sellers. (2)***
10.16 Stock Purchase Agreement, dated as of August 29, 1997 by and among
Global, Conway Office Products as Buyer, Eastern Copy Products, Inc. and
Michael E. Kleinhans as Seller. (2)
10.17 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Duplicating Specialties, Inc. (d/b/a Copytronix) and
Dean Groves as Seller. (2)***
10.18 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Quality Business Systems, Inc. and Gary Stevens as
Seller. (2)***
10.19 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Cascade Office Systems, Inc. and Fred Woodard as
Seller. (2)***
10.20 Stock Purchase Agreement, dated as of December 23, 1997 by and among
Global, ESI as Buyer, Electronic Systems of Richmond, Inc. ("ESRI") and
the Shareholders of ESRI as Seller. (2)***
10.21 Stock Purchase Agreement, dated as of December 31, 1997, as assigned, by
and among Global, Connecticut Business Systems, Inc. as Buyer, and the
Company, Michael E. Shea, Jr. and Peter Wenzke as Sellers. (2)***
10.22 Asset Purchase Agreement, dated as of February 26, 1998 by and among
Connecticut Systems, Inc., Bloom's Business Systems, a division of
Bloom's Incorporated, the Assets and Bloom's Incorporated as Seller.
(2)***
10.23 Stock Purchase Agreement, dated as of November 13, 1996, by and among
Global as Buyer, Southern Business Communications of D.C., Inc., and
George Gough, Mark M. Lloyd, and Arthur E. Kreps as Sellers. (2)
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
10.24 Equity Subscription Agreement, dated as of March 27, 1998, by and among
Global, FUND IV, JNL and Thomas S. Johnson. (2)
10.25 Form of Indemnification Agreement between Global and its directors and
executive officers. (1)**
10.26 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. (4)
10.27 Stock Purchase Agreement, dated as of September 16, 1998, by and among
Global, Carr Acquisition Corporation, as buyer, Carr Business Machines
of Great Neck Inc. (d/b/a Carr Business Systems) and its Shareholders,
as Sellers. (Incorporated by reference to Global's Current Report on
Form 8-K, as filed with the SEC on September 29, 1998.)
10.28 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. (4)
10.29 Stock Purchase Agreement, dated as of November 19, 1998, by and among
Global as Buyer, Capitol Office Solutions, Inc., FUND IV, Armen
Manoogian, and the other persons named therein as Sellers. (Incorporated
by reference to Global's Current Report on Form 8-K, as filed with the
SEC on January 5, 1998.)
10.30 Stock Purchase Agreement, dated as of December 22, 1998, by and among
Global as Buyer, Distinctive Business Products, Inc., and the
shareholders thereof, as Sellers. (Incorporated by reference to Global's
Quarterly Report on Form 10-Q filed with the SEC on February 16, 1999.)
10.31 Merger Agreement and Plan of Merger, dated as of February 26, 1999, by
and among Global, Dahill Acquisition, Inc., Dahill Industries, Inc. and
Randall E. Davidson.*
10.32 Registration Rights Agreement, dated March 8, 1999, by and among
Global,the subsidiary guarantors, First Union Capital Markets Corp.,
Prudential Securities Incorporated, Raymond James & Associates, Inc. and
Scotia Capital Markets (USA) Inc.*
10.33 Merger Agreement, dated as of June 24, 1999, by and among Global, Lewan
Acquisition, Inc., Lewan & Associates, Inc. and the shareholders of
Lewan & Associates, Inc. (Incorporated by reference to Global's Current
Report on Form 8-K filed with the SEC on July 6, 1999.)
11.1 Statement regarding computation of per share earnings (See Consolidated
Statements of Operations for the years ended March 31, 1997, 1998 and
1999 appearing herein and Note 7 to the Notes to Consolidated Financial
Statements for the same period).
12.1 Statement regarding computation of ratio of earnings to fixed charges.
21.1 Subsidiaries of Global.
23.1 The consent of Ernst & Young LLP.
23.2 The consent of Ernst & Young LLP.
23.3 The consent of Pasquale & Bowers, LLP.
23.4 The consent of Moss Adams LLP.
23.5 The consent of Edmondson, LedBetter & Ballard, L.L.P.
23.6 The consent of Arthur Andersen LLP.
23.7 The consent of Joseph D. Kalicka & Company, LLP.
23.8 The consent of Margolin, Winer & Evens LLP.
23.9 The consent of Deloitte & Touche LLP.
23.10 The consent of Hogan & Hartson L.L.P. (Included as part of Exhibit 5.1.)
24.1 Powers of Attorney. (Included on some signature pages to the
Registration Statement.)*
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of United States Trust Company, as
trustee.
99.1 Form of Senior Subordinated Note Letter of Transmittal.*
99.2 Form of Senior Subordinated Note Guaranteed Delivery.*
99.3 Form of Senior Subordinated Note Letter to Brokers, Dealers, Commercial
Banks, Trust Companies and other Nominees.*
99.4 Form of Senior Subordinated Note Letter to Clients.*
99.5 Section 145 of the Delaware General Corporation Law.*
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S>
99.6 Sections 10-2B-8.51 to 8.58 of the Alabama Business Corporation Act.*
99.7 Section 719 of the Maine Business Corporation Act.*
99.8 Section 67 of the Massachusetts Business Corporation Law.*
99.9 Sections 402(b) and 721 to 726 of the Business Corporation Code of the
State of New York.*
99.10 Sections 1741 to 1750 of the Pennsylvania Business Corporation Law.*
99.11 Sections 33-771 to 33-778 of the Connecticut Business Corporation Act.*
99.12 Sections 293-A:8.50 to 293-A:8.58 of the New Hampshire Business
Corporation Act.*
99.13 Sections 55-8-50 to 55-8-58 of the North Carolina Business Corporation
Act.*
99.14 Section 2-418 of the General Corporation Law of the State of Maryland.*
99.15 Section 8.75 of the Illinois Business Corporation Act.*
99.16 Section 60.047(2)(d) and 60.367 to 60.414 of the Oregon Business
Corporation Act.*
99.17 Sections 13.1-692.1, 13.1-696 to 13.1-704 of the Virginia Stock
Corporation Act.*
99.18 Article 2.02-1 of the Texas Business Corporation Act and Article 1302-
7.06 of the Texas Miscellaneous Corporation Laws Act.*
99.19 Sections 23B.08.500 to 23B.08.600 the Washington Business Corporation
Act.*
99.20 Sections 14-2-202(b)(4) and 14-2-850 to 14-2-859 of the Georgia Business
Corporation Code.*
99.21 Sections 7-108-401 to 7-108-402 and 7-109-101 to 7-109-110 of the
Colorado Business Corporation Act.
99.22 Article 11 of the Texas Revised Limited Partnership Act.
</TABLE>
- --------
(1) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on May 8, 1998.
(2) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on June 11, 1998.
(3) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on March 27, 1998.
(4) Incorporated by reference to Global's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
(5) Incorporated by reference to Global's Registration Statement on Form S-8,
No. 333-80801, as filed with the SEC on June 16, 1999.
* Previously filed.
** Management contract or compensatory plan, contract or arrangement.
*** Confidential treatment has been granted for portions of this exhibit.
(b) Financial Statement Schedules
Report of Independent Auditors on Schedule
Schedule II--Valuation and Qualifying Accounts
Item 22. Undertakings
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described above, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this registration statement through
the date of responding to the request.
II-7
<PAGE>
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement;
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent post-
effective amendment hereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in this registration statement when it becomes
effective; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement.
The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to remove from registration by
means of a post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Global Imaging
Systems, Inc. has duly caused this amended registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Tampa, State of Florida as of July 27, 1999.
Global Imaging Systems, Inc.
By: /s/ Thomas S. Johnson
-------------------------------------
Thomas S. Johnson
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ Thomas S. Johnson President, Chief Executive
- -------------------------- Officer and Director (Principal
Thomas S. Johnson Executive Officer)
/s/ Raymond Schilling Senior Vice President, Chief
- -------------------------- Financial Officer,Secretary and
Raymond Schilling Treasurer(Principal Financial
and Accounting Officer)
* Chairman of the Board
- --------------------------
Carl D. Thoma
* Director
- --------------------------
L. Neal Berney
* Director
- --------------------------
Bruce D. Gorchow
* Director
- --------------------------
William C. Kessinger
* Director
- --------------------------
Edward N. Patrone
By* /s/ Thomas S. Johnson Director
- --------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
American Photocopy Equipment Company of
Pittsburgh
By: /s/ Thomas S. Johnson
---------------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President and Director (Principal
- --------------------------- Executive Officer)
Matthew G. Swider
/s/ Raymond Schilling Vice President, Assistant
- --------------------------- Secretary and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Berney, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President and Director (Principal
- --------------------------- Executive Officer)
L. Neal Berney
/s/ Raymond Schilling Vice President and Director
- --------------------------- (Principal Financial and
Raymond Schilling Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City Tampa, State of
Florida as of July 27, 1999.
Business Equipment Unlimited
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President (Principal Executive
- --------------------------- Officer)
Douglas A. Timm
/s/ Raymond Schilling Vice President, Secretary,
- --------------------------- Treasurer and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
* Director
- ---------------------------
Peter W. Dinan
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Cameron Office Products, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President (Principal Executive
- --------------------------- Officer)
Dennis Cameron
/s/ Raymond Schilling Vice President and Director
- --------------------------- (Principal Financial and
Raymond Schilling Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
* Director
- ---------------------------
Peter W. Dinan
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Capitol Copy Products, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President and Treasurer (Principal
- --------------------------- Executive Officer)
Stephen Rolla
/s/ Raymond Schilling Vice President and Director
- --------------------------- (Principal Financial and
Raymond Schilling Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Capitol Office Solutions, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President, Chief Executive Officer
- --------------------------- and Director (Principal Executive
Stephen Rolla Officer)
/s/ Raymond Schilling Vice President, Secretary,
- --------------------------- Treasurer and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Carr Business Machines of Great Neck,
Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President and Director (Principal
- --------------------------- Executive Officer)
Paul A. Schulman
/s/ Raymond Schilling Vice President, Secretary,
- --------------------------- Treasurer and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Centre Business Products, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President (Principal Executive
- --------------------------- Officer)
C. Arnold McClure
/s/ Raymond Schilling Vice President and Director
- --------------------------- (Principal Financial and
Raymond Schilling Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board and Chairman
- --------------------------- of the Board of Southern Business
Thomas S. Johnson Communications, Inc., the
registrant's sole stockholder
* Director
- ---------------------------
Mark M. Lloyd
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Connecticut Business Systems, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President and Director (Principal
- --------------------------- Executive Officer)
Michael E. Shea, Jr.
/s/ Raymond Schilling Vice President, Secretary,
- --------------------------- Treasurer and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Conway Office Products, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas S. Johnson and Raymond Schilling, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement or any
registration statement relating to this registration statement under Rule 462
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ Robert LaPointe President (Principal Executive
- --------------------------- Officer)
Robert LaPointe
/s/ Raymond Schilling Vice President, Asst. Secretary,
- --------------------------- Asst. Treasurer and Director
Raymond Schilling (Principal Financial and
Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
* Director
- ---------------------------
James B. Conway
* Director
- ---------------------------
Peter W. Dinan
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Copy Service and Supply, Inc.
By: /s/ Thomas S. Johnson
---------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President and Director (Principal
- --------------------------- Executive Officer)
Terry K. Smith
/s/ Raymond Schilling Vice President, Assistant
- --------------------------- Secretary and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-in-Fact
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
COS Financial, Inc.
By: /s/ Thomas S. Johnson
----------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President, Treasurer and Director
- --------------------------- (Principal Executive Officer)
Stephen Rolla
/s/ Raymond Schilling Vice President and Director
- --------------------------- (Principal Financial and
Raymond Schilling Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Daniel Communications, Inc.
By: /s/ Thomas S. Johnson
----------------------------------
Thomas S. Johnson
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas S. Johnson and Raymond Schilling, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement or any
registration statement relating to this registration statement under Rule 462
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ Joseph Daniel Grant President (Principal Executive
- --------------------------- Officer)
Joseph Daniel Grant
/s/ Raymond Schilling Vice President and Director
- --------------------------- (Principal Financial and
Raymond Schilling Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
/s/ Mark M. Lloyd Director
- ---------------------------
Mark M. Lloyd
</TABLE>
II- 22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Distinctive Business Products, Inc.
By: /s/ Thomas S. Johnson
----------------------------------
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
* President and Director (Principal
- --------------------------- Executive Officer)
John R. Cosich
/s/ Raymond Schilling Vice President, Secretary,
- --------------------------- Treasurer and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Duplicating Specialties, Inc.
By: /s/ Thomas S. Johnson
----------------------------------
Thomas S. Johnson
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas S. Johnson and Raymond Schilling, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement or any
registration statement relating to this registration statement under Rule 462
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ Steven Phillips President (Principal Executive
- --------------------------- Officer)
Steven Phillips
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
/s/ Raymond Schilling Vice President, Chief Financial
- --------------------------- Officer,Assistant Secretary,
Raymond Schilling Treasurer and Director(Principal
* Director (Vice Chairman)
- ---------------------------
Thomas Metzler
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Eastern Copy Products, Inc.
By: /s/ Thomas S. Johnson
----------------------------------
Thomas S. Johnson
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas S. Johnson and Raymond Schilling, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement or any
registration statement relating to this registration statement under Rule 462
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
/s/ Paul Mosley President (Principal Executive
- --------------------------- Officer)
Paul Mosley
/s/ Raymond Schilling Vice President, Assistant
- --------------------------- Secretary and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
* Director
- ---------------------------
Peter W. Dinan
*By: /s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Electronic Systems, Inc.
/s/ Thomas S. Johnson
By: _____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
<S> <C>
* President and Director (Principal
- -------------------------- Executive Officer)
William G. Kamarek
Vice President, Assistant
Secretary and Director
/s/ Raymond Schilling (Principal Financial and
- -------------------------- Accounting Officer)
Raymond Schilling
Chairman of the Board
/s/ Thomas S. Johnson
- --------------------------
Thomas S. Johnson
*By: /s/ Thomas S. Johnson
--------------------------
Thomas S. Johnson
Attorney-In-Fact
</TABLE>
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Electronic Systems of Richmond, Inc.
/s/ Thomas S. Johnson
By: ____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
Name Title
President and Director (Principal
* Executive Officer)
- ---------------------------
Timothy D. McCulloch
/s/ Raymond Schilling Vice President, Assistant
- --------------------------- Secretary and Director (Principal
Raymond Schilling Financial and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
Director
*
- ---------------------------
William G. Kamarek
/s/ Thomas S. Johnson
*By: _________________
Thomas S. Johnson
Attorney-In-Fact
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Global Imaging Finance Company
/s/ Thomas S. Johnson
By: ____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
Name Title
President, Chief Executive Officer
/s/ Thomas S. Johnson and Chairman of the Board
- --------------------------- (Principal Executive Officer)
Thomas S. Johnson
Vice President and Director
/s/ Raymond Schilling (Principal Financial and
Accounting Officer)
- ---------------------------
Raymond Schilling
Director
*
- ---------------------------
Carl D. Thoma
/s/ Thomas S. Johnson
*By: _________________
Thomas S. Johnson
Attorney-in-Fact
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Global Imaging Operations, Inc.
/s/ Thomas S. Johnson
By: ____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
Name Title
President and Chairman of the
/s/ Thomas S. Johnson Board (Principal Executive
Officer)
- ---------------------------
Thomas S. Johnson
Vice President, Treasurer and
/s/ Raymond Schilling Director (Principal Financial and
Accounting Officer)
- ---------------------------
Raymond Schilling
Director
*
- ---------------------------
Carl D. Thoma
/s/ Thomas S. Johnson
*By: _________________
Thomas S. Johnson
Attorney-In-Fact
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Global Operations Texas, L.P.
Global Imaging Systems, Inc.,
its General Partner
By: ________________________________
/s/ Thomas S. Johnson
By: ________________________________
Thomas S. Johnson
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas S. Johnson and Raymond Schilling, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement or any
registration statement relating to this registration statement under Rule 462
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
<S> <C>
President and Chief Executive
/s/ Thomas S. Johnson Officer of Global Imaging Systems,
- -------------------------- Inc. (Principal Executive Officer)
Thomas S. Johnson and Director
/s/ Raymond Schilling Senior Vice President, Chief
- -------------------------- Financial Officer, Secretary and
Raymond Schilling Treasurer of Global Imaging
Systems, Inc. (Principal Financial
and Accounting Officer)
/s/ Carl D. Thoma Chairman of the Board of Global
- -------------------------- Imaging Systems, Inc., the General
Carl D. Thoma Partner of Global Operations
Texas, L.P.
/s/ L. Neal Berney Director of Global Imaging Systems,
- -------------------------- Inc., the General Partner of
L. Neal Berney Global Operations Texas, L.P.
Director of Global Imaging Systems,
/s/ Bruce D. Gorchow Inc., the General Partner of
- -------------------------- Global Operations Texas, L.P.
Bruce D. Gorchow
/s/ William C. Director of Global Imaging Systems,
Kessinger Inc., the General Partner of
- -------------------------- Global Operations Texas, L.P.
William C. Kessinger
Director of Global Imaging Systems,
/s/ Edward N. Patrone Inc., the General Partner of
- -------------------------- Global Operations Texas, L.P.
Edward N. Patrone
</TABLE>
II-30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Lewan & Associates, Inc.
/s/ Thomas S. Johnson
By: _______________________________
Thomas S. Johnson
Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas S. Johnson and Raymond Schilling, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, from such person and in each person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement or any
registration statement relating to this registration statement under Rule 462
and to file the same, with all exhibits thereto and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
<TABLE>
<CAPTION>
Name Title
<S> <C>
/s/ Paul R. Lewan President (Principal Executive
- --------------------------- Officer)
Paul R. Lewan
/s/ Raymond Schilling Vice President, Assistant Secretary
- --------------------------- and Director (Principal Financial
Raymond Schilling and Accounting Officer)
/s/ Thomas S. Johnson Chairman of the Board
- ---------------------------
Thomas S. Johnson
/s/ Lloyd S. Lewan Director
- ---------------------------
Lloyd S. Lewan
</TABLE>
II-31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
ProView, Inc.
/s/ Thomas S. Johnson
By: ____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
Name Title
President (Principal Executive
* Officer)
- ---------------------------
Neil C. Davis
Vice President and Director
/s/ Raymond Schilling (Principal Financial and
Accounting Officer)
- ---------------------------
Raymond Schilling
Chairman of the Board
/s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
Director
*
- ---------------------------
Mark M. Lloyd
/s/ Thomas S. Johnson
*By: _________________
Thomas S. Johnson
Attorney-In-Fact
II-32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Quality Business Systems, Inc.
/s/ Thomas S. Johnson
By: ____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
Name Title
President and Director (Principal
* Executive Officer)
- ---------------------------
Thomas Metzler
Vice President, Chief Financial
/s/ Raymond Schilling Officer, Assistant Secretary,
Treasurer and Director (Principal
- --------------------------- Financial and Accounting Officer)
Raymond Schilling
Chairman of the Board
/s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
/s/ Thomas S. Johnson
*By: _________________
Thomas S. Johnson
Attorney-In-Fact
II-33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Southern Business Communications, Inc.
/s/ Thomas S. Johnson
By: ____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
Name Title
President and Director (Principal
* Executive Officer)
- ---------------------------
Mark M. Lloyd
Vice President, Secretary,
/s/ Raymond Schilling Treasurer and Director (Principal
Financial and Accounting Officer)
- ---------------------------
Raymond Schilling
Chairman of the Board
/s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
/s/ Thomas S. Johnson
*By: _________________
Thomas S. Johnson
Attorney-In-Fact
II-34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida as of July 27, 1999.
Southern Copy Systems, Inc.
/s/ Thomas S. Johnson
By: ____________________________________
Thomas S. Johnson
Chairman
Pursuant to the requirements of the Securities Act of 1933, this amended
registration statement has been signed by the following persons in the
capacities indicated as of July 27, 1999.
Name Title
Vice Chairman and Director
* (Principal Executive Officer)
- ---------------------------
L. Neal Berney
Vice President and Director
/s/ Raymond Schilling (Principal Financial and
Accounting Officer)
- ---------------------------
Raymond Schilling
Chairman of the Board
/s/ Thomas S. Johnson
- ---------------------------
Thomas S. Johnson
/s/ Thomas S. Johnson
*By: _________________
Thomas S. Johnson
Attorney-In-Fact
II-35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Global Imaging Systems, Inc.
We have audited the consolidated financial statements of Global Imaging
Systems, Inc. as of March 31, 1999 and 1998, and for each of the three years in
the period ended March 31, 1999, and have issued our report thereon dated May
12, 1999. Our audits also included the financial statement schedule listed in
Item 14(a) of the Annual Report (Form 10-K). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Tampa, Florida
May 12, 1999
II-36
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED MARCH 31, 1999 AND 1998
Reserve for returns and allowances and bad debts:
<TABLE>
<CAPTION>
Additions
----------------------
Balance at the Charged to Charged to Balance at
Beginning of Costs and Other the End of
the period Expenses Accounts(1) Deductions the period
-------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended:
March 31, 1997.... $ 200,000 $ 30,824 $ 147,005 $ 68,785 $ 309,044
March 31, 1998.... $ 309,044 $289,879 $ 532,689 $ 261,068 $ 870,544
March 31, 1999.... $ 870,544 $345,993 $ 472,583 $ 335,888 $1,353,232
Reserve for excess and slow-moving inventory:
<CAPTION>
Additions
----------------------
Balance at the Charged to Charged to Balance at
Beginning of Costs and Other the End of
the period Expenses Accounts(1) Deductions the period
-------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended:
March 31, 1997.... $ 133,026 $256,280 $ 340,000 $ 403,207 $ 326,099
March 31, 1998.... $ 326,099 $888,802 $ 686,877 $ 606,758 $1,295,020
March 31, 1999.... $1,295,020 $759,721 $1,160,660 $1,004,646 $2,210,755
</TABLE>
- --------
(1) These amounts primarily represent reserve balances acquired in connection
with business combinations.
II-37
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1 Note Purchase Agreement, dated March 3, 1999, by and among Global, the
subsidiary guarantors, First Union Capital Markets Corp., Prudential
Securities Incorporated, Raymond James & Associates, Inc. and Scotia
Capital Markets (USA) Inc.*
3.1a Amended and Restated Certificate of Incorporation of Global Imaging
Systems, Inc.(1)
3.1b Amended and Restated Bylaws of Global Imaging Systems, Inc.(1)
3.2a Certificate of Incorporation of American Photocopy Equipment Company
of Pittsburgh.*
3.2b Bylaws, as amended of American Photocopy Equipment Company of
Pittsburgh.*
3.3a Certificate of Incorporation, as amended of Berney, Inc.*
3.3b Bylaws, as amended of Berney, Inc., as amended.*
3.4a Articles of Incorporation of Business Equipment Unlimited.*
3.4b Bylaws, as amended of Business Equipment Unlimited.*
3.5a Articles of Organization of Cameron Office Products, Inc.*
3.5b Bylaws, as amended of Cameron Office Products, Inc.*
3.6a Certificate of Incorporation of Capitol Copy Products, Inc.*
3.6b Bylaws, as amended of Capitol Copy Products, Inc.*
3.7a Certificate of Incorporation of Capitol Office Solutions, Inc.*
3.7b Bylaws, as amended of Capitol Office Solutions, Inc.*
3.8a Certificate of Incorporation of Carr Business Machines of Great Neck
Inc.*
3.8b Bylaws, as amended of Carr Business Machines of Great Neck Inc.*
3.9a Articles of Incorporation of Centre Business Products, Inc.*
3.9b Bylaws, as amended of Centre Business Products, Inc.*
3.10a Certificate of Incorporation of Connecticut Business Systems, Inc.*
3.10b Bylaws of Connecticut Business Systems, Inc.*
3.11a Record of Organization, as amended of Conway Office Products, Inc.*
3.11b Bylaws, as amended of Conway Office Products, Inc.*
3.12a Articles of Incorporation of Copy Service and Supply, Inc.*
3.12b Bylaws, as amended of Copy Service and Supply, Inc.*
3.13a Articles of Incorporation of COS Financial, Inc.*
3.13b Bylaws, as amended of COS Financial, Inc.
3.14a Articles of Incorporation of Distinctive Business Products, Inc.*
3.14b Bylaws, as amended of Distinctive Business Products, Inc.*
3.15a Restated Articles of Incorporation of Duplicating Specialties, Inc.
d/b/a Copytronix.*
3.15b Bylaws, as amended of Duplicating Specialties, Inc. d/b/a Copytronix.*
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.16a Certificate of Incorporation, as amended of Eastern Copy Products,
Inc.*
3.16b Bylaws, as amended of Eastern Copy Products, Inc.*
3.17a Articles of Incorporation of Electronic Systems, Inc.*
3.17b Bylaws, as amended of Electronic Systems, Inc.*
3.18a Articles of Incorporation of Electronic Systems of Richmond, Inc.*
3.18b Bylaws of Electronic Systems of Richmond, Inc.*
3.19a Certificate of Limited Partnership of Global Operations Texas, L.P.
3.19b Agreement of Limited Partnership of Global Operations Texas, L.P.
3.20a Certificate of Incorporation of Global Imaging Finance Company.*
3.20b Bylaws, as amended of Global Imaging Finance Company.*
3.21a Certificate of Incorporation of Global Imaging Operations, Inc.*
3.21b Bylaws, as amended of Global Imaging Operations, Inc.*
3.22a Articles of Incorporation of ProView, Inc.*
3.22b Bylaws, as amended of ProView, Inc.*
3.23a Articles of Incorporation of Quality Business Systems, Inc.*
3.23b Bylaws, as amended of Quality Business Systems, Inc.*
3.24a Restated Articles of Incorporation of Southern Business
Communications, Inc.*
3.24b Bylaws, as amended of Southern Business Communications, Inc.*
3.25a Articles of Incorporation of Southern Copy Systems, Inc.
3.25b Bylaws, as amended of Southern Copy Systems, Inc.*
3.26a Articles of Incorporation, as amended, of Lewan & Associates, Inc.
3.26b Bylaws, as amended, of Lewan & Associates, Inc.
3.27a Certificate of Incorporation of Daniel Communications, Inc.
3.27b Bylaws of Daniel Communications, Inc.
4.1 Indenture dated as of March 8, 1999 between Global, the subsidiary
guarantors and United States Trust Company of New York, as Trustee,
relating to the 10 3/4% Senior Subordinated Notes Due 2007.*
4.1a Schedule of Supplemental Indentures adding additional subsidiary
guarantors. (Form of Supplemental Indenture is included in Indenture
filed as Exhibit 4.1.)
4.2 Form of Exchange Note. (Included in Indenture filed as Exhibit 4.1.)
4.3 Credit Agreement, dated as of June 23, 1999, by and among the Company
and certain of its subsidiaries, as Borrowers, the Lenders referred to
therein, First Union National Bank, as Administrative Agent, Key
Corporate Capital Inc., as Syndication Agent, and ScotiaBanc, Inc., as
Documentation Agent.
5.1 Opinion of Hogan & Hartson L.L.P.
10.1 Registration Agreement, dated as of June 9, 1994, as amended, by and
among Global and the stockholders identified therein. (Incorporated by
reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed on March 17, 1998.)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.2 Termination Agreement, dated as of May 27, 1998, by and among Global;
FUND IV; Golder, Thoma, Cressey, Rauner, Inc. and the stockholders
identified therein.(2)
10.3 Executive Agreement, dated as of June 9, 1994, as amended, by and
among Global, Thomas S. Johnson and FUND IV.(2)**
10.4 Executive Agreement, dated as of June 9, 1994, as amended, by and
among Global, Raymond Schilling and FUND IV.(2)**
10.5 Executive Agreement, dated as of January 1, 1995, as amended, by and
among Global, H. Michael Mueller and FUND IV.(2)**
10.6 Executive Agreement, dated as of March 31, 1997, by and among Global,
Alfred N. Vieira and FUND IV.(2)**
10.7 1998 Stock Option and Incentive Plan.(2)**
10.7a Form of Incentive Stock Option Agreement.**
10.7b Form of Non-Qualified Stock Option Agreement.**
10.7c Form of Director's Stock Option Agreement.**
10.7d Director Non-Incentive Stock Option Agreement.(5)**
10.7e Amendments to Global Imaging Systems, Inc. 1998 Stock Option and
Incentive Plan and forms of stock option agreements.(5)**
10.8 Form of Supply Agreement between the Company and Konica.(3)***
10.9 Non-Exclusive Third Party Lessor Agreement, dated July 16, 1996, as
amended, by and between Global and General Electric Capital
Corporation.(3)***
10.10 License Agreement, dated as of July 31, 1996, as amended, between
Global and Copelco Capital, Inc.(3)***
10.11 Non-Exclusive Third Party Lessor Agreement, dated July 26, 1996, as
amended, by and between Global and Tokai Financial Services,
Inc.(3)***
10.12 Stock Purchase Agreement, dated as of June 27, 1996 by and among
Global as Buyer, Copy Service & Supply, Inc., Office Furniture
Concepts, Inc., CSS Leasing, LLC and Terry K. Smith and
Crystal E. Smith as Sellers.(4)
10.13 Stock Purchase Agreement, dated as of November 13, 1996 by and among
Global as Buyer and Southern Business Communications, Inc. and Mark M.
Lloyd and Arthur E. Kreps as Sellers.(4)***
10.14 Asset Purchase Agreement, dated as of November 13, 1996 by and among
ATS-Atlanta One, LLC as Seller, ATS-Atlanta One, Inc. as Purchaser,
and ATS-Atlanta, Inc., Mark M. Lloyd and
Arthur E. Kreps.(4)
10.15 Stock Purchase Agreement, dated as of August 7, 1997 by and among
Global, ESI Acquisition Corporation as Buyer, Electronic Systems, Inc.
("ESI") and the Shareholders of ESI as Sellers.(4)***
10.16 Stock Purchase Agreement, dated as of August 29, 1997 by and among
Global, Conway Office Products as Buyer, Eastern Copy Products, Inc.
and Michael E. Kleinhans as Seller.(4)
10.17 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Duplicating Specialties, Inc. (d/b/a Copytronix) and
Dean Groves as Seller.(4)***
10.18 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Quality Business Systems, Inc. and Gary Stevens as
Seller.(4)***
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.19 Stock Purchase Agreement, dated as of September 30, 1997 by and among
Global as Buyer, Cascade Office Systems, Inc. and Fred Woodard as
Seller.(4)***
10.20 Stock Purchase Agreement, dated as of December 23, 1997 by and among
Global, ESI as Buyer, Electronic Systems of Richmond, Inc. ("ESRI")
and the Shareholders of ESRI as Seller.(4)***
10.21 Stock Purchase Agreement, dated as of December 31, 1997, as assigned,
by and among Global, Connecticut Business Systems, Inc. as Buyer, and
the Company, Michael E. Shea, Jr. and Peter Wenzke as Sellers.(4)***
10.22 Asset Purchase Agreement, dated as of February 26, 1998 by and among
Connecticut Systems, Inc., Bloom's Business Systems, a division of
Bloom's Incorporated, the Assets and Bloom's Incorporated as
Seller.(4)***
10.23 Stock Purchase Agreement, dated as of November 13, 1996, by and among
Global as Buyer, Southern Business Communications of D.C., Inc., and
George Gough, Mark M. Lloyd, and Arthur E. Kreps as Sellers.(4)
10.24 Equity Subscription Agreement, dated as of March 27, 1998, by and
among Global, FUND IV, JNL and Thomas S. Johnson.(2)
10.25 Form of Indemnification Agreement between Global and its directors and
executive officers.(1)**
10.26 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.(4)
10.27 Stock Purchase Agreement, dated as of September 16, 1998, by and among
Global, Carr Acquisition Corporation, as buyer, Carr Business Machines
of Great Neck Inc. (d/b/a Carr Business Systems) and its Shareholders,
as Sellers. (Incorporated by reference to Global's Current Report on
Form 8-K, as filed with the SEC on September 29, 1998.)
10.28 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.(4)
10.29 Stock Purchase Agreement, dated as of November 19, 1998, by and among
Global as Buyer, Capitol Office Solutions, Inc., FUND IV, Armen
Manoogian, and the other persons named therein as Sellers.
(Incorporated by reference to Global's Current Report on Form 8-K, as
filed with the SEC on January 5, 1998.)
10.30 Stock Purchase Agreement, dated as of December 22, 1998, by and among
Global as Buyer, Distinctive Business Products, Inc., and the
shareholders thereof, as Sellers. (Incorporated by reference to
Global's Quarterly Report on Form 10-Q filed with the SEC on February
16, 1999.)
10.31 Merger Agreement and Plan of Merger, dated as of February 26, 1999, by
and among Global, Dahill Acquisition, Inc., Dahill Industries, Inc.
and Randall E. Davidson.*
10.32 Registration Rights Agreement, dated March 8, 1999, by and among
Global,the subsidiary guarantors, First Union Capital Markets Corp.,
Prudential Securities Incorporated, Raymond James & Associates, Inc.
and Scotia Capital Markets (USA) Inc.*
10.33 Merger Agreement, dated as of June 24, 1999, by and among Global,
Lewan Acquisition, Inc., Lewan & Associates, Inc. and the shareholders
of Lewan & Associates, Inc. (Incorporated by reference to Global's
Current Report on Form 8-K filed with the SEC on July 6, 1999.)
11.1 Statement regarding computation of per share earnings (See
Consolidated Statements of Operations for the years ended March 31,
1997, 1998 and 1999 appearing herein and Note [ ] to the Notes to
Consolidated Financial Statements for the same period).
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
12.1 Statement regarding computation of ratios.
21.1 Subsidiaries of Global.
23.1 The consent of Ernst & Young LLP.
23.2 The consent of Ernst & Young LLP.
23.3 The consent of Pasquale & Bowers, LLP.
23.4 The consent of Moss Adams LLP.
23.5 The consent of Edmondson, LedBetter & Ballard, L.L.P.
23.6 The consent of Arthur Andersen LLP.
23.7 The consent of Joseph D. Kalicka & Company, LLP.
23.8 The consent of Margolin, Winer & Evens LLP.
23.9 The consent of Deloitte & Touche LLP.
23.10 The consent of Hogan & Hartson L.L.P. (Included as part of Exhibit
5.1.)
24.1 Powers of Attorney (Included on some signature pages to the
Registration Statement.).*
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of United States Trust Company, as
trustee.
99.1 Form of Senior Subordinated Note Letter of Transmittal.*
99.2 Form of Senior Subordinated Note Guaranteed Delivery.*
99.3 Form of Senior Subordinated Note Letter to Brokers, Dealers,
Commercial Banks, Trust Companies and other Nominees.*
99.4 Form of Senior Subordinated Note Letter to Clients.*
99.5 Section 145 of the Delaware General Corporation Law.*
99.6 Sections 10-2B-8.51 to 8.58 of the Alabama Business Corporation Act.*
99.7 Section 719 of the Maine Business Corporation Act.*
99.8 Section 67 of the Massachusetts Business Corporation Law.*
99.9 Sections 402(b) and 721 to 726 of the Business Corporation Code of the
State of New York.*
99.10 Sections 1741 to 1750 of the Pennsylvania Business Corporation Law.*
99.11 Sections 33-771 to 33-778 of the Connecticut Business Corporation
Act.*
99.12 Sections 293-A:8.50 to 293-A:8.58 of the New Hampshire Business
Corporation Act.*
99.13 Sections 55-8-50 to 55-8-58 of the North Carolina Business Corporation
Act.*
99.14 Section 2-418 of the General Corporation Law of the State of
Maryland.*
99.15 Section 8.75 of the Illinois Business Corporation Act.*
99.16 Section 60.047(2)(d) and 60.367 to 60.414 of the Oregon Business
Corporation Act.*
99.17 Sections 13.1-692.1, 13.1-696 to 13.1-704 of the Virginia Stock
Corporation Act.*
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
99.18 Article 2.02-1 of the Texas Business Corporation Act and Article 1302-
7.06 of the Texas Miscellaneous Corporation Laws Act.*
99.19 Sections 23B.08.500 to 23B.08.600 the Washington Business Corporation
Act.*
99.20 Sections 14-2-202(b)(4) and 14-2-850 to 14-2-859 of the Georgia
Business Corporation Code.*
99.21 Sections 7-108-401 to 7-108-402 and 7-109-101 to 7-109-110 of the
Colorado Business Corporation Act.
99.22 Article 11 of the Texas Revised Limited Partnership Act.
</TABLE>
- --------
(1) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on May 8, 1998.
(2) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on June 11, 1998.
(3) Incorporated by reference to Global's Registration Statement on Form S-1,
No. 333-48103, as filed with the SEC on March 27, 1998.
(4) Incorporated by reference to Global's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
(5) Incorporated by reference to Global's Registration Statement on Form S-8,
No. 333-80801, as filed with the SEC on June 16, 1999.
* Previously filed.
** Management contract or compensatory plan, contract or arrangement.
*** Confidential treatment has been granted for portions of this exhibit.
6
<PAGE>
COS FINANCIAL, INC.
(formerly General Service Leasing, Inc.)
BY-LAWS
ARTICLE I
Stockholders
SECTION 1. Annual Meeting. The annual meeting of the stockholders of the
Corporation shall be held on a day duly designated by the stockholders in
January, if not a legal holiday, and if a legal holiday, then the next
succeeding day not a legal holiday, for the transaction of such corporate
business as may come before the meeting.
SECTION 2. Special Meetings. Special meetings of the stockholders may be
called at any time for any purpose or purposes by the Chairman of the Board, the
President, by a Vice President, or by a majority of the Board of Directors, and
shall be called forthwith by the Chairman of the Board, the President, by a Vice
President, the Secretary-Treasurer or any director of the Corporation upon the
request in writing of the holders of a majority of all the shares outstanding
and entitled to vote on the business to be transacted at such meeting. Such
request shall state the purpose or purposes of the meeting. Business transacted
at all special meetings of stockholders shall be confined to the purpose or
purposes stated in the notice of the meeting.
SECTION 3. Place of Holding Meetings. All meetings of stockholders shall
be held at the principal office of the Corporation or elsewhere in the United
States as designated by the Board of Directors.
SECTION 4. Notice of Meetings. Written notice of each meeting of the
stockholders shall be mailed, postage prepaid by the Secretary-Treasurer, to
each stockholder of record entitled to vote thereat at his post office address,
as it appears upon the books of the Corporation, at least ten (10) days before
the meeting. Each such notice shall state the place, day, and hour at which the
meeting is to be held and, in the case of any special meeting, shall state
briefly the purpose or purposes thereof.
SECTION 5. Quorum. The presence in person or by proxy of the holders of
record of a majority of the shares of the capital stock of the Corporation
issued and outstanding and entitled to vote thereat shall constitute a quorum at
all meetings of the stockholders, except as otherwise provided by law, by the
Articles of Incorporation or by these By-Laws. If less than a quorum shall be in
attendance at the time for which the meeting shall have been called, the meeting
may be adjourned from time to time by a majority vote of the stockholders
present or represented, without any notice other than by announcement at the
meeting, until a quorum shall attend. At any adjourned meeting at which a quorum
shall attend, any business may be transacted which might have been transacted if
the meeting had been held as originally called.
<PAGE>
SECTION 6. Conduct of Meetings. Meetings of stockholders shall be
presided over by the President of the Corporation or if he is not present, by a
Vice President or if none of said officers is present, by chairman to be elected
at the meeting. The Secretary-Treasurer of the Corporation, or if he is not
present, any Assistant Secretary-Treasurer shall act as secretary of such
meetings: in the absence of the Secretary-Treasurer and any Assistant
Secretary-Treasurer the presiding officer may appoint a person to act as
Secretary-Treasurer of the meeting.
SECTION 7. Voting. At all meetings of stockholders, every stockholder
entitled to vote thereat shall have one (1) vote for each share of stock
standing in his name on the books of the Corporation on the date for the
determination of stockholders entitled to vote at such meeting. Such vote may be
either in person or by proxy appointed by an instrument in writing, subscribed
by such stockholder or his duly authorized attorney, bearing a date not more
than three (3) months prior to said meeting, unless said instrument provides for
a longer period. Such proxy shall be dated, but need not be sealed, witnessed or
acknowledged. All elections shall be had and all questions shall be decided by a
majority of the votes cast at a duly constituted meeting, except as otherwise
provided by law, in the Articles of Incorporation or by these By-Laws.
If the chairman of the meeting shall so determine, a vote by ballot may be
taken upon any election or matter, and the vote shall be so taken upon the
request of the holders of ten percent (10%) of the stock entitled to vote on
such election or matter. In either of such events, the proxies and ballots shall
be received and be taken in charge and all questions touching the qualification
of voters and the validity of proxies and the acceptance or rejection of votes,
shall be decided by the tellers. Such tellers shall be appointed by the chairman
of said meeting.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The property and business of the Corporation
shall be managed under the direction of the Board of Directors of the
Corporation.
SECTION 2. Number and Term of Office. The number of directors shall be
three or such other number, but not less than three as may be designated from
time to time by resolution of a majority of the entire Board of Directors
provided that so long as there are less than three stockholders, the number of
directors may be less than three but not less than the number of stockholders.
Directors need not be stockholders. The directors shall be elected each year at
the annual meeting of stockholders, except as hereinafter provided, and each
director shall serve until his successor shall be elected and shall qualify.
2
<PAGE>
SECTION 3. Filling of Vacancies. In the case of any vacancy in the Board
of Directors through death, resignation, disqualification, removal or other
cause, the remaining directors, by affirmative vote of the majority thereof, may
elect a successor to hold office for the unexpired portion of the term of the
director whose place shall be vacant, and until the election of his successor,
or until he shall be removed, prior thereto, by an affirmative vote of the
holders of a majority of the stock.
Similarly and in the event of the number of directors being increased as
provided in these By-Laws, the additional directors so provided for shall be
elected by a majority of the entire Board of Directors already in office, and
shall hold office until the next annual meeting of stockholders and thereafter
until his or their successors shall be elected.
Any director may be removed from office with or without cause by the
affirmative vote of the holders of the majority of the stock issued and
outstanding and entitled to vote at any special meeting of stockholders
regularly called for the purpose.
SECTION 4. Place of Meeting. The Board of Directors may hold their
meetings and have one or more offices, and keep the books of the Corporation,
either within or outside the State of Maryland, at such place or places as they
may hold their meetings by conference telephone or other similar electronic
communications equipment in accordance with the provisions of the Maryland
Corporation law.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by resolution of the Board, provided that notice of every resolution
of the Board fixing or changing the time or place for the holding of regular
meetings of the Board shall be mailed to each director at least three (3) days
before the first meeting held pursuant thereto. The annual meeting of the Board
of Directors shall be held immediately following the annual stockholders'
meeting at which a Board of Directors is elected. Any business may be transacted
at any regular meeting of the Board.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by direction of the Chairman of the Board or the
President and must be called by the Chairman of the Board, the President or the
Secretary-Treasurer upon written request of a majority of the Board of
Directors. The Secretary-Treasurer shall give notice of each special meeting of
the Board of Directors, by mailing the same at least three (3) days prior to the
meeting or by telegraphing the same at least two (2) days before the meeting, to
each director; but such notice may be waived by any director. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at any
special meetings. At any meeting at which every director shall be present, even
though without notice, any business may be transacted and any director may in
writing waive notice of the time, place and objectives of any special meeting.
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SECTION 7. Quorum. A majority of the whole number of directors shall
constitute a quorum for the transaction of business at all meetings of the Board
of Directors, but, if at any meeting less than a quorum shall be present, a
majority of those present may adjourn the meeting from time to time, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or by the Articles of Incorporation or by these
By-Laws.
SECTION 8. Compensation of Directors. Directors shall not receive any
stated salary for their services as such, but each director shall be entitled to
receive from the Corporation reimbursement of the expenses incurred by him in
attending any regular or special meeting of the Board, and, by resolution of the
Board of Directors, a fixed sum may also be allowed for attendance at each
regular or special meeting of the Board and such reimbursement and compensation
shall be payable whether or not a meeting is adjourned because of the absence of
a quorum. Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 9. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation, which,
to the extent provided in the resolution, shall have and may exercise the powers
of the Board of Directors, and may authorize the seal of the Corporation to be
affixed to all papers which may require it. Such committee or committees shall
have such names as may be determined from time to time by resolution adopted by
the Board of Directors.
ARTICLE III
Officers
SECTION 1. Election, Tenure and Compensation. The officers of the
Corporation shall be a President and a Secretary-Treasurer, and also such other
officers including one or more Vice Presidents and/or one or more assistants to
the foregoing officers as the Board of Directors from time to time may consider
necessary for the proper conduct of the business of the Corporation. The
officers shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of the stockholders except where a longer
term is expressly provided in an employment contract duly authorized and
approved by the Board of Directors. The President and Chairman of the Board
shall be directors and the other officers may, but need not be, directors. Any
two or more of the above offices, except those of President and Vice President,
may not be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity if such instrument is required
by law or by these By-Laws to be executed, acknowledged or verified by any two
or more officers. The compensation or salary paid all officers of the
Corporation shall be fixed by resolutions adopted by the Board of Directors.
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In the event that any office other than an office required by law shall not
be filled by the Board of Directors, or, once filled, subsequently becomes
vacant, then such office and all references thereto in these By-Laws shall be
deemed inoperative unless and until such office is filled in accordance with the
provisions of these By-Laws.
Except where otherwise expressly provided in a contract duly authorized by
the Board of Directors, all officers and agents of the Corporation shall be
subject to removal at any time by the affirmative vote of a majority of the
whole Board of Directors, and all officers, agents, and employees shall hold
office at the discretion of the Board of Directors or of the officers appointing
them.
SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman
of the Board shall preside at all meetings of the Board of Directors unless the
Board of Directors shall by a majority vote of a quorum thereof elect a chairman
other than the Chairman of the Board to preside at meetings of the Board of
Directors. He may sign and execute all authorized bonds, contracts or other
obligations in the name of the Corporation; and he shall be ex-officio a member
of all standing committees.
SECTION 3. Powers and Duties of the President. The President shall be the
chief executive officer of the Corporation and shall have general charge and
control of all its business affairs and properties. He shall preside at all
meetings of the stockholders.
The President may sign and execute all authorized bonds, contracts or other
obligations in the name of the Corporation. He shall have the general powers and
duties of supervision and management usually vested in the office of president
of a corporation. The President shall be ex-officio a member of all the standing
committees. He shall do and perform such other duties as may, from time to time,
be assigned to him by the Board of Directors.
In the event that the Board of Directors does not take affirmative action
to fill the office of Chairman of the Board, the President shall assume and
perform all powers and duties given to the Chairman of the Board by these
By-Laws.
SECTION 4. Powers and Duties of the Vice President. The Board of
Directors shall appoint a Vice President and may appoint more than one Vice
President. Any Vice President (unless otherwise provided by resolution of the
Board of Directors) may sign and execute all authorized bonds, contracts, or
other obligations in the name of the Corporation. Each Vice President shall have
such other powers and shall perform such other duties as may be assigned to him
by the Board of Directors or by the President. In case of the absence or
disability of the President, the duties of that office shall be performed by any
Vice President, and the taking of any action by any such Vice President shall be
conclusive evidence of the absence or disability of the President.
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SECTION 5. Secretary-Treasurer. The Secretary-Treasurer shall give, or
cause to be given, notice of all meetings of stockholders and directors and all
other notices required by law or by these By-Laws, and in case of his absence or
refusal or neglect to do so any such notice may be given by any person thereunto
directed by the President, or by the directors or stockholders upon whose
written request the meeting is called as provided in these By-Laws. The
Secretary-Treasurer shall record all the proceedings of the meetings of the
stockholders and of the directors in books provided for that purpose, and he
shall perform such other duties as may be assigned to him by the directors or
the President. He shall have custody of the seal of the Corporation and shall
affix the same to all instruments requiring it, when authorized by the Board of
Directors or the President, and attest the same.
The Secretary-Treasurer shall have custody of all the funds and securities
of the Corporation, and he shall keep full and accurate account of receipts and
disbursements in books belonging to the Corporation. He shall deposit all moneys
and other valuables in the name and to the credit of the Corporation in such
depository or depositories as may be designated by the Board of Directors.
The Secretary-Treasurer shall disburse the funds of the Corporation as may
be ordered by the stockholders, taking proper vouchers for such disbursements.
He shall render to the President and the Board of Directors, whenever either of
them so requests, an account of all his transactions as Secretary-Treasurer and
of the financial condition of the Corporation.
The Secretary-Treasurer shall give the Corporation a bond, if required by
the Board of Directors, in a sum, and with one or more sureties, satisfactory to
the Board of Directors, for the faithful performance of the duties of his office
and for the restoration to the Corporation in case of his death, resignation,
retirement, or removal from office of all books, papers, vouchers, moneys, and
other properties of whatever kind in his possession or under his control
belonging to the Corporation.
The Secretary-Treasurer shall perform all the duties generally incident to
the office of the Secretary-Treasurer, subject to the control of the Board of
Directors and the President.
SECTION 6. Assistant Secretary-Treasurer. The Board of Directors may
appoint an Assistant Secretary-Treasurer or more than one Assistant Secretary-
Treasurer. Each Assistant Secretary-Treasurer shall (except as otherwise
provided by resolution of the Board of Directors) have power to perform all
duties of the Secretary-Treasurer in the absence or disability of the Secretary-
Treasurer and shall have such other powers and shall perform such other duties
as may be assigned to him by the Board of Directors or the President. In case of
the absence or disability of the Secretary-Treasurer, the duties of the office
shall be performed by any Assistant Secretary-Treasurer, and the taking of any
action by any such Assistant Secretary-Treasurer in place of the Secretary-
Treasurer shall be conclusive evidence of the absence or disability of the
Secretary-Treasurer.
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ARTICLE IV
Capital Stock
SECTION 1. Issuance of Certificates of Stock. The certificates for shares
of the stock of the Corporation shall be of such form not inconsistent with the
Articles of Incorporation, or its amendments, as shall be approved by the Board
of Directors. All certificates shall be signed by the President or by the Vice
President and countersigned by the Secretary-Treasurer or by an Assistant
Secretary-Treasurer. All certificates for each class of stock shall be
consecutively numbered. The name of the person owning the shares issued and the
address of the holder, shall be entered in the Corporation's books. All
certificates surrendered to the Corporation for transfer shall be canceled and
no new certificated representing the same number of shares shall be issued until
the former certificate or certificates for the same number of shares shall have
been so surrendered and canceled, unless a certificate of stock be lost or
destroyed, in which event another may be issued in its stead upon proof of such
loss or destruction and unless waived by the President, the giving of a
satisfactory bond of indemnity not exceeding an amount double the value of the
stock. Both such proof and such bond shall be in a form approved by the general
counsel of the corporation, the Transfer Agent of the Corporation and by the
Registrar of the stock.
SECTION 2. Transfer of Shares. Shares of the capital stock of the
Corporation shall be transferred on the books of the Corporation only by the
holder thereof in person or by his attorney upon surrender and cancellation of
certificates for a like number of shares as hereinbefore provided.
SECTION 3. Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share or shares in the name of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the laws of Maryland.
SECTION 4. Closing Transfer Books. The Board of Directors may fix the
time not exceeding ten (10) days preceding the date of any meeting of
stockholders or any dividend payment date or any date for the allotment of
rights, during which time the books of the Corporation shall be closed against
transfers of stock, or, in lieu thereof, the directors may fix a date not
exceeding ten (10) days preceding the date of any meeting of stockholders or any
dividend payment date or any date for the allotment of rights, as a record date
for the determination of the stockholders entitled to notice of and to vote at
such meeting or to receive such dividends or rights as the case may be; and only
stockholders of record on such date shall be entitled to notice of and to vote
at such meeting or to receive such dividends or rights as the case may be.
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ARTICLE V
Corporate Seal
SECTION 1. Seal. In the event that the President shall direct the
Secretary-Treasurer to obtain a corporate seal, the corporate seal shall be
circular in form and shall have inscribed thereon the name of the Corporation,
the year of its organization and the word "Maryland". Duplicate copies of the
corporate seal may be provided for use in the different offices of the
Corporation but each copy thereof shall be in the custody of the
Secretary-Treasurer of the Corporation or of an Assistant Secretary-Treasurer of
the Corporation nominated by the Secretary-Treasurer.
ARTICLE VI
Bank Accounts and Loans
SECTION 1. Bank Accounts. Such officers or agents of the Corporation as
from time to time shall be designated by the Board of Directors shall have
authority to deposit any funds of the Corporation in such banks or trust
companies as shall from time to time be designated by the Board of Directors and
such officers or agents as from time to time shall be authorized by the Board of
Directors may withdraw any or all of the funds of the Corporation so deposited
in any bank or trust company, upon checks, drafts or other instruments or orders
for the payment of money, drawn against the account or in the name or on behalf
of this Corporation, and made or signed by such officers or agents; and each
bank or trust company with which funds of the Corporation are so deposited is
authorized to accept, honor, cash and pay, without limit as to amount, all
checks, drafts or other instruments or orders for the payment of money, when
drawn, made or signed by officers or agents so designated by the Board of
Directors until written notice of the revocation of the authority of such
officers or agents by the Board of Directors shall have been received by such
bank or trust company. There shall from time to time be certified to the banks
or trust companies in which funds of the Corporation are deposited, the
signature of the officers or agents of the Corporation so authorized to draw
against the same. In the event that the Board of Directors shall fail to
designate the persons by whom checks, drafts and other instruments or orders for
the payment of money shall be signed, as hereinabove provided in this Section,
all of such checks, drafts and other instruments or orders for the payment of
money shall be signed by the President or a Vice President and countersigned by
the Secretary-Treasurer or an Assistant Secretary-Treasurer of the Corporation.
SECTION 2. Loans. Such officers or agents of this Corporation as from
time to time shall be designated by the Board of Directors shall have authority
to effect loans, advances or other forms of credit at any time or times for the
Corporation from such banks, trust companies, institutions, corporations, firms
or persons as the Board of Directors shall from time to time
8
<PAGE>
designate, and as security for the repayment of such loans, advances or other
forms of credit to assign, transfer, endorse and deliver, either originally or
in addition or substitution, any or all stocks bonds, rights and interests of
any kind in or to stocks or bonds, certificates of such rights or interests,
deposits, accounts documents covering merchandise, bills and accounts receivable
and other commercial paper and evidences of debt at any time held by the
Corporation; and for such loans, advances or other forms of credit to make,
execute and deliver one or more notes, acceptances or written obligations of the
Corporation on such terms, and with such provisions as to the security or sale
or disposition thereof as such officers or agents shall deem proper; and also to
sell to, or discount or rediscount with, such banks, trust companies,
institutions, corporations, firms or persons any and all commercial paper, bills
receivable, acceptances and other instruments and evidences of debt at any time
held by the Corporation, and to that end to endorse, transfer and deliver the
same. There shall from time to time be certified to each bank, trust company,
institution, corporation, firm or person so designated the signatures of the
officers or agents so authorized; and each such bank, trust company,
institution, corporation, firm or person is authorized to rely upon such
certification until written notice of the revocation by the Board of Directors
of the authority of such officers or agents shall be delivered to such bank,
trust company, institution, corporation, firm or person.
ARTICLE VII
Reimbursements
SECTION 1. Any payments made to an officer or other employee of the
Corporation, such as salary, commission, interest or rent, or entertainment
expense incurred by him, which shall be disallowed in whole or in part as a
deductible expense by the Internal Revenue Service, shall be reimbursed by such
officer or other employee of the Corporation to the full extent of such
disallowance. It shall be the duty of the Directors, as a Board, to enforce
payment of each amount disallowed. In lieu of payment by the officer or other
employee, subject to the determination of the Directors, proportionate amounts
may be withheld from his future compensation payments until the amount owed to
the Corporation has been recovered. Officers or other employees shall incur
certain expenses for which such officers or other employees are not entitled to
reimbursement.
ARTICLE VIII
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end on
the last day of December.
SECTION 2. Notices. Whenever, under the provisions of these By-Laws,
notice is required to be given to any director, officer or stockholder, it shall
not be construed to mean
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personal notice, but such notice shall be given in writing, by mail, by
depositing the same in a post office or letter box, in a postpaid sealed
wrapper, addressed to each stockholder, officer or director at such address as
appears on the books of the Corporation, or in default of any other address, to
such director, officer or stockholder, at the general post office in the City of
Beltsville, Maryland, and such notice shall be deemed to be given at the time
the same shall be thus mailed. Any stockholder, director or officer may waive
any notice required to be given under these By-Laws.
ARTICLE IX
Amendments
SECTION 1. Amendment of By-Laws. The Board of Directors shall have the
power and authority to amend, alter or repeal these By-Laws or any provision
thereof, and may from time to time make additional By-Laws.
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<PAGE>
EXHIBIT 3.19a
CERTIFICATE OF LIMITED PARTNERSHIP
OF
GLOBAL OPERATIONS TEXAS, L.P.
Pursuant to Article Two, Section 2.01 of the Texas Revised Limited
Partnership Act (the "Act"), the undersigned, being the sole general partner of
Global Operations Texas, L.P., a Texas limited partnership (the "Partnership"),
does hereby adopt the following Certificate of Limited Partnership for such
Partnership:
1. The name of the Partnership is Global Operations Texas, L.P.
2. The address of the registered office of the Partnership is 800 Brazos,
Suite 1100, Austin Texas 78701, and the name of the registered agent
at such address is Capitol Corporate Services, Inc.
3. The address of the principal office in the United States where records
are to be kept or made available under Section 1.07 of the Act is 2600
Longhorn Boulevard, Austin, Texas 78758.
4. The name of the sole general partner is Global Imaging Systems, Inc.
The mailing address and the street address of the business of the sole
general partner is 3820 Northdale Boulevard, Suite 200A, Tampa,
Florida 33624.
EXECUTED BY THE UNDERSIGNED on this the 30 day of June, 1999.
--
GLOBAL IMAGING SYSTEMS, INC.
General Partner
By: /s/ Raymond Schilling
---------------------------
Ray Schilling,
-------------
Its SVP & CEO
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
This Agreement of Limited Partnership dated to be effective as of June 30,
1999, is entered into by and among Global Imaging Systems, Inc., a Delaware
corporation, as the General Partner, and Conway Office Products, Inc., a New
Hampshire corporation.
W I T N E S S E T H:
ARTICLE 1.
Definitions
-----------
Section 1.1 Definitions. Certain terms used in this instrument are
-----------
capitalized. Such terms shall have the meaning set forth in the text or as set
forth below:
Section 1.2 Defined Terms. As used in this instrument:
-------------
(a) "Act" means the Texas Revised Limited Partnership Act, Article
6132a-1, et. seq., Texas Revised Civil Statutes, as from time to time amended.
(b) "Additional Capital Contribution" means any Capital Contribution
made by a Partner in addition to such Partner=s Initial Capital Contribution.
(c) "Affiliate" means the officers, directors, employees, agents and
shareholders of a corporation, the officers, members, managers and agents of a
limited liability company, the partners, employees and agents of a partnership,
and any other Person that directly or indirectly controls, is controlled by, or
is under common control with the Person in question. As used in this definition
of "Affiliate," the term "control" means the possession, directly or indirectly,
of the 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.
(d) "Bankruptcy" means, as to any Person, the Person's taking of any
action seeking relief under, or advantage of, any applicable debtor relief,
liquidation, receivership, conservatorship, bankruptcy, moratorium,
rearrangement, insolvency, reorganization or similar law affecting the rights or
remedies of creditors generally, as in effect from time to time.
(e) "Business" means the business of selling, leasing, financing,
servicing, repairing and managing office equipment and imaging systems.
(f) "Capital Contribution" means any contribution by a Partner to the
capital of the Partnership.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
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(h) "General Partner" means the Person named as such in the opening
recital of this Agreement, together with any other Person who becomes a general
partner of the Partnership pursuant to this Agreement, so long as such Person
remains a General Partner.
(i) "Initial Capital Contribution" means, as to any Partner, the
amount set forth opposite such Partner=s name on Exhibit A to this Agreement
under "Initial Capital Contribution."
(j) "Limited Partner" means each Person who is or who becomes a
Limited Partner pursuant to this Agreement, so long as such Person remains a
Limited Partner.
(k) "Liquidator" means the Person or Persons who liquidate the
Partnership pursuant to Article 10.
(l) "Ownership Interest" means the interest of each Partner in the
Partnership as set forth opposite the Partner=s name on the attached Exhibit A.
---------
(m) "Partners" means, the General Partner, and all Limited Partners,
collectively.
(n) "Partnership" means the Texas limited partnership formed pursuant
to this Agreement.
(o) "Partnership Property" means all property, whether real, personal
or mixed, and whether tangible or intangible, from time to time acquired,
developed or constructed by the Partnership.
(p) "Person" means any individual, corporation, association,
partnership, joint venture, real estate investment trust, other trust estate,
government or department or agency thereof, or any other form of entity or
organization.
ARTICLE 2.
Formation of Partnership
------------------------
Section 2.1 Formation. The Partners hereby form the Partnership pursuant
---------
to the Act. The General Partner shall promptly execute any certificate or
certificates required by law to be filed in connection with the formation of the
Partnership, shall cause such certificate or certificates to be filed in the
appropriate records, and shall comply with all other legal requirements for the
formation and operation of the Partnership. Except as herein stated, the Act
shall govern the rights and liabilities of the Partners.
Section 2.2 Name. The name of the Partnership shall be Global Operations
----
Texas, L.P. The name may be changed from time to time as the General Partner
may determine.
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Section 2.3 Principal Office; Registered Office and Agent. The principal
---------------------------------------------
business of the Partnership shall be located at such place as the Partnership
shall establish for the operation of its business, and the registered office of
the Partnership shall be located at 800 Brazos, Suite 1100, Austin, Texas 78701,
or at such other place or places as may from time to time be designated by the
General Partner, in which event notice thereof shall be given to the Limited
Partner and (for changes in the registered office) to the Secretary of State of
Texas. The registered agent of the Partnership at the Partnership's registered
office shall be Capitol Corporate Services, Inc., until a successor registered
agent shall be appointed by the General Partner.
Section 2.4 Term. This Agreement shall be effective and the Partnership
----
shall begin upon the date a certificate of limited partnership is filed as
required under Section 2.1, and this Agreement shall continue until the date the
Partnership is dissolved under Article 9 and thereafter, to the extent provided
for by applicable law, until wound up and terminated under Article 10.
ARTICLE 3.
Purposes and Powers of the Partnership
--------------------------------------
Section 3.1 Purposes. The Partnership shall be authorized to engage in
--------
the following businesses and/or activities; to-wit:
(a) acquire, finance, operate, hold, sell, lease or otherwise dispose
of or exploit the Business and the Partnership Property; and,
(b) to engage in any other lawful purpose or business; and,
(c) to do all things necessary or appropriate to any of the forgoing,
and to enter into, execute and deliver such other agreements as are incidental
to or related to the foregoing.
Section 3.2 Powers. Subject to the limitations contained in this
------
Agreement and in the Act, the Partnership purposes may be accomplished by the
General Partner taking any action which is permitted hereunder or under the Act.
ARTICLE 4.
Capital Contributions and Ownership Interests
---------------------------------------------
Section 4.1 Initial Capital Contributions. Each Partner has made the
-----------------------------
Initial Capital Contribution to the capital of the Partnership, as set forth on
Exhibit A to this Agreement.
Section 4.2 Additional Capital Contributions. No Partner shall have any
--------------------------------
right or obligation to make any Additional Capital Contribution to the
Partnership.
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Section 4.3 Ownership Interest. The Ownership Interest of each Partner
------------------
shall be that percentage of 100% set forth by such Partner's name on Exhibit A.
ARTICLE 5.
Tax Matters
-----------
Section 5.1 Election To Be Treated As An Association For Federal Income
-----------------------------------------------------------
Tax Purposes. The Partnership shall elect to be treated as an association for
- ------------
federal income tax purposes. The General Partner is authorized to execute and
file in behalf of the Partnership all necessary elections and other tax filings
in behalf of the Partnership.
Section 5.2 Texas Franchise Tax Matters. The Partnership will be treated
---------------------------
as a partnership for purposes of Texas franchise tax and therefor shall not be
obligated to pay Texas franchise tax or file Texas franchise tax returns under
current law. It is anticipated that the General Partner shall be obligated to
report a portion of the profits and losses of the Partnership in connection with
the Texas franchise tax reporting and payment obligations of the General Partner
and/or its Affiliates. The General Partner shall cause the Partnership to
maintain such books and records as shall be necessary for the Partnership to
allocate to the General Partner one percent (1%) (the Ownership Interest of the
General Partner) of all items of income, gain or loss of the Partnership and for
the General Partner to determine that portion of the income and losses of the
Partnership which must be included in determining its Texas franchise tax
liability.
ARTICLE 6.
Distributions
-------------
Section 6.1 Distributions.
-------------
(a) Distributions to Partners shall be made, from time to time, in
accordance with the order and priority set forth in Section 6.1(b), in such
amounts, and at such times, as the General Partner determines.
(b) Distributions of Partnership cash among the Partners shall be in
accordance with their respective Ownership Interests at the time of the
distribution.
ARTICLE 7.
Authority, Obligations, Indemnification,
----------------------------------------
Remuneration and Removal of the General Partner
-----------------------------------------------
Section 7.1 Authority of the General Partner as Manager. Subject to any
-------------------------------------------
limitations imposed upon the General Partner by law, the General Partner shall
have full and exclusive
4
<PAGE>
management authority and control of all Partnership decisions and the affairs of
the Partnership. The General Partner shall have full and complete power to do
any and all things deemed by it, in its sole discretion, appropriate, necessary,
or advisable in the conduct of the Partnership business, and, except as
otherwise provided in this Agreement, may, without limitation, do, or cause the
Partnership to do, any one or more of the following:
(a) cause the Partnership to acquire or develop such assets and
property (whether real, personal or mixed and whether tangible or intangible) on
such terms as the General Partner, in its sole and absolute discretion,
determines to be appropriate; and
(b) make all decisions with respect to the operation of the Business
or other activities of the Partnership; and
(c) cause the Partnership to borrow money and grant liens and security
interests in Partnership Property on such terms as the General Partner, in its
sole discretion, determines appropriate; and
(d) cause the Partnership to guarantee any indebtedness or obligations
of the General Partner or any of its Affiliates and/or to grant liens and
security interests in Partnership Property on same terms as the General Partner,
in its sole discretion, determines to be appropriate;
(e) prosecute, defend or settle any dispute or litigation involving
the Partnership; and
(f) negotiate and execute any contracts and agreements involving the
Partnership, the Business or the Partnership Property, including any agreements,
notes, or security agreements to be executed in connection with any financing to
be obtained by the Partnership that the General Partner deems necessary or
appropriate, and to pay, prepay, modify, renew, extend, and otherwise cause the
Partnership to perform its obligations with respect to, and otherwise deal with,
any such financing or contracts or agreements; and
(g) employ and compensate from Partnership funds appropriate managers,
employees, consultants, contractors and agents, and act through any such duly
authorized managers, employees, consultants, contractors or agents; and
(h) sell, convey, transfer, assign, pledge, encumber or otherwise
dispose of any or all of the Partnership Property, whether in bulk or otherwise,
or any interest therein; and
(i) cause the Partnership to be merged or consolidated with any other
Person; and
(j) cause the Partnership to join in, execute and file such
registration statements and/or other documents relating to compliance by the
General Partner or the Partnership with all applicable securities laws and
regulations as the General Partner, in its discretion, determines to be
appropriate; and
5
<PAGE>
(k) do any act which is necessary or incidental to carry out the
purposes of the Partnership or any of the foregoing.
The General Partner may execute in the Partnership name any and all bills
of sale, contracts, certificates and other documents and papers pertaining to
the business of the Partnership. Any Person dealing with the Partnership shall
be entitled to presume that any prerequisites to the taking of action by the
General Partner have been satisfied, and no Person shall be obligated to inquire
into the authority of the General Partner to act on behalf of the Partnership
with respect to any matter.
Section 7.2 Obligations of the General Partner. The General Partner shall
----------------------------------
manage, or cause to be managed, the Partnership affairs in accordance with the
Act and all other legal requirements and contractual obligations applicable to
the Partnership.
Section 7.3 Indemnification of the General Partner. To the full extent
--------------------------------------
permitted by applicable law (including Articles 2 and 11 of the Act), the
Partnership (but not any Partner) shall promptly indemnify and save harmless the
General Partner from, and reimburse the General Partner for, all payments
reasonably and properly made and personal liabilities reasonably and properly
incurred pursuant to the provisions of this Agreement in the conduct of
Partnership business or for the preservation of its business or property, as
well as all judgments, penalties, including excise and similar taxes, fines,
settlements and reasonable expenses, if the General Partner was, is, or is
threatened to be, a named defendant or respondent in a proceeding because the
Person is or was a general partner. The foregoing shall, without limitation, be
deemed to make mandatory the indemnification permitted under Section 9.2 of the
Act and to authorize advance payment of expenses to the full extent permitted by
applicable law. These indemnification rights are in addition to any other
rights the General Partner may have, including, but not limited to, rights
against third parties.
Section 7.4 Reimbursement of the General Partner. The General Partner
------------------------------------
shall be entitled to reimbursement of all expenses paid or incurred by the
General Partner or its Affiliates in connection with the Business.
Section 7.5 Removal of the General Partner. The General Partner may not
------------------------------
be removed without its prior written consent.
Section 7.6 Limited Power of Attorney. By its execution of this
-------------------------
Agreement, each Limited Partner irrevocably appoints the General Partner its
true and lawful attorney-in-fact and agent with full power and authority to act
in its name and place in executing, and filing and recording, if necessary, (a)
any certificates or other documents required to be filed pursuant to Chapter 36
of the Texas Business and Commerce Code, (b) any amendments to or the
cancellation of the certificate of limited partnership required to be filed
under the Act and (c) any amendments to Exhibit A to this Agreement to reflect
---------
the admission of any new General Partner or Limited Partner if the same is
authorized by this Agreement. This limited power of attorney is coupled with an
interest, is irrevocable, survives the death, incompetence or legal disability
of a Limited Partner and is binding on any assignee or vendee of all or part of
any interest in the Partnership.
Section 7.7 Merger with Felco Office Systems, Inc. Each of the Partners
--------------------------------------
agrees and consents to the merger (the "Merger") of Felco Office Systems, Inc.,
a Texas corporation, with and
6
<PAGE>
into the Partnership in accordance with the Plan of Merger attached as Exhibit B
to this Agreement (the "Plan of Merger"). Each of the Partners agrees that the
Plan of Merger has been delivered to them and acknowledges that no further
notice or approval of the Plan of Merger or the Merger is required.
Section 7.8 Supplemental Indenture. Each of the Partners agrees that the
----------------------
guaranty by the Partnership of those certain notes issued by the General Partner
pursuant to that certain Indenture dated as of March 8, 1999, together with any
notes issued in exchange therefor (collectively, the "Notes"), is in the best
interest of the Partnership. The General Partner is authorized to execute and
deliver in behalf of the Partnership that one certain Supplemental Indenture
pursuant to which the Partnership shall guarantee the Notes.
ARTICLE 8.
Rights and Status of Limited Partners
-------------------------------------
Section 8.1 General. The Limited Partners have the rights and the status
-------
of limited partners under the Act. No Limited Partner, who is not also a
General Partner, shall participate in the management of the Partnership affairs
or have any power to do any act on behalf of the Partnership, unless authorized
by both this Agreement and by the Act. The foregoing prohibition shall not,
however, prohibit the Limited Partners from participating in any decision as
provided herein. Any act done or taken in connection with the affairs of the
Partnership by a Person who is both a General Partner and a Limited Partner
shall be conclusively presumed to be in his capacity as a General Partner unless
an intention to act in his capacity as a Limited Partner is specifically and
expressly stated.
Section 8.2 Limitation on Liability. Except as provided in the Act, no
-----------------------
Limited Partner shall have any personal liability whatever, whether to the
Partnership, the General Partner or any creditor of the Partnership, for the
debts of the Partnership or any of its losses beyond the amount of the Limited
Partner's Capital Contribution. Neither the General Partner nor the Partnership
shall take any action or pursue any course of conduct that could create any
personal liability for any Limited Partner.
ARTICLE 9.
Dissolution
-----------
Section 9.1 Causes. Each Partner expressly waives any right which it
------
might otherwise have to dissolve the Partnership except as set forth in this
Article 9. Upon the happening of the first to occur of the following events,
the Partnership shall be dissolved:
(a) The Bankruptcy of a General Partner, the assignment of a General
Partner's entire interest in the Partnership, or any other act of withdrawal of
a General Partner pursuant to any of the provisions of Subsection (a) of Section
4.02 of the Act;
7
<PAGE>
(b) The execution by the General Partner and all of the Limited
Partners of an instrument dissolving the Partnership;
(c) The occurrence of any other circumstance which, by law, would
require that the Partnership be dissolved; or
(d) December 31, 2049.
Section 9.2 Reconstitution. If the Partnership is dissolved as a result
--------------
of an event described in Section 9.1, then (i) if there remains at least one
General Partner, the Partnership shall be reconstituted and its business
continued without being wound up, and (ii) if there are no remaining General
Partners, the Partnership may be reconstituted and its business continued if,
within ninety (90) days after the date of dissolution, all of the Limited
Partners affirmatively elect to reconstitute the Partnership, agree on the
identity of the new General Partner or General Partners, and execute an
instrument confirming such facts. If the Partnership is reconstituted,
Exhibit A shall be revised and an amended certificate of limited partnership
- ------- -
shall be executed and filed.
Section 9.3 Interim Manager. If the Partnership is dissolved as a result
---------------
of an event described in Section 9.1 and there are no remaining General
Partners, all of the Limited Partners may appoint an interim manager of the
Partnership, who shall have and may exercise only the rights, powers and duties
of a General Partner necessary to preserve the Partnership Property and business
until the earlier of (a) the election of a new General Partner pursuant to
Section 9.2 if the Partnership is reconstituted by that method, or (b) if the
Partnership is not reconstituted by that method, the appointment of a Liquidator
under Section 10.1. Any interim manager may resign at any time by giving
fifteen (15) days prior written notice and may be removed at any time, with or
without cause, by written notice of removal signed by all of the Limited
Partners. Upon the death, dissolution, removal or resignation of an interim
manager, a successor interim manager (who shall have and succeed to all of the
rights, powers and duties of his predecessor interim manager) may be appointed
by all of the Limited Partners, evidenced by written appointment and acceptance.
The right to appoint a successor interim manager in the manner provided herein
shall be recurring and continuing for so long as the functions and services of
the interim manager are authorized to continue under the provisions hereof, and
every reference herein to the "interim manager" shall be deemed to refer also to
any such successor interim manager appointed in the manner herein provided. The
interim manager shall not be liable as a general partner to the Limited Partners
and shall, while acting in the capacity as interim manager on behalf of the
Partnership, be entitled to the same indemnification rights as are set forth for
the General Partner in Section 7.3.
ARTICLE 10.
Winding Up and Termination
--------------------------
Section 10.1 General.
-------
(a) If the Partnership is dissolved and is not reconstituted, the
General Partner (or in the event that there is no General Partner, a liquidator
or liquidating committee selected by all of
8
<PAGE>
the Limited Partners) shall commence to wind up the affairs of the Partnership
and to liquidate and sell its assets. The Person or Persons actually conducting
such liquidation in accordance with the foregoing sentence, whether the General
Partner, a liquidator, or a liquidating committee, is herein referred to as the
"Liquidator." The Liquidator (if other than the General Partner) shall have
sufficient business expertise and competence to conduct the winding up and
termination of the Partnership and, in the course thereof, to cause the
Partnership to perform any contracts which the Partnership has entered into. The
Liquidator shall proceed, as promptly as practicable without undue sacrifice, to
sell the Partnership Property (or so much thereof as then remains) for the best
price and on the best terms obtainable in the sole judgment of the Liquidator,
having due regard for the activity and condition of relevant markets and general
financial and economic conditions. Except as restricted by this Section 10.1,
the Liquidator shall have and may exercise, in connection with its functions and
services hereunder and without further authorization or consent of any of the
Partners (or their successors in interest), all the powers conferred upon the
General Partner under the terms of this Agreement to the extent necessary or
desirable in the good faith judgment of the Liquidator to perform its duties and
functions, and shall have full power to make sales of the Partnership Property
and incident thereto to execute deeds, bills of sale, assignments, and transfers
of assets and properties of the Partnership (provided that the Liquidator may
not thereby impose personal liability on any Partner or his successor in
interest under any warranty of title or other provision contained in any such
instrument) and to take such other actions as may be in its sole discretion
reasonably required to complete the liquidation and winding up of the
Partnership as provided herein. The Liquidator (if not the General Partner)
shall not be liable as a general partner to the Limited Partners and shall,
while acting in such capacity on behalf of the Partnership, be entitled to the
indemnification rights as are set forth for the General Partner in Section 7.3.
(b) The Liquidator (if not the General Partner) shall be entitled to
receive such reasonable compensation for its services as may be agreed upon in
writing by the Liquidator and all of the Limited Partners, which compensation
shall be treated as a Partnership operating expense. Any Liquidator may resign
at any time by giving thirty (30) days written notice to all Partners (or their
respective successors in interest), and may be removed at any time by written
notice of removal signed by all of the Limited Partners. Upon the death,
dissolution, resignation or removal of any Liquidator, a successor Liquidator
(who shall have and succeed to all the rights, powers, and duties of his
predecessor Liquidator) shall, within thirty (30) days thereafter, be appointed
by all of the Limited Partners, and a successor Liquidator shall be so appointed
from time to time as required until the functions and services of the Liquidator
as set forth in this Section 10.1 are completed. Every reference herein to
"Liquidator" shall be deemed to refer to and include any such successor
Liquidator appointed in the manner herein provided.
Section 10.2 Creation of Reserves. After making payment or provision for
--------------------
payment of all debts and liabilities of the Partnership and all expenses of
liquidation, the Liquidator may set up such cash reserves as the Liquidator may
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership.
Section 10.3 Distributions upon Liquidation. In the course of winding up
------------------------------
and terminating the business affairs of the Partnership, its assets (other than
cash) shall be sold. Unless otherwise agreed by all of the Limited Partners,
all Partnership Property shall be sold upon liquidation of the Partnership and
no Partnership Property shall be distributed in kind to the Partners. Following
the
9
<PAGE>
liquidation of the Partnership, the Partnership shall distribute its assets in
the following order of priority:
(a) First, to Partnership creditors (other than Partners) to
extinguish Partnership liabilities and obligations, including the costs and
expenses of liquidation;
(b) Second, to repay the Partners (General or Limited) any
liabilities owed by the Partnership (including interest) with respect to any
sums lent to the Partnership by the Partners to the extent not previously paid;
and
(c) Third, the balance, if any, to the Partners in accordance with
their Ownership Interests.
No Partner shall be entitled to demand and receive property other than cash in
return for his interest in the Partnership. Except as may be expressly
otherwise provided in this Agreement, in no event shall any Partner be required
to contribute additional funds to the Partnership by reason of any negative
balance in his Capital Account. Any Partner may be a purchaser at any sale
required under or conducted pursuant to this Article 10. Each holder of an
interest in the Partnership shall look solely to the assets of the Partnership
for all distributions and shall have no recourse therefor (upon dissolution or
otherwise) against the Partnership, the General Partner or the Liquidator.
Section 10.4 Completion of Liquidation. Upon the completion of the
-------------------------
liquidation of the Partnership and the distribution of all Partnership funds,
the Partnership shall terminate and the Liquidator shall have the authority to
execute and record all documents required to effectuate the dissolution and
termination of the Partnership.
ARTICLE 11.
Miscellaneous
-------------
Section 11.1 Notices. Except as and to the extent otherwise specified in
-------
this Agreement, the following provisions shall apply as to notices hereunder.
All notices given pursuant to this Agreement shall be in writing and shall
either be mailed by first class mail, postage prepaid, registered or certified
with return receipt requested, or delivered to the intended addressee, or sent
by prepaid telegram or facsimile transmittal followed by confirmatory letter.
Notice so mailed shall be effective upon the expiration of four (4) days after
its deposit. Notice given in any other manner shall be effective only if and
when received by the addressee. For purposes of notice, the addresses of the
Partners shall be as stated under their names on the attached Exhibit A;
---------
provided, however, that each Partner shall have the right to change its address
for notice hereunder to any other location by the giving of thirty (30) days'
notice to the other Partners in the manner set forth above.
10
<PAGE>
Section 11.2 Law Governing. This Agreement shall be governed by and
-------------
construed in accordance with the substantive federal laws of the United States
and the laws of the State of Texas.
Section 11.3 Attorneys' Fees. If any litigation is initiated by any
---------------
Partner against another Partner relating to this Agreement or the subject matter
hereof, the Partner prevailing in such litigation shall be entitled to recover,
in addition to all damages allowed by law and other relief, all court costs and
reasonable attorneys' fees incurred in connection therewith.
Section 11.4 Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of the Partners, their spouses and their (and
their spouses') respective heirs, legal representatives, successors and assigns.
"Partners" as used in this Agreement shall not include any spouse of any Person
named herein as a Partner.
Section 11.5 Waiver of Partition. Notwithstanding any statute or
-------------------
principle of law to the contrary, each Partner hereby agrees that, during the
term of the Partnership, it shall have no right (and hereby waives any right
that it might otherwise have had) to cause any Partnership Property to be
partitioned and/or distributed in kind.
Section 11.6 Entire Agreement. This Agreement contains the entire
----------------
agreement among the Partners relating to the subject matter hereof and any prior
oral or written agreements or any representations or offers whatsoever which are
not contained herein are terminated.
Section 11.7 Amendments. Amendments or modifications may be made to this
----------
Agreement only by setting the same forth in a document duly executed by the
General Partner and all of the Limited Partners.
Section 11.8 Severability. This Agreement is intended to be performed in
------------
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable laws, ordinances, rules and regulations, but if any provision
of this Agreement or the application thereof to any Person or circumstance
shall, for any reason and to any extent, be invalid or unenforceable, but the
extent of such invalidity or unenforceability does not destroy the basis of the
bargain among the Partners as expressed herein, the remainder of this Agreement
and the application of such provision to other Persons or circumstances shall
not be affected thereby, but rather shall be enforced to the greatest extent
permitted by law.
Section 11.9 Gender and Number. Whenever required by the context, as used
-----------------
in this Agreement, the singular number shall include the plural and the neuter
shall include the masculine or feminine gender, and vice versa.
Section 11.10 Exhibits. Each Exhibit to this Agreement is incorporated
--------
herein for all purposes.
11
<PAGE>
Section 11.11 Captions. The Article and Section headings appearing in
--------
this Agreement are for convenience of reference only and are not intended, to
any extent or for any purpose, to limit or define the text of any Article or
Section.
Section 11.12 Counterparts and Instruments of Execution. This Agreement
-----------------------------------------
may be executed in counterparts, each of which shall be an original but all of
which shall constitute but one document, binding on all parties hereto,
notwithstanding that all the parties are not signatories to the same
counterpart.
Section 11.13 Admission of Additional Partners. In no event shall any
--------------------------------
Person become a Partner except upon compliance with this Agreement and the laws
of the State of Texas, including, if necessary, the filing of an appropriate
amended Certificate of Limited Partnership with the Secretary of State of Texas.
Section 11.14 No Third Party Beneficiaries. Any provision of this
----------------------------
Agreement relating to contributions and payments by the Partners to the
Partnership shall be solely for the benefit of, and may be enforced only by, the
Partnership and the Partners in their capacity as such, and shall not be for the
benefit of or enforceable by any third party.
EXECUTED to be effective as of the date first above written.
GENERAL PARTNER:
Global Imaging Systems, Inc.,
a Delaware corporation
By: /s/ Tom Johnson
----------------------------------------------
Tom Johnson Its CEO & President
--------------------, ----------------------
LIMITED PARTNER:
Conway Office Products, Inc.,
a New Hampshire corporation
By: /s/ Ray Schilling
----------------------------------------------
Ray Schilling Its SVP & CFO
--------------------, ----------------------
12
<PAGE>
EXHIBIT A
---------
PARTNERS
--------
Initial
Capital Ownership
Name of Partner Contribution Interest
- --------------- -----------------------------------------------------
GENERAL PARTNER
- ---------------
Global Imaging Systems, Inc. $ 1 1%
3820 Northdale Boulevard, Ste. 200A,
Tampa, Florida 33624
LIMITED PARTNERS
- ----------------
Conway Office Products, Inc. $ 99 99%
---- -------
110 Perimeter Road
Nashua, New Hampshire 03063
TOTAL $100 100%
13
<PAGE>
EXHIBIT B
---------
PLAN OF MERGER
--------------
1. Pursuant to the provisions of Part Five of the Texas Business Corporation
Act (the "TBCA"), and Article 2.11 of the Texas Revised Limited Partnership
Act (ATRLPA@), Felco Office Systems, Inc., a corporation organized and
existing under the laws of the State of Texas ("Felco"), shall be merged
(the "Merger") with and into Global Operations Texas, L.P., a limited
partnership organized and existing under the laws of the State of Texas
("Global L.P.").
2. The Merger shall become effective upon the issuance of the Certificate of
Merger by the Secretary of State of the State of Texas (the "Effective
Time').
3. At the Effective Time, the separate corporation existence of Felco shall
cease and Global L.P. shall continue as the sole surviving entity in the
Merger (the "Surviving Entity"). The name of the Surviving Entity shall be
" AGlobal Operations Texas, L.P." and the Surviving Entity shall continue to
be governed by the TRLPA.
4. From and after the Effective Time, all right, title and interest in and to
all real estate and other property owned by each of the parties to the
Merger shall be allocated to and vested in the Surviving Entity without
reversion or impairment, without assignment having occurred, but subject to
any existing liens or encumbrances thereon. From and after the Effective
Time, all liabilities and obligations of each of the parties to the Merger
shall be allocated to the Surviving Entity, and the Surviving Entity shall
be the primary obligor therefor and, except as otherwise provided by law or
contract, Felco shall not be liable therefor.
5. Pursuant to the Merger, and without any action on the part of any holder
thereof, (a) each share of Common Stock of Felco which is issued and
outstanding as of the Effective Time, and all rights in respect thereof,
shall be canceled and cease to exist, (b) each share of Preferred Stock of
Felco which is issued and outstanding as of the Effective Time, and all
rights in respect thereof, shall be canceled and cease to exist and (c) all
of the ownership interest of the general partner and the limited partner of
Global L.P. which is issued and outstanding as of the Effective Time in
accordance with that one certain Agreement of Limited Partnership of Global
dated June 30, 1999 (the AGlobal L.P. Partnership Agreement@), shall be
converted into and become the issued and outstanding ownership interest of
the general partner and the limited partner, respectively, of the Surviving
Entity.
6. From and after the Effective Time, each person who held shares of Common
Stock of Felco immediately prior to the Merger and who duly exercises his
right to dissent from the Merger pursuant to the provisions of article 5.12
of the TBCA shall be entitled to only the right to receive such
consideration as may be determined to be due to such dissenting shareholder
pursuant to the laws of the State of Texas in full satisfaction of all
rights pertaining to such shares.
<PAGE>
7. The Certificate of Limited Partnership of Global L.P. shall be the
Certificate of Limited Partnership of the Surviving Entity, until
thereafter amended in accordance with the TRLPA. No changes or amendments
shall be made to such Certificate of Limited Partnership pursuant to this
Plan of Merger or in connection with the Merger.
8. The Global L.P. Partnership Agreement shall be the Agreement of Limited
Partnershp of the Surviving Entity without amendment.
9. The Merger and the Plan of Merger have been approved by all of the partners
of Global L.P. in accordance with the Global L.P. Partnership Agreement.
10. This Plan of Merger shall be submitted to the stockholders of Felco as
provided by article 5.03 of the TBCA. After the approval or adoption
thereof by the stockholders of Felco in accordance with the laws of the
State of Texas, all required documents shall be executed, filed and
recorded and all required acts shall be done in order to accomplish the
Merger under the applicable provisions of the TBCA, TLRPA and any other
applicable law. The officers of each party to the Merger shall be and
hereby are authorized to do all acts and things necessary and proper to
effect the Merger.
11. This Plan of Merger shall be governed by, and construed in accordance with,
the laws of the State of Texas, without regard to choice of laws
principles.
2
<PAGE>
REAL 2648 PAGE 479
ARTICLES OF INCORPORATION
OF
SOUTHERN COPY SYSTEMS, INC.
KNOW ALL MEN BY THESE PRESENTS: That for the purpose of forming a
corporation under the Alabama Business Corporations Act, as last amended, the
undersigned, Edward Segrest Patridge and Dan Schorsten, are over the age of
nineteen (19) years, desiring to organize a body corporate under the laws of the
State of Alabama, adopt the following Articles of Incorporation for such
corporation:
ARTICLE I
The name of the corporation is SOUTHERN COPY SYSTEMS, INC., and the
corporation shall be authorized to trade in said name or to use any other trade
name not now being used by any other person, firm or corporation.
ARTICLE II
The period of duration of the corporation shall be perpetual.
ARTICLE III
The objects and purposes for which the corporation is formed are as
follows:
(a) To engage in the business of selling, leasing and servicing copying
machines and business machines;
(b) To engage in and transact such other business or businesses as may be
reasonably related to any of the foregoing.
(c) To take, own, hold, deal in, mortgage or otherwise encumber and to
purchase, sell, lease, exchange, transfer or in any manner whatever dispose of
real property and personal property or choses in action, within or without the
State of Alabama.
(d) To borrow money and give as security therefor any property, real,
personal or mixed, owned by the corporation, or in which the corporation has any
interest.
(e) To utilize and exercise such powers and rights as are conferred on
corporations under the provisions of the statutes or laws of the State of
Alabama, including by not limited to, those powers enumerated pursuant to the
Alabama Business Corporations Act, as last amended.
1
<PAGE>
REAL 2648 PAGE 480
(f) The transaction of any or all other lawful business for which such
corporation may be incorporated under the Alabama Business Corporations Act as
last amended.
ARTICLE IV
The aggregate number of shares which the corporation shall have the
authority to issue shall be one thousand (1,000) shares of common stock at a par
value of One Hundred ($100.00) Dollars per share. The total of authorized stock
is thus One Hundred Thousand ($100,000.00) dollars and all of said stock shall
be common and none shall be preferred stock, or stock of a different class. The
corporation will begin business with two hundred (200) shares of said common
stock of the aggregate value if Twenty Thousand ($20,000.00) Dollars.
ARTICLE V
The address of the initial registered agent of the corporation is 2508 Vole
Drive, Birmingham, Alabama 35244, and the name of its initial registered agent
at such address is Edward Segrest Patridge.
ARTICLE VI
The number of directors constituting the initial Board of Directors of the
corporation is two and the names and addresses of the persons who are to serve
as the directors until the first annual meeting of stockholders or until their
successors are elected and shall qualify are:
<TABLE>
<CAPTION>
NAMES ADDRESSES OFFICE
<S> <C> <C>
Edward Segrest Patridge 2508 Vole Dr. President
Birmingham, AL 35244
Dan Schorsten 104 Lee Etta Dr. Secretary/Treasurer
Gallatin, TN 37066
</TABLE>
2
<PAGE>
REAL 2648 PAGE 481
ARTICLE VII
The name and address of the incorporators are as follows:
<TABLE>
<CAPTION>
NAMES ADDRESSES NO. OF SHARES
<S> <C> <C>
Edward Segrest Patridge 2508 Vole Dr. 100
Birmingham, AL 35244
Dan Schorsten 104 Lee Etta Dr. 100
Gallatin, TN 37066
</TABLE>
Dated this the 31st day of January, 1985.
SOUTHERN COPY SYSTEMS, INC.
BY: /s/ Edward Segrest Patridge
---------------------------
Edward Segrest Patridge
Its President
/s/ Dan Schorsten
---------------------------
Dan Schorsten
Secretary/Treasurer
3
<PAGE>
EXHIBIT 3.26A
ARTICLES OF INCORPORATION
OF
LEWAN and ASSOCIATES, INC.
KNOW ALL MEN BY THESE PRESENTS, That we, Stanley K. Mann, Roger N.
Flair, and Linda Feather, the undersigned natural persons of the age of twenty-
one years or more, acting as incorporators of a corporation (hereinafter
referred to as the "Corporation") under the provisions of the Colorado
Corporation Act, adopt the following Articles of Incorporation:
ARTICLE I
Name
----
The name of the Corporation is LEWAN and ASSOCIATES, INC.
ARTICLE II
Period of Duration
------------------
The period of duration of the Corporation shall be perpetual.
ARTICLE III
Purposes and Powers
-------------------
The objects for which the Corporation is formed are:
To purchase, sell, rent, as lessor or lessee, repair, and deal
generally in new and used office machines, office equipment, office furniture,
and office supplies of every variety and to purchase, sell, rent as lessor, and
deal generally in and with accessories and parts for such products; and,
To take, purchase, or otherwise acquire, and to own and hold such
personal property, chattels, chattels real, rights, easements, privileges,
choses in action, notes, bonds, mortgages, and securities as may lawfully be
acquired and held by corporations under the laws of the State of Colorado.
<PAGE>
To sell, assign, convey, exchange, lease, and otherwise deal in and
dispose of such real and personal property, lands, buildings, chattels, chattels
real, rights, easements, privileges, choses in action, notes, bonds, mortgages
and securities as may lawfully be acquired, held, or disposed of by the
corporation under the laws of the State of Colorado.
To purchase, or in any way acquire for investment or for sale or
otherwise, lands, contracts for the purchase or sale of lands, buildings,
improvements, and any other real property of any kind or any interest therein,
and as the consideration of same to pay cash or to issue the capital stock,
debenture bonds, mortgage bonds, or other obligations of the corporation, and to
sell, convey, lease, mortgage, deed of trust, turn to account, or otherwise deal
with all or any part of the property of the corporation; to make and obtain
loans upon real estate, improved or unimproved, and upon personal property,
giving or taking evidences of indebtedness and securing the payment thereof by
mortgage, trust deed, pledge or otherwise; and to enter into contracts to buy or
sell any property, real or personal; to buy and sell mortgages, trust deeds,
contracts, and evidences of indebtedness, to purchase or otherwise acquire, for
the purpose of holding or disposing of the same, real or personal property of
every kind and description, including the good will, stock, rights, and property
of any person, firm, association, or corporation, paying for the same in cash,
stock, or bonds of this corporation; and to draw, make, accept, indorse,
discount, execute, and issue promissory notes, bills of exchange, warrants,
bonds, debentures, and other negotiable or transferable instruments, or
obligations of the corporation without restriction or limit as to the amount.
2
<PAGE>
To have and to exercise all the powers now or hereafter conferred by
the laws of the State of Colorado, upon corporations organized pursuant to the
laws under which the corporation is organized and any and all acts amendatory
thereof and supplemental thereto.
The above enumerated powers shall not be construed as limiting or
restricting in any manner the powers of this corporation which shall always have
such incidental powers as may be connected with or related to any specific power
herein enumerated.
ARTICLE IV
Authorized Shares
-----------------
The aggregate number of shares which the Corporation shall have
authority to issue is 49,900 shares of common stock, and each of such shares
shall be of $1.00 par value. When issued, all shares shall be fully paid and
non-assessable, and the private property of shareholders shall not be liable for
corporate debts. Each shareholder of record shall have one vote for each share
of stock outstanding in his name on the books of the Corporation and shall be
entitled to vote said stock.
ARTICLE V
Shareholders' Rights
--------------------
Section1. Cumulative Voting. Cumulative voting shall not be allowed
-------- -----------------
in the election of Directors.
Section 2. Preemptive Rights. The holders of the shares of the
--------- -----------------
Corporation shall have the preemptive right to purchase, at equitable prices,
terms, and conditions as shall be fixed by the Board of Directors, such as the
shares of the Corporation as may be issued, from time to time, over and above
the shares of the Corporation initially authorized. Such preemptive rights
shall apply to all shares subsequently authorized or shares held in the treasury
of the Corporation.
ARTICLE VI
Registered Office and Registered Agent
--------------------------------------
Section 1. Registered Office. The address of the initial Registered
--------- -----------------
Office of the Corporation is 1701 Wadsworth, Lakewood, Colorado 80215.
3
<PAGE>
Section 2. Stock Ledger and Other Books. A stock ledger and other books
--------- ----------------------------
of record of said Corporation shall be kept within the State of Colorado in
charge of Paul R. Lewan whose address is 1701 Wadsworth, Lakewood, Colorado
80215.
Section 3. Registered Agent. The name of the initial registered agent
--------- ----------------
of the Corporation at said address is Paul R. Lewan.
ARTICLE VII
Directors
---------
Section 1. Number of Directors. The business of the Corporation shall
--------- -------------------
be transacted by a Board of Directors composed of from four to seven members.
It shall not be necessary to be a shareholder in this corporation to be a member
of such Board. The initial Board of Directors, as herein identified, shall
consist of four members. The number of directors may be increased or decreased
from time to time by amendment of the Bylaws.
If, in the interval between meetings of shareholders of the Corporation,
the Board of Directors of the Corporation deem it desirable that the number of
Directors be increased or decreased, Directors may be appointed or deleted by
the Board of Directors of the Corporation then in office.
Section 2. Quorum of Directors. A quorum for the transaction of
--------- -------------------
business shall be three of the Board of directors as then constituted.
Section 3. Executive Committee. The directors, by appropriate
--------- -------------------
resolution, may designate two or more directors to constitute an Executive
Committee, which committee, to the extent provided in such resolution or the
Bylaws of the Corporation, shall have and may exercise all of the authority of
the Board of Directors in the management of the Corporation.
Section 4. No act, contract, or other transaction of the Executive
---------
Committee or between the Corporation and two or more of its directors as
members or employees, or in which they are in any way interested shall be
affected or invalidated in any way because of such fact, provided, a full
disclosure is made to the Board of Directors,
4
<PAGE>
and the Board of Directors ratify such act, contract, or other transaction. The
director or directors so interested may be present, and counted in determining
the existence of a quorum at any meeting of the Board of Directors which
ratifies such act, contract or other transaction, and may vote thereat with like
force and effect.
Section 5. Names and Addresses. The names and addresses of the persons
--------- -------------------
who are to serve as directors until the first meeting of shareholders, and until
their successors shall have been elected and qualified are as follows:
Name Address
---- -------
Paul R. Lewan 1240 South Birch, Apartment 403
Denver, Colorado 80222
Gordon L. Wegner 1792 Park Lake Drive
Boulder, Colorado 80301
Carl Hofinga 558 South York
Denver, Colorado 80209
Stanley K. Mann 269 Cedar Brook Road
Pine Book Hills
Boulder, Colorado 80302
ARTICLE VIII
This Corporation reserves the right to amend, alter or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereinafter prescribed by the Statutes of the State of Colorado, and all rights
and powers conferred on the directors and stockholders herein are granted
subject to this reservation.
ARTICLE IX
This Corporation may, at any meeting of its Board of Directors, by a
majority vote of the whole Board, sell, lease, exchange and/or convey all of its
property and assets including its good will and its corporate franchises upon
such terms and conditions for such consideration or considerations as its Board
of Directors shall deem expedient and for the best interests of the Corporation.
And said consideration or considerations may consist in whole or in part of
sharing the stock in
5
<PAGE>
and/or other securities of any other corporation or corporations; provided,
however, in all such cases the affirmative vote of the holders of a majority of
the stock of this Corporation then issued and outstanding and having voting
power shall be voted in ratification of the action of the Board of Directors,
said vote to be taken at stockholders' meeting of the Corporation duly called
for that purpose. Nothing herein shall be construed to limit the power of the
Board of Directors of the Corporation to sell, lease, exchange and/or convey
such parts or parcels of its real or personal property or assets as the Board of
Directors determine are no longer necessary or expedient to be held by
Corporation.
ARTICLE X
Incorporators
-------------
The names and addresses of the incorporators of the Corporation are as
follows:
Name Address
---- -------
Stanley K. Mann 269 Cedar Brook Road
Pine Brook Hills
Boulder, Colorado 80302
Roger N. Flair 3910 Longwood
Boulder, Colorado 80303
Linda Feather 4435 Grinnell Avenue
Boulder, Colorado 80303
EXECUTED this 19th day of June, 1972 by the undersigned incorporators.
/s/ Stanley K. Mann
______________________________
/s/ Roger N. Flair
______________________________
/s/ Linda Feather
______________________________
STATE OF COLORADO)
)ss
COUNTY OF BOULDER)
Before me, ___________________________ a Notary Public in and for the
said County and State, appeared Stanley K. Mann, Roger N. Flair, and Linda
Feather, being all of the incorporators referred to in Article X
6
<PAGE>
of the foregoing Articles of Incorporation, and upon oath swore to the truth of
the facts therein stated.
WITNESS MY HAND AND NOTARIAL SEAL this 19th day of June, 1972,
My commission expires _________________________________.
________________________________
Notary Public
(SEAL)
7
<PAGE>
ARTICLES OF AMENDMENT
To the
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Act, the undersigned
corporation adopts the following Articles of Amendment to the Articles of
Incorporation:
FIRST: The name of the corporation is (note 3) LEWAN AND ASSOCITES, INC.
------------------------
______________________________________________________________________________.
SECOND: The following amendment was adopted by the shareholders of the
corporation on Sept. 26 1980, in the manner prescribed by the Colorado
-------- --
Corporation Act:
ARTICLE I
---------
The name of the corporation shall be LEWAN & ASSOCIATES, INC.
THIRD: The number of shares of the corporation outstanding at the time
of such adoption was 100; and the number of shares entitled to vote thereon was
---
100.
- ---
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows: None
CLASS (Note 1) NUMBER OF SHARES
----- ----------------
FIFTH: the number of shares voted for such amendment was 100; and the
---
number of shares voted against such amendment was 0.
-
SIXTH: The number of shares of each class entitled to vote thereon as a
class voted for and against such amendment, respectively, was: None
CLASS (Note 1) NUMBER OF SHARES VOTED
----- ----------------------
For Against
--- -------
SEVENTH: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
No Change
(Note 2)
EIGHTH: The manner in which such amendment effects a change in the
amount of stated capital, and the amount of stated capital as changed by such
amendment, are as follows:
No change
(Note 2)
LEWAN AND ASSOCIATES, INC. (Note 3)
--------------------------
By ___________________________
PAUL R. LEWAN President
(Note 4)
STATE OF COLORADO, and __________________________
City and County of Denver CARL H. HOFINGA Secretary
- --------- ------
Before me, Heidi D. Vendel, a Notary Public in and for the said County
---------------
and State personally appeared PAUL R. LEWAN and CARL H. HOFINGA who acknowledged
----------------------------------
before me that they are the President & Secretary of LEWAN AND ASSOCIATED, INC.,
---------------------- --------------------------
(Title of Office) (Name of Corporation)
a Colorado corporation and that he signed the foregoing Articles of Amendment as
his free and voluntary act and deed for the uses and purposes therein set forth,
and that the facts contained therein are true.
In witness whereof I have hereunto set my hand and seal this 8/th/ day
----
of October AD 1980
- -------- --
My commission expires 8/29/82 ______________________
-------
(Notary Public)
Notes: 1. If inapplicable, insert "None."
2. If inapplicable, insert "No change."
3. Exact corporate name of corporation adopting the Articles of
Amendment. (If this is a change of name amendment the name before this
amendment is filed)
4. Signatures and titles of officers signing for the corporation
SUBMIT IN DUPLICATE: means original TYPED copy and first carbon copy, or Xerox
copies both having original signatures & verifications.
8
<PAGE>
MAIL TO:
Colorado Secretary of State
Corporations Office
1560 Broadway, Suite 200
Denver, Colorado 80202
(303) 866-2361
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendments to its
Articles of Incorporation:
FIRST: The Name of the corporation is (note 1) Lewan & Associates, Inc.
------------------------
SECOND: The following amendment to the Articles of Incorporation was
adopted on October 17, 1990, as prescribed by the Colorado Corporation Code, in
----------------
the manner marked with an X below:
_______ Such amendment was adopted by the board of directors where no
shares have been issued.
X Such amendment was adopted by a vote of the shareholders. The
-------
number of shares voted for the amendment was sufficient for approval.
ARTICLE IV shall be amended to read as follows:
ARTICLE IV
Authorized Shares
-----------------
The aggregate number of shares which the Corporation shall have authority
to issue is 399,200,000 shares of common stock, and each of such shares shall be
of "no par" value. When issued, all shares shall be fully paid and non-
assessable, and the private property of shareholders shall not be liable for
corporate debts. Each shareholder of record shall have one vote for each share
of stock outstanding in his name on the books of the Corporation and shall be
entitled to vote said stock.
THIRD: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the amendment
shall be effected, is as follows: One hundred (100) shares of $1.00 par value
issued and outstanding common stock representing one hundred percent (100%) of
the issued and outstanding stock of the Corporation prior to this amendment will
be exchanged for 800,000 shares of "no par" value common stock.
10
<PAGE>
FOURTH: The manner in which such amendment effects a change in the amount of
stated capital, and the amount of stated capital as changed by such amendment,
are as follows: The par value of the common stock will be changed from $1.00
(one dollar) per share to "no par" value per share. The stated capital of the
Corporation will remain unchanged at $100.00.
Lewan & Associates, Inc. (Note 1)
---------------------------------------
By ___________________________________
Its ________________________President
And ___________________________________ (Note 2)
Its ________________________Secretary
________________________________________________(Note 3)
Its ________________________Director
NOTES:
1. Exact corporate name of corporation adopting the Articles of
Amendments, (If this is a change of name amendment, the name before
this amendment if filed).
2. Signatures and titles of officers signing for the corporation.
3. Where no shares have been issued, signature of a director.
2
<PAGE>
ARTICLES OF MERGER
Relating to Merger of
LEWAN ACQUISITION, INC.
with and into
LEWAN & ASSOCIATES, INC.
Pursuant to Sections 7-111-101, 7-111-103 and 7-111-105 of the Colorado
Business Corporation Act, LEWAN ACQUISITION, INC. and LEWAN & ASSOCIATES, INC.,
both Colorado corporations, certify and adopt the following Articles of Merger:
I. Plan of Merger.
--------------
PLAN OF MERGER
Relating to Merger of
LEWAN ACQUISITION, INC.
With and into
LEWAN & ASSOCIATES, INC.
Pursuant to Sections 7-111-101, of the Colorado Business Corporation Act, LEWAN
ACQUISITION, INC. ("LEWAN ACQUISITION") and LEWAN & ASSOCIATES ("LEWAN"), both
Colorado corporations, certify the following Plan of Merger adopted for the
purpose of effecting the merger of Lewan Acquisition with and into Lewan (the
"MERGER"), in accordance with Article 111 of the Colorado Business Corporation
Act.
A. Parties. The name of each of the undersigned corporations that are a
-------
party to the Plan of Merger and the laws under which such corporation are
organized:
Name State
---- -----
Lewan & Associates, Inc., Colorado
Lewan Acquisition, Inc. Colorado
The name of the surviving corporation is:
Name State
---- -----
Lewan & Associates, Inc., Colorado
B. Terms and Conditions. The Merger contemplates that Lewan Acquisition
--------------------
will merge with and into Lewan. Pursuant to the terms of the certain
Merger Agreement by and among Global Imaging Systems, Inc., a Delaware
corporation and parent of Lewan Acquisition ("GLOBAL"), Lewan
Acquisition, Lewan and certain shareholders of Lewan, dated as of June
24, 1999 (the "MERGER AGREEMENT"), the shareholders of Lewan will
--
3
<PAGE>
receive, subject to certain adjustments, consideration comprised of (I)
$50,000,000 in cash, (ii) $5,000,000 in common shares of Global, and
(iii) an earnout payment, as defined in the Merger Agreement, not the
exceed $20,000,000. As provided in the Merger Agreement, the Merger shall
be effective as of June 1, 1999. The Merger Agreement is subject to
certain customary conditions. Immediately after the Merger, Global will
be the sole shareholder of the Surviving corporation. The sole director
of the Surviving Corporation shall be Raymond Schilling. The Articles
Incorporation of Lewan, as amended herein, (the "ARTICLES") shall be the
Articles of Incorporation of the Surviving Corporation. The Bylaws of
Lewan shall be the Bylaws of Lewan Acquisition.
C. Conversion of Shares. Upon approval of the Plan of Merger by the parties
--------------------
thereto:
1. Each share of each class of the capital stock of Lewan issued and
outstanding immediately prior to the Merger shall be canceled; and
2. Each share of common stock of the Corporation shall be converted into
a share of common stock of the Surviving Corporation.
D. Amendment to the Articles of Incorporation of Lewan. Subsequent to
---------------------------------------------------
approval of this Plan of Merger, the Articles shall be amended as
follows:
1. Article IV of the Articles shall be amended to read in full as
follows:
The aggregate number of shares which the Corporation shall
have authority to issue is 1,000 shares of Common stock, and each
of such shares shall be of $.01 par value. When issued, all
shares shall be fully paid and non-assessable, and the private
property of shareholders shall not be liable for corporate debts.
Each shareholder of record shall have one vote for each share of
stock outstanding in his name on the books of the Corporation and
shall be entitled to vote said stock.
2. Article VII, Section 1 of the Articles shall be amended to read in
full as follows:
The business of the Corporation shall be transacted by a
Board of Directors composed of from on (1) to seven (7) members.
Subject to amendment of the Bylaws or resolution of the Board
then constituted, the number of directors be shall established at
on (1). It shall not be necessary to be a shareholder of the
corporation to be a member of such Board. The number of directors
may be increased or decreased from time to time by amendment of
the Bylaws of the Corporation or by resolution of the Board of
Directors of the Corporation then in office.
4
<PAGE>
3. Article VII, Section 2 of the Articles shall be amended to read in
full as follows:
A quorum for the transaction of business
shall be the majority of the Board then constituted.
4. Article VII, Section 4 of the Articles shall be deleted.
5. Article VII, Section 5 of the Articles shall be deleted.
6. Article X of the Articles shall be deleted.
II. Shareholder Approval:
--------------------
The Plan of Merger was approved by the unanimous consent of the
shareholders of both corporations party to the merger and neither
corporation required approval by a separate voting group of shareholders.
Dated as of the 24/th/ day of June, 1999.
--
LEWAN & ASSOCIATES, INC.
By: _______________________
Paul R. Lewan
President
LEWAN ACQUISITION, INC.
By: _______________________
Raymond Schilling
Vice President
5
<PAGE>
STATE OF COLORADO
CITY AND COUNTY OF DENVER
The foregoing instrument was acknowledged before me, a Notary Public,
this 24/th/ day of June, 1999, by Paul R. Lewan, as president of Lewan &
--
Associates Inc., of and on behalf of said corporation.
WITNESS my hand and official seal.
Notary Public
My Commission Expires:
STATE OF COLORADO
--------
CITY AND COUNTY OF DENVER
------
The foregoing instrument was acknowledged before me, a Notary Public,
this 24/th/ day of June, 1999, by Raymond Schilling, as Vice President of
--
Lewan Acquisition, In., for and on behalf of said corporation
WITNESS my hand and official seal
Notary Public
My commission expires:
6
<PAGE>
EXHIBIT 3.26b
BYLAWS
OF
LEWAN & ASSOCIATES, INC.
- --------------------------------------------------------------------------------
ARTICLE I.
Principal Office and Corporate Seal
-----------------------------------
Section 1. Principal Office. The principal office and place of business
----------------
of Lewan & Associates, Inc. (formerly known as Lewan Acquisition, Inc.) (the
"Corporation") in the State of Colorado shall be at 1400 South Colorado Blvd.,
Denver, CO 80222, or such other offices and places of business as is designated
from time to time by resolution of the Board of Directors.
Section 2. Corporate Seal. The seal of the Corporation shall have
--------------
inscribed thereon the name of the Corporation, and shall be in such form as may
be approved by the Board of Directors, which shall have power to alter the same
at pleasure.
ARTICLE II.
Shares and Transfer Thereof
---------------------------
Section 1. Execution of Stock Certificates. The shares of this
-------------------------------
Corporation shall be represented by certificates signed by the Chairman of the
Board, any Vice Chairman, the President or any Vice President and the Secretary
or any Assistant Secretary of the Corporation, and may be sealed with the seal
of the Corporation or a facsimile thereof. The signatures of the Chairman of
the Board, a Vice Chairman, the President or the Vice President and the
Secretary or the Assistant Secretary upon a certificate may be facsimiles. In
case any officer who has signed a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he or she were such officer at the date of its issue.
Section 2. Exchange of Certificates. Except as provided in Section 3 of
------------------------
this Article II no new certificates evidencing shares shall be issued unless and
until the old certificate or certificates, in lieu of which the new certificate
is issued, shall be surrendered for cancellation.
Section 3. Lost or Stolen Certificates. Any shareholder claiming that his
---------------------------
or her certificate for shares is lost, stolen or destroyed may make an affidavit
or affirmation of that fact and lodge the same with the Secretary or any
Assistant Secretary of the Corporation, accompanied by a signed application for
a new certificate. Thereupon, the directors may require the giving of a
satisfactory bond of indemnity to the Corporation not exceeding an amount double
the value of the shares as represented by such certificate. Thereafter, a new
certificate
1
<PAGE>
may be issued of the same tenor and representing the same number, class and
series of shares as were represented by the certificate alleged to be lost,
stolen or destroyed.
Section 4. Record Date. For the purpose of determining shareholders
-----------
entitled to notice of, or to vote at any meeting of shareholders, or any
adjournment thereof (other than meetings by written consent), or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of, or to vote at a meeting of shareholders.
Such books shall be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors
may fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than fifty (50) days and, in
case of a meeting of shareholders, not less than ten (10) days prior to the date
on which the particular action requiring such determination of shareholders, or
any adjournment thereof, or entitled to receive payment of any dividend, or for
the determination of shareholders for any proper purpose shall be thirty (30)
days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
ARTICLE III.
Shareholders and Meetings Thereof
---------------------------------
Section 1. Voting of Shares Held by an Entity.
----------------------------------
(a) Shares standing in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such corporation may prescribe,
or, in the absence of such provision as the board of directors of such other
corporation may determine.
(b) Shares held by an administrator, executor, guardian or conservator
may be voted by him or her, either in person or by proxy, without a transfer of
such shares into his or her name. Shares standing in the name of a trustee may
be voted by him or her, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him or her without a transfer of such shares
into his or her name.
(c) Shares standing in the name of a receiver may be voted by such
receiver and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his or her name if authority to
do so is contained in an appropriate order of the court by which such receiver
was appointed.
(d) A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the pledgee,
and thereafter the pledgee shall be entitled to vote the shares so transferred.
2
<PAGE>
(e) Neither treasury shares of its own stock held by the Corporation,
nor shares held by another corporation (if a majority of the shares entitled to
vote for the election of directors of such other corporation are held by the
Corporation) shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting.
Section 2. Shareholder Meeting Place. Meetings of shareholders shall be
-------------------------
held at the principal office of the Corporation or at such other place, either
within or without the State of Colorado, as may be designated in the notice of
meeting.
Section 3. Annual Shareholders' Meetings. In the absence of a resolution
-----------------------------
of the Board of Directors providing otherwise, the annual meeting of
shareholders of the Corporation for the election of directors, and for the
transaction of such other business as may properly come before the meeting shall
be held on the first Monday in each year, if the same be not a legal holiday,
and if a legal holiday, then on the next succeeding business day, at 10:00
o'clock a.m. If a quorum be not present, the meeting may be adjourned from time
to time, but no single adjournment shall exceed sixty (60) days.
Section 4. Special Meetings. Special meetings of shareholders may be
----------------
called by the Chairman, any Vice Chairman, the Board of Directors, or by the
President of the Corporation at the request of the holders of not less than one-
tenth of all shares entitled to vote on the subject matter for which the meeting
is called.
Section 5. Notice of Meeting. Written notice stating the place, day and
-----------------
hour of the shareholders meeting, and in case of a special meeting of
shareholders, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days nor more than fifty days before the date of the
meeting, either personally, by facsimile, by electronic mail or by U.S. mail, by
or at the direction of the Chairman, any Vice Chairman, the Secretary or the
Board of Directors of the Corporation, to each shareholder of record entitled to
vote at such meeting, except that if the authorized shares are to be increased,
at least ten days notice shall be given. If mailed (other than by electronic
mail), such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his or her address as it appears on
the stock transfer books or records of the Corporation, with postage thereon
prepaid, but if three successive letters mailed to the last-known address of any
shareholder of record are returned as undeliverable, no further notices to such
shareholder is made of shareholders known to the Corporation. Failure to
deliver such notice or obtain a waiver thereof shall not cause the meeting to be
lost, but it shall be adjourned by the shareholders present for a period not to
exceed sixty (60) days until any deficiency in notice or waiver shall be
supplied.
Section 6. Inspection of Stock Transfer Records. The officer or agent
------------------------------------
having charge of the stock transfer books or records for shares of this
Corporation shall make, at least ten days before each meeting of shareholders, a
complete list of the shareholders entitled to vote at such meeting or any
adjournment thereof, arranged in alphabetical order, with the address of and the
number of shares held by each, which list, for a period of ten days prior to
such meeting, shall be kept on file at the principal office of the Corporation,
whether within or outside Colorado, and
3
<PAGE>
shall be subject to inspection by any shareholder at any time during the usual
business hours of the Corporation. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting. The original stock
transfer books or records shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer book or to vote at any
meeting.
Section 7. Quorum. A quorum at any meeting of shareholders shall consist
------
of a simple majority of the shares of the Corporation entitled to vote thereat,
represented in person or by proxy. If a quorum is present, the affirmative vote
of a majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by law, the Articles of
Incorporation of the Corporation, or these bylaws. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The shareholders present at a duly organized meeting may
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
Section 8. Proxies. At all meetings of shareholders, a shareholder may
-------
vote in person or by proxy executed in writing by the shareholder or by his or
her duly authorized attorney in fact. Such proxy shall be filed with the
Secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution unless
otherwise provided in the proxy.
Section 9. Election of Directors. At each election for directors every
---------------------
shareholder entitled to vote at such election shall have the right to vote, in
person or by proxy, the number of shares owned by him or her for as many persons
as there are directors to be elected and for whose election he or she has a
right to vote.
ARTICLE IV.
Directors, Powers and Meetings
------------------------------
Section 1. Powers of Directors. The business and affairs of the
-------------------
Corporation shall be managed by a Board of any number from one (1) up to seven
(7) Directors who need not be shareholders of the Corporation or residents of
the State of Colorado and who shall be elected at the annual meeting of
shareholders or some adjournment thereof. Directors shall hold office until the
next succeeding annual meeting of shareholders or until their successors shall
have been elected and shall qualify; however, no provision of this section shall
be restrictive upon the right of the Board of Directors to fill vacancies or
upon the right of shareholders to remove Directors as is hereinafter provided.
The Directors shall elect a Chairman to act as presiding officer at meetings.
In the event that the Chairman is absent from a meeting, a Vice Chairman, if
any, shall act as presiding officer at the meeting, and if the Vice Chairman is
also absent, he or she may appoint a Director or the President to act as
Chairman.
4
<PAGE>
Section 2. Annual Board of Director Meetings. The annual meeting of the
---------------------------------
Board of Directors shall be held at the same place as, and immediately after,
the annual meeting of shareholders, and no notice shall be required in
connection therewith. The annual meeting of the Board of Directors shall be for
the purpose of electing officers and the transaction of such other business as
may come before the meeting.
Section 3. Special Meetings of the Board of Directors. Special meetings
------------------------------------------
of the Board of Directors may be called at any time by the Chairman (or in his
or her absence by a Vice Chairman), or by any Director of the Corporation, and
may be held within or outside the State of Colorado at such time and place as
the notice or waiver thereof may specify. Notice of such meetings shall sent by
facsimile, by electronic mail or by U.S. mail to the last known address (or
electronic mail address) of each Director at least twenty-four hours, or shall
be given to a Director in person or by telephone at least twenty-four hours,
prior to the date or time fixed for the meeting. Special meetings of the Board
of Directors may be held at any time that all Directors are present in person,
and presence of any Director at a meeting shall constitute waiver of notice of
such meeting except as otherwise provided by law. Unless specifically required
by law, the Articles of Incorporation of the Corporation or these bylaws,
neither the business to be transacted at, nor the purpose of, any meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 4. Quorum. A quorum at all meetings of the Board of Directors
------
shall consist of a majority of the number of Directors then fixed by these
bylaws, but a smaller number may adjourn from time to time without further
notice until a quorum be secured. The act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by the Articles of
Incorporation of the Corporation or these bylaws.
Section 5. Vacancies. Any vacancy occurring in the Board of Directors may
---------
be filled by the affirmative vote of a majority of the remaining Directors
though less than a quorum of the Board of Directors. A Director elected to fill
a vacancy shall be elected for the unexpired term of his or her predecessor in
office and shall hold such office until his or her successor is duly elected and
shall qualify. Any Directorship to be filled by reason of an increase in the
number of Directors shall be filled by the affirmative vote of a majority of the
Directors then in office or by an election at an annual meeting, or at a special
meeting of shareholders called for that purpose. A Director chosen to fill a
position resulting from an increase in the number of Directors shall hold office
until the next annual meeting of shareholders and until his or her successor
shall have been elected and shall qualify.
Section 6. Compensation. Directors of the Corporation may receive
------------
reimbursement for reasonable traveling expenses, if any, as is incurred by
attending such meetings of the Board of Directors; provided, however, such
reimbursement shall only be in accordance with the Corporation's or its parent's
policies in respect of such reimbursements. No such payment shall preclude any
Director from serving the Corporation in any other capacity therefor.
5
<PAGE>
Section 7. Committees. The Board of Directors may by resolution designate
----------
two or more Directors to constitute an executive committee which shall have and
may exercise such authority in the management of the Corporation as shall be
provided in such resolution. A meeting of said committee may be called by the
Chairman of the Board of Directors, a Vice Chairman of the Board of Directors,
the chairman of the committee, or the President of the Corporation, upon the
same notice as set forth in Article IV, Section 3 above.
Section 8. Removal of Directors. The shareholders of the Corporation may,
--------------------
at a meeting called for the express purpose of removing Directors, by a majority
vote of the shares entitled to vote at an election of Directors, remove the
entire Board of Directors or any lesser number, without cause.
Section 9. Limitation on Number of Directors. The shareholders of the
---------------------------------
Corporation may, at any meeting, by a majority vote of the shares entitled to
vote at an election of Directors limit the number of Directors of the
Corporation to a number equal to but not less than the number of shareholders of
the Corporation.
Section 10. Resignation. Any Director of the Corporation may resign at
-----------
any time by giving written notice of his or her resignation to the Board of
Directors, the Chief Executive Officer, the President or the Secretary of the
Corporation. Such resignation shall take effect at the date of receipt of such
notice or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 11. Telephonic Meetings. Members of the Board of Directors or any
-------------------
committee of the Directors may participate in a meeting of the Board of
Directors or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
ARTICLE V.
Officers
--------
Section 1. Designation. The elective officers of the Corporation shall be
-----------
a Chairman, a Vice Chairman, the President, the Treasurer, and the Secretary,
and may, by resolution of the Board of Directors, include one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers, and such other officers
and assistant officers as the Board of Directors deems necessary, and shall be
elected by the Board of Directors at its first meeting after the annual meeting
of shareholders. Unless removed in accordance with procedures established by
law and these bylaws, the said officers shall serve until the next succeeding
annual meeting of the Board of Directors and until their respective successors
are elected and shall qualify. Any offices may be held by the same person at
the same time.
Section 2. Duties. The officers of the Corporation shall respectively
------
exercise and perform the respective powers, duties, and functions as are stated
below, and as may be assigned to them by the Board of Directors.
6
<PAGE>
(a) Chairman or Vice Chairman. The Chairman and any Vice Chairman of
-------------------------
the Corporation shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and officers of the
Corporation. He, she or they shall preside at all meetings of the shareholders
and of the Board of Directors. The Chairman and any Vice Chairman, unless some
other person is specifically authorized by the Board of Directors, shall sign
all stock certificates, bonds, deeds, mortgages, leases, and contracts of the
Corporation.
(b) President. The President shall be the chief executive officer and
---------
chief operating officer of the Corporation and, subject to the direction and
control of the Chairman or any Vice Chairman, shall perform all the duties
commonly incident to his or her office and such other duties as the President
shall designate.
(c) Executive Vice Presidents, Senior Vice Presidents and Vice
----------------------------------------------------------
Presidents. The Board of Directors may designate one or more Executive Vice
- ----------
Presidents, one or more Senior Vice Presidents and one or more Vice Presidents
who shall have the responsibilities and duties as set forth by the President,
the Chairman, any Vice Chairman, or the Board of Directors. The
responsibilities of any such Executive Vice President or Senior Vice President
may include all responsibilities assumed by any Vice President, and may also
include the management of any and all Vice Presidents. In the absence or
disability of the President; the Executive Vice President, the Senior Vice
Presidents, and the Vice Presidents, in order of their rank as fixed by the
Board of Directors, and if not ranked, the Executive Vice Presidents in
chronological order of their election by the Board of Directors, then the Senior
Vice Presidents in chronological order of their election by the Board of
Directors, and then the Senior Vice Presidents in chronological order of their
election by the Board of Directors, shall perform all the duties of the
President, and when so acting shall have all the powers of, and be subject to
all the restrictions on the President.
(c) Secretary. The Secretary shall: (i) keep the minutes of the
---------
proceedings of the shareholders and of the Board of Directors of the Corporation
in one or more books provided for that purpose; (ii) see that all notices are
duly given in accordance with the provisions of these bylaws or as required by
law; (iii) be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all documents
the execution of which on behalf of the Corporation under its seal is duly
authorized; (iv) keep a register of the post office address of each shareholder
which shall be furnished to the Secretary by such shareholder; (v) sign with the
Chairman, Vice Chairman or President certificates for shares of the Corporation,
the issuance of which shall have been authorized by resolution of the Board of
Directors; (vi) have general charge of the stock transfer books of the
Corporation; and (vii) in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him or
her by the President or by the Board of Directors of the Corporation.
(d) Assistant Secretary. An Assistant Secretary may, at the request
-------------------
of the Secretary, or in the absence or disability of the Secretary, perform all
of the duties of the Secretary. He or she shall perform such other duties as
may be assigned to him or her by the Chairman, Vice Chairman or President or by
the Secretary.
7
<PAGE>
(e) Treasurer. The Treasurer, subject to the order of the Board of
---------
Directors, shall have the care and custody of the money, funds, valuable papers
and documents of the Corporation. He or she shall keep accurate books of
accounts of the Corporation's transactions, which shall be the property of the
Corporation, and shall render financial reports and statements of the condition
of the Corporation when so requested by the Board of Directors, the Chairman, a
Vice Chairman or the President. The Treasurer shall perform all duties commonly
incident to this office and such other duties as may from time to time be
assigned to him or her by the President, the Chairman or the Vice Chairman.
(f) Assistant Treasurer. An Assistant Treasurer may, at the request
-------------------
of the Treasurer, or in the absence or disability of the Treasurer, perform all
of the duties of the Treasurer. He or she shall perform such other duties as
may be assigned to him or her by the President or by the Treasurer.
Section 3. Compensation. All officers of the Corporation may receive
------------
salaries or other compensation if so ordered and fixed by the Board of
Directors. The Board shall have authority to fix salaries in advance for stated
periods or render the same retroactive as the Board of Directors may deem
advisable.
Section 4. Delegation of Authority. In the event of absence or inability
-----------------------
of any officer to act, the Board of Directors may delegate the powers or duties
of such officer to any other officer, Director, or person whom it may select.
Section 5. Removal of Officer. Any officer or agent may be removed by the
------------------
Board of Directors, at a meeting called for that purpose, whenever in its
judgment the best interests of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the person
so removed. Election or appointment of an officer or agent shall not, of
itself, create contract rights.
ARTICLE VI.
Finance
-------
Section 1. Reserves. The Board of Directors, in its sole discretion, may
--------
set aside from time to time, out of the net profits, earned surplus, or capital
surplus of the Corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the Corporation, and for any other purpose.
Section 2. Banking. The moneys of the Corporation shall be deposited in
-------
the name of the Corporation in such bank or banks or trust company or trust
companies as the President, Chairman or Vice Chairman shall designate, and may
be drawn out only on checks signed in the name of the Corporation by such person
or persons as the President, Chairman or Vice Chairman or, the Board of
Directors by appropriate resolution, may direct. Notes and commercial paper,
8
<PAGE>
when authorized by the Board, shall be signed in the name of the Corporation by
such officer or officers or agent or agents as shall thereunto be authorized
from time to time.
Section 3. Fiscal Year. The fiscal year of the Corporation shall begin
-----------
the first day of April and end the last day of March.
Section 4. Loans. The Corporation may lend money to, guarantee the
-----
obligations of and otherwise assist Directors, officers and employees of the
Corporation, or directors of another corporation of which the Corporation owns a
majority of the voting stock, only upon compliance with the requirements of the
Colorado Business Corporation Act.
ARTICLE VII.
Waiver of Notice
----------------
Any shareholder, officer or Director may waive, in writing, any notice
required to be given by law or under these bylaws, whether before or after the
time stated therein.
ARTICLE VIII.
Action Without a Meeting
------------------------
Any action required to be taken at a meeting of the Directors, a committee
of the Directors, if there be one, or shareholders of this Corporation, or any
action which may be taken at a meeting of Directors, a committee of Directors,
if there be one, or shareholders, may be taken without a meeting if a consent in
writing, setting forth the action so taken shall be signed by all of the
Directors, committee members, if there be one, or shareholders entitled to vote
with respect to the subject matter thereof.
ARTICLE IX.
Indemnification
---------------
Section 1. General. The Corporation shall indemnify any person who was or
-------
is a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a Director,
officer, employee, fiduciary, or agent of the Corporation, or is or was serving
at the request of the Corporation as a Director, officer, employee, fiduciary,
or agent or another corporation, partnership, joint venture, trust, or another
enterprise, against expenses (including attorney's fees) actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his or her duty to the
Corporation unless and only to the extent that the court in
9
<PAGE>
which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper. The termination of any action, suit,
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
----
contendere or its equivalent shall not, of itself, create a presumption that the
- ----------
person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interest of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
Section 2. Expenses. To the extent that a Director, officer, employee,
--------
fiduciary, or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, by proxy, suit, or proceeding referred to in
Section 1 of this Article IX, or in defense of any claim, issue, or matter
therein, he or she shall be indemnified against expenses (including attorney's
fees) actually and reasonably incurred by him or her in connection therewith.
Section 3. Determination of Indemnification. Any indemnification under
--------------------------------
Section 1 of this Article IX, (unless ordered by a court) and as distinguished
from Section 2 of this Article, shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee, fiduciary, or agent is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section 1 above. Such determination shall be made (i) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not parties to
such action, suit, or proceeding, or (ii) if such quorum is not obtainable, or,
even if obtainable and a quorum of disinterested Directors so directs, by
independent legal counsel in a written opinion, or (iii) by majority vote of a
quorum of shareholders in person.
Section 4. Advancement of Expenses. Expenses incurred in defending a
-----------------------
civil or criminal action, suit, or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit, or proceeding as
authorized by the Board of Directors in the specific case upon receipt of an
undertaking by or on behalf of the Director, officer, employee, fiduciary, or
agent to repay such amount unless it shall ultimately be determined that he or
she not is entitled to be indemnified by the Corporation as authorized.
Section 5. Non-Exclusive Right. The indemnification provided by this
-------------------
Article IX shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement, vote of shareholders or
disinterested Directors, or otherwise, and any procedure provided for by any of
the foregoing, both as to action in his or her official capacity and as to
action in another capacity while holding such office, shall continue as to a
person who has ceased to be a Director, officer, employee, fiduciary, or agent
and shall inure to the benefit of heirs, executors, and administrators of such a
person.
10
<PAGE>
ARTICLE X.
Amendments
----------
These bylaws may be altered, amended or repealed at the annual meeting of
the Board of Directors or at any special meeting of the Board of Directors
called for that purpose herein or by unanimous written consent of the Board of
Directors. In addition, these bylaws may be amended, altered or repealed by the
shareholders entitled to vote.
ARTICLE XI.
References to Articles of Incorporation
---------------------------------------
References to the Articles of Incorporation in these bylaws shall include
all amendments thereto or changes thereof unless specifically excepted.
[Remainder of Page Intentionally Left Blank]
11
<PAGE>
Exhibit 3.27a
ARTICLES OF INCORPORATION
OF
DANIEL COMMUNICATIONS, INC.
KNOW ALL MEN BY THESE PRESENTS that I, the undersigned, acting as the sole
incorporator, in order to form a corporation for the purposes hereinafter
stated, under and pursuant to the provisions of the Constitution and laws of the
State of Alabama, do hereby make, execute, and adopt the following Articles of
Incorporation:
FIRST
That the name by which I have assumed to designate said corporation and to
be used in its business and dealings is DANIEL COMMUNICATIONS, INC.
SECOND
The nature of the business and the purpose or purposes for which the
corporation is organized are as follows:
<PAGE>
To generally engage in the business of purchasing, assembling,
manufacturing, importing, or otherwise acquiring and selling, shipping,
exporting, delivering and otherwise disposing of commercial, industrial,
agricultural, military, educational, household and other types of
communications, electronic reproduction, electronic, sound, audio, video,
or audio-video equipment, components thereof or systems therefrom, and to
deliver, install, remove, repair and otherwise handle the same together
with all related products and supplies, incidental, necessary or convenient
thereto.
To acquire by purchase, exchange, lease or otherwise, and to own, operate,
hold, use, develop, sell, assign, lease, transfer, convey, exchange,
mortgage, grant security interest in, pledge or otherwise dispose of or
deal in and with, real and personal property of every class or description
and rights and privileges herein wheresoever situate.
To purchase, lease or otherwise lawfully acquire, hold, and own all tools,
materials, fixtures, machinery, office supplies, furniture, and equipment
apparatus of whatever nature, raw materials, ingredients, component parts
or materials whatsoever necessary or incidental to the business aforesaid,
To own, operate, and/or lease automobiles, trucks or other means of
transportation necessary or incident to the corporation's business.
Generally, to do and perform any and all things that may be incidental to
or necessary or proper to the conduct of any and all of the above described
objects and purposes or any other object or purpose not prohibited by law,
with full power to do and perform any and all of the foregoing objects and
purposes in the State of Alabama or other States of the United States and
in foreign countries and to do such things as are incidental, proper or
necessary to the operation of the business or to the carrying out of the
objects, purposes, powers, and privileges therein granted, as well as to
exercise all those powers expressly conferred on business corporations by
the Alabama Business Corporation Act, together with all the rights bestowed
upon such corporations under the
<PAGE>
laws of the State of Alabama.
In addition to the objects aforesaid, the Corporation shall have the power
to conduct and carry on or transact any lawful business activity for which
corporations may be incorporated under the Alabama Business Corporation Act
and not prohibited by law nor required by law to be specifically stated in
these Articles.
The foregoing clauses shall be construed both as objects and powers, and it
is hereby expressly provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of this
corporation.
THIRD
The address of the initial registered office of the Corporation is, 604
Southern Way, Spanish Fort, Alabama, 36527, and the name of its registered agent
at such address is, DANNY GRANT.
FOURTH
The total or aggregate number of shares of stock which the Corporation
shall have authority to issue is 1,000 of the par value of $1.00 per share. All
of the stock of the corporation shall be common stock.
<PAGE>
FIFTH
Each shareholder has preeminent rights with respect to the issuance of
additional shares of stock of the same class owned, including treasury shares.
SIXTH
The name and address of the incorporator is as follows:
DANNY GRANT
604 SOUTHERN WAY
SPANISH FORT, AL 36527
SEVENTH
The duration of the corporation is not limited to any period and shall be
perpetual.
EIGHTH
Provisions for the regulations of the internal affairs of the corporation
are as follows:
The business and affairs of the corporation shall be governed by a Board of
Directors who shall be elected by shareholders at the annual meeting of
shareholders. The numbers of directors is initially fixed at one (1) and such
<PAGE>
number as may from time to time be changed by the By-Laws of the corporation.
Directors need not be shareholders in the corporation.
The By-laws of the corporation shall determine the officers of the
corporation and the Board of Directors, at its annual meeting, shall elect the
persons to fill the offices as determined.
The Board of Directors may make such rules and regulations for the
government of the corporation as are not in conflict with its By-Laws or the
laws of the State of Alabama.
NINTH
The following, whose name and address appear below, shall serve the
corporation as the initial Board of Directors until the first annual meeting of
the shareholders and/or until successors are duly elected and qualified:
DANNY GRANT
604 SOUTHERN WAY
SPANISH FORT, AL 36527
TENTH
The holders of the capital stock of this corporation entitled to vote may
vote by proxy.
<PAGE>
ELEVENTH
Any unissued shares of stock herein authorized or hereafter increased or
created may be issued from time to time by the corporation in such manner,
amounts and proportions and for such consideration as shall be determined from
time to time by the Board of Directors and as may be permitted by law; and all
issued shares of the capital stock of the corporation shall be deemed fully paid
and nonassessable and the holders of such shares shall not be liable thereunder
to the corporation or its creditors. The unissued shares of stock herein
authorized or hereafter increased or created may be issued from to time by the
Board of Directors of the corporation, which may consist of money or property
(including stock or securities of this or any other corporation, real property
or personal property) or services performed, and without any consent or approval
of the Board of Directors as to the value of any property or of any services
received or resolved to be received in exchange for any issuance shall, in the
absence of fraud or bad faith, be conclusive on all persons.
TWELFTH
Any person, his or her heirs and/or personal representatives, made a party
to any action, suit or proceeding by
<PAGE>
reason of the fact that he or she is or was a director, officer, or employee of
this corporation or of any corporation which he or she served as such at the
request of this corporation, shall be indemnified by the corporation against the
reasonable expenses, including attorney's fees, actually and necessarily
incurred by him or her in connection with the defense of such action, suit or
proceeding, or in connection with any appeal therein except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that
such officer, director or employee is liable for negligence of misconduct in the
performance of his or her duties. Such right of indemnification shall not be
deemed exclusive of any other rights to which such director, officer or employee
may be entitled by law.
WHEREFORE, the undersigned incorporator tenders for filing this, his Articles
of Incorporation, and tenders to the Judge of Probate of Baldwin County,
Alabama, and to the Secretary of State of Alabama the lawful fees and charges,
and pray that these Articles of Incorporation may be examined and approved, and
that, upon completion thereof, this corporation may be deemed to be incorporated
for the purposes herein set out, and that the certificate of the Judge of
Probate of Baldwin County, Alabama, be issued.
IN WITNESS WHEREOF, the undersigned incorporator has hereunto set to these
Articles of Incorporation his
<PAGE>
respective hand and seal as the incorporator of the above named corporation on
this the 2nd day of July, 1987.
/s/ Danny Grant (SEAL)
----------------------------
DANNY GRANT
THIS INSTRUMENT PREPARED BY:
OWENS, LATOUR, BENTON & SIMPSON
Attorneys at Law
P.O. Box 471
Fairhope, Alabama 36533
<PAGE>
[SEAL APPEARS HERE]
State of Alabama
I, Glen Browder, Secretary of State, of the State of Alabama, having custody of
the Great and Principal Seal of said State, do hereby certify that pursuant to
the provisions of Section 10-2A-26, Code of Alabama 1975, the corporate name
Daniel Communications, Inc. is reserved as available based only upon an
examination of the corporation records on file in this office for the exclusive
use of Daniel Communications, Inc. for a period of one hundred twenty days from
this date. In the case of a domestic corporation, the name of the county in
which the corporation was or is proposed to be incorporated is Baldwin. I
further certify that as set out in the application for reservation of corporate
name, the Secretary of State's office does not assume any responsibility for the
availability of the corporate name requested nor for any duplication which might
occur.
[SEAL APPEARS HERE] In Testimony Whereof, I have hereunto
set my hand and affixed the Great Seal of the
State, at the Capitol, in the
City of Montgomery, on this day.
May 19, 1987- expires 9-17-87
---------------------------------------------
Date
/s/ Glen Browder
---------------------------------------------
Glen Browder Secretary of State
<PAGE>
State of Alabama
Baldwin County
CERTIFICATE OF INCORPORATION
OF
Daniel Communications, Inc.
The undersigned, as Judge of Probate of Baldwin County, State of Alabama,
hereby certifies that duplicate originals of Articles of Incorporation for the
incorporation of Daniel Communications, Inc., duly signed pursuant to the
provisions of the Alabama Business Corporation Act, have been received in this
office and are found to conform to law.
ACCORDINGLY the undersigned, as such Judge of Probate, and by virtue of the
authority vested in him by law, hereby issues this Certificate of Incorporation
of Daniel Communications, Inc., and attaches hereto a duplicate original of the
Articles of Incorporation.
GIVEN Under My Hand and Official Seal on this the 6th day of July, 1987.
/s/ [SIGNATURE ILLEGIBLE]
---------------------------------
Judge of Probate
[STAMP APPEARS HERE]
<PAGE>
Exhibit 3.27b
AMENDED AND RESTATED
--------------------
BY-LAWS
-------
OF
--
DANIEL COMMUNICATIONS, INC.
---------------------------
ARTICLE I
---------
OFFICES
The principal office of the Corporation shall be located in the City,
County and State of Daphne, Baldwin County, Alabama.
The Corporation may have such other offices either within or without the
State of Alabama as the Board of Directors may designate or as the business of
the Corporation may from time to time require.
ARTICLE II
----------
STOCKHOLDERS
2.1 ANNUAL MEETING
- --- --------------
The annual meeting of the Stockholders of the Corporation shall be held on
the first Monday of January of each year, or such other date as may be
prescribed by the Board of Directors, for the purpose of:
(i) electing Directors;
(ii) considering and acting upon the reports of Officers and Directors;
and
(iii) the transaction of such other business as may come before the
meeting.
2.2 SPECIAL MEETINGS
- --- ----------------
Special meetings of the Stockholders may be called by the Chairman, any
Vice Chairman, the President, or any Vice President, or by a majority of the
Board of Directors, and shall be called by any of the above named Officers upon
the written request of not less than 1/10th of all the outstanding shares of
stock of the Corporation entitled to vote at the meeting.
<PAGE>
2.3 PLACE OF MEETING
- --- ----------------
The Board of Directors may designate any place either within or without the
State of Alabama as the place of meeting for any annual or special meeting. In
the absence of any designation, all meetings shall be held at the principal
office of the Corporation.
2.4 NOTICE OF MEETING
- --- -----------------
Written or printed notice, stating the place, date and time of the meeting
and, in case of a special meeting or an annual meeting at which special action
is to be taken, the purpose or purposes for which the meeting is called, shall
be delivered not less than ten (10) days before the date of the meeting, either
personally or by mail, by or at the direction of the Secretary or any Assistant
Secretary, to each Stockholder of record entitled to vote at such meeting,
unless the meeting be called for the purpose of increasing the authorized stock
or the bonded or mortgage indebtedness of the Corporation, in which event not
less than thirty (30) days notice of such meeting shall be given in the manner
herein prescribed.
If mailed, such notice shall be deemed to be delivered when deposited in
the U. S. Mail, addressed to the Stockholder at his address as it appears on the
stock transfer books of the Corporation.
If given personally, such notice shall be deemed to be delivered when
handed to the Stockholder, or left at his place of business or his residence.
2.5 FIXING OF RECORD DATE
- --- ---------------------
For the purpose of determining Stockholders entitled to notice of or to
vote at any meeting of Stockholders or any adjournment thereof, or Stockholders
entitled to receive payment of any dividend, the date on which notice of the
meeting is mailed or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be the record date
for such determination of Stockholders. When a determination of Stockholders
entitled to vote at any meeting of Stockholders has been made as provided in
this section, such determination shall apply to any adjournment thereof.
2.6 VOTING LISTS
- --- ------------
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least ten (10) days before each meeting of
Stockholders, a complete list of the Stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the registered
office of the Corporation and
-2-
<PAGE>
shall be subject to inspection of any Stockholder at any time during usual
business hours. Such list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any Stockholder
during the whole time of the meeting. The original stock transfer book shall be
prima facie evidence as to who are the Stockholders entitled to examine such
list or transfer books or to vote at any meeting of Stockholders.
2.7 QUORUM
- --- ------
A majority of the outstanding shares of the Corporation entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
Stockholders. If less than a majority of the outstanding shares are represented
at a meeting a majority of the shares so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted at the
meeting as originally notified. The Stockholders present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Stockholders to leave less than a quorum.
2.8 PROXIES
- --- -------
At all meetings of Stockholders, a Stockholder may vote by proxy executed
in writing by the Stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the Secretary of the Corporation before or at the time
of the meeting. No proxy shall be valid after eleven (11) months from the date
of its execution, unless otherwise provided in the proxy.
2.9 VOTING OF SHARES
- --- ----------------
Each outstanding share, regardless of class, shall be entitled to one vote
on each matter submitted to a vote at a meeting of the Stockholders except to
the extent that the voting rights of the shares of any class or classes are
limited or denied by the Certificate of Incorporation.
2.10 VOTING OF SHARES BY CERTAIN HOLDERS
- ---- -----------------------------------
Shares standing in the name of another Corporation may, to the extent
permitted by law, be voted by such officer, agent or proxy as the By-Laws of
such Corporation may prescribe, or, in the absence of such provision, as the
Board of Directors of such Corporation may determine. Shares held by an
administrator, executor, or guardian may be voted by him either in person or by
proxy without a transfer of such shares into his name. Shares standing in the
name of a trustee may be voted by him either in person or by proxy, but no
trustee shall be entitled to vote shares held by him without a transfer of such
shares into his name.
-3-
<PAGE>
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A Stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
2.11 VOTING OF STOCK IN OTHER CORPORATIONS
- ---- -------------------------------------
Any stock in other corporations which may, from time to time, be held by
this Corporation may be represented and voted at any meeting of Stockholders of
any such other corporation by the Chairman, any Vice Chairman, the President or
any Vice President of this Corporation, or by proxy or proxies appointed by any
of the above named Officers, or in such other fashion as the Board of Directors
may, by resolution of its Board, specify.
2.12 CUMULATIVE VOTING
- ---- -----------------
Cumulative voting shall not be permitted.
2.13 INFORMAL ACTION BY STOCKHOLDERS
- ---- -------------------------------
Any action required to be taken at a meeting of the Stockholders, or any
other action which may be taken at a meeting of the Stockholders, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the Stockholders entitled to vote with respect to the
subject matter thereof.
2.14 ORDER OF BUSINESS
- ---- -----------------
At all meetings of Stockholders, any Stockholder present and entitled to
vote in person or by proxy shall be entitled to require, by written request to
the Chairman of the meeting, that the order of business shall be as follows:
(1) Organization.
(2) Proof of notice of meeting or of waivers thereof. (The
certificate of the Secretary of the Corporation, or the affidavit
of any other person who mailed the notice or caused the same to
be mailed, being proof of service of notice by mail).
-4-
<PAGE>
(3) Submission by Secretary, or by Inspectors, if any shall have been
elected or appointed, of list of Stockholders entitled to vote,
present in person or by proxy.
(4) If an annual meeting, or a meeting called for that purpose,
reading of unapproved minutes of preceding meetings and actions
thereon.
(5) Reports.
(6) If an annual meeting, or a meeting called for that purpose, the
election of Directors.
(7) Unfinished business.
(8) New Business.
(9) Adjournment.
ARTICLE III
-----------
BOARD OF DIRECTORS
3.1 GENERAL POWERS
- --- --------------
The business and affairs of the Corporation shall be managed by its Board
of Directors, which shall have and exercise, in the name and on behalf of the
Corporation, all the rights and privileges legally exercisable by law under the
Articles of Incorporation or these By-Laws.
3.2 NUMBER, TENURE AND QUALIFICATIONS
- --- ---------------------------------
The number of directors shall be from one to ten in number, as determined
by the Stockholders. Each Director shall be elected at and shall hold office
until the next annual meeting of the Stockholders and until his successor shall
have been elected and qualified, except a Director or Directors elected to fill
a vacancy or vacancies, who shall be elected in the manner provided for in
Section 3.8 hereof.
As of the date of this Amended and Restated Bylaws, the number of directors
of the Corporation shall be set at three. The number of Directors may be
increased or decreased from time to time by resolution of the Stockholders or by
amendment to the By-Laws.
Directors need not be residents of the State of Alabama or Stockholders of
the Corporation.
-5-
<PAGE>
3.3 ANNUAL AND OTHER REGULAR MEETINGS
- --- ---------------------------------
The regular annual meeting of the Board of Directors shall be held without
other notice than this By-Law immediately after, and at the same place as, the
annual meeting of the Stockholders. The Board of Directors may provide, by
resolution, the date, time and place, either within or without the State of
Alabama, for the holding of additional regular meetings without other notice
than such resolution.
3.4 SPECIAL MEETINGS
- --- ----------------
Special meetings of the Board of Directors may be called by the Chairman,
any Vice Chairman, the President or any Vice President, or by any member of the
Board of Directors.
The person or persons authorized to call a special meeting of the Board of
Directors shall fix the place, either within or without the State of Alabama,
and the date and time for holding any such meeting.
3.5 NOTICE
- --- ------
Notice of any special meeting shall state the date, time and place of the
meeting and the purpose or purposes for which the meeting is called and may be
given in any one of the following fashions, viz:
1. By written notice at least twenty-four (24) hours in advance of such
meeting, delivered in person or by leaving such notice at the place of
business or residence of such Director, or by depositing such notice
in the U.S. mail postage prepaid, addressed to the Director at his
address as it appears on the records of the Secretary of the
Corporation.
2. Verbally in person or by telephone at least twenty-four (24) hours in
advance of such meeting by communication with the Director in person
or by telephone.
3. By facsimile or other electronic means (including, without limitation
electronic mail) at least twenty-four (24) hours in advance of such
meeting. A Director may waive notice of any meeting and the attendance
of a Director of any meeting shall constitute a waiver of notice of
such meeting and the purpose for which held, except where a Director
attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose
of, any regular meeting of the Board of Directors need be specified in
any required notice or waiver of such meeting.
-6-
<PAGE>
3.6 QUORUM
- --- ------
A majority of the number of Directors duly elected and serving shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors, but if less than such majority is present at a meeting, a majority
of the Directors present may adjourn the meeting from time to time without
further notice.
3.7 MANNER OF ACTING
- --- ----------------
The act of the majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors, except where a
greater number is required by law or by the certificate of incorporation.
3.8 VACANCIES
- --- ---------
Any vacancy occurring in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors though less than a
quorum of the Board of Directors. A Director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by reason of an increase in the number of Directors shall be filled by
election at an annual meeting or at a special meeting of Stockholders called for
that purpose.
3.9 COMPENSATION
- --- ------------
By resolution of the Board of Directors, the Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors, and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as Director. No such payment shall preclude any Director from
serving the Corporation in any other capacity and receiving compensation
therefor.
3.10 PRESUMPTION OF ASSENT
- ---- ---------------------
A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting or unless he shall file his written dissent to such
action with the person acting as the secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to the
Secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a Director who voted in favor of such
action.
-7-
<PAGE>
3.11 INFORMAL ACTION BY DIRECTORS
- ---- ----------------------------
Any action required to be taken at a meeting of the Directors, or any other
action which may be taken at a meeting of the Directors, may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the Directors.
ARTICLE IV
----------
OFFICERS
4.1 NUMBER
- --- ------
The Officers of the Corporation shall be:
A Chairman
One or More Vice Chairman
A President
One or more Vice Presidents
A Secretary
One or more Assistant Secretaries
A Treasurer
One or more Assistant Treasurers
each of whom shall be elected by the Board of Directors.
Such other office or offices as may be deemed necessary may be created by
the Board of Directors, who shall elect the person or persons to the office or
offices thus created.
Any two offices except those of President and Vice President, may be held
by the same person, but no Officer shall execute, acknowledge or certify any
instrument in more than one capacity, when such instrument is required to be
executed, acknowledged or verified by any two or more Officers.
-8-
<PAGE>
4.2 ELECTION AND TERM OF OFFICE
- --- ---------------------------
The Officers of the Corporation shall be elected by the Board of Directors
at the annual meeting of such Board, except an officer or officers elected to
fill a vacancy or vacancies, who shall be elected in the manner provided for in
Section 4.4 hereof. If the election of Officers shall not be held at such annual
meeting, such election shall be held as soon thereafter as conveniently may be.
Each Officer shall hold office until his successor shall have been duly elected
and shall have qualified or until his death or until he shall resign or shall
have been removed in the manner hereinafter provided, except Officers elected to
fill a vacancy, who shall be elected in the manner provided for in Section 4.4
hereof.
4.3 REMOVAL
- --- -------
Any Officer or Agent elected or appointed by the Board of Directors may be
removed by the Board of Directors whenever, in its judgment, the best interests
of the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
4.4 VACANCIES
- --- ---------
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may, at any regular or special meeting, be filled
by the Board of Directors for the unexpired portion of the term.
4.5 CHAIRMAN
- --- --------
The Chairman shall be the chairman of the board of Directors of the
Corporation and, in general, shall supervise the President and any Vice
President or Vice Presidents when and to the extent the Chairman deems necessary
or advisable.
He shall, when present, preside at all meetings of the Stockholders and
Directors and in his absence, any Vice Chairman or a chairman chosen by the
Directors shall preside at the meetings of Stockholders and Directors.
He may sign, with any Vice Chairman, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary, or any Assistant Secretary or
any other proper officer of the Corporation thereunto authorized by the Board of
Directors, certificates for shares of stock in the Corporation, and any deeds,
mortgages, contracts, or other instruments relating to the property or affairs
of the Corporation.
-9-
<PAGE>
4.6 PRESIDENT
- --- ---------
The President shall be the principal executive officer of the Corporation
and, in general, shall supervise and control all the business and affairs of the
Corporation and determine its policies, consulting with the Chairman, any Vice
Chairman, any Vice President or Vice Presidents when and to the extent the
President deems necessary or advisable.
The President shall also have such other powers as are incident to the
office of President and as may be assigned to him by the Board of Directors.
4.7 VICE PRESIDENTS
- --- ---------------
The Vice President or the Vice Presidents shall be the principal assistant
executive officer or officers of the Corporation and, in general, and in
conjunction with the President, shall supervise and control all the business
affairs of the Corporation and determine its policies, consulting with the
President when and to the extent necessary or advisable.
Such Vice President or Vice Presidents, in the order of seniority, shall,
when present, and may sign, with the Secretary or any Assistant Secretary or any
other proper officer of the Corporation thereunto authorized by the Board of
Directors, certificates for shares of stock in the Corporation, and any deeds,
mortgages, contracts or other instruments conveying or relating to the property
or affairs of the Corporation.
The Vice President, or Vice Presidents, shall also have such other powers
as are incident to the office of Vice President and as may be assigned to him or
them by the Board of Directors.
4.8 SECRETARY
- --- ---------
The Secretary shall:
(a) keep the minutes of the Stockholders' and of the Board of Directors'
meeting in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the provisions
of these By-Laws or as required by law;
(c) Be custodian of the corporate records and of the seal of the
Corporation and see that the seal of the Corporation is affixed to all
documents, the execution of which on behalf of the Corporation under
its seal is duly authorized;
-10-
<PAGE>
(d) keep a register of the post office addresses of each Stockholders,
which shall be furnished to the Secretary by such Stockholder;
(e) sign with the Chairman, Vice Chairman, the President, or any Vice
President, certificates for shares of the Corporation, the issuance of
which shall have been authorized by resolution of the Board of
Directors;
(f) have general charge of the stock transfer books of the Corporation;
and,
(g) in general, perform all duties incident to the office of the Secretary
and such other duties as from time to time may be assigned to him by
the Chairman, any Vice Chairman, the President, any Vice President, or
the Board of Directors.
4.9 TREASURER
- --- ---------
The Treasurer shall:
(a) be the chief financial officer of the Corporation and have general
supervision over its finances;
(b) have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for moneys
due and payable to the Corporation from any source whatsoever and
deposit all such moneys in the name of the Corporation in such banks,
trust companies, or other depositories as shall be selected in
accordance with the provision of Article V of these By-Laws; and
(c) in general, perform all of the duties incident to the office of the
Treasurer and such other duties as from time to time may be assigned
to him by the Chairman, any Vice Chairman, the President, any Vice
President, or the Board of Directors.
4.10 ABSENCE OF OFFICERS
- ---- -------------------
The Board of Directors may from time to time, in the absence of any one or
more of the Officers, designate any person or persons, for and on behalf of the
Corporation, to sign any deeds, mortgages, contracts or other instruments
conveying or relating to the property or affairs of the Corporation, and may
designate any person to fill any office temporarily or for any particular
purpose, and any instruments so signed in accordance with a resolution adopted
by the Board of Directors shall be the valid act of this Corporation as fully
and completely as if executed by any regular Officer.
-11-
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ARTICLE V
---------
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
5.1 CONTRACTS
- --- ---------
The Board of Directors may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the Corporation, and such authority may be general or
confined to specific instances.
5.2 LOANS
- --- -----
No loans shall be contracted on behalf of the Corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the Board of Directors. Such authority may be general or confined to specific
instances.
5.3 COMMERCIAL PAPER, ETC.
- --- ----------------------
All bills, notes, drafts and commercial paper of all kinds to be executed
on behalf of the Corporation as maker, acceptor, endorser, or otherwise, and all
negotiable instruments except checks shall be made in the name of the
Corporation and shall be signed by such person or persons as the Board of
Directors may from time to time designate.
Checks to be executed on behalf of the Corporation shall be made in the
name of the Corporation and shall be signed by such person or persons as the
Board of Directors or the Treasurer of the Corporation may from time to time
designate.
5.4 DEPOSITS
- --- --------
All funds of the Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies, or
other depositories as the Board of Directors or the Treasurer of the Corporation
may select.
ARTICLE VI
----------
CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.1 CERTIFICATE FOR SHARES
- --- ----------------------
Certificates representing shares of the Corporation shall be in such form
as may be determined by the Board of Directors and as will comply with the
provisions of Section 21 (39) of the Alabama Business Corporation Act. Such
certificates shall
-12-
<PAGE>
be signed by the Chairman, any Vice Chairman, the President, or any Vice
President and by the Secretary or any Assistant Secretary. All certificates for
shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the Corporation. All certificates surrendered to the Corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost, destroyed or mutilated certificate, a
new one may be issued therefor upon such terms and indemnity to the Corporation
as the Board of Directors may prescribe.
6.2 TRANSFER OF SHARES
- --- ------------------
Transfer of Shares of the Corporation shall be made only on the stock
transfer books of the Corporation by the holder of record thereof or by his
legal representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and on surrender for
cancellation of the certificate of such shares. The person in whose name shares
stand on the books of the Corporation shall be deemed by the Corporation to be
the owner thereof for all purposes.
The Stockholders may by resolution duly adopted restrict or limit the
negotiability of shares of stock, provided that a reference to such resolution
shall appear on the face or reverse side of each certificate for shares of stock
issued by the corporation.
ARTICLE VII
-----------
DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation
may pay, dividends on its outstanding shares in the manner and upon the terms
and conditions provided by law.
ARTICLE VIII
------------
SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation
and the state of incorporation and the words "Corporate Seal".
-13-
<PAGE>
ARTICLE IX
----------
WAIVER OF NOTICE
Whenever any notice is required to be given to any Stockholder or Director
of the Corporation under the provisions of these By-Laws or under the provisions
of the Articles of Incorporation or under the provisions of the Alabama Business
Corporation Act, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be deemed equivalent to the giving of such notice.
ARTICLE X
---------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
This Corporation shall indemnify and hold harmless each of its Directors
and Officers and each of the Directors and Officers of any subsidiary
corporation against any and all expenses actually and necessarily incurred by
him in connection with the defense of any action, suit or proceeding in which he
is made a party by reason of his being or having been a Director or Officer of
this Corporation or of any subsidiary corporation, including, without limiting
the generality of the foregoing, the amount of any judgment or award in such
action, suit or proceeding.
In the event of settlement of such action, suit or proceeding,
indemnification shall include reimbursement of amounts paid in settlement and
expenses actually and necessarily incurred by such Director or Officer in
connection therewith, but indemnification in the instance of settlement shall be
provided only if this Corporation is advised by its counsel that, in his
opinion, such settlement is for the best interest of this Corporation and the
Director or Officer to be indemnified has not been guilty of gross negligence or
wanton misconduct in respect of any matter covered by such settlement. Such
right of indemnification shall not be deemed exclusive of any other right or
rights to which he may be entitled under any by-law, agreement, vote of
Stockholders or otherwise.
ARTICLE XI
----------
JOINT MEETINGS OF STOCKHOLDERS AND DIRECTORS
At any regular, special or annual meeting where all of the Directors and
all of the Stockholders are present in person (or by proxy in the case of
Stockholders), the said Stockholders and Directors may meet jointly upon their
unanimous consent. The fact that such a joint meeting is held does not in itself
abrogate, change or diminish the exclusive rights and powers vested in the
Stockholders or in the Directors, as the case may be, and all motions or
resolutions shall be presumed to have been offered and voted on by the
Stockholders or the Directors vested with the power delegated to such group, and
where such motion or resolution reflects the
-14-
<PAGE>
unanimous consent of all of the Stockholders and Directors at such joint
meeting, same shall constitute the ratification and approval of such motion or
resolution by the other group.
ARTICLE XII
-----------
PARLIAMENTARY PROCEDURE
"Roberts' Rules of Order, Revised" shall be the parliamentary authority for
this corporation.
ARTICLE XIII
------------
AMENDMENTS
These By-Laws may be altered or amended and additional By-Laws adopted by
majority vote at any meeting of the Stockholders in the notice of which meeting
the proposed amendment or new By-Laws shall be set forth at large. This shall
not preclude the amendment of these By-Laws at any meeting where all of the
Stockholders are present in person or by proxy, prior notice of the proposed
amendment in such cases being then unnecessary.
ARTICLE XIV
-----------
The terms "stockholder" and "shareholder" as used herein are
interchangeable and both refer to shareholders as described or defined in the
Alabama Business Corporation Act.
-15-
<PAGE>
EXHIBIT 4.3
================================================================================
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of June 23, 1999,
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,
KEY CORPORATE CAPITAL INC.,
as Syndication Agent,
and
SCOTIABANC INC.,
as Documentation Agent
FIRST UNION CAPITAL MARKETS CORP.
acted as Lead Arranger
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS............................................................................................... 1
SECTION 1.1 Definitions...................................................................................... 1
-----------
SECTION 1.2 General.......................................................................................... 21
-------
SECTION 1.3 Other Definitions and Provisions................................................................. 21
--------------------------------
ARTICLE II REVOLVING CREDIT FACILITY................................................................................ 21
SECTION 2.1 Revolving Credit Loans........................................................................... 21
----------------------
SECTION 2.2 Swingline Loans.................................................................................. 22
---------------
SECTION 2.3 Procedure for Advances of Revolving Credit Loans and Swingline Loans............................. 23
--------------------------------------------------------------------
SECTION 2.4 Repayment of Loans............................................................................... 24
------------------
SECTION 2.5 Notes............................................................................................ 25
-----
SECTION 2.6 Permanent Reduction of the Revolving Credit Commitment........................................... 26
------------------------------------------------------
SECTION 2.7 Termination of Revolving Credit Facility......................................................... 26
----------------------------------------
ARTICLE III LETTER OF CREDIT FACILITY............................................................................... 27
SECTION 3.1 L/C Commitment and Aggregator L/C Commitment..................................................... 27
--------------------------------------------
SECTION 3.2 Procedure for Issuance of Letters of Credit...................................................... 28
-------------------------------------------
SECTION 3.3 Commissions and Other Charges.................................................................... 29
-----------------------------
SECTION 3.4 L/C Participations............................................................................... 29
------------------
SECTION 3.5 Reimbursement Obligation and Aggregator Reimbursement Obligation of the Borrowers................ 32
---------------------------------------------------------------------------------
SECTION 3.6 Obligations Absolute............................................................................. 32
--------------------
SECTION 3.7 Effect of Application............................................................................ 33
---------------------
ARTICLE IV TERM LOAN FACILITIES..................................................................................... 33
SECTION 4.1 Term Loans....................................................................................... 33
----------
SECTION 4.2 Procedure for Advance of Term Loans.............................................................. 34
-----------------------------------
SECTION 4.3 Repayment of Term Loans.......................................................................... 34
-----------------------
SECTION 4.4 Prepayments of Term Loans........................................................................ 36
-------------------------
SECTION 4.5 Term Notes....................................................................................... 38
----------
ARTICLE V GENERAL LOAN PROVISIONS................................................................................... 39
SECTION 5.1 Interest......................................................................................... 39
--------
SECTION 5.2 Notice and Manner of Conversion or Continuation of Loans......................................... 42
--------------------------------------------------------
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SECTION 5.3 Fees............................................................................................. 43
----
SECTION 5.4 Manner of Payment................................................................................ 44
-----------------
SECTION 5.5 Crediting of Payments and Proceeds............................................................... 45
----------------------------------
SECTION 5.6 Adjustments...................................................................................... 46
-----------
SECTION 5.7 Nature of Obligations of Lenders Regarding Extensions of Credit; Assumption by the
----------------------------------------------------------------------------------
Administrative Agent............................................................................. 46
--------------------
SECTION 5.8 Changed Circumstances............................................................................ 47
---------------------
SECTION 5.9 Indemnity........................................................................................ 49
---------
SECTION 5.10 Capital Requirements............................................................................. 49
--------------------
SECTION 5.11 Taxes............................................................................................ 49
-----
SECTION 5.12 Use of Proceeds.................................................................................. 51
---------------
SECTION 5.13 Security......................................................................................... 51
--------
ARTICLE VI CLOSING; CONDITIONS OF CLOSING AND BORROWING............................................................. 53
SECTION 6.1 Closing.......................................................................................... 53
-------
SECTION 6.2 Conditions to Closing and Initial Extensions of Credit........................................... 53
------------------------------------------------------
SECTION 6.3 Conditions to All Loans, Letters of Credit and Aggregator Letters of Credit...................... 57
---------------------------------------------------------------------------
SECTION 6.4 Post-Closing Covenants........................................................................... 58
----------------------
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BORROWERS......................................................... 60
SECTION 7.1 Representations and Warranties................................................................... 60
------------------------------
SECTION 7.2 Survival of Representations and Warranties, Etc.................................................. 67
-----------------------------------------------
ARTICLE VIII FINANCIAL INFORMATION AND NOTICES...................................................................... 67
SECTION 8.1 Financial Statements and Projections............................................................. 67
------------------------------------
SECTION 8.2 Officer's Compliance Certificate................................................................. 68
--------------------------------
SECTION 8.3 Accountants' Certificate......................................................................... 68
------------------------
SECTION 8.4 Other Reports.................................................................................... 69
-------------
SECTION 8.5 Notice of Litigation and Other Matters........................................................... 69
--------------------------------------
SECTION 8.6 Accuracy of Information.......................................................................... 70
-----------------------
ARTICLE IX AFFIRMATIVE COVENANTS.................................................................................... 70
SECTION 9.1 Preservation of Corporate Existence and Related Matters.......................................... 70
-------------------------------------------------------
SECTION 9.2 Maintenance of Property.......................................................................... 70
-----------------------
SECTION 9.3 Insurance........................................................................................ 70
---------
SECTION 9.4 Accounting Methods and Financial Records......................................................... 70
----------------------------------------
SECTION 9.5 Payment and Performance of Obligations........................................................... 71
--------------------------------------
SECTION 9.6 Compliance With Laws and Approvals............................................................... 71
----------------------------------
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SECTION 9.7 Environmental Laws............................................................................... 71
------------------
SECTION 9.8 Compliance with ERISA............................................................................ 71
---------------------
SECTION 9.9 Compliance With Agreements....................................................................... 72
--------------------------
SECTION 9.10 Conduct of Business.............................................................................. 72
-------------------
SECTION 9.11 Visits and Inspections........................................................................... 72
----------------------
SECTION 9.12 Additional Borrowers and Collateral.............................................................. 72
-----------------------------------
SECTION 9.13 Additional Real Property Collateral.............................................................. 73
-----------------------------------
SECTION 9.14 Vendor-Provided Financing........................................................................ 73
-------------------------
SECTION 9.15 Year 2000 Compatibility.......................................................................... 73
-----------------------
SECTION 9.16 Interest Rate Protection......................................................................... 73
------------------------
SECTION 9.17 Primary Deposit Accounts......................................................................... 74
------------------------
SECTION 9.18 Further Assurances............................................................................... 74
------------------
ARTICLE X FINANCIAL COVENANTS....................................................................................... 74
SECTION 10.1 Leverage Ratio................................................................................... 74
--------------
SECTION 10.2 Senior Leverage Ratio............................................................................ 74
---------------------
SECTION 10.3 Fixed Charge Coverage Ratio...................................................................... 75
---------------------------
SECTION 10.4 Minimum Net Worth................................................................................ 75
-----------------
SECTION 10.5 Minimum Pro Forma EBITDA......................................................................... 76
------------------------
ARTICLE XI NEGATIVE COVENANTS....................................................................................... 76
SECTION 11.1 Limitations on Debt.............................................................................. 76
-------------------
SECTION 11.2 Limitations on Guaranty Obligations.............................................................. 77
-----------------------------------
SECTION 11.3 Limitations on Liens............................................................................. 78
--------------------
SECTION 11.4 Limitations on Loans, Advances, Investments and Acquisitions..................................... 79
------------------------------------------------------------
SECTION 11.5 Limitations on Mergers and Liquidation........................................................... 84
--------------------------------------
SECTION 11.6 Limitations on Sale of Assets.................................................................... 84
-----------------------------
SECTION 11.7 Limitations on Dividends, Distributions and Redemptions.......................................... 85
-------------------------------------------------------
SECTION 11.8 Limitations on Exchange and Issuance of Capital Stock............................................ 85
-----------------------------------------------------
SECTION 11.9 Transactions with Affiliates..................................................................... 85
----------------------------
SECTION 11.10 Certain Accounting Changes; Organizational Documents............................................. 86
----------------------------------------------------
SECTION 11.11 Amendments; Payments and Prepayments of Subordinated Debt........................................ 86
---------------------------------------------------------
SECTION 11.12 Restrictive Agreements........................................................................... 86
----------------------
SECTION 11.13 Impairment of Security Interests................................................................. 86
--------------------------------
ARTICLE XII DEFAULT AND REMEDIES.................................................................................... 86
SECTION 12.1 Events of Default................................................................................ 86
-----------------
SECTION 12.2 Remedies......................................................................................... 89
--------
SECTION 12.3 Rights and Remedies Cumulative; Non-Waiver; etc.................................................. 90
-----------------------------------------------
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<S> <C>
ARTICLE XIII THE ADMINISTRATIVE AGENT............................................................................... 90
SECTION 13.1 Appointment...................................................................................... 90
-----------
SECTION 13.2 Delegation of Duties............................................................................. 91
--------------------
SECTION 13.3 Exculpatory Provisions........................................................................... 91
----------------------
SECTION 13.4 Reliance by the Administrative Agent............................................................. 91
------------------------------------
SECTION 13.5 Notice of Default................................................................................ 92
-----------------
SECTION 13.6 Non-Reliance on the Administrative Agent and Other Lenders....................................... 92
----------------------------------------------------------
SECTION 13.7 Indemnification.................................................................................. 93
---------------
SECTION 13.8 The Administrative Agent in Its Individual Capacity.............................................. 93
---------------------------------------------------
SECTION 13.9 Resignation of the Administrative Agent; Successor Administrative Agent.......................... 93
-----------------------------------------------------------------------
SECTION 13.10 Syndication Agent and Documentation Agent........................................................ 94
-----------------------------------------
ARTICLE XIV MISCELLANEOUS........................................................................................... 94
SECTION 14.1 Notices.......................................................................................... 94
-------
SECTION 14.2 Expenses; Indemnity.............................................................................. 95
-------------------
SECTION 14.3 Set-off.......................................................................................... 95
-------
SECTION 14.4 Governing Law.................................................................................... 96
-------------
SECTION 14.5 Consent to Jurisdiction.......................................................................... 96
-----------------------
SECTION 14.6 Binding Arbitration; Waiver of Jury Trial........................................................ 96
-----------------------------------------
SECTION 14.7 Reversal of Payments............................................................................. 97
--------------------
SECTION 14.8 Injunctive Relief; Punitive Damages.............................................................. 98
-----------------------------------
SECTION 14.9 Accounting Matters............................................................................... 98
------------------
SECTION 14.10 Successors and Assigns; Participations........................................................... 98
--------------------------------------
SECTION 14.11 Amendments, Waivers and Consents................................................................. 101
--------------------------------
SECTION 14.12 Performance of Duties............................................................................ 103
---------------------
SECTION 14.13 All Powers Coupled with Interest................................................................. 103
--------------------------------
SECTION 14.14 Survival of Indemnities.......................................................................... 103
-----------------------
SECTION 14.15 Titles and Captions.............................................................................. 103
-------------------
SECTION 14.16 Severability of Provisions....................................................................... 103
--------------------------
SECTION 14.17 Counterparts..................................................................................... 103
------------
SECTION 14.18 Company as Agent for the Borrowers............................................................... 103
----------------------------------
SECTION 14.19 Obligations Joint and Several; Contribution...................................................... 104
-------------------------------------------
SECTION 14.20 Term of Agreement................................................................................ 104
-----------------
</TABLE>
iv
<PAGE>
EXHIBITS AND SCHEDULES
----------------------
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 Form of Swingline Note
Exhibit A-3 Form of Term A Note
Exhibit A-4 Form of Term B Note
Exhibit B-1 Form of Notice of Revolving Credit/Swingline Borrowing
Exhibit B-2 Form of Term Loan 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 Joinder Agreement
SCHEDULES
- ---------
Schedule 1.1(a) Lenders and Commitments
Schedule 6.4(a) Locations of Real Property with Significant Inventory
Schedule 6.4(b)(i) Closing Date Vendor-Provided Financing
Schedule 6.4(b)(ii) Post-Closing Vendor-Provided Financing
Schedule 7.1(a) Jurisdictions of Organization and Qualification
Schedule 7.1(b) Subsidiaries and Capitalization
Schedule 7.1(i) ERISA Plans
Schedule 7.1(l) Material Contracts
Schedule 7.1(m) Labor and Collective Bargaining Agreements
Schedule 7.1(r) Description of Real Property
Schedule 7.1(t) Debt and Guaranty Obligations
Schedule 7.1(u) Litigation
Schedule 11.1 Existing Debt Not Otherwise Permitted
Schedule 11.3(f) Existing General Liens
Schedule 11.3(h) Existing Vendor-Provided Financing and Trade Financing Liens
Schedule 11.4 Existing Loans, Advances and Investments
</TABLE>
v
<PAGE>
AMENDED AND RESTATED
CREDIT AGREEMENT
----------------
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of the 23rd day of June,
1999, 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"), KEY CORPORATE CAPITAL INC., as Syndication Agent for
the Lenders (the "Syndication Agent"), and SCOTIABANC INC., as Documentation
Agent for the Lenders (the "Documentation Agent").
STATEMENT OF PURPOSE
--------------------
Pursuant to the Credit Agreement dated as of July 31, 1998 (as amended by
the First Amendment and Waiver to Credit Agreement dated as of December 11,
1998, and as further amended, restated, supplemented or otherwise modified from
time to time, the "Initial Credit Agreement"), by and among the Initial
Borrowers, the lenders party thereto (the "Initial Lenders"), the Administrative
Agent and the Documentation Agent, the Initial Lenders have extended certain
credit facilities to the Initial Borrowers pursuant to the terms thereof.
The Initial Borrowers have requested, and, subject to the terms and
conditions hereof, the Administrative Agent, the Syndication Agent, the
Documentation Agent and the Lenders have agreed, to amend and restate the
Initial Credit Agreement to provide for, among other things, (i) the increase of
the Aggregate Commitment from $175,000,000 to $250,000,000, (ii) the addition of
two term loan facilities, (iii) the addition of a separate letter of credit
facility, (iv) the addition of certain of the Lenders and (v) the modification
of certain other terms and conditions, all as set forth herein.
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:
"Acquiree" shall have the meaning assigned thereto in Section 6.4(c).
--------
"Acquiror" shall have the meaning assigned thereto in Section 6.4(c).
--------
<PAGE>
"Additional Borrower" means each Material Subsidiary which hereafter
-------------------
becomes a Borrower pursuant to Section 9.12.
"Additional Excess Refused Proceeds" shall have the meaning assigned
----------------------------------
thereto in Section 2.4(e).
"Adjustment Date" shall have the meaning assigned thereto in Section
---------------
5.1(c).
"Administrative Agent" means First Union in its capacity as Administrative
--------------------
Agent hereunder, and any successor thereto appointed pursuant to Section 13.9.
"Administrative Agent's Office" means the office of the Administrative
-----------------------------
Agent specified in or determined in accordance with the provisions of Section
14.1.
"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.
"Agreement" means this Credit Agreement, as amended, restated, supplemented
---------
or otherwise modified .
"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 Two Hundred Fifty Million Dollars ($250,000,000).
"Aggregator Issuing Lender" means First Union, in its capacity as issuer of
-------------------------
any Aggregator Letter of Credit, or any successor.
"Aggregator L/C Commitment" means (a) as to any Lender, the obligation of
-------------------------
such Lender to issue or participate in Aggregator Letters of Credit issued for
the account of the Borrowers hereunder in an aggregate 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 such amount may be reduced or modified at any time or
- ---------------
from time to time pursuant to the terms hereof, and (b) as to all Lenders, the
aggregate commitment of all Lenders to issue or participate in Aggregator
Letters of Credit issued for the account of the Borrowers, as such amount may be
reduced at any time or from time to time pursuant to the terms hereof. The
Aggregator L/C Commitment of all Lenders on the Closing Date shall be Eight
Million Five Hundred Thousand Dollars ($8,500,000).
2
<PAGE>
"Aggregator L/C Facility" means the letter of credit facility established
-----------------------
pursuant to Article III hereof (and pursuant to which the Borrowers may request
Aggregator Letters of Credit).
"Aggregator L/C Facility Termination Date" means the earlier to occur of
----------------------------------------
(a) the resignation of First Union as Administrative Agent in accordance with
Section 13.9 and (b) the Revolving Credit Maturity Date.
"Aggregator 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
Aggregator Letters of Credit and (b) the aggregate amount of drawings under
Aggregator Letters of Credit which have not then been reimbursed pursuant to
Section 3.5(b).
"Aggregator L/C Participants" means the collective reference to all the
---------------------------
Lenders which have an Aggregator L/C Commitment other than the Aggregator
Issuing Lender.
"Aggregator L/C Percentage" means, as to the respective Aggregator L/C
-------------------------
Commitment of any Lender at any time, the ratio of (a) the amount of the
Aggregator L/C Commitment of such Lender to (b) all of the Aggregator L/C
Commitments of all Lenders.
"Aggregator Letters of Credit" shall have the meaning assigned thereto in
----------------------------
Section 3.1(b).
"Aggregator Reimbursement Obligation" means the obligation of the Borrowers
-----------------------------------
to reimburse the Aggregator Issuing Lender pursuant to Section 3.5(b) for
amounts drawn under Aggregator Letters of Credit.
"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" means the applicable margin with respect to the Loans
-----------------
as set forth in Section 5.1(c).
"Application" means an application, as applicable, (i) in the form
-----------
specified by the Issuing Lender from time to time, requesting the Issuing Lender
to issue a Letter of Credit or (ii) in the form specified by the Aggregator
Issuing Lender from time to time, requesting the Aggregator Issuing Lender to
issue an Aggregator Letter of Credit.
"Assignment and Acceptance" shall have the meaning assigned thereto in
-------------------------
Section 14.10.
"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.
3
<PAGE>
"Base Rate Loan" means any Loan bearing interest at a rate based upon the
--------------
Base Rate as provided in Section 5.1(a).
"Benefited Lender" shall have the meaning assigned thereto in Section 5.6.
----------------
"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.
"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 11.4(b).
----------------
"Change in Control" shall have the meaning assigned thereto in Section
-----------------
12.1(i).
"Closing Date" means the date of this Agreement or such later Business Day
------------
upon which each condition described in Article VI shall be satisfied or waived
in all respects in a manner acceptable to the Administrative Agent, in its sole
discretion.
"Closing Date Vendor-Provided Financing" means any existing Vendor-Provided
--------------------------------------
Financing or any other existing trade payable of any Borrower or Borrowers (i)
which is secured by a Lien which covers assets of the applicable Borrower or
Borrowers other than or in addition to the property and related receivables
financed by such trade payable and (ii) with respect to which the corresponding
Lien shall be released as a result of the issuance on or about the Closing Date
of an Aggregator Letter of Credit. The Closing Date Vendor-Provided Financing
is set forth on Schedule 6.4(b)(i) attached hereto.
------------------
4
<PAGE>
"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 sum of such Lender's Revolving
----------
Credit Commitment, Term A Loan Commitment and Term B Loan Commitment as 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
-------------------
5.3(a).
"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.
"Credit Facility" means the collective reference to the Revolving Credit
---------------
Facility, the Term A Loan Facility, the Term B Loan Facility, the L/C Facility
and the Aggregator 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 with respect to accrued and unpaid cash earnout
payments reflected on the Consolidated balance sheet of the Company and its
Subsidiaries and created in connection with any Permitted Acquisition and all
other 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 Financing 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 ninety (90) days after the Closing Date with respect
- ---------
to Section 6.4(b) or sixty (60) days after the creation, incurrence or
assumption thereof with respect to Section 9.14, Debt shall include any Vendor-
Provided Financing or other trade payable in each case referred to in Sections
6.4(b) or 9.14, as applicable, with respect to which (A) the corresponding Lien
has not been released as a result of the issuance of an Aggregator Letter of
Credit as provided in such Sections 6.4(b) or 9.14, as applicable, (B) an
intercreditor agreement has not been executed as provided in such Sections
6.4(b) or 9.14, as applicable, or (C) a modification to the applicable security
documents which limits the collateral security secured thereby has not been
executed as provided in Sections 6.4(b) or 9.14, as applicable), (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
5
<PAGE>
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
(other than obligations with respect to the Aggregator Letters of Credit,
including, without limitation, any Aggregator Reimbursement Obligation).
Notwithstanding the foregoing, all payment obligations under any forward
contract executed by the Company in connection with any hedging arrangement
shall be excluded from Debt.
"Default" means any of the events specified in Section 12.1 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 institution which in the ordinary course of business
extends credit of the type extended hereunder and that has total assets in
excess of $250,000,000, (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, (f) a special
purpose investment fund which is organized for the specific purpose of making,
acquiring participations in, or investing in loans of the type made pursuant to
this Agreement, or (g) 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.
6
<PAGE>
"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 12.1,
----------------
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Excess Proceeds" shall have the meaning assigned thereto in Section
---------------
2.4(d).
"Excess Refused Proceeds" shall have the meaning assigned thereto in
-----------------------
Section 2.4(e).
"Existing Subordinated Notes" means the $100,000,000 Global Imaging
---------------------------
Systems, Inc. 10 3/4% Senior Subordinated Notes due 2007, including, without
limitation, any Add-On Notes, Exchange Notes or other replacement notes, in each
case issued pursuant to the Indenture dated as of March 8, 1999.
"Extensions of Credit" means, as to any Lender at any time, (a) an amount
--------------------
equal to the sum of (i) the amount equal to such Lender's Revolving Credit
Commitment Percentage of the Revolving Credit Loans then outstanding, (ii) the
amount equal to such Lender's Revolving Credit Commitment Percentage of the L/C
Obligations then outstanding, (iii) the amount equal to such Lender's Revolving
Credit Commitment Percentage of the Swingline Loans then outstanding, (iv) the
amount equal to such Lender's Term A Loan Percentage of the Term A Loans then
outstanding, (v) the amount equal to such Lender's Term B Loan Percentage of the
Term B Loans then outstanding and (vi) the amount equal to such Lender's
Aggregator L/C Percentage of the Aggregator L/C Obligations then outstanding or
(b) the making of any Loan or issuance of or participation in any Letter of
Credit or Aggregator Letter of Credit by any Lender, as the context requires.
7
<PAGE>
"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 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, FUCMC and First Union dated as of April 28, 1999.
"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, (b)
Interest Expense, (c) scheduled principal payments with respect to any Debt
(including, without limitation, the principal portion of payments attributable
to Capital Leases), (d) Capital Expenditures (excluding (i) Capital Expenditures
constituting part of a Permitted Acquisition and (ii) Rental Pool Capital
Expenditures), (e) Rental Expense and (f) cash earnout payments in connection
with any Permitted Acquisition.
"FUCMC" means First Union Capital Markets Corp., 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
8
<PAGE>
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.
"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.
9
<PAGE>
"Interest Period" shall have the meaning assigned thereto in Section
---------------
5.1(b).
"Inventory" shall have the meaning assigned thereto in the Security
---------
Agreement.
"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 9.12 in favor of Administrative
Agent for the ratable benefit of the Administrative Agent and the Lenders and
substantially in the form of Exhibit H, as amended, restated, supplemented or
---------
otherwise modified.
"L/C Commitment" means the lesser of (a) Seven Million Five Hundred
--------------
Thousand Dollars ($7,500,000) and (b) the Revolving Credit Commitment.
"L/C Facility" means the letter of credit facility established pursuant to
------------
Article III hereof (and pursuant to which the Borrowers may request Letters of
Credit).
"L/C Facility Termination Date" means the earlier to occur of (a) the
-----------------------------
resignation of First Union as Administrative Agent in accordance with Section
13.9 and (b) the Revolving Credit Maturity Date.
"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(b).
"L/C Participants" means the collective reference to all the Lenders other
----------------
than the Issuing Lender.
"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 14.10.
"Lending Office" means, with respect to any Lender, the office of such
--------------
Lender maintaining such Lender's Loans.
"Letters of Credit" shall have the meaning assigned thereto in Section
-----------------
3.1(a).
"Leverage Ratio" means the ratio calculated in accordance with Section
--------------
10.1.
"Lewan Acquisition" shall have the meaning assigned thereto in Section
-----------------
6.4(c).
10
<PAGE>
"Lewan Joinder Agreement" means the joinder agreement executed by Lewan
-----------------------
Acquisition, Inc. (to be known as Lewan & Associates, Inc.) pursuant to which
Lewan Acquisition, Inc. (to be known as Lewan & Associates, Inc.) shall become a
Grantor under the Security Agreement and an Issuer under the Pledge Agreement.
"Lewan Merger Agreement" shall have the meaning assigned thereto in Section
----------------------
6.4(c).
"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 Dow Jones
Market Screen 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 Dow Jones
Market Screen Page 3750, then "LIBOR" shall be determined by the Administrative
Agent to be the arithmetic average of the rate per annum at which deposits in
Dollars in a minimum amount of at least $5,000,000 would be offered by first
class banks in the London interbank market to the Administrative Agent at
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. Each calculation by the Administrative Agent of LIBOR shall be
conclusive and binding for all purposes, absent manifest error.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the
----------
next higher 1/100/th/ of 1%) determined by the Administrative Agent pursuant to
the following formula:
LIBOR Rate = LIBOR
-----------------------------------------
1.00 - Eurodollar Reserve Percentage
Each calculation by the Administrative Agent of the LIBOR Rate shall be
conclusive and binding for all purposes, absent manifest error.
"LIBOR Rate Loan" means any Loan bearing interest at a rate based upon the
---------------
LIBOR Rate as provided in Section 5.1(a).
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
----
charge, collateral assignment, 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,
-----
the Term A Loans, the Term B 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 Aggregator Letters of Credit, the
Security Documents, any Hedging Agreement with any Lender (which such Hedging
Agreement is permitted or required hereunder),
11
<PAGE>
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 EBITDA in
excess of five percent (5%) of the Consolidated Pro Forma EBITDA of the Company
and its Subsidiaries for such period as reflected on the financial statements
delivered in accordance with Section 8.1, (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 Administrative 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 9.12 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 EBITDA
for any period of four (4) consecutive fiscal quarters equal to not less than
ninety percent (90%) of Consolidated Pro Forma EBITDA for such period. The
Material Subsidiaries of the Borrowers as of the Closing Date are designated on
Schedule 7.1(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.
12
<PAGE>
"Net Cash Proceeds" means, as applicable, (a) with respect to any sale
-----------------
or other disposition of assets, the gross cash proceeds received by any 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 any 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 of Debt or offering of equity
securities and for purposes of Section 10.4, the gross cash proceeds received by
any 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
Consolidated 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 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,
-----
the Term A Notes, the Term B Notes and the 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 Revolving Credit/Swingline Borrowing" shall have the
----------------------------------------------
meaning assigned thereto in Section 2.3(a).
"Notice of Term Loan Borrowing" shall have the meaning assigned
thereto in Section 4.2.
"Notice of Conversion/Continuation" shall have the meaning assigned
---------------------------------
thereto in Section 5.2.
"Notice of Prepayment" shall have the meaning assigned thereto in
--------------------
Section 2.4(c).
13
<PAGE>
"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, (c) the Aggregator L/C Obligations, (d) all payment and
other obligations owing by any Borrower to any Lender or the Administrative
Agent under any Hedging Agreement with any Lender or the Administrative Agent
(which such Hedging Agreement is permitted or required hereunder), and (e) 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 Aggregator 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 8.2.
"Other Taxes" shall have the meaning assigned thereto in Section
-----------
5.11(b).
"Partnership/LLC" shall have the meaning assigned thereto in the
---------------
Pledge Agreement.
"Payment Refusal" shall have the meaning assigned thereto in Section
---------------
4.4(b).
"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
---------------------
11.4(e) hereof.
"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.
14
<PAGE>
"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 dated as of July 31,
----------------
1998, as amended, restated, supplemented or otherwise modified from time to
time, executed by the Borrowers in favor of the Administrative Agent for the
ratable benefit of itself and the other Lenders.
"Post-Closing Vendor-Provided Financing" means all existing Vendor-
--------------------------------------
Provided Financing and all other existing trade payable of any Borrower or
Borrowers (other than the Closing Date Vendor-Provided Financing) (i) which is
secured by a Lien which covers assets of the applicable Borrower or Borrowers
other than or in addition to the property and related receivables financed by
such trade payable and (ii) with respect to which the corresponding Lien shall
be released as a result of the issuance pursuant to Section 6.4(b)(ii) of an
Aggregator Letter of Credit. The Post-Closing Vendor-Provided Financing is set
forth on Schedule 6.4(b)(ii) attached hereto.
-------------------
"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 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 closed during such
period. For the purposes hereof, Pro Forma EBITDA shall be adjusted to reflect
any non-recurring costs and any extraordinary expenses of any such Permitted
Acquisition closed during such period in a manner satisfactory to the
Administrative Agent; provided that approval of the Required Lenders will also
--------
be necessary for any such adjustments (i) which exceed in total for any such
Permitted Acquisition the greater of (A) two percent (2%) of the then current
Pro Forma EBITDA of the Company and its subsidiaries (but calculated without
regard to the proposed acquired entity) or (B) fifteen percent (15%) of the
actual historical EBITDA of the proposed acquired entity and (ii) in connection
with any Permitted Acquisition for which the purchase price falls outside of the
Permitted Acquisition baskets set forth in Section 11.4(e). These adjustments
shall be consistent with the adjustments made in the financial information
delivered to the Administrative Agent and the 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.
15
<PAGE>
"Quoted Swingline Rate" means a rate to be agreed upon from time to
---------------------
time by the Swingline Lender and the Borrower.
"Quoted Swingline Rate Loan" means any Swingline Loan bearing interest
--------------------------
at a rate based upon the Quoted Swingline Rate as provided in Section 5.1(b).
"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.
"Register" shall have the meaning assigned thereto in Section
--------
14.10(d).
"Reimbursement Obligation" means the obligation of the Borrowers to
------------------------
reimburse the Issuing Lender pursuant to Section 3.5(a) 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, (a) any combination of Lenders
----------------
holding at least fifty-one percent (51%) of the sum of (i) the Revolving Credit
Commitments (or the Revolving Credit Loans if such Commitments have been
terminated) and (ii) the Term A Loans (or the Term A Loan Commitments if such
Commitments have not been terminated and no Term A Loans are outstanding) and
(b) any combination of Lenders holding at least fifty-one percent of the Term B
Loans.
"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 Commitment" means (a) as to any Lender, the
---------------------------
obligation of such Lender to make Revolving Credit Loans to the Borrowers
hereunder, to issue or participate in Letters of Credit issued for the account
of the Borrowers hereunder and to participate in Swingline Loans made to the
Borrowers 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 such amount may be reduced or modified at any time or
- ---------------
from time to
16
<PAGE>
time pursuant to the terms hereof, and (b) as to all Lenders, the aggregate
commitment of all Lenders to make Revolving Credit Loans to the Borrowers
hereunder, to issue or participate in Letters of Credit issued for the account
of the Borrowers hereunder and to participate in Swingline Loans made to the
Borrowers hereunder, as such amount may be reduced at any time or from time to
time pursuant to the terms hereof. The Revolving Credit Commitment of all
Lenders on the Closing Date shall be One Hundred Fifty Million Dollars
($150,000,000).
"Revolving Credit Commitment Percentage" means, as to the respective
--------------------------------------
Revolving Credit Commitment of any Lender at any time, the ratio of (a) the
amount of the Revolving Credit Commitment of such Lender to (b) all of the
Revolving Credit Commitments of all Lenders.
"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 Maturity Date" means the earliest of the dates
------------------------------
referred to in Section 2.7.
"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, modifications and supplements
thereto, any substitutes therefor, and any replacements, restatements, renewals
or extensions thereof, in whole or in part; "Revolving Credit Note" means any of
such Revolving Credit Notes.
"Security Agreement" means the Security Agreement dated as of July 31,
------------------
1998, as amended, restated, supplemented or otherwise modified from time to
time, executed by the Borrowers in favor of the Administrative Agent for the
ratable benefit of itself and the other Lenders.
"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
17
<PAGE>
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 the Debt evidenced by the Existing
-----------------
Subordinated Notes and any other Debt of any Borrower or any Subsidiary thereof
subordinated in right and time of payment to the Obligations and otherwise
containing terms and conditions 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.
"Swingline Commitment" means Fifteen Million Dollars ($15,000,000).
--------------------
"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 Maturity Date" means the earlier to occur of (a) the
-----------------------
resignation of First Union as Administrative Agent in accordance with Section
13.9 and (b) the Revolving Credit Maturity Date.
"Syndication Agent" means Key Corporate Capital Inc. in its capacity
-----------------
as Syndication Agent hereunder.
18
<PAGE>
"Taxes" shall have the meaning assigned thereto in Section 5.11(a).
-----
"Term Loans" means the Term A Loans or the Term B Loans made to the
----------
Borrowers by the Lenders pursuant to Section 4.1, or all such Term Loans, as the
context requires.
"Term A Loans" means the term loans to be made to the Borrowers by the
------------
Lenders pursuant to Section 4.1(a).
"Term A Loan Commitment" means (a) as to any Lender, the obligation of
----------------------
such Lender to make the Term A Loans to the account of the Borrowers hereunder
in an aggregate principal amount not to exceed the amount set forth opposite
such Lender's name on Schedule 1.1(a) hereto, as such amount may be reduced or
---------------
modified at any time or from time to time pursuant to the terms hereof, and (b)
as to all Lenders, the aggregate commitment to make Term A Loans. The Term A
Loan Commitment of all Lenders as of the Closing Date shall be Twenty-Five
Million Dollars ($25,000,000).
"Term A Loan Facility" shall mean the term loan facility established
--------------------
pursuant to Article IV hereof.
"Term A Loan Lender" means each Lender which has a Term A Loan
------------------
Commitment or which has extended Term A Loans to the Borrowers.
"Term A Loan Maturity Date" means the first to occur of (a) June 30,
-------------------------
2004, and (b) the date of termination by the Administrative Agent on behalf of
the Lenders pursuant to Section 12.2(a).
"Term A Loan Percentage" means, as to any Lender, (a) prior to making
----------------------
both the Term A Loans, the ratio of (i) the Term A Loan Commitment of such
Lender to (ii) the Term A Loan Commitments of all Lenders and (b) after the Term
A Loans are made, the ratio of (i) the outstanding principal balance of the Term
A Loans of such Lender to (ii) the aggregate outstanding principal balance of
the Term A Loans of all Lenders.
"Term A Notes" means the collective reference to the Term A Notes made
------------
by the Borrowers payable to the order of each Lender, substantially in the form
of Exhibit A-3 hereto, evidencing the Term A Loan Facility, and any amendments,
-----------
modifications and supplements thereto, any substitutes therefor, and any
replacements, restatements, renewals or extensions thereof, in whole or in part;
"Term A Note" means any of such Term A Notes.
"Term B Loans" means the term loans to be made to the Borrowers by the
------------
Lenders pursuant to Section 4.1(b).
"Term B Loan Commitment" means (a) as to any Lender, the obligation of
----------------------
such Lender to make the Term B Loans to the account of the Borrowers hereunder
in an aggregate principal amount not to exceed the amount set forth opposite
such Lender's name on Schedule 1.1(a) hereto, as such amount may be reduced or
---------------
modified at any time or from time to time pursuant to the terms hereof, and (b)
as to all Lenders, the aggregate commitment to make Term B Loans. The Term B
19
<PAGE>
Loan Commitment of all Lenders as of the Closing Date shall be Seventy-Five
Million Dollars ($75,000,000).
"Term B Loan Facility" shall mean the term loan facility established
--------------------
pursuant to Article IV hereof.
"Term B Loan Lender" means each Lender which has a Term B Loan
------------------
Commitment or which has extended Term B Loans to the Borrowers.
"Term B Loan Maturity Date" means the first to occur of (a) June 30,
-------------------------
2006, and (b) the date of termination by the Administrative Agent on behalf of
the Lenders pursuant to Section 12.2(a).
"Term B Loan Percentage" means, as to any Lender, (a) prior to making
----------------------
the Term B Loans, the ratio of (i) the Term B Loan Commitment of such Lender to
(ii) the Term B Loan Commitments of all Lenders and (b) after the Term B Loans
are made, the ratio of (i) the outstanding principal balance of the Term B Loans
of such Lender to (ii) the aggregate outstanding principal balance of the Term B
Loans of all Lenders.
"Term B Notes" means the collective reference to the Term B Notes made
------------
by the Borrowers payable to the order of each Lender, substantially in the form
of Exhibit A-4 hereto, evidencing the Term B Loan Facility, and any amendments,
-----------
modifications and supplements thereto, any substitutes therefor, and any
replacements, restatements, renewals or extensions thereof, in whole or in part;
"Term B Note" means any of such Term B Notes.
"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 Financing" means trade financing provided to the Company and
---------------
its Subsidiaries (other than Vendor-Provided Financing) arising in the ordinary
course of business which is (i) payable within sixty (60) days of the invoice
date thereof and (ii) not more than thirty (30) days past due.
20
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"Uniform Customs" the Uniform Customs and Practice for Documentary
---------------
Credits (1993 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.
-------------
"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 Revolving 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
21
<PAGE>
Credit Maturity 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 Revolving Credit 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 Revolving Credit Commitment
less such Lender's Revolving Credit Commitment Percentage of the sum of all
- ----
outstanding Swingline Loans and L/C Obligations. Each Revolving Credit Loan by a
Lender shall be in a principal amount equal to such Lender's Revolving Credit
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 Maturity 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 Maturity 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 Revolving Credit 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 Revolving Credit 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 Revolving Credit 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 Revolving Credit Commitment Percentage of a
Swingline Loan shall be affected by any other Lender's failure to fund its
Revolving Credit Commitment Percentage of a Swingline Loan, nor shall any
Lender's Revolving Credit Commitment Percentage be increased as a result of any
such failure of any other Lender to fund its Revolving Credit 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
22
<PAGE>
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 Revolving
Credit 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 VI. Further, each Lender
agrees and acknowledges that if prior to the refunding of any outstanding
Swingline Loans pursuant to this Section 2.2, one of the events described in
Section 12.1(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 Revolving Credit 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-1 (a "Notice of Revolving Credit/Swingline
-----------
Borrowing") not later than 11:00 a.m. (Charlotte time) (i) on the same Business
Day as each Base Rate Loan and each Quoted Swingline Rate 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 Revolving Credit Commitment then available to the Borrowers, or if less, (x)
with respect to Base Rate Loans (other than Swingline 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 $500,000 in excess thereof and (z) with
respect to Swingline Loans in an aggregate principle amount of $100,000 or a
whole multiple of $50,000 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, (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 and (F) in the case of a Swingline Loan,
whether such Loan is to be a Base Rate Loan or a Quoted Swingline Rate Loan.
The Administrative Agent shall promptly notify the Lenders of each Notice of
Revolving Credit/Swingline Borrowing.
23
<PAGE>
(b) Disbursement of Revolving Credit and Swingline 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 Revolving Credit 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
---------
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 5.7 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 Revolving Credit 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 Maturity Date. The Borrowers shall
-------------------------------------------
repay the outstanding principal amount of (i) all Revolving Credit Loans in full
on the Revolving Credit Maturity 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 Revolving Credit Loans.
---------------------------------------------
(i) If at any time the outstanding principal amount of all
Revolving Credit Loans plus the sum of all outstanding Swingline Loans and L/C
----
Obligations exceeds the Revolving Credit Commitment, 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
12.2(b).
(ii) The Borrower shall also repay the Revolving Credit Loans to
the extent required by Section 2.6(c).
(c) Optional Repayments. The Borrowers may at any time and from time
-------------------
to time repay the Revolving Credit Loans and Swingline Loans, in whole or in
part, upon at least three (3) Business Days' irrevocable notice to the
Administrative Agent with respect to LIBOR Rate
24
<PAGE>
Loans and one (1) Business Day irrevocable notice with respect to Base Rate
Loans and Quoted Swingline Rate Loans, in the form attached hereto as Exhibit D
---------
(a "Notice of Prepayment"), specifying (i) the date of repayment, (ii) the
amount of repayment, (iii) whether the repayment is of Revolving Credit Loans,
Swingline Loans or a combination thereof, and, if of a combination thereof, the
amount allocable to each, and (iv) whether the repayment is of LIBOR Rate Loans,
Base Rate Loans, Quoted Swingline Rate 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 (other than Swingline Loans), $3,000,000 or a whole
multiple of $500,000 in excess thereof with respect to LIBOR Rate Loans and
$100,000 or a whole multiple of $50,000 in excess thereof with respect to
Swingline Loans.
(d) Repayment of Excess Proceeds. If at any time proceeds ("Excess
----------------------------
Proceeds") remain after the prepayment of Term Loans pursuant to Section 4.4(b),
the amount of such Excess Proceeds shall be used on the date of the required
prepayment under Section 4.4(b) to prepay the outstanding principal amount of
the Revolving Credit Loans (with a corresponding reduction of the Revolving
Credit Commitment as set forth in Section 2.6(b) below) and Swingline Loans.
(e) Repayment Pursuant to Payment Refusals. In the event any Term B
--------------------------------------
Loan Lender makes a Payment Refusal election pursuant to Section 4.4(b) and
proceeds ("Excess Refused Proceeds") remain after the repayment of the
outstanding balance of the Term A Loans, the amount of such Excess Refused
Proceeds shall be used on the date of the required prepayment pursuant to
Section 4.4(b) to prepay the outstanding principal amount of the Revolving
Credit Loans (without a corresponding reduction in the Revolving Credit
Commitment) and Swingline Loans; provided that if proceeds ("Additional Excess
--------
Refused Proceeds") remain after the prepayment of the outstanding principal
amount of the Revolving Credit Loans and Swingline Loans, the amount of such
Additional Excess Refused Proceeds shall be applied in the manner set forth in
Section 4.4(b)(v).
(f) 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 thereto unless such repayment is accompanied by any
amount required to be paid pursuant to Section 5.9 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. Each Revolving Credit Note shall be dated as of
the Closing Date and shall bear interest on the unpaid principal amount thereof
at the applicable interest rate per annum specified in Section 5.1.
25
<PAGE>
(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. The
Swingline Note shall be dated as of the Closing Date and shall bear interest on
the unpaid principal amount thereof at the applicable interest rate per annum
specified in Section 5.1.
SECTION 2.6 Permanent Reduction of the Revolving Credit Commitment.
------------------------------------------------------
(a) Voluntary 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 Revolving Credit Commitment at any time or (ii) portions
of the Revolving Credit Commitment, from time to time, in an aggregate principal
amount not less than $3,000,000 or any whole multiple of $500,000 in excess
thereof. Notwithstanding the foregoing, the Revolving Credit Commitment cannot
be reduced to an amount less than the amount of the then outstanding Letters of
Credit and Swingline Loans.
(b) Mandatory Reductions. If at any time Excess Proceeds remain
--------------------
after the prepayment of Term Loans pursuant to Section 4.4(b), the Revolving
Credit Commitment shall be permanently reduced on the date of the required
prepayment under Section 4.4(b) by an amount equal to the amount of such Excess
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 Revolving Credit Loans, Swingline
Loans and L/C Obligations, as applicable, after such reduction to the Revolving
Credit Commitment as so reduced and if the Revolving Credit Commitment as so
reduced is less than the aggregate amount of all outstanding Letters of Credit,
the Borrowers shall be required to furnish cash collateral in accordance with
Section 12.2(b) in an amount equal to the aggregate then undrawn and unexpired
amount of such Letter of Credit. Any reduction of the Revolving Credit
Commitment to zero shall be accompanied by payment of all outstanding Revolving
Credit Loans and Swingline Loans (and furnishing of cash collateral in
accordance with Section 12.2(b) for all L/C Obligations) and termination of the
Revolving Credit Commitment and the Swingline Commitment and the Revolving
Credit Facility. Such cash collateral shall be applied in accordance with
Section 12.2(b). If the reduction of the Revolving Credit Commitment requires
the repayment of any LIBOR Rate Loan, such repayment shall be accompanied by any
amount required to be paid pursuant to Section 5.9 hereof.
SECTION 2.7 Termination of Revolving Credit Facility. The Revolving
----------------------------------------
Credit Facility shall terminate on the earliest of (a) June 23, 2004, (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 12.2(a).
26
<PAGE>
ARTICLE III
LETTER OF CREDIT FACILITIES
SECTION 3.1 L/C Commitment and Aggregator L/C Commitment.
--------------------------------------------
(a) 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 such issuance, (a) the L/C Obligations would exceed the L/C Commitment
or (b) the aggregate principal amount of outstanding Revolving Credit Loans plus
----
the aggregate principal amount of outstanding Swingline Loans plus the aggregate
----
amount of L/C Obligations would exceed the Revolving Credit Commitment. 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 Maturity Date) and (B) the Revolving Credit
Maturity 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, amendments or modifications of any
existing Letters of Credit, unless the context otherwise requires.
(b) Aggregator L/C Commitment. Subject to the terms and conditions
-------------------------
hereof, the Aggregator Issuing Lender, in reliance on the agreements of the
other applicable Lenders set forth in Section 3.4(b), agrees to issue standby
letters of credit ("Aggregator Letters of Credit") for the account of the
Borrowers on any Business Day from the Closing Date through but not including
the Aggregator L/C Facility Termination Date in such form as may be approved
from time to time by the Aggregator Issuing Lender; provided, that the
--------
Aggregator Issuing Lender shall have no obligation to issue any Aggregator
Letter of Credit if, after giving effect to such issuance, the Aggregator L/C
Obligations would exceed the Aggregator L/C Commitment. Each Aggregator Letter
of Credit shall (i) be denominated in Dollars in a minimum amount of $50,000,
(ii) be a standby letter of credit issued in the ordinary course of business to
secure Vendor-Provided Financing or any other trade payable which is secured by
a Lien which covers assets of the applicable Borrower or Subsidiary thereof
other than or in addition to the property and related receivables financed by
such financing or trade payable, (iii) expire on a date satisfactory to the
Aggregator Issuing Lender, which date shall be no later than the earlier of (A)
27
<PAGE>
the date that is twelve (12) months after the date of issuance thereof (provided
that any Aggregator Letter of Credit may be automatically renewable for
additional twelve (12) month periods so long as no such renewal shall cause such
Aggregator Letter of Credit to terminate on a date that is later than the
Revolving Credit Maturity Date) and (B) the Revolving Credit Maturity 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 Aggregator Issuing
Lender shall not at any time be obligated to issue any Aggregator Letter of
Credit hereunder if such issuance would conflict with, or cause the Aggregator
Issuing Lender or any Aggregator L/C Participant to exceed any limits imposed
by, any Applicable Law. References herein to "issue" and derivations thereof
with respect to Aggregator Letters of Credit shall also include extensions,
amendments or modifications of any existing Aggregator Letters of Credit, unless
the context otherwise requires.
SECTION 3.2 Procedure for Issuance of Letters of Credit.
-------------------------------------------
(a) 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 VI 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
L/C Participant's participation therein, all promptly following the issuance of
such Letter of Credit.
(b) Aggregator Letters of Credit. The Borrowers may from time to time
----------------------------
request that the Aggregator Issuing Lender issue an Aggregator Letter of Credit
in order to secure Vendor-Provided Financing by delivering to the Aggregator
Issuing Lender at the Administrative Agent's Office an Application therefor,
completed to the satisfaction of the Aggregator Issuing Lender, and such other
certificates, documents and other papers and information as the Aggregator
Issuing Lender may request. Upon receipt of any Application, the Aggregator
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 VI hereof, promptly issue the Aggregator Letter of Credit requested
thereby (but in no event shall the Aggregator Issuing Lender be required to
issue any Aggregator 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 Aggregator Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Aggregator Issuing Lender and the applicable
Borrower. The Aggregator Issuing Lender shall furnish to the Company a copy of
28
<PAGE>
such Aggregator Letter of Credit and furnish to each Aggregator L/C Participant
a copy of such Aggregator Letter of Credit and the amount of each Aggregator L/C
Participant's participation therein, all promptly following the issuance of such
Aggregator Letter of Credit.
SECTION 3.3 Commissions and Other Charges.
-----------------------------
(a) Letter of Credit Commissions.
----------------------------
(i) Letters of Credit. 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 product of (i) the Applicable Margin with
respect to LIBOR Rate Loans (as set forth in Section 5.1 hereof) in effect on
the corresponding payment date (determined on a per annum basis) and (ii) the
average face amount of such Letter of Credit for the corresponding quarterly
period. 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 Maturity 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
Revolving Credit Commitment Percentages.
(ii) Aggregator Letters of Credit. The Borrowers shall pay to
----------------------------
the Administrative Agent, for the account of the Aggregator Issuing Lender and
the Aggregator L/C Participants, a letter of credit commission with respect to
each Aggregator Letter of Credit in an amount as agreed upon by the Aggregating
Issuing Lender and the Borrowers.
(b) Issuance Fees. In addition to the foregoing commission, the
-------------
Borrowers shall pay the Issuing Lender or the Aggregator Issuing Lender, as
applicable, for its account an issuance fee with respect to each Letter of
Credit or Aggregator Letter of Credit, as applicable, in an amount equal to the
product of (i) one-eighth percent (0.125%) per annum and (ii) the average face
amount of such Letter of Credit or Aggregator Letter of Credit, as applicable,
for the corresponding quarterly period. Such fee shall be payable quarterly in
arrears on the last Business Day of each calendar quarter and on the Revolving
Credit Maturity Date.
(c) Other Costs and Expenses. In addition to the foregoing
------------------------
commissions, the Borrowers shall pay or reimburse the Issuing Lender and the
Aggregator Issuing Lender for such normal and customary costs and expenses as
are incurred or charges by the Issuing Lender and the Aggregator Issuing Lender
in issuing, effecting payment under, amending or otherwise administering any
Letter of Credit or any Aggregator Letter of Credit.
SECTION 3.4 L/C Participations.
------------------
(a) L/C Participations.
------------------
(i) 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
29
<PAGE>
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 Revolving Credit
Commitment Percentage in the Issuing Lender's obligations and rights under and
in respect of 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 VI 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 through a Revolving Credit Loan or otherwise 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 Revolving Credit Commitment Percentage
of the amount of such draft, or any part thereof, which is not so reimbursed.
(ii) 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)(i) 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(a) 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(a)(ii), 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.
(iii) 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
Revolving Credit Commitment Percentage of such payment in accordance with this
Section 3.4(a), 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.
(b) Aggregator L/C Participations.
-----------------------------
30
<PAGE>
(i) The Aggregator Issuing Lender irrevocably agrees to grant and
hereby grants to each Aggregator L/C Participant, and, to induce the Aggregator
Issuing Lender to issue Aggregator Letters of Credit hereunder, each Aggregator
L/C Participant irrevocably agrees to accept and purchase and hereby accepts and
purchases from the Aggregator Issuing Lender for such Aggregator L/C
Participant's own account and risk an undivided interest equal to such
Aggregator L/C Participant's Aggregator L/C Percentage in the Aggregator Issuing
Lender's obligations and rights under and in respect of each Aggregator Letter
of Credit issued hereunder and the amount of each draft paid by the Aggregator
Issuing Lender thereunder. Each Aggregator L/C Participant unconditionally and
irrevocably agrees with the Aggregator Issuing Lender (notwithstanding any
Default, Event of Default, non-satisfaction of conditions set forth in Article
VI or any other circumstances whatsoever) that, if a draft is paid under any
Aggregator Letter of Credit for which the Aggregator Issuing Lender is not
reimbursed in full by the Borrowers in accordance with the terms of this
Agreement, such Aggregator L/C Participant shall pay to the Aggregator Issuing
Lender upon demand at the Aggregator Issuing Lender's address for notices
specified herein an amount equal to such Aggregator L/C Participant's Aggregator
L/C Percentage of the amount of such draft, or any part thereof, which is not so
reimbursed.
(ii) Upon becoming aware of any amount required to be paid by any
Aggregator L/C Participant to the Aggregator Issuing Lender pursuant to Section
3.4(b)(i) in respect of any unreimbursed portion of any payment made by the
Aggregator Issuing Lender under any Aggregator Letter of Credit, the Aggregator
Issuing Lender shall notify each Aggregator L/C Participant of the amount and
due date of such required payment and such Aggregator L/C Participant shall pay
to the Aggregator Issuing Lender the amount specified on the applicable due
date. If any such amount is paid to the Aggregator Issuing Lender after the
date such payment is due, such Aggregator L/C Participant shall pay to the
Aggregator 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
Aggregator 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 Aggregator Issuing Lender with respect to any amounts
owing under this Section 3.4(b) shall be conclusive in the absence of manifest
error. With respect to payment to the Aggregator Issuing Lender of the
unreimbursed amounts described in this Section 3.4(b)(ii), if the Aggregator 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.
(iii) Whenever, at any time after the Aggregator Issuing Lender has
made payment under any Aggregator Letter of Credit and has received from any
Aggregator L/C Participant its Aggregator L/C Percentage of such payment in
accordance with this Section 3.4(b), the Aggregator Issuing Lender receives any
payment related to such Aggregator Letter of Credit (whether directly from any
Borrower or otherwise), or any payment of interest on account thereof, the
Aggregator Issuing Lender will distribute to such Aggregator L/C Participant its
pro
- ---
31
<PAGE>
rata share thereof; provided, that in the event that any such payment received
- ---- --------
by the Aggregator Issuing Lender shall be required to be returned by the
Aggregator Issuing Lender, such Aggregator L/C Participant shall return to the
Aggregator Issuing Lender the portion thereof previously distributed by the
Aggregator Issuing Lender to it.
SECTION 3.5 Reimbursement Obligation and Aggregator Reimbursement
-----------------------------------------------------
Obligation of the Borrowers.
- ---------------------------
(a) Reimbursement Obligation. 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 (i) such draft so paid and (ii) 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(a), the Borrowers shall be deemed to have timely given a Notice of Revolving
Credit/Swingline Borrowing hereunder to the Administrative Agent requesting the
Lenders to make a Revolving Credit Loan as 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 VI have been satisfied, the Lenders
shall make Revolving Credit Loans as 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.
(b) Aggregator Reimbursement Obligation. The Borrowers agree to
-----------------------------------
reimburse the Aggregator Issuing Lender on each date on which the Aggregator
Issuing Lender notifies the Borrowers of the date and amount of a draft paid
under any Aggregator Letter of Credit for the amount of (i) such draft so paid
and (ii) any taxes, fees, charges or other costs or expenses incurred by the
Aggregator Issuing Lender in connection with such payment. Each such payment
shall be made to the Aggregator 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.
SECTION 3.6 Obligations Absolute. The obligations of the Borrowers
--------------------
under this Article III (including, without limitation, the Reimbursement
Obligation and the Aggregator 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, the Aggregator
Issuing Lender, any beneficiary of a Letter of Credit or an Aggregator Letter of
Credit or any other Person. The
32
<PAGE>
Borrowers also agree that the Issuing Lender, the Aggregator Issuing Lender, the
L/C Participants and the Aggregator L/C Participants shall not be responsible
for, and the Reimbursement Obligation of the Borrowers under Section 3.5(a) and
the Aggregator Reimbursement Obligation of the Borrowers under Section 3.5(b)
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 Aggregator
Letter of Credit or any other party to which such Letter of Credit or such
Aggregator Letter of Credit, as applicable, may be transferred or any claims
whatsoever of any Borrower against any beneficiary of such Letter of Credit or
such Aggregator Letter of Credit, as applicable, or any such transferee. The
Issuing Lender and the Aggregator 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 or any Aggregator Letter of Credit, as applicable, except for errors or
omissions caused by the Issuing Lender's or the Aggregator Issuing Lender's, as
applicable, gross negligence or willful misconduct. The Borrowers agree that any
action taken or omitted by the Issuing Lender or the Aggregator Issuing Lender
under or in connection with any Letter of Credit or any Aggregator 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 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, the Aggregator Issuing Lender, any L/C Participant or any
Aggregator L/C Participant to the Borrowers. The responsibility of the Issuing
Lender and the Aggregator Issuing Lender, as applicable, to the Borrowers in
connection with any draft presented for payment under any Letter of Credit and
any Aggregator Letter of Credit, as applicable, shall, in addition to any
payment obligation expressly provided for in such Letter of Credit or such
Aggregator Letter of Credit, as applicable,, be limited to determining that the
documents (including each draft) delivered under such Letter of Credit or such
Aggregator Letter of Credit, as applicable, in connection with such presentment
are in conformity with such Letter of Credit or such Aggregator Letter of
Credit, as applicable.
SECTION 3.7 Effect of Application. To the extent that any
---------------------
provision of any Application related to any Letter of Credit or any Aggregator
Letter of Credit is inconsistent with the provisions of this Article III, the
provisions of this Article III shall apply.
ARTICLE IV
TERM LOAN FACILITIES
--------------------
SECTION 4.1 Term Loans.
----------
(a) Subject to the terms and conditions of this Agreement, each
Lender severally agrees to make Term A Loans to the Borrowers on a joint and
several basis on a date on or not later than forty-five days after the Closing
Date. The Term A Loans shall be funded by each Lender in a principal amount
equal to such Lender's Term A Loan Percentage of the aggregate principal
33
<PAGE>
amount of the Term A Loans made on the applicable date. The aggregate principal
amount of the Term A Loans made pursuant to Section 4.1(a) shall equal the total
Term A Loan Commitment.
(b) Subject to the terms and conditions of this Agreement, each
Lender severally agrees to make Term B Loans to the Borrowers on a joint and
several basis on the Closing Date. The Term B Loans shall be funded by each
Lender in a principal amount equal to such Lender's Term B Loan Commitment
Percentage of the aggregate principal amount of the Term B Loans made on the
Closing Date. The aggregate principal amount of the Term B Loans made pursuant
to Section 4.1(b) shall equal the total Term B Loan Commitment.
SECTION 4.2 Procedure for Advance of Term Loans.
-----------------------------------
(a) The Company, on behalf of the Borrowers, shall give the
Administrative Agent irrevocable prior written notice in the form attached
hereto as Exhibit B-2 (a "Notice of Term Loan Borrowing") (i) with respect to
-----------
the Term A Loans if made on the Closing Date, prior to 11:00 a.m. (Charlotte
time) on the Closing Date requesting that the Lenders make the Term A Loans as a
Base Rate Loan on such date (provided that the Borrowers may request that the
--------
Lenders make the Term A Loans as LIBOR Rate Loans on such date if the Borrowers
have delivered to the Administrative Agent a letter in form and substance
satisfactory to the Administrative Agent indemnifying the Lenders in the manner
set forth in Section 5.9 of this Agreement), (ii) with respect to the Term A
Loans if made after the Closing Date, prior to 11:00 a.m. (Charlotte time) (A)
on such date requesting that the Lenders make the Term A Loans as a Base Rate
Loan on such date or (B) three (3) Business Days prior to such date requesting
that the Lenders make the Term A Loans as a LIBOR Rate Loan on such date and
(iii) with respect to the Term B Loans, prior to 11:00 a.m. (Charlotte time) on
the Closing Date requesting that the Lenders make the Term B Loans as Base Rate
Loans on such date (provided that the Borrowers may request that the Lenders
--------
make the Term B Loans as LIBOR Rate Loans on such date if the Borrowers have
delivered to the Administrative Agent a letter in form and substance
satisfactory to the Administrative Agent indemnifying the Lenders in the manner
set forth in Section 5.9 of this Agreement).
(b) Upon receipt of such Notice of Term Loan Borrowing from the
Company, on behalf of the Borrowers, the Administrative Agent shall promptly
notify each Lender thereof. Not later than 2:00 p.m. (Charlotte time) on the
applicable borrowing date, each Lender will make available to the Administrative
Agent for the account of the Borrowers, at the office of the Administrative
Agent in immediately available funds, the amount of such Term A Loan or Term B
Loan, as applicable, to be made by such Lender on such borrowing date. The
Borrowers hereby irrevocably authorize the Administrative Agent to disburse the
proceeds of the Term A Loans or the Term B Loans, as applicable, in immediately
available funds by wire transfer to such Person or Persons as may be designated
by the Company, on behalf of the Borrowers.
SECTION 4.3 Repayment of Term Loans.
-----------------------
(a) Term A Loans. The Borrowers shall repay the aggregate outstanding
------------
principal amount of the Term A Loans in consecutive quarterly installments on
the last Business Day of each
34
<PAGE>
of June, September, December and March commencing September 30, 1999 as set
forth below, except as the amounts of individual installments may be adjusted
pursuant to Section 4.4 hereof:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
FISCAL YEAR PAYMENT DATE PRINCIPAL INSTALLMENT TERM A LOAN COMMITMENT
($) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
July 1, 1999 to September 30, 1999 625,000 24,375,000
June 30, 2000
- ------------------------------------------------------------------------------------------------------------------
December 31, 1999 625,000 23,750,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 1999 625,000 23,125,000
- ------------------------------------------------------------------------------------------------------------------
June 30, 2000 625,000 22,500,000
- ------------------------------------------------------------------------------------------------------------------
July 1, 2000 to September 30, 2000 937,500 21,562,500
June 30, 2001
- ------------------------------------------------------------------------------------------------------------------
December 31, 2000 937,500 20,625,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2000 937,500 19,687,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2001 937,500 18,750,000
- ------------------------------------------------------------------------------------------------------------------
July 1, 2001 to September 30, 2001 1,250,000 17,500,000
June 30, 2002
- ------------------------------------------------------------------------------------------------------------------
December 31, 2001 1,250,000 16,250,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2001 1,250,000 15,000,000
- ------------------------------------------------------------------------------------------------------------------
June 30, 2002 1,250,000 13,750,000
- ------------------------------------------------------------------------------------------------------------------
July 1, 2002 to September 30, 2002 1,562,500 12,187,500
June 30, 2003
- ------------------------------------------------------------------------------------------------------------------
December 31, 2002 1,562,500 10,625,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2002 1,562,500 9,062,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2003 1,562,500 7,500,000
- ------------------------------------------------------------------------------------------------------------------
July 1, 2003 to September 30, 2003 1,875,000 5,625,000
June 30, 2004
- ------------------------------------------------------------------------------------------------------------------
December 31, 2003 1,875,000 3,750,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2003 1,875,000 1,875,000
- ------------------------------------------------------------------------------------------------------------------
June 30, 2004 1,875,000 0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
If not sooner paid, the Term A Loans shall be paid in full, together with
accrued interest thereon, on the Term A Loan Maturity Date.
(b) Term B Loans. The Borrowers shall repay the aggregate outstanding
------------
principal amount of the Term B Loans in consecutive quarterly installments on
the last Business Day of each of June, September, December and March commencing
September 30, 1999 as set forth below, except as the amounts of individual
installments may be adjusted pursuant to Section 4.4 hereof:
35
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
FISCAL YEAR PAYMENT DATE PRINCIPAL INSTALLMENT TERM B LOAN COMMITMENT
($) ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
April 1, 1999 to September 30, 1999 187,500 74,812,500
March 31, 2000
- ------------------------------------------------------------------------------------------------------------------
December 31, 1999 187,500 74,625,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2000 187,500 74,437,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2000 187,500 74,250,000
- ------------------------------------------------------------------------------------------------------------------
April 1, 2000 to September 30, 2000 187,500 74,062,500
March 31, 2001
- ------------------------------------------------------------------------------------------------------------------
December 31, 2000 187,500 73,875,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2001 187,500 73,687,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2001 187,500 73,500,000
- ------------------------------------------------------------------------------------------------------------------
April 1, 2001 to September 30, 2001 187,500 73,312,500
March 31, 2002
- ------------------------------------------------------------------------------------------------------------------
December 31, 2001 187,500 73,125,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2002 187,500 72,937,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2002 187,500 72,750,000
- ------------------------------------------------------------------------------------------------------------------
April 1, 2002 to September 30, 2002 187,500 72,562,500
March 31, 2003
- ------------------------------------------------------------------------------------------------------------------
December 31, 2002 187,500 72,375,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2003 187,500 72,187,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2003 187,500 72,000,000
- ------------------------------------------------------------------------------------------------------------------
April 1, 2003 to September 30, 2003 187,500 71,812,500
March 31, 2004
- ------------------------------------------------------------------------------------------------------------------
December 31, 2003 187,500 71,625,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2004 187,500 71,437,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2004 187,500 71,250,000
- ------------------------------------------------------------------------------------------------------------------
April 1, 2004 to September 30, 2004 187,500 71,062,500
March 31, 2005
- ------------------------------------------------------------------------------------------------------------------
December 31, 2004 187,500 70,875,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2005 187,500 70,687,500
- ------------------------------------------------------------------------------------------------------------------
June 30, 2005 187,500 70,500,000
- ------------------------------------------------------------------------------------------------------------------
April 1, 2005 to September 30, 2005 17,625,000 52,875,000
March 31, 2006
- ------------------------------------------------------------------------------------------------------------------
December 31, 2005 17,625,000 35,250,000
- ------------------------------------------------------------------------------------------------------------------
March 31, 2006 17,625,000 17,625,000
- ------------------------------------------------------------------------------------------------------------------
June 30, 2006 17,625,000 0
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
If not sooner paid, the Term B Loans shall be paid in full, together with
accrued interest thereon, on the Term B Loan Maturity Date.
SECTION 4.4 Prepayments of Term Loans.
-------------------------
(a) Optional Prepayment of Term Loans. The Borrowers shall have the
---------------------------------
right at any time and from time to time, upon delivery to the Administrative
Agent of a Notice of Prepayment at least three (3) Business Days prior to any
repayment, to prepay the Term Loans in whole or in part without premium or
penalty except as provided in Section 5.9 hereof. Each optional prepayment of
the Term Loans hereunder shall be in an aggregate principal amount of at least
36
<PAGE>
$3,000,000 or any whole multiple of $500,000 in excess thereof, shall be applied
to the outstanding principal balance of the Term Loans on a pro rata basis
--- ----
between the Term A Loans and the Term B Loans and shall reduce the remaining
scheduled installments of the Term A Loans and the Term B Loans in inverse order
of maturity thereof. Each repayment shall be accompanied by any amount required
to be paid pursuant to Section 5.9 hereof.
(b) Mandatory Prepayment of Term Loans.
----------------------------------
(i) Asset Sale Proceeds. No later than one hundred twenty (120)
-------------------
days following any Borrower's receipt thereof, such Borrower shall make
mandatory principal prepayments of the Term Loans in the manner set forth in
Section 4.4(b)(v) below in amounts equal to one hundred percent (100%) of the
aggregate Net Cash Proceeds in excess of $2,500,000 in the aggregate from the
sale or other disposition or series of related sales or other dispositions of
assets by any Borrower or any of its Subsidiaries pursuant to Section 11.6(e)
("Asset Sale Proceeds"); provided that such prepayment shall not be required to
--------
the extent that such Net Cash Proceeds are reinvested in comparable replacement
assets within one hundred twenty (120) days of any such transaction. Such
prepayment shall be made within one hundred twenty (120) days after the date of
consummation of any such transaction. Notwithstanding any of the foregoing to
the contrary, upon and during the continuance of an Event of Default and upon
notice from the Administrative Agent, all Asset Sale Proceeds received by the
Borrowers and their Subsidiaries shall be applied to make prepayments of the
Term Loans, such prepayments to be made within three (3) Business Days after the
date of receipt of Asset Sale Proceeds.
(ii) Insurance Proceeds. No later than one hundred twenty (120)
------------------
days following the date of receipt by any Borrower or any of its Subsidiaries of
any Net Cash Proceeds in excess of $2,500,000 in the aggregate under any of the
insurance policies maintained pursuant to Section 4(a)(vi) of the Security
Agreement ("Insurance Proceeds") which have not been reinvested as of such date
to replace or restore the damaged property to which such Net Cash Proceeds
relate, such Borrower shall make mandatory principal prepayments of the Term
Loans in the manner set forth in Section 4.4(b)(v) below in amounts equal to one
hundred percent (100%) of the aggregate amount of such Insurance Proceeds (as
required in accordance in accordance with Section 4(a)(vi) of the Security
Agreement). Such prepayment shall be made within one hundred twenty (120) days
after the date of receipt of such Net Cash Proceeds. Notwithstanding any of the
foregoing to the contrary, upon and during the continuance of an Event of
Default and upon notice from the Administrative Agent, all Insurance Proceeds
received by the Borrowers and their Subsidiaries shall be applied to make
prepayments of the Term Loans, such prepayments to be made within three (3)
Business Days after the date of receipt of Insurance Proceeds.
(iii) Debt Proceeds. The Borrowers shall make mandatory principal
-------------
prepayments of the Term Loans in the manner set forth in Section 4.4(b)(v) below
in amounts equal to one hundred percent (100%) of the aggregate Net Cash
Proceeds from any incurrence of Debt permitted by Section 11.1(c) or any other
Debt not permitted hereunder (but otherwise consented to by the Required
Lenders) by any Borrower or any of its Subsidiaries. Such
37
<PAGE>
prepayment shall be made within three (3) Business Days after the date of
receipt of Net Cash Proceeds of any such transaction.
(iv) Equity Proceeds. The Borrowers shall make mandatory principal
---------------
prepayments of the Term Loans in the manner set forth in Section 4.4(b)(v) below
in amounts equal to fifty percent (50%) of the aggregate Net Cash Proceeds from
any offering of equity securities by any Borrower or any of its Subsidiaries.
Such prepayment shall be made within three (3) Business Days after the date of
receipt of Net Cash Proceeds of any such transaction.
(v) Notice; Manner of Payment. Upon the occurrence of any event
-------------------------
triggering the prepayment requirement under Sections 4.4(b)(i) through and
including 4.4(b)(iv), the Company, on behalf of the Borrowers, shall promptly
deliver a Notice of Prepayment to the Administrative Agent and upon receipt of
such notice, the Administrative Agent shall promptly so notify the Lenders.
Each prepayment under this Section 4.4(b) shall be applied as follows: first,
-----
to reduce the outstanding principal balance of the Term Loans on a pro rata
--- ----
basis between the Term A Loans and the Term B Loans and to reduce in inverse
order of maturity the remaining amortization payments of the Term A Loans and
the Term B Loans pursuant to Section 4.3 and (ii) second, to the extent of any
------
excess, to repay the outstanding principal balance of the Revolving Credit Loans
pursuant to Section 2.4(d) and to reduce permanently the Revolving Credit
Commitment pursuant to Section 2.6(b); provided that any Term B Loan Lender may
--------
elect to have its pro rata share (based on its Term B Loan Percentage) of any
mandatory prepayment under Section 4.4(b)(iv) be applied first to the
outstanding balance of the Term A Loans and to reduce the remaining scheduled
installments of the Term A Loans in the inverse order of maturity thereof and
then to Revolving Credit Loans in accordance with Section 2.4(e) (any such
election, a "Payment Refusal"); provided further that if Additional Excess
-------- -------
Refused Proceeds remain after the prepayment of the Term A Loans in accordance
with this Section 4.4(b)(v) and the prepayment of the Revolving Credit Loans in
accordance with Section 2.4(e), the amount of such Additional Excess Refused
Proceeds shall be reapplied to the pro rata share of any Term B Loan Lenders
that have made a Payment Refusal election (which repayment such Term B Loan
Lenders may not refuse) and to reduce in inverse order of maturity the remaining
amortization payments of the Term B Loans pursuant to Section 4.3. Any such
Term B Loan Lender that makes a Payment Refusal shall, no later than 11:00 a.m.
(Charlotte time) two (2) Business Days preceding the date specified for any
prepayment of the Loans, notify the Administrative Agent in writing of such
election. Each prepayment under this Section shall be accompanied by any
payment required under Section 5.9.
(vi) No Reborrowing. Amounts prepaid pursuant to this Section 4.4 may
--------------
not be reborrowed and will constitute a permanent reduction of the Term A Loan
Commitment and the Term B Loan Commitment, as applicable. Each prepayment shall
be accompanied by any amount required to be paid pursuant to Section 5.9 hereof.
SECTION 4.5 Term Notes.
----------
(a) Term A Notes. Each Lender's Term A Loan and the obligation of the
------------
Borrowers to repay such Term A Loan shall be evidenced by a separate Term A Note
executed by the
38
<PAGE>
Borrowers payable to the order of such Lender. Each Term A Note shall be dated
as of the Closing Date and shall bear interest on the unpaid principal amount
thereof at the applicable interest rate per annum specified in Section 5.1.
(b) Term B Notes. Each Lender's Term B Loan and the obligation of the
------------
Borrowers to repay such Term B Loan shall be evidenced by a separate Term B Note
executed by the Borrowers payable to the order of such Lender. Each Term B Note
shall be dated as of the Closing Date and shall bear interest on the unpaid
principal amount thereof at the applicable interest rate per annum specified in
Section 5.1.
ARTICLE V
GENERAL LOAN PROVISIONS
SECTION 5.1 Interest.
--------
(a) Interest Rate Options.
---------------------
(i) Revolving Credit Loans and Term Loans. Subject to the
-------------------------------------
provisions of this Section 5.1, at the election of the Company, on behalf of the
Borrowers, the Revolving Credit Loans and the Term Loans 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 Revolving Credit/Swingline Borrowing is given
pursuant to Section 2.3 or at the time a Notice of Term Loan Borrowing is given
pursuant to Section 4.2 or at the time a Notice of Conversion/Continuation is
given pursuant to Section 5.2. Each Loan or portion thereof bearing interest
based on the Base Rate (including, without limitation, each Swingline Loan which
bears interest based on the Base Rate as provided in subsection (a)(ii) below)
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 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
---------------
5.1, at the election of the Company, on behalf of the Borrowers, each Swingline
Loan shall bear interest at (i) the Base Rate plus the Applicable Margin as set
----
forth below or (ii) the Quoted Swingline Rate (if agreed upon by the Swingline
Lender and the Company). The Company, on behalf of the Borrowers, shall select
the rate of interest applicable to any Swingline Loan at the time a Notice of
Revolving Credit/Swingline Borrowing is given pursuant to Section 2.3. Each
Swingline Loan or portion thereof bearing interest based on the Quoted Swingline
Rate shall be a "Quoted Swingline Rate Loan". Any Swingline 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.
39
<PAGE>
(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 5.1(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:
- --------
(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
Maturity Date, the Term A Loan Maturity Date or the Term B Loan Maturity Date,
as applicable, and Interest Periods shall be selected by the Company, on behalf
of the Borrowers, so as to permit the Borrowers to make quarterly principal
installment payments pursuant to Section 4.3 without the payment of any amounts
pursuant to Section 5.9; and
(v) there shall be no more than eight (8) Interest Periods in
effect at any time.
(c) Applicable Margin.
-----------------
(i) The Applicable Margin provided for in Section 5.1(a) with
respect to the Revolving Credit Loans, Term A Loans and the Swingline Loans
shall (A) for the period from the Closing Date to the first Adjustment Date
following the Closing Date equal the percentages set forth in the certificate
delivered pursuant to Section 6.2(e)(ii) and (B) thereafter be determined by
reference to the Leverage Ratio as of the end of the fiscal quarter immediately
preceding the delivery of the financial statements and the accompanying
Officer's Compliance Certificate, as of the closing date of any Permitted
Acquisition or as of the date issuance of any equity securities of any Borrower
as follows:
40
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin Per Annum
Level Leverage Ratio Base Rate + LIBOR Rate +
----- -------------- ----------------------------
<S> <C> <C>
I Greater than or equal
to 4.00 to 1.00 1.75% 3.00%
II Less than 4.00 to 1.00
and greater than or
equal to 3.50 to 1.00 1.50% 2.75%
III Less than 3.50 to 1.00
and greater than or
equal to 3.00 to 1.00 1.25% 2.50%
IV Less than 3.00 to 1.00
and greater than or
equal to 2.50 to 1.00 1.00% 2.25%
V Less than 2.50 to 1.00 0.75% 2.00%
</TABLE>
(ii) The Applicable Margin with respect to the Term B Loans shall
be 2.00% with respect to Base Rate Loans and 3.25% with respect to LIBOR Rate
Loans.
(iii) 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 (A) 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 X (as delivered pursuant to Section 11.4(e)
hereof) and (B) on the date of issuance of any equity securities by any
Borrower. Subject to Section 5.1(d), in the event the Company fails to deliver
such financial statements and Officer's Compliance Certificate, evidence of
covenant compliance or notice of issuance of equity securities, as applicable,
within the time required by Sections 8.1, 8.2 and 11.4(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
Officer's Compliance Certificate, evidence of covenant compliance or notice of
issuance of equity securities, as applicable.
(d) Default Rate. Subject to Section 12.3, 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 or Swingline 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 until the end of the applicable Interest Period
and
41
<PAGE>
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
Quoted Swingline Rate 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 and
--------------------------------
each Quoted Swingline Rate Loan shall be payable in arrears on the last Business
Day of each calendar quarter commencing September 30, 1999; 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 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 the
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 5.2 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
any outstanding Base Rate Loans (other than Swingline Loans) in a principal
amount equal to $3,000,000 or any whole multiple of $500,000 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,
42
<PAGE>
(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 5.3 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 (i) the average daily unused portion
of the Revolving Credit Commitment and (ii) on the Term A Loan Commitment (until
the Term A Loans are fully drawn by the Borrowers); provided, that the amount of
--------
outstanding Swingline Loans shall not be considered usage of the Revolving
Credit 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,
1999, and on the Revolving Credit Maturity Date. Such commitment fee shall be
distributed by the Administrative Agent to the Lenders pro rata in accordance
--- ----
with the Lenders' respective Revolving Credit Commitment Percentages. The
Commitment Fee Rate shall (i) for the period from the Closing Date to the first
Adjustment Date following the Closing Date equal the percentages set forth in
the certificate delivered pursuant to Section 6.2(e)(ii) and (ii) thereafter be
determined by reference to the Leverage Ratio as of the end of the fiscal
quarter immediately preceding the delivery of the financial statements and the
accompanying Officer's Compliance Certificate, as of the closing date of any
Permitted Acquisition or as of the date issuance of any equity securities of any
Borrower as follows:
<TABLE>
<CAPTION>
Level Leverage Ratio Commitment Fee Rate
----- -------------- -------------------
<S> <C> <C>
I Greater than or equal
to 4.00 to 1.00 0.500%
II Less than 4.00 to 1.00
and greater than or
equal to 3.50 to 1.00 0.500%
III Less than 3.50 to 1.00
and greater than or
equal to 3.00 to 1.00 0.500%
IV Less than 3.00 to 1.00
and greater than or
equal to 2.50 to 1.00 0.375%
V Less than 2.50 to 1.00 0.375%
</TABLE>
43
<PAGE>
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 Rate also shall be made by the Administrative Agent on (A) 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 X (as delivered pursuant to Section 11.4(e)
hereof) and (B) on the date of issuance of any equity securities by any
Borrower. Subject to Section 5.1(d), in the event the Company fails to deliver
such financial statements and Officer's Compliance Certificate, evidence of
covenant compliance or notice of issuance of equity securities, as applicable,
within the time required by Sections 8.1, 8.2 and 11.4(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
Officer's Compliance Certificate, evidence of covenant compliance or notice of
issuance of equity securities, as applicable.
(b) Utilization Fees. Commencing with the calendar quarter beginning
----------------
October 1, 1999, the Borrowers shall pay to the Administrative Agent, for the
account of the Lenders, a non-refundable utilization fee at a rate per annum
equal to 0.125% on the average daily unutilized portion of the Revolving Credit
Facility with respect to any calendar quarter for which the average utilization
under the Revolving Credit Facility for such calendar quarter is less than
thirty-three percent (33%) of the Revolving Credit Facility. The utilization
fee shall be payable in arrears on the last Business Day of each calendar
quarter during the term of this Agreement commencing December 31, 1999, and on
the Revolving Credit Maturity Date. Such utilization fee shall be distributed
by the Administrative Agent to the Lenders pro rata in accordance with the
--- ----
Lenders' respective Revolving Credit Commitment Percentages.
(c) Underwriting Fees. The Borrowers shall pay to First Union, for its
-----------------
account, on the Closing Date the underwriting fee as set forth in the Fee
Letter.
(d) 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 5.4 Manner of Payment.
-----------------
(a) Each payment by the Borrowers on account of the principal of or
interest on the Revolving Credit Loans or of any fee, commission or other
amounts (including the Reimbursement Obligation) payable to the Lenders under
this Agreement with respect to the Revolving Credit Loans, the Swingline Loans,
the Letters of Credit, any Revolving Credit Note or the Swingline 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 Revolving Credit Commitment Percentages
(except as specified below), in Dollars, in immediately available funds and
shall be made without any set-off, counterclaim or deduction whatsoever, (b)
each payment by the Borrowers on account of the principal of or interest on the
Term A Loans or of any fee, commission or other amounts payable to the Lenders
under this Agreement with respect to the Term A Loans or any Term A Note shall
be made in like manner, except for the account of the Lenders pro rata in
--- ----
accordance with their
44
<PAGE>
respective Term A Loan Percentages, (c) each payment by the Borrowers on account
of the principal of or interest on the Term B Loans or of any fee, commission or
other amounts payable to the Lenders under this Agreement with respect to the
Term B Loans or any Term B Note shall be made in like manner, except for the
account of the Lenders pro rata in accordance with their respective Term B Loan
--- ----
Percentages, (d) each payment by the Borrowers on account of any fee, commission
or other amounts (including the Aggregator Reimbursement Obligation) payable to
the Lenders under this Agreement with respect to the Aggregator Letters of
Credit shall be made in like manner, except for the account of the Lenders pro
---
rata in accordance with their respective Aggregator L/C Percentages, and (e) any
- ----
other amounts payable to the Lenders under this Agreement shall be made in like
manner, except for the account of the Lenders pro rata based on their respective
share in the Obligation with respect to which such payment was received. 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 12.1, 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 Revolving Credit Commitment Percentage, Term A Loan Percentage, Term B
Loan Percentage or Aggregator L/C Percentage, as applicable, (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, and each
payment to the Administrative Agent of the Aggregator Issuing Lender's fees or
Aggregator L/C Participants' commissions shall be made in like manner, but for
the account of the Aggregator Issuing Lender or the Aggregator 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. Each payment to the Administrative Agent of with respect to the Swingline
Note (including, without limitation, the Swingline Lender's fees or expenses)
shall be made for the account of the Swingline Lender. Any amount payable to any
Lender under Sections 5.8, 5.9, 5.10, 5.11 or 14.2 shall be paid to the
Administrative Agent for the account of the applicable Lender. Subject to
Section 5.1(b)(ii), if any payment under this Agreement or any Note shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day and such extension of time shall
in such case be included in computing any interest if payable along with such
payment.
SECTION 5.5 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 12.2, 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 other Loan Documents, then
to all indemnity obligations then due and payable by the Borrowers hereunder and
under the Loan Documents, then to all of the Administrative Agent's, the Issuing
Lender's and the Aggregator 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
45
<PAGE>
Swingline Note to the Swingline Lender, then to the principal amount outstanding
under the Swingline Note to the Swingline Lender, then to the Aggregator
Reimbursement Obligation and the cash collateral account described in Section
12.2(b) hereof to the extent of any Aggregator L/C Obligations then outstanding,
then to accrued and unpaid interest on the Revolving Credit Notes, the Term A
Notes, the Term B Notes, the Reimbursement Obligation and any termination
payments due in respect of a Hedging Agreement with any Lender (which such
Hedging Agreement is permitted or required hereunder) (pro rata in accordance
--- ----
with all such amounts due), then to the principal amount of the Revolving Credit
Notes, the Term A Notes, the Term B Notes and the Reimbursement Obligation, then
to the cash collateral account described in Section 12.2(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 5.6 Adjustments. If any Lender (a "Benefited 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 5.4, such Benefited 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
Benefited 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 Benefited
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 5.7 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 and Aggregator 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 Sections 2.3(b) and 4.2 and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrowers on such date a 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 not made available by such Lender in
accordance with the terms hereof, 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 amount not made
available by such Lender in
46
<PAGE>
accordance with the terms hereof 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 5.7
shall be conclusive, absent manifest error. If such Lender's ratable portion of
such borrowing is not made available to the Administrative Agent by such Lender
within three (3) Business Days after 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 ratable portion of any Loan available shall not relieve it or
any other Lender of its obligation, if any, hereunder to make its ratable
portion of such Loan available on such borrowing date, but no Lender shall be
responsible for the failure of any other Lender to make its ratable portion of
such Loan available on the borrowing date.
SECTION 5.8 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 Dow Jones Market
Screen 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 Loan 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 its Lending Offices) with any
request or directive (whether or not having the force of law) of any such
Governmental 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 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
47
<PAGE>
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 Governmental
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, Aggregator 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, Aggregator 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 Aggregator 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 Aggregator 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 5.8(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 Lender funded its ratable portion 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
48
<PAGE>
Borrowers through the Administrative Agent and shall be conclusively presumed to
be correct save for manifest error.
SECTION 5.9 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 Revolving Credit/Swingline Borrowing,
Notice of Term Loan 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 ratable portion 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 5.10 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, the Aggregator L/C Commitment 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 5.11 Taxes.
-----
(a) Payments Free and Clear. Any and all payments by the Borrowers
-----------------------
hereunder or under the Notes, the Letters of Credit or the Aggregator 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 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
49
<PAGE>
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 or withhold any Taxes from or in respect of any sum
payable hereunder or under any Note or in respect of any Letter of Credit or any
Aggregator 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 or withholdings (including deductions or withholdings
applicable to additional sums payable under this Section 5.11) 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 or withholdings
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 Governmental Authority in the manner provided in Section 5.11(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 Aggregator Letters of Credit or the other Loan
Documents, or the perfection of any rights or security interest in respect
thereof (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 5.11) 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 14.1, 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 W-8ECI or Forms
W-8BEN, 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 Form W-8 or W-9 or successor applicable form,
as the case may be, to establish
50
<PAGE>
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 W-8BEN or W-8ECI 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 W-8BEN or W-8ECI 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 5.11 shall survive the payment in full of the
Obligations and the termination of the Commitments and the Aggregator L/C
Commitment.
SECTION 5.12 Use of Proceeds. The Borrowers shall use the proceeds of the
---------------
Extensions of Credit (a) to refinance the obligations under the Initial Credit
Agreement as set forth herein, (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 5.13 Security.
--------
(a) Collateral. The Obligations of the Borrowers shall be secured by the
----------
Collateral described in the Security Documents.
(b) Reaffirmation of Security. Each Borrower hereby (i) reaffirms all of
-------------------------
its respective covenants, representations, warranties and other obligations set
forth in each Security Document executed prior to the Closing Date in connection
with the Initial Credit Agreement (including, without limitation, the Pledge
Agreement and the Security Agreement) and (ii) acknowledges, represents and
agrees that such covenants, representations, warranties and other obligations
remain in full force and effect and secure the Obligations hereunder.
(c) Amendments to Security Documents.
--------------------------------
(i) Security Agreement. (A) The parenthetical "as amended, restated,
------------------
supplemented or otherwise modified" in the parenthetical in the first paragraph
of the Statement of Purpose in the Security Agreement shall be deleted and "as
amended and restated by that certain Amended and Restated Credit Agreement dated
as of June 23, 1999, and as further amended, restated, supplemented or otherwise
modified" shall be inserted in lieu thereof, (B) the
51
<PAGE>
phrase "(and as supplemented from time to time)" shall be inserted in the
definition of "Perfection Certificate" in Section 1 of the Security Agreement
after the phrase "dated as of even date herewith", (C) the reference to "Section
2.2(a) of the Credit Agreement" in the definition of "Collateral" in Section 1
of the Security Agreement shall be deleted and "Section 2(a) of this Agreement"
shall be inserted in lieu thereof, (D) each reference to "$5,000,000" in Section
4(a)(vi) of the Security Agreement shall be deleted and "$2,500,000" shall be
inserted in lieu thereof, (E) each reference to "one hundred eighty (180) days"
in Section 4(a)(vi) of the Security Agreement shall be deleted and "one hundred
twenty (120) days" shall be inserted in lieu thereof, (F) the reference to
"Section 2.6(b)(ii) of the Credit Agreement" in Section 4(a)(vi) of the Security
Agreement shall be deleted and "Sections 4.4(b)(ii) and 4.4(b)(v) of the Credit
Agreement" shall be inserted in lieu thereof, (G) the reference to "Section 8.11
of the Credit Agreement" in Section 5(a) of the Security Agreement shall be
deleted and "Section 9.11 of the Credit Agreement" shall be inserted in lieu
thereof, (H) the reference to "Section 4.5 of the Credit Agreement" in Section
10 of the Security Agreement shall be deleted and "Section 5.5 of the Credit
Agreement" shall be inserted in lieu thereof, (I) the reference to "Section 13.1
of the Credit Agreement" in Section 14 of the Security Agreement shall be
deleted and "Section 14.1 of the Credit Agreement" shall be inserted in lieu
thereof, (J) the reference to "Section 13.11 of the Credit Agreement" in Section
17 of the Security Agreement shall be deleted and "Section 14.11 of the Credit
Agreement" shall be inserted in lieu thereof, and (K) the reference to "Section
13.1 of the Credit Agreement" in Section 20 of the Security Agreement shall be
deleted and "Section 14.1 of the Credit Agreement" shall be inserted in lieu
thereof.
(ii) Pledge Agreement. (A) The parenthetical "as amended, restated,
----------------
supplemented or otherwise modified" in the parenthetical in the first paragraph
of the Statement of Purpose in the Pledge Agreement shall be deleted and "as
amended and restated by that certain Amended and Restated Credit Agreement dated
as of June 23, 1999, and as further amended, restated, supplemented or otherwise
modified" shall be inserted in lieu thereof, (B) the phrase "(and as
supplemented from time to time)" shall be inserted in the definition of
"Perfection Certificate" in Section 1 of the Pledge Agreement after the phrase
"dated as of even date herewith", (C) the reference to "Section 8.12 of the
Credit Agreement" in Section 6(g) of the Pledge Agreement shall be deleted and
"Section 9.12 of the Credit Agreement" shall be inserted in lieu thereof, (D)
the reference to "Section 4.5 of the Credit Agreement" in Sections 8(a), 9 and
15 of the Pledge Agreement shall be deleted and "Section 5.5 of the Credit
Agreement" shall be inserted in lieu thereof, (E) the reference to "Section
13.11 of the Credit Agreement" in Section 20 of the Pledge Agreement shall be
deleted and "Section 14.11 of the Credit Agreement" shall be inserted in lieu
thereof, and (F) the reference to "Section 13.1 of the Credit Agreement" in
Sections 23 and 26 of the Pledge Agreement shall be deleted and "Section 14.1 of
the Credit Agreement" shall be inserted in lieu thereof.
52
<PAGE>
ARTICLE VI
CLOSING; CONDITIONS OF CLOSING AND BORROWING
--------------------------------------------
SECTION 6.1 Closing. The closing shall take place at the offices of
-------
Kennedy, Covington, Lobdell & Hickman, L.L.P. at 10:00 a.m. on June 23, 1999 or
on such other date as the parties hereto shall mutually agree.
SECTION 6.2 Conditions to Closing and Initial Extensions of Credit. The
------------------------------------------------------
obligation of the Lenders to close this Agreement and to make the initial Loan,
issue the initial Letter of Credit or issue the initial Aggregator 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 Term A Notes;
(iv) the Term B Notes;
(v) the Swingline Note; and
(vi) the Lewan Joinder 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 the
Borrowers shall have delivered original counterparts thereof to the
Administrative Agent (including, without limitation, an affidavit that such
documents have been executed and delivered outside of the State of Florida).
(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.
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<PAGE>
(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 6.2(b)(iii); provided
--------
that with respect to items (A) and (B) noted herein such Borrower shall not be
required to deliver the documents noted therein if such Borrower certifies that
the articles of incorporation of such Borrower and all amendments thereto and
the bylaws of such Borrower and all amendments thereto which were delivered to
the Administrative Agent in connection with the Initial Credit Agreement have
not been repealed, revoked, rescinded or further amended in any respect and that
each remains in full force and effect as of the Closing Date.
(iii) Certificates of Good Standing. 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 the laws of
the jurisdiction where its principal place of business is located.
(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 5.11(e)
hereof.
(c) Collateral.
----------
(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
54
<PAGE>
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 9.3 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.
(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.
55
<PAGE>
(e) Financial Matters.
-----------------
(i) Financial Statements. The Administrative Agent shall have
--------------------
received the unaudited Consolidated financial statements of the Company and its
Subsidiaries as of December 31, 1998, in form and substance satisfactory to the
Administrative Agent and prepared in accordance with GAAP.
(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 are calculations evidencing compliance on a pro forma basis with the
---------
covenants contained in Article 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 Rate pursuant to Sections 5.1(c)
and 5.3(a) and (F) attached thereto is a calculation setting forth the Pro Forma
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 Letter. The Borrowers shall have paid
------------------------------
to the Administrative Agent and the Lenders the fees set forth or referenced in
Section 5.3 and any other accrued and unpaid fees or commissions due hereunder
(including, without limitation, legal fees and expenses), 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) Notices of Borrowing. The Administrative Agent shall have
--------------------
received a Notice of Revolving Credit/Swingline Borrowing from the Company, on
behalf of the Borrowers, in accordance with Section 2.3(a) and a Notice of Term
Loan Borrowing from the Company, on behalf of the Borrowers, in accordance with
Section 4.2, 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
Administrative Agent. The Administrative Agent shall have received copies of
all other instruments and other evidence as the Administrative Agent may
reasonably request, in form and substance satisfactory to the
56
<PAGE>
Administrative Agent, with respect to the transactions contemplated by this
Agreement and the taking of all actions in connection therewith.
(iii) 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.
(g) Refinancing of the Initial Loans. On the Closing Date, (i) all loans
--------------------------------
under the Initial Credit Agreement (the "Initial Loans") made by any Initial
Lender who is not a Lender hereunder shall be repaid in full and the commitments
and other obligations and rights (except as expressly set forth in the Initial
Credit Agreement) of such Initial Lender shall be terminated, (ii) all
outstanding Initial Loans shall be deemed Revolving Credit Loans hereunder and
the Administrative Agent shall make such transfers of funds as are necessary in
order that the outstanding balance of such Revolving Credit Loans, together with
any Revolving Credit Loans funded on the Closing Date, reflect the Revolving
Credit Commitments of the Lenders hereunder, (iii) there shall have been paid in
cash in full all accrued but unpaid interest due on the Initial Loans to the
Closing Date, (iv) there shall have been paid in cash in full all accrued but
unpaid fees under the Initial Credit Agreement due to the Closing Date and all
other amounts, costs and expenses then owing to any of the Initial Lenders
and/or First Union, as administrative agent under the Initial Credit Agreement,
and (v) all outstanding promissory notes issued by the Borrowers to the Initial
Lenders under the Initial Credit Agreement shall be deemed canceled and the
originally executed copies thereof shall be promptly returned to the
Administrative Agent who shall forward such notes to the Company, on behalf of
the Borrowers.
(h) Lewan Acquisition Documents. The Borrowers shall have delivered to the
---------------------------
Administrative Agent such documents, certificates and opinions as the
Administrative Agent reasonably requests to be delivered on the Closing Date in
connection with the Lewan Acquisition, including, without limitation, each
document, certificate and opinion required to be delivered on the Closing Date
hereunder and under the Lewan Joinder Agreement.
SECTION 6.3 Conditions to All Loans, Letters of Credit and Aggregator
---------------------------------------------------------
Letters of Credit. The obligations of the Lenders to make any Loan or convert
- -----------------
or continue any Loan, the Issuing Lender to issue or extend any Letter of Credit
or the Aggregator Issuing Lender to issue or extend any Aggregator Letter of
Credit is subject to the satisfaction of the following conditions precedent on
the relevant borrowing, conversion, continuation or issue date, as applicable:
(a) Continuation of Representations and Warranties. The representations
----------------------------------------------
and warranties contained in Article VII 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.
57
<PAGE>
(b) No Existing Default. No Default or Event of Default shall have
-------------------
occurred and be continuing (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 Aggregator Letter of Credit, as
applicable, or after giving effect to the issuance of such Letters of Credit or
Aggregator Letters of Credit, as applicable, 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.
(d) Loans In Connection With Permitted Acquisitions. The Borrowers shall
-----------------------------------------------
comply with the following requirements in connection with any Loan made to a
Borrower to finance a Permitted Acquisition: (i) such Loan shall be a Revolving
Credit Loan or Term A Loan (if within the permitted time period provided in
Section 4.1(a)) made on the closing date of such Permitted Acquisition and (ii)
the Borrowers shall have complied with each applicable term and condition
contained in Sections 6.3, 9.12, 9.13, 9.14 and 11.4 in connection with such
Permitted Acquisition; provided that the Administrative Agent, the Lenders and
--------
the Borrowers agree that any such Loan may be made to the applicable Borrower no
earlier than three (3) Business Days prior to the closing date of such Permitted
Acquisition if (i) the proceeds of such Loan are deposited into a deposit
account of the applicable Borrower (or the proceeds of such Loan are advanced to
a Wholly-Owned Subsidiary of a Borrower created solely for the purpose of
consummating such Permitted Acquisition and deposited into a deposit account of
such Wholly-Owned Subsidiary) which is maintained with a financial institution
reasonably acceptable to the Administrative Agent and (ii) such financial
institution shall have entered into an escrow arrangement, in form and substance
satisfactory to the Administrative Agent, pursuant to which such financial
institution shall retain control of the proceeds of such Loan until (A) all
conditions in the applicable acquisition documents necessary for the Permitted
Acquisition to close have been satisfied to the reasonable satisfaction of the
Administrative Agent and (B) the Borrowers shall have complied with each
applicable term and condition contained in Sections 6.3, 9.12, 9.13, 9.14 and
11.4 in connection with such Permitted Acquisition; provided further that the
-------- -------
Borrowers agree (and such financial institution shall agree pursuant to such
escrow agreement) that the proceeds of the Loan deposited in such deposit
account shall be immediately applied to repay such Loan if the conditions
(ii)(A) and (ii)(B) have not been satisfied within such three (3) Business Day
period.
SECTION 6.4 Post-Closing Covenants.
----------------------
(a) Real Property Security Documents. Within sixty (60) 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 $1,000,000 (the
locations of such real property to be set forth on Schedule 6.4(a) attached
---------------
hereto). In addition, the Borrowers 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
58
<PAGE>
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) Vendor Provided Financing.
-------------------------
(i) Closing Date Vendor-Provided Financing. Within thirty (30) days
--------------------------------------
of the Closing Date, with respect to the Closing Date Vendor-Provided Financing,
(A) an Aggregator Letter of Credit shall have been issued to secure such Closing
Date Vendor-Provided Financing and (B) the Borrowers shall have delivered to the
Administrative Agent UCC termination statements and other applicable release
documents, in form and substance satisfactory to the Administrative Agent, with
respect to all Liens securing the Closing Date Vendor-Provided Financing.
(ii) Post-Closing Vendor-Provided Financing. Within ninety (90) days
--------------------------------------
of the Closing Date, with respect to each Post-Closing Vendor-Provided
Financing, (A) (1) an Aggregator Letter of Credit shall have been issued to
secure such Post-Closing Vendor-Provided Financing and (2) the Borrowers shall
have delivered to the Administrative Agent UCC termination statements and other
applicable release documents, in form and substance satisfactory thereto, with
respect to all Liens securing such Post-Closing Vendor-Provided Financing, (B)
the Borrowers shall have delivered to the Administrative Agent an intercreditor
agreement, in form and substance satisfactory to the Administrative Agent, with
each applicable financial institution which has provided such Post-Closing
Vendor-Provided Financing or (C) the Borrowers shall have delivered to the
Administrative Agent a modification to the security documents of each applicable
financial institution which has provided such Post-Closing Vendor-Provided
Financing, which modification shall limit the collateral security for such Post-
Closing Vendor-Provided Financing to the property and related receivables
financed thereby and which modification shall be in form and substance
satisfactory to the Administrative Agent.
(c) The Lewan Acquisition.
---------------------
(i) Pursuant to Section 11.4(e)(C) hereof, the Lenders hereby
consent to the acquisition (the "Lewan Acquisition") by the Company and Lewan
Acquisition, Inc. (the "Acquiror") of Lewan & Associates, Inc. (the "Acquiree")
pursuant to the Merger Agreement by and among the Company, the Acquiror, the
Acquiree and certain shareholders of the Acquiree (the "Lewan Merger
Agreement"); provided that the Lewan Acquisition shall be consummated in
--------
accordance in all material respects with the terms and conditions of the draft
of the Lewan Merger Agreement delivered to the Administrative Agent and the
Lenders prior to the Closing Date.
(ii) No later than June 25, 1999, the Company, the Acquiror and the
Acquiree shall deliver to the Administrative Agent evidence, in form and
substance satisfactory to the Administrative Agent, that (A) the Lewan
Acquisition has been consummated in accordance in all material respects with the
terms and conditions of the draft of the Lewan Merger Agreement
59
<PAGE>
delivered to the Administrative Agent and the Lenders prior to the Closing Date
and (B) the articles of merger to be filed in connection therewith have been
filed in the appropriate jurisdiction.
(d) Opinion Regarding Security Interests. No later than July 2, 1999, the
------------------------------------
Administrative Agent shall have received a favorable opinion of counsel from
Hogan & Hartson, counsel to the Borrowers, addressed to the Administrative Agent
and the Lenders, updating the prior opinions of counsel delivered thereby in
connection with the Initial Credit Agreement and certain Permitted Acquisitions
thereunder and with respect to the security interest of the Administrative Agent
and the Lenders in the Collateral.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
SECTION 7.1 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 or the Aggregator
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 7.1(a).
---------------
(b) Ownership. Each Subsidiary and each Material Subsidiary of each
---------
Borrower as of the Closing Date is listed on Schedule 7.1(b). As of the
---------------
Closing Date, the capitalization of each Borrower and each Subsidiary thereof
consists of the number of shares, authorized, issued and outstanding, of such
classes and series, with or without par value, described on Schedule 7.1(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 7.1(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
--------
7.1(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
60
<PAGE>
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 Extensions of Credit 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.
(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
--------
7.1(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.
61
<PAGE>
(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, service mark, service mark 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 to
or 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 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
62
<PAGE>
(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 7.1(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 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.
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<PAGE>
(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, Letters
of Credit or Aggregator 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 7.1(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 7.1(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 7.1(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 7.1(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.
(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 unaudited balance sheet of the
--------------------
Company and its Subsidiaries as of December 31, 1998 and the related unaudited
statements of income and retained earnings and cash flows for the fiscal quarter
then ended, copies of which have been
64
<PAGE>
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 December 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 or leased 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 7.1(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
--------
7.1(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 11.3. 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 11.3
hereof.
(t) Debt and Guaranty Obligations. Schedule 7.1(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 7.1(u), as of the Closing
---------- ---------------
Date there are no actions, suits or proceedings pending nor, to the knowledge of
any Borrower, threatened
65
<PAGE>
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 (i) 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 (ii) is hereby designated as "Senior Indebtedness" or
"Designated Senior Indebtedness", as applicable, 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, the
-----------------------
Letters of Credit or the Aggregator 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) Year 2000 Compliance. The Borrowers and their Subsidiaries have no
--------------------
reason to believe that the material computer applications used by the Borrowers
and their Subsidiaries (and the computer applications of their suppliers,
vendors and customers that are material to their business and operations) shall
not be able to perform properly date-sensitive functions for all dates before
and after January 1, 2000.
(z) 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 (other
than the business plans and projections delivered on the Closing Date or
pursuant to Section 8.1(c), which business plans and projections shall represent
the good faith opinions of the Company and senior management thereof as to the
projected results contained therein). 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 in writing to the Administrative Agent
having a Material Adverse Effect, or insofar as any
66
<PAGE>
Borrower can now foresee, which could reasonably be expected to have a Material
Adverse Effect.
SECTION 7.2 Survival of Representations and Warranties, Etc. All
-----------------------------------------------
representations and warranties set forth in this Article VII 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 VIII
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full and the
Commitments and the Aggregator L/C Commitment terminated, unless consent has
been obtained in the manner set forth in Section 14.11 hereof, the Borrowers
will furnish or cause to be furnished to the Administrative Agent at the
Administrative Agent's office at the address set forth in Section 14.1 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 8.1 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 as of the end of and for the corresponding period in 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
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<PAGE>
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 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 as
of the end of and 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 sixty (60) 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 8.2 Officer's Compliance Certificate. At each time financial
--------------------------------
statements are delivered pursuant to Sections 8.1(a) or (b) and at such other
times as the Administrative Agent shall reasonably request (including, without
limitation, in connection with any Permitted Acquisition pursuant to Section
11.4), 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 8.3 Accountants' Certificate. At each time financial statements
------------------------
are delivered pursuant to Section 8.1(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
X hereof as at the end of each respective period.
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<PAGE>
SECTION 8.4 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 8.5 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
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<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
7.1 inaccurate in any respect.
SECTION 8.6 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 whether pursuant to this Article VIII
or any other provision of this Agreement, or any of the Security Documents,
shall comply with Section 7.1(z).
ARTICLE IX
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments and the Aggregator L/C Commitment terminated, unless consent has
been obtained in the manner provided for in Section 14.11, each Borrower will,
and will cause each of its Subsidiaries to:
SECTION 9.1 Preservation of Corporate Existence and Related Matters.
-------------------------------------------------------
Except as permitted by Section 11.5, 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 9.2 Maintenance of Property. Protect and preserve all properties
-----------------------
useful in and material to its business, including copyrights, patents, trade
names, trademarks and service marks; 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 9.3 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.
SECTION 9.4 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
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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 9.5 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 9.5 in good faith so
long as adequate reserves are maintained with respect thereto in accordance with
GAAP.
SECTION 9.6 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 9.7 Environmental Laws. In addition to and without limiting the
------------------
generality of Section 9.6, (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 9.8 Compliance with ERISA. In addition to and without limiting
---------------------
the generality of Section 9.6, (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 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.
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<PAGE>
SECTION 9.9 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 9.10 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 9.11 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 9.12 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 11.4(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 8.2, 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 6.2 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 11.4(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 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
11.4(e) in connection with the
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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 9.13 Additional Real Property Collateral. Promptly at the request
-----------------------------------
of the Administrative Agent or 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, 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 9.14 Vendor-Provided Financing. Within sixty (60) days of the
-------------------------
creation, incurrence or assumption of any Vendor-Provided Financing or any other
trade payable which is secured by a Lien which covers assets of any applicable
Borrower or any Subsidiary thereof other than or in addition to the property and
related receivables financed by such financing or trade payable, in each case
which Lien is not permitted by clause (x) of Section 11.3(h)(iv), (i) (A) an
Aggregator Letter of Credit shall be issued to secure such financing or trade
payable and (B) the applicable Borrower or Subsidiary thereof shall deliver to
the Administrative Agent UCC termination statements and other applicable release
documents, in form and substance satisfactory to the Administrative Agent, with
respect to all Liens securing such financing or trade payable, (ii) the
applicable Borrower or Subsidiary thereof shall deliver to the Administrative
Agent an intercreditor agreement, in form and substance satisfactory to the
Administrative Agent, with each applicable financial institution which has
provided such financing or trade payable or (iii) the applicable Borrower or
Subsidiary thereof shall deliver to the Administrative Agent a modification to
the security documents of each applicable financial institution which has
provided such financing or trade payable, which modification shall limit the
collateral security for such financing or trade payable to the property and
related receivables financed thereby and which modification shall be in form and
substance satisfactory to the Administrative Agent.
SECTION 9.15 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 9.16 Interest Rate Protection. Maintain, commencing within ninety
------------------------
(90) days of any date on which the aggregate Extensions of Credit are equal to
or greater than
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<PAGE>
$100,000,000, a Hedging Agreement with a minimum notional amount at any date of
determination as agreed upon by the Borrowers and Administrative Agent and at an
interest rate and upon other terms and conditions satisfactory to the
Administrative Agent.
SECTION 9.17 Primary Deposit Accounts. Maintain, commencing within ninety
------------------------
(90) days of the Closing Date, its primary deposit account at First Union
National Bank.
SECTION 9.18 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, the Aggregator Letters of Credit
and the other Loan Documents.
ARTICLE X
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments and the Aggregator L/C Commitment terminated, unless consent has
been obtained in the manner set forth in Section 14.11 hereof, the Company and
its Subsidiaries on a Consolidated basis will not:
SECTION 10.1 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 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, 2001 4.25 to 1.00
January 1, 2002 through and
including December 31, 2002 4.00 to 1.00
January 1, 2003 through and
including December 31, 2003 3.75 to 1.00
January 1, 2004 and thereafter 3.50 to 1.00
</TABLE>
SECTION 10.2 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 EBITDA for the
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<PAGE>
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, 2001 3.00 to 1.00
January 1, 2002 through and
including December 31, 2002 2.75 to 1.00
January 1, 2003 through and
including December 31, 2003 2.50 to 1.00
January 1, 2004 and thereafter 2.25 to 1.00
</TABLE>
SECTION 10.3 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 for 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:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
Closing Date through and
including March 31, 2000 1.30 to 1.00
April 1, 2000 through and
including March 31, 2001 1.35 to 1.00
April 1, 2001 through and
including March 31, 2002 1.40 to 1.00
April 1, 2002 through and
including March 31, 2003 1.45 to 1.00
April 1, 2003 and thereafter 1.50 to 1.00
</TABLE>
SECTION 10.4 Minimum Net Worth. As of the end of any fiscal quarter,
-----------------
permit Net Worth to be less than (i) $85,000,000 plus (ii) fifty percent (50%)
----
of the aggregate of Net Income for each fiscal quarter ending after December 31,
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 amount of any equity issuance (including, without
limitation, any equity issuance in connection with a Permitted Acquisition)
after December 31, 1998.
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<PAGE>
SECTION 10.5 Minimum Pro Forma EBITDA. As of the end of any fiscal
------------------------
quarter, permit Pro Forma EBITDA for the period of four (4) consecutive fiscal
quarters ending on such date, to be less than the sum of (i) eighty-five percent
(85%) of Pro Forma EBITDA for such period of four (4) consecutive fiscal
quarters of entities acquired during such period (other than entities acquired
prior to April 28, 1999) plus (ii) the amount set forth below for any such date
----
during the corresponding period set forth below:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Closing Date through and
including December 31, 1999 $46,000,000
January 1, 2000 through and
including December 31, 2000 $49,000,000
January 1, 2001 through and
including December 31, 2001 $52,000,000
January 1, 2002 through and
including December 31, 2002 $54,000,000
January 1, 2003 through and
including December 31, 2003 $56,000,000
January 1, 2004 through and
including December 31, 2004 $59,000,000
January 1, 2005 and thereafter $62,000,000
</TABLE>
ARTICLE XI
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full and the
Commitments and the Aggregator L/C Commitment terminated, unless consent has
been obtained in the manner set forth in Section 14.11 hereof, each Borrower
will not, and will not permit any of its Subsidiaries to:
SECTION 11.1 Limitations on Debt. Create, incur, assume or suffer to
-------------------
exist any Debt except:
(a) the Obligations;
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(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;
(c) Subordinated Debt of the Company evidenced by the Existing
Subordinated Notes in an aggregate principal amount not to exceed $100,000,000
(as may be increased in an aggregate principal amount not to exceed $50,000,000
so long as (i) no Default or Event of Default exists on the date any such
increase, (ii) the Company shall comply with the terms and provisions of
Sections 2.6 and 4.4 hereof with respect to such increase, and (iii) the
documents evidencing such increase shall be reasonably satisfactory to the
Administrative Agent);
(d) Debt set forth on Schedule 11.1 which is existing on the Closing Date
-------------
and is not otherwise referred to in this Section 11.1, and the renewal and
refinancing (but not the increase in 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 $5,000,000 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 $5,000,000 on any
date of determination;
(g) intercompany Debt between any Borrower and any other Borrower and
intercompany Debt in connection with intercompany loans and advances permitted
under Section 11.4(f) hereof;
(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 $10,000,000 on any date of determination;
(i) unsecured obligations with respect to accrued and unpaid cash earnout
payments reflected on the Consolidated balance sheet of the Company and its
Subsidiaries and created in connection with any Permitted Acquisition in an
amount not to exceed $10,000,000;
(j) Debt consisting of Guaranty Obligations permitted by Section 11.2; and
provided, that none of the Debt permitted to be incurred by this Section 11.1
- --------
(other than the Subordinated Debt of the Company evidenced by the Existing
Subordinated Notes) 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 11.2 Limitations on Guaranty Obligations. Create, incur, assume or
-----------------------------------
suffer to exist any Guaranty Obligations except:
77
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(a) Guaranty Obligations in favor of the Administrative Agent for the
benefit of the Administrative Agent and the Lenders;
(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;
(c) Guaranty Obligations of the Company with respect to the Debt of any
Subsidiary Borrower permitted by Section 11.1; and
(d) Guaranty Obligations of certain Subsidiaries of the Company with
respect to the Subordinated Debt of the Company evidenced by the Existing
Subordinated Notes.
SECTION 11.3 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 11.3 and in existence
on the Closing Date and described on Schedule 11.3(f);
----------------
(g) Liens securing Debt permitted under Section 11.1(e);
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<PAGE>
(h) Liens securing obligations of the Company or any applicable Subsidiary
under Vendor-Provided Financing or Trade Financing and described on Schedule
--------
11.3(h) (as such Schedule 11.3(h) may be updated from time to time as a result
- ------- ----------------
of any Permitted Acquisition upon the approval of the Administrative Agent);
provided that (i) such Liens shall be created substantially simultaneously with
- --------
the acquisition of the related property, (ii) the principal amount of the
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, (iii) the obligations with respect to which such Liens are created
shall not exceed fifty percent (50%) of the fair market value of the Inventory
at any time and (iv) 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 (provided that such Liens may encumber property other than the
--------
property and related receivables of the applicable creditor financed by such
financing if (x) the aggregate amount of Vendor-Provided Financing secured
thereby does not exceed $200,000 with respect any single financing or $500,000
with respect to all such financings or (y) the applicable Borrower or Subsidiary
thereof complies with Section 6.4(b) or Section 9.14, as applicable, with
respect to such Liens); and
(i) Liens securing Debt permitted under Section 11.1(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.
SECTION 11.4 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) (i) investments in Borrowers, (ii) investments in Subsidiaries which
are not Borrowers in an aggregate amount not to exceed $500,000 at any time, and
(iii) the existing loans, advances and investments not otherwise referred to in
this Section 11.4 described on Schedule 11.4;
-------------
(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
79
<PAGE>
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 11.1(g) hereof; and
(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 9.10 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 $25,000,000 or the aggregate
Permitted Acquisition Value of such acquisition exceeds $50,000,000 (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, (I) pro forma
--- -----
compliance with each covenant contained in Articles X and XI
and (II) that the Person to be acquired shall have positive
pro forma cash flow;
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(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:
(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, (I) pro forma
--- -----
compliance with each covenant contained in Articles X and XI
and (II) that the Person to be acquired shall have positive
pro forma cash flow;
(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 9.12 and
9.13 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
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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 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;
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(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 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 Lenders, on or
before the closing date of the acquisition, an Officer's
Compliance Certificate demonstrating, in form and substance
reasonably satisfactory thereto, (I) pro forma compliance
--- -----
with each covenant contained in Articles X and XI and (II)
that the Person to be acquired shall have positive pro forma
cash flow;
(6) the Borrowers shall have delivered to the Lenders all
documents required pursuant to Sections 9.12, 9.13 and 9.14
hereof pursuant to the provisions thereof;
(7) the Borrowers shall have delivered to the Lenders, 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 Lenders 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 Lenders copies of
the final governing documentation (including, without
limitation, the
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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 Lenders such other
documents reasonably requested by the Administrative Agent
in connection with such acquisition; and
(f) intercompany loans and advances to a Wholly-Owned Subsidiary of any
Borrower if the following requirements are satisfied: (i) such Wholly-Owned
Subsidiary must be created solely for the purpose of consummating a Permitted
Acquisition under Section 11.4, (ii) such loan or advance must be made solely
for the purpose of consummating a Permitted Acquisition under Section 11.4 and
shall be made in compliance with Section 6.3(d) and (iii) the Borrowers and such
Wholly-Owned Subsidiary must comply with the Sections 6.3(d), 9.12, 9.13, 9.14
and 11.4.
SECTION 11.5 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 11.4(e); and
(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 11.6 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;
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(c) the transfer of assets to any Borrower or any Wholly-Owned Subsidiary
of any Borrower pursuant to Section 11.5(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
(e) 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 Sections 4.4 and 2.6 hereof.
SECTION 11.7 Limitations on Dividends, Distributions and Redemptions.
-------------------------------------------------------
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, to the extent that such change could reasonably
be expected to have a Material Adverse Effect, make any change in its capital
structure; provided that:
--------
(a) any Borrower or any Subsidiary thereof may pay dividends in shares of
its own capital stock;
(b) any Borrower or any Subsidiary thereof may pay cash dividends to any
Borrower; and
(c) any Borrower or any Subsidiary thereof may reacquire shares of its
capital stock which have been placed into escrow in connection with an
acquisition and which are reacquired pursuant to an escrow or other
indemnification claim under the documentation governing such acquisition.
SECTION 11.8 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 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 11.9 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
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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 11.10 Certain Accounting Changes; Organizational Documents.
----------------------------------------------------
(a) Change its Fiscal Year end, or make any change in its accounting
treatment and reporting practices except as required by GAAP; or
(b) Amend, modify or change its articles of incorporation (or corporate
charter or other similar organizational documents) or amend, modify or change
its bylaws (or other similar documents) in any manner adverse in any respect to
the rights or interests of the Lenders.
SECTION 11.11 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 11.12 Restrictive Agreements. Enter into any Debt (other than the
----------------------
Subordinated Debt of the Company evidenced by the Existing Subordinated Notes)
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; or
SECTION 11.13 Impairment of Security Interests. Take or omit to take any
--------------------------------
action, which action or omission might or would have the result of materially
impairing the security interests in favor of the Administrative Agent with
respect to the Collateral or grant to any Person (other than the Administrative
Agent for the benefit of itself and the Lenders pursuant to the Security
Documents) any interest whatsoever in the Collateral, except for Liens permitted
under Section 11.3 and asset sales permitted under Section 11.6.
ARTICLE XII
DEFAULT AND REMEDIES
SECTION 12.1 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, Reimbursement Obligations
-------------------------------------------------------------------
and Aggregator Reimbursement Obligations. Any Borrower shall default in any
- ----------------------------------------
payment of
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principal of any Loan, Note, Reimbursement Obligation or Aggregator
Reimbursement Obligation when and as due (whether at maturity, by reason of
acceleration or otherwise).
(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, Reimbursement Obligation or Aggregator 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 8.1(a) or (b), 8.2 or 8.5(e) or Articles X or XI 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 12.1) 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 or any Aggregator Reimbursement Obligation) the aggregate outstanding
amount of which Debt is in excess of $2,000,000 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 or any Aggregator Reimbursement Obligation) the aggregate outstanding
amount of which Debt is in excess of $2,000,000 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
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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.
(i) Change in Control. (i) 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 (A)
more than thirty-five percent (35%) of the common stock or (B) more than thirty-
five percent (35%) of the voting power of the Company entitled to vote in the
election of members of the board of directors of the Company or (C) 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, (ii)
any Borrower (other than the Company) shall fail to be a Wholly-Owned Subsidiary
of the Company or (iii) there shall have occurred under any indenture or other
instrument evidencing any Debt in excess of $2,000,000 any "change of control"
(as defined in such indenture or other evidence of Debt) obligating any Borrower
to repurchase, redeem or repay all or any part of such Debt or capital stock
provided for therein (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.
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(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 $2,000,000 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 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 $2,000,000.
(n) Judgment. A judgment or order for the payment of money which causes
--------
the aggregate amount of all such judgments to exceed $2,000,000 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 12.2 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, the Reimbursement Obligations and the
Aggregator 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 and all Aggregator L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit and the then outstanding Aggregator Letters of Credit shall have
presented or shall be entitled to present 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, Letters of Credit or Aggregator Letters of Credit thereunder;
provided, that upon the occurrence of an Event of Default specified in Section
- --------
12.1(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 without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in this
Agreement or in any other Loan Document to the contrary notwithstanding.
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(b) Letters of Credit. With respect to all Letters of Credit and
-----------------
Aggregator 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 and Aggregator 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 Aggregator Letters of Credit, and the unused portion thereof after all such
Letters of Credit and Aggregator 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 and Aggregator Letters of Credit shall have
expired or been fully drawn upon, the Reimbursement Obligation and the
Aggregator 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.
SECTION 12.3 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 any 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 XIII
THE ADMINISTRATIVE AGENT
SECTION 13.1 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
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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 13.2 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 13.3 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 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 13.4 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 14.10 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
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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 13.5 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 (or, when expressly required hereby, all of the Lenders);
provided that unless and until the Administrative Agent shall have received such
- --------
directions, the Administrative Agent shall not take such action, or refrain from
taking such action.
SECTION 13.6 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 hereafter 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 Letters of Credit and Aggregator Letters 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.
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SECTION 13.7 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 Revolving Credit Commitment
Percentages, Term A Loan Percentages, Term B Loan Percentages or Aggregator L/C
Percentages, as applicable, 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,
any Reimbursement Obligation or any Aggregator 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 13.7 shall survive the payment of the Notes, any Reimbursement
Obligation, any Aggregator Reimbursement Obligation and all other amounts
payable hereunder and the termination of this Agreement.
SECTION 13.8 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 the 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 or any Aggregator 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 the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
SECTION 13.9 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 13.9 shall
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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 13.10 Syndication Agent and Documentation Agent. The Syndication
-----------------------------------------
Agent, in its capacity as Syndication Agent, and the Documentation Agent, in its
capacity as Documentation Agent, shall have no duties or responsibilities under
this Agreement or any other Loan Document.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 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,
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.
3820 Northdale Boulevard
Suite 200A
Tampa, Florida 33624
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
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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 and Aggregator Letters of Credit issued.
SECTION 14.2 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
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 14.3 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 14.10 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
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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 12.2 and although such Obligations shall be contingent or
unmatured. Notwithstanding the foregoing, each Lender agrees to notify the
Company, on behalf of the Borrowers, and the Administrative Agent after any such
set-off and application; provided that the failure to give such notice shall not
--------
affect the validity of such set-off and application.
SECTION 14.4 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 14.5 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 14.1. Nothing in this Section 14.5 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 14.6 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
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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.
(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 14.7 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.
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SECTION 14.8 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, the 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.
SECTION 14.9 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 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 14.10 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 and the other Loan
Documents (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:
--------
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(i) if less than all of the assigning Lender's Commitment (and,
if applicable, Aggregator L/C Commitment) is to be assigned, the Revolving
Credit Commitment and/or the Term A Loan Commitment and/or the Term A Loans
and/or the Term B Loan Commitment and/or the Term B Loans and/or the
Aggregator L/C Commitment, as applicable, so assigned shall not be less
than $5,000,000; provided that (i) any Term B Loan Lender may assign a
--------
portion of its Term B Loan Commitment and/or Term B Loans in an amount less
than $5,000,000 to any investment fund affiliated therewith which is
managed by the same fund manager as such Term B Loan Lender and (ii) the
amount of the assigning Lender's Aggregator L/C Commitment so assigned
shall not be less than $1,000,000;
(ii) 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;
(iii) 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
(iv) 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.
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
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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 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 Revolving Credit Commitment and/or its Term A Loan
Commitment and/or its Term B Loan Commitment and/or its Aggregator L/C
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;
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(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, any Reimbursement
Obligation or any Aggregator Reimbursement Obligation, extend the term or
increase the amount of the Commitment or the Aggregator L/C 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 14.10, disclose
to the assignee, participant, proposed assignee or proposed participant, any
information relating to the Borrowers furnished to such Lender by or 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 14.11 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 (other than any Hedging Agreement, the terms and
conditions of which may be amended, modified or waived by the parties thereto)
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 the Company, on behalf of itself and the other
Borrowers; provided, that in addition no amendment, waiver or consent shall:
--------
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(a) (i) increase the Revolving Credit Commitment of any Lender, (ii)
reduce the rate of interest or fees payable on any Revolving Credit Loan or
Reimbursement Obligation, (iii) reduce or forgive the principal amount of
any Revolving Credit Loan or the amount of any Reimbursement Obligation,
(iv) extend the originally scheduled time or times of payment of the
principal of any Revolving Credit Loan or Reimbursement Obligation or the
time or times of payment of interest on any Revolving Credit Loan or
Reimbursement Obligation or any fee or commission with respect thereto, (v)
permit any subordination of the principal or interest on any Revolving
Credit Loan or Reimbursement Obligation or (vi) extend the time of the
obligation of the Lenders to make or issue or participate in Letters of
Credit, in any case, without the written consent of each Lender holding
Revolving Credit Loans or a Revolving Credit Commitment;
(b) (i) increase the Term A Loan Commitment of any Lender, (ii) reduce
the rate of interest or fees payable on any Term A Loan, (iii) reduce or
forgive the principal amount of any Term A Loan, (iv) permit any
subordination of the principal or interest on any Term A Loan or (v) extend
the originally scheduled time or times of payment of the principal of any
Term A Loan or the time or times of payment of interest on any Term A Loan
or any fee or commission with respect thereto, in any case, without the
written consent of each Lender holding a Term A Loan or a Term A Loan
Commitment;
(c) (i) increase the Term B Loan Commitment of any Lender, (ii) reduce
the rate of interest or fees payable on any Term B Loan, (iii) reduce or
forgive the principal amount of any Term B Loan, (iv) permit any
subordination of the principal or interest on any Term B Loan or (v) extend
the originally scheduled time or times of payment of the principal of any
Term B Loan or the time or times of payment of interest on any Term B Loan
or any fee or commission with respect thereto, in any case, without the
written consent of each Lender holding a Term B Loan or a Term B Loan
Commitment;
(d) (i) increase the Aggregator L/C Commitment of any Lender, (ii)
reduce the rate of interest or fees payable on any Aggregator Reimbursement
Obligation, (iii) reduce or forgive the amount of any Aggregator
Reimbursement Obligation, (iv) extend the originally scheduled time or
times of payment of the principal of any Aggregator Reimbursement
Obligation or the time or times of payment of interest on any Aggregator
Reimbursement Obligation or any fee or commission with respect thereto, (v)
permit any subordination of the principal or interest on any Aggregator
Reimbursement Obligation or (vi) extend the time of the obligation of the
Aggregator L/C Participants to make or issue or participate in Aggregator
Letters of Credit, in any case, without the written consent of each Lender
holding an Aggregator L/C Commitment;
(e) (i) release any Borrower from its Obligations hereunder or under
any other Loan Document, (ii) permit any assignment (other than as
specifically permitted or contemplated in this Agreement) of any of the
Borrower's rights and obligations hereunder or under any other Loan
Document, (iii) release any material portion of the Collateral or release
any Security Document (other than asset sales permitted pursuant to Section
11.6
102
<PAGE>
and as otherwise specifically permitted or contemplated in this Agreement
or the applicable Security Document), (iv) amend or waive any provision of
this Agreement relating to prepayments or the allocation thereof, (v) amend
or waive the provisions of Sections 9.12, 9.13 or 9.14 hereof or (vi) amend
the provisions of this Section 14.11 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
XIII shall be made without the written consent of the Administrative Agent, (b)
Article III (as it relates to the L/C Facility) without the written consent of
the Issuing Lender and (c) Article III (as it relates to the Aggregator L/C
Facility) without the written consent of the Aggregator Issuing Lender.
SECTION 14.12 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 14.13 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 14.14 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 XIV and any other
provision of this Agreement and the Loan 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 14.15 Titles and Captions. Titles and captions of Articles,
-------------------
Sections and subsections in, and the table of contents of, this Agreement are
for convenience only, and neither limit nor amplify the provisions of this
Agreement.
SECTION 14.16 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 14.17 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 14.18 Company as Agent for the Borrowers. The Borrowers hereby
----------------------------------
irrevocably appoint and authorize the Company (i) to provide the Administrative
Agent with all
103
<PAGE>
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 14.19 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 14.19 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.
(c) Notwithstanding anything to the contrary in this Agreement, the amount
of any Borrower's obligations under this Section 14.19 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 14.20 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 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 and Aggregator L/C Commitment. No termination of this Agreement
shall affect the rights and obligations of the parties hereto arising prior to
such termination or in respect of any provision of this Agreement which survives
such termination.
104
<PAGE>
[Signature Pages To Follow]
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:______________________________________________
Name: Raymond Schilling
Title: CFO, Senior VP, Treasurer and Secretary
[CORPORATE SEAL] GLOBAL IMAGING OPERATIONS, INC., as Borrower
By: _____________________________________________
Name: Raymond Schilling
Title: VP and Treasurer
[CORPORATE SEAL] GLOBAL IMAGING FINANCE COMPANY, as Borrower
By: _____________________________________________
Name: Raymond Schilling
Title: CFO, VP, Treasurer and Secretary
[CORPORATE SEAL] AMERICAN PHOTOCOPY EQUIPMENT COMPANY OF
PITTSBURGH (d/b/a AMCOM Office Systems),
as Borrower
By: _____________________________________________
Name: Raymond Schilling
Title: Assistant Secretary
[CORPORATE SEAL] BERNEY, INC., as Borrower
By: _____________________________________________
Name: Raymond Schilling
Title: Vice President
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
105
<PAGE>
[CORPORATE SEAL] BUSINESS EQUIPMENT UNLIMITED, as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: Secretary and Treasurer
[CORPORATE SEAL] CAMERON OFFICE PRODUCTS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: Vice President
[CORPORATE SEAL] CONNECTICUT BUSINESS SYSTEMS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP, Secretary and Treasurer
[CORPORATE SEAL] CONWAY OFFICE PRODUCTS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: Assistant Secretary and
Assistant Treasurer
[CORPORATE SEAL] COPY SERVICE AND SUPPLY, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP and Assistant Secretary
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
106
<PAGE>
[CORPORATE SEAL] DUPLICATING SPECIALTIES, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP, CFO, Asst. Secretary and Treasurer
[CORPORATE SEAL] EASTERN COPY PRODUCTS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP and Assistant Secretary
[CORPORATE SEAL] ELECTRONIC SYSTEMS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP and Assistant Secretary
[CORPORATE SEAL] ELECTRONIC SYSTEMS OF RICHMOND, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP and Assistant Secretary
[CORPORATE SEAL] FELCO OFFICE SYSTEMS, INC. (successor by
merger of Felco Office Systems, Inc. and Dahill
Industries, Inc.), as Borrower
By: _______________________________________
Attest: Name: Raymond Schilling
Title: Vice President and Secretary
- -----------------------
Assistant Secretary
- ---------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
107
<PAGE>
[CORPORATE SEAL] QUALITY BUSINESS SYSTEMS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP, CFO, Treasurer and Asst. Secretary
[CORPORATE SEAL] SOUTHERN BUSINESS COMMUNICATIONS, INC., as
Borrower
By: _______________________________________
Name: Raymond Schilling
Title: VP, Secretary and Treasurer
[CORPORATE SEAL] CARR BUSINESS MACHINES OF GREAT NECK, INC., as
Borrower
By: _______________________________________
Name: Raymond Schilling
Title: Vice President, Secretary and Treasurer
[CORPORATE SEAL] CAPITOL OFFICE SOLUTIONS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: Vice President, Secretary and Treasurer
[CORPORATE SEAL] DISTINCTIVE BUSINESS PRODUCTS, INC., as Borrower
By: _______________________________________
Name: Raymond Schilling
Title: Vice President, Secretary and Treasurer
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
108
<PAGE>
[CORPORATE SEAL] LEWAN ACQUISITION, INC. (to be known as
LEWAN & ASSOCIATES, INC.), as Borrower
By: _______________________________________
Name: _____________________________________
Title:_____________________________________
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
AGENTS AND LENDERS:
FIRST UNION NATIONAL BANK, as
Administrative Agent and as Lender
By: /s/ Jorge A. Gonzalez
----------------------------
Name: Jorge A. Gonzalez
--------------------------
Title: Senior Vice President
------------------------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
KEY CORPORATE CAPITAL INC., as
Syndication Agent and as Lender
By: /s/ Todd B. Boney
---------------------------------
Name: Todd Boney
-------------------------------
Title: Senior Vice President
------------------------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
SCOTIABANC INC., as Documentation Agent and
as Lender
By: /s/ Patrick J. Hawes
---------------------------------
Name: Patrick J. Hawes
--------------------------
Title: Comptroller
-------------------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
SUNTRUST BANK, TAMPA BAY, as Lender
By: /s/ W. David Wisdom
---------------------
Name: W. David Wisdom
----------------
Title: Vice President
-----------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
LASALLE BANK NATIONAL ASSOCIATION,
as Lender
By: /s/ John C. Thurston
--------------------------------
Name: John C. Thurston
------------------------------
Title: Vice President
-----------------------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
COMERICA BANK, as Lender
By: /s/ Martin G. Ellis
--------------------------------
Name: Martin G. Ellis
-----------------------------
Title: Vice President
----------------------------
[Signatures Continued On The Following Page]
<PAGE>
RAYMOND JAMES BANK, FSB, as Lender
By: /s/ Theresa J.Schefstad
--------------------------------
Name: Theresa J. Schefstad
------------------------------
Title: President & CEO
-----------------------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
BANK LEUMI LE-ISRAEL B.M., MIAMI
AGENCY, as Lender
By: /s/ Stephen Hanas
-------------------------------
Name: Stephen Hanas
-----------------------------
Title: Vice President
----------------------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
BANKBOSTON, N.A., as Lender
By: /s/ Shawn R. Foster
------------------------------
Name: Shawn R. Foster
----------------------------
Title: Vice President
---------------------------
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
SANKATY CAPITAL, as Lender
By:_______________________________
Name:_____________________________
Title:_____________________________
[Signatures Continued On The Following Page]
[Amended and Restated Credit Agreement]
<PAGE>
MORGAN STANLEY DEAN WITTER PRIME INCOME
TRUST, asLender
By: _________________________________
Name:________________________________
Title:_______________________________
By:_________________________________
Name:______________________________
Title:______________________________
<PAGE>
Exhibit 5.1
July 27, 1999
Global Imaging Systems, Inc.
3820 Northdale Boulevard, Suite 200A
Tampa, Florida 33624
Ladies and Gentlemen:
We are acting as special counsel to Global Imaging Systems, Inc., a
Delaware corporation (the "Company"), and to each of the Company's direct and
indirect subsidiaries identified on Exhibit A attached hereto (collectively, the
---------
"Subsidiaries") in connection with their Registration Statement on Form S-4, as
amended (the "Registration Statement"), filed with the Securities and Exchange
Commission relating to the proposed offering of up to $100,000,000 in aggregate
principal amount of 10 3/4% Senior Subordinated Exchange Notes due 2007 which
will be guaranteed by the Subsidiaries (the "Exchange Notes") in exchange for up
to $100,000,000 in aggregate principal amount of the Company's outstanding 10
3/4% Senior Subordinated Notes due 2007 that are guaranteed by the Subsidiaries
(the "Outstanding Notes"). This opinion letter is furnished to you at your
request to enable you to fulfill the requirements of Item 601(b)(5) of
Regulation S-K, 17 C.F.R. (S)229.601(b)(5), in connection with the Registration
Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. The Certificate of Incorporation of the Company, as certified by
the Secretary of the State of the State of Delaware on May 25, 1999 and by the
Secretary of the Company on the date hereof as being complete, accurate, and in
effect.
3. The Bylaws of the Company, as certified by the Secretary of the
Company on the date hereof as being complete, accurate, and in effect.
4. With respect to each corporate Subsidiary, the articles or
certificate of incorporation of such Subsidiary, as certified by the Secretary
of such Subsidiary on the date hereof as being complete, accurate, and in effect
with the Secretaries of State of the respective states of incorporation of the
Subsidiaries (and by the Clerk of the State Corporation Commission in the case
of the Commonwealth of Virginia) as indicated on Exhibit A attached hereto.
---------
<PAGE>
July 27, 1999
Page 2
5. With respect to each corporate Subsidiary, the By-laws of such
Subsidiary, as certified by the Assistant Secretary of such Subsidiary as of the
date hereof as being complete, accurate and in effect.
6. In the case of Global Operations Texas, L.P., the certificate of
limited partnership of such Subsidiary, as certified by the general partner of
such Subsidiary on the date hereof as being complete, accurate, and in effect
with the Secretary of State of the State of Texas.
7. The Partnership Agreement of Global Texas, L.P., as certified by
the general partner of Global Texas, L.P. as of the date hereof as being
complete, accurate and in effect.
8. Resolutions of the Board of Directors of the Company adopted by
unanimous written consent on February 26, 1999, as certified by the Secretary of
the Company on the date hereof as being complete, accurate, and in effect,
relating to the issuance of the Exchange Notes and the exchange of the Exchange
Notes for the Outstanding Notes, and all the transactions contemplated thereby.
9. With respect to each corporate Subsidiary, certain resolutions of
the board of directors and the shareholders of such Subsidiary adopted at a
special meeting held on February 27, 1999 (except with respect to Daniel
Communications, Inc. ("Daniel") and Lewan & Associates, Inc. ("Lewan"), certain
resolutions of the board of directors and shareholders of Daniel and Lewan,
respectively, adopted by unanimous written consent dated July __, 1999 and July
__, 1999), as certified by the Assistant Secretary of such Subsidiary as of the
date hereof as being complete, accurate and in effect, relating to the issuance
of such Subsidiary's guarantee of the Company's obligations under the Exchange
Notes and the exchange of the Exchange Notes and such Subsidiary's corresponding
guarantee for the Outstanding Notes and such Subsidiary's existing guarantee,
and all the transactions contemplated thereby.
10. Certain resolutions of the general partner of Global Texas, L.P.
adopted at a special meeting held on July 30, 1999, as certified by the
Assistant Secretary of the general partner of Global Texas, L.P. as of the date
hereof as being complete, accurate and in effect, relating to the issuance of
Global Texas, L.P.'s guarantee of the Company's obligations under the Exchange
Notes and the exchange of the Exchange Notes and Global Texas, L.P.'s guarantee
for the Outstanding Notes and Global Texas, L.P.'s existing guarantee, and all
the transactions contemplated thereby.
<PAGE>
July 27, 1999
Page 3
11. The Indenture dated March 8, 1999 by and among the Company, the
Subsidiaries, as guarantors, and the United States Trust Company of New York, as
trustee, as amended, modified or supplemented through the date hereof (the
"Indenture"), relating to the Outstanding Notes and the Exchange Notes.
In our examination of the aforesaid documents, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
accuracy and completeness of all documents submitted to us, the authenticity of
all original documents, and the conformity to authentic original documents of
all documents submitted to us as copies (including telecopies). This opinion
letter is given, and all statements herein are made, in the context of the
foregoing.
This opinion letter is based as to matters of law solely on applicable
provisions of (i) the General Corporation Law of the State of Delaware, the
Alabama Business Corporation Act, the Connecticut Business Corporation Act, the
Florida Business Corporation Act, the Georgia Business Corporation Code, the
Illinois Business Corporation Act, the Maine Business Corporation Act, the
General Corporation Law of the State of Maryland, the Massachusetts Business
Corporation Law, the Pennsylvania Business Corporation Law of 1988, the New
Hampshire Business Corporation Act, the Business Corporation Law of the State of
New York, the North Carolina Business Corporation Act, the Oregon Business
Corporation Act, the Texas Revised Limited Partnership Act, the Virginia Stock
Corporation Act, the Washington Business Corporation Act and the Colorado
Business Corporation Act and (ii) the contract law of the State of New York (but
not including any statutes, ordinances, administrative decisions, rules or
regulations of any political subdivisions of the State of New York), and we
express no opinion as to any laws, statutes, ordinances, rules or regulations
not specifically referred to above (such as state securities or "blue sky"
laws).
For purposes of this opinion letter, we have assumed that (i) the
Trustee has all requisite power and authority under all applicable laws,
regulations and governing documents to execute, deliver and perform its
obligations under the Indenture, (ii) the Trustee has duly authorized, executed
and delivered the Indenture, (iii) the Trustee is validly existing and in good
standing in all necessary jurisdictions, (iv) the Indenture constitutes a valid
and binding obligation, enforceable against the Trustee in accordance with its
terms and (v) there has been no material mutual mistake of fact or
misunderstanding or fraud, duress or undue influence, in connection with the
negotiation, execution or delivery of the Indenture or the guarantees.
<PAGE>
July 27, 1999
Page 4
Based upon, subject to and limited by the foregoing, we are of the
opinion that (i) following the effectiveness of the Registration Statement and
receipt by the Company of the Outstanding Notes in exchange for the Exchange
Notes as specified in the resolutions of the Board of Directors of the Company
and (ii) assuming due execution, authentication, issuance and delivery of the
Exchange Notes as provided in the Indenture, the Exchange Notes will constitute
valid and legally binding obligations of the Company, and the guarantee of each
Subsidiary will constitute a valid and binding obligation of such Subsidiary,
enforceable in accordance with their terms, except as the enforcement thereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights (including, without limitation, the effect of
statutory and other law regarding fraudulent conveyances, fraudulent transfers
and preferential transfers) and as may be limited by the exercise of judicial
discretion and the application of principles of equity including, without
limitation, requirements of good faith, fair dealing, conscionability and
materiality (regardless of whether the Exchange Notes or guarantees are
considered in a proceeding at law or in equity).
The opinion expressed in the immediately preceding paragraph shall be
understood to mean only that (i) if there is a default in performance of an
obligation, (ii) if a failure to pay or other damage can be shown and (iii) if
the defaulting party can be brought into a court which will hear the case and
apply the governing law, then, subject to the availability of defenses, and to
the exceptions set forth in the paragraph above, the court will provide a money
damage (or perhaps injunctive or specific performance) remedy.
This opinion letter has been prepared solely for your use in
connection with the filing of the Registration Statement on the date of this
opinion letter and speaks as of the date hereof. We assume no obligation to
advise you of any changes in the foregoing subsequent to the delivery of this
opinion letter.
We hereby consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the prospectus constituting a part of the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Hogan & Hartson L.L.P.
--------------------------
HOGAN & HARTSON L.L.P.
<PAGE>
EXHIBIT A
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction
Name of Incorporation
---- ----------------
<S> <C>
American Photocopy Equipment Company of Pittsburgh...................................... Delaware
Berney, Inc............................................................................. Alabama
Business Equipment Unlimited............................................................ Maine
Cameron Office Products, Inc............................................................ Massachusetts
Capitol Copy Products, Inc.............................................................. Delaware
Capitol Office Solutions, Inc........................................................... Delaware
Carr Business Machines of Great Neck, Inc............................................... New York
Centre Business Products, Inc........................................................... Pennsylvania
Connecticut Business Systems, Inc....................................................... Connecticut
Conway Office Products, Inc............................................................. New Hampshire
Copy Service and Supply, Inc............................................................ North Carolina
COS Financial, Inc...................................................................... Maryland
Daniel Communication, Inc............................................................... Alabama
Distinctive Business Products, Inc...................................................... Illinois
Duplicating Specialties, Inc............................................................ Oregon
Eastern Copy Products, Inc.............................................................. New York
Electronic Systems, Inc................................................................. Virginia
Electronic Systems of Richmond, Inc..................................................... Virginia
Global Imaging Finance Company.......................................................... Delaware
Global Imaging Operations, Inc.......................................................... Delaware
Global Operations Texas, L.P............................................................ Texas
Lewan & Associates, Inc................................................................. Colorado
ProView, Inc............................................................................ North Carolina
Quality Business Systems, Inc........................................................... Washington
Southern Business Communications, Inc................................................... Georgia
Southern Copy Systems, Inc.............................................................. Alabama
</TABLE>
<PAGE>
GLOBAL IMAGING SYSTEMS, INC.
RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12.1
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Year Ended March 31, Pro forma
----------------------------------------------------------
1995 1996 1997 1998 1999 1999(1)
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before
taxes and extraordinary item (629) 83 2,130 8,401 23,491 27,421
Fixed charges:
Interest expense (including debt cost
amortization) 375 2,041 3,189 6,713 8,427 17,060
Interest - capitalized leases - - - - - -
Estimated interest factor on rent 68 188 264 699 1,175 1,720
----------------------------------------------------------
Total fixed charges 443 2,229 3,453 7,412 9,602 18,780
----------------------------------------------------------
Earnings - adjusted (186) 2,312 5,583 15,813 33,093 46,201
==========================================================
Ratio of earnings to fixed charges (2) - 1.04 1.62 2.13 3.45 2.46
==========================================================
</TABLE>
(1) The pro forma information takes into account the effect of acquisitions.
(2) For the fiscal year ended March 31, 1995, earnings were insufficient to
cover fixed charges by $0.6 million.
<PAGE>
EXHIBIT 21.1
GLOBAL IMAGING SYSTEMS, INC. AND ADDITIONAL REGISTRANTS
Direct and Indirect Subsidiaries
<TABLE>
<CAPTION>
ADDITIONAL NAME(S) UNDER WHICH
SUBSIDIARY JURISDICTION OF
NAME DOES BUSINESS ORGANIZATION
---- ------------- ------------
<S> <C> <C>
American Photocopy Equipment Company of Pittsburgh AMCOM Office Systems Delaware
Berney, Inc. and its subsidiary: Alabama
Southern Copy Systems, Inc. Alabama
Capitol Office Solutions, Inc. and its subsidiaries: Delaware
Capitol Copy Products, Inc. Delaware
COS Financial, Inc. Maryland
Carr Business Machines of Great Neck Inc. Carr Business Systems New York
Connecticut Business Systems, Inc. Connecticut
Conway Office Products, Inc. and its subsidiaries: New Hampshire
Business Equipment Unlimited Maine
Cameron Office Products, Inc. Massachusetts
Eastern Copy Products, Inc. New York
Copy Service and Supply, Inc. North Carolina
Distinctive Business Products, Inc. Illinois
Duplicating Specialties, Inc. Copytronix Oregon
Henderson's Office Systems
Electronic Systems, Inc. and its subsidiary: Virginia
Electronic Systems of Richmond, Inc. Virginia
Global Operations Texas, L.P. Felco Office Systems Texas
Dahill Industries
Global Imaging Finance Company Delaware
Global Imaging Operations, Inc. Delaware
(a subsidiary of Global, American Photocopy Equipment
Company of Pittsburgh, Berney, Conway, Felco and
Southern Business Communications)
Lewan & Associates, Inc. Colorado
Quality Business Systems, Inc. Washington
Southern Business Communications, Inc. and its subsidiaries: Georgia
Daniel Communications, Inc. Alabama
ProView, Inc. North Carolina
Centre Business Products, Inc. Pennsylvania
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated May 12, 1999 in Amendment No. 1 to the Registration
Statement (Form S-4 No. 333-78093) and the related Prospectus of Global Imaging
Systems, Inc. for the registration of $100 million of 10.75% Senior
Subordinated Notes due 2007.
/s/ Ernst & Young LLP
Tampa, Florida
July 23, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 23, 1998, with respect to the financial
statements of Electronic Systems, Inc. included in Amendment No. 1 to the
Registration Statement (Form S-4 No. 333-78093) and related Prospectus of
Global Imaging Systems, Inc. for the registration of $100 million of 10.75%
Senior Subordinated Notes due 2007.
/s/ Ernst & Young LLP
Richmond, Virginia
July 23, 1999
<PAGE>
Exhibit 23.3
PASQUALE & BOWERS, LLP
-------------------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
100 Clinton Square, P.O. Box 7067 . Syracuse, NY 13261-7067
(315) 424-1508 . FAX (315) 424-1496
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
WE CONSENT to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of EASTERN COPY PRODUCTS, INC.
dated December 17, 1997, in the Amended Registration Statement Form S-4 (No.
333-78093) and related prospectus of Global Imaging Systems, Inc. 1998 for the
registration of $100,000,000 aggregate principal amount of 10- 3/4% senior
subordinated notes due 2007.
Pasquale & Bowers, LLP
/s/ Pasquale & Bowers, LLP
Syracuse, New York
July 23, 1999
<PAGE>
Exhibit 23.4
[LETTERHEAD OF MOSS ADAMS LLP APPEARS HERE]
INDEPENDENT AUDITOR'S CONSENT
We consent to the reference to our firm under the caption "Experts" and to
the use of our report on the financial statements of Duplicating Specialties,
Inc. dated December 19, 1997, included in the Amended Registration Statement on
Form S-4 (File Number 333-78093), and related prospectus of Global Imaging
Systems, Inc. 1998 for the registration of $100,000,000 aggregate principal
amount of 10 3/4% senior subordinated notes due 2007.
/s/ Moss Adams LLP
Vancouver, Washington
July 23, 1999
<PAGE>
Exhibit 23.5
Consent of Independent Certified Public Accountants
---------------------------------------------------
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of ELECTRONIC SYSTEMS OF
RICHMOND, INC. dated January 27, 1998, in the Amended Registration Statement on
Form S-4 (No. 333-78093), and related prospectus of Global Imaging Systems,
Inc. 1998 for the registration of $100,000,000 aggregate principal amount of
10-3/4% senior subordinated notes due 2007.
/s/ EDMONDSON, LEDBETTER & BALLARD, L.L.P.
Norfolk, Virginia
July 23, 1999
<PAGE>
Exhibit 23.6
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of CONNECTICUT BUSINESS SYSTEMS,
INC. dated February 16, 1998, in the Amended Registration Statement on Form S-4
(No. 33-78093), and related prospectus of Global Imaging Systems, Inc. 1998 for
the registration of $100,000,000 aggregate principal amount of 10-3/4% senior
subordinated notes due 2007.
ARTHUR ANDERSEN LLP
By: /s/ Philip M. Cahill
Hartford, Connecticut
July 23, 1999
<PAGE>
Exhibit 23.7
[LETTERHEAD OF JOSEPH D. KALICKA & COMPANY, LLP]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
(Notes)
WE CONSENT to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of BUSINESS SYSTEMS DIVISION, an
operating division of BLOOM'S INCORPORATED dated February 6, 1998 (for the
period ended December 31, 1997) and February 20, 1998 (for period ended
January 31, 1997) in the Amended Registration Statement on Form S-4
(No. 333-78093), and related prospectus of Global Imaging Systems, Inc. 1998
for the registration of $100,000,000 aggregate principal amount of 10-3/4%
senior subordinated notes due 2007.
JOSEPH D. KALICKA & COMPANY, LLP
/s/ Joseph D. Kalicka & Company LLP
- -----------------------------------
(Signature)
July 23, 1999
- -----------------------------------
(Date)
Holyoke, Massachusetts
<PAGE>
Exhibit 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report on the financial statements of Carr Business Machines of
Great Neck Inc. dated November 13, 1998, in the Registration Statement (Form S-
4) and related prospectus of Global Imaging Systems, Inc. 1998 for the
registration of $100,000,000 aggregate principal amount of 10 3/4% senior
subordinated notes due 2007.
/s/ Margolin, Winer & Evens LLP
Margolin, Winer & Evens LLP
Garden City, New York
July 23, 1999
<PAGE>
EXHIBIT 23.9
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this amendment No. 1 to the Registration Statement
(No. 333-78093) of Global Imaging Systems, Inc. on Form S-4 of our report dated
August 28, 1998, except for Note 13, as to which the date is December 21, 1998,
on our audits of the consolidated financial statements of Capitol Office
Solutions, Inc., appearing in the Prospectus which is part of the Registration
Statements. We also consent to the reference to our firm under the heading
"Experts."
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
McLean, VA
July 26, 1999
<PAGE>
EXHIBIT 23.10
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-78093 of Global Imaging Systems, Inc. of our report dated March 5, 1999,
except for Note 8, as to which the date is June 24, 1999 on the consolidated
financial statements of Lewan & Associates, Inc. as of December 31, 1998 and
1997 and for each of the three years in the period ended December 31, 1998,
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
July 23, 1999
<PAGE>
-4-
16. LIST OF EXHIBITS
----------------
(cont'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by
the Trust Indenture Reform Act of 1990 (Registration No.
33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee
pursuant to law or the requirements of its supervising or
examining authority.
NOTE
====
As of April 28, 1999, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
__________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the __th day
of July, 1999.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By:
------------------------------
Louis P. Young
Vice President
<PAGE>
-2-
INFORMATION REGARDING ADDITIONAL REGISTRANTS
The following additional registrants are wholly owned, direct and indirect
subsidiaries of Global Imaging Systems, Inc. and guarantors of the senior
subordinated notes.
<TABLE>
<CAPTION>
IRS
Employer
Jurisdiction of Primary S.I.C. Identification
Name Organization Code Number # Number
- ---- --------------- -------------- --------------
<S> <C> <C> <C>
1. American Photocopy Equipment Company of Pittsburgh Delaware 5995 25-1333970
d/b/a AMCOM Office Systems
2. Berney, Inc. Alabama 5995 63-0872797
3. Business Equipment Unlimited Maine 5995 01-0332262
4. Cameron Office Products, Inc. Massachusetts 5995 04-2943281
5. Capitol Copy Products, Inc. Delaware 5995
6. Capitol Office Solutions, Inc. Delaware 5995 52-1058303
7. Carr Business Machines of Great Beck Inc. d/b/a Carr New York 5995 11-2382276
Business Systems
8. Centre Business Products, Inc. Pennsylvania 5995 25-1402615
9. Connecticut Business Systems, Inc. Connecticut 5995 06-1164954
10. Conway Office Products, Inc. New Hampshire 5995 02-0326832
11. Copy Service and Supply, Inc. North Carolina 5995 56-1405771
12. COS Financial, Inc. Maryland 5995
13. Daniel Communications, Inc. Alabama 5995 63-0957776
14. Distinctive Business Products, Inc. Illinois 5995 36-3206780
15. Duplicating Specialties, Inc. d/b/a Copytronix Oregon 5995 93-0557407
16. Eastern Copy Products, Inc. New York 5995 16-1060031
17. Electronic Systems, Inc. Virginia 5995 54-1145980
18. Electronic Systems of Richmond, Inc. Virginia 5995 54-1221626
19. Global Imaging Finance Company Delaware 5995 59-3423296
20. Global Imaging Operations, Inc. Delaware 5995 04-3340313
21. Global Operations Texas, L.P. Texas 5995 Applied for
22. Lewan & Associates, Inc. Colorado 5995 84-0623459
23. ProView, Inc. North Carolina 5995 56-1879665
24. Quality Business Systems, Inc. Washington 5995 91-1332069
25. Southern Business Communications, Inc. Georgia 5995 58-1428621
26. Southern Copy Systems, Inc. Alabama 5995 63-0895357
</TABLE>
The address and telephone number of the principal executive offices for each of
the additional registrants are the same as for Global Imaging Systems, Inc., as
set forth on the facing page of this statement of eligibility.
<PAGE>
Exhibit 99.21
Excerpts from the Colorado Business Corporations Act
Section 7-108-401. General standards of conduct for directors and officers
(1) Each director shall discharge his or her duties as a director,
including his or her duties as a member of a committee, and each officer with
discretionary authority shall discharge his or her duties under that authority:
(a) In good faith;
(b) With the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and
(c) In a manner he or she reasonably believes to be in the best
interests of the corporation.
(2) In discharging his or her duties, a director or officer is entitled to
rely on information, opinions, reports, or statements, including financial
statements and other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the
director or officer reasonably believes to be reliable and competent in the
matters presented;
(b) Legal counsel, a public accountant, or another person as to
matters the director or officer reasonably believes are within such person's
professional or expert competence; or
(c) In the case of a director, a committee of the board of directors
of which the director is not a member if the director reasonably believes the
committee merits confidence.
(3) A director or officer is not acting in good faith if he or she has
knowledge concerning the matter in question that makes reliance otherwise
permitted by subsection (2) of this section unwarranted.
(4) A director or officer is not liable as such to the corporation or its
shareholders for any action he or she takes or omits to take as a director or
officer, as the case may be, if, in connection with such action or omission, he
or she performed the duties of the position in compliance with this section.
Section 7-108-402. Limitation of certain liabilities of directors and officers
(1) If so provided in the articles of incorporation, the corporation shall
eliminate or limit the personal liability of a director to the corporation or to
its shareholders for monetary damages for breach of fiduciary duty as a
director; except that any such provision shall not eliminate or limit the
liability of a director
<PAGE>
to the corporation or to its shareholders for monetary damages for any breach of
the director's duty of loyalty to the corporation or to its shareholders, acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, acts specified in section 7-108-403, or any
transaction from which the director directly or indirectly derived an improper
personal benefit. No such provision shall eliminate or limit the liability of a
director to the corporation or to its shareholders for monetary damages for any
act or omission occurring before the date when such provision becomes effective.
(2) No director or officer shall be personally liable for any injury to
person or property arising out of a tort committed by an employee unless such
director or officer was personally involved in the situation giving rise to the
litigation or unless such director or officer committed a criminal offense in
connection with such situation. The protection afforded in this subsection (2)
shall not restrict other common-law protections and rights that a director or
officer may have. This subsection (2) shall not restrict the corporation's
right to eliminate or limit the personal liability of a director to the
corporation or to its shareholders for monetary damages for breach of fiduciary
duty as a director as provided in subsection (1) of this section.
Section 7-108-403. Liability of directors for unlawful distributions
(1) A director who votes for or assents to a distribution made in violation
of section 7-106-401 or the articles of incorporation is personally liable to
the corporation for the amount of the distribution that exceeds what could have
been distributed without violating said section or the articles of incorporation
if it is established that the director did not perform the director's duties in
compliance with section 7-108-401. In any proceeding commenced under this
section, a director shall have all of the defenses ordinarily available to a
director.
(2) A director held liable under subsection (1) of this section for an
unlawful distribution is entitled to contribution:
(a) From every other director who could be held liable under
subsection (1) of this section for the unlawful distribution; and
(b) From each shareholder who accepted the distribution knowing the
distribution was made in violation of section 7-106-401 or the articles of
incorporation, the amount of the contribution from such shareholder being the
amount of the distribution to that shareholder that exceeds what could have been
distributed to that shareholder without violating said section or the articles
of incorporation.
*****
<PAGE>
Section 7-109-101. Definitions
As used in this article:
(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation, is or was
serving at the corporation's request as a director, an officer, an agent, an
associate, an employee, a fiduciary, a manager, a member, a partner, a promoter,
or a trustee of, or to hold any similar position with, another domestic or
foreign corporation or other person or of an employee benefit plan. A director
is considered to be serving an employee benefit plan at the corporation's
request if the director's duties to the corporation also impose duties on, or
otherwise involve services by, the director to the plan or to participants in or
beneficiaries of the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.
(3) "Expenses" includes counsel fees.
(4) "Liability" means the obligation incurred with respect to a proceeding
to pay a judgment, settlement, penalty, fine, including an excise tax assessed
with respect to an employee benefit plan, or reasonable expenses.
(5) "Official capacity" means, when used with respect to a director, the
office of director in a corporation and, when used with respect to a person
other than a director as contemplated in section 7-109-107, the office in a
corporation held by the officer or the employment, fiduciary, or agency
relationship undertaken by the employee, fiduciary, or agent on behalf of the
corporation. "Official capacity" does not include service for any other
domestic or foreign corporation or other person or employee benefit plan.
(6) "Party" includes a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding.
(7) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative and
whether formal or informal.
Section 7-109-102. Authority to indemnify directors
(1) Except as provided in subsection (4) of this section, a corporation may
indemnify a person made a party to a proceeding because the person is or was a
director against liability incurred in the proceeding if:
<PAGE>
(a) The person conducted himself or herself in good faith; and
(b) The person reasonably believed:
(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best interests;
and
(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and
(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.
(2) A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (II) of paragraph (b) of subsection (1) of this
section. A director's conduct with respect to an employee benefit plan for a
purpose that the director did not reasonably believe to be in the interests of
the participants in or beneficiaries of the plan shall be deemed not to satisfy
the requirements of paragraph (a) of subsection (1) of this section.
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the corporation; or
(b) In connection with any other proceeding charging that the director
derived an improper personal benefit, whether or not involving action in an
official capacity, in which proceeding the director was adjudged liable on the
basis that he or she derived an improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 7-109-103. Mandatory indemnification of directors
Unless limited by its articles of incorporation, a corporation shall indemnify a
person who was wholly successful, on the merits or otherwise, in the defense of
any proceeding to which the person was a party because the person is or was a
director,
<PAGE>
against reasonable expenses incurred by him or her in connection with the
proceeding.
Section 7-109-104. Advance of expenses to directors
(1) A corporation may pay for or reimburse the reasonable expenses incurred
by a director who is a party to a proceeding in advance of final disposition of
the proceeding if:
(a) The director furnishes to the corporation a written affirmation of
the director's good faith belief that he or she has met the standard of conduct
described in section 7-109-102;
(b) The director furnishes to the corporation a written undertaking,
executed personally or on the director's behalf, to repay the advance if it is
ultimately determined that he or she did not meet the standard of conduct; and
(c) A determination is made that the facts then known to those making
the determination would not preclude indemnification under this article.
(2) The undertaking required by paragraph (b) of subsection (1) of this
section shall be an unlimited general obligation of the director but need not be
secured and may be accepted without reference to financial ability to make
repayment.
(3) Determinations and authorizations of payments under this section shall
be made in the manner specified in section 7-109-106.
Section 7-109-105. Court-ordered indemnification of directors
(1) Unless otherwise provided in the articles of incorporation, a director
who is or was a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent jurisdiction. On
receipt of an application, the court, after giving any notice the court
considers necessary, may order indemnification in the following manner:
(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order indemnification,
in which case the court shall also order the corporation to pay the director's
reasonable expenses incurred to obtain court-ordered indemnification.
(b) If it determines that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances, whether
or not the director met the standard of conduct set forth in section 7-109-
102(1) or was adjudged liable in the circumstances described in section 7-109-
102(4), the court may order such indemnification as the court deems proper;
except that the
<PAGE>
indemnification with respect to any proceeding in which liability shall have
been adjudged in the circumstances described in section 7-109-102(4) is limited
to reasonable expenses incurred in connection with the proceeding and reasonable
expenses incurred to obtain court-ordered indemnification.
Section 7-109-106. Determination and authorization of indemnification of
directors
(1) A corporation may not indemnify a director under section 7-109-102
unless authorized in the specific case after a determination has been made that
indemnification of the director is permissible in the circumstances because the
director has met the standard of conduct set forth in section 7-109-102. A
corporation shall not advance expenses to a director under section 7-109-104
unless authorized in the specific case after the written affirmation and
undertaking required by section 7-109-104(1)(a) and (1)(b) are received and the
determination required by section 7-109-104(1)(c) has been made.
(2) The determinations required by subsection (1) of this section shall be
made:
(a) By the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those directors not parties to
the proceeding shall be counted in satisfying the quorum; or
(b) If a quorum cannot be obtained, by a majority vote of a committee
of the board of directors designated by the board of directors, which committee
shall consist of two or more directors not parties to the proceeding; except
that directors who are parties to the proceeding may participate in the
designation of directors for the committee.
(3) If a quorum cannot be obtained as contemplated in paragraph (a) of
subsection (2) of this section, and a committee cannot be established under
paragraph (b) of subsection (2) of this section, or, even if a quorum is
obtained or a committee is designated, if a majority of the directors
constituting such quorum or such committee so directs, the determination
required to be made by subsection (1) of this section shall be made:
(a) By independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in paragraph (a) or (b) of
subsection (2) of this section or, if a quorum of the full board cannot be
obtained and a committee cannot be established, by independent legal counsel
selected by a majority vote of the full board of directors; or
(b) By the shareholders.
<PAGE>
(4) Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible; except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected such counsel.
Section 7-109-107. Indemnification of officers, employees, fiduciaries, and
agents
(1) Unless otherwise provided in the articles of incorporation:
(a) An officer is entitled to mandatory indemnification under section
7-109- 103, and is entitled to apply for court-ordered indemnification under
section 7-109-105, in each case to the same extent as a director;
(b) A corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by its
bylaws, general or specific action of its board of directors or shareholders, or
contract.
Section 7-109-108. Insurance
A corporation may purchase and maintain insurance on behalf of a person who is
or was a director, officer, employee, fiduciary, or agent of the corporation, or
who, while a director, officer, employee, fiduciary, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of another domestic or
foreign corporation or other person or of an employee benefit plan, against
liability asserted against or incurred by the person in that capacity or arising
from his or her status as a director, officer, employee, fiduciary, or agent,
whether or not the corporation would have power to indemnify the person against
the same liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by the board of
directors, whether such insurance company is formed under the laws of this state
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the corporation has an equity or any other interest
through stock ownership or otherwise.
<PAGE>
Section 7-109-109. Limitation of indemnification of directors
(1) A provision treating a corporation's indemnification of, or advance of
expenses to, directors that is contained in its articles of incorporation or
bylaws, in a resolution of its shareholders or board of directors, or in a
contract, except an insurance policy, or otherwise, is valid only to the extent
the provision is not inconsistent with sections 7-109-101 to 7-109-108. If the
articles of incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the extent not
inconsistent with the articles of incorporation.
(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's power to
pay or reimburse expenses incurred by a director in connection with an
appearance as a witness in a proceeding at a time when he or she has not been
made a named defendant or respondent in the proceeding.
Section 7-109-110. Notice to shareholders of indemnification of director
If a corporation indemnifies or advances expenses to a director under this
article in connection with a proceeding by or in the right of the corporation,
the corporation shall give written notice of the indemnification or advance to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
<PAGE>
Exhibit 99.22
ARTICLE 11. INDEMNIFICATION
Definitions
Sec. 11.01. In this article:
(1) "Limited partnership" includes a domestic or foreign predecessor
entity of the limited partnership in a merger, consolidation, or other
transaction in which the liabilities of the predecessor are transferred to
the limited partnership by operation of law and in any other transaction in
which the limited partnership assumes the liabilities of the predecessor
but does not specifically exclude liabilities that are governed by this
article.
(2) "Enterprise" means a foreign or domestic limited partnership,
corporation, general partnership, joint venture, sole proprietorship,
trust, employee benefit plan, or similar entity.
(3) "Expenses" includes court costs and attorney's fees.
(4) "General partner" includes:
(A) any person who, while a general partner of a limited
partnership, is or was serving at the request of the limited
partnership as a representative of an enterprise; and
(B) a representative of an enterprise that is a general partner of
the limited partnership.
(5) "Official capacity" means:
(A) if used with respect to a general partner, the exercise of
authority by or on behalf of a general partner under this Act or
the partnership agreement, other than service for another
enterprise; and
(B) if used with respect to a limited partner, employee, or agent,
the relationship undertaken by the limited partner, employee, or
agent on behalf of the limited partnership, other than service for
another enterprise.
(6) "Proceeding" means any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, any appeal in such an action, suit, or proceeding, and any
inquiry or investigation that could lead to such an action, suit, or
proceeding.
(7) "Representative" means a person serving as a partner, director,
officer, venturer, proprietor, trustee, employee, or agent of an enterprise
or serving a similar function for an enterprise.
1
<PAGE>
General power and standard for indemnification
Sec. 11.02. If provided in a written partnership agreement, a limited
partnership may indemnify a person who was, is, or is threatened to be made a
named defendant or respondent in a proceeding because the person is or was a
general partner only if it is determined in accordance with section 11.06 of
this Act that the person:
(1) acted in good faith;
(2) reasonably believed;
(A) in the case of the conduct in the person's official capacity as
a general partner of the limited partnership, that the person's
conduct was in the limited partnership's best interests; and
(B)in all other cases, that the person's conduct was at least not
opposed to the limited partnership's best interests; and
(3) in the case of a criminal proceeding, had no reasonable cause to
believe that the person's conduct was unlawful.
Limitations on general power to indemnification
Sec. 11.03. Except to the extent permitted by Section 11.05 of this Act, a
general partner may not be indemnified under Section 11.02 of this Act with
respect to a proceeding in which:
(1) the person is found liable on the basis that the person improperly
received personal benefit, whether or not the benefit resulted from an
action taken in the person's official capacity; or
(2) the person is found liable to the limited partnership or the limited
partners.
Effect to settlement or other termination of proceeding
Sec 11.04. The termination of a proceeding by judgement, order, settlement,
conviction, or on a plea of nolo contendere or its equivalent does not alone
determine that the person did not meet the requirements provided by Section
11.02 of this Act. A person is considered to have been found liable in relation
to any claim, issue, or matter only if the person has been adjudged liable by a
court of competent jurisdiction and all appeals have been exhausted.
Liabilities for which indemnification allowed under general power
Sec 11.05. A general partner may be indemnified under Section 11.02 of this Act
against judgments, penalties, including excise and similar taxes, fines,
settlements, and reasonable expenses actually incurred by the person in
connection with the proceeding, except that if the person is found liable to the
limited partnership or the limited partners or is found
2
<PAGE>
<PAGE>
liable on the basis that the person improperly received personal benefit, the
indemnification:
(1) is limited to reasonable expenses actually incurred by the person in
connection with the proceeding; and
(2) shall not be made in relation to a proceeding in which the person has
been found liable for willful or intentional misconduct in the performance
of the person's duty to the limited partnership or the limited partners.
Determination that standard has been met
Sec. 11.06. A determination that indemnifications is permissible under Section
11.02 of this Act must be made:
(1) by a majority vote of a quorum consisting of general partners who at
the time of the vote are not named defendants or respondents in the proceeding;
(2) by special legal counsel selected by the general partners by vote as
provided by Subdivision (1) of this section or, if such a quorum cannot be
obtained, by a majority vote of all general partners; or
(3) by a majority in interest of the limited partners in a vote that
excludes the interests held by general partners who are named defendants or
respondents in the proceeding.
Authorization of payment and determination of reasonableness of amount
Sec. 11.07. Authorization of indemnification and determination of a
reasonableness of expenses must be made in the same manner as the determination
that indemnification is permissible, except that if the determination that
indemnification is permissible is made by special legal counsel, authorization
of indemnification and determination of reasonableness of expenses must be made
in the manner specified by Subdivision (2) of Section 11.06 of this Act
governing the selection of special legal counsel. A provision contained in a
written partnership agreement, a resolution of the general partners or of a
majority in interest of the limited partners, or an agreement that makes
mandatory the indemnification permitted under Section 11.02 of this Act,
constitutes authorization of indemnification in the manner required by this
section even though the provision may not have been adopted or authorized in the
same manner as the determination that indemnification is permissible.
Mandatory indemnification of successful general partner
Sec. 11.08. A limited partnership shall indemnify a general partner against
reasonable expenses incurred by the general partner in connection with a
proceeding in which the general partner is a named defendant or respondent
because the general partner is or was a general partner if the general partner
has been wholly successful, on the merits or otherwise, in the defense of the
proceeding.
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Expenses of suit for mandatory indemnification
Sec. 11.09. If, in a suit for the indemnification required by Section 11.08 of
this Act, a court of competent jurisdiction determines that the general partner
is entitled to indemnification under that section, the court shall order
indemnification and shall award to the general partner the expenses incurred in
securing the indemnification.
Court authorization of indemnification when not otherwise authorized
Sec. 11.10. If, on application of a general partner, a court of competent
jurisdiction determines, after giving notice that the court considers necessary,
that the general partner is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether the general partner has met the
requirements set forth in Section 11.02 of this Act or has been adjudged liable
in the circumstances described by Section 11.03 of this Act, the court may order
the indemnification that the court determines is proper and equitable. The
court shall limit indemnification to reasonable expenses if the general partner
is found liable to the limited partnership or the limited partners or if the
general partner is found liable on the basis that personal benefit was
improperly received by the general partner, whether or not the benefit resulted
from an action taken in the general partner's official capacity.
Advance payment of expenses
Sec. 11.11. The limited partnership may pay or reimburse, in advance of the
final disposition of the proceeding, reasonable expense incurred by a general
partner who was, is, or is threatened to be made a named defendant or respondent
in a proceeding, without the determination specified in Section 11.06 of this
Act or the authorization or determination specified in Section 11.07 of this
Act, after the limited partnership receives a written affirmation by the general
partner of the general partner's good faith belief that the general partner has
met the standard of conduct necessary for indemnification under this article,
and a written undertaking by or on behalf of the general partner to repay the
amount paid or reimbursed if it is ultimately determined that the general
partner has not met that standard or it is ultimately determined that
indemnification of the general partner against expenses incurred by such general
partner in connection with that proceeding is prohibited by Section 11.05 of
this Act. A provision contained in a written partnership agreement, a resolution
of the general partners or of the limited partners, or an agreement that makes
mandatory the payment or reimbursement permitted under this Section shall be
deemed to constitute authorization of that payment or reimbursement.
Type of undertaking required for advance payment of expenses
Sec. 11.12. The written undertaking required by Section 11.11 of this Act must
be an unlimited general obligation of the general partner, but need not be
secured and may be accepted without reference to financial ability to make
repayment.
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Limits on a contractual indemnification
Sec. 11.13. A provision for a limited partnership to indemnify or to advance
expenses to a general partner who was, is, or is threatened to be made a named
defendant or respondent in a proceeding, whether contained in the limited
partnership agreement, a resolution of the general partners or the limited
partners, an agreement, or otherwise, except in accordance with Section 11.18 of
this Act, is valid only to the extent that it is consistent with this article or
with the applicable reimbursement provisions of the Texas Uniform Partnership
Act (Article 6132b, Vernon's Texas Civil Statutes), or the Texas Revised
Partnership Act and its subsequent amendments as limited by the limited
partnership agreement, if such a limitation exists.
Reimbursement of expenses as witness
Sec. 11.14. Notwithstanding any other provision of this article, a limited
partnership may pay or reimburse expenses incurred by a general partner in
connection with the general partner's appearance as a witness or other
participation in a proceeding involving or affecting the limited partnership at
a time when the general partner is not a named defendant or respondent in the
proceeding.
Indemnification and advances to limited partners, employees, and agents
Sec. 11.15. A limited partnership may indemnify and advance expenses to a
limited partner, employee, or agent of the limited partnership to the same
extent that it may indemnify and advance expenses to a general partner under
this article.
Indemnification and advances to persons serving partnership in other enterprises
Sec. 11.16. A limited partnership may indemnify and advance expenses to persons
who are not or were not limited partners, employees, or agents of the limited
partnership but who are or were serving at the request of the limited
partnership as a representative of another enterprise to the same extent that it
may indemnify and advance expenses to a general partner under this article.
Indemnification of persons other than general partners
Sec. 11.17. A limited partnership may further indemnify and advance expenses to
a limited partner, employee, agent, or person identified in Section 11.16 of
this Act and who is not a general partner, to the extent, consistent with law,
provided by its partnership agreement, by general or specific action of its
general partner, by contract, or as permitted or required by common law.
Insurance and other arrangements for payment
Sec. 11.18. Except as otherwise provided by this article, and unless otherwise
provided by the partnership agreement, a limited partnership may purchase and
maintain insurance or another arrangement on behalf of any person who is or was
a general partner, limited partner, employee, or agent of the limited
partnership, or who is or was serving at the
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request of the limited partnership as a representative of another enterprise,
against any liability asserted against the person and incurred by the person in
that capacity or arising out of the person's status in that capacity, regardless
of whether the limited partnership would have the power to indemnify the person
against that liability under this article. However, if the insurance or other
arrangement is with a person or entity that is not regularly engaged in the
business of providing insurance coverage, the insurance or other arrangement may
provide for payment of a liability with respect to which the limited partnership
would not have the power to indemnify the person only if it includes coverage
for the additional liability that has been approved by a majority in interest
of the limited partners of the limited partnership. Without limiting the power
of the limited partnership to procure or maintain any kind of insurance or other
arrangement, a limited partnership may, for the benefit of persons indemnified
by the limited partnership, create a trust fund, establish any form of
self-insurance, secure its indemnity obligation by grant of a security interest
or other lien on the assets of the limited partnership, or establish a letter of
credit, guaranty, or surety arrangement. The insurance or other arrangement may
be procured, maintained, or established within the limited partnership or with
an insurer or other person considered appropriate by the general partner
regardless of whether all or part of the stock or other securities of the
insurer or other person are owned in whole or part by the limited partnership.
In the absence of actual fraud, the judgment of the general partners as to the
terms and conditions of the insurance or other arrangement and the identity of
the insurer or other person participating in an arrangement is conclusive, and
the insurance or other arrangement is not voidable and does not subject the
general partners approving the insurance or other arrangement to liability, on
any ground, regardless of whether general partners participating in approving
the insurance or other arrangement will be beneficiaries.
Reports of indemnification and advances
Sec. 11.19. Any indemnification of or advance of expenses to a general partner
in accordance with this article shall be reported promptly in writing to the
limited partners. The report must be made not later than six months after the
date that the indemnification occurs.
Service to employee benefit plan
Sec. 11.20. For purposes of this article, the limited partnership is considered
to have requested a general partner to serve an employee benefit plan if the
performance by a general partner of the general partner's duties to the limited
partnership also imposes duties on or otherwise involves services by the general
partner to the plan or participants in or beneficiaries of the plan. Excise
taxes assessed on a general partner with respect to an employee benefit plan
pursuant to applicable law are deemed fines. Action taken or omitted by a
general partner with respect to an employee benefit plan in the performance of
the general partner's duties for a purpose reasonably believed by the general
partner to be in the interest of the participants and beneficiaries of the plan
is considered to be for a purpose that is not opposed to the best interests of
the limited partnership.
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Restrictions on Indemnification
Sec. 11.21. The written partnership agreement of a limited partnership may
restrict the circumstances under which the limited partnership is required or
permitted to indemnify a person under Section 11.08, 11.09, 11.10, 11.15, 11.16,
or 11.17.
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