Exhibit 10.1
--------------------------------------------------------------------------------
MERGER AGREEMENT
Dated June 24, 1999
By and Among
GLOBAL IMAGING SYSTEMS, INC.
("Global"),
XXXXX ACQUISITION, INC.
("Newco"),
XXXXX & ASSOCIATES, INC.
(the "Company")
and
CERTAIN SHAREHOLDERS OF THE COMPANY
(collectively, the "Sellers ")
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...................................................... 1
1.1 Definitions......................................................... 1
ARTICLE II MERGER......................................................... 6
2.1 The Merger.......................................................... 6
2.2 Effective Time of the Merger........................................ 6
2.3 Articles of Incorporation........................................... 6
2.4 Bylaws.............................................................. 7
2.5 Directors and Officers of Surviving Corporation..................... 7
2.6 Effect of the Merger................................................ 7
2.7 Conversion of Shares............................................... 7
2.8 Purchase Price...................................................... 7
2.9 Payment of Purchase Price........................................... 8
(a) Cash Portion................................................... 8
(b) Stock/Escrow Portion........................................... 8
(c) Earnout........................................................ 8
(d) Miscellaneous.................................................. 8
2.10 Payment and Determination of Earnout................................ 9
(a) Cash Portion of Earnout........................................ 9
(b) Stock Portion of Earnout....................................... 9
(c) Determination.................................................. 9
2.11 Dissenting Shares................................................... 9
2.12 Closing............................................................. 9
(a) Date and Place................................................. 9
(b) Deliveries at the Closing...................................... 10
(c) Termination.................................................... 10
2.13 Escrow Arrangements................................................. 10
2.14 Purchase Price Adjustments.......................................... 11
(a) Funded Indebtedness............................................ 11
(b) Working Capital................................................ 11
(c) Cash on Hand................................................... 11
2.15 Closing Review...................................................... 11
2.16 Post-Closing Purchase Price Adjustment.............................. 11
2.17 Shareholders' Representative........................................ 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SELLERS.................................................. 13
3.1 Capitalization...................................................... 13
3.2 No Liens on Shares.................................................. 14
ii
3.3 Other Rights to Acquire Capital Stock.............................. 14
3.4 Due Organization................................................... 14
3.5 Subsidiaries....................................................... 14
3.6 Due Authorization.................................................. 14
3.7 Financial Statements............................................... 15
3.8 Certain Actions.................................................... 15
3.9 Properties......................................................... 16
3.10 Licenses and Permits............................................... 17
3.11 Intellectual Property.............................................. 17
3.12 Compliance with Laws............................................... 17
3.13 Insurance.......................................................... 18
3.14 Employee Benefit Plans............................................. 18
(a) Employee Welfare Benefit Plans................................ 18
(b) Employee Pension Benefit Plans................................ 18
(c) Employment and Non-Tax Qualified Deferred
Compensation Arrangements.................................... 19
3.15 Contracts and Agreements........................................... 19
3.16 Claims and Proceedings............................................. 19
3.17 Taxes.............................................................. 20
3.18 Personnel.......................................................... 21
3.19 Business Relations................................................. 21
3.20 Accounts Receivable................................................ 22
3.21 Bank Accounts...................................................... 22
3.22 Warranties......................................................... 22
3.23 Brokers............................................................ 22
3.24 Interest in Competitors, Suppliers, Customers, Etc................. 22
3.25 Indebtedness To and From Officers, Directors, Shareholders, and
Employees......................................................... 22
3.26 Undisclosed Liabilities............................................ 23
3.27 Information Furnished.............................................. 23
3.28 Personal Vehicles.................................................. 23
ARTICLE IV GLOBAL AND NEWCO'S REPRESENTATIONS AND WARRANTIES.............. 23
4.1 Due Organization................................................... 23
4.2 Due Authorization.................................................. 24
4.3 No Brokers......................................................... 24
4.4 Investment......................................................... 24
4.5 Information Furnished.............................................. 24
4.6 Adequate Funds..................................................... 24
ARTICLE V PRE-CLOSING COVENANTS............................................ 24
5.1 Consents of Others................................................. 24
-iii-
5.2 Best Efforts........................................................ 25
5.3 Powers of Attorney.................................................. 25
5.4 Conduct of Business Pending Closing................................. 25
5.5 Access to Records Before Closing.................................... 25
5.6 Termination of Company's Profit Sharing............................. 26
ARTICLE VI POST-CLOSING.................................................... 26
6.1 General............................................................. 26
6.2 Transition.......................................................... 26
6.3 Confidentiality..................................................... 26
6.4 Covenant Not to Compete............................................. 27
6.5 Additional Matters.................................................. 27
6.6 Conduct During Earnout Period....................................... 28
6.7 Registration Rights Agreement....................................... 28
ARTICLE VII CONDITIONS TO OBLIGATION OF PARTIES TO
CONSUMMATE CLOSING...................................................... 28
7.1 Conditions to Global and Newco's Obligations........................ 29
(a) Covenants, Representations and Warranties...................... 29
(b) Consents....................................................... 29
(c) Suppliers/Leases............................................... 29
(d) Discharge of Indebtedness and Lien............................. 29
(e) Leases......................................................... 29
(f) Transfer Taxes................................................. 30
(g) Documents to be Delivered by the Sellers and the Company....... 30
(i) Opinion of the Sellers' Counsel........................ 30
(ii) Certificates........................................... 30
(iii) Release................................................ 30
(iv) Escrow Agreement....................................... 30
(v) Executive Agreements................................... 30
(vi) Equity Subscription Agreement.......................... 30
(vii) Personal Vehicles...................................... 30
(viii) Sellers Receivables.................................... 30
(ix) Stock Certificates..................................... 31
(x) Consummation of Merger................................. 31
7.2 Conditions to the Sellers' and the Company's Obligations............ 31
(a) Covenants, Representations and Warranties...................... 31
(b) Consents....................................................... 31
(c) Documents to be Delivered by Global and Newco.................. 31
(i) Certificates........................................... 31
(ii) Escrow Agreement....................................... 32
(iii) Executive Agreements................................... 32
-iv-
(iv) Equity Subscription Agreement.......................... 32
(d) Payment to the Sellers and the Company and the Escrow Agent... 32
ARTICLE VIII INDEMNIFICATION............................................... 32
8.1 Indemnification of Global.......................................... 32
8.2 Defense of Claims.................................................. 33
8.3 Escrow Claim....................................................... 33
8.4 Tax Audits, Etc.................................................... 33
8.5 Indemnification of the Sellers..................................... 34
8.6 Limits on Indemnification.......................................... 34
ARTICLE IX MISCELLANEOUS
9.1 Modifications...................................................... 35
9.2 Notices............................................................ 35
9.3 Counterparts; Facsimile Transmission............................... 35
9.4 Expenses........................................................... 36
9.5 Binding Effect; Assignment......................................... 36
9.6 Entire and Sole Agreement.......................................... 36
9.7 Governing Law...................................................... 37
9.8 Survival of Representations, Warranties and Covenants.............. 37
9.9 Invalid Provisions................................................. 37
9.10 Public Announcements............................................... 37
9.11 Remedies Cumulative................................................ 38
9.12 Waiver............................................................. 38
9.13 DISPUTE RESOLUTION
-V-
LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Landlord Agreement
Exhibit C Opinion of the Company's and the Sellers' Counsel
Exhibit D-1 Sellers' and Company Officer's Certificates
Exhibit D-2 Company's Secretary's Certificate
Exhibit E Form of Release
Exhibit F Form of Executive Agreement
Exhibit G-1 Global and Newco Officer's Certificates
Exhibit G-2 Global and Newco Secretary's Certificate
Exhibit H Equity Subscription Agreement
LIST OF ANNEXES
Annex I Determination of Adjusted EBIT of the Company
Annex II Calculation of Earnout Payments
LIST OF SCHEDULES
Schedule 2.9 Sellers' Accounts
Schedule 2.12 Holders of Funded Indebtedness
Schedule 2.14(b) Working Capital Adjustments
Schedule 2.14(c) Cash on Hand Adjustments
Schedule 3.1 Ownership of Shares
Schedule 3.2 Liens on Shares
Schedule 3.4 Articles and Bylaws
Schedule 3.5 Subsidiaries
Schedule 3.8A Certain Actions
Schedule 3.8B Material Changes
Schedule 3.9 Properties
Schedule 3.10 Licenses and Permits
Schedule 3.11 Patents and Trademarks
Schedule 3.13 Insurance
Schedule 3.14 Employee Benefit Plans
Schedule 3.15 Contracts and Agreements
Schedule 3.16 Claims and Proceedings
Schedule 3.18 Personnel
Schedule 3.20 Accounts Receivable
Schedule 3.21 Bank Accounts
Schedule 3.25 Indebtedness with Officers, Directors and Shareholders
Schedule 3.26 Undisclosed Liabilities
Schedule 7.1(d) List of Indebtedness
-vi-
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is entered into as of June 24,
1999 by and among GLOBAL IMAGING SYSTEMS, INC., a Delaware corporation
("Global"), XXXXX ACQUISITION, INC., a Colorado corporation ("Newco"), XXXXX &
ASSOCIATES, INC., a Colorado corporation (the "Company") and the shareholders of
the Company listed on the signature page hereto (each are individually referred
to as a "Seller" and collectively referred to as the "Sellers").
W I T N E S S E T H:
WHEREAS, the Company is engaged in the distribution, sale and service
of copiers, fax machines, computer and networking equipment and other office
equipment in the State of Colorado (the "Business"); and
WHEREAS, the Sellers own more than 90% of all of the issued and
outstanding shares of capital stock of the Company (the "Shares"); and
WHEREAS, Global desires to purchase from the Sellers and the other
shareholders of the Company (collectively, the "Shareholders") all of the Shares
pursuant to a merger between Newco and the Company on the terms and subject to
the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In this Agreement, the following terms have the
-----------
meanings specified or referred to in this Section 1.1 and shall be equally
-----------
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement.
"Adjusted EBIT of the Company" shall mean the amount as
determined in accordance with Annex I attached hereto
-------
"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.
"Allocable Portions" shall mean the allocable portions of the Purchase
Price paid to Sellers and Shareholders as set forth in Schedule 2.9 hereto.
------------
"Buildings" means collectively [list all offices and warehouses
utilized by the company].
"Business" has the meaning specified in the first recital of the
Agreement
"Business Day" means any day in which the NASDAQ National Market
System is open for trading in the United States of America.
"Cash Portion of the Earnout" has the meaning set forth in Section
-------
2.10.
----
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)(S) 9601 et seq., any amendments thereto, any
-- ---
successor statutes, and any regulations promulgated thereunder.
"Closing" means the closing of the transfer of the Shares from the
Sellers and Shareholders to Global pursuant to the Merger.
"Closing Balance Sheet" has the meaning specified in Section 2.15.
------------
"Closing date" has the meaning specified in Section 2.12.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the first paragraph of this
Agreement.
"Company's Profit Sharing Plan" means a qualified plan under Code
Section 401(a) sponsored and maintained by Seller, which includes a qualified
cash or deferred arrangement, as defined in Section 401(k) of the Code.
"Confidential Information" means all (a) confidential information and
trade secrets of the Company including, without limitation, any of the same
comprising the identity, lists or descriptions of any customers, referral
sources or organizations; (b) financial statements, cost reports or other
financial information; (c) contract proposals, or bidding information; (d)
business plans and training and operations methods and manuals; (e) personnel
records; (f) information concerning fee structures; and (g) management systems,
policies or procedures, including related forms and manuals. Confidential
Information shall not include any information (i) which is disclosed pursuant to
subpoena or other legal process, (ii) which has been publicly disclosed, (iii)
which subsequently becomes legally known and is not in violation of any
obligation of confidentiality of such person, 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.
------------
-2-
"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.
"Dissenting Shares" has the meaning specified in Section 2.11.
------------
"E&Y" has the meaning specified in Section 2.3(c).
--------------
"Earnout Payment(s)" has the meaning specified in Section 2.9(c).
--------------
"Earnout Period(s)" has the meaning specified in Section 2.9(c).
--------------
"Earnout Shares" has the meaning specified in Section 2.10(b).
---------------
"Effective Date" has the meaning specified in Section 2.12.
------------
"Effective Time" has the meaning specified in Section 2.2.
-----------
"Encumbrance" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"Environmental Obligations" has the meaning specified in Section 3.12.
------------
"Equitable Exceptions" has the meaning specified in Section 3.6.
-----------
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Bank of Cherry Creek, N.A.
"Escrow Agreement" means the Escrow Agreement to be executed by and
among the Sellers, Global and the Escrow Agent in substantially the same form as
Exhibit A.
---------
"Escrow Period" has the meaning specified in Section 2.13.
------------
"Escrow Sum" has the meaning specified in Section 2.13.
------------
"Excess Cash" means the cash and cash equivalents less all outstanding
checks.
"Executive Agreement" means the executive agreement to be entered into
at Closing with Xxxx X. Xxxxx, Xxxxx X. Xxxxx, Xxxxx X. Xxxxxx and Xxxx
Xxxxxxxxx (with certain modifications for each of such executives) in the form
of Exhibit F.
---------
"Financial Statements" has the meaning specified in Section 3.7.
-----------
"Funded Indebtedness" means all (i) indebtedness of the Company for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company
-3-
which are accrued or required to be accrued under GAAP; (iii) obligations of the
Company to pay the deferred purchase or acquisition price for goods or services,
other than trade accounts payable or accrued expenses in the ordinary course of
business on no more than 90 day payment terms or other indebtedness of the
Company under extended credit terms of more than 30 days from manufacturers
provided to the Company; (iv) indebtedness of others guaranteed by the Company
or secured by an Encumbrance on any of the Company's assets; or (v) any
receivables owed by the Company to the Sellers.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Global" has the meaning specified in the first paragraph of this
Agreement.
"Global Stock" means the common stock, par value $.01 per share of
Global.
"Governmental Body" means any foreign, federal, state, local or other
governmental authority or regulatory body.
"Governmental Permits" has the meaning specified in Section 3.10.
------------
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"IRS" means the Internal Revenue Service.
"Independent Accountants" has the meaning specified in Section 2.15.
------------
"Indemnifiable Costs" has the meaning specified in Section 8.1.
-----------
"Indemnified Parties" has the meaning specified in Section 8.1.
-----------
"Intellectual Property" has the meaning specified in Section 3.11.
------------
"Material Adverse Change" or "Material Adverse Effect" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, or financial condition of the Company and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred, the quantitative amounts set
forth at the end of Article III shall be conclusive.
-----------
"Merger" has the meaning specified in Section 2.1 hereof.
-----------
"Merger Documents" has the meaning specified in Section 2.2 hereof.
-----------
"Newco" has the meaning specified in the first paragraph of this
Agreement.
-4-
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. (S)(S)
651 et seq., any amendment thereto, and any regulations promulgated thereunder.
-- ---
"Permitted Exception" means (a) liens for Taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable, (c) other liens or imperfections on property which are not material
in amount or do not materially detract from the value or the existing use of the
property affected by such lien or imperfection, and (d) such statements of fact
and exceptions shown on any title insurance policies delivered to Global.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"Preliminary Closing Balance Sheet" shall mean the company's best
estimate of the Company's balance sheet as of the Effective Date. The
Preliminary Closing Balance Sheet shall be delivered to Global not less than
three (3) nor more than five (5) days prior to the Closing Date.
"Purchase Price" has the meaning specified in Section 2.8.
-----------
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
(S)(S) 6901 et seq., and any successor statute, and any regulations promulgated
-- ---
thereunder.
"Requirements of Laws" means any foreign, federal, state and local
laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued
or promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"Sellers" has the meaning set forth in the first paragraph of this
Agreement.
"Shareholders" has the meaning specified in the second recital of this
Agreement.
"Shareholders' Representative" has the meaning set forth in Section
-------
2.17 of this Agreement.
----
"Shares" means all of the issued and outstanding shares of the capital
stock of the Company.
"Stock Portion of the Earnout" has the meaning set forth in Section
-------
2.10.
----
"Subsidiary(ies)" means any corporation with respect to which another
specified corporation has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
-5-
"Surviving Corporation" has the meaning set forth in Section 2.1 of
-----------
this Agreement.
"Tax" or "Taxes" means any federal, state, local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amount imposed thereon by any Governmental Body.
"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 (excluding amounts due from shareholders) and current liabilities
as calculated in accordance with GAAP.
"Working Capital Target" shall have the meaning assigned to such term
in Section 2.6 hereof.
-----------
ARTICLE II
MERGER
2.1 The Merger. At the Effective Time (as defined below), Newco will be
----------
merged with and into the Company (the "MERGER") and the separate existence of
Newco shall thereupon cease and the Company shall be the "Surviving
Corporation." The Merger shall have the effects set forth in the Colorado
Business Corporation Act (collectively, the "CBCA").
2.2 Effective Time of the Merger. As soon as practicable after the
----------------------------
satisfaction or waiver of the conditions hereinafter set forth, the parties
hereto will file with the Secretary of the State of the State of Colorado a
certificate or articles of merger or ownership and other documents (the "Merger
Documents"), in such respective forms as required by, and executed in accordance
with, the relevant provisions of the CBCA in order to effect the Merger. The
Merger shall become effective at such time as the Merger Documents shall have
been accepted for filing with the Secretary of the State of the State of
Colorado or such other times and dates as the parties shall agree should be
specified in the Merger Documents (the "Effective Time").
2.3 Articles of Incorporation. The Articles of Incorporation of the
-------------------------
Company in effect at the time of the Merger shall be the Articles of
Incorporation of the Surviving Corporation, until thereafter amended as provided
thereunder and in the CBCA.
-6-
2.4 Bylaws. The Bylaws of Newco in effect at the time of the Merger shall
------
be the Bylaws of the Surviving Corporation until altered, amended or repealed,
as provided thereunder and in the Articles of Incorporation and the CBCA.
2.5 Directors and Officers of Surviving Corporation.
-----------------------------------------------
(a) The directors of Newco at the Effective Time shall be the
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
(b) The officers of the Company at the Effective Time shall be the
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation, or as otherwise provided by law.
2.6 Effect of the Merger. the merger shall have the effects set forth in
--------------------
the CBCA. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the properties, rights, privileges, powers and
franchise of the Company and Newco shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and Newco shall become the
debts, liabilities and duties of the Surviving Corporation. The purpose of the
Surviving Corporation shall be the purposes of the Company immediately prior to
the Merger. The total number of shares which the Surviving Corporation is
authorized to issue shall be 1,000 shares of Common Stock, no par value per
share.
2.7 Conversion of Shares. At the Effective Time, by virtue of the Merger
--------------------
and without any action on the part of the Sellers or Shareholders:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares as to which the holders thereof shall have
properly exercised appraisal rights under the CBCA, if any) shall be converted
into the right to receive in cash its Allocable Portion of the Purchase Price
(as hereinafter defined).
(b) Each Share held in the treasury of the Company immediately prior
to the Effective Time shall be canceled and retired and cease to exist.
(c) Each share of common stock, par value $.01 per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchangeable for one share of common stock, par value $.01
per share, of the Surviving Corporation.
2.8 Purchase Price. The total potential merger consideration for the
--------------
Shares shall be equal to $55,000,000, subject to any adjustment required to be
made pursuant to Section 2.14 or Section 2.16 below, plus up to $20,000,000 of
------------ ------------
Earnout Payments set forth in Section 2.9(c) (collectively, the "Purchase
-------------
Price").
-7-
2.9 Payment of Purchase Price. The Purchase Price shall be payable by
-------------------------
Global at the Closing (as defined in Section 2.12 below) as follows:
------------
(a) Cash Portion. $50,000,000 of the Purchase Price, as adjusted in
------------
accordance with Section 2.14 below, will be paid in cash by wire transfer of
------------
funds to the accounts of the Sellers and Shareholders as specified in Schedule
--------
2.9 (including the payment of $1,000,000 for the covenant not to compete
---
provided in Section 6.4), and such amount shall be allocated among the Sellers
-----------
and the Shareholders in the Allocable Portions set forth in Schedule 2.9
------------
(subject to pro-rata adjustment in accordance with Section 2.14 below);
------------
(b) Stock/Escrow Portion. $5,000,000 of the Purchase Price shall be
--------------------
paid by Global at the Closing in the form of shares of Global Stock and
delivered to the Escrow Agent to be held in escrow in accordance with the terms
of the Escrow Agreement and the terms of Section 2.13 below; and the aggregate
------------
number of shares of Global Stock paid to the Escrow Agent at Closing shall be
determined based on the average of the closing bid price per share of the Global
Stock on the NASDAQ National Market System for the ten (10) Business Days prior
to the two (2) Business Days prior to the Closing Date; provided, however, that
(A) in the event that such average would result in a value for the Global Stock
of less than $12 per share (as adjusted for any stock splits or stock
dividends), then Global shall have the right to pay such amount in cash by wire
transfer of funds to the Escrow Agent and (B) in the event that such average
would result in a value for Global Stock of more than $20 per share (as adjusted
for any stock splits or stock dividends), then any Seller shall have the right
to require that such Seller's Allocable Portion of the Global Stock be paid to
the Escrow Agent in cash by wire transfer of funds to the Escrow Agent; and the
Global Stock (or cash in lieu thereof) delivered (or paid) to the Escrow Agent
at Closing in accordance with this Section 2.9(b) shall be allocated to the
--------------
Sellers and the Shareholders in accordance with Schedule 2.9;
------------
(c) Earnout. An amount, if any, equal to the excess of the Adjusted
-------
EBIT of the Company during each of the five 12 month periods commencing on the
Effective Date (each such 12-month period referred to as an "Earnout Period" and
collectively they are referred to as the "Earnout Periods") over the projected
amounts for each such Earnout Period (as set forth in Annex II) multiplied by
--------
the applicable multiplier for such Earnout Period in accordance with the formula
and examples set forth in Annex II (each such payment is referred to as an
--------
"Earnout Payment" and collectively they are referred to as the "Earnout
Payments") payable in accordance with Section 2.10 below. Each share of Global
------------
Stock to be included as part of any given Earnout Payment shall be valued using
the ten (10) Business Day trailing average of the closing price per share of the
Global Stock on the NASDAQ National Market System prior to the expiration date
of the applicable Earnout Period. Notwithstanding the foregoing, in no event
will the aggregate of all Earnout Payments, if any, exceed $20,000,000; and
(d) Miscellaneous. Global, the Sellers and the Shareholders receiving
-------------
Global Stock hereto acknowledge and agree that, because the Global Stock issued
in connection with the Closing and during the Earnout Periods, if any, under
this Agreement is restricted stock, the actual value of the Global Stock
received in connection with this Agreement is less than the value attributed to
such Global Stock based on the formula price set forth above.
-8-
2.10 Payment and Determination of Earnout. Each Earnout Payment
------------------------------------
shall be payable in the aggregate as follows: (i) 75% in cash ("Cash Portion of
the Earnout") and (ii) 25% in Global Stock ("Stock Portion of the Earnout").
(a) Cash Portion of Earnout. The Cash Portion of the Earnout, if
-----------------------
any, shall be payable to the Sellers and the Shareholders and shall be allocated
among the Sellers and Shareholders in accordance with their Allocable Portions
set forth in Schedule 2.9. The Cash Portion of the Earnout shall be paid by wire
------------
transfer or other delivery of immediately available funds within one hundred and
twenty (120) days following the expiration of the applicable Earnout Period to
an account designated by the Shareholders' Representative in respect of the
Earnout Payment to be made therefor.
(b) Stock Portion of Earnout. The Stock Portion of the Earnout,
------------------------
if any, will be issued to the Sellers and the Shareholders (in the aggregate) by
the delivery of the number of shares of Global Stock calculated in accordance
with the formula set forth in Section 2.9(c) (collectively for each such Earnout
-------------
Period, the "Earnout Shares"). The Earnout Shares shall be allocated among the
Sellers and the Shareholders pursuant to their Allocable Portions set forth in
Schedule 2.9 and shall be issued to such Sellers and the Shareholders (as
------------
rounded down to the nearest whole number); provided, however, that each Seller
and Shareholder receiving Earnout Shares must enter into an Equity Subscription
Agreement in the form attached hereto as Exhibit H in respect of such shares.
---------
The Earnout Shares, if any, shall be issued on or before one hundred and twenty
(120) days following the expiration of the applicable Earnout Period in respect
of the Earnout Payment to be made therefor.
(c) Determination. The Earnout Payment for each Earnout Period,
-------------
if any, shall be determined by the Company, in consultation with Ernst & Young,
LLP ("E&Y") or the Company's other outside auditors, if different from E&Y, all
in accordance with the terms of this Agreement, Annex I and Annex II hereto.
------- --------
2.11 Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary, Shares which are issued and outstanding immediately prior to the
Effective Time and which are held by stockholders who have not voted such Shares
in favor of the Merger and who shall have delivered a written demand for
appraisal of such Shares in the manner provided in the CBCA (the "Dissenting
Shares") shall not be converted into or be exchangeable for the right to receive
the cash consideration provided above, unless and until such holder shall have
failed to perfect or shall have effectively withdrawn or lost his right to
appraisal and payment under the CBCA. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, his Shares shall
thereupon be deemed to have been converted into and to have become exchangeable
for, at the Effective Time, the right to receive the cash consideration provided
herein.
2.12 Closing.
-------
(a) Date and Place. The Closing of the purchase and sale of the
--------------
Shares pursuant to the Merger contemplated by this Agreement shall take place at
10:00 a.m., Mountain Time, at the offices of Xxxxx & Xxxxxxx, LLP or at the
offices of the counsel to the Sellers in Denver, Colorado on June 24, 1999, or
at such other date and time as the parties shall agree (the "Closing Date"),
effective as of June 1, 1999 (the "Effective Date").
-9-
(b) Deliveries at the Closing. At the Closing, (i) the Sellers
-------------------------
and Shareholders will deliver to Global and Newco the various certificates,
instruments, and documents referred to in Section 7(a) below, (ii) Global and
-----------
Newco will deliver to the Sellers and Shareholders the various certificates,
instruments, and documents referred to in Section 7(b) below, (iii) each of the
-----------
Sellers and Shareholders will deliver to Global and Newco stock certificates
representing all of its Shares, endorsed in blank or accompanied by duly
executed assignment documents, (iv) the Merger Documents will be filed and the
Merger will be declared effective in the State of Colorado, and (v) Global and
Newco will deliver to the Sellers and Shareholders the Purchase Price (other
than the Earnout Payments) specified in Section 2.9 above as may be adjusted
-----------
after the Closing pursuant to Section 2.14 above.
------------
(c) Termination. Global, Newco, the Company and the Sellers may
-----------
terminate this Agreement at any time prior to the Closing Date by mutual written
consent. In addition, (i) Global may terminate this Agreement at any time prior
to the Closing by giving written notice to the Sellers if the Closing shall not
have occurred on or before June 30, 1999 by reason of the failure of any
condition precedent under Section 7.1 hereof (unless the failure results
-----------
primarily from Global itself breaching any representation, warranty, or covenant
contained in this Agreement or unless such failure is as a result of a delay in
receiving approvals under the HSR Act) and (ii) the Sellers may terminate this
Agreement by giving written notice to Global at any time prior to the Closing if
the Closing shall not have occurred on or before June 30, 1999 by reason of the
failure of any condition precedent under Section 7.2 hereof (unless the failure
-----------
results primarily from either the Sellers themselves or the Company itself
breaching any representation, warranty, or covenant contained in this Agreement
or unless such failure is as a result of a delay in receiving approvals under
the HSR Act). If the transactions contemplated by this Agreement are terminated
pursuant to this Section 2.12(c) by notice in writing to the non-terminating
--------------
party or parties, this Agreement shall become void and of no further force and
effect, except that such termination shall not relieve (i) any party from its
covenants in respect of confidentiality contained in Section 6.3 and (ii) any
-----------
party then in breach of any representation, warranty, covenant or agreement
contained in this Agreement from liability in respect of such breach.
2.13 Escrow Arrangements . Pursuant to the Escrow Agreement to be
-------------------
entered into among Sellers, Global and the Escrow Agent, the $5,000,000 of the
Purchase Price payable in Global Stock pursuant to Section 2.9(b) shall be
-------------
delivered to the Escrow Agent at Closing. Such Global Stock (which, together
with all interest and dividends accrued thereon, if any, 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 the
Sellers and Shareholders to Global pursuant to Section 2.16 (at any time during
------------
the Escrow Period) or Sellers' indemnification obligations under Article VIII
------------
below. At the conclusion of the period ending on the first anniversary of the
Closing Date (such period being referred to herein as the "Escrow Period"), such
remaining portion of the Escrow Sum not theretofore claimed by or paid to Global
in accordance with the terms of the Escrow Agreement and this Agreement shall be
disbursed to the Sellers and Shareholders. The Sellers and Global agree that
each will execute and deliver such reasonable instruments and documents as are
furnished by any other party to enable such furnishing party to receive those
portions of the Escrow Sum to which the furnishing party is entitled under the
provisions of the Escrow Agreement and this Agreement.
-10-
2.14 Purchase Price Adjustments.
--------------------------
(a) Funded Indebtedness. The portion of the Purchase Price
-------------------
payable at Closing pursuant to Section 2.9(a) above will be reduced by the total
--------------
amount of Funded Indebtedness as of the Closing, if any, assumed or paid by
Global in cash by wire transfer of funds to the accounts of the holders of
Funded Indebtedness listed on Schedule 2.12 hereto to satisfy the Company's
-------------
Funded Indebtedness with such holders.
(b) Working Capital. The portion of the Purchase Price payable
---------------
at Closing pursuant to Section 2.9(a) will be reduced, on a dollar-for-dollar
--------------
basis, by the amount, if any, by which the Working Capital as reflected on the
Preliminary Closing Balance Sheet, as adjusted for the addbacks and other non-
recurring items between the Effective Date and Closing Date as set forth on
Schedule 2.14(b), is less than $5,800,000 (the "Working Capital Target").
----------------
(c) Cash on Hand. The portion of the Purchase Price payable at
------------
Closing pursuant to Section 2.9(a) will be reduced, on a dollar for dollar
--------------
basis, by the amount, if any, by which the Excess Cash of the Company (included
in the Working Capital) at the Effective Date, as adjusted for the addbacks and
other non-recurring items between the Effective Date and Closing Date as set
forth on Schedule 2.14(c), is less than $2,000,000.
----------------
2.15 Closing Review. Within 180 days following the Closing Date, there
--------------
shall be delivered to the Sellers a balance sheet of the Company (the "Closing
Balance Sheet") of the Company at and as of the Effective Date. The Closing
Balance Sheet shall be prepared in accordance with GAAP by Global. In the event
that the Shareholders' Representative disputes any items on the Closing Balance
Sheet within ten (10) days after the Sellers' receipt thereof, the parties shall
jointly select and retain an independent "Big Five" accounting firm (the
"Independent Accountants") to review the disputed item(s) on the Closing Balance
Sheet. The final determination of such disputed item(s) by the Independent
Accountants shall be binding on the parties and shall be reflected on the
Closing Balance Sheet. The cost of retaining the Independent Accountants shall
be borne by the Sellers; provided, however, that Global shall reimburse the
Sellers for the cost of the Independent increase of more than 7.5% in the
Working Capital amount determined by Global.
2.16 Post-Closing Purchase Price Adjustment. In the event that the
--------------------------------------
Working Capital as reflected on the 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 Closing Balance Sheet from the amount of
Working Capital reflected on the Preliminary Closing Balance Sheet or (ii) the
amount, if any, by which the Working Capital reflected on the Closing Balance
Sheet is less than 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 Closing Balance Sheet
from the amount of Working Capital reflected on the Preliminary Closing Balance
Sheet; provided, however, that in no event shall such upward adjustment exceed
the total amount of any downward adjustment to the Purchase Price made pursuant
to Section 2.14(b) above. The post-closing adjustment to the Purchase Price, if
---------------
any, payable by the Sellers and Shareholders to Global shall be paid by the
Sellers and Shareholders to Global in cash and shall be allocated among Sellers
and
-11-
Shareholders based on the Allocable Portions. In addition, the post-closing
adjustment to the Purchase Price, if any, payable by Global to the Sellers and
Shareholders shall be paid in cash. Such payments shall be made in immediately
available funds within ten (10) business days of delivery of the Closing Balance
Sheet, unless the Sellers dispute any items on the Closing Balance Sheet, in
which case it shall be paid within ten (10) business days after the Independent
Accountants finally determine the disputed item(s), and Global or Independent
Accountants deliver(s) to the Sellers (and the Global, if applicable) a Closing
Balance Sheet modified to reflect such determination.
2.17 Shareholders' Representative.
----------------------------
(a) In order to administer efficiently (A) the implementation of
the Agreement by the Sellers and Shareholders, (B) the waiver of any condition
to the obligations of the Sellers or the Shareholders to consummate the
transactions contemplated hereby, and (C) the settlement of any dispute with
respect to the Agreement, the Sellers and Shareholders hereby designate Xxxxx X.
Xxxxx as their representative (the "Shareholders' Representative").
(b) The Sellers and Shareholders hereby authorize the
Shareholders' Representative (A) to take all action necessary in connection with
the implementation of the Agreement on behalf of the Sellers and Shareholders,
the waiver of any condition to the obligations of the Shareholders to consummate
the transactions contemplated hereby, or the settlement of any dispute, (B) to
give and receive all notices required to be given under the Agreement and (C) to
take any and all additional action as is contemplated to be taken by or on
behalf of the Sellers and/or Shareholders by the terms of this Agreement.
(c) In the event that the Shareholders' Representative dies,
becomes legally incapacitated or resigns from such position, Xxxxx X. Xxxxxx
shall fill such vacancy and shall be deemed to be the Shareholders'
Representative for all purposes of this Agreement; however, no change in the
Shareholders' Representative shall be effective until Global is given notice of
it by the Sellers and Shareholders.
(d) All decisions and actions by the Shareholders'
Representative shall be binding upon all of the Sellers and Shareholders, and no
Seller or Shareholder shall have the right to object, dissent, protest or
otherwise contest the same, in the absence of fraud, gross negligence or willful
misconduct of the Shareholders' Representative.
(e) By their execution of this Agreement, the Sellers and
Shareholders agree that:
(i) Global shall be able to rely conclusively on the
instructions and decisions of the Shareholders' Representative as to any
actions required or permitted to be taken by the Sellers or Shareholders or
the Shareholders' Representative hereunder, and no party hereunder shall
have any cause of action against Global for action taken by Global in
reliance upon the instructions or decisions of the Shareholders'
Representative;
-12-
(ii) all actions, decisions and instructions of the
Shareholders' Representative shall be conclusive and binding upon all of
the Sellers and Shareholders; no Seller or Shareholder shall have any cause
of action against Global or the Company for any action taken or omitted to
be taken, decision made or omitted to be made or any instruction given or
omitted to be given by the Shareholders' Representative; and no Seller or
Shareholder shall have any cause of action against the Shareholders'
Representative for any action taken, decision made or instruction given by
the Shareholders' Representative under this Agreement, except for fraud,
gross negligence or willful breach of this Agreement by the Shareholders'
Representative;
(iii) the Shareholders' Representative shall be deemed to
fulfill any fiduciary obligation to the Sellers and Shareholders so long as
no Seller or Shareholder is adversely affected by any action or failure to
act of the Shareholders' Representative in a disproportionate measure
compared to any other Seller or Shareholder;
(iv) remedies available at law for any breach of the
provisions of this Section 2.17 are inadequate; therefore, Global shall be
------------
entitled to temporary and permanent injunctive relief without the necessity
of proving damages if Global brings an action to enforce the provisions of
this Section 2.17;
------------
(v) the provisions of this Section 2.17 are independent
------------
and severable, shall constitute an irrevocable power of attorney, coupled
with an interest until death, granted by the Sellers and Shareholders to
the Shareholders' Representative and shall be binding upon the executors,
heirs, legal representatives and successors of each Shareholder; and
(vi) All fees and expenses incurred by the Shareholders'
Representative shall be paid by the Sellers and Shareholders based on their
aggregate Allocable Portions of the Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and the Sellers jointly and severally represent and warrant to
Global and Newco that:
3.1 Capitalization. The authorized capital stock of the Company consists
--------------
of 399,200,000 shares of Common Stock, 1,050,000 of which are issued and
outstanding. All of the Shares are duly authorized, validly issued, fully paid,
and nonassessable. All of the Shares are owned of record and beneficially by
the Sellers and Shareholders in the amounts set forth on Schedule 3.1 hereto.
------------
None of the Shares was issued or will be transferred under this Agreement in
violation of any preemptive or preferential rights of any Person. The Sellers
and the Shareholders collectively own all of the issued and outstanding capital
stock of the Company and
-13-
the Sellers own more than 90% of all classes of the issued and outstanding
capital stock of the Company.
3.2 No Liens on Shares. Except as shown on Schedule 3.2, each
------------------ ------------
Seller owns his, her or its 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 and upon consummation of the
Merger, each Seller will have full power and authority to convey good and
marketable title to his, her or its Shares, free and clear of any Encumbrances.
3.3 Other Rights to Acquire Capital Stock. Except as set forth in
-------------------------------------
this Agreement, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.4 Due Organization. The Company is a corporation duly organized,
----------------
validly existing, and in good standing under the laws of the State of Colorado
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 the States
------------
of Colorado and Wyoming and in each other jurisdiction in which the nature of
the Business or the ownership of its properties requires such qualification
except where the failure to be so qualified does not and could not reasonably be
expected to have a Material Adverse Effect.
3.5 Subsidiaries. The Company has no Subsidiaries. The Company does
------------
not have any direct ownership interests in any Person. The Sellers do not own
any other Person engaged in the Business.
3.6 Due Authorization. The Company and the Sellers each have full
-----------------
power and authority to execute, deliver and perform this Agreement, the Merger
Documents and to carry out the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement, the Merger Documents and the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action of the Company. This Agreement has been duly and
validly executed and delivered by the Company and the Sellers and constitutes
the valid and binding obligations of the Company and the Sellers, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief (the "Equitable Exceptions").
Except for the Equitable Exceptions and assuming all necessary consents to the
consummation of the transactions contemplated hereby, as specifically set forth
on Schedules 3.9 and 3.15, are
------------- ----
-14-
obtained, the execution, delivery, and performance of this Agreement (as well as
the Merger Documents and all other instruments, agreements, certificates, or
other documents contemplated hereby) by the Company and the Sellers, do not (a)
violate any Requirements of Laws or any Court Order of any Governmental Body
applicable to the Company or the Sellers, or their respective property, (b)
violate or conflict with, or permit the cancellation of, or constitute a default
under, any material agreement to which the Company or the Sellers are a party,
or by which any of them or any of their respective property is bound, (c) permit
the acceleration of the maturity of any Material indebtedness of, or Material
indebtedness secured by the property of, the Company or the Sellers, or (d)
violate or conflict with any provision of the charter or bylaws of the Company.
3.7 Financial Statements. The following Financial Statements
--------------------
(collectively the "Financial Statements") of the Company have been delivered to
Global by the Company: audited balance sheets of the Company as of December 31,
1997 and December 31, 1998, and audited statements of income of the Company for
the fiscal years ending December, 1997 and December 31, 1998. The Financial
Statements have been prepared in accordance with GAAP throughout the periods
indicated and fairly present the financial position, results of operations and
changes in financial position of the Company as of the indicated dates and for
the indicated periods. Except to the extent reflected or provided for in the
Financial Statements or the notes thereto and obligations and liabilities
incurred in the ordinary course of business since the date of the last of such
Financial Statements, the Company has no liabilities required by GAAP to be
reflected on the Company's balance sheet or notes thereto that are not so
reflected, nor any other obligations (whether absolute, contingent, or
otherwise) which are (individually or in the aggregate) Material (in amount or
to the conduct of the Business); and neither the Company nor the Sellers have
knowledge of any basis for the assertion of any such liability or obligation.
Since December 31, 1998, there has been no Material Adverse Change in the
prospects of the Company.
3.8 Certain Actions. Since December 31, 1998, the Company has not,
---------------
except as disclosed on Schedule 3.8A hereto or any of the Financial Statements
-------------
or notes thereto and except for certain year-end bonuses approved by Global: (a)
discharged or satisfied any Encumbrance or paid any obligation or liability,
absolute or contingent, other than current liabilities incurred and paid in the
ordinary course of the Business; (b) paid or declared any dividends or
distributions, or purchased, redeemed, acquired, or retired any stock or
indebtedness from any stockholder (other than distributions to pay estimated
income taxes of the Sellers associated with the income of the Company); (c) made
or agreed to make any loans or advances or guaranteed or agreed to guarantee any
loans or advances to any party whatsoever; (d) suffered or permitted any
Encumbrance other than Permitted Exceptions to arise or be granted or created
against or upon any of its assets, real or personal, tangible or intangible; (e)
canceled, waived, or released or agreed to cancel, waive, or release any of its
receivables, rights, or claims against third parties in excess of $25,000
individually or $50,000 in the aggregate; (f) sold, assigned, pledged,
mortgaged, or otherwise transferred, or suffered any material damage,
destruction, or loss (whether or not covered by insurance) to, any assets
(except in the ordinary course of the Business); (g) amended its charter or
bylaws; (h) paid or made a commitment to pay any severance or termination
payment to any employee or consultant; (i) made any material change in
-15-
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 $100,000; (k) made any investment or commitment therefor in
any Person; (l) made any payment or contracted for the payment of any bonus or
other compensation or personal expenses, other than (i) wages and salaries and
business expenses paid in the ordinary course of the Business, and (ii) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (m) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (n) materially amended or experienced a
termination of any material contract, agreement, lease, franchise or license to
which the Company is a party that would or could reasonably be expected to have
a Material Adverse Effect, except in the ordinary course of the Business; or (o)
entered into any other material transactions that would or could reasonably be
expected to have a Material Adverse Effect except in the ordinary course of the
Business. Since December 31, 1998, except as disclosed on Schedule 3.8B hereto
-------------
or any of the Financial Statements or notes thereto, there has not been (a) any
Material Adverse Change including, but not limited to, the loss of any material
customers or suppliers of the Company, or in any material assets of the Company,
(b) any extraordinary contracts, commitments, orders or rebates, (c) any strike,
material slowdown, or demand for recognition by a labor organization by or with
respect to any of the employees of the Company, or (d) any shutdown, material
slow-down, or cessation of any material operations conducted by, or constituting
part of, the Company, nor has the Company agreed to do any of the foregoing.
3.9 Properties. Attached hereto as Schedule 3.9 is a list
---------- ------------
containing a description of each interest in real property (including, without
limitation, leasehold interests) and each item of personal property utilized by
the Company in the conduct of the Business having a book value in excess of
$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. The Sellers and the Company have delivered to Global a lien
search obtained from the counties where the Company conducts business and the
Colorado and Wyoming Secretaries of State offices of all UCC liens of record
against the Company's personal property in the State of Colorado and Wyoming,
respectively. 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 reasonably suitable for the
purposes for which they are currently being used. With the exception of used
equipment and inventory valued at no more than $75,000 in the aggregate on the
Company's Financial Statements, the physical properties of the Company,
including the real properties leased by the Company, to the best knowledge of
the Company and the Sellers, are in good operating condition and repair, normal
wear and tear excepted, and are free from any defects of a material nature.
Except for Permitted Exceptions or as otherwise set forth on Schedule 3.9, the
------------
Company has full and unrestricted legal and equitable title to all such
properties and assets. 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
-16-
violations which would not, individually or in the aggregate, have a Material
Adverse Effect. Except for Permitted Exceptions or as set forth on Schedule 3.9,
------------
no restrictive covenants, easements, rights-of-way, or regulations of record
impair the uses of the properties of the Company for the purposes for which they
are now operated. All leases of real or personal property by the Company are
legal, valid, binding, enforceable and in full force and effect and, assuming
all necessary consents to the consummation of the transactions contemplated
herein, as set forth on Schedule 3.9, are obtained, will remain legal, valid,
------------
binding, enforceable and in full force and effect on essentially the same terms
immediately following the Closing, except to the extent that enforceability may
be limited by the Equitable Exceptions. All facilities owned or leased by the
Company have received all material approvals of any Governmental Body (including
Governmental Permits) required in connection with the operation thereof and have
been operated and maintained in accordance with all Requirements of Laws.
3.10 Licenses and Permits. Attached hereto as Schedule 3.10 is a
-------------------- -------------
list of all Material licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "Governmental Permits") the
absence of which could individually or in the aggregate have a Material Adverse
Effect. The Company has complied in all material respects with the terms and
conditions of all such Governmental Permits, and the Company has not received
notification from any Governmental Body of violation of any such Governmental
Permit or the Requirements of Laws governing the issuance or continued validity
thereof other than violations (if any) which would not individually or in the
aggregate have a Material Adverse Effect. No additional Governmental Permit is
required from any Governmental Body thereof in connection with the conduct of
the 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, 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 the
Sellers are aware of any infringement by others of any such rights owned by the
Company.
3.12 Compliance with Laws. The Company has (i) complied in all
--------------------
material respects with all Requirements of Laws, Governmental Permits and Court
Orders applicable to the Business and has filed with the proper Governmental
Bodies all statements and reports required by all Requirements of Laws,
Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are
-17-
subject and (ii) conducted the Business and is in compliance in all material
respects with all federal, state and local energy, public utility, health,
safety and environmental Requirements of Laws, Governmental Permits and Court
Orders including the Clean Air Act, the Clean Water Act, RCRA, the Safe Drinking
Water Act, CERCLA, OSHA, the Toxic Substances Control Act and any similar state,
local or foreign laws (collectively "Environmental Obligations") and all other
federal, state, local or foreign governmental and regulatory requirements,
except where any such failure to comply or file would not, in the aggregate,
have a Material Adverse Effect. No claim has been made by any Governmental Body
(and, to the best knowledge of the Company and the Sellers, no such claim is
anticipated) to the effect that the Business fails to comply, in any respect,
with any Requirements of Laws, Governmental Permit or Environmental Obligation
or that a Governmental Permit or Court Order is necessary in respect thereto.
3.13 Insurance. Attached hereto as Schedule 3.13 is a list of all
--------- -------------
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Global. To the best of the Company's
and the Sellers' knowledge and belief, no event relating to the Company has
occurred which will result in (i) cancellation of any such insurance coverages;
(ii) a retroactive upward adjustment of premiums under any such insurance
coverages; or (iii) any prospective upward adjustment in such premiums. All of
such insurance coverages will remain in full force and effect following the
Closing.
3.14 Employee Benefit Plans.
----------------------
(a) Employee Welfare Benefit Plans. Except as disclosed on
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any "employee
-------------
welfare benefit plan" as such term is defined in Section 3(1) of ERISA. With
respect to each such plan: (i) the plan is in material compliance with ERISA;
(ii) the plan has been administered in accordance with its governing documents;
(iii) neither the plan, nor any fiduciary with respect to the plan, has engaged
in any "prohibited transaction" as defined in Section 406 of ERISA other than
any transaction subject to a statutory or administrative exemption; (iv) except
for the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
(b) Employee Pension Benefit Plans. Except as disclosed in
------------------------------
Schedule 3.14, the Company does not maintain or contribute to any arrangement
-------------
that is or may be an "employee pension benefit plan" relating to employees, as
such term is defined in Section 3(2) of ERISA. With respect to each such plan:
(i) the plan is qualified under Section 401(a) of the Code, and any trust
through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA; (iii) the plan has been administered in
accordance with its governing documents as modified by applicable law; (iv) the
plan has not suffered an "accumulated funding deficiency" as defined in Section
412(a) of the Code; (v) the plan has not engaged in, nor has any fiduciary with
respect to the plan engaged in, any "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code other than a transaction
subject to statutory or administrative exemption; (vi) the plan has not been
subject to a "reportable event" (as defined in Section
-18-
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 Merger, stock grant or stock option arrangement entered into between the
Company and any current or former officer, consultant, director or employee of
the Company that is not intended to be a tax qualified arrangement under Section
401(a) of the Code.
3.15 Contracts and Agreements. Attached hereto as Schedule 3.15 is
------------------------ -------------
a list and brief description of all written or oral contracts, commitments,
leases, and other agreements (including, without limitation, promissory notes,
loan agreements, and other evidences of indebtedness, guarantees, agreements
with distributors, suppliers, dealers, franchisors and customers, and service
agreements) to which the Company is a party or by which the Company or its
properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract $75,000 or
greater (collectively, the "Contracts"). The Company is not and, to the best
knowledge of the Sellers and the Company, no other party thereto is in default
(and no event has occurred which, with the passage of time or the giving of
notice, or both, would constitute a default by the Company) under any of the
Contracts, and the Company has not waived any right under any of the Contracts,
except for any such defaults or waivers, which would not have a Material Adverse
Effect. Except for the Equitable Exceptions, all of the Contracts are legal,
valid, binding, enforceable and in full force and effect and, assuming all
necessary consents to the consummation of the transactions contemplated herein,
as specifically set forth on Schedules 3.9 and 3.15, are obtained, will remain
------------- ----
legal, valid, binding, enforceable and in full force and effect on essentially
the same terms immediately after the Closing, except to the extent that
enforceability may be limited by the Equitable Exceptions. Except as set forth
in Schedule 3.15, the Company has not guaranteed any obligations of any other
-------------
Person. To the best knowledge of the Company and the Sellers, no manufacturer
of office equipment sold by the Company will cease doing business with the
Company immediately following the Closing.
3.16 Claims and Proceedings. Attached hereto as Schedule 3.16 is a
---------------------- -------------
list and brief description of all claims, actions, suits, proceedings, or
investigations pending or, to the best knowledge and belief of the Sellers or
the Company, threatened against or affecting the Company or any of its
properties or assets, at law or in equity, or before or by any court,
municipality or other Governmental Body. Except as set forth on Schedule 3.16,
-------------
none of such claims, actions, suits, proceedings, or investigations, if
adversely determined, will result in any Material liability or loss to the
Company. The Company has not been and the Company is not now, subject to any
Court Order, stipulation, or consent of or with any court or Governmental Body.
No inquiry, action or proceeding has been instituted or, to the best knowledge
and belief of the Sellers or the
-19-
Company, threatened or asserted against the Sellers or the Company to restrain
or prohibit the carrying out of the transactions contemplated by this Agreement
or to challenge the validity of such transactions or any part thereof or seeking
damages on account thereof. Except as set forth on Schedule 3.16, there is no
-------------
basis for any such valid claim or action.
3.17 Taxes.
-----
(a) All Federal, foreign, state, county and local income, gross
receipts, excise, property, franchise, license, sales, use, withholding and
other Taxes due from the Company on or before the Closing will have been paid
and all Tax Returns which are required to be filed by the Company on or before
the Closing will have been filed within the time and in the manner provided by
law, and all such Tax Returns are true and correct and accurately reflect the
Tax liabilities of the Company. No Tax Returns of the Company are presently
subject to an extension of the time to file. All Taxes, assessments, penalties,
and interest of the Company which have become due pursuant to such Tax Returns
or any assessments received have been paid or adequately accrued on the
Company's Financial Statements. The provisions for Taxes reflected on the
balance sheets contained in the Financial Statements are adequate to cover all
of the Company's Tax liabilities for the respective periods then ended and all
prior periods. The Company has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes, and there are no pending or, to the best knowledge of the Sellers or the
Company, threatened claims, assessments, notices, proposals to assess,
deficiencies, or audits with respect to any such Taxes. For Governmental Bodies
with respect to which the Company does not file Tax Returns, no such
Governmental Body has given the Company written notification that the Company is
or may be subject to taxation by that Governmental Body. The Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of the Company.
(B) Neither the Company nor any other corporation has filed
an election under Section 341(f) of the Code that is applicable to the Company
or any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Section 280G of the Code. The Company has not been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code. The Company is not a party to any Tax allocation or sharing
agreement. The Company has not and has never been (nor does the Company have any
liability for unpaid Taxes because it once was) a member of an affiliated group
during any part of a return year any corporation other than the Company also was
a member of the affiliated group. No Seller (A) has been a member of an
affiliated group, as defined in Section 1504(a) of the Code, filing a
consolidated federal income Tax Return (other than a group the common parent of
which was any Seller) and (B) has any Liability for the Taxes of any Person
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract or otherwise.
-20-
(c) The Company is not be liable for any Tax under Section 1374
of the Code in connection with a deemed sale of such Company's assets caused by
an election under Section 338(h)(10) of Code. The Company has not, in the past
ten (10) years, (i) acquired assets from another corporation in a transaction in
which the Company's Tax basis for the acquired assets was determined in whole or
in part by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor or (ii) acquired the stock of any other
corporation that is a qualified subchapter S subsidiary.
(d) The Company has not had at any time during the Company's
existence owned any subsidiaries (including any "qualified subchapter S
subsidiaries" within the meaning of Section 1361(b)(3)(13) of the Code).
(e) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the transfer and
sale of the Shares pursuant to this Agreement.
3.18 Personnel. Attached hereto as Schedule 3.18 is a list of the
--------- -------------
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal year ended December 31, 1998 (including base
salary, bonus and incentive pay) exceed (or during the fiscal year ending
December 31, 1999 are expected to exceed) $100,000. Schedule 3.18 also
-------------
summarizes the bonus, profit sharing, percentage compensation, company
automobile, club membership, and other like benefits, if any, paid or payable to
such directors, officers, and employees during the Company's fiscal year ended
December 31, 1998 and to the date hereof. Except as disclosed on Schedule 3.18,
-------------
since December 31, 1998, the Company has not changed the employment
compensation, benefits or consulting payments to the Sellers, except in the
ordinary course of business consistent with past practice. Schedule 3.18 also
-------------
contains a brief description of all material terms of employment agreements to
which the Company is a party and all severance benefits which any director,
officer or employee of the Company is or may be entitled to receive. The
employee relations of the Company are generally good and there is no pending or,
to the best knowledge of the Sellers or the Company, threatened labor dispute or
union organization campaign. None of the employees of the Company are
represented by any labor union or organization. The Company is in compliance in
all material respects with all Requirements of Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and are not engaged in any unfair labor practices. Neither the Company or the
Sellers has been advised, or has good reason to believe, that any of the persons
whose names are set forth on Schedule 3.18 or any other employee will not agree
-------------
to remain employed by the Company after the consummation of the transactions
contemplated hereby. There is no unfair labor practice claim against the Company
before the National Labor Relations Board, or any strike, dispute, slowdown, or
stoppage pending or, to the best knowledge of the Company and the Sellers,
threatened against or involving the Company, and none has occurred.
3.19 Business Relations. Neither the Company nor the Sellers know or
------------------
has good reason to believe that any customer or supplier of the Company will
cease to do business with the Company after the consummation of the transactions
contemplated hereby in the same
-21-
manner and at the same levels as previously conducted with the Company except
for any reductions which, individually or in the aggregate, do not result in a
Material Adverse Change. Neither the Sellers nor the Company has received any
notice of any material disruption (including delayed deliveries or allocations
by suppliers) in the availability of any portion of the materials used by the
Company nor is the Company or the Sellers aware of any facts which could lead
them to believe that the Business will be subject to any such material
disruption.
3.20 Accounts Receivable. All of the accounts, notes, and loans
-------------------
receivable that have been recorded on the books of the Company are bona fide and
represent amounts validly due for goods sold or services rendered and, except as
disclosed on Schedule 3.20, all such amounts (net of any allowance for doubtful
-------------
accounts) will be collected in full within 180 days following the Closing Date.
Except as disclosed on Schedule 3.20 hereto (a) all of such accounts, notes, and
-------------
loans receivable are free and clear of any Encumbrances; (b) no claims of offset
have been asserted in writing against any of such accounts, notes, or loans
receivable; and (c) none of the obligors of such accounts, notes, or loans
receivable has given written notice that it will or may refuse to pay the full
amount or any portion thereof.
3.21 Bank Accounts. Attached hereto as Schedule 3.21 is a list of all
------------- -------------
banks or other financial institutions with which the Company has an account or
maintains a safe deposit box, showing the type and account number of each such
account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith.
3.22 Warranties. Except for warranty claims that are typical and in
----------
the ordinary course of the Business, no written claim for breach of product or
service warranty to any customer has been made against the Company since January
1, 1997. To the best knowledge of the Sellers and the Company, no state of facts
exists, and no event has occurred, which could reasonably be expected to form
the basis of any present claim against the Company for liability on account of
any express or implied warranty to any third party in connection with products
sold or services rendered by the Company, except for warranty claims which are
typical and in the ordinary course of business, none of which individually or in
the aggregate would have a Material Adverse Effect.
3.23 Brokers. Neither the Company nor the Sellers have engaged, or
-------
caused to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
3.24 Interest in Competitors, Suppliers, Customers, Etc.. No officer,
----------------------------------------------------
director, or shareholder of the Company or any affiliate of any such officer,
director, or shareholder, has any ownership interest in any competitor,
supplier, or customer of the Company (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
3.25 Indebtedness To and From Officers, Directors, Shareholders, and
---------------------------------------------------------------
Employees. Attached hereto as Schedule 3.25 is a list and brief description of
--------- -------------
the payment terms
-22-
of all indebtedness of the Company to officers, directors, shareholders, and
employees of the Company and all indebtedness of officers, directors,
shareholders, and employees of the Company to the Company, excluding
indebtedness for travel advances or similar advances for expenses incurred on
behalf of and in the ordinary course of the Business, consistent with past
practices.
3.26 Undisclosed Liabilities. Except as indicated in Schedule 3.26
----------------------- -------------
hereto, the Company does not have any liabilities (whether absolute, accrued,
contingent or otherwise), of a nature required by GAAP to be reflected on a
corporate balance sheet or disclosed in the notes thereto, except such
liabilities which are accrued or reserved against in the Financial Statements or
disclosed in the notes thereto, including without limitation any accounts
payable or service liabilities of the Company incurred prior to the Closing
Date, other than liabilities incurred in the ordinary course of the Business
since the date of the latest of such Financial Statements.
3.27 Information Furnished. The Company and the Sellers have made
---------------------
available to Global true and correct copies of all material corporate records of
the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in this Agreement, and neither
this Agreement, the Schedules hereto, nor any written information, instrument,
or document delivered to Global pursuant to this Agreement contains any untrue
statement of a material fact or omits any material fact necessary to make the
statements herein or therein, as the case may be, not misleading.
3.28 Personal Vehicles. All personal vehicles have been removed from
-----------------
the Business prior to the Closing Date.
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 $100,000. 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 $100,000 per occurrence or $200,000 in the aggregate. The term
"knowledge" shall mean actual knowledge after reasonable inquiry of the officers
and employees of the Company with responsibility for the applicable subject
matter. All references to the "Company" in Sections 3.6 through 3.28 shall
------------ ----
include the Companies' Subsidiaries.
ARTICLE IV'
GLOBAL AND NEWCO'S REPRESENTATIONS AND WARRANTIES
Global and Newco jointly and severally represent and warrant to the
Sellers as follows:
4.1 Due Organization. Each of Global and Newco is a corporation duly
----------------
organized, validly existing, and in good standing under the laws of the States
of Delaware and
-23-
Colorado 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 and the Merger Documents has been duly authorized by all necessary
corporate action of each of Global and Newco and the Agreement has been duly and
validly executed and delivered by each of Global and Newco and constitutes the
valid and binding obligation of each of Global and Newco, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by the Equitable Exceptions. The execution, delivery, and performance of
this Agreement (as well as the Merger Documents and all other instruments,
agreements, certificates or other documents contemplated hereby) by each of
Global and Newco, do not (a) violate any Requirements of Laws or Court Order of
any Governmental Body applicable to either Global or Newco or either of their
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under any agreement to which either Global or Newco is a
party or by which either of them or theirs property is bound, (c) permit the
acceleration of the maturity of any indebtedness of, or any indebtedness secured
by the property of, Global or Newco, or (d) violate or conflict with any
provision of the charter or bylaws of Global or Newco.
4.3 No Brokers. Neither Global or Newco 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 for which the Company, Sellers or
Shareholders could be liable.
4.4 Investment. Upon consummation of the Merger, Global will acquire
----------
the Shares solely for investment purposes and for its own account and not with a
view to the distribution thereof.
4.5 Information Furnished. To the best knowledge of each of Global and
---------------------
Newco, neither this Agreement, nor any written information, instrument, or
document delivered to the Sellers or Shareholders by Global or Newco 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.
4.6 Adequate Funds. Global possesses access to adequate funds
--------------
necessary to consummate the transactions contemplated by this Agreement.
ARTICLE V
PRE-CLOSING COVENANTS
5.1 Consents of Others. Prior to the Closing, the Company and the
------------------
Sellers shall use their best efforts to obtain and to cause the Company to
obtain all authorizations, consents and permits required of the Company, the
Sellers and Shareholders to permit them to consummate the transactions
contemplated by this Agreement, including, without limitation, any vote of the
Shareholders required for consummation of the Merger.
-24-
5.2 Best Efforts. Global, Newco, the Company and the Sellers shall use
------------
all reasonable efforts to cause all conditions for the Closing to be met.
5.3 Powers of Attorney. The Company and the Sellers shall cause the
------------------
Company to terminate at or prior to the Closing all powers of attorney granted
by the Company other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other government agencies.
5.4 Conduct of Business Pending Closing. From the date of this
Agreement to the Closing Date:
(i) Except as otherwise contemplated by this Agreement, or as
Global may otherwise consent to in writing, the Company and the
Sellers shall conduct the Business only in the ordinary course and
shall not engage in any material activity or enter into any material
transaction which would cause a breach of any of the representations
and warranties contained in Article III.
-----------
(ii) The Company shall, and the Sellers shall use their best
efforts to cause the Company to, preserve substantially intact its
current business organization and present relationships with its
customers, vendors, suppliers and employees and to maintain all of its
insurance currently in effect.
(iii) The Sellers and the Company shall give prompt notice to
Global of any notice of material default received by the Company or
the Business subsequent to the date of this Agreement under any
Contract or any Material Adverse Change occurring prior to the Closing
Date in the operation of the Company or the Business.
(iv) Neither the Company nor the Sellers, nor any of their
representatives, shall solicit, encourage or discuss any Acquisition
Proposal (as hereinafter defined) or supply any non-public information
concerning the Company or the Business or the Company's assets to any
party other than Global or its representatives. As used herein,
"Acquisition Proposal" means any proposal other than the transactions
herein contemplated, for (i) any merger or other business combination
involving the Company or the Business, (ii) the acquisition of the
Company or a material equity interest in the Company or a material
portion of its assets, or (iii) the dissolution or liquidation of the
Company.
5.5 Access to Records Before Closing. Prior to the Closing Date, the
--------------------------------
Sellers and the Company agree that they will give, or cause to be given, to
Global and Newco and their representatives, during normal business hours and at
Global's expense, full and unrestricted access to the Company's personnel,
officers, agents, employees, assets, properties, titles, contracts, corporate
minute and other books, records, files and documents of the Sellers with respect
to the Business (including financial, tax basis, budget projections,
accountants' work papers and other information as Global may request) and to the
Business' personnel, customers, suppliers and independent accountants,
-25-
to allow Global to obtain such information as Global shall desire, and to make
copies of such information, to the extent reasonably necessary. Additionally,
the Sellers and the Company will provide Global opportunities to meet with key
employees of the Business, to visit facilities of the Business and to otherwise
conduct due diligence in respect of the Company and the Business. All materials
copied by Global shall be maintained in confidence by Global and returned to the
Sellers and/or the Company, as appropriate, if the Closing of the transactions
contemplated hereunder fails to occur.
5.6 Termination of Company's Profit Sharing Plan Sellers and the
--------------------------------------------
Company will adopt all necessary corporate resolutions to terminate or freeze
the Company's Profit Sharing Plan, effective as of no later than one business
day prior to the Closing Date. Immediately prior to such termination, Sellers
and the Company will make all necessary payments to fund the contributions: (i)
necessary or required to maintain the tax-qualified status of the Company's
Profit Sharing Plan, and (ii) for elective deferrals made pursuant to the
Company's Profit Sharing Plan for the period prior to termination.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 General. In case at any time after the Closing any further action
-------
is legally necessary or reasonably desirable (as determined by Global and the
Sellers) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at the
sole cost and expense of the requesting party (unless the requesting party is
entitled to indemnification therefor under Article VIII below). The Sellers and
------------
Global acknowledge and agree that from and after the Closing, Global will be
entitled to possession of all documents, books, records, agreements, and
financial data of any sort relating to the Company, which shall be maintained at
the chief executive office of the Company; provided, however, that the Sellers
shall be entitled to reasonable access to and to make copies of such books and
records at their sole cost and expense, and Global will maintain all of the same
for a period of at least six (6) years after Closing.
6.2 Transition. For a period of three (3) years following Closing, the
----------
Sellers will not take any action that primarily is designed or intended to have
the effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of the Company from maintaining the same business relations
with the Company after the Closing as it maintained with the Company prior to
the Closing. For a period of three (3) years following Closing, the Sellers will
refer all customer inquiries relating to the Business to the Company.
6.3 Confidentiality. For a period of three (3) years from and after
---------------
the Closing Date, the Sellers will (i) treat and hold as such all Confidential
Information, (ii) refrain from using any of the Confidential Information except
in connection with this Agreement, as an employee of the Company, or otherwise
for the benefit of the Company, Buyer or its subsidiaries, and (iii) deliver
promptly to Buyer or destroy, at the written request and option of Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession, except
-26-
as otherwise permitted herein. In the event that any Seller is requested or
required (by oral question or written request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar legal proceeding) to disclose any Confidential Information, such Seller
will notify Global promptly of the request or requirement.
6.4 Covenant Not to Compete. For and in consideration of the
-----------------------
allocation of $1,000,000 of the Purchase Price paid to the Sellers by Global,
each individual Seller covenants and agrees, for a period of three (3) years
from and after the Closing Date, that he will not, directly or indirectly
without the prior written consent of Global, for or on behalf of any entity:
(a) become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent, contractor
with, employer or representative of, or in any manner associated with, or give
financial, technical or other assistance to, any Person, firm or corporation for
the purpose of engaging in the Business in competition with the Company, Global
or their respective affiliates within the greater of (i) a 100 mile radius of
any of the Company's current office facilities in the States of Colorado and
Wyoming (the "Current Trade Area") or (ii) in any geographic area in the States
of Colorado or Wyoming 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, Global or any of their respective
affiliates for the purpose of providing office equipment sales or service or
computer or network integration sales or service to such customers in
competition with the Company in the Current Trade Area or to cause them to
reduce or end their business with the Company; or
(c) enter into any agreement with, or solicit the employment of
employees, consultants or representatives of the Company for the purpose of
causing them to leave the employment of the Company;
provided, however, that no owner of less than one percent (1%) of the
outstanding stock of any publicly-traded corporation shall be deemed to be in a
violation of this Section 6.4 solely by reason thereof.
-----------
6.5 Additional Matters.
------------------
(a) The Sellers shall cause the Company to file with the
appropriate governmental authorities all Tax Returns required to be filed by it
for any taxable period ending prior to the Closing Date and the Company shall
remit any Taxes due in respect of such Tax Returns. In addition, the Sellers
shall cause Xxxxxxxx & Xxxxxx, P.C. to prepare a short period tax return for the
Company covering the period from January 1, 1999 through the Effective Date. The
cost of preparation of such short period tax return shall be paid for by the
Sellers.
(b) Global and the Sellers recognize that each of them will need
access, from time to time, after the Closing Date, to certain accounting and Tax
records and information held by Global and/or the Company to the extent such
records and information pertain to events occurring on or prior to the Closing
Date; therefore, Global agree to cause the Company to
-27-
(A) use its best efforts to properly retain and maintain such records for a
period of six (6) years from the date the Tax Returns for the year in which the
Closing occurs are filed or until the expiration of the statute of limitations
with respect to such year, whichever is later, and (B) allow each Seller and his
agents and representatives at times and dates mutually acceptable to the
parties, to reasonably inspect, review and make copies of such records from time
to time, such activities to be conducted during normal business hours and at the
inspecting party's expense.
6.6 Conduct During Earnout Period. Sellers acknowledge and agree that,
-----------------------------
during the Earnout Period, Global shall be entitled to oversee the operation and
management of the Business of the Company, including the setting of goals and
review of budgets and performance, all of which shall be reasonably and legally
designed and intended to maximize the productivity, efficiency, profitability
and Adjusted EBIT of the Company. The Sellers further agree, during the Earnout
Period, not and not to allow the Company to cut staff, capital expenditures and
general and administrative expenses or take other actions that are not
consistent with the Company's prior practices and/or prudent business practices,
and Sellers agree not and not to allow the Company to engage in any activity in
order to increase current year profits of the business of the Company at the
expense of the longer term growth of the business of the Company. During the
Earnout Period, Global agrees to (i) maintain separate books and records for the
Company; (ii) maintain the Company as a separate entity and not to sell or
otherwise dispose of any of its assets except in the Ordinary Course of Business
or sell or otherwise dispose of any of its stock; (iii) cause the Company to be
operated essentially as it was prior to the sale of the Shares (pursuant to the
Merger) except in so far as the prior practices of the Company were imprudent or
unreasonable or its productivity efficiency and profitability can be improved
and increased through economies of scale, Global's experience or otherwise; (iv)
not to include, for purposes of the calculation of Adjusted EBIT of the Company,
any revenues or expenses associated with an acquisition by the Company without
the prior written consent of Sellers (in which event, assuming approval of the
Sellers has been obtained, Global and the Sellers shall negotiate in good faith
to determine how such acquisition shall effect the determination of Adjusted
EBIT of the Company); and (v) not unreasonably change, except with the consent
of Shareholders' Representative, and except in the Ordinary Course of Business,
(A) the prices charged for the Company's products and services or (B) the level
the Company's general and administrative expenses, unless the prior business
practices were unreasonable or imprudent and/or unless the changes are
reasonably necessary to support the growth of the Company's business. Global,
the Company and the Sellers recognize and acknowledge that the relationship that
will exist between Global, the Company and the Sellers upon the consummation of
the transactions contemplated herein will be based on a high degree of mutual
trust and confidence among the parties, and each of Global and the Sellers agree
that at all times following the Closing that each will act with respect to its
dealings with the Company and its operations in such a way as to promote, to the
extent reasonably possible, the successful operation and growth of the Company.
During the Earnout Period, Global will not terminate without Cause any three (3)
or more of Xxxx X. Xxxxx, Xxxxx X. Xxxxx, Xxxxx X. Xxxxxx and Xxxx Xxxxxxxxx.
6.7 Registration Rights Agreement. Global agrees to use its reasonable
-----------------------------
best efforts to allow Sellers to become a party to the Global registration
rights agreement, a copy of which has been provided to or made available to the
Shareholders' Representative.
-28-
ARTICLE VII
CONDITIONS TO OBLIGATION OF PARTIES TO CONSUMMATE CLOSING
7.1 Conditions to Global and Newco's Obligations. The obligations of
--------------------------------------------
Global and Newco under this Agreement to consummate the Closing are subject to
the conditions that:
(a) Covenants, Representations and Warranties. The Company and the
-----------------------------------------
Sellers shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained in
this Agreement to be performed and complied with by each of them prior to or at
the Closing Date. The representations and warranties of the Company and the
Sellers set forth in this Agreement shall be accurate in all material respects
at and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date, except for any changes resulting from activities or
transactions which may have taken place after the date hereof and which are
permitted or contemplated by this Agreement or which have been entered into in
the ordinary course of business and except to the extent that such
representations and warranties are expressly made as of another specified date
and, as to such representation, the same shall be true in all material respects
as of such specified date. In addition, Global shall have determined from its
due diligence review of the Company that no Material Adverse Change or Material
Adverse Effect shall have occurred in the financial condition, business,
operations or prospects of the Company from those presented to Global.
(b) Consents. All statutory requirements for the valid
--------
consummation by the Company and the Sellers and Shareholders of the transactions
contemplated by this Agreement shall have been fulfilled and all authorizations,
consents and approvals, including expiration or early termination of all waiting
periods under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the transactions contemplated hereby shall
have been obtained in form and substance reasonably satisfactory to Global,
unless such failure could not reasonably be expected to have a Material Adverse
Effect. All approvals of the Board of Directors and shareholders of the Company
necessary for the consummation of this Agreement, the Merger and the
transactions contemplated hereby shall have been obtained.
(c) Suppliers/Leases. The Sellers shall have obtained, where
----------------
necessary, the written consent of (i) the Company's Material office equipment
suppliers and (ii) the lessors of the Buildings to the transactions contemplated
by the Agreement. The lessors of the Buildings shall have provided a Landlord
Agreement to Global's lenders in substantially the same form as Exhibit B
---------
hereto, except as specifically waived by Global.
(d) Discharge of Indebtedness and Liens. The Sellers and the
-----------------------------------
Company shall have provided for the payment in full by the Company of all Funded
Indebtedness of the Company. Such Funded Indebtedness, if any, as of December
31, 1998, is listed on Schedule 7.1(d) hereto. The Sellers shall have also
---------------
provided for the termination of all Encumbrances of record on the properties of
the Company, except for Permitted Exceptions. All liens or UCC filings against
the Company and each of the Subsidiaries or Affiliates of the
-29-
Company which engaged in the Business other than Permitted Exceptions shall have
been terminated as of the Closing.
(e) Leases. All of the automobile leases for the Company's ten
------
facilities shall be reasonably satisfactory to Global and shall
continue to remain in full force and effect without change following
the Closing Date.
(f) Transfer Taxes. The Sellers and Shareholders shall be
--------------
responsible for all stock transfer or gains taxes imposed on the
Sellers and Shareholders incurred in connection with this Agreement.
(g) Documents to be Delivered by the Sellers and The Company. The
--------------------------------------------------------
following documents shall be delivered at the Closing by the Sellers
and the Company:
(i) Opinion of the Sellers' Counsel. Global shall have
-------------------------------
received an opinion of counsel to the Company and the Sellers, dated
the Closing Date, in substantially the same form as the form of
opinion that is Exhibit C hereto.
(ii) Certificates. Global shall have received an officer's
------------
certificate and a secretary's certificate of the Company executed by officers of
the Company, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit D-1 and D-2, respectively, hereto.
----------- ---
(iii) Release. The Sellers shall have furnished the Company
-------
with a general release in substantially the same form as the form attached as
Exhibit E hereto.
---------
(iv) Escrow Agreement. The Sellers shall have delivered to
----------------
Global at the Closing the duly executed Escrow Agreement required pursuant to
Section 2.5 hereof.
-----------
(v) Executive Agreements. Xxxx Xxxxx, Xxxxx Xxxxx, Xxxxx
--------------------
X. Xxxxxx and Xxxx Xxxxxxxxx shall have each duly executed and delivered the
Executive Agreements in substantially the same forms attached as Exhibit F
---------
hereto, pursuant to which each of them will be employed by the Company following
the Closing.
(vi) Equity Subscription Agreement. Sellers shall have
-----------------------------
executed and delivered to Global an Equity Subscription Agreement in
substantially the same form as the form attached hereto as Exhibit H.
---------
(vii) Personal Vehicles. Sellers shall have removed all
personal vehicles from the Business. The Company shall have terminated or
transferred the life insurance policy on the life of Xxxxxxxx Xxxxx.
-30-
(viii) Sellers Receivables. The Sellers shall, and the Company
-------------------
shall have caused, all of the Company's officers, directors and/or
employees to have repaid in full all debts and other obligations, if any,
owed to the Company.
(ix) Stock Certificates. The Sellers and Shareholders 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; and
(x) Consummation of Merger. The Sellers shall have executed,
----------------------
delivered and filed with the State of Colorado all of the Merger Documents
including any certificates and articles of merger necessary for
consummation of the Merger and the Merger shall be deemed to have become
effective under the laws of the State of Colorado.
7.2 Conditions to the Sellers' and the Company's Obligations. The
--------------------------------------------------------
obligation of the Sellers and the Company under this Agreement to consummate the
Closing is subject to the conditions that:
(a) Covenants, Representations and Warranties. Global and Newco shall
-----------------------------------------
have each 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 Newco prior to or at the Closing
and the representations and warranties of Global and Newco 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 Newco 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 Newco 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 efforts to have obtained
the release of the Sellers from all personal guarantees with respect to the
Company.
(c) Documents to be Delivered by Global and Newco. The following
---------------------------------------------
documents shall be delivered at the Closing by Newco:
(i) Certificates. The Sellers shall have received an officers'
------------
certificate and a secretary's certificate executed by officers of each of
Global and
-31-
Newco, dated the Closing Date, in substantially the same forms as the
forms of certificates that are Exhibit G-1 and G-2, respectively,
hereto.
(ii) Escrow Agreement. Global shall have delivered to the Sellers
----------------
at the Closing the duly executed Escrow Agreement required pursuant to
Section 2.5 hereof.
-----------
(iii) Executive Agreements. Global shall have caused the Company
--------------------
to duly execute and deliver the Executive Agreements with Xxxx Xxxxx, Xxxxx
Xxxxx, Xxxxx Xxxxxx and Xxxx Xxxxxxxxx in the same forms attached as
Exhibit F hereto, pursuant to which each of them will be employed by the
---------
Company following the Closing.
(iv) Equity Subscription Agreement; Options. Global shall have
--------------------------------------
executed and delivered to Sellers an Equity Subscription Agreement in
substantially the same form as the form attached hereto as Exhibit H. In
---------
addition, Global shall have granted customary stock options for the
purchase of an aggregate of 100,000 shares of Global Stock to certain key
employees of the Company agreed upon by Global and Sellers.
(d) Payments to the Sellers and the Company and the Escrow Agent. The
------------------------------------------------------------
Sellers and Shareholders shall have received the Purchase Price for the Shares.
The Escrow Agent shall have received the Escrow Sum from Global.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification of Global. Except as provided in Section 8.6, as
------------------------- -----------
Global's sole and exclusive monetary remedy for any breach by the Sellers
hereunder, the Sellers agree to jointly and severally indemnify and hold
harmless Global and each officer, director, and affiliate of Global, including
without limitation the Company or any successor of the Company (collectively,
the "Indemnified Parties") from and against any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively, the
"Indemnifiable Costs"), which any of the Indemnified Parties may sustain, or to
which any of the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by the Sellers or the Company of or under
any of the representations, covenants, agreements or other provisions of this
Agreement or any agreement or document executed in connection herewith; (B) the
assertion and final determination of any claim or liability against the Company
or any of the Indemnified Parties by any Person based upon the facts which form
the alleged basis for any litigation to the extent it should have been, but was
not, reserved for in the Financial Statements in accordance with GAAP; (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 and (D) any liability arising under ERISA or
other
-32-
Requirements of Laws with respect to the operation of or in connection with the
termination of the Company's 401(k) Plan and the termination or freezing of the
Company's Profit Sharing Plan, including any claims Taxes, fines, fees or
assessments associated therewith. Notwithstanding the foregoing, all liability
of any Seller for breach of any representation, warranty or covenant contained
herein with respect to the ownership, sale and/or transfer of such Seller's
shares to Global pursuant to the Merger shall be an individual Indemnifiable
Cost only from such Seller and no other Seller shall be, in the absence of fraud
by such other Seller, jointly and severally liable for such individual Seller's
breach of such representations, warranties or covenants with respect to such
Seller's shares. Notwithstanding anything to the contrary contained in this
Agreement, Shareholders shall be required to bear their Allocable Portion of any
Indemnifiable Costs paid to Global from the Escrow Sum.
8.2 Defense of Claims. If any legal proceeding shall be instituted, or any
-----------------
claim or demand made, against any Indemnified Party in respect of which the
Sellers may be liable hereunder, such Indemnified Party shall give prompt
written notice thereof to the Sellers and, except as otherwise provided in
Section 8.4 below, the Sellers shall have the right to defend, or cause the
-----------
Company or its successors to defend, any litigation, action, suit, demand, or
claim for which it may seek indemnification unless, in the reasonable judgment
of Global, such litigation, action, suit, demand, or claim, or the resolution
thereof, would have 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 the Sellers' expense. In the event the
Sellers fail or refuse to defend the same within a reasonable length of time,
the Indemnified Parties shall be entitled to assume the defense thereof, and the
Sellers shall be jointly and severally liable to repay the Indemnified Parties
for all expenses reasonably incurred in connection with said defense (including
reasonable attorneys' fees and settlement payments) if it is determined that
such request for indemnification was proper. If the Sellers shall not have the
right to assume the defense of any litigation, action, suit, demand, or claim in
accordance with either of the two preceding sentences, the Indemnified Parties
shall have the absolute right to control the defense of and to settle, in
Indemnified Parties' sole discretion such litigation, action, suit, demand, or
claim, but each Seller shall be entitled, at his own expense, to participate in
such litigation, action, suit, demand, or claim.
8.3 Escrow Claim. If any claim for indemnification is made by an
------------
Indemnified Party or a Seller pursuant to this Article VIII prior to the
------------
expiration of the Escrow Period, such Indemnified Party or Seller shall first
apply to the Escrow Agent for reimbursement of such claim in accordance with the
provisions of the Escrow Agreement prior to seeking reimbursement for such
claim.
8.4 Tax Audits, Etc.. In the event of an audit of any Tax Return of the
----------------
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, 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; provided, however, Global will consult with the
Sellers on any such audit. The Sellers shall cooperate fully in all matters
relating to any such audit or other Tax proceeding (including according access
to all records pertaining thereto), and will execute and file any and all
consents, powers of attorney, and other documents as shall be
-33-
reasonably necessary in connection therewith; provided, however, that none of
the Sellers will be obligated to take any such action that would or could
reasonably be expected to result in incurrence of any liability by such Seller,
except as required by applicable Tax law. If additional Taxes are payable by the
Company as a result of any such audit or other proceeding, the Sellers shall be
responsible for and shall promptly pay all Taxes, interest, and penalties to
which any of the Indemnified Parties shall be entitled to indemnification.
8.5 Indemnification of the Sellers. Global agrees to indemnify and hold
------------------------------
harmless the Sellers and the Company and each officer, director, shareholder or
affiliate of the Company (including the Shareholders), from and against any
Indemnifiable Costs arising out of any material misrepresentation, breach or
default by Global or Newco of or under any of the covenants, agreements or other
provisions of this Agreement or any agreement or document executed in connection
herewith. In addition, the Company and Global shall indemnify the Sellers for
any payment or satisfaction of any guarantees by the Sellers of the Company's
obligations occurring after the Closing Date.
8.6 Limits on Indemnification. All Indemnifiable Costs sought by any party
-------------------------
hereunder shall be net of any insurance proceeds received by such Person with
respect to such claim (less the present value of any premium increases occurring
as a result of such claim). Except for any claims for breach of the
representations, warranties and covenants of the Sellers under Sections 3.1,
-------------
3.2, 3.3, 3.14, 3.17 or 6.5 hereof (for which indemnification claims must be
-------------------- ---
made prior to the expiration of the applicable statute of limitations and if so
made, such claims shall continue after such date until finally resolved), the
right to make claims for indemnification provided under this Article VIII shall
------------
expire 18 months after the Closing Date (except for claims made prior to such
date which shall continue after such date until finally resolved). The Sellers
shall not be obligated to pay any amounts for indemnification under this Article
-------
VIII until the aggregate indemnification obligation hereunder exceeds $75,000,
----
whereupon the Sellers shall be liable for all amounts for which indemnification
may be sought. Notwithstanding the foregoing, in no event shall the aggregate
liability of the Sellers to Global hereunder exceed $12,000,000 (except for any
claims for breach of the representations, warranties and covenants of the
Sellers under Sections 3.1, 3.2 or 3.3 which shall be limited to the Purchase
Price). Global shall not be obligated to pay any amounts for indemnification
under this Article VIII until the aggregate indemnification obligation hereunder
------------
exceeds $75,000, whereupon Global shall be liable for all amounts for which
indemnification may be sought. Notwithstanding the foregoing, in no event shall
the aggregate liability of the Global to Sellers for joint and several claims
hereunder exceed $12,000,000, except to the extent that the Earned Payout Amount
is validly earned hereunder and is not otherwise paid by Global to the Sellers,
in which case the sum of the Earned Payout Amount plus $12,000,000 shall be the
maximum aggregate liability of Global to Sellers. However nothing in this
Article VIII shall limit Global or the Sellers in exercising or securing any
------------
remedies provided by applicable common law with respect to the conduct of the
Sellers or Global in connection with this Agreement or in the amount of damages
that it can recover from the other in the event that Global or the Sellers
successfully proves gross negligence, intentional fraud or intentional
fraudulent conduct in connection with this Agreement.
-34-
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 if sent by United States certified mail, return receipt requested, postage
prepaid, shall be deemed duly given on the first attempted delivery by United
States Postal Service, or if sent by facsimile or receipted overnight courier
services shall be deemed duly given on the business day received if received
prior to 5:00 p.m. local time or on the following business day if received after
5:00 p.m. local time or on a non-business day, addressed to the respective
parties hereto as follows:
Global or Newco:
---------------
Global Imaging Systems, Inc.
0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx 000X
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, President
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
With a copy to:
--------------
Xxxxx & Xxxxxxx L.L.P.
Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
-35-
The Company or the Sellers:
--------------------------
Xxxxx & Associates, Inc.
0000 Xxxxx Xxxxxxxx Xxxx.
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
And with a copy to:
------------------
Hall & Xxxxx, LLC
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax No.: 000-000-0000
Tel No.: 000-000-0000
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
9.3 Counterparts; Facsimile Transmission. This Agreement may be executed in
------------------------------------
several counterparts, each of which shall be deemed an original but all of which
counterparts collectively shall constitute one instrument, and in making proof
of this Agreement, it shall never be necessary to produce or account for more
than one such counterpart. Signatures of a party to this Agreement or other
documents executed in connection herewith which are sent to the other parties by
facsimile transmission shall be binding as evidence of acceptance of the terms
hereof or thereof by such signatory party, with originals to be circulated to
the other parties in due course.
9.4 Expenses. Each of the parties hereto will bear all costs, charges and
--------
expenses incurred by such party in connection with this Agreement and the
consummation of the transactions contemplated herein; provided, however, that
the Sellers shall bear all costs and expenses of (i) any broker involved in this
transaction and (ii) all legal expenses of the Sellers and the Company with
respect to this Agreement and the transactions contemplated hereby; provided,
further, that such expenses may be paid by the Company to the extent that no
working capital adjustment would occur pursuant to Section 2.14(b) as of the
---------------
Closing Date. Notwithstanding the foregoing, if and only if the Merger is not
consummated after the Sellers have met all of the conditions to Global's and
Newco's obligations to close set forth in Section 7.1, Global shall pay the
-----------
excess accounting fees of the Company incurred due to the accelerated timing of
the Company's pre-closing audit.
9.5 Binding Effect; Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Company, Global, Newco and the Sellers, their heirs,
representatives, successors, and permitted assigns, in accordance with the terms
hereof. This Agreement shall not
-36-
be assignable by the Company or the Sellers without the prior written consent of
Global. This Agreement shall be assignable by Global to a wholly-owned
subsidiary of Global or a wholly-owned subsidiary of any such subsidiary without
the prior written consent of the Sellers, but any such assignment shall not
relieve Global of its obligations hereunder. In addition, the indemnification
rights of Global under Article VIII hereof may be assigned by Global to First
------------
Union National Bank, N.A.
9.6 Entire and Sole Agreement. This Agreement and the other schedules and
-------------------------
agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, representations, warranties,
statements, promises, information, arrangements and understandings, whether oral
or written, express or implied, with respect to the subject matter hereof.
9.7 Governing Law. This Agreement and its validity, construction,
-------------
enforcement, and interpretation shall be governed by the substantive laws of the
State of Colorado (without reference to Colorado' rules related to choice of
laws).
9.8 Survival of Representations, Warranties and Covenant. Regardless of
----------------------------------------------------
any investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect thereof, all covenants, agreements,
representations, and warranties and the related indemnities made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby shall
survive the Closing for a period of 18 months, provided (a) the representations
and warranties contained in Sections 3.14 and 3.17 of this Agreement, and the
------------- ----
related indemnities, shall survive the Closing until the expiration of the
applicable statutes of limitations for determining or contesting Tax
liabilities, (b) the representations, warranties and covenants contained in
Sections 3.1, 3.2, 3.3, and 6.5 of this Agreement, and the related indemnities,
------------ --- --- ---
shall survive the Closing indefinitely and not expire, and (c) all other
covenants which have specific expiration terms shall expire as of the dates set
forth therein.
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.
-37-
9.12 Waiver. No failure or delay on the part of any party in exercising any
------
right, power, or privilege hereunder or under any of the documents delivered in
connection with this Agreement shall operate as a waiver of such right, power,
or privilege; nor shall any single or partial exercise of any such right, power,
or privilege preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege.
9.13 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN THE SELLERS AND GLOBAL WITH
------------------
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF THE
SELLERS AND GLOBAL HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD), WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE
RESOLVED BY BINDING ARBITRATION BEFORE A PANEL OF THREE ARBITRATORS IN
ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION IN DENVER,
COLORADO, OR BY ANY OTHER MEANS OF ALTERNATIVE DISPUTE RESOLUTION MUTUALLY
AGREED UPON BY THE PARTIES. EACH PARTY SHALL BE ENTITLED TO DISCOVERY PURSUANT
TO THE FEDERAL RULES OF CIVIL PROCEDURE AND FEDERAL RULES OF EVIDENCE.
[THIS SPACE INTENTIONALLY LEFT BLANK]
-38-
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/ Xxx Xxxxxxx
----------------------------------------
Xxx Xxxxxxx
President and CEO
NEWCO:
-----
XXXXX ACQUISITION, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: VP, CFO, Secretary and Treasurer
THE COMPANY:
-----------
XXXXX & ASSOCIATES, INC.
By: /s/ Xxxx X. Xxxxx
----------------------------------------
Name: Xxxx X. Xxxxx
Title: President
THE SELLERS:
-----------
/s/ Xxxx X. Xxxxx
---------------------------------------------
Xxxx X. Xxxxx
[SELLERS' SIGNATURES CONTINUED ON NEXT PAGE]
-39-
/s/ Xxxxx X. Xxxxx
--------------------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxx
--------------------------------------------
Xxxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxxxxx
--------------------------------------------
Xxxx X. Xxxxxxxxx
XXXXXXXX X. XXXXX TRUST
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Xxxxx X. Xxxxx, Trustee
XXXXXXXX X. XXXXX TRUST
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Xxxxx X. Xxxxx, Trustee
XXXXXXX X. XXXXX TRUST
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Xxxxx X. Xxxxx, Trustee
XXXXX FAMILY LIMITED PARTNERSHIP
By: /s/ Xxxxx X. Xxxxx
---------------------------------------
Xxxxx X. Xxxxx, General Partner
XXXX AND XXXXXXXX XXXXX CHARITABLE UNITRUST
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxxx, Independent Trustee
-40-
