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EXHIBIT 10.21
STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL IMAGING SYSTEMS INC.,
▇▇▇▇▇▇ OFFICE PRODUCTS, INC.,
EASTERN COPY PRODUCTS, INC.
AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
DATED AUGUST 29, 1997
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TABLE OF CONTENTS
PAGE
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ARTICLE I............................................................................... 1
1.1 Definitions....................................................................... 1
ARTICLE II.............................................................................. 6
2.1 Agreement to Sell and Purchase.................................................... 6
2.2 Purchase Price.................................................................... 6
2.3 Payment of Purchase Price......................................................... 6
2.4 Closing........................................................................... 7
2.5 Escrow Arrangements............................................................... 7
2.6 Purchase Price Adjustments........................................................ 7
2.7 Closing Audit..................................................................... 8
2.8 Post-Closing Purchase Price Adjustment............................................ 8
ARTICLE III............................................................................. 9
3.1 Capitalization.................................................................... 9
3.2 No Liens on Shares................................................................ 9
3.3 Other Rights to Acquire Capital Stock............................................. 9
3.4 Due Organization.................................................................. 9
3.5 Subsidiaries...................................................................... 9
3.6 Due Authorization................................................................. 10
3.7 Financial Statements.............................................................. 10
3.8 Certain Actions................................................................... 11
3.9 Properties........................................................................ 12
3.10 Licenses and Permits.............................................................. 12
3.11 Intellectual Property............................................................. 13
3.12 Compliance with Laws.............................................................. 13
3.13 Insurance......................................................................... 14
3.14 Employee Benefit Plans............................................................ 14
(a) Employee Welfare Benefit Plans............................................. 14
(b) Employee Pension Benefit Plans............................................. 14
(c) Employment and Non-Tax Qualified Deferred Compensation Arrangements........ 14
3.15 Contracts and Agreements.......................................................... 15
3.16 Claims and Proceedings............................................................ 15
3.17 Taxes............................................................................. 15
3.18 Personnel......................................................................... 16
3.19 Business Relations................................................................ 17
3.20 Accounts Receivable............................................................... 17
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3.21 Bank Accounts.................................................................... 17
3.22 Warranties....................................................................... 18
3.23 Brokers.......................................................................... 18
3.24 Interest in Competitors, Suppliers, Customers, Etc............................... 18
3.25 Indebtedness To and From Officers, Directors, Shareholders, and Employees........ 18
3.26 Undisclosed Liabilities.......................................................... 18
3.27 Information Furnished............................................................ 19
ARTICLE IV............................................................................. 19
4.1 Due Organization................................................................. 19
4.2 Due Authorization................................................................ 19
4.3 No Brokers....................................................................... 20
ARTICLE V.............................................................................. 20
5.1 Consents of Others............................................................... 20
5.2 Seller's Efforts................................................................. 20
5.3 Powers of Attorney............................................................... 20
ARTICLE VI............................................................................. 21
6.1 General.......................................................................... 21
6.2 Transition....................................................................... 21
6.3 Confidentiality.................................................................. 21
6.4 Covenant Not to Compete.......................................................... 21
ARTICLE VII............................................................................ 23
7.1 Conditions to Global's and ▇▇▇▇▇▇'▇ Obligations.................................. 23
(a) Covenants, Representations and Warranties................................. 23
(b) Consents.................................................................. 23
(c) Leases.................................................................... 23
(d) Discharge of Indebtedness and Liens....................................... 24
(e) Material Adverse Change................................................... 24
(f) Transfer Taxes............................................................ 24
(g) Financial Condition....................................................... 24
(h) Documents to be Delivered by Seller and the Company....................... 24
(i) Opinion of Seller's Counsel....................................... 24
(ii) Certificates...................................................... 24
(iii) Release........................................................... 24
(iv) Escrow Agreement.................................................. 24
(v) Employment Agreement.............................................. 25
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(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................ 25
(b) Consents................................................. 26
(c) Documents to be Delivered by Global and ▇▇▇▇▇▇........... 26
(i) Opinion of Global's and ▇▇▇▇▇▇'▇ Counsel........ 26
(ii) Certificates.................................... 26
(iii) Escrow Agreement................................ 26
(iv) Employment Agreement............................ 26
(v) Purchase Price.................................. 26
(d) Right of Reinvestment.................................... 26
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...................................... 31
9.6 Entire and Sole Agreement....................................... 31
9.7 Governing Law................................................... 31
9.8 Survival of Representations, Warranties and Covenants........... 31
9.9 Invalid Provisions.............................................. 31
9.10 Public Announcements............................................ 32
9.11 Remedies Cumulative............................................. 32
9.12 Waiver.......................................................... 32
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 ▇▇▇▇▇▇▇▇▇ Executive Agreement
Exhibit G Opinion of Global's and ▇▇▇▇▇▇'▇ Counsel
Exhibit H Global Certificate
Exhibit I Collateral Assignment of Rights
Exhibit J Syracuse Building Lease
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 3.7 Financial Statements
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.22 Warranties
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 3.27 Information Furnished
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
August 29, 1997, by and among GLOBAL IMAGING SYSTEMS INC., a Delaware
corporation ("GLOBAL"), ▇▇▇▇▇▇ OFFICE PRODUCTS, INC., a New Hampshire
corporation and wholly-owned subsidiary of Global ("▇▇▇▇▇▇"), EASTERN COPY
PRODUCTS, INC., a New York corporation (the "COMPANY") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
(the "SELLER").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and services
of office equipment in 30 counties in the western part of the State of New York
and three counties in northern Pennsylvania (the "BUSINESS"); and
WHEREAS, Seller owns 90 shares of the outstanding Common Stock of the
Company (the "SHARES"), which Shares, together with the Konica Shares,
constitute all of the issued and outstanding capital stock of the Company; and
WHEREAS, ▇▇▇▇▇▇ desires to purchase from Seller and Seller desires to
sell to ▇▇▇▇▇▇ hereby all of the Shares owned by Sellers 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
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1.1 DEFINITIONS. In this Agreement, the following terms have the
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meanings specified or referred to in this Section 1.1 and shall be equally
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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.
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"BUILDINGS" shall mean collectively (i) the Company's office,
showroom and warehouse facilities located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "SYRACUSE BUILDING"); (ii) the Company's office facility
located at ▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇; (iii) the Company's building
facility located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (Buffalo
location); (iv) the Company's building located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇; and (v) the Company's satellite sales office 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
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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.
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"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means all 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.
"CONTRACTS" has the meaning specified in Section 3.15.
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"▇▇▇▇▇▇" has the meaning specified in the first paragraph of this
Agreement.
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"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"ECCCI" means Eastern Copy Credit Corporation, Inc., a New York
corporation and, prior to its merger into the Company, a wholly-owned subsidiary
of the Company.
"ECP VEND" means ECP Vend-a-Copy Division, Inc., a New York
corporation and, prior to its merger into the Company, a wholly-owned subsidiary
of the Company.
"EFFECTIVE DATE" has the meaning specified in Section 2.4.
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"EMPLOYMENT AGREEMENT" shall mean the executive agreement with
▇▇▇▇▇▇▇▇▇ to be entered into at Closing in the form of Exhibit F.
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"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL OBLIGATIONS" has the meaning specified in Section
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3.12.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means the Skaneateles Savings Bank.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Seller, Konica, ▇▇▇▇▇▇ and the Escrow Agent in the form of Exhibit
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A.
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"ESCROW PERIOD" has the meaning specified in Section 2.5.
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"ESCROW SUM" has the meaning specified in Section 2.5.
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"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
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"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (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; (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
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credit terms of more than 30 days from manufacturers provided to the Company; or
(vi) any receivables owed by the Seller to the Company.
"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.
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"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
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2.7.
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"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
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"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
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"INTELLECTUAL PROPERTY" has the meaning specified in Section
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3.11.
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"▇▇▇▇▇▇▇▇▇" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
"KONICA" means Konica Business Machines U.S.A., Inc.
"KONICA PURCHASE AGREEMENT" means that certain Stock Purchase
Agreement dated August __, 1997 between ▇▇▇▇▇▇ and Konica.
"KONICA SHARES" means the 10 shares of the Company's Common Stock
owned by Konica.
"L-T DEFERRED SERVICE LIABILITIES" means all long-term deferred
service liabilities owed to customers of the Company and/or its subsidiaries.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "MATERIAL ADVERSE
CHANGE" or "MATERIAL ADVERSE EFFECT" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
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"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
(S)(S) 651 et seq., any amendment thereto, and any regulations promulgated
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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 ▇▇▇▇▇▇.
"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 ▇▇▇▇▇▇ not less than one
(1) nor more than five (5) days prior to the Closing Date.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
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"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. (S)(S) 6901 et seq., and any successor statute, and any regulations
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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, excluding the Konica Shares.
"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
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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 as calculated in accordance with
GAAP.
"WORKING CAPITAL TARGET" shall have the meaning assigned to such
term in Section 2.6 hereof.
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ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
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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
▇▇▇▇▇▇ and ▇▇▇▇▇▇ agrees to purchase the Shares from Seller.
2.2 PURCHASE PRICE. The total purchase price for the Shares and the
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Konica Shares (the "PURCHASE PRICE") shall be equal to $7,084,598.68, subject
to any adjustment required to be made pursuant to Section 2.6 or Section 2.8
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below.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable
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by ▇▇▇▇▇▇ at the Closing (hereinafter defined) as follows:
(A) $6,041,498 of the Purchase Price less the amounts set forth
in Section 2.6(a), (b), (c) and (d) will be paid, at the direction of the
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Seller, in cash by wire transfer of funds as specified in Schedule 2.3
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(including the payment of $135,000 for the covenant not to compete provided in
Section 6.4);
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(B) the assumption by ▇▇▇▇▇▇ of all L-T Deferred Service
Liabilities; and
(C) $1,159,000 of the Seller's portion of the Purchase Price
less the amount set forth in Section 2.6(e) will be paid in cash by wire
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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
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the Seller in accordance with the terms of Section 2.5 below.
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2.4 CLOSING. The Closing of the purchase and sale of the Shares
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contemplated by this Agreement shall take place at 11:00 a.m., Eastern time, at
the offices of Eastern Copy Products, Inc. in Syracuse, New York, on August 29,
1997, or at such other date and time as the parties shall agree (the "CLOSING
DATE"), effective as of August 1, 1997 (the "EFFECTIVE DATE").
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be
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entered into among Seller, Konica, ▇▇▇▇▇▇ and the Escrow Agent, $1,159,000 of
the Purchase Price (including the Konica portion) 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 and Konica to ▇▇▇▇▇▇ pursuant to Section 2.8 or
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Article VIII below. At the conclusion of the period ending on the third
anniversary of the Closing Date (such period being referred to herein as the
"ESCROW PERIOD"), 90% of such remaining portion of the Escrow Sum not
theretofore claimed by or paid to ▇▇▇▇▇▇ or previously delivered to Seller and
Konica in accordance with the terms of the Escrow Agreement and this Agreement
shall be disbursed to Seller. Seller and ▇▇▇▇▇▇ 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.
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(A) The Purchase Price payable pursuant to Section 2.3(a) above
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will be reduced by the total amount of Funded Indebtedness, if any, assumed or
paid by ▇▇▇▇▇▇ 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
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Funded Indebtedness with such institutions.
(B) The Purchase Price payable pursuant to Section 2.3(a) above
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will increased or decreased, as the case may be, by the amount by which L-T
Deferred Service Liabilities on the Closing Date are more or less than $710,000.
(C) The portion of the Purchase Price payable at Closing will be
reduced by the amount, if any, by which the adjusted Working Capital as
reflected on the Preliminary Closing Balance Sheet is less than $[971,000] (the
"WORKING CAPITAL TARGET").
(D) The Seller's portion of the Purchase Price payable pursuant
to Section 2.3(a) above will be reduced by an amount equal to ten percent (10%)
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of the aggregate Purchase Price payable at Closing (after any adjustments
determined pursuant to Sections 2.6(a), (b) and (c) above), which amount shall
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be paid to Konica pursuant to the Konica Purchase Agreement.
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(E) The portion of the Purchase Price payable pursuant to
Section 2.3(c) above to the Escrow Sum will be reduced by $115,900, which amount
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shall be paid from the amount paid to Konica pursuant to the Konica Purchase
Agreement.
2.7 CLOSING AUDIT. Within 120 days following the Closing Date, there
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shall be delivered to ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇. In the event that the Seller disputes any
items on the Audited Closing Balance Sheet within thirty 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 by Seller; provided, however, that ▇▇▇▇▇▇ shall reimburse Seller
for the cost of the Independent Accountants in the event that such review
results in an increase in the Company's Working Capital as reflected on the
Audited Closing Balance Sheet prepared by Ernst & Young, LLP.
2.8 POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event that the
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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(c) above. The post-closing adjustment to the
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Purchase Price, if any, shall be paid by Seller to ▇▇▇▇▇▇ from the Escrow Sum or
by ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ delivers to
Seller an Audited Closing Balance Sheet modified to reflect such determination.
Notwithstanding the foregoing, Konica shall be responsible for or shall receive,
as the case may be, ten percent (10%) of any adjustment to the Purchase Price
made pursuant to this Section 2.8.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SELLER
The Company and Seller represent and warrant to Global and ▇▇▇▇▇▇
that:
3.1 CAPITALIZATION. The authorized capital stock of the Company
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consists of 100 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
and Konica in the amounts set forth on Schedule 3.1 hereto. None of the Shares
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was issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person. The Seller and Konica
collectively own 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
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the Shares, free and clear of any Encumbrances other than the rights and
obligations arising under this Agreement, and none of the Shares is subject to
any outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Shares is subject to any restriction on
transfer thereof except for restrictions imposed by applicable federal and state
securities laws. At Closing, 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
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this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of New York
and has full corporate power and authority to carry on the Business as now
conducted and as proposed to be conducted through Closing. Complete and correct
copies of the Articles of Incorporation and Bylaws of the Company, and all
amendments thereto, have been heretofore delivered to Global and are attached
hereto as Schedule 3.4. The Company is qualified to do business in Pennsylvania
------------
and in each jurisdiction in which the nature of the Business or the ownership of
its properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect.
3.5 SUBSIDIARIES. If ECP Vend and/or ECCCI have not been merged into
------------
the Company, the Company is the owner of all of the outstanding shares of the
capital stock of each of ECP Vend and ECCCI (the "SUBSIDIARY SHARES") free and
clear of all Encumbrances, and none of the Subsidiary Shares is subject to any
outstanding option, warrant, call, or similar right
-9-
of any other Person to acquire the same, and none of the Subsidiary Shares is
subject to any restriction on transfer thereof except for restrictions imposed
by applicable federal and state securities laws. There are no authorized or
outstanding warrants, options, or rights of any kind to acquire from the
Company, ECP Vend or ECCCI any equity or debt securities of either ECP Vend or
ECCCI, or securities convertible into or exchangeable for equity or debt
securities of either ECP Vend or ECCCI, and there are no Subsidiary Shares
reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company, ECP Vend or ECCCI to
issue, sell or deliver any additional Subsidiary Shares. Except for ECP Vend and
ECCCI, neither the Company, nor its subsidiaries, directly or indirectly have
any subsidiaries or any direct or indirect ownership interests in any Person.
The Seller does not own any other Person engaged in the Business.
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 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, (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 and ▇▇▇▇▇▇ by
the Company: consolidated balance sheets of the Company as of July 31, 1994,
July 31, 1995, July 31, 1996 and June 30, 1997, and consolidated statements of
income of the Company for the fiscal years ended July 31, 1994, July 31, 1995
and July 31, 1996 and for the 11 month period ending June 30, 1997.
The Financial Statements have been prepared in accordance with GAAP throughout
the periods indicated and fairly present the financial position, results of
operations and changes in financial position of the Company as of the indicated
dates and for the indicated periods, subject (in the case of the 6 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
-10-
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 July 31, 1996, there has been no Material Adverse Change in
the prospects of the Company.
3.8 CERTAIN ACTIONS. Since July 31, 1996, 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) cancelled, 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 otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any assets
(except in the ordinary course of the Business); (g) amended its charter or
bylaws; (h) paid or made a commitment to pay any severance or termination
payment to any employee or consultant; (i) made any material change in its
method of management or operation or method of accounting; (j) made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $50,000; (k) made any investment or commitment therefor in any Person;
(l) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (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 July 31, 1996, except as disclosed on Schedule 3.8B hereto or
-------------
any of the Financial Statements or notes thereto, there has not been (a) any
Material Adverse Change including, but not limited to, the loss of any material
customers or suppliers of the Company, or in any material assets of the Company,
(b) any extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
-11-
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. Seller and the Company have delivered to Global a lien search
obtained from the New York Secretary of State of all UCC liens of record against
the Company's personal property in the State of New York. All of the properties
and assets necessary for continued operation of the Business as currently
conducted (including, without limitation, all books, records, computers and
computer software and data 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, the Company has full and unrestricted legal
------------
and equitable title to all such properties and assets. The operation of the
properties and Business of the Company in the manner in which they are now and
have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations which
would not, individually or in the aggregate, have a Material Adverse Effect.
Except for Permitted Exceptions or as set forth on Schedule 3.9, no restrictive
------------
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following 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. 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. 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
-12-
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 infringement by others of any
such rights owned by the Company.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and 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. All of such insurance
coverages will remain in full force and effect following the Closing.
3.14 EMPLOYEE BENEFIT PLANS.
----------------------
-13-
(A) EMPLOYEE WELFARE BENEFIT PLANS. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
-------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan, (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(B) EMPLOYEE PENSION BENEFIT PLANS. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
-------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section 4043(b) of ERISA), the
reporting of which has not been waived by regulation of the Pension Benefit
Guaranty Corporation; (vii) no termination or partial termination of the plan
has occurred within the meaning of Section 411(d)(3) of the Code; (viii) all
contributions required to be made to the plan or under any applicable collective
bargaining agreement have been made to or on behalf of the plan; (ix) there is
no material litigation, arbitration or disputed claim outstanding; and (x) all
applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis.
(C) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
------------------------------------------------------
ARRANGEMENTS. Except as disclosed in Schedule 3.14, the 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
-14-
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 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
-15-
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.
(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 has never made an election to be taxed under subchapter S of
the Code.
(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 years ended July 31, 1996 or July 31, 1997
(including base salary, bonus and incentive pay) exceed (or by July 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 years ended July, 1996, July 1997 and to
the date hereof. Schedule 3.18 also contains a brief description of all
-------------
material terms of employment agreements to which the Company is a party and all
severance benefits which any director, officer or employee of the Company is or
may be entitled to receive. The employee relations of the Company are generally
good and there is no pending or, to the best knowledge of 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
-16-
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.
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) 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 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,
-17-
negotiation, execution, delivery, or performance of this Agreement or the
transactions contemplated hereby.
3.24 INTEREST IN COMPETITORS, SUPPLIERS, CUSTOMERS, ETC. No
--------------------------------------------------
officer, director, or shareholder of the Company or any affiliate of any such
officer, director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS, SHAREHOLDERS, AND
---------------------------------------------------------------
EMPLOYEES. Attached hereto as Schedule 3.25 is a list and brief description of
--------- -------------
the payment terms of all indebtedness of the Company to officers, directors,
shareholders, and employees of the Company and all indebtedness of officers,
directors, shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 UNDISCLOSED LIABILITIES. Except as indicated in Schedule 3.26
----------------------- -------------
hereto, the Company does not have any 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 or ▇▇▇▇▇▇ pursuant to this Agreement
contains any untrue statement of a material fact or omits any material fact
necessary to make the statements herein or therein, as the case may be, not
misleading.
In making the representations and warranties set forth above, the term
"Material" or "material" shall, where appropriate in context of its use, be
deemed to mean an amount of money greater than $25,000, the terms "Material
Adverse Change," "material adverse trend," "Material Adverse Effect," or any
other term of like import shall mean the occurrence of any single event, or any
series of related events, or set of related circumstances, which proximately
causes an actual, direct economic loss to the Company, taken as a whole, in
excess of $25,000 per occurrence or $50,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the
employees of the Company with responsibility for the applicable
-18-
subject matter. All references to the "COMPANY" in Sections 3.6 through 3.27
------------ ----
shall include the Companies' subsidiaries.
ARTICLE IV
GLOBAL'S AND ▇▇▇▇▇▇'▇ REPRESENTATIONS AND WARRANTIES
Global and ▇▇▇▇▇▇ represent and warrant to Seller as follows:
4.1 DUE ORGANIZATION. Each of Global and ▇▇▇▇▇▇ is a corporation
----------------
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and New Hampshire, respectively, and each 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 ▇▇▇▇▇▇, and the Agreement has been duly and validly executed and
delivered by Global and ▇▇▇▇▇▇ and constitutes the valid and binding obligation
of Global and ▇▇▇▇▇▇, 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 and ▇▇▇▇▇▇, do not (a) violate any Requirements of Laws or Court Order of
any Governmental Body applicable to Global or its property or ▇▇▇▇▇▇ or its
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under any agreement to which Global or ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇, or (d) violate or conflict with any provision of the charter
or bylaws of Global or ▇▇▇▇▇▇.
4.3 NO BROKERS. Neither Global nor ▇▇▇▇▇▇ has engaged, or caused to
----------
be incurred any liability to any finder, broker or sales agent in connection
with the origin, negotiation, execution, delivery, or performance of this
Agreement or the transactions contemplated hereby.
4.4 INVESTMENT. ▇▇▇▇▇▇ will acquire the Shares for investment and
----------
for its own account and not with a view to the distribution thereof.
-19-
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) Konica and the Company's
other 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
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
▇▇▇▇▇▇▇▇▇) 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, ▇▇▇▇▇▇ 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 copies of such books and records at
his sole cost and expense and ▇▇▇▇▇▇ 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.
-20-
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 ▇▇▇▇▇▇ for a period of three (3) years from the Closing, and deliver
promptly to ▇▇▇▇▇▇ or destroy, at the written request and option of ▇▇▇▇▇▇, 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 ▇▇▇▇▇▇ promptly of the request or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
-----------------------
allocation of $135,000 of the Purchase Price paid to the Seller by ▇▇▇▇▇▇,
Seller covenants and agrees, for a period of four (4) years from and after the
Closing Date, that he will not, directly or indirectly without the prior written
consent of ▇▇▇▇▇▇, 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 Ithaca, Rochester,
Oswego, Buffalo and Syracuse, New York (the "CURRENT TRADE AREA") or (ii) in any
geographic area in which the Company currently conducts business;
(B) enter into any agreement with, service, assist or solicit
the business of any customers of the Company for the purpose of providing office
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.
-21-
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 ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, CPA to prepare a short period tax return for the
Company covering the period July 31, 1997 through the Effective Date. The cost
of preparation of such short period tax return shall be paid for by Seller.
(B) ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, ▇▇▇▇▇▇ 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.
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO GLOBAL'S AND ▇▇▇▇▇▇'▇ OBLIGATIONS. Subject to
-----------------------------------------------
Section 2.4 above, the obligation of Global and ▇▇▇▇▇▇ 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.
-22-
(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 the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to ▇▇▇▇▇▇
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 lessors of the Buildings shall have provided an
------
Estoppel Certificate to Global's lenders in the form of Exhibit B hereto, except
---------
as specifically waived by Global and ▇▇▇▇▇▇. The leases for all of such
Buildings shall provide that such leases (i) survive the Closing for the term of
such leases, copies of which have been provided to Global and ▇▇▇▇▇▇; provided,
however, that the lease for the Syracuse Building shall be for a term of five
(5) years after the Closing on the terms of Exhibit J hereof and (ii) the annual
---------
rent for the lease of the Syracuse Building shall be for no more than $120,000.
In addition, the lease for the Syracuse Building attached hereto in the form of
Exhibit J shall be executed at Closing.
---------
(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 15, 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.
(E) MATERIAL ADVERSE CHANGE. There has been no Material Adverse
-----------------------
Change with respect to the Company since June 30, 1997.
(F) TRANSFER TAXES. 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 $971,000.00 and the
Company shall continue to have cash on hand (included in Working Capital) at the
Closing (in an amount not less than $100,000 or, if less than $100,000, 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:
-23-
(I) OPINION OF SELLER'S COUNSEL. Global and ▇▇▇▇▇▇ shall
---------------------------
have received an opinion of counsel to the Company and Seller, dated
the Closing Date, in substantially the same form as the form of
opinion that is Exhibit C hereto.
---------
(II) CERTIFICATES. ▇▇▇▇▇▇ shall have received an
------------
officer's certificate and a secretary's certificate of the Company
executed by officers of the Company, dated the Closing Date, in
substantially the same forms as the forms of certificates that are
Exhibit D 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
----------------
▇▇▇▇▇▇ at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(V) EMPLOYMENT AGREEMENT. ▇▇▇▇▇▇▇▇▇ shall have duly
--------------------
executed and delivered the Employment Agreement in substantially the
same form attached as Exhibit F hereto, pursuant to which he will be
---------
employed by the Company following the Closing.
(VI) BUILDING LEASES. The leases of the Buildings (other
---------------
than the Syracuse Building) will be for the terms and at the rates per
annum as are currently in effect in accordance with those leases
agreements provided to Global and ▇▇▇▇▇▇ prior to the date hereof, and
the lease for the Syracuse Building attached hereto as Exhibit J,
---------
shall be executed and delivered by the Seller, as the owner of the
Syracuse Building. Seller shall have delivered to ▇▇▇▇▇▇ an Estoppel
Certificate of the landlords of the Buildings to Global's lenders in
the same form attached as Exhibit B hereto, except as specifically
---------
waived by Global and ▇▇▇▇▇▇.
(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
-------
I.
-
(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.
-24-
(I) PURCHASE OF KONICA SHARES. ▇▇▇▇▇▇ shall have
-------------------------
consummated the purchase of the Konica Shares from Konica and received
the Konica Shares from Konica.
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 and
-----------------------------------------
▇▇▇▇▇▇ 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 or ▇▇▇▇▇▇ prior to or
at the Closing and the representations and warranties of Global and ▇▇▇▇▇▇ set
forth in Article IV hereof shall be accurate in all material respects, at and as
of the Closing Date, with the same force and effect as though made on and as of
the Closing Date except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by the Agreement or which have been entered into in
the ordinary course of the Business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representations, the same shall be true as of such specified
date.
(B) CONSENTS. All statutory requirements for the valid
--------
consummation by Global and ▇▇▇▇▇▇ of the transactions contemplated by this
Agreement shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation by Global and ▇▇▇▇▇▇ 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 AND ▇▇▇▇▇▇. The
----------------------------------------------
following documents shall be delivered at the Closing by Global and ▇▇▇▇▇▇:
(I) OPINION OF GLOBAL'S AND ▇▇▇▇▇▇'▇ COUNSEL. Seller
----------------------------------------
shall have received an opinion of ▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, counsel
to Global and ▇▇▇▇▇▇, dated the Closing Date, in substantially the
same form as the form of opinion that is Exhibit G hereto.
---------
(II) CERTIFICATES. Seller shall have received an
------------
officers' certificate and a secretary's certificate executed by
officers of ▇▇▇▇▇▇ and Global, dated the Closing Date, in
substantially the same forms as the forms of certificates that are
Exhibit H hereto.
---------
-25-
(III) ESCROW AGREEMENT. ▇▇▇▇▇▇ shall have delivered to
----------------
Seller at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
-----------
(IV) EMPLOYMENT AGREEMENT. ▇▇▇▇▇▇ shall have caused the
--------------------
Company to duly execute and deliver the Employment Agreement with
▇▇▇▇▇▇▇▇▇ in the same form attached as Exhibit F hereto, pursuant to
---------
which he will be employed by the Company following the Closing.
(V) PURCHASE PRICE. Seller shall have received the
--------------
Purchase Price for the Shares.
(D) RIGHT OF REINVESTMENT. ▇▇▇▇▇▇▇▇▇ shall have been offered
---------------------
the right to invest up to $395,400 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 and ▇▇▇▇▇▇'▇ sole and exclusive remedy for any breach by the Seller
hereunder, Seller agrees to indemnify and hold harmless Global and ▇▇▇▇▇▇ and
each officer, director, and affiliate of Global and ▇▇▇▇▇▇, including without
limitation the Company or any successor of the Company (collectively, the
"INDEMNIFIED PARTIES") from and against any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively, the
"INDEMNIFIABLE COSTS"), which any of the Indemnified Parties may sustain, or to
which any of the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by 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 tortious acts or omissions to act prior to Closing for which the
Company did not carry liability insurance for themselves as the insured party,
whether or not such acts or omissions to act result in a breach or violation of
any representation or warranty.
8.2 DEFENSE OF CLAIMS. If any legal proceeding shall be instituted,
-----------------
or any claim or demand made, against any Indemnified Party in respect of which
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
-26-
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 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, Global shall have the right to
control any and all such audits which may result in the assessment of additional
Taxes against the Company and any and all subsequent proceedings in connection
therewith, including appeals (subject to the prior written consent of Seller,
which shall not unreasonably be withheld and subject to the right of Seller to
have their accountants and attorneys consult with Global on such audits or
procedures at Seller's expense). Seller shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If additional Taxes are payable by the
Company as a result of any such audit or other proceeding, Seller shall be
responsible for and shall promptly pay all Taxes, interest, and penalties to
which any of the Indemnified Parties shall be entitled to indemnification, net
of the present value of any Tax benefits to Global as a result of any such audit
or other proceeding..
8.5 INDEMNIFICATION OF SELLER. ▇▇▇▇▇▇ 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 or ▇▇▇▇▇▇ 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 or ▇▇▇▇▇▇ before or after or the Company
after, the Closing. In addition, the Company and Global shall indemnify the
-27-
Seller for any payment or satisfaction of any guarantees by Seller of the
Company's obligations occurring after the Closing Date.
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by
-------------------------
any party hereunder shall be net of any insurance proceeds received by such
Person with respect to such claim (less the present value of any premium
increases occurring as a result of such claim). Except for any claims for
breach of the representations 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 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 $25,000, 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 and ▇▇▇▇▇▇ exceed
$5,000,000 (except for 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 ▇▇▇▇▇▇ in connection with this Agreement or in the amount
of damages that it can recover from the other in the event that ▇▇▇▇▇▇
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:
-28-
Global or ▇▇▇▇▇▇:
----------------
Global Imaging Systems Inc.
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
or after September 1, 1997:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
The Company or Seller:
----------------------
c/o Eastern Copy Products, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
▇▇▇▇▇▇▇▇ & Fabiano
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
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 ▇▇▇▇▇▇. This Agreement shall be
assignable by ▇▇▇▇▇▇ to a wholly-owned subsidiary of Global without the prior
written consent of Seller, but any such assignment shall not relieve Global or
▇▇▇▇▇▇ 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 New York.
9.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
-----------------------------------------------------
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, all
covenants, agreements, representations, and warranties and
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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 SYRACUSE, NEW YORK, OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES.
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[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
GLOBAL:
------
GLOBAL IMAGING SYSTEMS INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
▇▇▇▇▇▇:
------
▇▇▇▇▇▇ OFFICE PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman
THE COMPANY:
-----------
EASTERN COPY PRODUCTS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
President
SELLER:
------
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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