EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
DATED SEPTEMBER 16, 1998
BY AND AMONG
GLOBAL IMAGING SYSTEMS, INC.
("GLOBAL"),
XXXX ACQUISITION CORPORATION
(THE "BUYER")
XXXX BUSINESS MACHINES OF GREAT NECK INC.
(D/B/A XXXX BUSINESS SYSTEMS)
(the "Company")
AND
THE SHAREHOLDERS OF THE COMPANY
(COLLECTIVELY, THE "SELLERS ")
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.................................................... 1
1.1 DEFINITIONS........................................................ 1
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ARTICLE II AGREEMENT OF PURCHASE AND SALE; CLOSING...................... 6
2.1 AGREEMENT TO SELL AND PURCHASE..................................... 6
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2.2 PURCHASE PRICE AND ASSUMPTION OF INDEBTEDNESS...................... 6
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2.3 PAYMENT OF PURCHASE PRICE AND ASSUMPTION OF INDEBTEDNESS........... 6
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2.4 CLOSING............................................................ 7
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(a) DATE AND PLACE................................................ 7
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2.5 ESCROW ARRANGEMENTS................................................ 7
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2.6 PURCHASE PRICE ADJUSTMENTS......................................... 8
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(b) FUNDED INDEBTEDNESS........................................... 8
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(c) WORKING CAPITAL............................................... 8
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(e) CASH ON HAND.................................................. 8
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2.7 CLOSING AUDIT...................................................... 8
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2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT............................. 8
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLERS........................................... 9
3.1 CAPITALIZATION..................................................... 9
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3.2 NO LIENS ON SHARES................................................. 9
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3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK.............................. 10
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3.4 DUE ORGANIZATION................................................... 10
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3.5 SUBSIDIARIES....................................................... 10
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3.6 DUE AUTHORIZATION.................................................. 10
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3.7 FINANCIAL STATEMENTS............................................... 11
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3.8 CERTAIN ACTIONS.................................................... 12
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3.9 PROPERTIES......................................................... 13
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3.10 LICENSES AND PERMITS.............................................. 14
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3.11 INTELLECTUAL PROPERTY............................................. 14
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3.12 COMPLIANCE WITH LAWS.............................................. 15
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3.13 INSURANCE......................................................... 15
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3.14 EMPLOYEE BENEFIT PLANS............................................ 15
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(a) EMPLOYEE WELFARE BENEFIT PLANS................................ 15
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(b) EMPLOYEE PENSION BENEFIT PLANS................................ 16
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(c) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED
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COMPENSATION ARRANGEMENTS................................... 16
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3.15 CONTRACTS AND AGREEMENTS.......................................... 16
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3.16 CLAIMS AND PROCEEDINGS............................................ 17
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3.17 TAXES............................................................. 17
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3.18 PERSONNEL......................................................... 19
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3.19 BUSINESS RELATIONS................................................ 19
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3.20 ACCOUNTS RECEIVABLE............................................... 20
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3.21 BANK ACCOUNTS..................................................... 20
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3.22 WARRANTIES........................................................ 20
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3.23 BROKERS........................................................... 20
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3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC................ 20
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3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
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EMPLOYEES......................................................... 21
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3.26 UNDISCLOSED LIABILITIES........................................... 21
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3.27 INFORMATION FURNISHED............................................. 21
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ARTICLE IV GLOBAL'S REPRESENTATIONS AND WARRANTIES........................ 22
4.1 DUE ORGANIZATION................................................... 22
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4.2 DUE AUTHORIZATION.................................................. 22
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4.3 NO BROKERS......................................................... 22
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4.4 INVESTMENT......................................................... 23
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4.5 INFORMATION FURNISHED.............................................. 23
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ARTICLE V PRE-CLOSING COVENANTS......................................... 23
5.1 CONSENTS OF OTHERS................................................. 23
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5.2 BEST EFFORTS....................................................... 23
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5.3 POWERS OF ATTORNEY................................................. 23
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5.4 CONDUCT OF BUSINESS PENDING CLOSING................................ 23
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5.5 ACCESS TO RECORDS BEFORE CLOSING................................... 24
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ARTICLE VI POST-CLOSING.................................................. 25
6.1 GENERAL............................................................ 25
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6.2 TRANSITION......................................................... 25
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6.3 CONFIDENTIALITY.................................................... 25
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6.4 COVENANT NOT TO COMPETE............................................ 25
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6.5 ADDITIONAL MATTERS................................................. 26
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ARTICLE VII CONDITIONS TO OBLIGATION OF PARTIES TO
CONSUMMATE CLOSING........................................ 28
7.1 CONDITIONS TO THE BUYER'S AND GLOBAL'S OBLIGATIONS................. 28
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(a) COVENANTS, REPRESENTATIONS AND WARRANTIES..................... 28
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(b) CONSENTS...................................................... 28
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(c) SUPPLIERS/LEASES.............................................. 29
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(d) DISCHARGE OF INDEBTEDNESS AND LIEN............................ 29
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(e) MATERIAL ADVERSE CHANGE....................................... 29
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(f) TRANSFER TAXES................................................ 29
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(g) DOCUMENTS TO BE DELIVERED BY THE SELLERS AND THE COMPANY...... 29
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(i) OPINION OF THE SELLERS' COUNSEL.......................... 29
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(ii) CERTIFICATES............................................ 29
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(iii) RELEASE................................................ 30
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(iv) ESCROW AGREEMENT........................................ 30
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(v) EMPLOYMENT AGREEMENTS.................................... 30
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(vi) BUILDING LEASES......................................... 30
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(vii) COLLATERAL ASSIGNMENT OF RIGHTS........................ 30
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(viii) STOCK CERTIFICATES.................................... 30
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7.2 CONDITIONS TO THE SELLERS' AND THE COMPANY'S OBLIGATIONS........... 30
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(a) COVENANTS, REPRESENTATIONS AND WARRANTIES..................... 31
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(b) CONSENTS...................................................... 31
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(c) DOCUMENTS TO BE DELIVERED BY THE BUYER AND GLOBAL............. 31
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(i) CERTIFICATES............................................. 31
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(ii) ESCROW AGREEMENT........................................ 31
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(iii) EMPLOYMENT AGREEMENTS.................................. 31
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(vii) COLLATERAL ASSIGNMENT OF RIGHTS........................ 32
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(vii) LEASE.................................................. 32
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(iv) PAYMENTS TO THE SELLERS AND THE COMPANY
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AND THE ESCROW AGENT.................................. 32
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ARTICLE VIII INDEMNIFICATION............................................ 32
8.1 INDEMNIFICATION OF THE BUYER AND GLOBAL............................ 32
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8.2 DEFENSE OF CLAIMS.................................................. 33
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8.3 ESCROW CLAIM....................................................... 33
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8.4 TAX AUDITS, ETC.................................................... 33
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8.5 INDEMNIFICATION OF THE SELLERS..................................... 34
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8.6 LIMITS ON INDEMNIFICATION.......................................... 34
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ARTICLE IX MISCELLANEOUS................................................ 35
9.1 MODIFICATIONS...................................................... 35
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9.2 NOTICES............................................................ 35
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9.3 COUNTERPARTS; FACSIMILE TRANSMISSION............................... 36
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9.4 EXPENSES........................................................... 36
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9.5 BINDING EFFECT; ASSIGNMENT......................................... 36
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9.6 ENTIRE AND SOLE AGREEMENT.......................................... 37
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9.7 GOVERNING LAW...................................................... 37
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9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.............. 37
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9.9 INVALID PROVISIONS................................................. 37
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9.10 PUBLIC ANNOUNCEMENTS.............................................. 38
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9.11 REMEDIES CUMULATIVE............................................... 38
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9.12 WAIVER............................................................ 38
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9.13 DISPUTE RESOLUTION................................................ 38
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LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Estoppel Certificate for Building Leases
Exhibit C Opinion of the Company's and the Sellers' Counsel
Exhibit D Sellers' Certificates
Exhibit E Form of Release
Exhibit F-1 Form of Xxxxxxxx Employment Agreement
Exhibit F-2 Form of Xxxxx Employment Agreement
Exhibit G Global Certificates
Exhibit H Equity Subscription Agreement
LIST OF SCHEDULES
Schedule 2.3 Sellers' Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.5 Subsidiaries
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 7.1(d) List of Indebtedness
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
September 16, 1998, effective as of September 1, 1998, by and among GLOBAL
IMAGING SYSTEMS, INC., a Delaware corporation ("GLOBAL"), XXXX ACQUISITION
CORPORATION, a New York corporation and wholly-owned subsidiary of Global (the
"BUYER"), XXXX BUSINESS MACHINES OF GREAT NECK INC. (D/B/A XXXX BUSINESS
SYSTEMS), a New York corporation (the "COMPANY") and Xxxx X. Xxxxxxxx and Xxxxxx
X. Xxxxx (collectively, the "SELLERS").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and service
of copiers, fax machines and other office equipment in the State of New York
(the "BUSINESS"); and
WHEREAS, the Sellers own all of the issued and outstanding shares of
capital stock of the Company (the "SHARES"); and
WHEREAS, the Buyer desires to purchase from the Sellers and the
Sellers desire to sell to the Buyer all of the Shares on the terms and subject
to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In this Agreement, the following terms have the meanings
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specified or referred to in this Section 1.1 and shall be equally applicable to
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both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time to the
extent permitted by the applicable provisions thereof and by this Agreement.
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"BUILDINGS" means collectively (i) 00 Xxxxx Xxxxx, Xxxx, Xxxxxxxxxxx,
Xxx Xxxx and (ii) Xxxxx 000, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
"BUSINESS" has the meaning specified in the first recital of the
Agreement.
"BUSINESS DAY" means any day in which the NASDAQ National Market
System is open for trading in the United States of America.
"BUYER" has the meaning specified in the first paragraph of this
Agreement.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments thereto, any
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successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from the
Sellers to the Buyer.
"CLOSING BALANCE SHEET" has the meaning specified in Section 2.7.
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"CLOSING DATE" has the meaning specified in Section 2.4.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of this
Agreement.
"CONFIDENTIAL INFORMATION" means all (a) confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; (b) financial statements, cost reports or other
financial information; (c) contract proposals, or bidding information; (d)
business plans and training and operations methods and manuals; (e) personnel
records; (f) information concerning fee structures; and (g) management systems,
policies or procedures, including related forms and manuals. Confidential
Information shall not include any information (i) which is disclosed pursuant to
subpoena or other legal process, (ii) which has been publicly disclosed, (iii)
which subsequently becomes known to a third party not subject to a
confidentiality agreement with Global, the Buyer or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
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"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
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"EMPLOYMENT AGREEMENTS" means the employment agreements with Xxxx X.
Xxxxxxxx and Xxxxxx X. Xxxxx to be entered into at Closing in the form of
Exhibits F-1 and F-2.
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"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section 3.12.
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"EQUITABLE EXCEPTIONS" has the meaning specified in Section 3.6.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW" has the meaning specified in Section 2.5.
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"ESCROW AGENT" means Xxxxxxx X. Xxxxxxxxx, Esq..
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by and
among the Sellers, Global, the Buyer and the Escrow Agent in substantially the
same form as Exhibit A.
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"ESCROW LEGEND" has the meaning specified in Section 2.5.
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"ESCROW PERIOD" has the meaning specified in Section 2.5.
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"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
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"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company which are accrued or required to be accrued under
GAAP; (iii) obligations of the Company to pay the deferred purchase or
acquisition price for goods or services, other than trade accounts payable or
accrued expenses in the ordinary course of business on no more than 90 day
payment terms; (iv) indebtedness of others guaranteed by the Company or secured
by an Encumbrance on any of the Company's assets; (v) indebtedness of the
Company under extended credit terms of
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more than 30 days from manufacturers provided to the Company; or (vi) any
receivables owed by the Company to the Sellers.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GLOBAL STOCK" means the common stock, par value $.01 per share of
Global.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has the meaning specified in Section 3.10.
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"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"IRS" means the Internal Revenue Service.
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section 2.7.
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"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
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"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
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"INTELLECTUAL PROPERTY" has the meaning specified in Section 3.11.
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"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
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"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. (S)(S)
651 et seq., any amendment thereto, and any regulations promulgated thereunder.
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"PERMITTED EXCEPTION" means (a) liens for Taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other
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like liens arising in the ordinary course of business for sums not yet due and
payable, (c) other liens or imperfections on property which are not material in
amount or do not materially detract from the value or the existing use of the
property affected by such lien or imperfection, and (d) such statements of fact
and exceptions shown on any title insurance policies delivered to Global or the
Buyer.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of the Effective Date. The
Preliminary Closing Balance Sheet shall be delivered to the Buyer and Global not
less than three (3) nor more than five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
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"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
(S)(S) 6901 et seq., and any successor statute, and any regulations promulgated
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thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLERS" has the meaning set forth in the first paragraph of this
Agreement.
"SHARES" means all of the issued and outstanding shares of the capital
stock of the Company.
"SUBSIDIARY" has the meaning set forth in Section 3.5 of this
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Agreement.
"SUBSIDIARY SHARES" has the meaning set forth in Section 3.5 of this
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Agreement.
"TAX" or "TAXES" means any federal, state, local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed thereon by any Governmental Body.
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"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and current liabilities as calculated in accordance with GAAP.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the representations
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and warranties, for the consideration, and subject to the terms and conditions
set forth in this Agreement, the Sellers agree to sell the Shares to the Buyer
and the Buyer agrees to purchase the Shares from the Sellers.
2.2 PURCHASE PRICE. The total potential purchase price for the Shares (the
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"PURCHASE PRICE") shall be equal to $17,500,000, subject to any adjustment
required to be made pursuant to Section 2.6 or Section 2.8 below.
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2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable (i) by
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Buyer (with respect to the portion of the Purchase Price set forth in Section
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2.3(a)) and (ii) by Global (with respect to the portion of the Purchase Price
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set forth in Section 2.3(b) and Section 2.3(c) below) at the Closing (as defined
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in Section 2.4 below) as follows:
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(a) $14,000,000 of the Purchase Price as adjusted as set forth in
Section 2.6 below will be paid, at the direction of the Sellers, in
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cash by wire transfer of funds as specified in Schedule 2.3
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(including the payment of $150,000 for the covenant not to compete
provided in Section 6.4);
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(b) $1,750,000 of the Purchase Price as adjusted as set forth in
Section 2.6(b) below will be paid by Global in the form of shares
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of Global Stock to the Escrow Agent, such shares to be held
pursuant to the terms of the Escrow Agreement; and
(c) $1,750,000 of the Purchase Price shall be paid by Global at the
Closing in the form of shares of Global Stock to be issued to Xxxx
X. Xxxxxxxx at the Closing. The number of shares of Global Stock to
be issued to the Sellers (either under Section 2(b) or Section
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2(c)) shall be determined based on the average of the closing bid
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price per share of the Global Stock on the NASDAQ National Market
System for the ten Business Days prior to the two (2) Business Days
prior to the
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Closing Date (as defined). The Global Stock delivered and issued at
Closing to the Sellers and to the Escrow Agent shall be allocated
among the Sellers as specified in Schedule 2.3.
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2.4 CLOSING.
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(a) DATE AND PLACE. The Closing of the purchase and sale of the Shares
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contemplated by this Agreement shall take place at noon, Eastern Time, at the
offices of Xxxxxxx X. Xxxxxxxxx, Esq. in Hauppauge, New York on September 16,
1998, or at such other date and time as the parties shall agree (the "CLOSING
DATE"), effective as of September 1, 1998 (the "EFFECTIVE DATE").
(b) [RESERVED]
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be entered
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into among the Sellers, Buyer, Global and the Escrow Agent, $1,750,000 of the
Purchase Price shall be paid to the Sellers by the delivery of shares of Global
Stock as set forth in Section 2.3(b) above (the "ESCROW"); provided, that the
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shares of Global Stock held in the Escrow must include a legend that none of the
shares of Global Stock held thereunder shall be transferred without the express
written consent of Global (the "ESCROW LEGEND"). The Escrow shall be held
pursuant to the terms of the Escrow Agreement for delivery therefrom to Buyer or
Global pursuant to Section 2.8 or Article VIII below. At the conclusion of the
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period ending on the first anniversary of the Closing Date (such period being
referred to herein as the "ESCROW PERIOD"), such remaining portion of the Escrow
not theretofore claimed by or delivered to Buyer or Global in accordance with
the terms of the Escrow Agreement and this Agreement shall be reissued without
the Escrow Legend and transferred to the account of the Sellers. The Sellers
and the Buyer and Global agree that each will execute and deliver such
reasonable instruments and documents as are furnished by any other party to
enable such furnishing party to receive those shares of the Escrow to which the
furnishing party is entitled under the provisions of the Escrow Agreement and
this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
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(a) FUNDED INDEBTEDNESS. The portion of the Purchase Price payable
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pursuant to Section 2.3(a) above will be reduced by the total amount of Funded
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Indebtedness as of the Closing, if any, assumed or paid by the Buyer in cash by
wire transfer of funds to the accounts of the holders of Funded Indebtedness
listed on Schedule 2.6 hereto to satisfy the Company's Funded Indebtedness with
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such holders.
(b) WORKING CAPITAL. The portion of the Purchase Price payable
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pursuant to Section 2.3(a) above will be reduced, on a dollar-for-dollar basis,
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by the amount, if any, by which the Working Capital as reflected on the
Preliminary Closing Balance Sheet is less than $2,394,322.
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(c) CASH ON HAND. The portion of the Purchase Price payable pursuant
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to Section 2.3(a) above will be reduced by the amount, if any, by which the
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cash on hand of the Company (included in the Working Capital) at Closing is less
than $100,000.
2.7 CLOSING REVIEW. Within 120 days following the Closing Date, there
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shall be delivered to the Sellers a balance sheet of the Company (the "CLOSING
BALANCE SHEET") of the Company at and as of the Effective Date. The Closing
Balance Sheet shall be prepared in accordance with GAAP by the Buyer. In the
event that the Sellers dispute any items on the Closing Balance Sheet within ten
(10) days after the Sellers' receipt thereof, the parties shall jointly select
and retain an independent "Big Five" accounting firm (the "INDEPENDENT
ACCOUNTANTS") to review the disputed item(s) on the Closing Balance Sheet. The
final determination of such disputed item(s) by the Independent Accountants
shall be binding on the parties and shall be reflected on the Closing Balance
Sheet. The cost of retaining the Independent Accountants shall be borne by the
Sellers; provided, however, that the Buyer shall reimburse the Sellers for the
cost of the Independent Accountants in the event that such review results in an
increase of more than $50,000 in the Company's Working Capital as reflected on
the Closing Balance Sheet.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the Working
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Capital as reflected on the Closing Balance Sheet is less than $2,394,322, then
the Purchase Price will be adjusted downward, on a dollar-for-dollar basis, to
reflect the lesser of (i) the decrease, if any, in Working Capital as reflected
on the Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet or (ii) the amount, if any, by which the
Working Capital reflected on the Closing Balance Sheet is less than $2,394,322.
Conversely, the Purchase Price will be adjusted upward, on a dollar-for dollar
basis, to reflect the increase, if any, in the total Working Capital as
reflected on the Closing Balance Sheet from the amount of Working Capital
reflected on the Preliminary Closing Balance Sheet; provided, however, that in
no event shall such upward adjustment exceed the total amount of any downward
adjustment to the Purchase Price made pursuant to Section 2.6(b) above. The
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post-closing adjustment to the Purchase Price, if any, shall be paid either (i)
by the Sellers to the Buyer or Global (at the sole discretion of Global) in
shares of Global Stock from the Escrow pursuant to the Escrow Agreement or (ii)
by the Buyer to the Sellers in immediately available funds. Such payments or
deliveries, as the case may be, of the post-closing adjustment shall be made
within ten (10) business days of delivery of the Closing Balance Sheet, unless
the Sellers dispute any items on the Closing Balance Sheet, in which case it
shall be paid within ten (10) business days after the Independent Accountants
finally determine the disputed item(s), and the Buyer or Global delivers to the
Sellers a Closing Balance Sheet modified to reflect such determination.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and the Sellers jointly and severally represent and
warrant to the Buyer and Global that:
3.1 CAPITALIZATION. The authorized capital stock of the Company consists
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of 200 shares of Common Stock, no par value, 111 of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
the Sellers in the amounts set forth on Schedule 3.1 hereto. None of the Shares
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was issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person. The Sellers own all of the
issued and outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.2, the Sellers own
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the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, the Sellers will have full power and authority to
convey good and marketable title to the Shares, free and clear of any
Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in this
-------------------------------------
Agreement, there are no authorized or outstanding warrants, options, or rights
of any kind to acquire from the Company any equity or debt securities of the
Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of New York and has
full corporate power and authority to carry on the Business as now conducted and
as proposed to be conducted through Closing. Complete and correct copies of the
Articles of Incorporation and Bylaws of the Company, and all amendments thereto,
have been heretofore delivered to the Buyer or Global and are attached hereto as
Schedule 3.4. The Company is qualified to do business in the State of New York
------------
and in each jurisdiction in which the nature of the Business or the ownership of
its properties requires such qualification except where the failure
-9-
to be so qualified does not and could not reasonably be expected to have a
Material Adverse Effect.
3.5 SUBSIDIARIES. The Company is the owner of all of the outstanding
------------
shares of the capital stock of each subsidiary (individually, a "SUBSIDIARY" and
collectively, the "SUBSIDIARIES") of the Company listed on Schedule 3.5 (such
------------
shares shall be collectively referred to as the "SUBSIDIARY SHARES"), free and
clear of all Encumbrances, and none of the Subsidiary Shares is subject to any
outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Subsidiary Shares is subject to any
restriction on transfer thereof except for restrictions imposed by applicable
federal and state securities laws. There are no authorized or outstanding
warrants, options, or rights of any kind to acquire from the Company, or any
Subsidiary of the Company, any equity or debt securities of any Subsidiary of
the Company, or securities convertible into or exchangeable for equity or debt
securities of any Subsidiary of the Company, and there are no Subsidiary Shares
reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company or any Subsidiary of
the Company to issue, sell or deliver any additional Subsidiary Shares. Except
for the Subsidiaries of the Company listed on Schedule 3.5, neither the Company,
------------
nor its Subsidiaries, directly or indirectly have any subsidiaries or any direct
or indirect ownership interests in any Person. The Sellers do not own any other
Person engaged in the Business.
3.6 DUE AUTHORIZATION. The Company and the Sellers each have full power
-----------------
and authority to execute, deliver and perform this Agreement and to carry out
the transactions contemplated hereby. The execution, delivery, and performance
of this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action of the Company. This
Agreement has been duly and validly executed and delivered by the Company and
the Sellers and constitutes the valid and binding obligations of the Company and
the Sellers, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief (the "EQUITABLE
EXCEPTIONS"). Except for the Equitable Exceptions and assuming all necessary
consents to the consummation of the transactions contemplated hereby, as
specifically set forth on Schedules 3.9 and 3.15, are obtained, the execution,
------------- ----
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the Company
and the Sellers, do not (a) violate any Requirements of Laws or any Court Order
of any Governmental Body applicable to the Company or the Sellers, or their
respective property, (b) violate or conflict with, or permit the cancellation
of, or constitute a default under, any material agreement to which the Company
or the Sellers are a party, or by which any of them or any of their respective
property is bound, (c) permit the acceleration of the maturity of any material
indebtedness of,
-10-
or material indebtedness secured by the property of, the Company or the Sellers,
or (d) violate or conflict with any provision of the charter or bylaws of the
Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements (herein so
--------------------
called) of the Company have been delivered to the Buyer or Global by the
Company: unaudited reviewed balance sheets of the Company as of December 31,
1995, December 31, 1996 and December 31, 1997, and an unreviewed, unaudited
balance sheet as of each of the following dates: January 1, 1998, February 28,
1998, March 31, 1998, April 30, 1998, May 31, 1998, June 30, 1998 and July 31,
1998, and unaudited reviewed statements of income of the Company for the fiscal
years ending December 31, 1995, December 31, 1996 and December 31, 1997, and an
unreviewed, unaudited statements of income for the seven month period ending
July 31, 1998. The Financial Statements have been prepared in accordance with
GAAP throughout the periods indicated and fairly present the financial position,
results of operations and changes in financial position of the Company as of the
indicated dates and for the indicated periods, subject (in the case of the seven
month Financial Statements) to year end accruals made in the ordinary course of
the Business which are not Materially adverse and which are consistent with past
practices and subject to the adjustment to Working Capital set forth in the
definition of Working Capital above. Except to the extent reflected or provided
for in the Financial Statements or the notes thereto and obligations and
liabilities incurred in the ordinary course of business or on Schedule 3.7 since
------------
the date of the last of such Financial Statements, the Company has no
liabilities, including without limitation any deferred service liabilities,
required by GAAP to be reflected on the Company's balance sheet or notes thereto
that are not so reflected, nor any other obligations (whether absolute,
contingent, or otherwise) which are (individually or in the aggregate) Material
(in amount or to the conduct of the Business); and neither the Company nor the
Sellers have knowledge of any basis for the assertion of any such liability or
obligation. Since June 30, 1998, there has been no Material Adverse Change in
the prospects of the Company.
3.8 CERTAIN ACTIONS. Since June 30, 1998, the Company has not, except as
---------------
disclosed on Schedule 3.8A hereto or any of the Financial Statements or
-------------
notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder (other than distributions to pay
estimated income taxes of the Sellers associated with the income of the
Company); (c) made or agreed to make any loans or advances or guaranteed or
agreed to guarantee any loans or advances to any party whatsoever; (d) suffered
or permitted any Encumbrance other than Permitted Exceptions to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) canceled, waived, or released or agreed to cancel, waive, or
release any of its receivables, rights, or claims against third parties in
excess of $25,000 individually
-11-
or $50,000 in the aggregate; (f) sold, assigned, pledged, mortgaged, or
otherwise transferred, or suffered any material damage, destruction, or loss
(whether or not covered by insurance) to, any assets (except in the ordinary
course of the Business); (g) amended its charter or bylaws; (h) paid or made a
commitment to pay any severance or termination payment to any employee or
consultant; (i) made any material change in its method of management or
operation or method of accounting; (j) made any capital expenditures, including,
without limitation, replacements of equipment in the ordinary course of the
Business, or entered into commitments therefor, except for capital expenditures
or commitments therefor which do not, in the aggregate, exceed $50,000; (k) made
any investment or commitment therefor in any Person; (l) made any payment or
contracted for the payment of any bonus or other compensation or personal
expenses, other than (i) wages and salaries and business expenses paid in the
ordinary course of the Business, and (ii) wage and salary adjustments made in
the ordinary course of the Business for employees who are not officers,
directors, or shareholders of the Company; (m) made, amended, or entered into
any written employment contract or created or made any material change in any
bonus, stock option, pension, retirement, profit sharing or other employee
benefit plan or arrangement; (n) materially amended or experienced a termination
of any material contract, agreement, lease, franchise or license to which the
Company is a party that would or could reasonably be expected to have a Material
Adverse Effect, except in the ordinary course of the Business; or (o) entered
into any other material transactions that would or could reasonably be expected
to have a Material Adverse Effect except in the ordinary course of the Business.
Since June 30, 1998, except as disclosed on Schedule 3.8B hereto or any of the
-------------
Financial Statements or notes thereto, there has not been (a) any Material
Adverse Change including, but not limited to, the loss of any material customers
or suppliers of the Company, or in any material assets of the Company, (b) any
extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Company, nor has the Company agreed to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing a
---------- ------------
description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book value in excess of $20,000 as of
the date hereof. Except for Permitted Exceptions or as expressly set forth on
Schedule 3.9, such real and personal properties are free and clear of
------------
Encumbrances. The Sellers and the Company have delivered to the Buyer or Global
a lien search obtained from the counties where the Company conducts business and
the New York Secretary of State office of all UCC liens of record against the
Company's personal property in the State of New York. All of the properties and
assets necessary for continued operation of the Business as currently conducted
(including, without limitation, all books, records, computers and computer
software and data
-12-
processing systems) are owned, leased or licensed by the Company and are
reasonably suitable for the purposes for which they are currently being used.
With the exception of used equipment and inventory valued at no more than
$10,000 in the aggregate on the Company's Financial Statements, the physical
properties of the Company, including the real properties leased by the Company,
to the best knowledge of the Company and the Sellers, are in good operating
condition and repair, normal wear and tear excepted, and are free from any
defects of a material nature. Except for Permitted Exceptions or as otherwise
set forth on Schedule 3.9, the Company has full and unrestricted legal and
------------
equitable title to all such properties and assets. To the best knowledge of the
Sellers and the Company, the operation of the New York (Manhattan), New York
property of the Company in the manner in which it is now and has been operated
does not violate any zoning ordinances, municipal regulations, or other
Requirements of Laws, except for any such violations which would not,
individually or in the aggregate, have a Material Adverse Effect. The operation
of the other properties and the Business of the Company (in any location) in the
manner in which they are now and have been operated do not violate any zoning
ordinances, municipal regulations, or other Requirements of Laws, except for any
such violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Except for Permitted Exceptions or as set forth on
Schedule 3.9, no restrictive covenants, easements, rights-of-way, or regulations
------------
of record impair the uses of the properties of the Company for the purposes for
which they are now operated. All leases of real or personal property by the
Company are legal, valid, binding, enforceable and in full force and effect and,
assuming all necessary consents to the consummation of the transactions
contemplated herein, as set forth on Schedule 3.9, are obtained, will remain
------------
legal, valid, binding, enforceable and in full force and effect on essentially
the same terms immediately following the Closing, except to the extent that
enforceability may be limited by the Equitable Exceptions. All facilities owned
or leased by the Company have received all material approvals of any
Governmental Body (including Governmental Permits) required in connection with
the operation thereof and have been operated and maintained in accordance with
all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a list of
-------------------- -------------
all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could individually or the in the aggregate have a Material
Adverse Effect. The Company has complied in all material respects with the terms
and conditions of all such Governmental Permits, and the Company has not
received notification from any Governmental Body of violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof other than violations (if any) which would not
individually or in the aggregate have a Material Adverse Effect. No additional
Governmental Permit is required from any Governmental Body thereof in connection
with the conduct of the
-13-
Business which Governmental Permit, if not obtained, would have a Material
Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a list and
--------------------- -------------
brief description of all patents, trademarks, tradenames, copyrights, licenses,
computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities (collectively, the
"INTELLECTUAL PROPERTY"). The Company has furnished the Buyer or Global with
copies of all license agreements to which the Company is a party, either as
licensor or licensee, with respect to any Intellectual Property. Except as
described on Schedule 3.11 hereto, the Company has good title to or the right to
-------------
use such Intellectual Property and all inventions, processes, designs, formulae,
trade secrets and know-how necessary for the conduct of their Business, as
presently conducted without the payment of any royalty or similar payment, and
the Company is not infringing on any patent right, tradename, copyright or
trademark right or other Intellectual Property right of others, which
infringement does not individually or in the aggregate have a Material Adverse
Effect, and neither the Company nor the Sellers are aware of any infringement by
others of any such rights owned by the Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all material
--------------------
respects with all Requirements of Laws, Governmental Permits and Court Orders
applicable to the Business and has filed with the proper Governmental Bodies all
statements and reports required by all Requirements of Laws, Governmental
Permits and Court Orders to which the Company or any of its employees (because
of their activities on behalf of the Company) are subject and (ii) conducted the
Business and is in compliance in all material respects with all federal, state
and local energy, public utility, health, safety and environmental Requirements
of Laws, Governmental Permits and Court Orders including the Clean Air Act, the
Clean Water Act, RCRA, the Safe Drinking Water Act, CERCLA, OSHA, the Toxic
Substances Control Act and any similar state, local or foreign laws
(collectively "ENVIRONMENTAL OBLIGATIONS") and all other federal, state, local
or foreign governmental and regulatory requirements, except where any such
failure to comply or file would not, in the aggregate, have a Material Adverse
Effect. No claim has been made by any Governmental Body (and, to the best
knowledge of the Company and the Sellers, no such claim is anticipated) to the
effect that the Business fails to comply, in any respect, with any Requirements
of Laws, Governmental Permit or Environmental Obligation or that a Governmental
Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to the Buyer or Global. To the best of
the Company's and the
-14-
Sellers' knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on Schedule
------------------------------ --------
3.14, the Company does not maintain or contribute to any "employee welfare
----
benefit plan" as such term is defined in Section 3(1) of ERISA. With respect to
each such plan: (i) the plan is in material compliance with ERISA; (ii) the plan
has been administered in accordance with its governing documents; (iii) neither
the plan, nor any fiduciary with respect to the plan, has engaged in any
"prohibited transaction" as defined in Section 406 of ERISA other than any
transaction subject to a statutory or administrative exemption; (iv) except for
the processing of routine claims in the ordinary course of administration, there
is no material litigation, arbitration or disputed claim outstanding; and (v)
all premiums due on any insurance contract through which the plan is funded have
been paid.
(b) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in Schedule
------------------------------ --------
3.14, the Company does not maintain or contribute to any arrangement that is or
----
may be an "employee pension benefit plan" relating to employees, as such term is
defined in Section 3(2) of ERISA. With respect to each such plan: (i) the plan
is qualified under Section 401(a) of the Code, and any trust through which the
plan is funded meets the requirements to be exempt from federal income tax under
Section 501(a) of the Code; (ii) the plan is in material compliance with ERISA;
(iii) the plan has been administered in accordance with its governing documents
as modified by applicable law; (iv) the plan has not suffered an "accumulated
funding deficiency" as defined in Section 412(a) of the Code; (v) the plan has
not engaged in, nor has any fiduciary with respect to the plan engaged in, any
"prohibited transaction" as defined in Section 406 of ERISA or Section 4975 of
the Code other than a transaction subject to statutory or administrative
exemption; (vi) the plan has not been subject to a "reportable event" (as
defined in Section 4043(b) of ERISA), the reporting of which has not been waived
by regulation of the Pension Benefit Guaranty Corporation; (vii) no termination
or partial termination of the plan has occurred within the meaning of Section
411(d)(3) of the Code; (viii) all contributions required to be made to the plan
or under any applicable collective bargaining agreement have been made to or on
behalf of the plan; (ix) there is no material litigation, arbitration or
disputed claim outstanding; and (x) all applicable premiums due to the Pension
Benefit Guaranty Corporation for plan termination insurance have been paid in
full on a timely basis.
(c) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION ARRANGEMENTS.
-------------------------------------------------------------------
Except as disclosed in Schedule 3.14, the
-------------
-15-
Company does not maintain or contribute to any retirement or deferred or
incentive compensation or stock purchase, stock grant or stock option
arrangement entered into between the Company and any current or former officer,
consultant, director or employee of the Company that is not intended to be a tax
qualified arrangement under Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is a list
------------------------ -------------
and brief description of all written or oral contracts, commitments, leases, and
other agreements (including, without limitation, promissory notes, loan
agreements, and other evidences of indebtedness, guarantees, agreements with
distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $50,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of the Sellers and the Company, no other party thereto is in default
(and no event has occurred which, with the passage of time or the giving of
notice, or both, would constitute a default by the Company) under any of the
Contracts, and the Company has not waived any right under any of the Contracts,
except for any such defaults or waivers, which would not have a Material Adverse
Effect. Except for the Equitable Exceptions, all of the Contracts are legal,
valid, binding, enforceable and in full force and effect and, assuming all
necessary consents to the consummation of the transactions contemplated herein,
as specifically set forth on Schedules 3.9 and 3.15, are obtained, will remain
------------- ----
legal, valid, binding, enforceable and in full force and effect on essentially
the same terms immediately after the Closing, except to the extent that
enforceability may be limited by the Equitable Exceptions. Except as set forth
in Schedule 3.15, the Company has not guaranteed any obligations of any other
-------------
Person. To the best knowledge of the Company and the Sellers, no manufacturer
of office equipment sold by the Company will cease doing business with the
Company immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a list
---------------------- -------------
and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Sellers or
the Company, threatened against or affecting the Company or any of its
properties or assets, at law or in equity, or before or by any court,
municipality or other Governmental Body. Except as set forth on Schedule 3.16,
-------------
none of such claims, actions, suits, proceedings, or investigations, if
adversely determined, will result in any Material liability or loss to the
Company. The Company has not been and the Company is not now, subject to any
Court Order, stipulation, or consent of or with any court or Governmental Body.
No inquiry, action or proceeding has been instituted or, to the best knowledge
and belief of the Sellers or the Company, threatened or asserted against the
Sellers or the Company to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement or to challenge the validity of such
-16-
transactions or any part thereof or seeking damages on account thereof. Except
as set forth on Schedule 3.16, there is no basis for any such valid claim or
-------------
action.
3.17 TAXES.
-----
(a) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing will have been paid
and all Tax Returns which are required to be filed by the Company on or before
the Closing will have been filed within the time and in the manner provided by
law, and all such Tax Returns are true and correct and accurately reflect the
Tax liabilities of the Company. No Tax Returns of the Company are presently
subject to an extension of the time to file. All Taxes, assessments, penalties,
and interest of the Company which have become due pursuant to such Tax Returns
or any assessments received have been paid or adequately accrued on the
Company's Financial Statements. The provisions for Taxes reflected on the
balance sheets contained in the Financial Statements are adequate to cover all
of the Company's Tax liabilities for the respective periods then ended and all
prior periods. The Company has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes, and there are no pending or, to the best knowledge of the Sellers or the
Company, threatened claims, assessments, notices, proposals to assess,
deficiencies, or audits with respect to any such Taxes. For Governmental Bodies
with respect to which the Company does not file Tax Returns, no such
Governmental Body has given the Company written notification that the Company is
or may be subject to taxation by that Governmental Body. The Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of the Company. The Company (and any predecessor of the
Company) has been a validly electing S corporation within the meanings of
Sections 1361 and 1362 of the Code at all times since the date of its
incorporation, and the Company will be an S corporation until and including the
Closing Date.
(b) Neither the Company nor any other corporation has filed an election
under Section 341(f) of the Code that is applicable to the Company or any assets
held by the Company. The Company has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The
Company is not a party to any Tax allocation or sharing agreement. The Company
has not and has never been (nor does the Company have any liability for unpaid
Taxes because it once was) a member of an affiliated group during any part of a
return year any corporation other than the Company also was a member of the
-17-
affiliated group. No Seller (A) has been a member of an affiliated group, as
defined in Section 1504(a) of the Code, filing a consolidated federal income Tax
Return (other than a group the common parent of which was any Seller) and (B)
has any Liability for the Taxes of any Person under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.
(c) The Company would not be liable for any Tax under Section 1374 of
the Code in connection with a deemed sale of such Company's assets caused by an
election under Section 338(h)(10) of Code. The Company has not, in the past ten
(10) years, (i) acquired assets from another corporation in a transaction in
which the Company's Tax basis for the acquired assets was determined in whole or
in part by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (ii) acquired the stock of any other
corporation that is a qualified subchapter S subsidiary.
(d) The Company has not had at any time during the Company's existence
owned any subsidiaries (including any "qualified subchapter S subsidiaries"
within the meaning of Section 1361(b)(3)(13) of the Code.
(e) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the names
--------- -------------
and annual rates of compensation of the directors and executive officers of the
Company, and of the employees of the Company whose annual rates of compensation
during the fiscal year ended December 31, 1997 (including base salary, bonus and
incentive pay) exceed (or by December 31, 1998 are expected to exceed) $60,000.
Schedule 3.18 also summarizes the bonus, profit sharing, percentage
-------------
compensation, company automobile, club membership, and other like benefits, if
any, paid or payable to such directors, officers, and employees during the
Company's fiscal year ended December 31, 1997 and to the date hereof. Schedule
--------
3.18 also contains a brief description of all material terms of employment
----
agreements to which the Company is a party and all severance benefits which any
director, officer or employee of the Company is or may be entitled to receive.
The employee relations of the Company are generally good and there is no pending
or, to the best knowledge of the Sellers or the Company, threatened labor
dispute or union organization campaign. None of the employees of the Company
are represented by any labor union or organization. The Company is in
compliance in all material respects with all Requirements of Laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and are not engaged in any unfair labor practices. Neither the
Company or the Sellers has been advised, or has good reason to believe, that any
of the persons
-18-
whose names are set forth on Schedule 3.18 or any other employee will not agree
-------------
to remain employed by the Company after the consummation of the transactions
contemplated hereby. There is no unfair labor practice claim against the Company
before the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of the Company and the Sellers,
threatened against or involving the Company, and none has occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor the Sellers know or has
------------------
good reason to believe that any customer or supplier of the Company will cease
to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither the Sellers nor the Company has received any
notice of any material disruption (including delayed deliveries or allocations
by suppliers) in the availability of any portion of the materials used by the
Company nor is the Company or the Sellers aware of any facts which could lead
them to believe that the Business will be subject to any such material
disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans receivable
-------------------
that have been recorded on the books of the Company are bona fide and represent
amounts validly due for goods sold or services rendered and, except as disclosed
on Schedule 3.20, all such amounts (net of any allowance for doubtful accounts)
--------------
will be collected in full within 180 days following the Closing Date. Except as
disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and loans
-------------
receivable are free and clear of any Encumbrances; (b) no claims of offset have
been asserted in writing against any of such accounts, notes, or loans
receivable; and (c) none of the obligors of such accounts, notes, or loans
receivable has given written notice that it will or may refuse to pay the full
amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of all
------------- -------------
banks or other financial institutions with which the Company has an account or
maintains a safe deposit box, showing the type and account number of each such
account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and in the
----------
ordinary course of the Business, no written claim for breach of product or
service warranty to any customer has been made against the Company since January
1, 1997. To the best knowledge of the Sellers and the Company, no state of
facts exists, and no event has occurred, which could reasonably be expected to
form the basis of any present claim against the Company for liability on account
of any express or implied warranty to any third party in connection with
products sold or services rendered by the Company, except for warranty claims
which are typical
-19-
and in the ordinary course of business, none of which individually or in the
aggregate would have a Material Adverse Effect.
3.23 BROKERS. Neither the Company nor the Sellers have engaged, or caused
-------
to be incurred any liability to any finder, broker, or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No officer,
--------------------------------------------------
director, or shareholder of the Company or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description of
---------
the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in Schedule 3.26 hereto,
----------------------- -------------
the Company does not have any liabilities (whether absolute, accrued, contingent
or otherwise), of a nature required by GAAP to be reflected on a corporate
balance sheet or disclosed in the notes thereto, except such liabilities which
are accrued or reserved against in the Financial Statements or disclosed in the
notes thereto, including without limitation any accounts payable or service
liabilities of the Company incurred prior to the Closing Date, other than
liabilities incurred in the ordinary course of the Business since the date of
the latest of such Financial Statements.
3.27 INFORMATION FURNISHED. The Company and the Sellers have made
---------------------
available to the Buyer or Global true and correct copies of all material
corporate records of the Company and all material agreements, documents, and
other items listed on the Schedules to this Agreement or referred to in this
Agreement, and neither this Agreement, the Schedules hereto, nor any written
information, instrument, or document delivered to the Buyer or Global pursuant
to this Agreement contains any untrue statement of a material fact or omits any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
-20-
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $25,000. The terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $50,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the officers
and employees of the Company with responsibility for the applicable subject
matter. All references to the "Company" in Sections 3.6 through 3.27 shall
------------ ----
include the Companies' Subsidiaries.
ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global and the Buyer jointly and severally represent and warrant to the
Sellers as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized, validly
----------------
existing, and in good standing under the laws of the State of Delaware and has
full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby. The Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of New York and has full corporate power and authority to
execute, deliver and perform this Agreement and to carry out the transactions
contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance of this
-----------------
Agreement has been duly authorized by all necessary corporate action of Global
and the Buyer and the Agreement has been duly and validly executed and delivered
by each of Global and the Buyer and constitutes the valid and binding obligation
of each such corporation, enforceable in accordance with its terms, except to
the extent that enforceability may be limited by the Equitable Exceptions. The
execution, delivery, and performance of this Agreement (as well as all other
instruments, agreements, certificates or other documents contemplated hereby) by
the Buyer and Global, do not (a) violate any Requirements of Laws or Court Order
of any Governmental Body applicable to the Buyer or Global or its property, (b)
violate or conflict with, or permit the cancellation of, or constitute a default
under any agreement to which the Buyer or Global is a party or by which it or
its property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, the Buyer or
Global, or (d) violate or conflict with any provision of the charter or bylaws
of the Buyer or Global.
-21-
4.3 NO BROKERS. Neither the Buyer nor Global has engaged, or caused to be
----------
incurred any liability to any finder, broker or sales agent in connection with
the origin, negotiation, execution, delivery, or performance of this Agreement
or the transactions contemplated hereby.
4.4 INVESTMENT. The Buyer will acquire the Shares solely for investment
----------
purposes and for its own account and not with a view to the distribution
thereof.
4.5 INFORMATION FURNISHED. To the best knowledge of Global and the Buyer,
---------------------
neither this Agreement, nor any written information, instrument, or document
delivered to the Sellers by the Buyer or Global pursuant to this Agreement
contains any untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein, as the case may be, not
misleading.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and the Sellers
------------------
shall use their best efforts to obtain and to cause the Company to obtain all
authorizations, consents and permits required of the Company and the Sellers to
permit them to consummate the transactions contemplated by this Agreement.
5.2 BEST EFFORTS. The Buyer, Global, the Company and the Sellers shall use
------------
all reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and the Sellers shall cause the
------------------
Company to terminate at or prior to the Closing all powers of attorney granted
by the Company other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
5.4 CONDUCT OF BUSINESS PENDING CLOSING. From the date of this Agreement
-----------------------------------
to the Closing Date:
(i) Except as otherwise contemplated by this Agreement, or as Global may
otherwise consent to in writing, the Company and the Sellers shall conduct
the Business only in the ordinary course and shall not engage in any
material activity or enter into any material transaction which would cause a
breach of any of the representations and warranties contained in Article
-------
III.
---
(ii) The Company shall, and the Sellers shall use their best efforts to
cause the Company to, preserve substantially intact its
-22-
current business organization and present relationships with its customers,
vendors, suppliers and employees and to maintain all of its insurance
currently in effect.
(iii) The Sellers and the Company shall give prompt notice to the Buyer
and Global of any notice of material default received by the Company or the
Business subsequent to the date of this Agreement under any Contract or any
Material Adverse Change occurring prior to the Closing Date in the operation
of the Company or the Business.
(iv) Neither the Company nor the Sellers, nor any of their
representatives, shall solicit, encourage or discuss any Acquisition
Proposal (as hereinafter defined) or supply any non-public information
concerning the Company or the Business or the Company's assets to any party
other than the Buyer or Global or its representatives. As used herein,
"ACQUISITION PROPOSAL" means any proposal other than the transactions herein
contemplated, for (i) any merger or other business combination involving the
Company or the Business, (ii) the acquisition of the Company or a material
equity interest in the Company or a material portion of its assets, or (iii)
the dissolution or liquidation of the Company.
5.5 ACCESS TO RECORDS BEFORE CLOSING. Prior to the Closing Date, the
--------------------------------
Sellers and the Company agree that they will give, or cause to be given, to the
Buyer, Global and their representatives, during normal business hours and at
Global's expense, full and unrestricted access to the Company's personnel,
officers, agents, employees, assets, properties, titles, contracts, corporate
minute and other books, records, files and documents of the Sellers with respect
to the Business (including financial, tax basis, budget projections,
accountants' work papers and other information as the Buyer or Global may
request) and to the Business' personnel, customers, suppliers and independent
accountants, to allow Global to obtain such information as Global or the Buyer
shall desire, and to make copies of such information, to the extent reasonably
necessary. Additionally, the Sellers and the Company will provide Global or the
Buyer opportunities to meet with key employees of the Business, to visit
facilities of the Business and to otherwise conduct due diligence in respect of
the Company and the Business. All materials copied by the Buyer or Global shall
be maintained in confidence by the Buyer and Global and returned to the Sellers
and/or the Company, as appropriate, if the Closing of the transactions
contemplated hereunder fails to occur.
-23-
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any further action
-------
is legally necessary or reasonably desirable (as determined by Global and the
Sellers) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Sellers and
------------
Global acknowledge and agree that from and after the Closing, Global and the
Buyer will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Company, which shall
be maintained at the chief executive office of the Company; provided, however,
that the Sellers shall be entitled to reasonable access to and to make copies of
such books and records at their sole cost and expense, and Global and the Buyer
will maintain all of the same for a period of at least six (6) years after
Closing. Thereafter, the Company will offer such documentation to the Sellers
before disposal thereof.
6.2 TRANSITION. For a period of three (3) years following Closing, the
----------
Sellers will not take any action that primarily is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Company from maintaining the same business relations
with the Company after the Closing as it maintained with the Company prior to
the Closing. For a period of three (3) years following Closing, the Sellers
will refer all customer inquiries relating to the Business to the Company.
6.3 CONFIDENTIALITY. The Sellers will treat and hold as such all
---------------
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement or otherwise for the benefit of the
Company, the Buyer or Global for a period of three (3) years from the Closing,
and deliver promptly to Global or destroy, at the written request and option of
Global, all tangible embodiments (and all copies) of the Confidential
Information which are in their possession, except as otherwise permitted herein.
In the event that any Seller is requested or required (by oral question or
written request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar legal
proceeding) to disclose any Confidential Information, such Seller will notify
Global promptly of the request or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the allocation of
-----------------------
$150,000 of the Purchase Price paid to the Sellers by the Buyer and Global, each
Seller covenants and agrees, for a period of three (3) years from and after the
Closing Date, that he will not, directly or indirectly without the prior written
consent of the Buyer and Global, for or on behalf of any entity:
-24-
(a) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/office equipment dealer, service or
distribution business in competition with the Company, within the greater of (i)
a 100 mile radius of the Company's office facilities in the States of New York
and Connecticut (the "CURRENT TRADE AREA") or (ii) in any geographic area in
which the Company currently conducts business;
(b) enter into any agreement with, service, assist or solicit the
business of any customers of the Company for the purpose of providing copier and
office equipment sales or service to such customers in competition with the
Company in the Current Trade Area or to cause them to reduce or end their
business with the Company; or
(c) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation shall be deemed to be in a
violation of this Section 6.4 solely by reason thereof.
-----------
6.5 ADDITIONAL MATTERS.
------------------
(a) The Sellers shall cause the Company to file with the appropriate
governmental authorities all Tax Returns required to be filed by it for any
taxable period ending prior to the Closing Date and the Company shall remit any
Taxes due in respect of such Tax Returns. In addition, the Sellers shall cause
Xxxxxxxx, Xxxxx & Xxxxx to prepare a short period tax return for the Company
covering the period from January 1, 1998 through August 31, 1998. The cost of
preparation of such short period tax return shall be paid for by the Sellers.
(b) The Buyer, Global and the Sellers recognize that each of them will
need access, from time to time, after the Closing Date, to certain accounting
and Tax records and information held by the Buyer, Global and/or the Company to
the extent such records and information pertain to events occurring on or prior
to the Closing Date; therefore, Global and the Buyer agree to cause the Company
to (A) use its best efforts to properly retain and maintain such records for a
period of six (6) years from the date the Tax Returns for the year in which the
Closing occurs are filed or until the expiration of the statute of limitations
with respect to such year, whichever is later, and (B) allow each Seller and his
agents and representatives at times and dates mutually acceptable to the
parties, to reasonably inspect, review and make copies of such records from time
to time, such
-25-
activities to be conducted during normal business hours and at the inspecting
party's expense.
(c) SECTION 338(H)(10) ELECTION. The Sellers, the Buyer and Global
---------------------------
shall join in making a timely election (but in no event later than 180 days
following the Closing) under Section 338(h)(10) of the Code (including the
prerequisite election under Section 338 of the Code) and any similar state law
provisions in all applicable states which permit corporations to make such
elections, with respect to the sale and purchase of the Shares pursuant to this
Agreement, and each party shall provide the others all necessary information to
permit such elections to be made. The Buyer, Global and the Sellers shall, as
promptly as practicable following the Closing Date, take all actions necessary
and appropriate (including filing such forms, returns, schedules and other
documents as may be required) to effect and preserve timely elections; provided,
however, that the Buyer and Global shall be the party responsible for preparing
and filing the forms, returns, schedules and other documents necessary for
making an effective and timely election. All Taxes attributable to the elections
made pursuant to this Section 6.5(c) shall be the liability of the Sellers;
--------------
provided, however, that (i) Global or the Buyer shall make a one-time payment
prior to such election to reimburse the Sellers for any additional Taxes and
other costs solely as a result of such election, (ii) said reimbursement shall
be grossed up (based on the Sellers' highest marginal tax brackets with respect
to the nature of the income giving rise to the Taxes) so that the Sellers will
be made whole, after taxes, for the additional Taxes to be paid, and (iii) the
amount and the timing of the one-time reimbursement payment shall be mutually
determined as of the date of the Closing Date by the Sellers' and Global's
accountants. In connection with such elections, within sixty (60) days following
the Closing Date, the Buyer, Global and the Sellers shall act together in good
faith to determine and agree upon the "deemed sales price" to be allocated to
each asset of the Company in accordance with Treasury Regulation Section
1.338(h)(10)-1(f) and the other regulations under Section 338 of the Code.
Notwithstanding the generality of immediately preceding sentence, the Buyer,
Global and the Sellers agree that the "deemed sales price" shall be allocated to
the monetary assets of the Company at their fair market value as of the Closing
Date as determined as part of the determination of the Working Capital of the
Company in accordance with Section 2.8 hereof, $150,000 shall be allocated to
-----------
the covenant not to compete contained in Section 6.4 hereof, and the balance of
-----------
the "deemed sales price" shall be allocated to the fixed assets, goodwill and
other intangible assets of the Company. Each of the Buyer, Global and the
Sellers shall report the tax consequences of the transactions contemplated by
this Agreement consistently with such allocations and shall not take any
position inconsistent with such allocations in any Tax Return or otherwise. In
the event that Global and the Sellers are unable to agree as to such
allocations, Global's reasonable positions with respect to such allocations
shall control. The Sellers shall be liable for, and shall indemnify and hold the
Buyer, Global and the Company harmless against, any Taxes or other costs
attributable solely to (i) a failure on the part of any Seller to take all
actions
-26-
required of him under this Section 6.5(c); or (ii) a failure on the part of the
--------------
Company to qualify, at or prior to the Closing, as an "S corporation" for
federal and/or state income Tax purposes.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO THE BUYER'S AND GLOBAL'S OBLIGATIONS. The obligation of
--------------------------------------------------
Global and the Buyer under this Agreement to consummate the Closing is subject
to the conditions that:
(a) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company and the
-----------------------------------------
Sellers shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and the
Sellers set forth in this Agreement shall be accurate in all material respects
at and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date, except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by this Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date. In addition, the Buyer and Global shall have
determined from its due diligence review of the Company that no Material Adverse
Change or Material Adverse Effect shall have occurred in the financial
condition, business, operations or prospects of the Company from those presented
to the Buyer or Global.
(b) CONSENTS. All statutory requirements for the valid consummation
--------
by the Company and the Sellers of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to Global,
unless such failure could not reasonably be expected to have a Material Adverse
Effect. All approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement and the transactions
contemplated hereby shall have been obtained.
(c) SUPPLIERS/LEASES. The Sellers shall have obtained, where
----------------
necessary, the written consent of (i) the Company's Material office equipment
-27-
suppliers and (ii) the lessors of the Buildings to the transactions contemplated
by the Agreement. The lessors of the Buildings shall have provided an Estoppel
Certificate to Global's lenders in substantially the same form as Exhibit B
---------
hereto, except as specifically waived by Global.
(d) DISCHARGE OF INDEBTEDNESS AND LIENS. The Sellers and the Company
-----------------------------------
shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company. Such Funded Indebtedness, if any, as of August 31,
1998, is listed on Schedule 7.1(d) hereto. The Sellers shall have also provided
---------------
for the termination of all Encumbrances of record on the properties of the
Company, except for Permitted Exceptions. All liens or UCC filings against the
Company and each of the Subsidiaries or Affiliates of the Company which engaged
in the Business other than Permitted Exceptions shall have been terminated as of
the Closing.
(e) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change with respect to the Company since June 30, 1998.
(f) TRANSFER TAXES. The Sellers shall be responsible for all stock
--------------
transfer or gains taxes imposed on the Sellers incurred in connection with this
Agreement.
(g) DOCUMENTS TO BE DELIVERED BY THE SELLERS AND THE COMPANY. The
--------------------------------------------------------
following documents shall be delivered at the Closing by the Sellers and the
Company:
(i) OPINION OF THE SELLERS' COUNSEL. Global and the Buyer shall
-------------------------------
have received an opinion of counsel to the Company and the Sellers, dated
the Closing Date, in substantially the same form as the form of opinion
that is Exhibit C hereto.
---------
(ii) CERTIFICATES. Global and the Buyer shall have received an
------------
officer's certificate and a secretary's certificate of the Company executed
by officers of the Company, dated the Closing Date, in substantially the
same forms as the forms of certificates that are Exhibit D-1 and D-2,
----------- ---
respectively, hereto.
(iii) RELEASE. The Sellers shall have furnished the Company
-------
with a general release in substantially the same form as the form attached
as Exhibit E hereto.
---------
(iv) ESCROW AGREEMENT. The Sellers shall have delivered to
----------------
Global and the Buyer at the Closing the duly executed Escrow Agreement
required pursuant to Section 2.5 hereof.
-----------
-28-
(v) EMPLOYMENT AGREEMENTS. Xxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx
---------------------
shall have duly executed and delivered the Employment Agreements in
substantially the same form attached as Exhibits F-1 and F-2 hereto,
------------ ---
pursuant to which they will be employed by the Company following the
Closing.
(vi) BUILDING LEASES. Global and the Buyer shall be reasonably
---------------
satisfied with the terms of the leases of the Buildings, except as
otherwise provided in subparagraph (ix) below. The Sellers shall have
-----------------
delivered to Global and the Buyer an Estoppel Certificate of the landlords
of the Existing Buildings to Global's lenders in substantially the same
form as the form attached as Exhibit B hereto, except as specifically
---------
waived by Global.
(vii) EQUITY SUBSCRIPTION AGREEMENT. Xxxx X. Xxxxxxxx and Xxxxxx
-----------------------------
X. Xxxxx shall have executed and delivered to Global an Equity Subscription
Agreement in substantially the same form as the form attached hereto as
Exhibit H.
---------
(viii) STOCK CERTIFICATES. The Sellers shall have delivered the
------------------
Shares accompanied by duly executed stock powers, together with any stock
transfer stamps or receipts for any transfer taxes required to be paid
thereon.
7.2 CONDITIONS TO THE SELLERS' AND THE COMPANY'S OBLIGATIONS. The
--------------------------------------------------------
obligation of the Sellers and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(a) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Buyer and Global
-----------------------------------------
shall have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this Agreement
to be performed and complied with by the Buyer and Global prior to or at the
Closing and the representations and warranties of the Buyer and Global set forth
in Article IV hereof shall be accurate in all material respects, at and as of
----------
the Closing Date, with the same force and effect as though made on and as of the
Closing Date except for any changes resulting from activities or transactions
which may have taken place after the date hereof and which are permitted or
contemplated by the Agreement or which have been entered into in the ordinary
course of the Business and except to the extent that such representations and
warranties are expressly made as of another specified date and, as to such
representations, the same shall be true as of such specified date.
(b) CONSENTS. All statutory requirements for the valid consummation
--------
by the Buyer and Global of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
expiration or early termination of all waiting periods under the XXX Xxx
-00-
xxx xxxxx xx xxx xxxxxxx, xxxxx, local and foreign governmental agencies and
regulatory authorities required to be obtained in order to permit the
consummation by the Buyer and Global of the transactions contemplated hereby
shall have been obtained unless such failure shall not have a Material Adverse
Effect on the Business. The Buyer and Global shall have used its reasonable
efforts to have obtained the release of the Sellers from all personal guarantees
with respect to the Company.
(c) DOCUMENTS TO BE DELIVERED BY THE BUYER AND GLOBAL. The following
-------------------------------------------------
documents shall be delivered at the Closing by Global:
(i) CERTIFICATES. The Sellers shall have received an officers'
------------
certificate and a secretary's certificate executed by officers of the Buyer
and Global, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G-1 and G-2, respectively, hereto.
----------- ---
(ii) ESCROW AGREEMENT. The Buyer and Global shall have delivered
----------------
to the Sellers at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(iii) EMPLOYMENT AGREEMENTS. The Buyer and Global shall have
---------------------
caused the Company to duly execute and deliver the Employment Agreements
with Xxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx in the same form attached as
Exhibit F-1 and F-2 hereto, pursuant to which they will be employed by the
----------- ---
Company following the Closing.
(iv) EQUITY SUBSCRIPTION AGREEMENT. Global shall have executed
-----------------------------
and delivered to Xxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx an Equity
Subscription Agreement in substantially the same form as the form attached
hereto as Exhibit H.
---------
(v) LEASE. The Buyer and Global shall have caused the Company to
-----
duly execute and deliver the lease for the Existing Building in
Farmingdale, New York appended hereto as Exhibit I.
---------
(d) PAYMENTS TO THE SELLERS AND THE COMPANY AND THE ESCROW AGENT. The
------------------------------------------------------------
Sellers shall have received the Purchase Price for the Shares. The Escrow Agent
shall have received the Escrow from Global.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF THE BUYER AND GLOBAL. Except as provided in
---------------------------------------
Section 8.6, as the Buyer's and Global's sole and exclusive monetary
-----------
-30-
remedy for any breach by the Sellers hereunder, the Sellers agree to jointly and
severally indemnify and hold harmless Global and each officer, director, and
affiliate of the Buyer or Global, including without limitation the Company or
any successor of the Company (collectively, the "INDEMNIFIED PARTIES") from and
against any and all damages, losses, claims, liabilities, demands, charges,
suits, penalties, costs and expenses (including court costs and reasonable
attorneys' fees and expenses incurred in investigating and preparing for any
litigation or proceeding) (collectively, the "INDEMNIFIABLE COSTS"), which any
of the Indemnified Parties may sustain, or to which any of the Indemnified
Parties may be subjected, arising out of (A) any misrepresentation, breach or
default by the Sellers or the Company of or under any of the representations,
covenants, agreements or other provisions of this Agreement or any agreement or
document executed in connection herewith; (B) the assertion and final
determination of any claim or liability against the Company or any of the
Indemnified Parties by any Person based upon the facts which form the alleged
basis for any litigation to the extent it should have been, but was not,
reserved for in the Financial Statements in accordance with GAAP; and (C) the
Company's tortious acts or omissions to act prior to Closing for which the
Company did not carry liability insurance for themselves as the insured party,
whether or not such acts or omissions to act result in a breach or violation of
any representation or warranty.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted, or any
-----------------
claim or demand made, against any Indemnified Party in respect of which the
Sellers may be liable hereunder, such Indemnified Party shall give prompt
written notice thereof to the Sellers and, except as otherwise provided in
Section 8.4 below, the Sellers shall have the right to defend, or cause the
-----------
Company or its successors to defend, any litigation, action, suit, demand, or
claim for which it may seek indemnification unless, in the reasonable judgment
of Global, such litigation, action, suit, demand, or claim, or the resolution
thereof, would have a material ongoing effect on the Buyer or Global, the
Company or its successors, and such Indemnified Party shall extend reasonable
cooperation in connection with such defense, which shall be at the Sellers'
expense. In the event the Sellers fail or refuse to defend the same within a
reasonable length of time, the Indemnified Parties shall be entitled to assume
the defense thereof, and the Sellers shall be jointly and severally liable to
repay the Indemnified Parties for all expenses reasonably incurred in connection
with said defense (including reasonable attorneys' fees and settlement payments)
if it is determined that such request for indemnification was proper. If the
Sellers shall not have the right to assume the defense of any litigation,
action, suit, demand, or claim in accordance with either of the two preceding
sentences, the Indemnified Parties shall have the absolute right to control the
defense of and to settle, in Indemnified Parties' sole discretion such
litigation, action, suit, demand, or claim, but each Seller shall be entitled,
at his own expense, to participate in such litigation, action, suit, demand, or
claim.
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8.3 ESCROW CLAIM. If any claim for indemnification is made by an
------------
Indemnified Party or a Seller pursuant to this Article VIII prior to the
------------
expiration of the Escrow Period, such Indemnified Party or Seller shall first
apply to the Escrow Agent for reimbursement of such claim in accordance with the
provisions of the Escrow Agreement prior to seeking reimbursement for such
claim. Upon expiration of the Escrow Period, the Buyer or Global may offset any
claim for indemnification made by the Buyer or Global pursuant to this Article
-------
VIII against the Earn-Out Payment.
----
8.4 TAX AUDITS, ETC. In the event of an audit of any Tax Return of the
----------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, the Buyer and Global shall have
------------
the right to control any and all such audits which may result in the assessment
of additional Taxes against the Company and any and all subsequent proceedings
in connection therewith, including appeals. The Sellers shall cooperate fully
in all matters relating to any such audit or other Tax proceeding (including
according access to all records pertaining thereto), and will execute and file
any and all consents, powers of attorney, and other documents as shall be
reasonably necessary in connection therewith. If additional Taxes are payable
by the Company as a result of any such audit or other proceeding, the Sellers
shall be responsible for and shall promptly pay all Taxes, interest, and
penalties to which any of the Indemnified Parties shall be entitled to
indemnification; provided, however, that Sellers shall be afforded the
opportunity to participate in any such audit procedure.
8.5 INDEMNIFICATION OF THE SELLERS. The Buyer and Global agree to jointly
------------------------------
and severally indemnify and hold harmless the Sellers and the Company and each
officer, director, stockholder or affiliate of the Company, from and against any
Indemnifiable Costs arising out of any material misrepresentation, breach or
default by the Buyer or Global of or under any of the covenants, agreements or
other provisions of this Agreement or any agreement or document executed in
connection herewith, including without limitation any Indemnifiable Costs
arising out of the breach of Global and/or Buyer's representation contained in
Section 4.3. In addition, the Company, the Buyer and Global shall indemnify the
-----------
Sellers for any payment or satisfaction of any guarantees by the Sellers of the
Company's obligations occurring after the Closing Date.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by any party
-------------------------
hereunder shall be net of any insurance proceeds received by such Person with
respect to such claim (less the present value of any premium increases occurring
as a result of such claim). Except for any claims for breach of the
representations, warranties and covenants of the Sellers under Sections 3.1,
-------------
3.2, 3.3, 3.17, 3.26 or 6.5 hereof (for which indemnification claims must be
-------------------- ---
made prior to the expiration of the applicable statute of limitations and if so
made, such claims shall continue after such date until finally resolved), the
right to make claims for indemnification provided under this Article VIII shall
------------
expire on April 1, 2001
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(except for claims made prior to such date which shall continue after such date
until finally resolved). The Sellers shall not be obligated to pay any amounts
for indemnification under this Article VIII until the aggregate indemnification
------------
obligation hereunder exceeds $25,000, whereupon the Sellers shall be liable for
all amounts for which indemnification may be sought. Notwithstanding the
foregoing, in no event shall the aggregate liability of the Sellers to the Buyer
and Global hereunder exceed the $10,000,000. Global shall not be obligated to
pay any amounts for indemnification under this Article VIII until the aggregate
------------
indemnification obligation hereunder exceeds $25,000, whereupon the Buyer and
Global shall be liable for all amounts for which indemnification may be sought.
However nothing in this Article VIII shall limit the Buyer, Global or the
------------
Sellers in exercising or securing any remedies provided by applicable common law
with respect to the conduct of the Sellers, on the one hand, and the Buyer or
Global, on the other, in connection with this Agreement or in the amount of
damages that either such party can recover from the other party in the event
that the Sellers, on the one hand, or the Buyer or Global, on the other,
successfully proves intentional fraud or intentional fraudulent conduct in
connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
-------------
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given when personally delivered,
or 48 hours after deposited in the United States mail, first-class, postage
prepaid, or by facsimile addressed to the respective parties hereto as follows:
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Global or the Buyer:
-------------------
c/o Global Imaging Systems, Inc.
13902 North Xxxx Xxxxx Road, Suite 300
Box 273478
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxx Xxxxxxx, President
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
With a copy to:
---------------
Xxxxx & Xxxxxxx L.L.P.
Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
The Company or Sellers:
-----------------------
Xxxx Business Machines of Great Neck Inc.
00 Xxxxx Xxxxx Xxxx
Xxxxxxxxxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxxx
Xxxxxx X. Xxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
And with a copy to:
-------------------
Xxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxx X. Xxxxxxxxx, P.C.
0000 Xxxxxxxxxxx Xxxxxx
Xxx Xxxxx, Xxx Xxxx 00000
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS; FACSIMILE TRANSMISSION. This Agreement may be executed
------------------------------------
in several counterparts, each of which shall be deemed an original but all of
which counterparts collectively shall constitute one instrument, and in
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making proof of this Agreement, it shall never be necessary to produce or
account for more than one such counterpart. Signatures of a party to this
Agreement or other documents executed in connection herewith which are sent to
the other parties by facsimile transmission shall be binding as evidence of
acceptance of the terms hereof or thereof by such signatory party, with
originals to be circulated to the other parties in due course.
9.4 EXPENSES. Each of the parties hereto will bear all costs, charges and
--------
expenses incurred by such party in connection with this Agreement and the
consummation of the transactions contemplated herein; provided, however, that
the Sellers shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of the Sellers and the Company with
respect to this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Company, the Buyer, Global and the Sellers, their
heirs, representatives, successors, and permitted assigns, in accordance with
the terms hereof. This Agreement shall not be assignable by the Company or the
Sellers without the prior written consent of Global. This Agreement shall be
assignable by Global or the Buyer to a wholly-owned subsidiary of Global without
the prior written consent of the Sellers, but any such assignment shall not
relieve Global of its obligations hereunder. In addition, the indemnification
rights of Global under Article VIII hereof may be assigned by the Buyer or
------------
Global to First Union National Bank, N.A.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other schedules and
-------------------------
agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of New York.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Regardless of
-----------------------------------------------------
any investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect thereof, all covenants, agreements,
representations, and warranties and the related indemnities made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
survive the Closing for a period ending on April 1, 2001, provided (a) the
representations and warranties contained in Sections 3.14 and 3.17 of this
------------- ----
Agreement, and the related indemnities, shall survive the Closing until the
expiration of the applicable statutes of limitations for determining or
contesting Tax
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liabilities, (b) the representations, warranties and covenants contained in
Sections 3.1, 3.2, 3.3, and 6.5 of this Agreement, and the related indemnities,
------------ --- --- ---
shall survive the Closing indefinitely and not expire.
9.9 INVALID PROVISIONS. If any provision of this Agreement is deemed
------------------
or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this Agreement
ever be reformed or rewritten by any judicial body of competent jurisdiction,
such provision as so reformed or rewritten shall be binding upon all parties
hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
--------------------
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
-------------------
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in exercising
------
any right, power, or privilege hereunder or under any of the documents delivered
in connection with this Agreement shall operate as a waiver of such right,
power, or privilege; nor shall any single or partial exercise of any such right,
power, or privilege preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN THE SELLERS, ON THE ONE
------------------
HAND, AND THE BUYER AND GLOBAL, ON THE OTHER, WITH RESPECT TO ANY PROVISION OF
THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF THE SELLERS, THE BUYER AND
GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF INTENTIONAL
FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE RESOLVED BY
BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION
ASSOCIATION IN NEW YORK, NEW YORK, OR BY ANY OTHER MEANS OF ALTERNATIVE DISPUTE
RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES. EACH PARTY SHALL BE ENTITLED TO
DISCOVERY PURSUANT TO THE FEDERAL RULES OF CIVIL PROCEDURE AND FEDERAL RULES OF
EVIDENCE.
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[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
BUYER:
-----
XXXX ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
President and Chairman of the Board
GLOBAL:
------
GLOBAL IMAGING SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
President and Chief Executive Officer
THE COMPANY:
-----------
XXXX BUSINESS MACHINES OF GREAT NECK
INC. (D/B/A XXXX BUSINESS SYSTEMS)
By: /s/ Xxxx X. Xxxxxxxx
--------------------
Name: Xxxx X. Xxxxxxxx
Title: President
THE SELLERS:
-----------
/s/ Xxxx X. Xxxxxxxx
--------------------
Xxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxx
-------------------
Xxxxxx X. Xxxxx
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