EXHIBIT 10.24
[***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[**]") OR OTHERWISE
IDENTIFIED HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
CASCADE OFFICE SYSTEMS, INC. (THE "COMPANY")
AND
THE SHAREHOLDERS OF THE COMPANY
DATED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PAGE
ARTICLE I 1
1.1 Definitions............................................... 1
ARTICLE II........................................................... 5
2.1 Agreement to Sell and Purchase............................ 5
2.2 Purchase Price............................................ 5
2.3 Payment of Purchase Price................................. 5
2.4 Closing................................................... 6
2.5 Escrow Arrangements....................................... 6
2.6 Purchase Price Adjustments................................ 6
2.7 Closing Audit............................................. 7
2.8 Post-Closing Purchase Price Adjustment.................... 7
ARTICLE III.......................................................... 8
3.1 Capitalization............................................ 8
3.2 No Liens on Shares........................................ 8
3.3 Other Rights to Acquire Capital Stock..................... 8
3.4 Due Organization.......................................... 8
3.5 Subsidiaries.............................................. 9
3.6 Due Authorization......................................... 9
3.7 Financial Statements...................................... 9
3.8 Certain Actions........................................... 10
3.9 Properties................................................ 11
3.10 Licenses and Permits...................................... 11
3.11 Intellectual Property..................................... 12
3.12 Compliance with Laws...................................... 12
3.13 Insurance................................................. 12
3.14 Employee Benefit Plans.................................... 13
(a) Employee Welfare Benefit Plans...................... 13
(b) Employee Pension Benefit Plans...................... 13
(c) Employment and Non-Tax Qualified Deferred
Compensation Arrangements......................... 13
3.15 Contracts and Agreements.................................. 13
3.16 Claims and Proceedings.................................... 14
3.17 Taxes..................................................... 14
3.18 Personnel................................................. 15
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3.19 Business Relations............................................................ 16
3.20 Accounts Receivable........................................................... 16
3.21 Bank Accounts................................................................. 16
3.22 Warranties.................................................................... 17
3.23 Brokers....................................................................... 17
3.24 Interest in Competitors, Suppliers, Customers, Etc............................ 17
3.25 Indebtedness To and From Officers, Directors, Shareholders, and Employees..... 17
3.26 Undisclosed Liabilities....................................................... 17
3.27 Information Furnished......................................................... 17
ARTICLE IV............................................................................... 18
4.1 Due Organization.............................................................. 18
4.2 Due Authorization............................................................. 18
4.3 No Brokers.................................................................... 18
4.5 Due Diligence Review.......................................................... 19
4.7 Investment Intent............................................................. 19
4.9 Qualification as a Sophisticated Investor..................................... 19
4.11 Legend........................................................................ 19
ARTICLE V................................................................................ 20
5.1 Consents of Others............................................................ 20
5.2 Seller's Efforts.............................................................. 20
5.3 Powers of Attorney............................................................ 20
ARTICLE VI............................................................................... 20
6.1 General....................................................................... 20
6.2 Transition.................................................................... 20
6.3 Confidentiality............................................................... 21
6.4 Covenant Not to Compete....................................................... 21
6.6 Additional Matters............................................................ 22
ARTICLE VII.............................................................................. 23
7.1 Conditions to Global's Obligations............................................ 23
(a) Covenants, Representations and Warranties.............................. 23
(b) Consents............................................................... 24
(c) Leases................................................................. 24
(d) Discharge of Indebtedness and Liens.................................... 24
(e) Material Adverse Change................................................ 24
(f) Transfer Taxes......................................................... 24
(g) Financial Condition.................................................... 24
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(h) Documents to be Delivered by Seller and the Company..... 25
(i) Opinion of Seller's Counsel...................... 25
(ii) Certificates..................................... 25
(iii) Release.......................................... 25
(iv) Escrow Agreement................................. 25
(v) Consulting Agreement............................. 25
(vi) Building Leases.................................. 25
(vii) Collateral Assignment of Rights.................. 25
(viii) Stock Certificates............................... 25
7.2 Conditions to Seller's and the Company's Obligations........... 25
(a) Covenants, Representations and Warranties............... 26
(b) Consents................................................ 26
(c) Documents to be Delivered by Global..................... 26
(ii) Certificates..................................... 26
(iii) Escrow Agreement................................. 26
(iv) Consulting Agreement............................. 26
(iv) Purchase Price................................... 27
(d) Right of Reinvestment................................... 27
ARTICLE VIII.............................................................. 27
8.1 Indemnification of Global...................................... 27
8.2 Defense of Claims.............................................. 27
8.3 Escrow Claim................................................... 28
8.4 Tax Audits, Etc................................................ 28
8.5 Indemnification of Seller...................................... 28
8.6 Limits on Indemnification...................................... 28
ARTICLE IX................................................................ 29
MISCELLANEOUS............................................................. 29
9.1 Modifications.................................................. 29
9.2 Notices........................................................ 29
9.3 Counterparts................................................... 30
9.4 Expenses....................................................... 30
9.5 Binding Effect; Assignment..................................... 30
9.6 Entire and Sole Agreement...................................... 30
9.7 Governing Law.................................................. 31
9.8 Survival of Representations, Warranties and Covenants.......... 31
9.9 Invalid Provisions............................................. 31
9.10 Public Announcements........................................... 31
9.11 Remedies Cumulative............................................ 31
9.12 Waiver......................................................... 31
9.13 DISPUTE RESOLUTION............................................. 32
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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 Seller's Counsel
Exhibit D Seller's Certificates
Exhibit E Release
Exhibit F ▇▇▇▇▇▇▇ Consulting Agreement
Exhibit G Global Certificates
Exhibit H Collateral Assignment of Rights
LIST OF SCHEDULES
Schedule 2.3 Seller's Accounts
Schedule 2.6 Holders of Funded Indebtedness
Schedule 3.1 Ownership of Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 7.1(d) Indebtedness
The Exhibits and Schedules to this Stock Purchase Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of
September 30, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), CASCADE OFFICE SYSTEMS, INC., a Washington corporation
(the "COMPANY") and THE SHAREHOLDER OF THE COMPANY (the "SELLER").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and service
of office equipment in the State of Washington (the "BUSINESS"); and
WHEREAS, Seller owns all of the outstanding shares of capital stock of
the Company (the "SHARES"), which Shares constitute all of the issued and
outstanding capital stock of the Company; and
WHEREAS, Global desires to purchase from Seller and Seller desires to
sell to Global hereby all of the Shares owned by Seller all on the terms and
subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In this Agreement, the following terms have the
meanings specified or referred to in this Section 1.1 and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.7.
"BUILDINGS" shall mean the Company's offices, showroom and
warehouse facilities located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇.
"BUSINESS" has the meaning specified in the first recital of the
Agreement
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments
thereto, any successor statutes, and any regulations promulgated thereunder.
"CLOSING" means the closing of the transfer of the Shares from
the Seller to Global.
"CLOSING DATE" has the meaning specified in Section 2.4.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; financial statements, cost reports or other financial
information; contract proposals, or bidding information; business plans and
training and operations methods and manuals; personnel records; fee structure;
and management systems, policies or procedures, including related forms and
manuals. Confidential Information shall not include any information (i) which
is disclosed pursuant to subpoena or other legal process, (ii) which has been
publicly disclosed, (iii) which subsequently becomes known to a third party not
subject to a confidentiality agreement with Global or the Company, or (iv) which
is subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONSULTING AGREEMENT" shall mean the consulting agreement with
▇▇▇▇ ▇▇▇▇▇▇▇ to be entered into at Closing in the form of Exhibit F.
"CONTRACTS" has the meaning specified in Section 3.15.
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
"ENCUMBRANCE" means any bona fide lien, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, or restrictive covenant.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
3.12.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the First Trust National Association.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Seller, Global and the Escrow Agent in the form of Exhibit A.
"ESCROW PERIOD" has the meaning specified in Section 2.5.
"ESCROW SUM" has the meaning specified in Section 2.5.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable or accrued expenses in the ordinary course of business on no more than
90 day payment terms; (iv) indebtedness of others guaranteed by the Company or
secured by an Encumbrance on the Company's property; (v) indebtedness of the
Company under extended credit terms of more than 30 days from manufacturers
provided to the Company; or (vi) any receivables owed by the Seller to the
Company. Funded Indebtedness does not include the officer loan which is being
paid off at Closing.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GLOBAL" has the meaning specified in the first paragraph of this
Agreement.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
2.7.
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
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"INTELLECTUAL PROPERTY" has the meaning specified in Section
3.11.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "MATERIAL ADVERSE
CHANGE" or "MATERIAL ADVERSE EFFECT" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) other liens or imperfections on property which
are not material in amount or do not materially detract from the value or the
existing use of the property affected by such lien or imperfection, (d) such
statements of fact and exceptions shown on any title insurance policies
delivered to Global.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of the Effective Date. The
Preliminary Closing Balance Sheet shall be delivered to Global not less than
five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
promulgated thereunder.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLER" has the meaning set forth in the first paragraph of this
Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company.
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"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed thereon by any
Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"WORKING CAPITAL" shall mean the difference between the Company's
current assets and its current liabilities (excluding Funded Indebtedness) as
calculated in accordance with GAAP.
"WORKING CAPITAL TARGET" shall have the meaning assigned to such
term in Section 2.6 hereof.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, Seller agrees to sell the Shares to
Global and Global agrees to purchase the Shares from Seller.
2.2 PURCHASE PRICE. The total purchase price for the Shares (the
"PURCHASE PRICE") shall be equal to $1,056,371 and the note payable to Seller of
$373,829 and $19,800 for the payments due under the Consulting Agreement,
subject to any adjustment required to be made pursuant to Section 2.6 or Section
2.8 below.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
by Global at the Closing (hereinafter defined) as follows:
(A) $926,371 of the Purchase Price as adjusted downward as set
forth in Section 2.6 below will be paid, at the direction of the Seller, in cash
by wire transfer of funds as specified in Schedule 2.3 (including the payment of
$30,000 for the covenant not to compete provided in Section 6.4 and in addition
$19,800 for the payments due under the Consulting Agreement);
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(B) $130,000 of the Purchase Price will be paid in cash by wire
transfer of funds to the Escrow Agent to be held in escrow for satisfaction of
Seller's indemnification obligations specified in Section 8.1 or payment to the
Seller in accordance with the terms of Section 2.5 below; and
(C) $373,829 shall be paid to Seller for repayment of a loan
owed to Seller by Company.
2.4 CLOSING. The Closing of the purchase and sale of the Shares
contemplated by this Agreement shall take place at 9:00 a.m., Pacific Coast
time, at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ in Seattle, Washington on September
30, 1997, or at such other date and time as the parties shall agree (the
"CLOSING DATE"), effective as of September 1, 1997 (the "EFFECTIVE DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement in the
form attached as Exhibit A hereto to be entered into among Seller, Global and
the Escrow Agent, $130,000 of the Purchase Price shall be delivered to the
Escrow Agent at Closing. Such monies (which, together with all interest accrued
thereon, is hereinafter referred to as the "ESCROW SUM") shall be held pursuant
to the terms of the Escrow Agreement for payment from such Escrow Sum of the
amounts, if any, owing by Seller to Global pursuant to Section 2.8 or Article
VIII below. At the conclusion of the period ending on the first anniversary of
the Closing Date (such period being referred to herein as the "ESCROW PERIOD"),
such remaining portion of the Escrow Sum not theretofore claimed by or paid to
Global in accordance with the terms of the Escrow Agreement and this Agreement
shall be disbursed to Seller. Seller and Global agree that each will execute and
deliver such reasonable instruments and documents as are furnished by any other
party to enable such furnishing party to receive those portions of the Escrow
Sum to which the furnishing party is entitled under the provisions of the Escrow
Agreement and this Agreement.
2.6 PURCHASE PRICE ADJUSTMENTS.
(A) The Purchase Price payable pursuant to Section 2.3(a) above
will be reduced by the total amount of Funded Indebtedness (excluding $373,829
paid to Seller pursuant to Section 2.3(c) above), if any, assumed or paid by
Global in cash by wire transfer of funds to the accounts of the holders of
Funded Indebtedness listed on Schedule 2.6 hereto to satisfy the Company's
Funded Indebtedness with such institutions.
(b) The portion of the Purchase Price payable at Closing will be
reduced by $41,021, which is the amount by which the adjusted Working Capital as
reflected on the Preliminary Closing Balance Sheet is less than $527,156 [the
amount which is $25,000 less than the average of the Working Capital balances at
the end of each of the first six months of 1997] (the "WORKING CAPITAL TARGET").
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2.7 CLOSING AUDIT. Within 90 days following the Closing Date,
there shall be delivered to Global and to Seller an audit of the Preliminary
Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET") of the Company at
and as of the Effective Date. The Preliminary Closing Balance Sheet shall be
audited by Ernst & Young, LLP in accordance with GAAP. The cost of the Audited
Closing Balance Sheet shall be paid by Global. In the event that the Seller
disputes any items on the Audited Closing Balance Sheet within ten days after
Seller's receipt thereof, the parties shall jointly select and retain an
independent "Big Six" accounting firm (the "INDEPENDENT ACCOUNTANTS") to review
the disputed item(s) on the Audited Closing Balance Sheet. The final
determination of such disputed item(s) by the Independent Accountants shall be
reflected on the Audited Closing Balance Sheet. The cost of retaining the
Independent Accountants shall be borne equally by Seller and Global.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
Working Capital as reflected on the Audited Closing Balance Sheet is less than
the Working Capital Target, then the Purchase Price will be adjusted downward,
on a dollar-for-dollar basis, to reflect the lesser of (i) the decrease, if any,
in Working Capital as reflected on the Audited Closing Balance Sheet from the
amount of Working Capital reflected on the Preliminary Closing Balance Sheet or
(ii) the amount, if any, by which the Working Capital reflected on the Audited
Closing Balance Sheet is less than the Working Capital Target. Conversely, the
Purchase Price will be adjusted upward, on a dollar-for dollar basis, to reflect
the increase, if any, in the total Working Capital as reflected on the Audited
Closing Balance Sheet from the amount of Working Capital reflected on the
Preliminary Closing Balance Sheet, provided, however, that in no event shall
such upward adjustment exceed the total amount of any adjustment to the Purchase
Price made pursuant to Section 2.6(b) above. The post-closing adjustment to the
Purchase Price, if any, shall be paid by Seller to Global from the Escrow Sum
(or, at Seller's option, in cash) or by Global to Seller, as the case may be, in
immediately available funds within ten (10) business days of delivery of the
Audited Closing Balance Sheet, unless the Seller disputes any items on the
Audited Closing Balance Sheet, in which case it shall be paid within ten (10)
business days after the Independent Accountants finally determine the disputed
item(s), and Global delivers to Seller an Audited Closing Balance Sheet modified
to reflect such determination.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
The Company and Seller represent and warrant to Global that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
consists of 1,098 shares of Common Stock, all of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
Seller in the amounts set forth on Schedule 3.1 hereto. None of the Shares was
issued or will be transferred under this Agreement in violation of any
preemptive or
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preferential rights of any Person. The Seller owns all of the issued and
outstanding capital stock of the Company.
3.2 NO LIENS ON SHARES. Except as shown on Schedule 3.1, Seller
owns the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, Seller will have full power and authority to
convey good and marketable title to the Shares, free and clear of any
Encumbrances.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock, except for the right of
first refusal granted to Quality Business Systems, Inc. (the "QBS RIGHT").
3.4 DUE ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Washington and has full corporate power and authority to carry on the Business
as now conducted and as proposed to be conducted through Closing. Complete and
correct copies of the Articles of Incorporation and Bylaws of the Company, and
all amendments thereto, have been heretofore delivered to Global and are
attached hereto as Schedule 3.4. Except as set forth on Schedule 3.10, the
Company is qualified to do business in the State of Washington and in each
jurisdiction in which the nature of the Business or the ownership of its
properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 SUBSIDIARIES. The Company has no subsidiaries or ownership
interest in any Person.
3.6 DUE AUTHORIZATION. The Company and the Seller each have full
power and authority to execute, deliver and perform this Agreement and to carry
out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and Seller and constitutes the valid and binding obligations of the Company and
Seller, enforceable in accordance with its terms, except to the extent that
enforceability may be limited by laws affecting creditors' rights and debtors'
obligations generally, and legal limitations relating to remedies of specific
performance and injunctive and other forms of equitable relief. The execution,
delivery, and performance of this Agreement (as
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well as all other instruments, agreements, certificates, or other documents
contemplated hereby) by the Company and Seller, do not (a) violate any
Requirements of Laws or any Court Order of any Governmental Body applicable to
the Company or Seller, or their respective property, (b) violate or conflict
with, or permit the cancellation of, or constitute a default under, any material
agreement to which the Company or Seller are a party, or by which any of them or
any of their respective property is bound (other than the consent of the
Company's landlord), (c) permit the acceleration of the maturity of any material
indebtedness of, or indebtedness secured by the property of, the Company or
Seller, or (d) violate or conflict with any provision of the charter or bylaws
of the Company.
3.7 FINANCIAL STATEMENTS. The following Financial Statements
(herein so called) of the Company have been delivered to Global by the Company:
compiled balance sheets of the Company as of December 31, 1994, December 31,
1995 and December 31, 1996 and unaudited balance sheet as of August 31, 1997,
and compiled statements of income of the Company for the fiscal years ended
December 31, 1994, December 31, 1995 and December 31, 1996 and unaudited
statement of income for the eight (8) month period ending August 31, 1997.
The Financial Statements have been prepared in accordance with GAAP except for
built-in gain tax liability as described on Schedule 3.7, throughout the periods
indicated and fairly present the financial position, results of operations and
changes in financial position of the Company as of the indicated dates and for
the indicated periods, subject (in the case of the eight (8) month Financial
Statements) to year end accruals made in the ordinary course of the Business
which are not materially adverse and which are consistent with past practices.
Except to the extent reflected or provided for in the Financial Statements or
the notes thereto and obligations and liabilities incurred in the ordinary
course of business since the date of the last of such Financial Statements, the
Company has no liabilities required by GAAP to be reflected on the Company's
balance sheet or notes thereto that are not so reflected, nor any other
obligations (whether absolute, contingent, or otherwise) which are (individually
or in the aggregate) Material (in amount or to the conduct of the Business); and
neither the Company nor Seller has knowledge of any basis for the assertion of
any such liability or obligation. Since April 30, 1997, there has been no
Material Adverse Change in the prospects of the Company except for the slowdown
in deliveries by Konica (the "KONICA SLOWDOWN").
3.8 CERTAIN ACTIONS. Since April 30, 1997, the Company has not,
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
or notes thereto: (a) discharged or satisfied any Encumbrance or paid any
obligation or liability, absolute or contingent, other than current liabilities
incurred and paid in the ordinary course of the Business; (b) paid or declared
any dividends or distributions, or purchased, redeemed, acquired, or retired any
stock or indebtedness from any stockholder; (c) made or agreed to make any loans
or advances or guaranteed or agreed to guarantee any loans or advances to any
party whatsoever; (d) suffered or permitted any Encumbrance to arise or be
granted or created against or upon any of its assets, real or personal, tangible
or intangible; (e) canceled, waived, or released or agreed to cancel, waive, or
release any of its debts, rights, or claims against third parties in excess of
$10,000 individually or $25,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or
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otherwise transferred, or suffered any material damage, destruction, or loss
(whether or not covered by insurance) to, any assets (except in the ordinary
course of the Business); (g) amended its charter or bylaws; (h) paid or made a
commitment to pay any severance or termination payment to any employee or
consultant; (i) made any material change in its method of management or
operation or method of accounting; (j) made any capital expenditures, including,
without limitation, replacements of equipment in the ordinary course of the
Business, or entered into commitments therefor, except for capital expenditures
or commitments therefor which do not, in the aggregate, exceed $35,000; (k) made
any investment or commitment therefor in any Person; (l) made any payment or
contracted for the payment of any bonus or other compensation or personal
expenses, other than (A) wages and salaries and business expenses paid in the
ordinary course of the Business, and (B) wage and salary adjustments made in the
ordinary course of the Business for employees who are not officers, directors,
or shareholders of the Company; (m) made, amended, or entered into any written
employment contract or created or made any material change in any bonus, stock
option, pension, retirement, profit sharing or other employee benefit plan or
arrangement; (n) materially amended or experienced a termination of any material
contract, agreement, lease, franchise or license to which the Company is a party
that would or could reasonably be expected to have a Material Adverse Effect,
except in the ordinary course of the Business; or (o) entered into any other
material transactions that would or could reasonably be expected to have a
Material Adverse Effect except in the ordinary course of the Business. Since
April 30, 1997, except as disclosed on Schedule 3.8B hereto or any of the
Financial Statements or notes thereto, there has not been (a) any Material
Adverse Change including, but not limited to, the loss of any material customers
or suppliers of the Company, or in any material assets of the Company, (b) any
extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company other than the Konica Slowdown,
or (d) any shutdown, material slow-down, or cessation of any material operations
conducted by, or constituting part of, the Company, nor has the Company agreed
to do any of the foregoing.
3.9 PROPERTIES. Attached hereto as Schedule 3.9 is a list containing
a description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book value in excess of $25,000 as of
the date hereof. Except for Permitted Exceptions or as expressly set forth on
Schedule 3.9, such real and personal properties are free and clear of
Encumbrances. Global has performed a lien search obtained from the counties
where the Company conducts business and the Washington Secretary of State office
of all UCC liens of record against the Company's personal property in the State
of Washington. All of the properties and assets necessary for continued
operation of the Business as currently conducted (including, without limitation,
all books, records, computers and computer software and data processing systems)
are owned, leased or licensed by the Company and are suitable for the purposes
for which they are currently being used. With the exception of used equipment
and inventory valued at no more than $10,000 on the Company's Financial
Statements, the physical properties of the Company, including the real
properties leased by the Company, are in good operating condition and repair,
normal wear and tear excepted, and are free from any defects of a material
nature. Except for Permitted Exceptions or as otherwise set forth on Schedule
3.9,
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the Company has full and unrestricted legal and equitable title to all such
properties and assets. The operation of the properties and Business of the
Company in the manner in which they are now and have been operated does not
violate any zoning ordinances, municipal regulations, or other Requirements of
Laws, except for any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect except as set forth in Schedule 3.10.
Except for Permitted Exceptions or as set forth on Schedule 3.9, no restrictive
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following the Closing (except for the consent of the Company's landlord), except
to the extent that enforceability may be limited by laws affecting creditors'
rights and debtors' obligations generally, and legal limitations relating to
remedies of specific performance and injunctive and other forms of equitable
relief. All facilities owned or leased by the Company have received all
approvals of any Governmental Body (including Governmental Permits) required in
connection with the operation thereof and have been operated and maintained in
accordance with all Requirements of Laws.
3.10 LICENSES AND PERMITS. Attached hereto as Schedule 3.10 is a
list of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could have a Material Adverse Effect. Except as set forth in
Schedule 3.10, the Company has complied in all material respects with the terms
and conditions of all such Governmental Permits, and the Company has not
received notification from any Governmental Body of violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof other than violations (if any) which would not
individually or in the aggregate have a Material Adverse Effect. No additional
Governmental Permit is required from any Governmental Body thereof in connection
with the conduct of the Business which Governmental Permit, if not obtained,
would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Schedule 3.11 is a
list and brief description of all patents, trademarks, tradenames, copyrights,
licenses, computer software or data (other than general commercial software) or
applications therefor owned by or registered in the name of the Company or in
which the Company has any rights, licenses, or immunities (collectively, the
"INTELLECTUAL PROPERTY"). The Company has furnished Global with copies of all
license agreements to which the Company is a party, either as licensor or
licensee, with respect to any Intellectual Property. Except as described on
Schedule 3.11 hereto, the Company has good title to or the right to use such
Intellectual Property and all inventions, processes, designs, formulae, trade
secrets and know-how necessary for the conduct of their Business, in their
Business as presently conducted without the payment of any royalty or similar
payment, and the Company is not infringing on any patent right, tradename,
copyright or trademark right or other Intellectual Property right of others, and
neither the Company nor Seller is aware of any
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infringement by others of any such rights owned by the Company, except as
disclosed on Schedule 3.11 hereto.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and are in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking Water
Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state, local
or foreign laws (collectively "ENVIRONMENTAL OBLIGATIONS") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. No claim has been made by any Governmental Body
(and, to the best knowledge of the Company and Seller, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental Obligation
or that a Governmental Permit or Court Order is necessary in respect thereto.
3.13 INSURANCE. Attached hereto as Schedule 3.13 is a list of all
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and Seller's knowledge and belief, no event relating to the Company has occurred
which will result in (i) cancellation of any such insurance coverages; (ii) a
retroactive upward adjustment of premiums under any such insurance coverages; or
(iii) any prospective upward adjustment in such premiums. To the best of
Seller's and the Company's knowledge after due inquiry, all of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
Schedule 3.14, the Company does not maintain or contribute to any "employee
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
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(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
Schedule 3.14, the Company does not maintain or contribute to any arrangement
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the Company does not
maintain or contribute to any retirement or deferred or incentive compensation
or stock purchase, stock grant or stock option arrangement entered into between
the Company and any current or former officer, consultant, director or employee
of the Company that is not intended to be a tax qualified arrangement under
Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Attached hereto as Schedule 3.15 is a
list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $25,000 or
greater (collectively, the "CONTRACTS"). The Company is not and, to the best
knowledge of Seller and the Company, no other party thereto is in default (and
no event has occurred which, with the passage of time or the giving of notice,
or both, would constitute a default by the Company) under any of the Contracts,
and the Company has not waived any right under any of the Contracts. All of the
Contracts to which the Company is a party are legal, valid, binding, enforceable
and in full force and effect and will remain legal, valid, binding, enforceable
and in full force and effect on identical terms immediately after the Closing,
except to the extent that enforceability may be limited by laws affecting
creditors' rights and debtors' obligations generally, and legal limitations
relating to remedies of specific performance and injunctive and other forms of
equitable relief. Except as set forth in Schedule 3.15, the Company has not
guaranteed any obligations of any
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other Person. To the best of Seller's and the Company's Knowledge, no
manufacturer of office equipment sold by the Company will cease doing business
with the Company immediately following the Closing.
3.16 CLAIMS AND PROCEEDINGS. Attached hereto as Schedule 3.16 is a
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Seller or the
Company, threatened against or affecting the Company or any of its properties or
assets, at law or in equity, or before or by any court, municipality or other
Governmental Body. Except as set forth on Schedule 3.16, none of such claims,
actions, suits, proceedings, or investigations, if adversely determined, will
result in any liability or loss to the Company. The Company has not been and the
Company is not now, subject to any Court Order, stipulation, or consent of or
with any court or Governmental Body. No inquiry, action or proceeding has been
instituted or, to the best knowledge and belief of the Seller or the Company,
threatened or asserted against the Seller or the Company to restrain or prohibit
the carrying out of the transactions contemplated by this Agreement or to
challenge the validity of such transactions or any part thereof or seeking
damages on account thereof. To the best knowledge of the Company and Seller,
except as set forth on Schedule 3.16, there is no basis for any such valid claim
or action.
3.17 TAXES.
(A) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by law, and
all such Tax Returns are true and correct and accurately reflect the Tax
liabilities of the Company. No Tax Returns of the Company or any of the Seller
are presently subject to an extension of the time to file. All Taxes,
assessments, penalties, and interest of the Company which have become due
pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Seller or the Company are aware.
For Governmental Bodies with respect to which the Company does not file Tax
Returns, no such Governmental Body has given the Company written notification
that the Company is or may be subject to taxation by that Governmental Body. The
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of the Company.
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(B) Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. The Company has not and
has never been (nor does the Company have any liability for unpaid Taxes because
it once was) a member of an affiliated group during any part of which return
year any corporation other than the Company also was a member of the affiliated
group. The Company's election to be taxed under subchapter S of the Code is
valid, legally binding and in full force and effect under all applicable Tax
laws.
(C) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 PERSONNEL. Attached hereto as Schedule 3.18 is a list of the
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal year ended December 31, 1996 (including base
salary, bonus and incentive pay) exceed (or by December 31, 1997 are expected to
exceed) $60,000. Schedule 3.18 also summarizes the bonus, profit sharing,
percentage compensation, company automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Company's fiscal year ended December 31, 1996 and to the date hereof.
Schedule 3.18 also contains a brief description of all material terms of
employment agreements to which the Company is a party and all severance benefits
which any director, officer or employee of the Company is or may be entitled to
receive. The employee relations of the Company are generally good and there is
no pending or, to the best knowledge of Seller or the Company, threatened labor
dispute or union organization campaign. None of the employees of the Company are
represented by any labor union or organization. The Company is in compliance in
all material respects with all Requirements of Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and are not engaged in any unfair labor practices. Neither the Company or Seller
has been advised, or has good reason to believe, that any of the persons whose
names are set forth on Schedule 3.18 or any other employee will not agree to
remain employed by the Company after the consummation of the transactions
contemplated hereby. There is no unfair labor practice claim against the Company
before the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of the Company and Seller, threatened
against or involving the Company, and none has occurred.
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3.19 BUSINESS RELATIONS. Neither the Company nor Seller knows or
has good reason to believe that any customer or supplier of the Company will
cease to do business with the Company after the consummation of the transactions
contemplated hereby in the same manner and at the same levels as previously
conducted with the Company except for any reductions which do not result in a
Material Adverse Change. Neither Seller nor the Company has received any notice
of any material disruption (including delayed deliveries or allocations by
suppliers) other than the Konica Slowdown, in the availability of any material
portion of the materials used by the Company nor is the Company or Seller aware
of any facts which could lead them to believe that the Business will be subject
to any such material disruption.
3.20 ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and except as
disclosed on Schedule 3.20 all such amounts (net of any allowance for doubtful
accounts) will be collected in full within 180 days following the Closing Date
except for such failures which would not in the aggregate have a Material
Adverse Effect. Except as disclosed on Schedule 3.20 hereto (a) all of such
accounts, notes, and loans receivable are free and clear of any Encumbrances;
(b) no claims of offset have been asserted in writing against any of such
accounts, notes, or loans receivable; and (c) none of the obligors of such
accounts, notes, or loans receivable has given written notice that it will or
may refuse to pay the full amount or any portion thereof.
3.21 BANK ACCOUNTS. Attached hereto as Schedule 3.21 is a list of
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 WARRANTIES. Except for warranty claims that are typical and
in the ordinary course of the Business, no written claim for breach of product
or service warranty to any customer has been made against the Company since
January 1, 1997. To the best knowledge of Seller and the Company, no state of
facts exists, and no event has occurred, which could reasonably be expected to
form the basis of any present claim against the Company for liability on account
of any express or implied warranty to any third party in connection with
products sold or services rendered by the Company.
3.23 BROKERS. Neither the Company nor Seller has engaged, or
caused to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No officer,
director, or shareholder of the Company or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or
-16-
has real or contingent rights to own, less than one percent of any class of
outstanding securities) or any property used in the operation of the Business,
except for the QBS Right.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description
of the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. To the best of Seller's and the
Company's knowledge, except as indicated in Schedule 3.26 hereto, the Company
does not have any material liabilities (whether absolute, accrued, contingent or
otherwise), of a nature required by GAAP to be reflected on a corporate balance
sheet or disclosed in the notes thereto, except such liabilities which are
accrued or reserved against in the Financial Statements or disclosed in the
notes thereto, including without limitation any accounts payable or service
liabilities of the Company incurred prior to the Closing Date, other than
liabilities incurred in the ordinary course of the Business since the date of
the latest of such Financial Statements.
3.27 INFORMATION FURNISHED. The Company and Seller have made
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Section 2 of this Agreement,
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Global pursuant to this Agreement contains
any knowingly untrue statement of a material fact or knowingly omits any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $25,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $40,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable subject matter.
All references to the "COMPANY" in Sections 3.6 through 3.27 shall include the
Companies' subsidiaries.
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ARTICLE IV
GLOBAL'S REPRESENTATIONS AND WARRANTIES
Global represents and warrants to Seller as follows:
4.1 DUE ORGANIZATION. Global is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and has full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and performance
of this Agreement has been duly authorized by all necessary corporate action of
Global and the Agreement has been duly and validly executed and delivered by
Global and constitutes the valid and binding obligation of Global, enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief. The execution, delivery, and
performance of this Agreement (as well as all other instruments, agreements,
certificates or other documents contemplated hereby) by Global, do not (a)
violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Global or its property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under any agreement to which Global
is a party or by which it or its property is bound, (c) permit the acceleration
of the maturity of any indebtedness of, or any indebtedness secured by the
property of, Global, or (d) violate or conflict with any provision of the
charter or bylaws of Global.
4.3 NO BROKERS. Global has not engaged, or caused to be
incurred any liability to any finder, broker or sales agent in connection with
the origin, negotiation, execution, delivery, or performance of this Agreement
or the transactions contemplated hereby.
4.4 DUE DILIGENCE REVIEW. This transaction has been structured as a
sale of stock to accommodate the desires of Global. Global has conducted its own
due diligence review of all aspects of this stock purchase transaction, and has
a full and complete opportunity as it deems necessary to ask questions of, and
obtain information from, the Seller in order to evaluate the merits and risks of
purchasing the Shares. Global can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding the Shares for an
indefinite period. Global understands that in the future it will be precluded
from selling the Shares, except in a private placement transaction, and that
there is no assurance Global will be able to locate prospective purchasers in
order to dispose of the Shares even in a private placement transaction. Neither
Seller nor the Company has made any representation or warranty to Global other
than as set forth in this Agreement and except for the representations and
warranties expressly set forth herein, Global has relied exclusively on its own
investigation of the Company in deciding to purchase the shares.
-18-
4.5 INVESTMENT INTENT. Global represents and warrants that the stock
being acquired by it is being acquired for its own account for investment and
without the view to, or for re-sale in connection with, any distribution or
public offering thereof within the meaning of the Securities Act of 1933 (the
"SECURITIES ACT"). Global understands that the stock has not been registered
under the Securities Act or any state securities act, and therefore, the shares
must be held indefinitely unless they are registered under the Securities Act or
an exemption from registration is available.
4.6 QUALIFICATION AS A SOPHISTICATED INVESTOR. Global represents
and warrants that it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
being made by Global hereunder.
4.7 LEGEND. Each Share shall will be endorsed with the following
legend:
The securities evidenced hereby have not been registered
under the Securities Act of 1933 and may not be sold,
transferred, assigned, pledged or otherwise distributed for
value unless there is an effective registration statement
under such Act covering such securities or unless such sale,
transfer, assignment, pledge or distribution is exempt from
the registration and prospectus delivery requirements of
such Act.
ARTICLE V
COVENANTS OF THE COMPANY AND SELLER
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company and
Seller shall use their best efforts to obtain and to cause the Company to obtain
all authorizations, consents and permits required of the Company and Seller to
permit them to consummate the transactions contemplated by this Agreement.
Seller shall have obtained the written consent of (i) the Company's Material
office equipment suppliers and (ii) the lessors of the Buildings to the
transactions contemplated by the Agreement.
5.2 SELLER'S EFFORTS'. The Company and Seller shall use all
reasonable efforts to cause all conditions for the Closing to be met.
5.3 POWERS OF ATTORNEY. The Company and Seller shall cause the
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
ARTICLE VI
POST-CLOSING COVENANTS
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6.1 GENERAL. In case at any time after the Closing any further
action is legally necessary or reasonably desirable (as determined by Global and
Seller) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Seller
acknowledges and agrees that from and after the Closing, Global will be entitled
to possession of all documents, books, records, agreements, and financial data
of any sort relating to the Company, which shall be maintained at the chief
executive office of the Company; provided, however, that Seller shall be
entitled to reasonable access to and to make and keep copies of such books and
records at his sole cost and expense and Global will maintain all of the same
for a period of at least three (3) years after Closing. Thereafter, the Company
will offer such documentation to Seller before disposal thereof.
6.2 TRANSITION. For a period of four (4) years following Closing,
the Seller will not take any action that primarily is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of the Company from maintaining the same business
relations with the Company after the Closing as it maintained with the Company
prior to the Closing. For a period of four (4) years following Closing, the
Seller will refer all customer inquiries relating to the Business to the
Company.
6.3 CONFIDENTIALITY. The Seller will treat and hold as such
all Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement or otherwise for the
benefit of the Company or Global for a period of three (3) years from the
Closing, and deliver promptly to Global or destroy, at the written request and
option of Global, all tangible embodiments (and all copies) of the Confidential
Information which are in their possession except as otherwise permitted herein.
In the event that Seller is requested or required (by oral question or written
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar legal proceeding) to disclose
any Confidential Information, Seller will notify Global promptly of the request
or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
allocation of $30,000 of the Purchase Price paid to the Seller by Global, Seller
covenants and agrees, for a period of three years from and after the Closing
Date, that he will not, directly or indirectly without the prior written consent
of Global, for or on behalf of any entity:
(A) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the copier/office equipment dealer, service or
distribution business in competition with the Company, within the greater of (i)
a 100 mile radius of the Company's office facilities in the State of Washington
(the
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"CURRENT TRADE AREA") or (ii) in any geographic area in which the Company
currently conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
equipment sales or service to such customers in competition with the Company in
the Current Trade Area or to cause them to reduce or end their business with the
Company; or
(C) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
Provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation, and no owner of any amount
of Global stock, shall be deemed to be in a violation of this Section 6.4 solely
by reason thereof.
6.5 ADDITIONAL MATTERS.
(A) The Seller shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, Seller shall
cause Seller's CPA to prepare a short period tax return for the Company covering
the period January 1, 1997 through the Effective Date. The cost of preparation
of such short period tax return shall be paid for by Seller. Global will pay for
all reasonable services incurred by Seller's CPA in preparation of the short
year return that pertain to the Section 338 election, including consultations
with Global and Global's CPAs related to same. Seller's CPA will invoice Global
based on Seller's CPA's reasonable allocation of costs incurred.
(B) Global and Seller recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Global and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Global agrees to cause the Company to (A) use its best efforts
to properly retain and maintain such records for a period of six (6) years from
the date the Tax Returns for the year in which the Closing occurs are filed or
until the expiration of the statute of limitations with respect to such year,
whichever is later, and (B) allow the Seller and his agents and representatives
at times and dates mutually acceptable to the parties, to inspect, review and
make copies of such records as such other party may deem necessary or
appropriate from time to time, such activities to be conducted during normal
business hours and at the other party's expense.
(C) SECTION 338(H)(10) ELECTION. Seller and Global shall join
in making a timely election (but in no event later than 180 days following the
Closing) under Section 338(h)(10) of the Code (including the prerequisite
election under Section 338 of the
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Code) and any similar state law provisions in all applicable states which permit
corporations to make such elections, with respect to the sale and purchase of
the Shares pursuant to this Agreement, and each party shall provide the others
all necessary information to permit such elections to be made. Global and the
Seller shall, as promptly as practicable following the Closing Date, take all
actions necessary and appropriate (including filing such forms, returns,
schedules and other documents as may be required) to effect and preserve timely
elections; provided, however, that Global shall be the party responsible for
preparing and filing the forms, returns, schedules and other documents necessary
for making an effective and timely election. All Taxes attributable to the
elections made pursuant to this Section 6.5(c) shall be the liability of the
Seller; provided, however, that Global shall reimburse Seller for any additional
Taxes solely as a result of such election. In connection with such elections,
within sixty (60) days following the Closing Date, Global and the Seller shall
act together in good faith to determine and agree upon the "deemed sales price"
to be allocated to each asset of the Company in accordance with Treasury
Regulation Section 1.338(h)(10)-1(f) and the other regulations under Section 338
of the Code. Notwithstanding the generality of the immediately preceding
sentence, Global and the Seller agree that the "deemed sales price" shall be
allocated to the monetary assets of the Company at their fair market value as of
the Closing Date as determined as part of the determination of the Working
Capital of the Company in accordance with Section 2.8 hereof, $30,000 shall be
allocated to the covenant not to compete contained in Section 6.4 hereof, and
the balance of the "deemed sales price" shall be allocated to the fixed assets,
goodwill and other intangible assets of the Company. Both Global and Seller
shall report the tax consequences of the transactions contemplated by this
Agreement consistently with such allocations and shall not take any position
inconsistent with such allocations in any Tax Return or otherwise. In the event
that Global and the Seller are unable to agree as to such allocations, Global's
reasonable positions with respect to such allocations shall control. The Seller,
shall be liable for, and shall indemnify and hold Global and the Company
harmless against, any Taxes or other costs attributable solely to (i) a failure
on the part of the Seller to take all reasonable actions at Global's timely
request required of him under this Section 6.5(c); or (ii) a failure on the part
of the Company to qualify, at or prior to the Closing, as an "S corporation" for
federal and/or state income Tax purposes. Global's reimbursement to Seller shall
include the amount necessary to provide Seller with the same net proceeds (after
taxes) as would have resulted from the sale of stock by Seller for a price equal
to the Purchase Price stated in Section 2.2 of this Agreement (including the
officer loan repayment and the fees payable under the Consulting Agreement).
Seller's marginal tax rate, for purposes of "grossing-up" the reimbursement (to
net the appropriate amount) shall be 39.6%. The Seller shall further be
reimbursed by Global, if, in the future, an audit of the sale results in
additional taxes due by the Seller solely as a result of a deemed asset sale
resulting from the 338(h)(10) election. An example of this would be an
adjustment, upward, of the Built-in Gain tax. Global's reimbursement will again
be "grossed-up" by Seller's proven marginal tax rate to negate any tax impact to
Seller. This indemnification by Global shall remain in effect for all open tax
years. Global shall pay all incremental costs, legal/accounting, etc.,
associated with the Section 338(h)(10) election that may be incurred by Seller.
Such reimbursement shall be made to Seller by Global within fifteen (15) days
after written notice to Global, which notice shall be given pursuant to Section
9.2 herein.
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ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S OBLIGATIONS. The obligation of Global
under this Agreement to consummate the Closing is subject to the conditions
that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company
and Seller shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and Seller
set forth in this Agreement shall be accurate in all material respects at and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
consummation by the Company and Seller of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under all federal, state, local and foreign governmental agencies and regulatory
authorities required to be obtained in order to permit the consummation of the
transactions contemplated hereby shall have been obtained in form and substance
reasonably satisfactory to Global unless such failure could not reasonably be
expected to have a Material Adverse Effect. All approvals of the Board of
Directors and shareholders of the Company necessary for the consummation of this
Agreement and the transactions contemplated hereby shall have been obtained.
(C) LEASES. The Company, Global and Seller shall each use
their reasonable best efforts to cintinue in full force and effect the leases
for all of such Buildings as provided in Schedule 7.1(c) hereto.
(D) DISCHARGE OF INDEBTEDNESS AND LIENS. Seller and the
Company shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company and all extended credit from vendors at the Closing
(other than customary accounts payable outstanding on 90 day or less payment
terms in accordance with past practices). Such Funded Indebtedness, if any, as
of August 31, 1997, is listed on Schedule 7.1(d) hereto. Seller shall have also
provided for the termination of all Encumbrances of record on the properties of
the Company, except for Permitted Exceptions. All liens or UCC filings against
the Company and each of the Subsidiaries or Affiliates of the Company which
engaged in the Business, shall have been terminated as of the Closing.
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(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
Change with respect to the Company since April 30, 1997 except for the Konica
Slowdown.
(F) TRANSFER TAXES. Except as noted in Section 6.5(c), Seller
shall be responsible for all stock transfer or gains taxes imposed on Seller
incurred in connection with this Agreement.
(G) FINANCIAL CONDITION. The Company's total adjusted Working
Capital as projected at the Closing shall be greater than $527,156 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing (in an amount not less than $25,000 or, if less than $25,000, the
Purchase Price will be reduced further by the amount of such deficiency), to
continue to operate the Business in the ordinary course.
(H) DOCUMENTS TO BE DELIVERED BY SELLER AND THE COMPANY. The
following documents shall be delivered at the Closing by Seller and the Company
or their attorney:
(I) OPINION OF SELLER'S COUNSEL. [Intentionally Left
Blank.]
(II) CERTIFICATES. Global shall have received an officer's
certificate and a secretary's certificate of the Company executed by
officers of the Company, dated the Closing Date, in the forms that are
attached as Exhibit D hereto.
(III) RELEASE. Seller shall have furnished the Company with
a general release of liabilities, excluding compensation and employee
benefits as well as obligations pursuant to this Agreement, in the
form attached as Exhibit E hereto.
(IV) ESCROW AGREEMENT. Seller shall have delivered to
Global at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
(V) CONSULTING AGREEMENT. ▇▇▇▇ ▇▇▇▇▇▇▇ shall have duly
executed and delivered the Consulting Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
engaged by the Company, pursuant to the Consulting Agreement.
(VI) BUILDING LEASES. Global is reasonably satisfied with
the terms of the leases of the Buildings.
(VII) COLLATERAL ASSIGNMENT OF RIGHTS. Seller shall have
executed and delivered to ▇▇▇▇▇▇▇ National Life Insurance Company a
Collateral Assignment of Rights in the form attached hereto as Exhibit
H.
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(VIII) STOCK CERTIFICATES. Seller shall have delivered
the Shares accompanied by duly executed stock powers, together with
any stock transfer stamps or receipts for any transfer taxes required
to be paid thereon.
7.2 CONDITIONS TO SELLER'S AND THE COMPANY'S OBLIGATIONS. The
obligation of Seller and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(A) COVENANTS, REPRESENTATIONS AND WARRANTIES. Global shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants contained in this Agreement to be
performed and complied with by Global prior to or at the Closing and the
representations and warranties of Global set forth in Article IV hereof shall be
accurate in all material respects, at and as of the Closing Date, with the same
force and effect as though made on and as of the Closing Date except for any
changes resulting from activities or transactions which may have taken place
after the date hereof and which are permitted or contemplated by the Agreement
or which have been entered into in the ordinary course of the Business and
except to the extent that such representations and warranties are expressly made
as of another specified date and, as to such representations, the same shall be
true as of such specified date.
(B) CONSENTS. All statutory requirements for the valid
consummation by Global of the transactions contemplated by this Agreement shall
have been fulfilled and all authorizations, consents and approvals, including
expiration or early termination of all waiting periods under all federal, state,
local and foreign governmental agencies and regulatory authorities required to
be obtained in order to permit the consummation by Global of the transactions
contemplated hereby shall have been obtained unless such failure shall not have
a Material Adverse Effect on the Business. Global shall have used its
reasonable best efforts to have obtained the release of the Seller from all
personal guarantees with respect to the Company.
(C) DOCUMENTS TO BE DELIVERED BY GLOBAL. The following documents
shall be delivered at the Closing by Global:
(II) CERTIFICATES. Seller shall have received an officers'
certificate and a secretary's certificate executed by officers of
Global, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G hereto.
(III) ESCROW AGREEMENT. Global shall have delivered to
Seller at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
(IV) CONSULTING AGREEMENT. Global shall have caused the
Company to duly execute and deliver the Consulting Agreement with ▇▇▇▇
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▇▇▇▇▇▇▇ in the same form attached as Exhibit F hereto, pursuant to
which he will be engaged by the Company pursuant to the Consulting
Agreement.
(IV) PURCHASE PRICE. Seller shall have received the
Purchase Price for the Shares and the repayment of the officer loan
and the consulting fees due to Consultant.
(D) RIGHT OF REINVESTMENT. Seller shall have been offered the
right to invest up to $20,000 in the capital stock of Global on the same terms
provided to other recent outside investors in Global.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF GLOBAL. Except as provided in Section 8.6,
as Global's sole and exclusive remedy for any breach by the Seller hereunder,
Seller agrees to indemnify and hold harmless Global and each officer, director,
and affiliate of Global, including without limitation the Company or any
successor of the Company (collectively, the "INDEMNIFIED PARTIES") from and
against any and all material damages, losses, claims, liabilities, demands,
charges, suits, penalties, costs and expenses (including court costs and
reasonable attorneys' fees and expenses incurred in investigating and preparing
for any litigation or proceeding) (collectively, the "INDEMNIFIABLE COSTS"),
which any of the Indemnified Parties may sustain, or to which any of the
Indemnified Parties may be subjected, arising out of (A) any Material
misrepresentation, breach or default by Seller or the Company of or under any of
the representations, covenants, agreements or other provisions of this Agreement
or any agreement or document executed in connection herewith; (B) the assertion
and final determination of any claim or liability against the Company or any of
the Indemnified Parties by any Person based upon the facts which form the
alleged basis for any litigation to the extent it should have been, but was not,
reserved for in the Financial Statements in accordance with GAAP; and (C) the
Company's Material tortious acts or omissions to act prior to Closing for which
the Company did not carry liability insurance for themselves as the insured
party.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
or any claim or demand made, against any Indemnified Party in respect of which
Seller may be liable hereunder, such Indemnified Party shall give prompt written
notice thereof to Seller and, except as otherwise provided in Section 8.4 below,
Seller shall have the right to defend, or cause the Company or its successors to
defend, any litigation, action, suit, demand, or claim for which it may seek
indemnification unless, in the reasonable judgment of Global, such litigation,
action, suit, demand, or claim, or the resolution thereof, would have an ongoing
effect on Global, the Company or its successors, and such Indemnified Party
shall extend reasonable cooperation in connection with such defense, which shall
be at Seller's expense. In the event Seller fails or refuses to defend the same
within a reasonable length of time, the Indemnified Parties shall be entitled to
assume the defense thereof, and Seller shall be liable to repay the Indemnified
Parties
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for all expenses reasonably incurred in connection with said defense (including
reasonable attorneys' fees and settlement payments) if it is determined that
such request for indemnification was proper. If Seller shall not have the right
to assume the defense of any litigation, action, suit, demand, or claim in
accordance with either of the two preceding sentences, the Indemnified Parties
shall have the absolute right to control the defense of and to settle, in their
sole discretion and without the consent of Seller, such litigation, action,
suit, demand, or claim, but Seller shall be entitled, at his own expense, to
participate in such litigation, action, suit, demand, or claim.
8.3 ESCROW CLAIM. If any claim for indemnification is made by an
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall apply to the Escrow Agent provided
in Section 2.5 of this Agreement for reimbursement of such claim in accordance
with the provisions of the Escrow Agreement.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, Seller shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Global,
which shall not unreasonably be withheld and subject to the right of Global to
have their accountants and attorneys consult with Seller on such audits or
procedures at Global's expense). Global shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. Subject to the limitations set forth in
Article VIII hereof, if additional Taxes are payable by the Company as a result
of any such audit or other proceeding, Seller shall be responsible for and shall
promptly pay all material Taxes, interest, and penalties to which any of the
Indemnified Parties shall be entitled to indemnification.
8.5 INDEMNIFICATION OF SELLER. Global agrees to indemnify and hold
harmless Seller and the Company and each officer, director, stockholder or
affiliate of the Company, from and against any Indemnifiable Costs arising out
of (A) any material misrepresentation, breach or default by Global of or under
any of the covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith, and (B) any tortious acts
or omissions by Global before or after or the Company after, the Closing. In
addition, the Company and Global shall indemnify the Seller for any payment or
satisfaction of any guarantees by Seller of the Company's obligations occurring
after the Closing Date including the lease of the Buildings.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations and warranties of the Seller under Sections 3.1,
3.2, 3.3 or 3.17 hereof (the indemnification for which shall expire on the
expiration of the applicable statute of limitations), the indemnification
provided under this Article
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[******Certain information on this page has been omitted and filed
separately with the Securities and Exchange Commission. Confidential
treatment has been requested with respect to the omitted portions.]
VIII shall expire on the third anniversary of the Closing Date. The Seller shall
not be obligated to pay any amounts for indemnification under this Article VIII
until the aggregate indemnification obligation hereunder exceeds $15,000,
whereupon Seller shall be liable for all amounts for which indemnification may
be sought. Notwithstanding the foregoing, in no event shall the aggregate
liability of Seller to Global exceed [**] (including the Escrow Amount) (except
for successful claims made for any breach of the representations and warranties
of Seller under Sections 3.1, 3.2, 3.3, or 3.17 hereof, as to which the limit of
indemnification hereunder shall be the Purchase Price). However nothing in this
Article VIII shall limit Global or Seller in exercising or securing any remedies
provided by applicable common law with respect to the conduct of Seller or
Global in connection with this Agreement or in the amount of damages that it can
recover from the other in the event that Global successfully proves intentional
fraud or intentional fraudulent conduct in connection with this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 MODIFICATIONS. Any amendment, change or modification of this
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
9.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered, or 48 hours after deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the respective parties hereto as
follows:
Global:
Global Imaging Systems Inc.
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
-▇▇-
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
The Company or Seller:
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: ____________________
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart.
9.4 EXPENSES. Each of the parties hereto will bear all costs,
charges and expenses incurred by such party in connection with this Agreement
and the consummation of the transactions contemplated herein, provided, however,
that Seller shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of Seller or the Company with respect to
this Agreement and the transactions contemplated hereby.
9.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Company, Global and Seller, their heirs,
representatives, successors, and permitted assigns, in accordance with the
terms hereof. This Agreement shall not be assignable by the Company or Seller
without the prior written consent of Global. This Agreement shall be assignable
by Global to a wholly-owned subsidiary of Global without the prior written
consent of Seller, but any such assignment shall not relieve Global of its
obligations hereunder.
9.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
schedules and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements, representations,
warranties, statements, promises, information, arrangements and understandings,
whether oral or written, express or implied, with respect to the subject matter
hereof.
9.7 GOVERNING LAW. This Agreement and its validity, construction,
enforcement, and interpretation shall be governed by the substantive laws of the
State of Washington.
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9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall survive the Closing for a period of three
(3) years, provided (a) the representations and warranties contained in Section
3.17 of this Agreement, and the related indemnities, shall survive the Closing
until the expiration of the applicable statutes of limitations for determining
or contesting Tax liabilities and (b) the representations and warranties
contained in Sections 3.1, 3.2 and 3.3 of this Agreement, and the related
indemnities, shall survive the Closing until expiration of the applicable
statute of limitations.
9.9 INVALID PROVISIONS. If any provision of this Agreement is deemed
or held to be illegal, invalid or unenforceable, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision and be legal,
valid and enforceable. Further, should any provision contained in this Agreement
ever be reformed or rewritten by any judicial body of competent jurisdiction,
such provision as so reformed or rewritten shall be binding upon all parties
hereto.
9.10 PUBLIC ANNOUNCEMENTS. Neither party shall make any public
announcement of the transactions contemplated hereby without the prior written
consent of the other party, which consent shall not be unreasonably withheld.
9.11 REMEDIES CUMULATIVE. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which any
party may be lawfully entitled.
9.12 WAIVER. No failure or delay on the part of any party in
exercising any right, power, or privilege hereunder or under any of the
documents delivered in connection with this Agreement shall operate as a waiver
of such right, power, or privilege; nor shall any single or partial exercise of
any such right, power, or privilege preclude any other or further exercise
thereof or the exercise of any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN SELLER AND GLOBAL WITH
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF
SELLER AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN SEATTLE, WASHINGTON, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY
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AGREED UPON BY THE PARTIES OR, IF NOT AGREED, THEN BY ARBITRATION AT JUDICIAL
ARBITRATION MEDIATION SERVICE IN SEATTLE, WASHINGTON.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
GLOBAL IMAGING SYSTEMS INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
THE COMPANY:
CASCADE OFFICE SYSTEMS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇ ▇▇▇▇▇▇▇
President
SELLER:
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
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