<PAGE> 1
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
February 10, 1995
Commission File No.: 0-14685
GENICOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 51-0271821
(State or other (I.R.S.
jurisdiction of Employer
incorporation or Identification
organization) No.)
14800 Conference Center Drive
Suite 400, Westfields 22021-3806
Chantilly, Virginia (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code:
(703) 802-9200
1
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<TABLE>
GENICOM Corporation and Subsidiaries
Form 8-K Index
<CAPTION>
Item 5. Other Events
<S> <C> <C>
On February 16, 1995, the registrant
completed its acquisition of Printer Systems
Corporation ("PSC"). Pursuant to a Purchase
Agreement with Arthur D. Gallo, Joel E.
Laurance, Krishnasamarj Narayanaswamy,
Atlantic Ventures Partners II, L.P. and PSC,
GENICOM acquired all of the outstanding
common and preferred shares of PSC for
consideration aggregating to potentially
$ 4.8 million. Of the consideration $ 0.8
million was payable at closing and $ 1.2
million is payable over the three years
subsequent to closing. The remaining balance
up to $ 2.8 million in additional
consideration is contingent upon attainment
of performance objectives during the three
years subsequent to closing. The purchase
price will be funded from the Registrant's
cash flows from operations and credit
facilities. The transaction will be
accounted for as a purchase for financial
reporting purposes.
A copy of the Purchase Agreement is filed
herewith as Exhibit 2.1.
The registrant is reporting this acquisition
under Item 5 because the acquisition does not
involve a significant amount of assets within
the meaning of Instruction 4 to Item 2 for
Form 8-K.
On February 15, 1995, the registrant
announced the signing of a definitive
agreement with PSC and its shareholders to
acquire substantially all of the outstanding
common and preferred shares. A copy of the
press release is filed herewith as Exhibit
99.1.
Item 7. Financial Statements and Exhibits
(c) Exhibits
2.1 Purchase Agreement dated February 10,
1995.
99.1 Press release dated February 15, 1995,
published by the Registrant.
Signatures 3
</TABLE>
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GENICOM Corporation
-----------------------
Registrant
Date: March 8, 1995
James C. Gale
----------------------
Signature
James C. Gale
Senior Vice President
Finance and Chief
Financial Officer
(Mr. Gale is the Chief
Financial Officer and
has been duly authorized
to sign on behalf of the
Registrant)
3
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<TABLE>
GENICOM Corporation and Subsidiaries
INDEX TO EXHIBITS TO FORM 8-K
February 10, 1995
<CAPTION>
Exhibit
Number Description Page
<S> <C> <C>
2.1 Purchase Agreement dated E-1 - E-79
February 10, 1995.
99.1 Press release dated February E-80
15, 1995, published by the
Registrant.
</TABLE>
PURCHASE AGREEMENT
BY AND AMONG
GENICOM CORPORATION
ARTHUR D. GALLO,
JOEL E. LAURANCE,
KRISHNASAMARAJ NARAYANASWAMY,
ATLANTIC VENTURES PARTNERS II, L.P.,
AND
PRINTER SYSTEMS CORPORATION
Dated: February ___, 1995
TABLE OF CONTENTS
ARTICLE 1 - Definitions 1
Section 1.1 Certain Definitions 1
Section 1.2 Other Definitions 4
ARTICLE 2 - Sale and Purchase of PSC Capital Stock
4
Section 2.1 Sale of Stock 4
Section 2.2 Consideration 4
Section 2.3 Expenses 6
ARTICLE 3 - Closing 6
Section 3.1 Closing of Transaction
6
Section 3.2 Closing Deliveries 6
Section 3.3 Post-Closing Deliveries . . . . . . . .
. . . 7
Section 3.4 Further Assurance 7
ARTICLE 4 - Representations and Warranties of Sellers
8
Section 4.1 Title 8
Section 4.2 Power, Authorization and Validity
8
Section 4.3 Valid Transfer 8
Section 4.4 Consents 9
Section 4.5 No Brokers 9
Section 4.6 Information 9
Section 4.7 No Violation of Existing Agreements
9
Section 4.8 Litigation 10
Section 4.9 No Material Misstatements
10
Section 4.10 Limitations on Other Representations
10
ARTICLE 5 - Representations and Warranties of PSC
10
Section 5.1 Capitalization 11
Section 5.2 Power, Authorization and Validity
11
Section 5.3 Consents 11
Section 5.4 Organization and Good Standing
12
Section 5.5 No Violation of Agreements
12
Section 5.6 Subsidiaries 12
Section 5.7 Litigation 13
Section 5.8 Computer Software and Related Property
13
Section 5.9 Industrial Property Rights
16
Section 5.10 Business Know-how 17
Section 5.11 Financial Statements
17
Section 5.12 Property and Assets 18
Section 5.13 Inventory 19
Section 5.14 Accounts Receivable 19
Section 5.15 No Undisclosed Liabilities
20
Section 5.16 Absence of Certain Changes
20
Section 5.17 Taxes 22
Section 5.18 Licenses and Permits
23
Section 5.19 Corporate Documents 23
Section 5.20 Insurance 23
Section 5.21 Certain Contracts and Obligations
24
Section 5.22 Employees 25
Section 5.23 Environmental Matters
26
Section 5.24 ERISA 27
Section 5.25 Compliance 30
Section 5.26 No Material Misstatements
30
Section 5.27 Customers 30
Section 5.28 Suppliers 30
Section 5.29 Brokers 31
Section 5.30 Information 31
Section 5.31 Bank Accounts 31
Section 5.32 Sensitive Transactions
31
Section 5.33 Limitations on Other Representations
31
ARTICLE 6 - Representations and Warranties of Genicom
32
Section 6.1 Power, Authorization and Validity
32
Section 6.2 Consents 32
Section 6.3 No Violation of Agreements
32
Section 6.4 Organization and Good Standing
33
Section 6.5 Financial Statements
33
Section 6.6 No Undisclosed Liabilities
33
Section 6.7 Litigation 34
Section 6.8 Corporate Documents 34
Section 6.9 No Material Misstatements . . . . .
. . . . . 34
Section 6.10 Compliance 34
Section 6.11 Lender . . . . . . . . . . . . . . .
. . . . 35
Section 6.12 SEC Reports 35
Section 6.13 Brokers 35
Section 6.14 Information 35
Section 6.15 Limitations on Other Representations
36
ARTICLE 7 - Pre-Closing Covenants 36
Section 7.1 Affirmative Covenants of Sellers and PSC
36
Section 7.2 Negative Covenants of Sellers and PSC
37
Section 7.3 Other Covenants of Sellers and PSC
40
Section 7.4 Genicom Covenants 41
Section 7.5 Reasonable Efforts . . . . . . . . . .
. . . 42
ARTICLE 8 - Conditions to the Obligations of Sellers
42
Section 8.1 Representation and Warranties
42
Section 8.2 Covenants 42
Section 8.3 Compliance with Law 42
Section 8.4 Opinion of Genicom's Counsel
42
Section 8.5 No Litigation 42
Section 8.6 Closing Certificates
42
Section 8.7 Documents 43
Section 8.8 Due Diligence 43
Section 8.9 Gallo as Vice President and General
Manager 43
Section 8.10 Laurance Stock Options
43
Section 8.11 Adragna Stock Options
43
Section 8.12 No Genicom Material Adverse Effect
43
Section 8.13 Genicom Disclosure Schedule . . . . .
. . . 44
Section 8.14 Certain Agreements . . . . . . . . . .
. . . 44
Section 8.15 VMA Consent . . . . . . . . . . . . .
. . . . 44
Section 8.16 CIT Subordination Agreements . . . . .
. . . 44
ARTICLE 9 - Conditions to the Obligations of Genicom
44
Section 9.1 Representations and Warranties
44
Section 9.2 Covenants 44
Section 9.3 Compliance with Law 44
Section 9.4 Governmental Consents 44
Section 9.5 Documents 45
Section 9.6 No Litigation 45
Section 9.7 Opinions of PSC's and Certain Seller's
Counsel 45
Section 9.8 Due Diligence 45
Section 9.9 Seller Approvals, Transfer and Delivery
45
Section 9.10 PSC Stock Options 45
Section 9.11 Lenders' Consents 46
Section 9.12 Closing Certificate 46
Section 9.13 Certificate Regarding Net Asset Value
of PSC . . . . . . . . . . . . . . .
. . . . 46
Section 9.14 No PSC Material Adverse Effect
46
Section 9.15 Seller and PSC Disclosure Schedules
. . . . . 46
Section 9.16 Gallo Nondisclosure Agreement . . . . .
. . . 46
Section 9.17 Termination of Bonus Plans . . . . .
. . . . 46
Section 9.18 Certain Agreements . . . . . . . . . .
. . . 46
Section 9.19 VMA Consent . . . . . . . . . . . . .
. . . . 46
Section 9.20 CIT Subordination Agreements . . . . .
. . . 47
ARTICLE 10 - Termination of Agreement 47
Section 10.1 Termination 47
Section 10.2 Survival 48
ARTICLE 11 - Genicom Further Covenants 48
Section 11.1 Taxes 48
Section 11.2 Books and Records 48
Section 11.3 Credit Guarantee Release 48
Section 11.4 Gallo Employment 48
Section 11.5 Audit of Genicom Books . . . . . . .
. . . . 49
ARTICLE 12 - Indemnification 50
Section 12.1 Indemnification by Sellers
50
Section 12.2 Indemnification by Genicom
50
Section 12.3 Notice of Claim
51
Section 12.4 Limitation on Seller Liability
53
Section 12.5 Limitation on Genicom Liability
54
Section 12.6 Seller Indemnity Floor, as Between
Sellers 55
Section 12.7 Waiver of Certain Rights . . . . . . . .
. . 55
ARTICLE 13 - Miscellaneous 55
Section 13.1 Notices 55
Section 13.2 Entire Agreement 56
Section 13.3 Waivers and Amendments; Non-Contractual
Remedies; Preservation of Remedies
56
Section 13.4 Governing Law 57
Section 13.5 Binding Effect; No Assignment
57
Section 13.6 No Third Party Beneficiaries
57
Section 13.7 Counterparts 57
Section 13.8 Opinion of Counsel 58
Section 13.9 Exhibits 58
Section 13.10 Headings 58
Section 13.11 Publicity 58
Section 13.12 Severability 58
Section 13.13 Attorneys' Fees
58
Section 13.14 Confidentiality
58
Section 13.15 Survival 59
Section 13.16 Terminology 60
EXHIBITS
Exhibit A Printer Systems Corporation Stock and
Genicom Corporation Payments
Exhibit B Determination of Performance Payment
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement") is entered into
on this ____ day of ___________, 1995, by and among GENICOM
CORPORATION, a Delaware corporation ("Genicom"), ARTHUR D.
GALLO ("Gallo"), JOEL E. LAURANCE ("Laurance"),
KRISHNASAMARAJ NARAYANASWAMY ("Narayanaswamy"), and ATLANTIC
VENTURE PARTNERS II, L.P., a Delaware limited partnership
("AVP") (Gallo, Laurance, Narayanaswamy and AVP,
individually, "Seller" and collectively, "Sellers") and
PRINTER SYSTEMS CORPORATION, a Virginia corporation ("PSC").
RECITALS
WHEREAS, Gallo owns 2,214,113 shares of the common
stock of PSC, par value $.01 per share (the "PSC Common
Stock"), Laurance owns 50,000 shares of PSC Common Stock,
Narayanaswamy owns 50,000 shares of PSC Common Stock, and
AVP owns 499,276 shares of PSC Common Stock; and
WHEREAS, AVP owns 6,250 shares of PSC's Series B
Convertible Preferred Stock, par value $100.00 per share
(the "Series B Convertible Preferred Stock"); and
WHEREAS, all holders of stock options in PSC will,
prior to Closing, terminate their options; and
WHEREAS, the PSC Common Stock and the Series B
Convertible Preferred Stock held by Sellers as of Closing
will constitute all of the issued and outstanding shares of
capital stock of PSC; and
WHEREAS, Sellers desire to sell, and Genicom desires to
purchase for cash both at Closing and in certain annual
payments thereafter, the PSC Common Stock and the Series B
Convertible Preferred Stock, all upon the terms and subject
to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises set
forth in this Agreement and subject to the terms and
conditions stated herein, Genicom, Sellers and PSC hereby
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions. The terms defined in this
Section 1.1 shall, for all purposes of this Agreement, have
the meanings herein specified, unless the context expressly
or by necessary implication otherwise requires:
"Business Know-how" shall mean trade and business
secrets, know-how, data, designs, inventions, processes,
production methods,
development documentation, programming tools,
specifications, Software Design Materials, Software Repair
Materials, Future Enhancements, technology, discoveries and
improvements, information, drawings, manuals, reports,
recorded knowledge, performance and other standards,
catalogues, confidential and proprietary information and
other proprietary and intellectual property rights, but
shall exclude any Industrial Property Rights.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Disclosure Schedule" shall mean any Seller Disclosure
Schedule, PSC Disclosure Schedule or Genicom Disclosure
Schedule.
"End-User" shall mean any Person with the right to use
the Software (and/or Software Repair Materials or Future
Enhancements) solely for its internal business purposes but
without any rights whatsoever to license, sublicense,
market, sell, transfer, copy (except for back-up copies),
modify, transmit (electronically or otherwise) or otherwise
dispose of the Software.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Formal Change Letter" shall mean a standard letter
sent to customers (including marketing and licensing
representatives) of PSC setting forth Enhancements to the
Software and/or Software Repair Materials.
"GAAP" means United States generally accepted
accounting principles and practices in effect from time to
time applied consistently throughout the periods involved.
"Industrial Property Rights" shall mean and include
utility and design patents and reissue patents, patent
applications (including all divisional, continuation and
continuation-in-part applications), patent disclosures,
trademarks, trademark applications, trademark registrations,
service marks, service mark applications, service mark
registrations, trade names, copyrights, copyright
applications, mask-works, copyright registrations, and all
other patent, trademark, service mark, trade name, trade
dress and copyright rights.
"Lien" shall mean any lien, security interest, claim,
charge, mortgage, pledge, restriction or encumbrance of any
kind, including but not limited to any of the foregoing
arising through or as a result of options, mortgages,
indentures, security agreements or other agreements,
arrangements, contracts, understandings, commitments or
obligations of any kind, whether written or oral and whether
or not relating in any way to credit or to the borrowing of
money, and "Liens" shall refer to all of the foregoing
collectively; provided, however, that the term "Lien" shall
not include any limitation on the transferability of any
share of PSC capital stock arising from the registration
requirements of the Securities Act and applicable state
securities laws.
"Material Adverse Effect" shall mean any change or
effect that, individually or when taken together with all
other such changes or effects, could reasonably be expected
to be materially adverse to the financial condition, assets,
properties, business or operations of the referenced entity.
"Net Asset Value of PSC" shall mean the amount of total
assets of PSC less the amount of total liabilities of PSC as
of the date of the Closing, as determined by PSC in good
faith and in accordance with GAAP.
"Off-the-Shelf Software" shall mean computer software
and enhancements which are commercially available, used
solely for internal purposes by PSC and not distributed by
PSC to End-Users or to marketing or licensing
representatives.
"Person" shall mean any individual, firm, corporation,
or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Securities Act" shall mean the Securities Act of 1933,
as amended.
"Tax" or "Taxes" shall mean any and all taxes, charges,
fees, levies or assessments payable to any federal, state,
local or foreign taxing authority or agency including but
not limited to (a) income, franchise, profits, gross
receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding,
disability, employment, social security, workers
compensation, unemployment compensation, utility, severance,
excise, stamp, windfall profits, transfer and gains taxes,
(b) customs duties, imposts, charges, levies or other
similar assessments of any kind and (c) interest, penalties
and additions to tax imposed thereto.
"To the knowledge of Genicom," "to Genicom's
knowledge," and like terms shall mean to the knowledge of
Paul T. Winn, James C. Gale and James A. Jones.
"To the knowledge of PSC," "to PSC's knowledge," and
like terms shall mean to the knowledge of PSC's executive
officers, meaning Gallo, Laurance and Daniel J. Adragna
("Adragna").
References to PSC and Genicom in this Agreement include
their respective majority owned subsidiaries, unless the
context thereof clearly indicates otherwise.
1.2 Other Definitions. In addition to the terms
defined in Section 1.1, certain other terms are defined
elsewhere in this Agreement, and, whenever such terms are
used in this Agreement, they shall have their respective
defined meanings, unless the context expressly or by
necessary implication otherwise requires.
ARTICLE 2
SALE AND PURCHASE OF PSC CAPITAL STOCK
2.1 Sale of Stock. Subject to the terms and conditions
set forth in this Agreement, at Closing each Seller,
severally but not jointly, hereby agrees to sell, convey,
transfer, assign and deliver to Genicom free and clear of
all Liens, and Genicom hereby agrees to purchase from each
Seller, severally but not jointly, for the consideration
specified in Section 2.2, all of such Seller's PSC Common
Stock and Series B Convertible Preferred Stock, the number
of shares of which are set forth beside the name of such
Seller on Exhibit A.
2.2 Consideration.
(a) As consideration for the sale of the PSC Common
Stock and Series B Convertible Preferred Stock to Genicom,
Genicom agrees to pay to Sellers an aggregate of
$2,000,000.00 (the "Base Payment"), and up to $3,000,000.00
(subject to the credit described in Section 2.2(c)) as a
performance payment ("Performance Payment"), for a maximum
purchase price of $5,000,000.00 (subject to the credit
described in Section 2.2(c)).
(b) Of the Base Payment, (i) $800,000.00, less the
amount, if any, by which the Net Asset Value of PSC, as set
forth in the certificate delivered by PSC to Genicom
pursuant to Section 9.13, is less than $1,900,000.00, shall
be paid in cash at Closing in accordance with Section
3.2(c)(i) and (ii) the balance of $1,200,000.00 shall be
paid in equal installments of $400,000.00 on the first,
second and third anniversary dates of Closing in accordance
with Section 3.3(a). Of the amount payable in cash at
Closing pursuant to clause (b)(i), Genicom shall pay
directly to Venture Management Associates, a California
limited partnership ("VMA"), the amount required under and
in accordance with Section 3.2(c)(i). Of the amount payable
in cash on the first, second and third anniversary of
Closing pursuant to clause (b)(ii), Genicom shall pay
directly to VMA the amounts required under and in accordance
with Section 3.3(a).
(c) As more fully specified on Exhibit B, the
determination of the amount of the Performance Payment to be
paid to each Seller and to VMA shall be based on the
performance of the Page Printer Business Unit of Genicom, as
reconstituted after Closing and which will include the IBM
plug-compatible printer business as described in Exhibit B
(the "Page Printer Business Unit"). The Performance Payment
shall be paid over a three year period, with the first year,
second year and third year payment not to exceed
$600,000.00, $1,500,000.00, and $2,000,000.00, respectively,
and on a cumulative basis not to exceed $3,000,000.00
(subject to the credit described below in this Section
2.2(c)). It is agreed that if the portion of the
Performance Payment calculated under the formula set forth
on Exhibit B exceeds $600,000.00 in year one or
$1,500,000.00 in year two (with any such excess in either of
those years not being reduced by performance in any
subsequent year), the excess will be paid in a subsequent
year provided that such additional payment will not result
in the payment exceeding the specified limit for that year.
Notwithstanding the foregoing, in consideration of Genicom's
structuring the transaction as provided in this Agreement,
Genicom shall receive a credit of $200,000.00 against the
Performance Payment, which shall be taken Dollar for Dollar
against the first $200,000.00 of earned Performance Payment
and before any Performance Payment is made. The respective
percentages of the Performance Payment to be received by
each Seller and by VMA are specified on Exhibit A. Genicom
shall make Performance Payment payments on or before the
30th day after the last day of the applicable Genicom fiscal
year following Closing as set forth on Exhibit B; said
payments to be made in accordance with Section 3.3(b).
(d) In the event that, during the 3 year period
following Closing, the Page Printer Business Unit is sold to
another Person (excluding sales to a subsidiary controlled
by Genicom) or the business of the Page Printer Business
Unit is terminated by Genicom, Genicom and Sellers agree to
negotiate in good faith an equitable settlement of the
amount of additional Performance Payment, if any, to be paid
to Sellers in connection with such sale or termination,
based upon the following factors: (i) the past performance
of the Page Printer Business Unit from Closing until the
date of sale or termination, (ii) the then current business
environment and (iii) in the event of a sale, the terms of
the sale transaction. Genicom intends, during the 3 year
period following Closing, to seek to operate the Page
Printer Business Unit as a successful business unless the
best interests of Genicom and its stockholders require
otherwise, and intends to consult with Gallo, so long as
Gallo is employed by Genicom, or with Sellers if Gallo is no
longer so employed, in any decision to sell, or terminate
the business of, the Page Printer Business Unit.
(e) Any Base Payment, Performance Payment or
Acceleration Payment not paid when due shall bear interest
at the "Prime Rate" listed in the "Money Rates" (or
equivalent) section of the Wall Street Journal on the date
payment was due, calculated and accruing from the date
payment was due to the date of payment.
(f) Genicom may, in its sole discretion, cause
independent accountants selected by Genicom (which may be
Genicom's regular independent accountants), to prepare an
unaudited balance sheet of PSC as of the date of the Closing
(the "Closing Balance Sheet"). Such accountants shall be
directed to commence preparation of the Closing Balance
Sheet within 45 days after Closing, and Genicom, PSC and
Sellers shall cooperate and use their reasonable efforts to
assure that the Closing Balance Sheet is timely completed
within 120 days after Closing. In the event that the Net
Asset Value of PSC, as computed based upon the Closing
Balance Sheet, is less than such amount as computed by PSC
prior to the Closing and reported on the certificate
delivered to Genicom pursuant to Section 9.13, Genicom shall
be entitled to a credit against the Base Payment in an
amount equal to the amount of such shortfall. Any claim
under this paragraph must be made not later than 30 days
after receipt by Genicom of the Closing Balance Sheet and,
if no claim is made within such period, Genicom shall have
no further rights under this paragraph.
2.3 Expenses. Expenses of this transaction, including
but not limited to legal and accounting fees ("Transaction
Expenses"), incurred by PSC and by Sellers will be paid by
PSC and shall be shown on the interim unaudited PSC balance
sheet prepared as of Closing by PSC's chief financial
officer. Transaction Expenses incurred by Genicom will be
paid by Genicom.
ARTICLE 3
CLOSING
3.1 Closing of Transaction. Subject to the conditions
set forth herein, the purchase of PSC capital stock
described in Sections 2.1 and 2.2 hereof shall occur on or
before February 16, 1995 at 10:00 o'clock a.m., or on such
other date and at such time as mutually agreed by the
parties in writing ("Closing"), at the offices of Shulman,
Rogers, Gandal, Pordy & Ecker, P.A., 11921 Rockville Pike,
Third Floor, Rockville, Maryland 20852, or such other place
as the parties may agree.
3.2 Closing Deliveries. At Closing:
(a) Each Seller shall deliver to Genicom:
(i) certificates representing the Seller's PSC
Common Stock and, if applicable, Series B Convertible
Preferred Stock (the amount of which is set forth beside
such Seller's name on Exhibit A), endorsed to Genicom, which
shall transfer to Genicom good title to the PSC Common Stock
and, if applicable, Series B Convertible Preferred Stock,
free and clear of all Liens; and
(ii) all options for PSC Stock, if any; and
(iii) such other documents, including officer's
certificates, receipts and opinions of counsel, as may be
required by this Agreement or reasonably requested by
Genicom.
(b) PSC shall deliver to Genicom:
(i) the resignations of such officers and
directors of PSC as are designated by Genicom; and
(ii) such agreements and documents, including
officer's certificates and opinions of counsel, as may be
required by this Agreement or reasonably requested by
Genicom.
(c) Genicom shall deliver to each Seller and VMA, as
applicable:
(i) by wire transfer, the amounts of the Base
Payment computed in accordance with Exhibit A; and
(ii) such other documents, including officer's
certificates and opinions of counsel, as may be required by
this Agreement or reasonably requested by any Seller.
(d) Genicom shall deliver to Gallo, Laurance and
Adragna options for Genicom stock as required by Sections
8.9, 8.10 and 8.11, respectively.
3.3 Post-Closing Deliveries. Following Closing,
Genicom shall deliver to each Seller and VMA, as applicable:
(a) at the times specified in Section 2.2(b), by wire
transfer or certified check, their respective portions of
the Base Payment as listed on Exhibit A; and
(b) at the times specified in Section 2.2(c), by wire
transfer or certified check, their respective portions of
the Performance Payment, if any, determined in accordance
with Exhibit A and Exhibit B, along with a statement
certified by the chief financial officer of Genicom as to
the calculation of the amounts thereof.
3.4 Further Assurance. Sellers, PSC and Genicom at any
time after Closing shall execute, acknowledge and deliver
any other assignments, conveyances and other assurances,
documents and instruments of transfer, reasonably requested
by any party and will take any other action consistent with
the terms of this Agreement
that may reasonably be requested by any party for the
purpose of accomplishing the agreements set forth herein.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as set forth in the Seller Disclosure Schedule
to be delivered by each Seller to Genicom prior to Closing,
which Seller Disclosure Schedule contains, with respect to
each matter disclosed therein, a reference to the Section of
this Agreement to which such disclosure relates, each Seller
hereby represents and warrants to Genicom, solely with
respect to such Seller and the shares of PSC capital stock
owned and held by such Seller, as follows:
4.1 Title. Seller is the sole record and beneficial
owner of, and owns and holds good and valid title to, the
PSC Common Stock and, if applicable, the Series B
Convertible Preferred Stock being transferred by Seller and
set forth beside Seller's name on Exhibit A, free and clear
of any Liens, and does not own any other shares of PSC
capital stock or any other securities exercisable or
exchangeable for, or convertible into, any such stock.
There are no agreements, options, warrants, rights, calls or
commitments of any character to which Seller is a party or
by which Seller is bound providing for the purchase,
repurchase or redemption of, or granting a right of first
refusal in, or in any way relating to, the shares of PSC's
capital stock held by Seller. There are no voting trusts,
proxies or other agreements or arrangements or
understandings with respect to the voting of Seller's
capital stock of PSC.
4.2 Power, Authorization and Validity. Seller has all
requisite power and authority and, if applicable, legal
capacity, to execute, deliver and perform its obligations
under this Agreement. All action on the part of Seller, and
its officers, directors, shareholders, trustees and partners
(if any) necessary for the authorization, execution,
delivery and performance of all obligations of Seller under
this Agreement, and for the delivery of the PSC Common Stock
and, if applicable, the Series B Convertible Preferred Stock
being purchased hereunder, has been taken. This Agreement
constitutes the valid and legally binding obligation of
Seller, enforceable against the Seller in accordance with
its terms. If Closing occurs, that certain Agreement by and
among Sellers and PSC to be dated prior to Closing (the
"Seller Agreement") constitutes the valid and legally
binding obligation of Seller, enforceable against the Seller
in accordance with its terms.
4.3 Valid Transfer. Upon the delivery to Genicom or
its representatives of certificates for Seller's PSC Common
Stock and, if applicable, Series B Convertible Preferred
Stock, together with appropriate transfer powers, Genicom
shall own all right, title and interest in such PSC Common
Stock and Series B Convertible Preferred Stock free and
clear of any Liens.
4.4 Consents. No consent, approval or authorization
of, or designation, declaration or filing with, any federal,
state, local or foreign government, board, authority,
agency, department, bureau, court, commission or other body,
office or instrumentality or any arbitrator with authority
to bind a party at law (individually a "Governmental Entity"
and collectively, "Governmental Entities"), or any other
Person, is required on the part of Seller in connection with
the valid execution and delivery of this Agreement, or the
performance by Seller of Seller's obligations hereunder, or
the sale of the PSC Common Stock and, if applicable, the
Series B Convertible Preferred Stock by Seller, except such
filings and approvals as may be required to comply with
federal and state securities laws.
4.5 No Brokers. There is no legally binding
arrangement made by or on behalf of Seller for the payment
of any fees or expenses of any investment banker, broker or
finder in connection with the origin, negotiation or
execution of this Agreement, or in connection with any
transaction contemplated hereby, except for the payments to
VMA as set forth in Sections 2.2(b) and (c) and determined
pursuant to Exhibit A and Exhibit B, which amount
constitutes all amounts owed to VMA by PSC and Seller either
in connection with the transactions contemplated by this
Agreement or for any other reason.
4.6 Information. Seller believes it has received all
the information it considers necessary or appropriate for
deciding whether to engage in the transactions contemplated
herein. Seller has had an opportunity, subject to reasonable
confidentiality restrictions, to ask questions and receive
answers from Genicom and PSC regarding the terms and
conditions of the transactions contemplated herein and the
business, properties, prospects and financial condition of
Genicom and PSC and to obtain additional information (to the
extent Genicom or PSC possessed such information or could
acquire it without unreasonable effort or expense) necessary
to verify the accuracy of any information furnished to it or
to which it had access. Neither this Section 4.6 nor any
investigation by or on behalf of Seller, heretofore or
hereafter made, shall limit, or affect the survival of, any
representation and warranty contained herein or the ability
of Seller to obtain indemnification pursuant to Article 12
hereof.
4.7 No Violation of Agreements. The execution and
delivery of this Agreement by Seller does not, and the
performance of this Agreement by Seller will not (a)
conflict with or violate any provision of Seller's governing
documents, if any, (b) conflict with or violate any federal,
state, foreign or local law, statute, ordinance, rule,
published policy or guideline, regulation, order, judgment
or decree (individually a "Law" and collectively, "Laws")
applicable to Seller, or (c) result in any breach of or
constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or require
payment by PSC or Genicom under, or result in the creation
of a Lien on any of the properties or assets of PSC pursuant
to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other
instrument or obligation to which Seller is a party or by
which Seller is bound.
4.8 Litigation. There is no litigation, proceeding or
investigation pending or to Seller's knowledge, threatened
in writing, relating to Seller which questions the validity
of this Agreement, or any action taken or to be taken in
connection herewith or therewith or seeks to prohibit or
render illegal the transactions contemplated by this
Agreement.
4.9 No Material Misstatements. No representation or
warranty of a Seller contained in this Agreement (including
but not limited to, in the Seller Disclosure Schedule or any
Exhibit to this Agreement), or in any document, instrument
or certificate delivered pursuant hereto at Closing (all
such representations and warranties collectively, the
"Written Seller Representations") contains any untrue
statement of material fact, or omits to state a material
fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they are
made, not misleading.
4.10 Limitations on Other Representations. Except for
the Written Seller Representations, neither such Seller, nor
any other Person on behalf of such Seller, makes any other
express or implied representation or warranty on behalf of
such Seller, and, except for the Written Seller
Representations by such Seller, each Seller hereby disclaims
any such representation or warranty, whether by such Seller,
any other Seller, PSC, or any of their respective officers,
directors, employees, agents or representatives, or any
other Person, with respect to the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby, notwithstanding any delivery,
disclosure, statement, representation or warranty to Genicom
or any of its officers, directors, employees, agents or
representatives, or any other Person.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PSC
Except as set forth in the PSC Disclosure Schedule to
be delivered by PSC to Genicom prior to Closing, which PSC
Disclosure Schedule contains, with respect to each matter
enclosed therein, a reference to the Section of this
Agreement to which such disclosure relates, PSC hereby
represents and warrants to Genicom as follows:
5.1 Capitalization. The authorized capital stock of
PSC consists of 9,900,000 shares of PSC Common Stock, par
value $0.01 per share, and 100,000 shares of Preferred
Stock, par value $100.00 per share, of which 2,813,389
shares of PSC Common Stock, and 6,250 shares of Preferred
Stock, such shares of Preferred Stock having been designated
Series B Convertible Preferred Stock, are issued and
outstanding. There are no voting trusts, proxies or other
agreements or arrangements or understandings to which PSC is
a party or by which it is bound relating to the issued or
unissued capital stock of PSC, and to the knowledge of PSC,
no such agreements exist between or among any Persons other
than PSC. All outstanding shares of capital stock of PSC
are held by the Sellers as set forth on Exhibit A. All of
the issued and outstanding shares of capital stock of PSC
have been duly authorized, validly issued and are fully paid
and nonassessable, with no preemptive rights, and have been
issued in compliance with all applicable federal and state
securities laws. There are no agreements, options,
warrants, rights, calls or commitments of any character to
which PSC is a party or by which PSC is bound providing for
the issuance, grant or sale of any shares of capital stock
or securities convertible into, or exercisable or
exchangeable for, capital stock, or for the repurchase,
redemption or other acquisition of shares of such stock or
such securities. PSC has no plans to issue any shares of
capital stock or securities convertible into, or exercisable
or exchangeable for, capital stock. There are no
agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any Person is or
may be entitled to receive any payment based on the revenues
or earnings, or calculated in accordance therewith, of PSC.
5.2 Power, Authorization and Validity. PSC has all
requisite power and authority to execute, deliver and
perform its obligations under this Agreement. All action on
the part of PSC, and its officers, directors and
shareholders necessary for the authorization, execution,
delivery and performance of all obligations of PSC under
this Agreement has been taken. This Agreement constitutes
the valid and legally binding obligations of PSC,
enforceable against PSC in accordance with its terms. If
Closing occurs, the Seller Agreement constitutes the valid
and legally binding obligation of PSC, enforceable against
PSC in accordance with its terms.
5.3 Consents. No consent, approval or authorization
of, or designation, declaration or filing with, any
Governmental Entity, or any other Person, is required on the
part of PSC in connection with the valid execution and
delivery of this Agreement, the performance by PSC of its
obligations hereunder, or, to the knowledge of PSC, the sale
of the PSC Common Stock and, if applicable, the Series B
Convertible Preferred Stock by each Seller, except such
filings and approvals as may be required to comply with
federal and state securities laws.
5.4 Organization and Good Standing. PSC is a
corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia and
has the corporate power and authority to own, operate and
lease its properties and to carry on its business as now
conducted, and is qualified as a foreign corporation in
Maryland and in each other jurisdiction in which a failure
to be so qualified could reasonably be expected to have a
Material Adverse Effect on PSC. All minute books and
records of PSC relating to proceedings of the shareholders
and the board of directors and any applicable committees of
PSC have been made available to Genicom. Such minute books
and records are (a) the original minute books and records of
PSC with respect to all proceedings of the shareholders and
the board of directors and applicable committees through the
date hereof and (b) true, complete and correct in all
respects. There have been no material changes, additions or
alterations in such minute books or records that have not
been disclosed to Genicom in writing.
5.5 No Violation of Agreements. The execution and
delivery of this Agreement by PSC and each Seller does not,
and the performance of this Agreement by PSC and each Seller
will not (a) conflict with or violate the Articles of
Incorporation or By-laws, in each case as amended or
restated, of PSC, (b) conflict with or violate any Law
applicable to PSC, or by which any of PSC's properties are
bound or to which any of its properties are subject, which
conflict with or violation could reasonably be expected to
have a Material Adverse Effect on PSC, or (c) result in any
breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default)
under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a Lien on any of
the properties or assets of PSC pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which
PSC is a party or by which PSC or any of its properties are
bound or to which any of its properties are subject.
5.6 Subsidiaries. PSC does not have any subsidiaries,
or any interests, direct or indirect, in any corporation,
partnership, joint venture or other business entity, other
than its ownership of all of the outstanding capital stock
of Printer Systems International, Inc., a Virginia
corporation, and The Printer Connection, Inc., a Virginia
corporation (each a "Subsidiary"). No Subsidiary (a) has
conducted any business during the period of 24 consecutive
calendar months ending on the date hereof, (b) has any
assets of any nature or (c) has any indebtedness,
obligations, commitments or liabilities of any nature (known
or unknown, accrued, absolute, contingent, threatened in
writing or otherwise). PSC has no obligation to make any
investment in (in the form of a loan, capital contribution
or otherwise), or to provide any guarantee with respect to
obligations of, any Person.
5.7 Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration or investigation of any
kind, at law or in equity (including but not limited to
actions or proceedings seeking injunctive relief and any
other action or proceeding of any nature before any
Governmental Entity), pending or, to the knowledge of PSC,
threatened against or affecting PSC or any properties or
rights of PSC. PSC is not subject to any continuing order
of, consent decree, settlement agreement or other similar
written agreement with or, to the knowledge of PSC,
investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental
Entity including but not limited to cease-and-desist or
other orders. PSC has not admitted in writing its inability
to pay its debts generally as they become due, filed or
consented to the filing against it of a petition in
bankruptcy or a petition to take advantage of any insolvency
act, made an assignment for the benefit of creditors,
consented to the appointment of a receiver for itself or for
the whole or any substantial part of its property, or had a
petition in bankruptcy filed against it, been adjudicated a
bankrupt, or filed a petition or answer seeking
reorganization or arrangement under the federal bankruptcy
laws or any other similar law of any jurisdiction.
5.8 Computer Software and Related Property.
(a) The PSC Disclosure Schedule sets forth a list and
description of all the computer software (including the
latest versions of the source code and object code
(including micro-code)) but excluding the Off-the-Shelf
Software; all enhancements, upgrades, revisions,
improvements, modifications and new releases (collectively,
"Enhancements") of such computer software which have been
distributed to End-Users or to marketing or licensing
representatives (including the latest versions of the source
code and object code (including micro-code) therefore); and
all documentation, user manuals, training and instructional
materials, technical manuals and support materials (whether
recorded or distributed in print, electronic or video
formats) (the "Documentation") related thereto
(collectively, the "Software"), currently owned, leased or
licensed by PSC or as to which PSC otherwise currently has
rights to sell, modify, incorporate into other software,
reproduce, market, license, sublicense or otherwise use,
together with a description of the nature of PSC's right,
title and interest therein. The PSC Disclosure Schedule
sets forth a list and description of all functional,
technical and design specifications, compatibility
characteristics, flow charts, test software and beta-test
results in the possession of or owned by PSC (the "Software
Design Materials") for the Software. The PSC Disclosure
Schedule sets forth a list and description of (i) all known
defects, "bugs" and operational problems in the Software
("Defects") and (ii) the programming code, "fixes" and
"patches" which cure the Defects, including the latest
versions of the source and object code (including micro-
code), Documentation and Software Design Materials
therefore, to the extent that they have not been
incorporated into the Software (the "Software Repair
Materials"). The PSC Disclosure Schedule sets forth a list
and description of all Enhancements and new software
programs or products which are under development but which
have not yet been distributed to End-Users or to marketing
or licensing representatives and the Documentation and
Software Design Materials therefore (the "Future
Enhancements"). The Software, Software Design Materials,
Software Repair Materials and Future Enhancements
(collectively, the "Software Property") constitute all
computer software and source code, technical and design
material, software correction materials and software works
in progress currently used in the operation of the business
of PSC, excluding Off-the-Shelf Software.
The Software Property and Industrial Property Rights:
(i) are owned by PSC free and clear of all Liens; (ii) have
been protected by PSC by the trade secret procedures
described in the PSC Disclosure Schedule and by the patents,
copyrights, trademarks, service marks (including
registrations therefore) and other rights described in the
PSC Disclosure Schedule and (iii) are not subject to any
legal or contractual restriction that would prevent the
Software Property and Industrial Property Rights from being
licensed, sublicensed, marketed, incorporated in other
software, modified, copied, transmitted (electronically or
otherwise) or otherwise used, licensed or sold by PSC
without restriction or payment to any third party, provided,
however, that with respect to Software Property and
Industrial Property Rights which are owned by third parties
and licensed by PSC, PSC's representation is limited to its
knowledge. The consummation of the transactions
contemplated by this Agreement will not alter any of the
rights described in the preceding sentence. PSC has acted
and continues to act in a commercially reasonable manner to
maintain its Industrial Property Rights in the Software
Property.
(b) No Person has disputed or otherwise questioned
(except disputes and questions which have been withdrawn)
PSC's right, title or interest in or to any of the Software
Property. Neither the Software Property nor PSC's use or
licensing thereof or of any part or copy thereof,
misappropriates, infringes upon or violates any Industrial
Property Right of any third party and there are no claims
with respect to any such infringement or violation pending
or, to the knowledge of PSC, threatened in writing,
provided, however, that with respect to Software Property
and Industrial Property Rights which are owned by third
parties and licensed by PSC, PSC's representation is limited
to its knowledge.
(c) All licenses of the Software Property granted by
PSC to third parties are in writing and require the
licensees thereunder to maintain the confidentiality
thereof. All employees of, and other software programmers
or developers retained by, PSC, past and present, who have
had access to any of the Software Property have executed and
delivered to PSC confidentiality agreements substantially in
one of the forms contained in the PSC Disclosure Schedule.
No written claim with respect to Software Property by or
against any past or present PSC employee or other PSC
software programmer or developer or PSC has been made. To
the knowledge of PSC, there has not been any breach of any
confidentiality agreement in favor of or binding on PSC
relating to the Software Property either by the employees of
PSC or other software programmers or developers of PSC, or
any third parties.
(d) Except as set forth in the PSC Disclosure Schedule
or pursuant to written license agreements with End-Users or
pursuant to written distribution, marketing or licensing
agreements with representatives or agents who are authorized
to distribute, market or license only to End-Users, forms of
which are contained in the PSC Disclosure Schedule, PSC has
not conveyed any Industrial Property Rights to any part of
the Software Property (excluding conveyances which are no
longer in effect). No third party has currently or has had
within the past three years access to the Software Design
Materials or the source code of the Software, Software
Repair Materials or Future Enhancements. Except pursuant to
written agreements between PSC and End-Users or pursuant to
written distribution, marketing or licensing agreements with
representatives or agents who are authorized to distribute,
market or license only to End-Users, PSC has not granted or
provided, and is not obligated to grant or provide, any
rights to license, sublicense, market, incorporate into
other software, sell, copy (except for authorized back-up
copies), modify, transmit (electronically or otherwise) or
otherwise use any Software Property. The PSC Disclosure
Schedule sets forth the date and contents (including level
of Enhancement) of each Formal Change Letter and indicates
with respect to each Person listed in the PSC Disclosure
Schedule pursuant to the first three sentences of this
Section 5.8(d), the levels of Enhancement of each type of
Software, Software Repair Materials or Future Enhancements
which has been provided to, licensed to or otherwise
accessed by each such Person.
(e) Each End-User has entered into an agreement with
PSC in the form of one of the standard forms of license
agreement currently in use by PSC and contained in the PSC
Disclosure Schedule or has entered into an agreement with
PSC which includes substantially similar provisions
protecting the rights of PSC in the Software Property,
limiting warranties and otherwise. Except pursuant to
written license agreements with End-Users or pursuant to
written distribution, marketing or licensing agreements with
representatives or agents who are authorized to distribute,
market or license only to End-Users, no Person has any right
to make or permit others to make copies of any Software
Property, other than a right to make a limited number of
such copies for back-up purposes only.
(f) None of the Software has manifested any operating
problems which would or could lead to claims of breach of
warranty by End-Users, other than any such problems that
have been corrected in the ordinary course of business.
Such problems have not resulted, and PSC does not reasonably
anticipate that such problems will in the future in the
aggregate result, in losses or expenses for PSC. All such
Software is tested either internally or as part of any
ongoing development process at customer sites, if and to the
extent PSC has received written notice or actual knowledge
of problems, all such problems have been remedied. PSC has
disclaimed all implied warranties with respect to any
Software distributed by or for it, and has only made the
warranties set forth in the PSC Disclosure Schedule.
(g) All Off-the-Shelf Software used by PSC is duly
licensed by PSC, and used in accordance with any limitations
or restrictions in such license agreements.
5.9 Industrial Property Rights. The PSC Disclosure
Schedule contains a true and complete list of all Industrial
Property Rights owned by PSC, and a true and complete list
of all Industrial Property Rights of which PSC is licensee
or in which PSC otherwise has any rights or interest
(collectively, the "PSC Industrial Property Rights"),
together with a description of the nature of PSC's interest
therein. PSC owns on an exclusive basis, free and clear of
all Liens, or has the perpetual right to use, without
payment to or interference from any other party, all PSC
Industrial Property Rights. Within the past three years,
PSC has not given any notice, nor has PSC received any
notice, of conflict with the rights of others with respect
to the PSC Industrial Property Rights and PSC has not
infringed on Industrial Property Rights of any other Person,
provided, however, that with respect to Industrial Property
Rights which are owned by third parties and licensed by PSC,
PSC's representation is limited to its knowledge. The
operation of the business of PSC after Closing in the manner
heretofore conducted by PSC will not infringe on any
Industrial Property Rights of others or any other
proprietary rights of others, provided, however, that with
respect to Industrial Property Rights which are owned by
third parties and licensed by PSC, PSC's representation is
limited to its knowledge. No action, suit, arbitration or
legal, administrative or other proceeding or governmental
investigation is pending to which PSC is a party, or, to the
knowledge of PSC, threatened in writing or orally which
involves any of the PSC Industrial Property Rights. PSC is
not subject to any judgment, order, writ, injunction or
decree of any Governmental Entity, nor has PSC entered into
or become a party to any contract or agreement still in
effect, which restricts or impairs the validity,
enforceability or use of any of the PSC Industrial Property
Rights. No other Industrial Property Rights are used in or
necessary to conduct the business of PSC, other than Off-the-
Shelf Software licenses.
5.10 Business Know-how. PSC owns all Business Know-how
used in the business of PSC as presently conducted
(collectively, the "PSC Business Know-how"), free and clear
of all Liens, and no royalties are payable to anyone
relating thereto. Within the past 3 years PSC has not given
any written notice, nor has PSC received any written notice,
of any conflict with the rights of others with respect to
any PSC Business Know-how, and, to the knowledge of PSC, the
PSC Business Know-how does not conflict with the rights of
others. PSC Business Know-how is sufficient to conduct the
business of the PSC as presently conducted and is contained
in written materials owned and possessed by PSC.
5.11 Financial Statements. PSC has furnished to
Genicom a complete and correct copy of the audited balance
sheet of PSC (including the notes thereto, the "Audited
Balance Sheet") as of September 30, 1994 and September 30,
1993 and the related statements of operations, changes in
stockholders' equity and cash flows for the fiscal years
then ended, including the notes thereto (collectively, the
"Audited Financial Statements") and the unaudited balance
sheet as of December 31, 1994 and the related statements of
income, stockholder's equity and cash flow for the three
month period then ended (the "Unaudited Financial
Statements"). The Audited Financial Statements and the
Unaudited Financial Statements shall be collectively
referred to as the "Financial Statements." The Financial
Statements fairly present the financial position and results
of operations of PSC, as at the dates and for the periods
indicated and are in each case in conformity with GAAP, and
have been prepared from and are in accordance with the books
and records of PSC, subject in the case of the Unaudited
Financial Statements, to normal year-end adjustments which
would be otherwise required for full year presentation under
GAAP (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of items
customarily reflected in the footnotes to financial
statements presented for an entire accounting year prepared
in accordance with GAAP (which if presented, would not
differ materially from those included in the Audited
Financial Statements). The statements of income included in
the Financial Statements do not contain any items of special
or nonrecurring income except as expressly specified
therein, and the balance sheets included in the Financial
Statements do not reflect any writeup or revaluation
increasing the book value of any assets except as expressly
specified therein. The books and records of PSC are in all
material respects complete and correct and are maintained in
accordance with good accounting practices and sound and
customary business practices.
5.12 Property and Assets.
(a) The plants, buildings, structures and improvements
located on real estate leased by PSC (the "PSC Real
Property") are suitable for the continued conduct of its
business at such property as presently conducted and are in
good operating condition and repair, except with respect to
ordinary wear and tear, and have been properly maintained in
the ordinary course of business with routinely scheduled
maintenance and are suitable for the uses for which they are
intended. To the knowledge of PSC, such plants, buildings,
structures and improvements are being operated in conformity
with all applicable Laws relating thereto currently in
effect or scheduled to come into effect, except for such non-
conformity which could not reasonably be expected to have a
Material Adverse Effect on PSC. To the knowledge of PSC,
there are no pending or threatened developments which might
curtail the present or future use of any of such PSC Real
Property for the purpose for which it was leased or for the
purposes for which it is used. No use by PSC of any PSC
Real Property is dependent upon a nonconforming use or
special permit or license. To the knowledge of PSC, none of
the plants, buildings, structures and improvements located
on PSC Real Property encroaches in any respect on property
of others. Each plant, building, structure and improvement
operated by PSC is served by gas, electricity, water, sewage
and waste disposal and other utilities adequate to operate
such plant, building, structure and improvement
substantially as operated on the date hereof, and none of
the utilities serving any such plants, buildings, structures
and improvements has notified PSC in writing of any
reduction in service or any increase in the cost thereof.
PSC does not own and has never owned any real property.
(b) PSC has good and marketable title to, or a valid
leasehold interest pursuant to a written lease in, all
personal property (including but not limited to all
inventory) used or useful in its business free and clear of
any Lien. PSC has physical custody of all such personal
property. PSC has made available to Genicom a list of all
machinery, equipment, furniture, tools, supplies and other
tangible personal property (other than books and records and
purchase orders, forms, labels, stationery, shipping
materials, brochures, photographs and advertising materials)
wherever located which are used or useful in PSC's business
as of the most recent practicable date.
(c) All tangible personal property used or useful in
PSC's business (including but not limited to all machinery,
equipment, furniture, tools, supplies and other tangible
personal property) is in good condition and repair, except
with respect to ordinary wear and tear, and has been
properly maintained in the ordinary course of business with
routinely scheduled maintenance and is suitable for the uses
for which intended. All such personal property is being
operated in all respects in conformity with all applicable
Laws relating thereto currently in effect or scheduled to
come into effect, except for such non-conformity which could
not reasonably be expected to have a Material Adverse Effect
on PSC.
(d) The assets reflected in the unaudited balance
sheet of PSC as of December 31, 1994 include all tangible
and intangible properties and rights of PSC necessary to
conduct, or used by PSC in the conduct of, its business as
presently being conducted.
5.13 Inventory. All inventories (including inventories
of work in progress and materials) of PSC are of good,
usable and merchantable quality, net of any reserves
provided therefor in the Financial Statements. All such
inventories are reflected in the Audited Financial
Statements, and the Unaudited Financial Statements, at the
lower of cost (determined on a first-in, first-out method)
or market, all in accordance with GAAP, subject in the case
of the Unaudited Financial Statements to normal year-end
adjustments which would be otherwise required for full year
presentation under GAAP (the effect of which will not,
individually or in the aggregate, be materially adverse) and
the absence of items customarily reflected in the footnotes
to financial statements presented for an entire accounting
year prepared in accordance with GAAP (which if presented,
would not differ materially from those included in the
Audited Financial Statements). Such inventories do not
include any obsolete or discontinued items, except to the
extent of the reserves therefor reflected in the Audited
Financial Statements and the Unaudited Financial Statements.
All materials and work in progress included in such
inventories are suitable and processable for the production
of finished products of PSC's standard specifications. The
inventory of PSC in the amounts reflected in the Unaudited
Financial Statements and the inventory acquired after
December 31, 1994, by PSC consist of items of a quality and
quantity usable or resalable in the normal course of
business of PSC and, if salable, are, if sold in the normal
course, salable at market values not less than the book
value amounts thereof, net of any reserves provided for in
the Unaudited Financial Statements.
5.14 Accounts Receivable. The accounts receivable
shown in the Unaudited Financial Statements have arisen in
the ordinary course of business and are valid and genuine
and are current and collectible within 90 days net of the
reserves shown on the balance sheet contained in the
Unaudited Financial Statements. PSC has not received any
written notice of any claim by a customer, and to the
knowledge of PSC, there are no facts that would give rise to
a claim that would constitute an offset or defense to any
such
receivable (subject to the reserve shown on the balance
sheet contained in the Unaudited Financial Statements).
Since December 31, 1994, (a) no event has occurred that
would, under the practices of PSC reflected on the unaudited
balance sheet as of such date, require an increase of more
than $5,000.00 in the amount of the reserve for
uncollectible accounts receivable for PSC and (b) there has
been no material adverse change in the composition of such
accounts receivable in terms of aging. PSC has made
available to Genicom a detailed list of its accounts
receivable, showing in reasonable detail the age thereof.
The prepaid expenses reflected on the unaudited balance
sheet of PSC as of December 31, 1994 have been incurred
solely for the benefit of PSC.
5.15 No Undisclosed Liabilities. PSC has no material
indebtedness, obligations, commitments or liabilities of any
nature (known or unknown, accrued, absolute, contingent,
threatened in writing or otherwise) other than those (a)
fully reflected or reserved against, and quantified, in the
Unaudited Financial Statements and (b) incurred in the
ordinary course of business and consistent with past
practices since December 31, 1994.
5.16 Absence of Certain Changes. Since September 30,
1994 there has not been:
(a) any change in the business, financial condition,
assets, liabilities, results of operations or prospects of
PSC except for changes which could not reasonably be
expected to have a Material Adverse Effect on PSC;
(b) (i) any increase in the compensation payable or to
become payable by PSC to any of the officers, employees,
agents, directors or consultants of PSC (the "PSC
Personnel"), (ii) except for amounts awarded in the ordinary
course of business, consistent with past practice under
plans existing at September 30, 1994, any bonus, incentive
compensation, service award or other like benefit granted,
made or accrued, contingently or otherwise, for or to the
credit of any PSC Personnel, (iii) any employee welfare,
pension, retirement, profit-sharing or similar payment or
arrangement made or agreed to by PSC for any PSC Personnel
except pursuant to plans existing at September 30, 1994,
(iv) any new employment agreement involving annual
compensation in excess of $10,000.00, or management or
consulting agreement involving annual payments in excess of
$10,000.00 to which PSC is a party and pursuant to which any
third party will perform services for PSC, (v) any grant or
award of any termination or severance payment for any PSC
Personnel or (vi) any resignation or termination of
employment of any key officer of PSC;
(c) any addition to or modification of the employee
benefit plans, arrangements or practices affecting any PSC
Personnel other than (i) the extension of coverage to any
other PSC Personnel who became eligible after September 30,
1994 in accordance with the terms thereof in effect on
September 30, 1994 or (ii) as required by Law;
(d) any sale, assignment or transfer of any of the
assets of PSC other than sales of inventory in the ordinary
course of business and consistent with past practice;
(e) any acquisition by merger or consolidation with,
or purchase of all or substantially all of the assets or
capital stock of, or any other acquisition of any material
assets or business of, any Person or division thereof;
(f) any failure to operate PSC in the ordinary course,
or any failure by PSC to use its reasonable efforts to keep
available to it the services of PSC Personnel, or to use its
reasonable efforts to preserve for itself the goodwill of
its customers and others having business relations with it;
(g) any change in accounting methods or practices by
PSC except as required by GAAP, or any reversal of
previously established accounting provisions, or the
realization of any extraordinary or non-recurring gain;
(h) any entry into, or termination, amendment or
modification by PSC of any agreement listed or required to
be listed (including agreements which came into existence
after September 30, 1994, but which if in existence prior to
such date would have been required to be so listed) in the
PSC Disclosure Schedule pursuant to Section 5.21;
(i) any capital expenditure or the execution of any
lease or any incurring of any commitment or liability
therefor by PSC which is not in the ordinary course of
business or not consistent with the level of capital
expenditure during the fiscal year ending September 30,
1994;
(j) any failure to pay when due any material
obligation of PSC;
(k) any creation of any Lien on any asset of PSC, or
any satisfaction or discharge of any Lien or payment of any
obligation of PSC other than in the ordinary course of
business nd consistent with past practices;
(l) any incurrence of or commitment to incur any
indebtedness for borrowed money or any assumption,
guarantee, endorsement or other creation of responsibility
for obligations of any other Person or any loan or advance
to any Person by PSC;
(m) any damage, destruction or loss with respect to
any assets of PSC (whether or not covered by insurance)
having a PSC Material Adverse Effect;
(n) any declaration, setting aside or payment of
dividends or distributions (whether in cash, stock or
property) to any stockholder of PSC or in respect of any
capital stock of PSC, or any redemption, purchase or other
acquisition of any capital stock of PSC;
(o) any settlement of pending or threatened litigation
involving the making of any payment by PSC;
(p) any change in employee relations which has had or
is reasonably likely to have a PSC Material Adverse Effect;
(q) any disposition (other than in the ordinary course
of business and consistent with past practices) or lapsing
of any Software Property or Industrial Property Rights or
any disclosure to any Person of any Industrial Property
Rights not theretofore a matter of public knowledge;
(r) any entry into any sale/leaseback transaction; or
(s) any agreement by PSC or any Seller to do or cause
PSC to do any of the foregoing.
5.17 Taxes.
(a) PSC has timely filed, or will file when due if due
before Closing, all federal, state, foreign, county and
local returns, declarations and reports and information
returns and statements required to be filed or sent by or
with respect to any Tax for any period ending before Closing
(collectively, the "PSC Returns"), (b) as of the time of
filing, the PSC Returns correctly reflected (and, as to PSC
Returns not filed as of the date hereof but which are filed
prior to Closing, will correctly reflect) the facts
regarding the income, business, assets, operations,
activities and status of PSC, and any other information
required to be shown thereon and (c) PSC has timely paid, to
the extent due and payable, or made adequate reserve or
provision for the payment of all Taxes (and interest and
penalties that were due pursuant to such PSC Returns or
pursuant to assessments received by them) upon or relating
to its properties, its employees, payroll, income and gross
receipts, its ownership or use of any of its assets and any
other aspect of its business, as shown on such PSC Returns.
No audit of any PSC Return is currently pending or, to the
knowledge of PSC, threatened. There are no outstanding
agreements by PSC for the extension of time for the
assessment of any such Tax and no deficiency for any
material amount of Tax has been asserted in writing or
assessed by a taxing authority against PSC. Since September
30, 1994, PSC has not incurred any fixed or contingent Tax
liabilities other than in the ordinary course of business.
5.18 Licenses and Permits. PSC has all of the
consents, licenses, permits, authorization, orders,
approvals and certificates necessary to permit PSC to own,
operate, use, lease, and maintain its assets and properties
in the manner in which it is now operated and maintained and
to conduct its business as it is now being conducted, except
for those the lack of which will not have a Material Adverse
Effect on PSC (the "PSC Permits"). All of the PSC Permits
are in full force and effect; there is no action, proceeding
or investigation pending or, to the knowledge of PSC,
threatened, regarding suspension or cancellation of any of
the PSC Permits; none of the PSC Permits will terminate or
lapse by reason of the transactions contemplated by this
Agreement; no application has been or is proposed to be made
to amend any PSC Permit or to acquire any additional PSC
Permits; and PSC has no reason to believe that any PSC
Permit in effect on the date hereof will not be renewed.
PSC has not received from any Governmental Entity any
written notification with respect to possible conflicts,
defaults or violations of Laws.
5.19 Corporate Documents. PSC has delivered to Genicom
true and complete copies of the Articles of Incorporation
and By-laws of PSC as now in effect and as will be in effect
as of Closing. No action has been taken by the Board of
Directors or stockholders of PSC for the purpose of
effecting the amendment or modification of such Articles of
Incorporation or By-laws. PSC is not in violation of any
provision of its Articles of Incorporation or By-laws.
5.20 Insurance. PSC maintains valid policies of
workers' compensation insurance and of insurance with
respect to its properties and business of the kinds and in
the amounts not less than is customarily obtained by
corporations of established reputation engaged in the same
or similar business and similarly situated, including but
not limited to insurance against loss, damage, fire, theft,
public liability and other risks. All insurance policies
(a) are issued by insurance companies reasonably believed by
PSC to be financially sound and reputable, (b) are
sufficient for material compliance with all requirements of
Law and of all applicable agreements to which PSC is a party
or by which PSC is bound, (c) are valid, outstanding, and
enforceable policies, and (d) will not in any way be
affected by, terminate, or lapse by reason of, the
transactions contemplated by this Agreement. PSC has not
received (x) any written notice of cancellation of any
policy described above or refusal of coverage thereunder,
(y) any written notice that any issuer of such policy has
filed for protection under applicable bankruptcy laws or is
otherwise in the process of liquidating or has been
liquidated, or (z) any other written indication that such
policies are no longer in full force and effect or that the
issuer of any such policy is no longer willing or able to
perform its obligations thereunder.
5.21 Certain Contracts and Obligations. The PSC
Disclosure Schedule sets forth a list of each of the
following written contracts, agreements, instruments,
understandings, arrangements and other commitments (each an
"Commitment"), into which PSC has entered or by which it is
bound or to which any of its assets is subject and which
remain in effect: (a) each Commitment which requires future
expenditures by PSC in excess of $10,000.00 during any
period of 12 consecutive calendar months, (b) each
employment and consulting Commitment, noncompetition
Commitment, bonus Commitment, severance Commitment, and each
distributor and sales representative Commitment, (c) each
Commitment to which any shareholder, officer, director or
employee of PSC, or any "affiliate" or "associate" of such
persons (as such terms are defined in the rules and
regulations promulgated under the Securities Act), or any
member of the immediate family of any of the foregoing, is a
party, including but not limited to any agreement or other
arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise
requiring payments to, any such person or entity, (d) each
lease or similar Commitment which requires expenditures by
PSC in excess of $10,000.00 during any period of 12
consecutive calendar months under which (i) PSC is a lessee
of, or holds or operates, any property (real, machinery,
equipment, or other personal, tangible or intangible,
property) or (ii) PSC is a lessor of, or makes available for
use by any third party, any property (real, machinery,
equipment, or other personal, tangible or intangible,
property), (e) each license or other Commitment as licensor
or licensee, relating in whole or in part to Software
Property, PSC Industrial Property Rights or PSC Business
Know-how, which requires expenditures by PSC, or pursuant to
which PSC may receive in excess of $10,000.00, (f) each
Commitment for the sale of any of its assets not in the
ordinary course of business (for purposes of this clause
only, sales in excess of $10,000.00 per year shall not be
deemed in the ordinary course of business), or the grant of
any preferential rights to purchase any of its assets,
property or rights or requiring the consent of any party to
the transfer thereof, (g) each Commitment under which PSC
has borrowed any money or issued any note, bond, indenture
or other evidence of indebtedness other than trade payables
incurred in the ordinary course of business and consistent
with past practices and transactions involving amounts less
than $10,000.00, (h) each mortgage, pledge, security
agreement, deed of trust, financing statement or other
document or Commitment granting a Lien on any properties or
assets of PSC (including Liens upon properties acquired
under conditional sales, capital leases or other title
retention or security devices), (i) each guarantee or
endorsement (other than endorsements made in the ordinary
course of business in connection with the deposit of items
for collection) of, or obligation to purchase goods or
services for the purpose of supplying funds for the purchase
or payment of, any other contingent obligations or
assurances in respect of, indebtedness, liabilities or
obligations of any Person, (j) each Commitment relating to
PSC owning any interest in or being a joint venturer or
partner of any joint venture or partnership (limited or
general), (k) any obligation to register any shares of its
capital stock or other securities with the Securities and
Exchange Commission or otherwise relating to such stock or
other securities, (l) any obligation to make payments,
contingent or otherwise, arising out of the prior
acquisition of the business, assets or stock of any other
Person, (m) any agreement containing non-competition or
other limitations restricting the conduct of the business of
the Company and (n) each other Commitment (whether written
or oral) to which PSC is a party or by which PSC or any of
its assets or business is bound or subject that is material
to PSC.
PSC has made available to Genicom or counsel to Genicom
true, complete and correct copies of the foregoing
agreements. All of such agreements and contracts are valid
and binding obligations of PSC, and are in full force and
effect and will continue in full force and effect
immediately following the consummation of the transactions
contemplated by this Agreement in each case without the
breach of any terms or conditions thereof or the forfeiture
or impairment of any rights thereunder and without the
consent, approval or act or the making of any filing with,
any other Person. PSC has not received any written notice
of the cancellation of any such agreement and, to the
knowledge of PSC, there are no material outstanding disputes
thereunder. Except with respect to those agreements to
which PSC's officers, directors or shareholders are parties,
each of such agreements is with unrelated third parties and
was entered into on an arm's length basis in the ordinary
course of business. None of such agreements will by reason
of the transactions contemplated hereby cease to be
enforceable by PSC in accordance with its terms.
(i) PSC has performed all material obligations required
to be performed by it to date under such agreements, is not
(with or without the lapse of time or the giving of notice,
or both) in breach or default in any respect thereunder, and
has not received written notice alleging that PSC is in
breach or default in any respect thereunder, and (ii) to the
knowledge of PSC, each of the other parties to such
agreements has performed all material obligations required
to be performed by it to date under such agreements, and is
not (with or without the lapse of time or the giving of
notice, or both) in breach or default thereunder.
5.22 Employees. All employees of PSC whose employment
responsibility requires access to confidential or
proprietary information of PSC have executed and delivered
agreements substantially in one of the forms contained in
the PSC Disclosure Schedule, and all of such agreements are
in full force and effect. PSC, after reasonable
investigation, is not aware that any of PSC's employees is
in violation of such agreements, and PSC will use its
reasonable efforts to prevent any such violation prior to
Closing. None of the employees of PSC is represented by any
labor union, and there is no labor strike or other labor
trouble pending with respect to PSC (including but not
limited to any organization drive) or threatened in writing.
PSC is not a party to any collective bargaining agreement.
To the knowledge of PSC, none of the employees of PSC is in
material violation of any term of any employment contract,
patent or other proprietary information disclosure
agreement, non-competition or covenant not to compete
agreement, or any other contract or agreement relating to
the employment of such employee by PSC.
5.23 Environmental Matters. PSC possesses all
environmental permits, licenses, approvals and
authorizations ("PSC Environmental Permits") which are
required under applicable Environmental Law with respect to
the conduct of its business. PSC has conducted its business
in compliance with such PSC Environmental Permits and
applicable Environmental Law. No claim has been issued, no
complaint has been filed, no penalty has been assessed and
no investigation or review is pending or, to the knowledge
of PSC, threatened by (a) any Governmental Entity with
respect to the handling, treatment, use, storage, recycling,
transportation, disposal or Release of any Hazardous
Materials at any premises of PSC or at any location utilized
by PSC with respect to the foregoing (including, without
limitation, off-site storage and disposal facilities owned
or operated by third parties) or (b) any third party
relating to personal injuries resulting from the Release of
any Hazardous Materials by PSC. Except as permitted by
Environmental Law, PSC has not used, treated, transported,
generated or handled any Hazardous Materials in connection
with the conduct of its business. For purposes of this
Agreement, (a) "Environmental Law" means all current
federal, state, and local, civil and criminal laws,
statutes, ordinances, codes, permits, permit conditions,
rules and regulations and common law rights of action
relating to the protection of the environment and human
health and safety including but not limited to laws
governing the handling, use, generation, treatment, storage,
transportation or disposal of Hazardous Materials including
but not limited to the Resource Conservation and Recovery
Act of 1976, the Toxic Substances Control Act, the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Water Pollution Control
Act, the Clean Air Act, the Hazardous Materials
Transportation Act, and the Occupational Safety and Health
Act, (b) "Hazardous Materials" means petroleum and petroleum
products, radioactive materials, ionizing and non-ionizing
radiation including but not limited to electro-magnetic
fields, pesticides, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead and products
containing lead and any materials or substances defined as
or included in the definition of "hazardous materials,"
"hazardous wastes," "hazardous substances," "toxic
substances," "toxic pollutants," "pollutants,"
"contaminants," "solid wastes" or "regulated substances"
under any applicable Environmental Law and (c) "Release"
means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of a Hazardous Material into the
environment.
5.24 ERISA.
(a) Employee Plans. The PSC Disclosure Schedule
contains a true, correct and complete list of all pension,
profit sharing, retirement, compensation, welfare benefit
and other similar plans, programs and agreements, whether
reduced to writing or not, that are subject to ERISA, other
than any "multi-employer plan," as such term is defined in
Section 4001(a)(3) of ERISA, relating to PSC's employees or
retired employees, or maintained at any time during the past
10 years, by PSC or by any other member of any controlled
group of corporations, group of trades or business under
common control, or affiliated service group (as defined for
purposes of Section 414(b), (c), (m) and (o), respectively,
of the Code) (the "PSC Member") (collectively, the "PSC
Employee Plan(s)").
(b) Prohibited Transactions: Other ERISA Breaches.
None of PSC, any PSC Member, nor any of their directors,
officers, employees or agents, or any "party in interest" or
"disqualified person," as such terms are defined in Section
3(14) of ERISA and Section 4975(d)(2) of the Code,
respectively, has, with respect to any PSC Employee Plan,
engaged in or been a party to any non-exempt, "prohibited
transaction," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA, or engaged in any other breach
of fiduciary duty (or other violation of) under Part IV of
Title I of ERISA, in connection with which, directly or
indirectly, PSC, any PSC Member or their directors or
employees or any PSC Employee Plan or any related funding
medium could be subject to either a penalty assessed
pursuant to Section 502(i) of ERISA, a Tax imposed by
Section 4975 of the Code, or a civil penalty imposed by
Section 502(l) of ERISA.
(c) Compliance. With respect to all PSC Employee
Plans, PSC and any PSC Member are substantially in
compliance with the requirements prescribed by any and all
Laws (including but not limited to ERISA and the Code)
applicable to such PSC Employee Plans. PSC and any PSC
Member have in all material respects performed all
obligations required to be performed by them under, and are
not in violation, in any respect of, and there has been no
default or violation by any other party with respect to, any
of the PSC Employee Plans. (i) None of the PSC Employee
Plans which are subject to Title IV of ERISA has been or
will be terminated prior to Closing in whole or in part
within the meaning of ERISA or the Code; (ii) no liability
has been incurred to, nor has any event or circumstance
occurred, nor will any event or circumstance occur prior to
Closing, which could result in such a liability being
asserted by, the Pension Benefit Guaranty Corporation
("PBGC") with respect to any Employee Plan (other than the
payment of annual premiums under Section 4007 of ERISA or
benefits payable in accordance with the terms of such PSC
Employee Plan); (iii) no PSC Employee Plan that is subject
to Part 3 of Subtitle B of Title I of ERISA or Section 412
of the Code, or both, incurred any "accumulated funding
deficiency" (as defined in ERISA), whether or not waived;
(iv) neither PSC nor any PSC Member has failed to pay any
amounts due and owing as required by the terms of any PSC
Employee Plan; (v) there has been no "reportable event"
within the meaning of Section 4043(b)(1)-(9) of ERISA (other
than the transactions contemplated by this Agreement), or
any event described in Section 4063(a) of ERISA, with
respect to any PSC Employee Plan (vi) neither PSC nor any
PSC Member has failed to make any payment to a PSC Employee
Plan required under Section 302 of ERISA nor has any lien
ever been imposed under Section 302(f) of ERISA; (vii)
neither PSC nor any PSC Member has adopted an amendment to
any PSC Employee Plan which requires the provision of
security under Section 307 of ERISA, (viii) the PBGC has not
instituted any proceedings to terminate a PSC Employee Plan
pursuant to Section 4042 of ERISA, and (ix) neither PSC nor
any PSC Member has failed to provide any information to the
PBGC that could result in the sanctions imposed by ERISA
Section 4071.
(d) Multi-employer Plans. Neither PSC nor any PSC
Member contributor, are required to contribute, or have ever
been required to contribute to a "multi-employer plan," as
such term is defined in Section 4001(a)(3) of ERISA.
(e) Retiree Benefits. No PSC Employee Plan provides
health or life insurance benefits for retirees. No such plan
contains any provisions, and no commitments or agreements
exist, which in any way could limit or prohibit PSC from
amending any such plan to reduce or eliminate such retiree
benefits.
(f) Copies of Employee Plans and Related Documents.
PSC has previously made available to Genicom true, correct
and complete copies of all PSC Employee Plans which have
been reduced to writing and written descriptions of all PSC
Employee Plans which have not been reduced to writing, and
all agreements, including trust agreements and insurance
contracts, related to such PSC Employee Plans, and the most
recent Summary Plan Description and all modifications
thereto for each PSC Employee Plan communicated to
employees. With respect to each PSC Employee Plan, PSC has
previously made available to Genicom true, correct and
complete copies of (i) the annual actuarial valuation
reports for the last five years with respect to any "defined
benefit plan," as such term is defined in Section 3(35) of
ERISA (the "PSC Defined Benefit Plan"), (ii) the Form 5500
and all Schedules attached thereto, or both, filed for the
last five years, for all PSC Employee Plans, and (iii) any
filings made with the PBGC, Internal Revenue Service or
Department of Labor, or any correspondence with or from such
agencies, regarding the termination of any PSC Defined
Benefit Plan.
(g) Qualifications. Each PSC Employee Plan intended to
qualify under Section 401(a) of the Code has been determined
by the Internal Revenue Service to so qualify, and the
trusts created thereunder have been determined to be exempt
from Tax under the provisions of Section 501(a) of the Code.
Each PSC Employee Plan which is a funded welfare benefit
plan intended to be exempt from Tax under the provisions of
Section 501(c)(9) of the Code has been determined by the
Internal Revenue Service to be so exempt. Copies of all
determination letters with respect to each such PSC Employee
Plan have been previously made available by PSC to Genicom,
and, to the knowledge of PSC, nothing has since occurred, or
will occur prior to Closing, which might cause or has caused
the loss of such qualification or exemption. To the
knowledge of PSC, no such PSC Employee Plan has been
operated in a manner which would cause it to be disqualified
in operation and all PSC Employee Plans have been
administered in compliance with and consistent with all
applicable requirements of the Code and ERISA, including but
not limited to all reporting, notice, and disclosure
requirements.
(h) Funding Status, Etc.
(i) Neither PSC nor any corporation or trade or
business (whether or not incorporated) which would be
treated as a member of the controlled group of PSC under
Section 4001(1)(14) of ERISA would be liable for (A) any
amount pursuant to Sections 4062, 4063, 4064, 4068 or 4069
of ERISA if any of the PSC Employee Plans which are subject
to Title IV of ERISA were to terminate or (B) any amount
pursuant to Section 4201 of ERISA if a complete or partial
withdrawal from any multi-employer plan listed in the PSC
Disclosure Schedule occurred before Closing. Except as set
forth in the PSC Disclosure Schedule, all PSC Employee Plans
which are subject to Title IV of ERISA have no unfunded
benefit liabilities, as defined in Section 4001(a) (18) of
ERISA. There is no unpaid contribution due with respect to
the plan year of any such PSC Defined Benefit Plan ended
prior to Closing, as required under the minimum funding
requirements of Section 412 of the Code or Section 302 of
ERISA.
(ii) With respect to each PSC Employee Plan which
is a qualified "defined contribution plan," as defined in
Section 3(34) of ERISA, all contributions accrued for plan
years ending prior to Closing under the Plan terms and
applicable Law have been made by PSC.
(iii) All premiums or other payments required by
the terms of any group or individual insurance policies and
programs maintained by PSC and covering any present or
former employees of PSC with respect to all periods prior to
Closing have been fully paid for the length of the
obligation.
(i) Claims and Litigation. There are no pending, and
PSC has received no written threat of any, claims, suits or
other proceedings by present or former employees of PSC, or
any PSC Member, plan participants, beneficiaries or spouses
of any of the above, or the Internal Revenue Service, the
Department of Labor, the PBGC or any other Person, involving
any PSC Employee Plan (including but not limited to claims
against the assets of any trust, involving any PSC Employee
Plan, or relating to any rights or benefits thereunder),
other than ordinary and usual claims for benefits by
participants or beneficiaries (including but not limited to
claims pursuant to domestic relations orders).
5.25 Compliance. PSC is, and at all times during the
greater of (a) the 5 year period prior to the date hereof or
(b) the applicable statute of limitations has, in all
material respects, complied with all Laws applicable to it,
or the ownership of its assets or the operation of its
business (including but not limited to the Foreign Corrupt
Practices Act, as amended, and those Laws relating to
exports and imports). There is no term or provision of any
material mortgage, indenture, contract, agreement or
instrument to which PSC is a party or by which it is bound,
or, to the knowledge of PSC, of any provision of any Law
applicable to or binding upon PSC, which has or, so far as
PSC may now foresee, in the future is reasonably likely to
have, a Material Adverse Effect, on PSC.
5.26 No Material Misstatements. No representation or
warranty of PSC contained in this Agreement (including but
not limited to, in the PSC Disclosure Schedule or any
Exhibit to this Agreement), or in any document, instrument
or certificate delivered pursuant hereto at Closing (such
representations and warranties collectively, the "Written
PSC Representations") contains any untrue statement of
material fact, or omits to state a material fact necessary
in order to make the statements herein, in light of the
circumstances under which they are made, not misleading.
5.27 Customers. The PSC Disclosure Schedule sets forth
a true, correct and complete list of the names and addresses
of all customers of PSC which accounted for more than 5% of
PSC's total sales in the fiscal year that ended September
30, 1994. None of such customers has notified PSC in writing
that it intends to reduce or discontinue its relationship
with PSC.
5.28 Suppliers. The PSC Disclosure Schedule sets forth
a true, correct and complete list of the names and address
of the ten suppliers or vendors of PSC which accounted for
the largest dollar volume of purchases by PSC for the fiscal
year that ended September 30, 1994. None of such suppliers
or vendors has notified in writing PSC that it intends to
reduce or discontinue its relationship with PSC.
5.29 Brokers. There is no legally binding arrangement
made by or on behalf of PSC for the payment of any fees or
expenses of any investment banker, broker or finder in
connection with the origin, negotiation or execution of this
Agreement, or in connection with any transaction
contemplated hereby, except for the payment of fees to VMA
(which are to be paid as described in Sections 2.2(b) and
(c), 3.2(c)(i), and 3.3(a) and (b)).
5.30 Information. PSC believes that it has received
all the information it considers necessary or appropriate
for deciding whether to engage in the transactions
contemplated herein. PSC has had an opportunity, subject to
reasonable confidentiality restrictions, to ask questions
and receive answers from Genicom regarding the terms and
conditions of the transactions contemplated herein and the
business, properties, prospects and financial condition of
Genicom and to obtain additional information (to the extent
Genicom possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify
the accuracy of any information furnished to it or to which
it had access. Neither this Section 5.30 nor any
investigation by or on behalf of PSC, heretofore or
hereafter made, shall limit, or affect the survival of, any
representation and warranty contained herein or the ability
of PSC to obtain indemnification pursuant to Article 12
hereof.
5.31 Bank Accounts. The PSC Disclosure Schedule sets
forth a complete and correct list of all bank accounts of
PSC, including a description of the signature authority with
respect to each such account.
5.32 Sensitive Transactions. To the knowledge of PSC,
neither PSC nor any officer or director of PSC has directly
or indirectly used funds or other assets of PSC for (a)
illegal contributions, gifts, entertainment or other
expenses relating to political activity, (b) payments to or
for the benefit of government officials or employees other
than payments required or permitted by Law, (c) illegal
payments to or for the benefit of any Person or (d) the
establishment or maintenance of a secret or unrecorded fund.
5.33 Limitations on Other Representations. Except for
the Written Seller Representations, neither PSC, any of
PSC's officers, directors, employees, agents or
representatives nor any other Person on behalf of PSC, makes
any other express or implied representation or warranty on
behalf of PSC and, except for the Written PSC
Representations, PSC hereby disclaims any such
representation or warranty, whether by PSC, any of PSC's
officers, directors, employees, agents or representatives,
or any other Person, with respect to the execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby, notwithstanding the
delivery or disclosure to Genicom or any of its officers,
directors, employees, agents or representatives, or any
other Person with respect to any one or more of the
foregoing.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF GENICOM
Except as set forth in the Genicom Disclosure Schedule
previously delivered by Genicom to PSC prior to Closing,
which Genicom Disclosure Schedule contains, with respect to
each matter disclosed therein, a reference to the Section of
this Agreement to which such disclosure relates, Genicom
represents and warrants to PSC and each Seller as follows:
6.1 Power, Authorization and Validity. Genicom has all
requisite power and authority to enter into and perform its
obligations under this Agreement. All action on the part of
Genicom, and its officers, directors and shareholders
necessary for the authorization, execution, delivery and
performance of all obligations of Genicom under this
Agreement, has been taken or will be taken prior to Closing.
This Agreement constitutes the valid and legally binding
obligation of Genicom, enforceable against Genicom in
accordance with its terms.
6.2 Consents. No consent, approval or authorization
of, or designation, declaration or filing with, any
Governmental Entity, or any other Person, is required on the
part of Genicom in connection with the valid execution and
delivery of this Agreement, or the performance by Genicom of
its obligations hereunder.
6.3 No Violation of Agreements. The execution and
delivery of this Agreement by Genicom does not, and the
performance of this Agreement by Genicom will not (a)
conflict with or violate the Certificate of Incorporation or
By-laws, in each case as amended or restated, of Genicom,
(b) conflict with or violate any Law applicable to Genicom,
or by which any of Genicom's properties are bound or to
which any of its properties are subject, which conflict with
or violation could reasonably be expected to have a Material
Adverse Effect on Genicom, or (c) result in any breach of or
constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the
creation of a Lien on any of the properties or assets of
Genicom pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Genicom is a party
or by which Genicom or any of its properties are bound or to
which any of its properties are subject.
6.4 Organization, Standing and Authority of Genicom.
Genicom is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware
and has the corporate power and authority to own, operate
and lease its properties and to carry on its business as now
being conducted and as proposed to be conducted, and is
qualified as a foreign corporation in Maryland and in each
other jurisdiction in which a failure to be so qualified
could reasonably be expected to have a Material Adverse
Effect on Genicom.
6.5 Financial Statements. Genicom has furnished to PSC
and Sellers a complete and correct copy of the audited
balance sheet of Genicom (including the notes thereto, the
"Genicom Audited Balance Sheet") as of January 2, 1994 and
the related statements of operations, changes in
stockholders' equity and cash flows for the fiscal year then
ended, including the notes thereto (collectively, the
"Genicom Audited Financial Statements") and the unaudited
balance sheet as of October 2, 1994 and the related
statements of income, stockholder's equity and cash flow for
the three month and nine month periods then ended (the
"Genicom Unaudited Financial Statements") (the Genicom
Audited Financial Statements and the Genicom Unaudited
Financial Statements shall be collectively referred to as
the "Genicom Financial Statements"). The Genicom Financial
Statements fairly present the financial position and results
of operations of Genicom as at the dates and for the periods
indicated in each case in conformity with GAAP, and have
been prepared from and are in accordance with the books and
records of Genicom subject in the case of the Genicom
Unaudited Financial Statements, to normal year-end
adjustments which would be otherwise required for full year
presentation under GAAP (the effect of which will not,
individually or in the aggregate, be materially adverse) and
the absence of items customarily reflected in the footnotes
to financial statements presented for an entire accounting
year prepared in accordance with GAAP (which if presented,
would not differ materially from those included in the
Genicom Audited Financial Statements).
6.6 No Undisclosed Liabilities. Genicom has no
material indebtedness, obligations, commitments or
liabilities of any nature (known or unknown, accrued,
absolute, contingent, threatened in writing or otherwise)
that were not fully reflected or reserved against in the
Genicom Unaudited Financial Statements or reflected in the
notes to the Genicom Audited Financial Statements, except
for those incurred in the ordinary course of business and
consistent with past practice since October 2, 1994.
6.7 Litigation. There is no claim, action, suit,
litigation, proceeding, arbitration or investigation of any
kind, at law or in equity (including but not limited to
actions or proceedings seeking injunctive relief and any
other action or proceeding of any nature before any
Governmental Entity), pending or, to the knowledge of
Genicom, threatened against or affecting Genicom or any
properties or rights of Genicom, which reasonably could be
expected to have a Material Adverse Effect on Genicom.
Genicom is not subject to any continuing order of, consent
decree, settlement agreement or other similar written
agreement with or, to the knowledge of Genicom,
investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental
Entity including but not limited to cease-and-desist or
other orders. Genicom has not admitted in writing its
inability to pay its debts generally as they become due,
filed or consented to the filing against it of a petition in
bankruptcy or a petition to take advantage of any insolvency
act, made an assignment for the benefit of creditors,
consented to the appointment of a receiver for itself or for
the whole or any substantial part of its property, or had a
petition in bankruptcy filed against it, been adjudicated a
bankrupt, or filed a petition or answer seeking
reorganization or arrangement under the federal bankruptcy
laws or any other similar law of any jurisdiction.
6.8 Corporate Documents. Genicom has delivered to PSC
and Sellers true and complete copies of the Certificate of
Incorporation and By-laws of Genicom as now in effect and as
will be in effect as of Closing. No action has been taken
by the Board of Directors or stockholders of Genicom for the
purpose of effecting the amendment or modification of such
Certificate of Incorporation or By-laws. Genicom is not in
violation of any provision of its Articles of Incorporation
or By-laws.
6.9 No Material Misstatements. No representation or
warranty by Genicom made in this Agreement (including but
not limited to, in the Genicom Disclosure Schedule) or in
any document, instrument or certificate delivered pursuant
hereto at Closing (such representations and warranties
collectively, the Written Genicom Representations") contains
any untrue statement of material fact, or omits to state a
material fact necessary in order to make the statements
herein, in light of the circumstances under which they are
made, not misleading.
6.10 Compliance. Genicom is, and at all times during
the greater of (a) the 5 year period prior to the date
hereof or (b) the applicable statute of limitations complied
in all material respects with all Laws applicable to it, or
the ownership of its assets or the operation of its business
(including but not limited to the Foreign Corrupt Practices
Act, as amended, and those Laws relating to exports and
imports). There is no term or provision of any material
mortgage, indenture, contract, agreement or instrument to
which Genicom is a party or by which it is bound, or, to the
knowledge of Genicom, of any provision of any Law applicable
to or binding upon Genicom, which has or, so far as Genicom
may now foresee, in the future is reasonably likely to have,
a Material Adverse Effect, on Genicom.
6.11 Lender. As of Closing the execution and delivery
of this Agreement by Genicom will not, and the performance
of this Agreement by Genicom will not conflict with or
violate, or result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would
become a default) under, its loan agreements with The CIT
Group/Credit Finance, Inc. ("CIT").
6.12 SEC Reports. Genicom has heretofore delivered to
PSC its (a) Annual Report on Form 10-K for the year ended
January 2, 1994 as filed with the Securities and Exchange
Commission ("SEC"), (b)Quarterly Report on Form 10-Q for
the fiscal quarters ended April 3, 1994, July 3, 1994 and
October 2, 1994 as filed with the SEC, (c) Current Report on
Form 8-K dated March 11, 1994, as amended June 9, 1994, (d)
proxy statement relating to all meetings of Genicom's
shareholders (whether annual or special) held in 1994 or to
be held during 1995 as filed with the SEC, if any, and
(e)all other reports, forms, schedules, registration
statements, and other documents filed by Genicom with the
SEC since January 2, 1994 (the items listed in (i)-(v) above
being referred to collectively as the "SEC Reports"). As of
their respective dates, each SEC Report complied in all
material respects with applicable SEC requirements and did
not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of
the circumstances under which they were made, not
misleading. Since January 2, 1994, Genicom has timely filed
with the SEC all reports, forms, schedules, proxy statements
and other documents which Genicom was required to so file by
applicable law and the rules and regulations of the SEC.
6.13 Brokers. There is no legally binding arrangement
made by or on behalf of Genicom for the payment of any fees
or expenses of any investment banker, broker or finder in
connection with the origin, negotiation or execution of this
Agreement, or in connection with any transactions
contemplated hereby.
6.14 Information. Genicom believes that it has
received all the information it considers necessary or
appropriate for deciding whether to engage in the
transactions contemplated herein. Genicom has had an
opportunity, subject to reasonable confidentiality
restrictions, to ask questions and receive answers from PSC
regarding the terms and conditions of the transactions
contemplated herein and the business, properties, prospects
and financial condition of PSC and to obtain additional
information (to the extent PSC possessed such information or
could acquire it without unreasonable effort or expense)
necessary to verify the accuracy of any information
furnished to it or to which it had access. Neither this
Section 6.13 nor any investigation by or on behalf of
Genicom, heretofore or hereafter made, shall limit, or
affect the survival of, any representation and warranty
contained herein or the ability of Genicom to obtain
indemnification pursuant to Article 12 hereof.
6.15 Limitations on Other Representations. Except for
the Written Genicom Representations, neither Genicom, any of
Genicom's officers, directors, employees, agents or
representatives, nor any other Person on behalf of Genicom,
makes any other express or implied representation or
warranty on behalf of Genicom and, except for the Written
Genicom Representations, Genicom hereby disclaims any such
representation or warranty, whether by Genicom, any of
Genicom's officers, directors, employees, agents or
representatives, or any other Person, with respect to the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby,
notwithstanding the delivery or disclosure to PSC or any
Seller or any of its or their officers, directors,
employees, agents or representatives, or any other Person
with respect to any one or more of the foregoing.
ARTICLE 7
PRE-CLOSING COVENANTS
7.1 Affirmative Covenants of Sellers and PSC. Each
Seller covenants and agrees that it shall use its reasonable
efforts to cause PSC to, and PSC covenants and agrees that,
prior to the Closing, it shall:
(a) operate in the ordinary course, keep available the
services of its personnel and preserve the goodwill of its
customers and others having business relations with it;
(b) maintain in good repair all of its tangible
personal property, ordinary wear and tear excepted;
(c) make sales at prices and in quantities, and enter
into leases on terms and conditions, and otherwise in a
manner consistent with past practices;
(d) maintain inventories at levels consistent with
past practices;
(e) keep in full force and effect insurance and bonds
comparable in amount and scope of coverage to that currently
maintained;
(f) materially comply with all Laws applicable to it
or its business;
(g) cause its management to confer with Genicom's
management on a regular and frequent basis to discuss the
general status of the ongoing operations of its business and
any material problems relating to the conduct of such
business;
(h) promptly notify Genicom of any emergency or
material change in the normal conduct of its business, and
of any event occurring after the date of execution of this
Agreement which causes or is reasonably expected to cause
any representation or warranty contained in this Agreement
to be incorrect or incomplete or adversely affect its
ability to perform any of its covenants and agreements
hereunder, and will keep Genicom fully informed of
developments with respect to such events and afford
Genicom's representatives access to all materials in its
possession relating thereto; provided, however, that the
delivery of any notice pursuant to this Section 7.1(h) shall
not limit or otherwise affect the remedies available
hereunder to the party receiving such notice;
(i) subject to reasonable confidentiality restrictions
and subject to the proviso that in no event shall Genicom be
provided access to any proprietary information provided to
Seller by any third party, cooperate with all reasonable due
diligence requests made by Genicom, its counsel, or its
accountants; and
(j) not later than the fifteenth day of each calendar
month commencing with the calendar month in which the date
of this Agreement occurs, deliver to Genicom its unaudited
financial statements for the immediately preceding calendar
month.
7.2 Negative Covenants of Sellers and PSC. Each Seller
agrees that it shall use its reasonable efforts to cause PSC
not to, and PSC covenants and agrees that, prior to the
Closing, it shall not:
(a) (i) except in accordance with compensation
arrangements set forth in the PSC Disclosure Schedule,
increase the compensation payable to or to become payable by
PSC to any PSC Personnel, (ii) except for any incentive
bonus and incentive compensation payments shown on the
interim unaudited PSC balance sheet prepared as of Closing
by PSC's chief financial officer which are earned under
incentive bonus and incentive compensation arrangements set
forth in the PSC Disclosure Schedule (the aggregate amount
of which shall not exceed $40,000.00), pay any bonus to any
PSC Personnel, (iii) grant any severance or termination pay
(other than pursuant to its normal severance policy as in
effect on the date of this Agreement) to, or enter into or
amend any employment or severance agreement with, any PSC
Personnel or (iv) establish, adopt, enter into or amend any
employee benefit plan or arrangement except as may be
required by applicable Law;
(b) declare or pay dividends on, or make any other
distribution in respect of, outstanding shares of its
capital stock or other equity interests;
(c) (i) redeem, purchase or otherwise acquire any
shares of its capital stock or other equity interests or any
securities or obligations convertible into or exercisable or
exchangeable for any such shares or interests, or any
warrants, options or other rights to acquire any such shares
or interests or any such securities or obligations, (ii)
effect any reorganization or recapitalization or (iii)
split, combine or reclassify any of its capital stock or
other equity interests or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of
or in substitution for, shares of its capital stock or other
equity interests;
(d) (i) issue, deliver, award, grant or sell, or
authorize or propose the issuance, delivery, award, grant or
sale (including the grant of any Liens, limitations in
voting rights, charges or other encumbrances) of, any shares
of any class of its capital stock (including shares held in
treasury) or other equity interests, or any securities
convertible into or exercisable or exchangeable for any such
shares or interests, or any warrants, options or other
rights to acquire any such shares or interests or any such
securities or obligations, (ii) except for the termination
of stock options as required by this Agreement, amend or
otherwise modify the terms of any such warrants, options,
securities, obligations or other rights so as to make such
terms more favorable to the holders thereof or (iii) file
any registration statement, offering statement, notice of
sale or similar document with the SEC;
(e) except for the acquisition of certain leases from
Gallo as described in the PSC Disclosure Schedule, acquire
or agree to acquire, by merging or consolidating with, or by
purchasing an equity interest in all or a portion of the
assets of, any Person (other than the purchase of assets
from suppliers or vendors in the ordinary course of
business, consistent with past practice and for adequate
consideration), or enter into any joint venture, partnership
or other similar arrangement with any Person;
(f) sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of
its assets, except for dispositions of printer or other
assets held for resale or lease in the ordinary course of
business and consistent with past practice;
(g) release any third party from its obligations under
any confidentiality agreement;
(h) propose or adopt any amendments to its Articles
of Incorporation or By-laws;
(i) (i) change any of its methods of accounting or
maintain its books and records other than in the usual,
regular and ordinary manner, (ii) make or rescind any
express or deemed election relating to Taxes, settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
Taxes (except where the amount of such settlements or
controversies, individually or in the aggregate, does not
exceed $10,000.00), or change any of its methods of
reporting income or deductions for federal income tax
purposes from those employed in the preparation of the
federal income tax returns for the taxable year ending
December 31, 1994 except, in the case of clause (i) or
clause (ii), as may be required by Law or generally accepted
accounting principles;
(j) incur any obligation for borrowed money or
purchase money indebtedness, whether or not evidenced by a
note, bond, debenture or similar instrument, except in the
ordinary course of business consistent with past practice
and in no event in excess of $10,000.00;
(k) cause any payments of accounts payable or
collections of accounts receivable to be made by it or to it
at an earlier or later time than is customary, or sell, or
otherwise dispose of any accounts receivable (except by
collection in the ordinary course);
(l) except for the acquisition of certain leases from
Gallo as described in the PSC Disclosure Schedule, enter
into any arrangement, agreement or contract with any
director, officer or other Person (other than customers in
the ordinary course of business) which provides for an
exclusive arrangement with that Person or is substantially
more restrictive or substantially less advantageous than
arrangements, agreements or contracts existing on the date
hereof or otherwise is not on an arms-length basis, in the
ordinary course of business and consistent with past
practices;
(m) modify, change, terminate or waive any material
right under any agreement listed or required to be listed
(including agreements which came into existence after
December 31, 1994, but which if in existence prior to such
date would have been required to be so listed) in the PSC
Disclosure Schedule pursuant to Section 5.21;
(n) introduce any new product or plan which would
substantially increase its risk exposure;
(o) agree in writing or otherwise to do any of the
foregoing; or
(p) directly or indirectly, through any officer,
director, agent or otherwise, initiate, solicit or knowingly
encourage (including by way of furnishing non-public
information or assistance), or take any other action to
facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction, or enter into or
maintain or continue discussions or negotiate with any
Person in furtherance of such inquiries or to obtain such a
Competing Transaction, or agree to or endorse any such
Competing Transaction, or authorize or permit any of its
officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other
representative retained by it to take any such action. The
Company shall notify Genicom orally (within one day) and in
writing (as promptly as practicable) of all relevant details
of all such inquiries and proposals received by it or by any
such officer, director, employee, investment banker,
financial advisor, attorney or accountant relating to any
such matters. If such inquiry or proposal is in writing,
the party receiving such inquiry or proposal shall deliver
or cause to be delivered to Genicom a copy of such inquiry
or proposal. For purposes of this Agreement, "Competing
Transaction" means (i) any merger, consolidation, share
exchange, business combination or other similar transaction
involving PSC, (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 15% or more of the
assets of PSC, in a single transaction or series of
transactions, (iii) any Person having acquired beneficial
ownership or the right to acquire beneficial ownership of
15% or more of the then outstanding shares of capital stock
of PSC or (iv) PSC or any Seller entering into any agreement
to engage in any of the foregoing.
7.3 Other Covenants of Sellers and PSC. In addition to
the foregoing covenants, each Seller and PSC covenants and
agrees as follows:
(a) Each Seller and PSC will execute and file, or join
in the execution and filing, of any application or other
document that may be necessary in order to obtain the
authorization, approval or consent of any Governmental
Entity, which may be reasonably required, or which Genicom
may reasonably request, in connection with the consummation
of the transactions contemplated by this Agreement. Each
Seller and PSC will use its commercially reasonable efforts
to obtain all such authorizations, approvals and consents.
Each Seller and PSC will notify Genicom in writing promptly
after learning of any material actions, suits, proceedings
or investigations by or before any Governmental Entity,
initiated by or against it or PSC, or threatened in writing
against it or PSC, related in any way to PSC or this
Agreement;
(b) each Seller and PSC will use its commercially
reasonable efforts to obtain such written consents and take
such other actions by Closing as may be necessary or
appropriate to allow the consummation of the transactions
contemplated hereby; and
(c) each Seller and PSC will use its commercially
reasonable efforts to satisfy or cause to be satisfied each
of the conditions precedent set forth in Article 9 (other
than Sections 9.12) on or before the date such condition is
required to be satisfied, to cause the transactions
contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make
all filings with, and give all notices to, third parties
that may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby.
7.4 Genicom Covenants. Genicom covenants and agrees
that, prior to the Closing, it shall:
(a) promptly notify PSC of any emergency or material
change in the normal conduct of its business, and of any
event occurring after the date of execution of this
Agreement which causes or is reasonably expected to cause
any representation or warranty contained in this Agreement
to be incorrect or incomplete or adversely affect its
ability to perform any of its covenants and agreements
hereunder, and will keep PSC fully informed of developments
with respect to such events and afford PSC's representatives
access to all materials in its possession relating thereto;
provided, however, that the delivery of any notice pursuant
to this Section 7.4(a) shall not limit or otherwise affect
the remedies available hereunder to the party receiving such
notice;
(b) subject to reasonable confidentiality restrictions
and subject to the proviso that in no event shall PSC be
provided access to any proprietary information provided to
Seller by any third party, cooperate with all reasonable due
diligence requests made by PSC, its counsel, or its
accountants;
(c) use its commercially reasonable efforts to satisfy
or cause to be satisfied each of the conditions precedent
set forth in Article 8 on or before the date such condition
is required to be satisfied, to cause the transactions
contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make
all filings with, and give all notices to, third parties
that may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby; and
(d) use its commercially reasonable efforts to obtain
such written consents and take such other actions by Closing
as may be necessary or appropriate to allow the consummation
of the transactions contemplated hereby.
7.5 Reasonable Efforts. For purposes of this
Agreement, the terms "reasonable efforts," "commercially
reasonable efforts" and similar terms, shall not require the
Person required to take such efforts to pay money in excess
of $3,000.00.
ARTICLE 8
CONDITIONS TO THE OBLIGATIONS OF SELLERS
Each Seller's obligations hereunder are subject to the
fulfillment or satisfaction, on and as of Closing or such
other date as specified herein, of each of the following
conditions (any one or more of which may be waived, but only
in a writing signed by such Seller, provided, however, that
only Gallo may so waive the conditions set forth in Section
8.9 below):
8.1 Representations and Warranties. The
representations and warranties of Genicom set forth in
Article 6 shall be true and accurate in every material
respect as of Closing with the same force and effect as if
they had been made as of Closing.
8.2 Covenants. Genicom shall have performed and
complied in all material respects with all of its covenants
contained in Article 7 hereof on or before the date
specified therein.
8.3 Compliance with Law. At the time of Closing, there
shall be no order, decree or ruling by any Governmental
Entity which would prohibit or render illegal the
transactions contemplated by this Agreement.
8.4 Opinion of Genicom's Counsel. Each Seller shall
have received from counsel to Genicom, a written opinion
reasonably satisfactory in form and substance to the counsel
to such Seller.
8.5 No Litigation. There shall be no litigation
pending or threatened by any regulatory body or private
party in which (i) an injunction is or may be sought against
the transactions contemplated hereby, or (ii) relief is or
may be sought against any party hereto as a result of this
Agreement, and in which, in the good faith judgment of PSC's
Board of Directors or such Seller (relying on the advice of
legal counsel) such regulatory body or private party has a
reasonable possibility of prevailing and such relief would
have a Material Adverse Effect upon PSC and/or any Seller.
8.6 Closing Certificates. Each Seller shall have
received a certificate of a responsible official of Genicom,
dated the date of Closing, certifying as to the fulfillment
of the conditions specified in Sections 8.1 and 8.2.
8.7 Documents. PSC and each Seller shall have received
all written consents, approvals, assignments, waivers,
authorizations or other certificates listed in the PSC
Disclosure Schedule with reference to this Section.
8.8 Due Diligence. Neither PSC nor any Seller shall
reasonably and in good faith conclude, based on due
diligence and after having presented their findings to
Genicom in writing and having given Genicom a reasonable
opportunity to respond thereto, that the business, financial
condition and prospects of Genicom are materially different
and adverse than has been represented to PSC and Seller by
Genicom.
8.9 Gallo as Vice President and General Manager. Gallo
shall be appointed Vice President and General Manager of the
Page Printer Business Unit, effective upon Closing and
pursuant to the offer letter of employment dated January 19,
1995 from Genicom to Gallo and accepted (countersigned) by
Gallo on January 20, 1995, as it may be amended by the
parties in writing. Further, Genicom shall issue stock
options to Gallo to purchase 20,000 shares of Genicom Common
Stock, at an option price per share equal to the fair market
value thereof at the time such options are granted, pursuant
to Genicom's standard form of option agreement effective
upon Closing. The stock options shall be for a term of 10
years and shall vest 20% per year during the first five
years of employment (with the anniversary date of employment
being the annual vesting date and with the initial 20%
vesting on the first such anniversary date)
8.10 Laurance Stock Options. Genicom shall issue stock
options to Laurance to purchase 8,000 shares of Genicom
Common Stock, at an option price per share equal to the fair
market value thereof at the time such options are granted,
pursuant to Genicom's standard form of option agreement
effective upon Closing. The stock options shall be for a
term of 10 years and shall vest 20% per year during the
first five years of employment (with the anniversary date of
employment being the annual vesting date and with the
initial 20% vesting on the first such anniversary date)
8.11 Adragna Stock Options. Genicom shall issue stock
options to Adragna to purchase 5,000 shares of Genicom
Common Stock, at an option price per share equal to the fair
market value thereof at the time such options are granted,
pursuant to Genicom's standard form of option agreement
effective upon Closing. The stock options shall be for a
term of 10 years and shall vest 20% per year during the
first five years of employment (with the anniversary date of
employment being the annual vesting date and with the
initial 20% vesting on the first such anniversary date)
8.12 No Genicom Material Adverse Effect. Since the
date of this Agreement, there shall have been no change,
occurrence or circumstance in the business, results of
operations or financial condition of Genicom having a
Material Adverse Effect on Genicom.
8.13 Genicom Disclosure Schedule. Sellers shall have
received the Genicom Disclosure Schedule, which shall be
satisfactory in form and substance to Sellers.
8.14 Certain Agreements. Sellers shall have entered
into the Seller Agreement, and it shall be in full force and
effect.
8.15 VMA Consent. VMA shall have entered into an
agreement, in form and substance satisfactory to Genicom,
pursuant to which VMA agrees to accept the payments
described in Article 2 hereof and Exhibits A and B hereto as
full payment and satisfaction of all obligations of PSC and
any Seller to VMA.
8.16 CIT Subordination Agreements. Sellers shall have
entered into subordination agreements in form and substance
satisfactory to Sellers, Genicom and CIT.
ARTICLE 9
CONDITIONS TO THE OBLIGATIONS OF GENICOM
The obligations of Genicom hereunder are subject
to the fulfillment or satisfaction, on and as of Closing or
such other date as specified herein, of each of the
following conditions (any one or more of which may be waived
by Genicom, but only in a writing signed by Genicom):
9.1 Representations and Warranties. The
representations and warranties of each Seller and of PSC set
forth in Articles 4 and 5, respectively, shall be true and
accurate in every material respect as of Closing, with the
same force and effect as if they had been made as of
Closing.
9.2 Covenants. Each Seller and PSC shall have
performed and complied in all material respects with all of
its covenants contained in Article 7 hereof on or before the
date specified therein. It shall be a condition to the
participation by Genicom in this transaction as to all
Sellers that any breach by any Seller not materially
adversely affect, from Genicom's perspective, the
transaction as a whole.
9.3 Compliance with Law. At the time of Closing, there
shall be no order, decree or ruling by any Governmental
Entity which would prohibit or render illegal the
transactions contemplated by this Agreement.
9.4 Governmental Consents. There shall have been
obtained at or prior to Closing such governmental permits or
authorizations, and there shall have been taken such other
action by any Governmental Entity having jurisdiction over
the parties in the actions herein proposed to be taken as
may be required to consummate the transactions contemplated
herein.
9.5 Documents. Genicom shall have received all written
consents, assignments, waivers, authorizations or other
certificates reasonably deemed necessary by Genicom's legal
counsel to provide for the continuation in full force and
effect of any and all material contracts, licenses and
leases of PSC and to consummate the transactions
contemplated hereby and listed in the Genicom Disclosure
Schedule with reference to this Section.
9.6 No Litigation. There shall be no litigation pending
or threatened by any regulatory body or private party in
which (i) an injunction is or may be sought against the
transactions contemplated hereby, or (ii) relief is or may
be sought against any party hereto as a result of this
Agreement, and in which, in the good faith judgment of the
Board of Directors of Genicom (relying on the advice of its
legal counsel), such regulatory body or private party has a
reasonable possibility of prevailing and such relief would
have a Material Adverse Effect upon Genicom.
9.7 Opinions of PSC's and Certain Sellers' Counsel.
Genicom shall have received from counsel to PSC, Gallo and
AVP, a written opinion reasonably satisfactory in form and
substance to Genicom and its counsel.
9.8 Due Diligence. Genicom does not reasonably and in
good faith conclude, based on due diligence and after having
presented their findings to PSC and Sellers in writing and
having given PSC and Sellers a reasonable opportunity to
respond thereto, that the business, financial condition and
prospects of PSC are materially different and adverse than
has been represented to Genicom by Sellers and PSC.
9.9 Seller Approvals, Transfer and Delivery. Sellers
owning all of the outstanding securities of PSC on a fully
diluted basis shall (i) execute this Agreement, and (ii)
sell, convey, transfer, assign and deliver to Genicom all of
their respective PSC Common Stock and Series B Convertible
Preferred Stock. Such Sellers shall have delivered stock
certificates for their PSC Common Stock together with
executed stock powers therefor.
9.10 PSC Stock Options. All options, warrants or other
rights to acquire shares of PSC capital stock or securities
convertible into or exercisable or exchangeable for such
stock shall have been terminated pursuant to a written
instrument, in form and substance satisfactory to Genicom,
signed by the holder thereof and delivered to Genicom.
9.11 Lenders' Consents. Genicom shall have received
the approval or consent to the transactions contemplated
herein from each lender to Genicom whose approval or consent
is required or waivers by such lenders of their right to
approve or consent to the transactions contemplated herein.
9.12 Closing Certificate. Genicom shall have received
certificates executed by a responsible official of PSC and
by each Seller, dated the date of Closing, certifying as to
the fulfillment of the conditions specified in Sections 9.1
and 9.2.
9.13 Certificate Regarding Net Asset Value of PSC.
Genicom shall have received, not later than 5:00 p.m. on the
day prior to the date of Closing, a certificate, signed by
the President and the Chief Financial Officer of PSC,
setting forth the Net Asset Value of PSC and, in reasonable
detail, the computation thereof.
9.14 No PSC Material Adverse Effect. Since the date of
this Agreement, there shall have been no change, occurrence
or circumstance in the business, results of operations or
financial condition of PSC having a Material Adverse Effect
on PSC. For the purposes of this Agreement, and without
limiting the foregoing, the termination of employment by PSC
of more than one key employee, including but not limited to
software development engineers, shall
be deemed to have a "Material Adverse Effect" on PSC.
9.15 Seller and PSC Disclosure Schedules. Genicom
shall have received the Seller Disclosure Schedule and the
PSC Disclosure Schedule, which shall be satisfactory in form
and substance to Genicom.
9.16 Gallo Nondisclosure Agreement. Gallo and Genicom
shall have entered into an agreement satisfactory in form
and substance to Gallo and Genicom, which shall contain,
among other things, nondisclosure, noncompetition,
nonsolicitation and assignment of intellectual property
provisions.
9.17 Termination of Bonus Plans. The incentive bonus
plans by and between Gallo and PSC, Adragna and PSC, and
Laurance and PSC, and the incentive compensation plans by
and between Laurance and PSC and Brian Greenberg and PSC,
shall have been terminated pursuant to written instrument in
form and substance satisfactory to Genicom.
9.18 Certain Agreements. Sellers shall have entered
into the Seller Agreement, and it shall be in full force and
effect.
9.19 VMA Consent. VMA shall have entered into an
agreement, in form and substance satisfactory to Genicom,
pursuant to which VMA agrees to accept the payments
described in Article 2 hereof and Exhibits A and B hereto as
full payment and satisfaction of all obligations of PSC and
any Seller to VMA.
9.20 CIT Subordination Agreements. Sellers shall have
entered into subordination agreements in form and substance
satisfactory to Sellers, Genicom and CIT.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated
prior to Closing as follows:
(a) at the election of Seller, but (except as provided
below) only with respect to such Seller, if any one or more
of the conditions to the obligation of such Seller to close
set forth in Article 8 hereof has not been fulfilled or
waived as of the time of Closing;
(b) at the election of Gallo, if any one or more of
the conditions to the obligation of Gallo to close set forth
in Section 8.9 hereof has not been fulfilled or waived by
Gallo as of the time of Closing;
(c) by the mutual consent of all parties hereto;
(d) at the election of Genicom, if any one or more of
the conditions to the obligation of Genicom to close set
forth in Article 9 hereof has not been fulfilled or waived
as of the time of Closing;
(e) at the election of each Seller, but (except as
provided below) only with respect to such Seller, or
Genicom, if any action, suit or proceedings shall have been
instituted and be continuing by any Governmental Entity with
proper authority to restrain, modify or prohibit the
carrying out of the transactions contemplated hereby; and
(f) by any party hereto, if the Closing does not occur
prior to May 1, 1995.
Any termination of this Agreement by either AVP or
Gallo shall constitute a termination of this Agreement by
and for all Sellers and PSC. In the event that Genicom,
Gallo, AVP or any other Seller, as the case may be, elects
to terminate this Agreement pursuant to this Section 10.1,
the terminating party shall deliver a notice to the other
parties to this Agreement declaring its election to so
terminate this Agreement in accordance with the provisions
of this Section 10.1 and setting forth therein the basis for
such termination.
10.2 Survival. If this Agreement is terminated and the
transactions contemplated hereby are not consummated as
described above, this Agreement shall become void and be of
no further force and effect except as provided in Section
13.15. Except as provided in Section 13.15, none of the
parties hereto shall have any liability to any other party
hereto in respect to a termination of this Agreement, except
if and to the extent that failure to satisfy a condition of
Article 8 or Article 9 results from the intentional or
willful violation of a representation, warranty, covenant or
agreement of the party making such representation, warranty,
covenant or agreement under this Agreement.
ARTICLE 11
GENICOM FURTHER COVENANTS
Genicom further covenants and agrees that
following Closing:
11.1 Taxes. Genicom understands that additional
Federal and state income taxes may be imposed on PSC as of
the date of Closing if Genicom voluntarily makes an
election, or is treated as having made an election, under
Section 338 of the Code, to have its purchase of the PSC
Common Stock and the Series B Convertible Preferred Stock
treated as an asset acquisition for income tax purposes.
Genicom covenants and agrees that no Seller shall have any
liability of any nature for any of such income taxes
attributable to taxation under Code Section 338.
11.2 Books and Records. Genicom will retain all of the
books and records of PSC existing prior to Closing
(including but not limited to all payroll, Tax and financial
records) for a period of no less than 6 years after Closing.
Genicom further agrees that Sellers, their accountants,
attorneys and other agents shall have the right to inspect
and copy any of such records at Genicom's offices in
Washington, D.C. or Waynesboro, Virginia; provided that
Genicom is given at least 72 hours advance notice of such
inspection and that such inspection is held during Genicom's
normal business hours.
11.3 Credit Guarantee Release. Within 30 days
immediately following Closing, Genicom shall either (a)
eliminate the personal guarantees the ("Guarantees") of
Gallo and his wife of PSC's indebtedness to First Union Bank
of Maryland ("First Union") or (b) pay all indebtedness due
to First Union by PSC and obtain the release of the
Guarantees.
11.4 Gallo Employment. Subject to the approval of
Genicom's Board of Directors, Gallo shall be appointed a
corporate officer of Genicom following Closing. It is
Genicom's intent that Gallo remain employed by Genicom
during the 37 month period following Closing. During the 37
month period following Closing Gallo's employment may only
be terminated by Genicom for one of the following reasons:
(a) death of Gallo;
(b) Gallo's fraud or dishonesty in a material matter
to Genicom;
(c) Gallo's conviction of a felony or a crime of moral
turpitude;
(d) Genicom has sold or terminated the Page Printer
Business Unit in accordance with Section 2.2(d) above;
(e) the expiration of the 3 year period following
Closing; or
(f) in the event the reasonable financial or other
performance goals established by Genicom for the Page
Printer Business Unit have not been substantially satisfied,
in which event Genicom and Gallo shall negotiate in good
faith a mutually acceptable termination of Gallo's
employment.
11.5 Audit of Genicom Books. Genicom agrees to
maintain accounting, sales and other relevant records
relating to the Performance Payment ("Records") for a period
of not less than 3 years following the date which is 37
months following Closing. Sellers, their representatives
and accountants, shall, in accordance with the Seller
Agreement, have the right, solely for the purpose of
ascertaining the accuracy of the Performance Payment, to
inspect, review and audit (an "Audit") the Records, provided
that (i) the Seller seeking the Audit provides Genicom with
at least 30 days notice that the Seller desires an Audit,
(ii) the Audit is performed during normal business hours,
(iii) the Audit is performed at the expense of the Seller
(except as provided below), and (iv) no more than 1 audit as
to all Sellers may be performed in any 12 month period. If
as a result of any Audit the Performance Payment shall be
found to have been underpaid, the Seller shall provide
written notice thereof to Genicom within 10 business days
after completion of the Audit. Within 30 days after receipt
of such notice Genicom shall either make payment to remedy
the discrepancy or notify the Seller in writing that it
disputes the result of the Audit (a "Dispute Notice"). In
the event of a Dispute Notice, the parties shall negotiate
in good faith a resolution of the dispute. If such dispute
is not resolved within 45 days after the date of the Dispute
Notice, the dispute shall be submitted to binding
arbitration in accordance with the then in effect Commercial
Arbitration Rules (the "Rules") of the American Arbitration
Association ("AAA") before a single arbitrator with
knowledge of and experience in the matter in dispute, said
arbitrator to be selected from the AAA panel of arbitrators
in accordance with the Rules. The arbitration shall be
conducted in Fairfax County, Virginia. Each party shall
bear its own costs of the arbitration. In the event the
underpayment is more than $15,000.00 and the arbitrator
finds in favor of the Seller(s), Genicom shall also pay all
of the Seller's costs and expenses of the Audit within 30
days after receipt of an itemization thereof from the
Seller.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification by Sellers. Subject to the
limitations set forth in Section 12.4, each Seller hereby
agrees (i) with respect to clause (a) below in this Section
12.1, to severally, and not jointly, and (ii) with respect
to clauses (b) and (c) below in this Section 12.1, to
jointly and severally, indemnify and hold harmless Genicom
and each of Genicom's shareholders, affiliates, officers,
directors, employees, agents, successors and assigns
(Genicom and such Persons, collectively, "Genicom
Indemnified Persons") from and against each and every
demand, claim, loss (which shall include any diminution in
value), Lien, liability, penalty, assessment, settlement,
judgment, damage or other obligation whatsoever, together
with costs and expenses (including but not limited to
interest, penalties, costs of preparation and investigation,
and the reasonable fees, disbursements and expenses of
attorneys, accountants and other professional advisors)
(collectively, "Losses") imposed on or incurred by Genicom
Indemnified Persons, directly or indirectly, relating to,
resulting from or arising out of: (a) any inaccuracy in any
representation or warranty of such Seller in, or any breach
or nonfulfillment of any covenant, agreement or other
obligation of such Seller under, this Agreement, the Seller
Disclosure Schedule or any Exhibit hereto, or any agreement,
certificate or other document delivered or to be delivered
pursuant hereto at Closing; (b) any inaccuracy in any
representation or warranty of PSC in, or any breach or
nonfulfillment of any covenant, agreement or other
obligation of PSC under, this Agreement, the PSC Disclosure
Schedule or any Exhibit hereto, or any agreement,
certificate, or other document delivered or to be delivered
pursuant hereto at Closing; and (c) all claims by third
parties, including but not limited to business tort claims,
breach of contract claims and claims for malicious or
intentional misconduct, fraud, personal injury, property
damage and worker's compensation, arising out of the conduct
of the business of PSC prior to Closing, including but not
limited to any claim disclosed in the PSC Disclosure
Schedule.
12.2 Indemnification by Genicom. Subject to the
limitations set forth in Section 12.5, Genicom hereby
indemnifies and holds harmless each Seller and each of such
Seller's respective shareholders, affiliates, officers,
directors, employees, agents, spouses, heirs, personal and
legal representatives, successors and assigns (each Seller
and such Persons as to such Seller, collectively, "Seller
Indemnified Persons"; each Genicom Indemnified Person and
each Seller Indemnified Person shall be referred to as an
"Indemnified Person" and more than one Indemnified Person
shall be referred to as "Indemnified Persons") from and
against any and all Losses imposed on or incurred by such
Seller Indemnified Persons, directly or indirectly, relating
to, resulting from or arising out of: (a) any inaccuracy in
any representation or warranty of Genicom in, or any breach
or nonfulfillment of any covenant, agreement or other
obligation of Genicom under, this Agreement, the Genicom
Disclosure Schedule or any Exhibit hereto, or any agreement,
certificate or other document delivered or to be delivered
pursuant hereto at Closing; and (b) all claims by third
parties, including but not limited to business tort claims,
breach of contract claims and claims for malicious or
intentional misconduct, fraud, personal injury, property
damage and worker's compensation, arising out of the conduct
of the business of PSC on or after Closing.
12.3 Notice of Claim.
(a) In the event that subsequent to Closing any claim
is asserted against an Indemnified Person as to which such
Indemnified Person is entitled to indemnification hereunder,
the Indemnified Person shall within 30 days after learning
of such claim (provided, however, that if a claim arises by
virtue of litigation, then in no event less than 3 days
prior to the date in which an appearance or answer is due,
whichever is earlier) notify the party obligated to
indemnify it thereof in writing. In the event the
Indemnified Person shall fail to give notice of such claim
as aforesaid, such failure shall not result in or operate to
release, waive or otherwise affect the indemnifying Person's
obligations to indemnify under this Article unless (and only
to the extent that) the failure to give such notice
materially prejudices the ability of the indemnifying Person
to defend against such claim.
(b) The indemnifying Person shall have the right, upon
notice to the Indemnified Person (which notice shall
acknowledge the entitlement of the Indemnified Person to
indemnification hereunder) within 10 days after receipt from
the Indemnified Person of notice of such claim, to elect by
such notice to assume and conduct at its expense the defense
against such claim in its own name and/or, if necessary, in
the name of the Indemnified Person, by counsel reasonably
satisfactory to the Indemnified Person. Until the
indemnifying Person shall have assumed the defense of the
subject claim, all legal and other expenses reasonably
incurred by the Indemnified Person shall be borne by the
indemnifying Person. In the event that the indemnifying
Person shall fail to give such notice, it shall be deemed to
have elected not to assume and conduct the defense of the
subject claim, and in such event the Indemnified Person
shall have the right to assume and conduct such defense.
(c) If there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the
reasonable judgment of the Indemnified Person for the same
counsel to represent both the Indemnified Person and the
indemnifying Person, then the Indemnified Person shall be
entitled to retain its own counsel, in each jurisdiction for
which the Indemnified Person determines counsel is required,
at the expense of the indemnifying Person.
(d) In addition to the Indemnified Person's right to
assume the defense of a claim if the indemnifying Person
does not assume such defense, or if conflicts of interest
exist or may exist as described in Section 12.3(c), where
the indemnifying Person has assumed such defense and has not
breached such obligation, the Indemnified Person may
nonetheless at any time elect, by notice to the indemnifying
Person, to assume the defense of such claim by counsel
reasonably acceptable to the indemnifying Person and, in
such event, the Indemnified Person shall bear all expenses
thereafter incurred by it in defending such claim but the
indemnifying Person shall bear the cost of any damage, loss,
liability, judgment, fine, penalty, assessment or, subject
to Section 12.3(e), settlement arising therefrom.
(e) At any time the Indemnified Person assumes the
defense of a claim for any reason, the indemnifying Person
will cooperate with and make available to the Indemnified
Person such assistance as may be reasonably requested by the
Indemnified Person (including but not limited to officers,
directors, employees, representatives, information, books,
records and documents in the indemnifying Person's
possession or under its control which are reasonably
necessary or useful in connection with such defense), all at
the expense of the indemnifying Person, and the indemnifying
Person shall have the right at its expense to participate in
the defense; provided, however, that the Indemnified Person
shall have the right to compromise and settle in good faith
such claim with the consent of the indemnifying Person,
which consent shall not be unreasonably withheld.
(f) In the event that the indemnifying Person does
elect to assume and conduct the defense of the subject
claim, the Indemnified Person will cooperate with and make
available to the indemnifying Person such assistance as may
be reasonably requested by the indemnifying Person
(including but not limited to officers, directors,
employees, representatives, information, books, records and
documents in the Indemnified Person's possession or under
its control which are reasonably necessary or useful in
connection with such defense), all at the expense of the
indemnifying Person, and the Indemnified Person shall have
the right at its expense to participate in the defense;
provided, however, that the indemnifying Person shall have
the right to compromise and settle in good faith such claim
with the consent of the Indemnified Person, which consent
shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed
unreasonable to withhold consent to a settlement involving
injunctive or other equitable relief against the Indemnified
Person, its assets, employees or business, or in an amount
exceeding the maximum indemnification permitted by Section
12.4(b) or 12.5(b), as applicable.
(g) Any judgment entered or settlement agreed upon in
the manner provided herein shall be binding upon the
indemnifying Person, and shall conclusively be deemed to be
an obligation with respect to which the Indemnified Person
is entitled to indemnification hereunder (subject to
Sections 12.4 and 12.5, as applicable).
(h) If the indemnifying Person is a Seller and any
amount of the Base Payment or Performance Payment remains or
may in the future become due and payable to that
indemnifying Person, Genicom shall be permitted to set off
against such amount the amount owed by the indemnifying
Person subject to the Indemnity Floor. If the indemnifying
Person is Genicom or a Seller (in the event the
indemnification obligation cannot be satisfied by set off
against the amount of Base Payment or Performance Payment
then due and payable or to become due and payable), the
indemnifying Person shall promptly pay in cash to the
Indemnified Person(s) any amounts due, subject to the
Indemnity Floor and the Seller Indemnity Floor, as
applicable.
12.4 Limitation on Seller Liability. Notwithstanding
any other provision of this Agreement (including but not
limited to this Article 12):
(a) no Seller shall have any liability or obligation to
pay any Losses to any Genicom Indemnified Person under or
arising out of this Agreement (including but not limited to
this Article 12) unless and until the aggregate amount of
all Losses of such Genicom Indemnified Person (the
"Aggregate Losses") asserted against, suffered or incurred
by, or imposed on said Genicom Indemnified Person exceeds
the sum of $75,000.00 (the "Indemnity Floor"); at such time
as the Aggregate Losses exceed the Indemnity Floor, each
Seller (if and to the extent provided in Section 12.1 above,
and subject to Section 12.4(b) below) shall thereafter be
obligated to pay said Genicom Indemnified Person any Losses
which exceed the Indemnity Floor; provided, however, that no
Seller shall be obligated or liable to pay any Genicom
Indemnified Person any Losses which exceed the Indemnity
Floor if they involve claims for Losses of less than
$7,500.00 (provided that a series of claims for Losses of
substantially similar nature and/or arising out of or
otherwise related to the same factual context shall be
aggregated and treated as a single claim for Losses for
purposes of this limitation). For purposes of this Section
12.4(a) Genicom shall be deemed to include PSC.
(b) no Seller shall have any liability or obligation to
pay any Losses to any Genicom Indemnified Person under or
arising out of this Agreement (including but not limited to
this Article 12) which, when aggregated with all Losses for
which such Seller is then or was previously liable or
obligated to pay to any Genicom Indemnified Person under or
arising out of this Agreement (including but not limited to
this Article 12), are in excess of the amount of the Base
Payment and the Performance Payment actually paid or payable
to such Seller.
The limitations set forth in this Section 12.4 shall
not apply (i) with respect to any Seller, with respect to
any Loss imposed on or incurred by Genicom Indemnified
Persons, directly or indirectly, relating to, resulting from
or arising out of any inaccuracy in any representation or
warranty of such Seller set forth in the first sentence of
Section 4.1 and (ii) with respect to Gallo, with respect to
any Loss imposed on or incurred by Genicom Indemnified
Persons, directly or indirectly, relating to, resulting from
or arising out of any inaccuracy in any representation or
warranty of PSC set forth in the first sentence of Section
5.1.
12.5 Limitation on Genicom Liability. Notwithstanding
any other provision of this Agreement (including but not
limited to this Article 12):
(a) Genicom shall not have any liability or obligation
to pay any Losses to any Seller Indemnified Person under or
arising out of this Agreement (including but not limited to
this Article 12) unless and until the aggregate amount of
all Losses of all such Seller Indemnified Persons (the
"Aggregate Seller Losses") asserted against, suffered or
incurred by, or imposed on any or all of said Seller
Indemnified Persons exceeds the sum of $75,000.00 (the
"Seller Indemnity Floor," which Seller Indemnity Floor is an
aggregate for all Seller Indemnified Persons, and not a
separate Seller Indemnity Floor for each Seller Indemnified
Person); at such time as the Aggregate Seller Losses exceed
the Seller Indemnity Floor, Genicom (if and to the extent
provided in Section 12.2 above) shall thereafter be
obligated to pay each Seller Indemnified Person, as
applicable and pro-rata, any Losses incurred by the Seller
Indemnified Persons which exceed the Seller Indemnity Floor;
provided, however, that Genicom shall not be obligated or
liable to pay any Seller Indemnified Person any Losses which
so exceed the Seller Indemnity Floor if they involve claims
for Losses of less than $7,500.00 (provided that a series of
claims for Losses of substantially similar nature and/or
arising out of or otherwise related to the same factual
context shall be aggregated and treated as a single claim
for Losses for purposes of this limitation) ("Small Genicom
Claims"). For purposes of this Section 12.5(a) Genicom
shall be deemed to include PSC.
(b) Genicom shall not have any liability or obligation
to pay any Losses to any Seller Indemnified Person under or
arising out of this Agreement (including but not limited to
this Article 12) which, when aggregated with all Losses for
which Genicom is then or was previously liable or obligated
to pay to any Seller Indemnified Person under or arising out
of this Agreement (including but not limited to this Article
12), are in excess of the amounts actually paid under this
Agreement, which shall include any amounts paid or to be
paid under Section 2.2(d) of this Agreement.
12.6 Seller Indemnity Floor, As Between Sellers. In
the event any Seller Indemnified Person shall incur any Loss
which is subject to the Seller Indemnity Floor or the Small
Genicom Claims exception referred to in Section 12.5 above
and, as a result thereof, such Seller Indemnified Person is
not indemnified therefor by Genicom, then each other Seller
hereby covenants and agrees to indemnify and hold such
Seller Indemnified Person harmless as to such other Seller's
Proportionate Share of such Loss or Small Genicom Claim, as
the case may be (to the extent such Seller Indemnified
Person is not compensated therefor by Genicom).
12.7 Waiver of Certain Rights. Each Seller hereby
waives irrevocably any right against PSC or Genicom of
subrogation, contribution, indemnity or reimbursement to
which it may be entitled in respect to such Seller's payment
of indemnification pursuant to this Article 12.
ARTICLE 13
MISCELLANEOUS
13.1 Notices. Any notice or other communication
required or permitted hereunder shall be in writing and
shall be delivered personally, telegraphed, telexed, or sent
by facsimile transmission or sent by certified, registered
or express mail, postage prepaid. Any such notice shall be
deemed given when so delivered personally, telegraphed,
telexed or sent by facsimile transmission or, if mailed, 2
business days after the date of deposit in the United states
mail, by certified mail return receipt requested, as
follows:
(a) If to Genicom to:
Genicom Corporation
14800 Conference Center Drive
Suite 400, Westfields
Chantilly, Virginia 22021-3806
Attention: Paul T. Winn
Telecopier: (703) 802-8618
(b) If to PSC to:
Printer Systems Corporation
207 Perry Parkway
Gaithersburg, MD 20877
Attention: Arthur D. Gallo
Telecopier: 301-216-2857
(c) If to Gallo:
14744 Braemar Crescent Way
Darnestown, MD 20878
(d) If to Laurance:
11355 King Valley Drive
Damascus, MD 20872
(e) If to Narayanaswamy:
India House -- Trichy Road
Coimbatore TN 641018
INDIA
(f) If to AVP:
Atlantic Venture Company, Inc.
38 Knollwood Street, Suite 410
Winston-Salem, NC 27103
Attention: Edward K. Crawford
Any party may by notice given in accordance with this
Section 13.1 to the other parties designate another address
or Person for receipt of notices hereunder. Rejection or
other refusal to accept, or the inability to deliver because
of a changed address of which no notice was given, shall not
affect the date of such notice sent in accordance with the
foregoing provisions.
13.2 Entire Agreement. This Agreement contains the
entire agreement among the parties with respect to the
related transactions contemplated hereby, and supersedes all
prior agreements written or oral, with respect thereto
(except as otherwise provided in Section 13.14).
13.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended
superseded, canceled, renewed or extended, and the terms
hereof may be waived, only by a written instrument signed by
each of the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party
exercising any right, power or privilege hereunder shall
operate as a waiver thereof. Nor shall any waiver on the
part of any party of any right, power or privilege, nor any
single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. The
rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may
otherwise have at law or in equity (provided, however, that
the limitations on the liabilities and obligations of the
Sellers contained in Section 12.4 shall apply to all such
rights and remedies of Genicom and any other Indemnified
Persons). The rights and remedies of any party based upon,
arising out of or otherwise in respect of any inaccuracy in
any representation or warranty, or any breach of any
covenant or agreement, contained in this Agreement shall in
no way be limited by the fact that the act, omission,
occurrence or other state of facts upon which any claim of
any such inaccuracy or breach is based may also be the
subject matter of any other representation, warranty,
covenant or agreement contained in this Agreement (or in any
other agreement between the parties) as to which there is no
inaccuracy or breach.
13.4 Governing Law. This Agreement shall be governed
by and construed in accordance with the substantive and
procedural laws of the Commonwealth of Virginia applicable
to agreements made and to be performed entirely within such
State.
13.5 Binding Effect; No Assignment. This Agreement
shall be binding upon and inure to the benefit of the
parties and their respective successors and assigns and
legal representatives. Without limiting the generality of
the foregoing, the obligations of Genicom to make payments
of the Base Payment and the Performance Payment after
Closing pursuant to Sections 2.2 and 3.3 shall specifically
be binding on and shall be the obligations of any successor
or assign of Genicom. Neither this Agreement, nor any right
hereunder, may be assigned by any party without the written
consent of the other parties hereto. Any such assignment or
attempted assignment shall be void.
13.6 No Third Party Beneficiaries. Nothing in this
Agreement is intended or shall be construed to give any
third party any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision
contained herein.
13.7 Counterparts. This Agreement may be executed by
the parties hereto in separate counterpart, each of which
when so executed and delivered shall be an original, but all
such counterparts shall together constitute one and the same
instruments. Each counterpart may consist of a number of
copies hereof each signed by less than all, but together
signed by all of the parties hereto. This Agreement will
become binding on each party upon such party's execution of
a counterpart hereof.
13.8 Opinion of Counsel. In rendering an opinion
referred to in any of the provisions hereof, counsel may
rely as to any factual matters involved in its opinion on
certificates of public officials or of corporate officers
and such other evidence as it may reasonably deem
appropriate, and as to any matters of law, on opinions of
other counsel, provided that the opinion of such other
counsel is reasonably satisfactory in form and substance to
the Person to whom the opinion is addressed.
13.9 Exhibits. The Exhibits are a part of this
Agreement as if fully set forth herein. All references
herein to Articles, Sections, paragraphs, and Exhibits shall
be deemed references to such parts of this Agreement, unless
the context shall otherwise require.
13.10 Headings. The headings in the Agreement are for
reference only, and shall not affect the interpretation of
this Agreement.
13.11 Publicity. All notices to third parties and all
other
publicity concerning the transactions contemplated by this
Agreement shall be jointly planned and coordinated by and
between Genicom and PSC, unless such notices or other
publicity is mandated by Law or the By-laws of the National
Association of Securities Dealers, Inc.
13.12 Severability. If any portion of this Agreement
shall be deemed unenforceable by a court of competent
jurisdiction, the remaining portions shall be valid and
enforceable.
13.13 Attorneys' Fees. If any legal action,
arbitration or
other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default
or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing
party shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding,
in addition to any other relief to which it may be entitled.
13.14 Confidentiality. Each Seller, Genicom and PSC
recognize that it has received and will receive confidential
information concerning the others during the course of the
negotiations and preparations relating to the exchange
contemplated herein. Accordingly, each Seller, Genicom and
PSC severally agrees (i) to use its respective reasonable
efforts to prevent the unauthorized disclosure of any
confidential information concerning any of the others that
was or is disclosed during the course of such negotiations
and preparations and (ii) to not make use of or permit to be
used any such confidential information other than for the
purpose of effectuating the exchange contemplated herein and
related transactions. The obligations of this Section 13.14
will not apply to information that (a) is or becomes part of
the public domain without breach of this Section 13.14, (b)
is disclosed by the disclosing party to third parties
without restrictions on disclosure, (c) is received by the
receiving party from a third party without breach of a
nondisclosure obligation of the third party or (d) is
required to be disclosed by Law. If this Agreement is
terminated, all copies of documents containing confidential
information shall be returned by the receiving party to the
disclosing party. Notwithstanding Section 13.2, in the
event this Agreement is terminated, then this Agreement
shall not be deemed to have superseded that certain
confidentiality agreement dated December 6, 1994 between PSC
and Genicom, which confidentiality agreement shall thereupon
be deemed to be and remain in full force and effect. This
Section 13.14 shall survive any termination of this
Agreement.
13.15 Survival. The representations and warranties
made in this Agreement (including but not limited to, in any
Disclosure Schedule or Exhibit to this Agreement) and/or in
any document, instrument or certificate delivered pursuant
hereto at Closing, shall survive for 18 months after
Closing, except for the representations and warranties set
forth in Sections 4.1 through 4.3, inclusive, 5.1, 5.8
through 5.10, inclusive, 5.17, 5.23 and 5.24, which shall
survive for the greater of (a) 36 months after the Closing
or (b) the period of the applicable statute of limitations.
The right and remedy of Genicom, PSC and the Seller to seek
and compel indemnity, reimbursement and other remedy from
any other party hereto with respect to such party's
representation or warranty shall remain in effect for the
periods specified in the preceding sentence with respect to
such representation and warranty. The covenants and
agreements of Genicom, PSC and Seller contained in this
Agreement (including but not limited to, in any Disclosure
Schedule or Exhibit to this Agreement) and/or in any
document, instrument or certificate delivered pursuant
hereto at Closing shall continue in full force and effect
until 18 months after Closing (unless earlier terminated in
accordance with their terms), except for the covenants and
agreements contained in Sections 2.2 and 3.3 (which shall
continue for the applicable statute of limitations), 3.4
(which shall continue indefinitely), 7.1 and 7.2 (which,
insofar as they relate to matters addressed in Sections 4.1
through 4.3, inclusive, 5.1, 5.8 through 5.10, inclusive,
5.17, 5.23 and 5.24, shall continue for 36 months after the
Closing), 11.1 (which shall continue for the applicable
statute of limitations), 11.2, 11.4 and 11.5 (which shall
continue for the period specified therein) and Article 12
(which shall continue for so long as indemnification may be
obtained thereunder). Notwithstanding any other provision
of this Agreement, any representation, warranty, covenant or
agreement in respect of which indemnification may be sought
under Article 12 shall survive the date specified in this
Section 13.15 if written notice, given in good faith, of the
specific basis for the claim of a Loss thereunder,
describing in reasonable detail the nature of such claim, is
given prior to the applicable survival date specified in
this Section 13.15, whether or not a Loss has actually been
sustained.
13.16 Terminology. All terms and words in this
Agreement, regardless of the number and gender in which they
are used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context or sense of this
Agreement or any paragraph, sentence or clause herein may
require, as if such terms and words had been fully and
properly written in the appropriate number and gender.
(remainder of page intentionally left blank)
(signatures on next page)
IN WITNESS WHEREOF, Genicom, Sellers and PSC have duly
executed and delivered this Agreement as of the date first
above written.
GENICOM CORPORATION, PRINTER SYSTEMS
CORPORATION,
a Delaware Corporation a Virginia corporation
By: ________________________ By:
_________________________
Its: ____________________________ Its
_________________________
_____________________________
Arthur D. Gallo
_____________________________
Joel E. Laurance
_____________________________
Krishnasamaraj
Narayanaswamy
ATLANTIC VENTURE PARTNERS
II,
L.P.
By: Atlantic Venture
Management Co., L.P.,
its General Partner
By:
____________________
Edward K.
Crawford
General Partner
EXHIBIT A
PRINTER SYSTEMS CORPORATION STOCK
AND
GENICOM CORPORATION PAYMENTS
Page 1 of 5
PSC STOCK OWNERSHIP
I. COMMON STOCK
Holder Number of Shares
Gallo 2,214,113
AVP 499,276
Narayanaswamy 50,000
Laurance 50,000
Total 2,813,389
II. SERIES B CONVERTIBLE PREFERRED STOCK
Holder Number of Shares
AVP 6,250
Exhibit A
Page 2 of 5
ASSUMPTIONS FOR BASE PAYMENT AND PERFORMANCE PAYMENT
CALCULATIONS:
(1) For the purpose of distribution, all payments are calculated
using the assumption that Base Payments are made first
followed by Performance Payments. This is to say, by way of
example, that the receipt of a Performance Payment 30 days
following the first anniversary of Closing will have no
impact on the Base Payment distribution to be made 24 months
after Closing.
(2a) By execution of the Seller Agreement, Gallo and AVP agree to
these divisions of Base Payment. AVP will receive $781,250
plus its appropriate percentage ownership split of
additional cash out of the Base Payment, as determined by
first giving consideration to VMA, Laurance and
Narayanaswamy.
(2b) By execution of the Seller Agreement, Gallo and AVP agree to
these divisions of Performance Payment. After the Genicom
credit, VMA fees and payments to Laurance and Narayanaswamy,
Gallo will receive the first $146,271 from the balance of
the Performance Payment prior to AVP receiving its
percentage payment.
(3) Genicom will receive a credit of $200,000 from the first
$200,000 of earned Performance Payment prior to any other
payments (pursuant to Section 2.2 of the Agreement).
(4) Pursuant to an agreement between VMA and PSC (assumed by
Sellers), VMA receives its transaction fee as follows: 8.0%
of the first $ Million, 6.0% of the second $ Million, 4.0%
of the third $ Million and 2.0% thereafter .
At Closing the initial VMA payment will be reduced by
previously paid fees of $40,000 and any adjustment required
as a result of PSC's Net Asset Value being less than
$1,900,000.
For purposes of calculating amounts due VMA, the first and
second $ Million are part of the Base Payment, the third $
Million begins with the Performance Payment.
(5) To the extent that the Net Asset Value of PSC is less than
$1,900,000, each Seller's Base Payment and the VMA payment
shall be adjusted in accordance with the Distribution
Formula.
(6) Except for Assumption (5), AVP and Gallo have agreed that
Narayanaswamy and Laurance are to receive payment of full
percentage of ownership after the VMA payment.
(7) The distribution amounts are subject to adjustment in
accordance with Sections 2.2(f) and 12.3(h) of the
Agreement.
Exhibit A
Page 3 of 5
BASE
PAYMENT (1) DISTRIBUTION FORMULA
AT CLOSING $ 800,000
Payment to Venture Management
Associates ("VMA") (4) 24,000 (800,000 x 8.0%) - 40,000
Payment to Laurance (6) 12,261 (800,000 - 24,000) x
1.58%** Percentage of ownership
Payment to Narayanaswamy (6) 12,261 (800,000 - 24,000) x
1.58%*
Payment to AVP 426,501 (2,000,000 - 100,000 -
30,020 - 30,020 - 781,250**** See Assumption (2a) above.) x 26.92%*
x 0.4****** Total percentage of Base Payment received at the specified
time, i.e. Closing, 12 months, 24 months and 36 months. + (781,250 x
0.4***)
Payment to Gallo 324,977 Balance to Gallo
12 MONTHS AFTER CLOSING 400,000
Credit to Genicom -
Payment to VMA (4) 28,000 (200,000 x 8.0%) +
(200,000 x 6.0%)
Payment to Laurance 5,878 (400,000 - 28,000) x 1.58%
Payment to Narayanaswamy 5,878 (400,000 - 28,000) x 1.58%
Payment to AVP 213,250 (2,000,000 - 100,000 -
30,020 - 30,020 - 781,250) x 26.92% x 0.2*** + (781,250 x 0.2***)
Payment to Gallo 146,995 Balance to Gallo
24 MONTHS AFTER CLOSING 400,000
Payment to VMA (4) 24,000 (400,000 x 6.0%)
Payment to Laurance 5,941 (400,000 - 24,000) x 1.58%
Payment to Narayanaswamy 5,941 (400,000 - 24,000) x 1.58%
Payment to AVP 213,250 (2,000,000 - 100,000 -
30,020 - 30,020 - 781,250) x 26.92% x 0.2 + (781,250 x 0.2)
Payment to Gallo 150,868 Balance to Gallo
36 MONTHS AFTER CLOSING 400,000
Payment to VMA (4) 24,000 (400,000 x 6.0%)
Payment to Laurance 5,941 (400,000 - 24,000) x 1.58%
Payment to Narayanaswamy 5,941 (400,000 - 24,000) x 1.58%
Payment to AVP 213,250 (2,000,000 - 100,000 -
30,020 - 30,020 - 781,250) x 26.92% x 0.2 + (781,250 x 0.2)
Payment to Gallo 150,868 Balance to Gallo
TOTAL $2,000,000
To VMA (4) $ 100,000
To Laurance 30,020
To Narayanaswamy 30,020
To AVP 1,066,251
To Gallo 773,709
TOTAL $2,000,000
Exhibit A
Page 4 of 5
PERFORMANCE PAYMENT EXAMPLE
BASE PERFORMANCE PAYMENT (1)
BASE +
PAYMENT (REASONABLE)
REASONABLE
AT CLOSING $ 800,000
$ 800,000
Payment to Venture Management
Associates ("VMA") (4) 24,000
24,000
Payment to Laurance 12,261
12,261
Payment to Narayanaswamy 12,261
12,261
Payment to AVP 426,501
426,501
Payment to Gallo 324,977
324,977
12 MONTHS AFTER CLOSING 400,000 $ 200,000
600,000
Credit to Genicom - 200,000 First $200,000
in Performance Payment credited to Genicom (3) 200,000
Payment to VMA (4) 28,000 -
28,000
Payment to Laurance 5,878 -
5,878
Payment to Narayanaswamy 5,878 -
5,878
Payment to AVP 213,250 -
213,250
Payment to Gallo 146,995 -
146,995
24 MONTHS AFTER CLOSING 400,000 300,000
700,000
Payment to VMA (4) 24,000 12,000 (300,000 x .04)
36,000
Payment to Laurance 5,941 4,550 (300,000 -
12,000) x 1.58% 10,491
Payment to Narayanaswamy 5,941 4,550 (300,000 -
12,000) x 1.58% 10,491
Payment to AVP 213,250 35,704 (300,000 -
12,000 - 4,550 - 4,550 - 146,271) x 26.92% 248,954
Payment to Gallo 150,868 243,195 Gallo to receive
first $146,271 of Performance Payment after 394,064
credit of
$200,000 to Genicom and payments to VMA, Laurance and
Narayanaswamy,
plus balance to Gallo after AVP's payment
(by agreement)
(2b)
36 MONTHS AFTER CLOSING 400,000 600,000
600,000
Payment to VMA (4) 24,000 22,000 (500,000 x .04)
+ (100,000 x .02) 46,000
Payment to Laurance 5,941 9,132 (600,000 -
22,000) x 1.58% 15,073
Payment to Narayanaswamy 5,941 9,132 (600,000 -
22,000) x 1.58% 15,073
Payment to AVP 213,250 155,598 (600,000 -
22,000) x 26.92% 368,848
Payment to Gallo 150,868 404,138 (600,000 -
22,000) x 69.92% 555,006
TOTAL $2,000,000 $1,100,000
$3,100,000
To VMA (4) $ 100,000 $ 34,000
$ 134,000
To Laurance 30,020 13,683
43,703
To Narayanaswamy 30,020 13,683
43,703
To AVP 1,066,251 191,301
1,257,552
To Gallo 773,709 647,333
1,421,042
TOTAL $2,000,000 $ 900,000
$2,900,000
Exhibit A
Page 5 of 5
PERFORMANCE PAYMENT EXAMPLE WITH CARRYOVER
BASE PERFORMANCE PAYMENT (1)
BASE +
PAYMENT (MAXIMUM)
MAXIMUM
AT CLOSING $ 800,000
$ 800,000
Payment to Venture Management
Associates ("VMA") (4) 24,000
24,000
Payment to Laurance 12,261
12,261
Payment to Narayanaswamy 12,261
12,261
Payment to AVP 426,501
426,501
Payment to Gallo 324,977
324,977
12 MONTHS AFTER CLOSING
Performance Payment Earned $ 900,000
900,000
Less Credit to Genicom - 200,000 First
$200,000 in Performance Payment credited to Genicom (3)
200,000
Available for Distribution 400,000 700,000 900,000 -
200,000 1,100,000
Maximum Distribution 400,000 600,000
1,000,000
Current Distribution 400,000 600,000
1,000,000
Carryover 100,000 700,000 -
600,000 100,000
Payment to VMA (4) 28,000 24,000 600,000 x
.04 52,000
Payment to Laurance 5,878 9,101 (600,000
- - 24,000) x 1.58% 14,978
Payment to Narayanaswamy 5,878 9,101 (600,000
- - 24,000) x 1.58% 14,978
Payment to AVP 213,250 110,783 (600,000
- - 24,000 - 9,101 -9,101 - 146,271) x 26.92% 324,033
Payment to Gallo 146,995 447,015 Gallo to
receive first $146,271 of Performance Payment after 594,010
credit of
$200,00 to Genicom and payments to VMA, Laurance and
Narayanaswamy, plus balance to Gallo after AVP's payment
(by
agreement) (2b)
24 MONTHS AFTER CLOSING
Performance Payment Earned 1,000,000
1,000,000
Prior Year Carryover 100,000
100,000
Available for Distribution 400,000 1,100,000
1,500,000
Maximum Distribution 400,000 1,500,000
1,900,000
Current Distribution 400,000 1,100,000
1,500,000
Carryover -
- -
Payment to VMA (4) 24,000 26,000 (200,000 x
.04) + (900,000 x .02) 50,000
Payment to Laurance 5,941 16,969 (1,100,000
- - 26,000) x 1.58% 22,910
Payment to Narayanaswamy 5,941 16,969 (1,100,000
- - 26,000) x 1.58% 22,910
Payment to AVP 213,250 289,121 (1,100,000
- - 26,000) x 26.92% 502,371
Payment to Gallo 150,868 750,941 (1,100,000
- - 26,000) x 69.92% 901,809
36 MONTHS AFTER CLOSING
Performance Payment Earned 1,400,000
1,400,000
Prior Year Carryover -
- -
Available for Distribution 400,000 1,400,000
1,800,000
Maximum Distribution 400,000 1,100,000 2,800,000
- - 1,100,000 - 600,000 1,500,000
Current Distribution 400,000 1,100,000
1,500,000
Payment to VMA (4) 24,000 22,000 (1,100,000
x .02) 46,000
Payment to Laurance 5,941 17,032 (1,100,000
- - 22,000) x 1.58% 22,973
Payment to Narayanaswamy 5,941 17,032 (1,100,000
- - 22,000) x 1.58% 22,973
Payment to AVP 213,250 290,198 (1,100,000
- - 22,000) x 26.92% 503,448
Payment to Gallo 150,868 753,738 (1,100,000
- - 22,000) x 69.92% 904,606
TOTAL $2,000,000 $2,800,000
$4,800,000
To VMA (4) $ 100,000 $ 72,000
$ 172,000
To Laurance 30,020 43,102
73,122
To Narayanaswamy 30,020 43,102
73,122
To AVP 1,066,251 690,101
1,756,352
To Gallo 773,709 1,961,694
2,725,403
TOTAL $2,000,000 $2,800,000
$4,800,000
EXHIBIT B
DETERMINATION OF PERFORMANCE PAYMENT
Page 1 of 3
The amount of the Performance Payment for each of the three
fiscal years ending December 31, 1995, December 29, 1996 and
December 28, 1997 following Closing (including for the fiscal
year ending December 31 , 1995, the product sales of PSC for the
period of January 1, 1995 through the date prior to Closing),
which is hereinafter referred to as the "Post Closing Period",
shall be one-third of the aggregate "Variable Margin", as herein
after defined, dollars over $3,921,000.00 derived from the world-
wide sales of Genicom and its subsidiaries attributable to the
following:
(a) all current PSC Page and Impact products, including
without limitation, the sale or license of controllers, printers
or technology, sold through all distribution channels (whether
PSC or Genicom),
(b) all current and future Genicom Impact products sold with
any PSC IBM compatible technology, and excluding specifically
Genicom Impact Printer product sales of existing (i) Open, (ii)
TX-non IPDS and (iii) CX-non IPDS products, which do not include
PSC IBM compatible technology,
(c) current and future Genicom Page products,
(d) all other Lexmark sourced products which are not
included in (a)-(c) above, and
(e) the sale or license of Rastek technology.
The items listed in (a) through (e) above, both inclusive, are
hereinafter referred to as the "Products". With respect to
Genicom subsidiaries, the determination of the aggregate
"Variable Margin" dollars shall be calculated by using the same
cost basis consistently used at the Page Printer Business Unit
and the sales price of the Products to the customers of the
subsidiaries rather than the sales derived by Genicom's sales of
the Products to its subsidiaries, thereby eliminating any effects
of transfer pricing. The addition of Products following Closing
as a result of stock or asset acquistions, mergers,
consolidations, or other business combinations shall be reviewed
by the management of the Page Printer Business Unit for the
purpose of determining whether any such addition would have an
adverse effect on the determination of "Variable Margin" dollars
utilized to calculate the Performance Payment. If it is
reasonably determined that there would be such an adverse effect,
the applicable Products shall be eliminated from the "Variable
Margin" dollars and Performance Payment calculations.
Exhibit B
Page 2 of 3
The amount of "Variable Margin" dollars shall be determined
by subtracting from the aggregate Sales of the Products, the
"Standard Margin" costs, comprised of the bill of material costs
which include the following:
(a) Standard Labor (standard labor hours times standard
labor rates (average hourly rates));
(b) Datacom Labor (standard labor hours times transfer
hourly billing rates which are fully burdened labor rates
designed to recover all such production related costs of the
Mexican subsidiary); and
(c) Standard Material (costs of materials included on the
bill of materials using standard costs which are updated
annually, including freight and duty, if applicable).
Further, the following adjustments to "Standard Margin" costs
shall be made to derive "Variable Margin" dollars:
(a) Cycle Count, which represents the allocation of the book
to physical adjustments made pursuant to Genicom's annual cycle
counts for the Products, which are not product specific. For the
purpose of calculating the Performance Payment, the adjustment
will not exceed 5% in the aggregate of the total book to physical
adjustments made pursuant to the Genicom annual cycle count;
(b) Free Installation, which represents the cost of
providing free installation for the Products;
(c) Royalties, which represent royalties due based upon
Products shipped;
(d) Software Amortization, which represents amortization of
capitalized software costs related to the Rastek technology and
will not include any other software development costs. For the
purpose of calculating the Performance Payment, the amortization
of software development costs which will be capitalized during
the Post Closing Period will not be included in the adjustments
to "Standard Margin". Further, any capitalized software which
may arise due to Genicom making an election under Section 338 of
the Code or which may arise due to present or future software
development attributable to the Products will not be included in
software amortization for the purpose of calculating the
Performance Payment;
Exhibit B
Page 3 of 3
(e) Printer Modification, which represents the cost of
printer modification to the Products and historically has been
estimated. For the purpose of the calculating the Performance
Payment, the estimate during the Post Closing Period will not
exceed the percentage used by Genicom in fiscal 1994;
(f) EM Serve Transaction Charge, which represents the cost
of picking and shipping Products from the West Coast by EM Serve
pursuant to an agreement under which Genicom has agreed to pay
$7.50 for each printer Product shipped;
(g) Material Variances, which represents the amounts
attributable to the Products for foreign currency fluctuations
and other purchase price variances;
(h) Warranty, which represents the accruals made each month
based upon estimated warranty cost per unit for each of the
Products when sold. Adjustments are made as actual charges are
incurred and identified by Product; and
(i) Other, which represents miscellaneous adjustments
provided by the billing or cost accounting departments. For the
purpose calculating the Performance Payment, this estimate shall
not exceed on half of one percent of the Sales of the Products
during the Post Closing Period; Other will not include valuation
allowance or write off for excess, slow moving or obsolete
inventory.
For the purpose of determining "Standard Margin" and the
adjustments thereto to derive "Variable Margin" dollars, the
"Standard Margin" costs and adjustments attributable to Genicom
Impact Printer products sales of (i) Open, (ii) TX-non IPDS and
(iii) CX-non IPDS products shall not be included.
GENICOM PRESS RELEASE
For Further Information:
Paul T. Winn James C. Gale
President and Chief Senior Vice President
Executive Officer Finance and Chief
703/802-9237 Financial Officer
703/802-9259
FOR IMMEDIATE RELEASE
GENICOM TO ACQUIRE PRINTER SYSTEMS CORPORATION
Transaction Will Enhance Laser Printer Business
Chantilly, VA - - February 15, 1995 - - GENICOM Corporation
(Nasdaq-NNM:GECM) today announced the signing of a definitive
agreement with Printer Systems Corporation ("PSC") to acquire
substantially all of PSC's outstanding common and preferred
shares for consideration aggregating to potentially $4.8 million.
Of the consideration $2.0 million is payable at closing and over
the three years subsequent to closing. The remaining balance of
up to $2.8 million in additional consideration is contingent upon
attainment of performance objectives during the three years
subsequent to closing.
The transaction is subject to approval by the Board of Directors
of both companies, certain third party consents and customary
filings. The purchase price will be funded from GENICOM's
current credit facilities.
Paul T. Winn, President and CEO of GENICOM, said, "This
acquisition will assist us to broaden our Page Printer Product
line, increase penetration in the IBM compatible market and build
on our value added application solution strategy. It also is
synergistic with our impact offerings addressing the IBM
compatible market by providing our customers an alternative
technology. PSC is well-respected for its broad line of
products, portfolio of software and hardware skills, and presence
in the IBM client server market. GENICOM has a strong heritage
in impact and non-impact printing technologies. Together, we
will offer a broad range of printing solutions to meet focused
customer applications.
"Taking advantage of our combined strengths, our objective will
be to continue the excellent relationships with PSC's key
customers and vendors, expand our offerings to our current
customer base and develop new customers for both lines of
products. We expect PSC to favorably impact GENICOM's 1995
earnings," Mr. Winn said.
Mr. Winn also noted, "I am pleased to report that Arthur D.
Gallo, President and CEO of PSC, has agreed to the appointment of
Vice President and General Manager of GENICOM's Page Printer
Business Unit."
PSC, with fiscal year 1994 revenues approximating $10.0 million,
sells its products primarily through original equipment
manufacturers who are some of the world's largest suppliers of
IBM-compatible peripherals. PSC markets proprietary software and
hardware technology for distributed communications, data stream
management and imaging with emphasis on complex raster image
command languages for laser printers and IBM network transmission
protocols.
Arthur D. Gallo commented, "We look forward to joining the
GENICOM team as this will broaden our capability to provide
superior products and services to the IBM Client Server Market.
Being apart of a larger organization should enable us to focus
our combined resources in accomplishing our joint strategic
goals."
As a result of the acquisition of Printer Systems Corporation,
GENICOM will consolidate its page printer and controller
development activities currently performed in Waynesboro,
Virginia and Huntsville, Alabama (RASTEK) at PSC's location in
Gaithersburg, Maryland.
GENICOM Corporation, through its worldwide operations, designs,
manufactures, markets and services a wide range of computer
printer technologies for general purpose applications as well as
a line of hermetically sealed relays. Through its Enterprising
Service Solutions business, GENICOM provides multivendor depot
and field support, express parts and professional services.
GENICOM had revenues of $233.8 million in 1994, and has its
headquarters near Washington, D.C.
