<PAGE> 1
CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
Commission File No. 0-27664
UNIDIGITAL INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3856672
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
20 West 20th Street, New York, New York 10011
(Address of Principal Executive Offices) (Zip Code)
(212) 337-0330
(Issuer's Telephone Number,
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: _X_ No:___
State the number of shares outstanding of each of the Issuer's classes
of common stock, as of April 7, 1997:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value 3,243,243
Transitional Small Business Disclosure Format:
Yes: ___ No: _X_
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UNIDIGITAL INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements.....................................1
CONSOLIDATED BALANCE SHEETS
as at August 31, 1996 (audited)
and February 28, 1997 (unaudited)............................2
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended
February 28, 1997 and February 29, 1996
(unaudited)..................................................3
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended
February 28, 1997 and February 29, 1996
(unaudited)..................................................4
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited).......................................5
Item 2. Management's Discussion and Analysis or
Plan of Operation........................................10
Results of Operations........................................10
Liquidity, Capital Resources and Other Matters...............14
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders......17
Item 5. Other Information........................................17
Item 6. Exhibits and Reports on Form 8-K.........................18
SIGNATURES..............................................................20
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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UNIDIGITAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
FEBRUARY 28, AUGUST 31,
1997 1996
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(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 2,458,704 $ 4,145,514
Accounts receivable (less allowance for doubtful
accounts of $233,058 and $200,814 at
February 28, 1997 and August 31, 1996, respectively) 5,322,473 3,207,857
Prepaid expenses and other current assets ........... 1,786,526 835,129
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Total current assets ............................. 9,567,703 8,188,500
Property, plant and equipment, net .................... 9,815,768 8,594,985
Intangible assets, net ................................ 951,494 797,213
Other assets .......................................... 54,047 42,628
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Total Assets ..................................... $20,389,012 $ 17,623,326
=========== ============
LIABILITIES
Current liabilities:
Due to banks ........................................ $ 1,497,375 $ 1,741,973
Current portion of long-term debt ................... 79,071 77,800
Current portion of capital lease obligations ........ 1,467,751 1,476,076
Accrued payments for acquisition
of business and cancellation of options ............ 24,442 202,930
Accounts payable and accrued expenses ............... 3,620,790 1,792,973
Income taxes payable ................................ 163,069 216,366
Loans and notes payable to stockholders ............. 364,604 361,039
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Total current liabilities ........................ 7,217,102 5,869,157
Non-current portion of long-term debt ................. 1,846,932 1,898,865
Non-current portion of capital lease obligations ...... 2,732,932 1,974,033
Deferred income taxes ................................. 473,582 516,596
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Total liabilities ................................ 12,270,548 10,258,651
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STOCKHOLDERS' EQUITY
Preferred stock -- authorized 5,000,000 shares,
$.01 par value each; none issued or ................. -- --
outstanding
Common stock -- authorized 10,000,000 shares,
$.01 par value each; 3,197,763 and 3,189,216 shares
issued and outstanding at February 28, 1997 and ..... 31,978 31,892
August 31, 1996, respectively
Additional paid-in capital ............................ 5,458,283 5,462,153
Retained earnings ..................................... 2,602,559 1,897,252
Cumulative foreign translation adjustment ............. 25,644 (26,622)
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Total stockholders' equity ....................... 8,118,464 7,364,675
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Total Liabilities and Stockholders' Equity ....... $20,389,012 $ 17,623,326
=========== ============
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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UNIDIGITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED, SIX MONTHS ENDED,
------------------------------ -------------------------------
FEBRUARY 28, FEBRUARY 29, FEBRUARY 28, FEBRUARY 29,
1997 1996 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales ................................ $ 5,265,916 $ 2,541,428 $ 10,493,635 $ 5,259,250
----------- ----------- ------------ -----------
Cost of sales ............................ 2,735,523 1,241,438 5,385,626 2,429,923
Selling, general and
administrative expenses ............... 1,592,516 774,241 3,014,550 1,535,935
Corporate expenses* ...................... 342,110 117,769 729,814 272,769
----------- ----------- ------------ -----------
Total operating expenses ............ 4,670,149 2,133,448 9,129,990 4,238,627
----------- ----------- ------------ -----------
Income from operations .............. 595,767 407,980 1,363,645 1,020,623
Interest expense ......................... 164,462 82,333 298,739 143,217
Interest and other expenses/
(income) .............................. 47,077 (30,832) 6,383 (30,832)
----------- ----------- ------------ -----------
Income before income taxes ............... 384,228 356,479 1,058,523 908,238
----------- ----------- ------------ -----------
Income taxes (including $367,000
nonrecurring provision relating to
termination of Subchapter S status
on February 1, 1996) ................... 140,741 520,000 353,216 636,000
----------- ----------- ------------ -----------
NET INCOME (LOSS) ........................ $ 243,487 $ (163,521) $ 705,307 $ 272,238
=========== =========== ============ ===========
Net income (loss) per common share ....... $ 0.08 $ (0.07) $ 0.22 $ 0.13
=========== =========== ============ ===========
Weighted average common shares outstanding 3,192,065 2,265,934 3,190,641 2,132,967
=========== =========== ============ ===========
</TABLE>
* For the three-month and six-month periods ended February 29, 1996, this line
item was referred to as "Principal stockholder/officers' compensation."
The Notes to Consolidated Financial Statements are made a part hereof.
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UNIDIGITAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED,
------------------------------
FEBRUARY 28, FEBRUARY 29,
1997 1996
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<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities:
Net income ........................................... $ 705,307 $ 272,238
----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization ...................... 884,584 392,956
Provision for deferred income taxes ................ (42,861) 366,000
Provision for doubtful accounts .................... 59,325 34,000
Loss on sale of equipment .......................... -- 1,967
Net changes in assets and liabilities:
Accounts receivable ............................... (2,124,397) (384,961)
Prepaid expenses and other current assets ......... (953,865) (104,987)
Other assets ...................................... (209,013) (13,203)
Accounts payable and accrued expenses ............. 1,831,800 455,377
Income taxes payable .............................. (51,269) 207,579
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Total adjustments ................................. (605,696) 954,728
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Net cash provided by operating activities ......... 99,611 1,226,966
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Cash flows from investing activities:
Additions to property and equipment ................... (464,125) (373,023)
Proceeds from sale of equipment ....................... -- 8,509
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Net cash used for investing activities ............ (464,125) (364,514)
Cash flows from financing activities:
Net proceeds from bank borrowings ..................... (295,241) 204,273
Payments on capital lease obligations ................. (903,654) (411,262)
Payments of notes for cancellation of options
and acquisition of business ......................... (178,383) (228,478)
Dividends paid ........................................ -- (750,000)
Net proceeds from public offering of common stock ..... -- 5,503,830
IPO issuance costs .................................... (4,214) --
Shareholder loans/(repayments) ........................ 4,008 --
Common Stock issued ................................... 430 --
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Net cash (used in) provided by financing activities (1,377,054) 4,318,363
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Effect of foreign exchange rates on cash ................ 54,758 5,772
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NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS ........................................ (1,686,810) 5,186,587
Cash and cash equivalents -- beginning of period ........ 4,145,514 186,802
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Cash and cash equivalents -- end of period .............. $ 2,458,704 $ 5,373,389
=========== ===========
Supplemental disclosures:
Interest paid ......................................... $ 225,102 $ 132,917
=========== ===========
Income taxes paid ..................................... $ 563,746 $ 60,911
=========== ===========
Noncash transactions:
Equipment acquired under capital lease obligations .... $ 1,570,875 $ 231,052
=========== ===========
Notes payable issued as dividends ..................... $ -- $ 498,000
=========== ===========
</TABLE>
The Notes to Consolidated Financial Statements are made a part hereof.
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UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE A - BASIS OF PRESENTATION:
The information presented for February 28, 1997, and for the three-month
and the six-month periods ended February 28, 1997 and February 29, 1996, is
unaudited, but, in the opinion of the Company's management, the accompanying
unaudited consolidated financial statements contain all adjustments (consisting
only of normal recurring accruals) which the Company considers necessary for the
fair presentation of the Company's financial position as of February 28, 1997
and the results of its operations and its cash flows for the three-month and the
six-month periods ended February 28, 1997 and February 29, 1996.
The consolidated financial statements included herein have been prepared
by the Company in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-QSB and Rule 10-01
of Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended August 31, 1996, which
were included as part of the Company's Annual Report on Form 10-KSB.
The consolidated financial statements include the accounts of Unidigital
and its direct and indirect subsidiaries. All significant intercompany balances
have been eliminated.
Interim results are not necessarily indicative of results that may be
expected for the full fiscal year.
Unless the context requires otherwise, all references herein to
"Unidigital" mean Unidigital Inc. and all references to the "Issuer" or the
"Company" mean collectively, Unidigital, its wholly-owned subsidiaries and its
and their subsidiaries, affiliated companies and predecessors.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Business:
Unidigital Inc., a Delaware corporation, is the parent holding company
of five wholly-owned operating subsidiaries, Unidigital Elements (NY), Inc.,
formerly known as LinoGraphics Corporation ("Elements (NY)"), Elements (UK)
Limited ("Elements (UK)"), Unidigital Elements (SF), Inc., formerly known as
LinoGraphics (Delaware) Corporation ("Elements (SF)"), Unidigital/Cardinal
Corporation ("Cardinal"), and Unidigital/Boris Corporation
("Unidigital/Boris"). Elements (NY) engages in the on-demand print and prepress
business in New York City. Elements (UK) engages in the on-demand print and
prepress business and, through its wholly-owned subsidiary, Regent
Communications Limited (UK) ("Regent"), operates the document production and
digital print business in London. Elements (SF) owns and operates the San
Francisco
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UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
on-demand prepress business and retouching studio. Cardinal engages in
the digital prepress and digital printing business services to advertising
agencies and corporations in the New York City area. Unidigital/Boris engages
in the business of digital imaging and photographic processing in the Boston
area.
On March 17, 1997, the Company announced a brand strategy that unifies the
marketing identity of the Company's on-demand print and prepress operations
which employ the same products and service strategy worldwide. In connection
therewith, the Company has changed the name of LinoGraphics Corporation and
LinoGraphics (Delaware) Corporation to Elements (NY) and Elements (SF),
respectively.
On March 31, 1997, the Company formed Unidigital/Boris in order to
consummate the Boris Acquisition (as hereinafter defined).
Foreign Currency Translation:
The portion of the Company's financial statements relating to the
Company's United Kingdom operations are translated into United States Dollars
using period-end exchange rates (POUNDS STERLING 1.00 = $1.56 at August 31, 1996
and $1.6295 at February 28, 1997) for balance sheets accounts and average
exchange rates (POUNDS STERLING 1.00 = $1.55 for the year ended August 31, 1996;
and $1.6365 and $1.53 for the three months ended February 28, 1997 and February
29, 1996, respectively; and $1.6365 and $1.55 for the six months ended February
28, 1997 and February 29, 1996, respectively) for the statements of operations
and cash flows for the respective periods. The translation difference is
recorded as a separate component of stockholders' equity.
Net Income Per Share:
Net income per share is computed is using the weighed average number of
common and common equivalent shares outstanding during the applicable period.
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UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE C - TERMINATION OF S CORPORATION STATUS AND RELATED INCOME TAX MATTERS:
Prior to the Company's initial public offering on February 1, 1996 (the
"IPO"), Elements (NY) filed its federal and state income tax returns under the
provisions of Subchapter S of the Internal Revenue Code, pursuant to which its
taxable income was reportable on the personal tax returns of its stockholders
and the applicable federal and state income taxes thereon were payable directly
by them. As a result of the IPO, the Subchapter S status was terminated
effective February 1, 1996. Accordingly, $367,000 additional federal and state
income taxes, applicable to temporary differences in the recognition of income
and expenses for financial accounting and income tax reporting purposes existing
at February 1, 1996, have been recorded and charged to operations for the
three-month and six-month periods ended February 29, 1996. Such charge results
solely from the termination of the Subchapter S status in the United States and
is nonrecurring.
NOTE D - STOCKHOLDERS' EQUITY:
Common Stock:
The Company has authorized 10,000,000 shares of Common Stock, $.01 par
value per share. As at February 28, 1997, 3,197,763 shares of Common Stock were
issued and outstanding. The Company has reserved for issuance (i) 675,000 shares
of Common Stock upon exercise of options granted or to be granted under its
Stock Options Plans, see Note E, and (ii) 92,000 shares of Common Stock upon
exercise of warrants issued to Burnham Securities Inc., the managing underwriter
for the IPO. The underwriter's warrants are exercisable at a price of $7.20 for
a period of four years commencing February 1, 1997. As at April 7, 1997,
3,243,243 shares of Common Stock were issued and outstanding.
Preferred Stock:
The Company has an authorized class of 5,000,000 shares of Preferred
Stock, $.01 par value per share, which may be issued by the Board of Directors
on such terms and with such rights, preferences and designations as the Board of
Directors may determine without further action by the Company's stockholders.
There were no shares of Preferred Stock issued or approved for issuance as of
February 28, 1997.
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UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE E - STOCK OPTION PLANS:
Unidigital's Board of Directors has adopted, and the stockholders of
Unidigital have approved, the 1995 Unidigital Inc. Long-Term Stock Investment
Plan (the "1995 Stock Plan"), the 1995 Directors Stock Option Plan (the "1995
Directors Plan"), the 1997 Equity Incentive Plan (the "1997 Plan"), and the 1997
Non-Employee Director Stock Option Plan (the "1997 Non-Employee Director Plan"
and, together with the 1995 Stock Plan, the 1995 Directors Plan, the 1997 Plan,
the "Stock Option Plans"). The total aggregate number of shares of Common Stock
for which options may be granted under the Stock Option Plans is 675,000,
subject to certain adjustments to reflect changes in Unidigital's capital stock.
The Company has committed to grant options to purchase 291,770 shares of
Common Stock at an exercise price ranging from $4.50 to $6.75 per share as of
February 28, 1997 under the 1995 Stock Plan. In addition, as of February 28,
1997, the Company has granted options to purchase (i) 10,000 shares of Common
Stock at an exercise price of $5.375 per share under the 1997 Plan, and (ii)
10,000 shares of Common Stock at an exercise price of $5.125 per share under the
1997 Non-Employee Director Plan. As of February 28, 1997, no options have been
granted under the 1995 Directors Plan. The Company has also granted options to
purchase 50,000 shares of Common Stock at an exercise price of $6.00 per share
outside the Plans as of February 28, 1997. Subsequent to the end of the quarter,
the Company granted options to purchase 50,000 shares of Common Stock at an
exercise price of $5.25 per share under the 1997 Plan in connection with the
Boris Acquisition.
NOTE F -SUBSEQUENT EVENTS:
Subsequent to the end of the quarter, on April 3, 1997, the Company
renegotiated its credit facility arrangements with its New York bank for the
Company's United States operations. The Company now has combined credit
facilities for its United States operations in the aggregate amount of
$8,350,000, which consist of a: (i) $4,500,000 revolving credit facility which
is available for corporate acquisition purposes; and (ii) $3,850,000 line of
credit facility which is available for working capital purposes. Such credit
facilities are available to be used by each of the Company's four United States
subsidiaries. Under such credit facilities, an ABR Loan (as defined in the
Credit Agreement) bears interest at the Alternate Base Rate (as defined in the
Credit Agreement) plus 0.25%. A Eurodollar Loan (as defined in the Credit
Agreement) bears interest at the Adjusted LIBO Rate (as defined in the Credit
Agreement) plus 2.50%. As at April 4, 1997, the Company had an outstanding
balance of approximately $1,725,000 under the revolving credit facility and
$2,503,000 under the line of credit. The foregoing information relating to the
Company's new credit facilities is qualified in its entirety by reference to
the complete text of the related documents which are filed as exhibits hereto.
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UNIDIGITAL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Subsequent to the end of the quarter, on April 4, 1997, Unidigital/Boris
purchased certain assets and assumed certain liabilities of Boris Image Group,
Inc. ("Boris Image Group"), a Boston, Massachusetts based company which
principally engages in the business of digital imaging and photographic
processing (the "Boris Acquisition"). The aggregate purchase price consists of
the following: (i) $1,725,000 in cash; (ii) an aggregate of $300,000 in
guaranteed future payments to Boris Image Group and its management team; (iii)
$250,000 in restricted Common Stock; and (iv) a potential earn-out payment of up
to $500,000 payable at the end of the Company's next fiscal year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
The Company provides a full range of digital prepress and digital print
services to the professional graphic design industry in the New York City, San
Francisco and London markets. Digital prepress services involve preparing an
image for reproduction by any of several printing processes. Using advanced
computer technology, the Company provides the imaging and reproduction services
required by graphic artists in connection with the creation of designs for
their clients, which include end-users of printed media such as consumer
product packaging, marketing and advertising materials. The Company's services
are designed to afford graphic artists the ability to make numerous changes and
enhancements in their designs throughout the design and approval process with
shorter turnaround times and at reduced costs as compared to traditional
prepress methods. Once a design is approved, the Company provides the vital
technological and service interface between graphic artists and traditional
commercial volume printers necessary to translate the approved design into the
format required for volume printing. The Company also provides scanning,
document creation services such as typesetting, and short-run digital printing.
RESULTS OF OPERATIONS
The consolidated financial information includes both the Company's United
States operations and its United Kingdom operations. On August 9, 1996, the
Company, through a wholly-owned subsidiary, acquired the business and certain
assets of a competing company located in New York City (the "Cardinal
Acquisition"). As a result of such acquisition, the Company has expanded its
digital prepress and digital print operations in the New York City and
surrounding area.
THREE MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
Net Sales. Net sales for the three months ended February 28, 1997 ("Second
Quarter of Fiscal 1997") increased by 107.2%, or $2,724,488, to $5,265,916 from
$2,541,428 for the three months ended February 29, 1996 ("Second Quarter of
Fiscal 1996"). Net sales for the Company's United States operations increased by
168.4%, or $2,028,228, from $1,204,296 in the Second Quarter of Fiscal 1996 to
$3,232,524 in the Second Quarter of Fiscal 1997. This increase was attributable
primarily to an increase in net sales resulting from the Cardinal Acquisition
and, to a lesser extent, the inclusion of net sales from the Elements (SF)
operations for the Second Quarter of Fiscal 1997. Net sales for the Company's
United Kingdom operations increased by 52.1%, or $696,260, from $1,337,132 in
the Second Quarter of Fiscal 1996 to $2,033,392 in the Second Quarter of Fiscal
1997. This increase was attributable primarily to increases in the Company's
short-run digital print operations.
Cost of Sales. Cost of sales for the Second Quarter of Fiscal 1997
increased by 120.4% or $1,494,085, to $2,735,523 from $1,241,438 for the Second
Quarter of Fiscal 1996. As a percentage of net sales, cost of sales increased
from 48.9% for the Second Quarter of Fiscal 1996 to 51.9% for the Second Quarter
of Fiscal 1997. Cost of sales for the Company's United States
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operations decreased 1.3% as a percentage of net sales from 47.1% for the Second
Quarter of Fiscal 1996 to 45.8% for the Second Quarter of Fiscal 1997. Such
decrease was attributable primarily to the Company's renegotiation of its vendor
contracts resulting in reduced supply costs to the Company, offset in part by
higher costs associated with increased digital print services provided by the
Company's United States operations. Costs of sales for the Company's United
Kingdom operations increased 9.7% as a percentage of net sales from 52.1% for
the Second Quarter of Fiscal 1996 to 61.8% for the Second Quarter of Fiscal
1997. Such increase was attributable primarily to the change in product mix in
the Company's United Kingdom operations to include more digital print services.
Digital print services have higher costs compared to digital prepress services.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("SG&A") increased 105.7%, or $818,275, from $774,241
for the Second Quarter of Fiscal 1996 to $1,592,516 for the Second Quarter of
Fiscal 1997. Such increase was attributable primarily to the increased level of
operations which resulted from the Cardinal Acquisition and, to a lesser extent,
the inclusion of the Elements (SF) operations in the Second Quarter of Fiscal
1997. As a percentage of net sales, SG&A decreased slightly from 30.5% for the
Second Quarter of Fiscal 1996 to 30.2% for the Second Quarter of Fiscal 1997.
Such decrease in SG&A as a percentage of net sales was due primarily to the
centralization of certain administrative functions.
Corporate Expenses. Corporate expenses for the Second Quarter of Fiscal
1997 increased 190.5%, or $224,341, to $342,110 from $117,769 for the Second
Quarter of Fiscal 1996. This increase was due to the hiring of additional
management and administrative personnel and costs associated with the Company's
acquisitions and the Company's status as a publicly held company. Such costs did
not exist in the Second Quarter of Fiscal 1996. Corporate expenses of Unidigital
include financial and administrative personnel, investor relations, legal and
other professional fees and facilities cost.
Income from Operations. Income from operations for the Second Quarter of
Fiscal 1997 increased 46.0%, or $187,787, to $595,767 from $407,980 for the
Second Quarter of Fiscal 1996. Of this amount, $346,085 was contributed by the
Company's United States operations and $249,682 by the Company's United Kingdom
operations. This increase resulted from higher net sales offset in part by
higher corporate expenses and, to a lesser extent, the higher production costs
associated with the changing product mix of the Company's operations to include
more digital print services.
Net Interest Expense. Net interest expense for the Second Quarter of
Fiscal 1997 increased by 127.9%, or $65,884, to $117,385 from $51,501 for the
Second Quarter of Fiscal 1996. This increase resulted from increased borrowings
under the Company's credit facilities and capital leases assumed by the Company
as part of the Cardinal Acquisition offset in part by the income earned on cash
balances from the IPO proceeds.
Income Taxes. Income taxes for the Second Quarter of Fiscal 1997 decreased
by 72.9%, or $379,259, to $140,741 from $520,000 for the Second Quarter of
Fiscal 1996. The Company
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<PAGE> 14
currently pays Federal, state and local income tax for its United States
operations where Elements (NY) previously paid only local corporate income tax
on United States operations as a result of its Subchapter S corporation status.
As a result of the termination of Elements (NY)'s Subchapter S corporation
status in February 1996, the Company recorded a nonrecurring charge to
operations and liability of $367,000 for additional deferred Federal and state
income taxes on temporary differences in the recognition of revenues and
expenses for income tax and financial reporting purposes in the Second Quarter
of Fiscal 1996. The Company's effective tax rate was 36.7% in the Second Quarter
of Fiscal 1997.
Net Income. As a result of the factors described above, net income for the
Second Quarter of Fiscal 1997 increased by $407,008, to $243,487 as compared to
a net loss of $163,521 for the Second Quarter of Fiscal 1996.
SIX MONTHS ENDED FEBRUARY 28, 1997 AND FEBRUARY 29, 1996
Net Sales. Net sales for the six months ended February 28, 1997 increased
by 99.5%, or $5,234,385, to $10,493,635 from $5,259,250 for the six months ended
February 29, 1996. Net sales for the Company's United States operations
increased by 144.4%, or $3,698,637, from $2,561,062 in the six months ended
February 29, 1996 to $6,259,699 in the six months ended February 28, 1997. This
increase was attributable primarily to an increase in net sales resulting from
the Cardinal Acquisition and, to a lesser extent, the inclusion of net sales
from the Elements (SF) operations for the six months ended February 28, 1997,
offset in part by a slight decrease in net sales by the Elements (NY)
operations. Net sales for the Company's United Kingdom operations increased by
56.9%, or $1,535,748, from $2,698,188 in the six months ended February 29, 1996
to $4,233,936 in the six months ended February 28, 1997. This increase was
attributable primarily to increases in the Company's short-run digital print and
prepress operations.
Cost of Sales. Cost of sales for the six months ended February 28, 1997
increased by 121.6%, or $2,955,703, to $5,385,626 from $2,429,923 for the six
months ended February 29, 1996. As a percentage of net sales, cost of sales
increased 5.1% from 46.2% for the six months ended February 29, 1996 to 51.3%
for the six months ended February 28, 1997. Cost of sales for the
Company's United States operations increased 4.3% as a percentage of net sales
from 42.9% for the six months ended February 29, 1996 to 47.2% for the six
months ended February 28, 1997. Such increase was attributable primarily to
higher costs associated with increased digital print services provided by the
Company's United States operations, offset in part by reduced supply costs due
to the Company's renegotiation of certain of its contracts with its vendors.
Costs of sales for the Company's United Kingdom operations increased 8.2% as a
percentage of net sales from 49.3% for the six months ended February 29, 1996 to
57.5% for the six months ended February 28, 1997. Such increase was attributable
primarily to the change in product mix in the Company's United Kingdom
operations to include more digital print services. Digital print services have
higher costs compared to digital prepress services.
Selling, General and Administrative Expenses. SG&A increased 96.3%, or
$1,478,615, from $1,535,935 for the six months ended February 29, 1996 to
$3,014,550 for the six months
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<PAGE> 15
ended February 28, 1997. Such increase was attributable primarily to the
increased level of operations which resulted from the Cardinal Acquisition and,
to a lesser extent, the inclusion of the Elements (SF) operations for the six
months ended February 28, 1997, offset in part by a decrease in SG&A at Elements
(NY) due to a decline in sales. As a percentage of net sales, SG&A decreased
slightly from 29.2% for the six months ended February 29, 1996 to 28.7% for the
six months ended February 28, 1997. Such decrease in SG&A as a percentage of net
sales was due primarily to the centralization of certain administrative
functions.
Corporate Expenses. Corporate expenses for the six months ended February
28, 1997 increased 167.6%, or $457,045, to $729,814 from $272,769 for the six
months ended February 29, 1996. This increase was due to the hiring of
additional management and administrative personnel and costs associated with the
Company's acquisitions and the Company's status as a publicly held company. Such
costs did not exist in the six months ended February 29, 1996. Corporate
expenses of Unidigital include financial and administrative personnel, investor
relations, legal and other professional fees and facilities cost.
Income from Operations. Income from operations for the six months ended
February 28, 1997 increased 33.6%, or $343,022, to $1,363,645 from $1,020,623
for the six months ended February 29, 1996. Of this amount, $587,631 was
contributed by the Company's United States operations and $776,014 by the
Company's United Kingdom operations. This increase resulted from higher net
sales offset in part by higher corporate expenses and, to a lesser extent, the
higher production costs associated with the changing product mix of the
Company's operations to include more digital print services.
Net Interest Expense. Net interest expense for the six months ended
February 28, 1997 increased by 171.5%, or $192,737, to $305,122 from $112,385
for the six months ended February 29, 1997. This increase resulted from
increased borrowings under the Company's credit facilities and capital leases
assumed by the Company as part of the Cardinal Acquisition offset in part by the
income earned on cash balances from the IPO proceeds.
Income Taxes. Income taxes for the six months ended February 28, 1997
decreased by 44.5%, or $282,784, to $353,216 from $636,000 for the six months
ended February 29, 1996. The Company currently pays Federal, state and local
income tax for its United States operations where Elements (NY) previously paid
only local corporate income tax on United States operations as a result of its
Subchapter S corporation status. As a result of the termination of Elements
(NY)'s Subchapter S corporation status in February 1996, the Company recorded a
nonrecurring charge to operations and liability of $367,000 for additional
deferred Federal and state income taxes on temporary differences in the
recognition of revenues and expenses for income tax and financial reporting
purposes in the six months ended February 29, 1996. The Company's effective tax
rate was 33.4% in the six months ended and February 28, 1997.
Net Income. As a result of the factors described above, net income for the
six months ended February 28, 1997 increased by 159.1%, or $433,069, to $705,307
from $272,238 for the six months ended February 29, 1996.
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LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
Cash Flow. Net cash provided by operations was $99,611 for the first six
months of fiscal 1997 and $1,226,966 for the first six months of fiscal 1996.
Net cash used for investing activities was $464,125 for the first six months of
fiscal 1997 and $364,514 for the first six months of fiscal 1996. The Company
used $464,125 and $373,023 for the acquisition of equipment by direct purchase
during such respective periods. For the first six months of fiscal 1997 and
fiscal 1996, the Company acquired equipment under capital leases of $1,570,875
and $231,052, respectively, and made payments under capital leases of $903,654
and $411,262, respectively. Net short-term bank borrowings provided funds of
$295,241 for the first six months of fiscal 1997 and $204,273 for the first six
months of fiscal 1996.
Bank Credit Facilities. The Company has borrowing arrangements with
commercial banks in both New York and London. During the second quarter of
fiscal 1997, the Company had combined credit facilities with a New York bank for
its United States operations in the aggregate amount of $4,050,000, which
consisted of: (i) $300,000 of five-year term loans, of which $150,000 was
available to Elements (NY) for leasehold improvements to its New York City
facilities, and $150,000 was available to Elements (SF) for the purchase of
equipment and for the Company's San Francisco operations; (ii) a $1,200,000 line
of credit which was available to Cardinal for working capital purposes; (iii) a
$1,400,000 term loan which was available to Cardinal for acquisition financing;
(iv) a $700,000 line of credit which was available to Elements (NY) for working
capital purposes; and (v) a $450,000 line of credit which was available to
Elements (SF) for working capital purposes. As at February 28, 1997, the Company
had an outstanding balance of approximately $1,523,324 under the term loans. As
at February 28, 1997, the Company had an outstanding balance of approximately
$1,493,000 under these lines of credit.
Subsequent to the end of the quarter, on April 3, 1997, the Company
renegotiated its credit facility arrangements with its New York bank for the
Company's United States operations. The Company now has combined credit
facilities for its United States operations in the aggregate amount of
$8,350,000, which consist of a: (i) $4,500,000 revolving credit facility which
is available for corporate acquisition purposes; and (ii) $3,850,000 line of
credit facility which is available for working capital purposes. Such credit
facilities are available to be used by each of the Company's four United States
subsidiaries. Under such credit facilities, an ABR Loan bears interest at the
Alternate Base Rate plus 0.25%. A Eurodollar Loan bears interest at the Adjusted
LIBO Rate plus 2.50%. As at April 4, 1997, the Company had an outstanding
balance of approximately $1,725,000 under the revolving credit facility and
$2,503,000 under the line of credit. The foregoing information relating to the
Company's new credit facilities is qualified in its entirety by reference to the
complete text of the related documents which are filed as exhibits hereto.
The credit facilities contain covenants which require the Company to
maintain certain tangible net worth and debt service coverage ratios based on
the combined assets of the Company and its subsidiaries and limiting borrowings
up to specified amounts of accounts receivable aged 90 days or less. The credit
facilities are secured by a first priority lien on all of
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<PAGE> 17
the assets of the borrowers. The lines of credit are renewable annually each
December. Unidigital is a guarantor on all bank debts of the Company's United
States operating subsidiaries.
The Company has combined lines of credit of Pounds Sterling 900,000
(approximately $1,404,000) for working capital for its United Kingdom
operations. These lines of credit are renewable annually and bear interest at
2.25% over the Bank's Base Rate, as defined, for borrowings up to Pounds
Sterling 600,000 and bear interest at 2.75% over the Bank's Base Rate for
borrowings in excess of such amount. At February 28, 1997, the Company had an
outstanding balance of Pounds Sterling 975,025 (approximately $1,588,803) under
these lines of credit which bear interest at a rate of 8.44% per annum. These
lines of credit contain covenants limiting borrowings up to specified amounts of
accounts receivable aged 120 days or less and are guaranteed by Unidigital for
the principal amount of up to Pounds Sterling 500,000.
As of February 28, 1997, the Company was in compliance with all covenants
under its credit facilities.
The Company expects that cash flow from operations will be sufficient
to fund its capital lease obligations, debt service payments under its credit
facilities, capital expenditures and operations for at least 12 months. The
Company may require additional financing to consummate future acquisitions.
There can be no assurance that the Company will be able to secure such
additional financing on terms favorable to the Company.
Working Capital. The Company's working capital increased by $31,258 from
$2,319,343 at August 31, 1996 to $2,350,601 at February 28, 1997. Such increase
was attributable primarily to increased net income offset in part by the
maturation of debt owing to the principal stockholder of the Company.
Acquisitions. Subsequent to the end of the quarter, on April 4, 1997,
Unidigital/Boris consummated the Boris Acquisition. The aggregate purchase price
consists of the following: (i) $1,725,000 in cash; (ii) an aggregate of $300,000
in guaranteed future payments to Boris Image Group and its management team;
(iii) $250,000 in restricted Common Stock; and (iv) a potential earn-out payment
of up to $500,000 payable at the end of the Company's next fiscal year.
Inflation, Foreign Currency Fluctuations and Interest Rate Changes.
Although the Company cannot accurately determine the precise effect thereof on
its operations, it does not believe inflation, currency fluctuations or interest
rate changes have historically had a material effect on revenues, sales or
results of operations. Inflation, currency fluctuations and changes in interest
rates have, however, at various times, had significant effects on the economies
of the United States and the United Kingdom and could adversely impact the
Company's revenues, sales and results of operations in the future. If there is a
material adverse change in the relationship between the Pound Sterling and the
United States Dollar, such change would adversely affect the results of the
Company's United Kingdom operations as reflected in the Company's financial
statements. The Company has not hedged its exposure with respect to this
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currency risk, and does not expect to do so in the future, since it does not
believe that it is practicable for it to do so at a reasonable cost.
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PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Stockholders of the Company was held on January 30,
1997.
There were 2,976,717 shares present at the meeting in person or by proxy.
The results of the vote taken at such meeting with respect to each nominee for
director were as follows:
NOMINEE FOR WITHHELD
------- --- --------
William E. Dye 2,974,523 2,194
Peter Saad 2,974,523 2,194
Anthony Manser 2,974,523 2,194
Harvey Silverman 2,974,523 2,194
David Wachsman 2,974,523 2,194
Also at the meeting, a vote was taken on the proposal to adopt the 1997
Equity Incentive Plan. Of the 2,976,717 shares present at the meeting in person
or by proxy, 2,562,605 shares were voted in favor of such proposal, 62,450
shares were voted against such proposal, and 5,500 shares abstained from voting.
There were also 346,162 broker non-votes with respect to such proposal.
In addition, a vote was taken at the meeting on the proposal to adopt the
1997 Non-Employee Director Stock Option Plan. Of the 2,976,717 shares present at
the meeting in person or by proxy, 2,611,605 shares were voted in favor of such
proposal, 15,750 shares were voted against such proposal, and 4,500 shares were
abstained from voting. There were also 344,862 broker non-votes with respect to
such proposal.
Finally, a vote was taken at the meeting on the proposal to ratify the
appointment of Ernst & Young LLP as the independent certified public accountants
of the Company for the fiscal year ending August 31, 1997. Of the 2,976,717
shares present at the meeting in person or by proxy, 2,974,248 shares were voted
in favor of such proposal, 2,169 shares were voted against such proposal, and
300 shares abstained from voting.
ITEM 5. OTHER INFORMATION.
Subsequent to the end of the quarter, on April 3, 1997, the Company
renegotiated its credit facility arrangements with its New York bank for the
Company's United States operations. The Company now has combined credit
facilities for its United States operations in the aggregate amount of
$8,350,000, which consist of a: (i) $4,500,000 revolving credit facility which
is available for corporate acquisition purposes; and (ii) $3,850,000 line of
credit facility which is available for working capital purposes. Such credit
facilities are available to be used by each of the Company's four United States
subsidiaries. Under such credit facilities, an ABR Loan bears
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interest at the Alternate Base Rate plus 0.25%. A Eurodollar Loan bears interest
at the Adjusted LIBO Rate plus 2.50%. As at April 4, 1997, the Company had an
outstanding balance of approximately $1,725,000 under the revolving credit
facility and $2,503,000 under the line of credit. The foregoing information
relating to the Company's new credit facilities is qualified in its entirety by
reference to the complete text of the related documents which are filed as
exhibits hereto.
Subsequent to the end of the quarter, on April 4, 1997,
Unidigital/Boris consummated the Boris Acquisition. The Company intends to
continue such line of business. The assets purchased included Boris Image
Group's entire customer list, inventory, accounts receivable, equipment, trade
name and certain contract rights. The aggregate purchase price consists of the
following: (i) $1,725,000 in cash; (ii) an aggregate of $300,000 in guaranteed
future payments to Boris Image Group and its management team; (iii) $250,000 in
restricted Common Stock; and (iv) a potential earn-out payment of up to
$500,000 payable at the end of the Company's next fiscal year. In addition, the
Company granted options to purchase 50,000 shares of Common Stock to employees
of Boris Image Group at an exercise price of $5.25 per share under the 1997
Plan. The Company funded the purchase price from its renegotiated credit
facility arrangements with The Chase Manhattan Bank. In determining the
purchase price, the Company considered, among other factors, the past and
projected revenues generated from the customers of Boris Image Group and the
value of the acquired assets.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.1 Asset Purchase Agreement dated as of April 4, 1997 by
and among Unidigital Inc., Unidigital/Boris
Corporation, Boris Image Group, Inc., Leslie W.
Brewer, II and Michael Hartnett.
10.2 1997 Equity Incentive Plan.
10.3 1997 Non-Employee Director Stock Option Plan.
10.4 Credit Agreement dated as of April 3, 1997, among
Unidigital Elements (NY), Inc., Unidigital/Cardinal
Corporation, Unidigital Elements (SF), Inc.,
Unidigital/Boris Corporation, and The Chase Manhattan
Bank.
10.5 Revolving Credit Note dated April 3, 1997 in the
aggregate principal amount of $4,500,000 evidencing
revolving credit facility with The Chase Manhattan Bank.
10.6 Line Loan Note dated April 3, 1997 in the aggregate
principal amount of $3,850,000 evidencing line of credit
facility with The Chase Manhattan Bank.
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<PAGE> 21
10.7 Security Agreement dated as of April 3, 1997, among
Unidigital Elements (NY), Inc., Unidigital/Cardinal
Corporation, Unidigital Elements (SF), Inc.,
Unidigital/Boris Corporation, and The Chase Manhattan
Bank.
10.8 Pledge Agreement dated as of April 3, 1997 made by
Unidigital Inc. in favor of The Chase Manhattan Bank.
10.9 Guarantee Agreement dated as of April 3, 1997 made by
Unidigital Inc. in favor of The Chase Manhattan Bank.
21 List of Subsidiaries.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which
this report on Form 10-QSB is filed. Financial statements with
respect to Boris Image Group shall be filed with the Securities and
Exchange Commission no later than sixty (60) days after the date of
the filing of this Form 10-QSB.
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Issuer caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIDIGITAL INC.
DATE: April 14, 1997 By: /s/William E. Dye
-------------------------------
William E. Dye, President,
Chief Executive Officer and
Chief Financial Officer
(Principal Executive, Financial
and Accounting Officer)
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<PAGE> 1
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
Agreement made as of the 4th day of April, 1997 by and among Unidigital
Inc., a Delaware corporation with its principal office at 20 West 20th Street,
New York, New York 10011 ("Unidigital"), its wholly-owned subsidiary,
Unidigital/Boris Corporation, a Massachusetts corporation with its principal
office at c/o Unidigital Inc., 20 West 20th Street, New York, New York 10011
(the "Buyer"), Boris Image Group, Inc., a Massachusetts corporation with its
principal office at 451 D Street, Boston, Massachusetts 02210 ("Seller") and
Leslie W. Brewer, II ("Brewer") and Michael Hartnett ("Hartnett"), the holders
of all of the issued and outstanding shares of common stock of the Seller
(Brewer and Hartnett are sometimes collectively referred to herein as the
"Shareholders"). The Seller and Brewer are sometimes collectively referred to
herein as the "Selling Parties".
Preliminary Statement
The Seller is engaged principally in the business of digital imaging and
photographic processing (the "Business"). The Buyer desires to purchase, and the
Seller desires to sell, certain of the assets and the Business of the Seller,
for the consideration set forth below and the assumption of certain of the
Seller's liabilities set forth below, subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
1.1 Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this Agreement,
except as specifically provided in Section l.l(b) hereof, at the closing of the
transactions contemplated by this Agreement (the "Closing"), the Seller shall
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall
purchase from the Seller, free and clear of all liens, liabilities, security
interests, leasehold interests and encumbrances of any nature whatsoever (except
as otherwise expressly provided herein), all of the properties, assets and other
claims, rights and interests of the Seller or which are used in the Business of
whatever kind, character or description, whether real, personal or mixed,
tangible or intangible, wherever situated, including without limitation:
(i) all inventories of raw materials, work in process, goods
in transit (i.e., inventories purchased by, but not delivered to, the Seller),
finished goods, office supplies, maintenance supplies, packaging materials,
spare parts and similar items (collectively, the "Inventory");
(ii) all accounts receivable and notes receivable (including
any security held by the Seller for the payment thereof) (collectively, the
"Accounts Receivable");
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(iii) those prepaid expenses set forth in Schedule 1.1(iii);
(iv) all rights under the contracts, agreements, leases,
licenses, purchase orders, customer sales agreements and other instruments set
forth on Schedule 2.9(b) and Schedule 2.13(a) attached hereto (collectively, the
"Contract Rights");
(v) all books; payment records; accounts; customer lists;
environmental reports or studies; correspondence; production records; technical,
accounting, manufacturing and procedural manuals; engineering data; development
and design data; plans, blueprints, specifications and drawings; employment and
personnel records; and other useful business records, including electronic
media, and any confidential or other information which has been reduced to
writing, utilized in the conduct of or relating to the Business or the Assets
(as hereinafter defined), subject to the Seller's right to retain copies thereof
which the Seller reasonably requires for its ongoing operation, winding-up or
dissolution;
(vi) all rights of the Seller under express or implied
warranties from the suppliers of the Assets to the extent transferable (but
excluding such rights insofar as the same pertain to liabilities retained by the
Seller hereunder);
(vii) the motor vehicles and other rolling stock listed on
Schedule 1.1(vii);
(viii) all of the machinery, equipment, tools, dies, tooling,
production fixtures, maintenance machinery and equipment, computers,
telecommunication systems, fittings and other office equipment, furniture,
leasehold improvements and construction in progress on the date hereof whether
or not reflected as capital assets in the accounting records of the Seller which
are owned by the Seller and used or useful in the Business including but not
limited to all of the foregoing located at the locations set forth on Schedule
1.l(viii) (collectively, the "Fixed Assets");
(ix) all right, title and interest of Seller in and to all
intangible property rights relating to the Business, including but not limited
to inventions, discoveries, trade secrets, processes, formulas, know-how, United
States and foreign patents, patent applications, trade names, including but not
limited to the name "Boris Image Group, Inc.", or any derivation thereof and
those names listed on Schedule 2.20 attached hereto, trademarks, trademark
registrations, applications for trademark registrations, copyrights, copyright
registrations, certification marks, industrial designs, technical expertise,
research data and other similar property and the registrations and applications
for registration thereof owned by the Seller or, where not owned, used by the
Seller in the Business and all goodwill associated thereto and all licenses and
other agreements to which the Seller is a party (as licensor or licensee) or by
which the Seller is bound relating to any of the foregoing kinds of property or
rights to any "know-how" or disclosure or use of ideas (collectively, the
"Intangible Property");
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<PAGE> 3
(x) all transferable approvals, authorizations,
certifications, consents, variances, permissions, licenses and permits to or
from, or filings, notices or recordings to or with, federal, state, foreign, and
local governmental authorities as held or effected by the Seller in connection
with the Assets;
(xi) all of the Seller's goodwill and the exclusive right
to use the names of the Seller as all or part of a corporate name;
(xii) except as specifically provided in Section 1.1(b)
hereof, all other assets, properties, claims, rights and interests of the Seller
which relate to the Business and exist on the date hereof, of every kind and
nature and description, whether tangible or intangible, real, personal or mixed;
and
(xiii) cash or cash equivalents ("Cash").
(b) Notwithstanding the provisions of Section 1.1(a) above, the
assets to be transferred to the Buyer under this Agreement shall not include (i)
any of Seller's rights or consideration under this Agreement, or (ii) any
refunds of federal, state, foreign or local income or other tax paid by the
Seller, or (iii) any insurance policies currently held by the Seller and related
premium agreements for general liability, product liability and workers
compensation insurance for periods prior to the date hereof, or (iv) except as
otherwise set forth on Schedule 1.1(b)(i) attached hereto, any of the assets of
Color Space Corporation, a Massachusetts corporation controlled by Brewer
("Color Space"), or (v) those assets listed on Schedule 1.1(b)(ii) attached
hereto (collectively, the "Excluded Assets").
(c) The Inventory, Accounts Receivable, Contract Rights, Fixed
Assets, Intangible Property, Cash and other properties, assets and business of
the Seller described in Section 1.1(a) above, other than the Excluded Assets,
shall be referred to collectively as the "Assets".
1.2 Further Assurances.
(a) At the Closing, the Seller shall execute and deliver a Bill of
Sale (the "Bill of Sale") substantially in the form attached hereto as Exhibit
A, and the assignments described in Sections 7.13(b) and (c) hereof. At any time
and from time to time after the Closing, at the Buyer's request and without
further consideration, the Selling Parties (or their successors) promptly shall
execute and deliver such assignments of leases and other instruments of sale,
transfer, conveyance, assignment and confirmation, and take such other action,
as the Buyer may reasonably request to more effectively transfer, convey and
assign to the Buyer, and to confirm the Buyer's title to, all of the Assets and
the Business, to put the Buyer in actual possession and operating control
thereof, to assist Buyer in exercising all rights with respect thereto and to
carry out the purpose and intent of this Agreement.
(b) The Selling Parties and the Buyer each will use its best efforts
to obtain as promptly as possible written consents to the transfer, assignment
or sublicense to the Buyer of all
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<PAGE> 4
agreements, commitments, purchase orders, contracts, licenses, leases, rights
and other contract documents being transferred pursuant to Section 1.1(a) hereof
where the approval or other consent of any other person is required. If any such
approval or consent cannot be obtained, or if the parties hereafter agree in
writing that it is not in their respective best interests to obtain any such
approval or other consent, the Selling Parties will cooperate with the Buyer in
any reasonable arrangement designed to provide the Buyer with substantially the
same economic benefits as if such approval or other consent had been obtained
and the transfer effected on or before the date hereof.
1.3 Assumption of Liabilities.
(a) At the Closing, the Buyer shall execute and deliver an
Instrument of Assumption of Liabilities (the "Instrument of Assumption")
substantially in the form attached hereto as Exhibit B, pursuant to which it
shall assume and agree to (i) perform, pay and discharge, in accordance with
their respective terms, all those liabilities and obligations set forth on
Schedule 1.3(a) attached hereto which were incurred in the ordinary course of
business of the Business and are outstanding on the date hereof (the obligations
set forth in (i) are collectively, the "Assumed Current Liabilities"); (ii)
perform in accordance with their terms those obligations outstanding on the date
hereof under the Contract Rights; and (iii) perform in accordance with their
terms those liabilities arising after the date hereof from any agreement,
contract, commitment or other contract documents which the Buyer has requested
be transferred to it pursuant to Section 1.1(a) but which has not been so
transferred due to the failure of Seller to obtain the consent or approval
required for such transfer, provided that the Buyer has received substantially
the same economic benefit of such contract as if such consent or approval had
been obtained (the obligations set forth in (i), (ii) and (iii) are,
collectively, the "Assumed Liabilities").
(b) Except as otherwise provided herein, the Buyer shall not assume
any of the liabilities of the Seller and the Shareholders and shall purchase the
Assets free and clear of all liens, mortgages, security interests, encumbrances
and claims and the Selling Parties each represent, warrant and agree that the
Buyer shall not be or become liable for any claims, demands, liabilities or
obligations not expressly assumed in this Agreement of any kind whatsoever
arising out of or relating to the conduct of the Business by Seller or the
Assets or Assumed Liabilities prior to the date hereof. Without limiting the
foregoing, the Buyer shall not at the Closing assume or agree to perform, pay or
discharge, and the Seller and the Shareholders shall remain unconditionally
liable for, all obligations, liabilities and commitments, fixed or contingent,
of the Seller and the Shareholders other than the Assumed Liabilities, including
but not limited to:
(i) except as set forth on Schedule 1.3(a) attached hereto,
severance, termination or other payments or benefits (including but not limited
to post-retirement benefits) including but not limited to those owing under
Seller's severance policy or any employment agreement to any employees (union or
non-union), sales agents or independent contractors employed by the Seller prior
to the Closing (collectively, "Seller's Employees"), liabilities arising under
any federal, state, local or foreign "plant closing law", liabilities accruing
under the Seller's employee benefit plans, retirement plans, and liabilities for
any Employee Plan (as defined in
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<PAGE> 5
Section 2.21 except those liabilities to Seller's Employees who become employees
of Buyer after the Closing relating solely to and arising solely out of their
term of employment with the Buyer);
(ii) worker's compensation claims arising from events
prior to Closing;
(iii) stock option or other stock-based awards made to
Seller's Employees,
(iv) liabilities for any federal, state, local or foreign
income taxes (including interest, penalties and additions to such taxes) or any
deferred income taxes of the Seller or the Shareholders;
(v) liabilities for any payroll taxes (including interest,
penalties and additions to such taxes), except those liabilities to Seller's
Employees who become employees of the Buyer after the Closing relating solely to
and arising solely out of their term of employment with the Buyer;
(vi) liabilities incurred for violations of occupational
safety, wage, health, welfare, employee benefit or environmental laws or
regulations prior to the date hereof;
(vii) liabilities to the extent related solely to the
Excluded Assets;
(viii) except as provided in Section 11 hereof, any tax
(including but not limited to any federal, state, local or foreign income,
franchise, single business, value added, excise, customs, intangible, sales,
transfer, recording, documentary or other tax) imposed upon, or incurred by, the
Seller or the Shareholders, if any, in connection with or related to this
Agreement or the transactions contemplated hereby (including interest, penalties
and additions to such taxes);
(ix) liabilities for any commercial rent taxes to the
extent accrued but not paid prior to the date hereof;
(x) other than the Assumed Liabilities, any liabilities of
Seller to third parties arising out of the failure of Seller to obtain any
necessary consents to the assignment to Buyer of contracts or leases to which
Seller is a party (including damages asserted by third parties for breach of
such contracts or leases due to the failure to obtain such consents);
(xi) except as set forth in Section 9.6 hereof,
liabilities, contingent or otherwise, which are not disclosed on Schedule
1.3(a);
(xii) liabilities in connection with the litigation
entitled Ross et al. v. Goodman et al. in Suffolk Superior Court (Civil
Action No. 89-6129D) and Goodman et al. v. Kayafus et al. in Middlesex
Superior Court (Civil Action No. (96-2200), each in the Commonwealth of
Massachusetts (collectively, the "Prior Litigation");
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(xiii) liabilities of Seller for any state franchise taxes or
annual license or other fees relating to qualification as a foreign corporation
or authorization to do business in such states (including interest, penalties
and additions to such taxes and fees); and
(xiv) any other liabilities of any kind or nature whether now
in existence or arising hereafter not expressly assumed by Buyer under Section
1.3(a) hereof.
1.4 Purchase Price. In consideration of the transfer of the Business and
Assets of the Seller to the Buyer hereunder, the Buyer will assume the Assumed
Liabilities and will pay an aggregate purchase price (the "Purchase Price"),
subject to the provisions of Section 1.5, equal to (i) $1,725,000 in cash
payable to the Seller (such aggregate amount of consideration to be paid in cash
in accordance with the provisions of this Section 1.4(i) hereof being referred
to herein as "Cash Consideration"), (ii) $150,000 payable to the Seller, such
amount to be paid by the issuance of an 8% promissory note (the "Note") in the
form attached hereto as Exhibit C, (iii) $225,000 payable to Brewer (or his
nominee), such amount to be paid by the issuance of such number of shares of
restricted Unidigital common stock (the "Unidigital Stock"), which when
multiplied by the average daily bid and asked prices of Unidigital's stock for
the 10 trading days immediately prior to the three trading days immediately
prior to the Closing, shall have a market value of $225,000, (iv) $25,000
payable to Hartnett (or his nominee), such amount to be paid in Unidigital
Stock, which when multiplied by the average daily bid and asked prices of
Unidigital's stock for the 10 trading days immediately prior to the three
trading days immediately prior to the Closing, shall have a market value of
$25,000 (such aggregate amount of consideration paid in stock in accordance with
the provisions of this Sections 1.4 (iii) and (iv) hereof being referred to
herein as the "Stock Consideration"), (v) an aggregate of $150,000 in a
guaranteed cash bonus pool for the management team and key staff of the Seller
(excluding Brewer) (the "Management Team") payable in two distributions of
$75,000 on the first and second anniversaries of the date hereof to be
distributed among the Management Team in accordance with the determination of
the Board of Directors of Buyer, (vi) 50,000 options to purchase the common
stock of Unidigital granted to the Management Team on the date hereof to be
distributed among the Management Team in accordance with the determination of
the Board of Directors of Buyer, and (vii) 50% of the pre-tax income of the
Business (excluding any interest charges related to the acquisition of the
Assets contemplated hereby) to the extent such pre-tax income exceeds $400,000
(but no payment shall be due on any pre-tax income of the Business in excess of
$1,400,000) for the year ending on the end of the first fiscal quarter of
Unidigital subsequent to the first anniversary of the date hereof (unless the
date hereof coincides with the end of a fiscal quarter of Unidigital in which
case the measurement period shall be on the first anniversary of the date
hereof). Such amount shall be payable within ninety (90) days of such
measurement date.
1.5 The Closing.
(a) The Closing shall take place at the offices of the Seller on the
date hereof. The transfer of the Assets by the Seller to the Buyer shall be
deemed to occur on the date hereof.
(b) At the Closing the Buyer shall pay the Purchase Price in
the following manner:
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(i) by the assumption of the Assumed Liabilities;
(ii) payment of the Cash Consideration;
(iii) delivery of the Note; and
(iv) delivery of the Stock Consideration. Buyer shall deliver
that portion of the Stock Consideration due to Brewer to a third-party escrow
agent, reasonably acceptable to the Seller and the Buyer, as "Escrow Agent"
pursuant to the Escrow Agreement (the "Escrow Agreement") in the form attached
hereto as Exhibit D. The disbursement of amounts held by the Escrow Agent shall
be done in accordance with the terms of the Escrow Agreement.
1.6 Allocation of Purchase Price. The aggregate amount of the Purchase
Price shall, for tax purposes only, be allocated among the Assets and Assumed
Liabilities substantially in accordance with the amounts set forth on Schedule
1.6. The Seller and the Buyer agree that they will not take any position which
is materially inconsistent with the allocations provided for in this Agreement
in preparing income, capital or franchise tax returns.
2. Representations of the Selling Parties
The representations and warranties made by the Selling Parties
herein or in any instrument or document furnished in connection herewith shall
survive the Closing until (and including) the fifth anniversary of the date
hereof. The representations and warranties in this Section 2 or in any document
delivered to the Buyer pursuant to this Agreement are deemed to be material and
the Buyer is entering into this Agreement relying on such representations and
warranties. The Selling Parties, jointly and severally, represent and warrant to
the Buyer as follows (it being understood that all references in this Section 2
to the Seller shall be deemed to include any of Seller's subsidiaries, unless
the context otherwise requires):
2.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation,
and has all requisite power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby. Schedule 2.1 sets forth the authorized and
outstanding capital stock of the Seller as well as the record and beneficial
owners thereof. Except as set forth on Schedule 2.1, the Seller does not own or
control, directly or indirectly, any corporation, partnership, association or
business entity. The Seller is duly qualified to do business and in good
standing in all jurisdictions in which its ownership of property or the
character of its business requires such qualification and failure to be
qualified would have a material adverse affect on the Business. Schedule 2.1
contains a true, correct and complete list of all of the jurisdictions in which
the ownership of the property used in the Business or the nature of the Business
requires qualification.
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2.2 Authorization. The execution and delivery of this Agreement (and all
other agreements provided for herein) by the Seller, and the consummation by the
Seller of all transactions contemplated hereby, has been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Seller is a party constitutes the
valid and legally binding obligations of the Seller, enforceable against it, in
accordance with their respective terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally. The execution, delivery and performance by the
Seller of this Agreement and the agreements provided for herein, and the
consummation by the Buyer of the transactions contemplated hereby and thereby,
do not, (a) violate the provisions of any law, rule or regulation applicable to
the Seller; (b) violate the provisions of the Articles of Organization or Bylaws
of the Seller; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (d) except as otherwise set forth herein
(including any schedules or exhibits attached hereto), conflict with or result
in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Seller pursuant
to, any indenture, mortgage, deed of trust or other instrument or agreement to
which any of them is a party or by which any of them or any of their properties
is or may be bound, other than with respect to obligations of Seller which will
be discharged at or prior to Closing. Schedule 2.2 attached hereto sets forth a
true, correct and complete list of all consents, approvals, permissions,
licenses, authorizations and other requirements prescribed by law, rule,
regulation or by contract in connection with the consummation by the Seller of
the transactions contemplated by this Agreement. Except as indicated on Schedule
2.2, all such items have been or will be, prior to the date hereof, obtained and
satisfied.
2.3 Ownership of the Assets. Schedule 2.3 attached hereto sets forth a
true, correct and complete list of all claims, liabilities, liens, pledges,
charges, encumbrances and equities of any kind affecting their respective Assets
(collectively, the "Encumbrances"). The Seller is, and at the Closing will be,
the true and lawful owner of the Assets, and will have the right to sell and
transfer to the Buyer good and marketable title to all Assets, which at the
Closing will be free and clear of all Encumbrances. The delivery to the Buyer of
the instruments of transfer of ownership contemplated by this Agreement will
vest good and marketable title to all Assets in the Buyer, free and clear of all
liens, mortgages, pledges, security interests, restrictions, prior assignments,
encumbrances and claims of any kind or nature whatsoever. The Assets to be
conveyed to the Buyer hereunder constitute all properties, assets, rights and
claims which are necessary in all material respects to the conduct of the
Business as currently conducted by the Seller.
2.4 Financial Statements.
(a) The Seller has previously delivered to the Buyer its audited
balance sheet as of June 30, 1996 (the "June 1996 Balance Sheet") and the
related statements of operations, shareholders' equity and changes in financial
position of the Seller for the fiscal year then ended (collectively, the "June
1996 Financial Statements") and its unaudited balance sheet as of
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February 28, 1997 (the "February 1997 Balance Sheet") the related unaudited
statements of operations, shareholders' equity and changes in financial position
of the Seller for the year then ended (in each case as prepared by management of
Seller) (the "Unaudited Financial Statements"). The June 1996 Financial
Statements and the Unaudited Financial Statements (collectively, the "Financial
Statements"), have been prepared in accordance with generally accepted
accounting principles applied consistently with past practice and the Unaudited
Financial Statements have been certified by the Seller's Chief Executive Officer
and Chief Financial Officer.
(b) The Financial Statements are accurate and complete, and fairly
present, as of their respective dates, the financial condition, retained
earnings (deficit), assets and liabilities of the Seller and the results of
operations of the Seller's business for the periods indicated. Nothing has come
to the attention of the Seller since the date of the Financial Statements which
would lead it to believe that the reserves and accruals shown thereon are
inadequate for all reasonably anticipated losses, costs and expenses and the
Seller reasonably believes that such reserves and accruals are adequate for all
of such losses, costs and expenses.
2.5 Litigation. Except as set forth on Schedule 2.5, the Seller is not a
party to, or to the Selling Parties' best knowledge threatened with, and none of
the Assets are subject to, any litigation, suit, action, investigation (to the
best of the Selling Parties' knowledge), grievance, arbitration, proceeding, or
controversy or claim before any court, administrative agency or other
governmental authority relating to or affecting the Assets or the business,
properties, condition (financial or otherwise) or prospects of the Business. The
Seller is not in violation of or in default with respect to any judgment, order,
award, writ, injunction, decree or rule of any court, governmental department,
commission, agency, instrumentality, arbitrator, administrative agency or
governmental authority or any regulation of any administrative agency or
governmental authority, where such violation or default would have a material
adverse effect upon the Assets, the business, properties, condition (financial
or otherwise) or prospects of the Business or the consummation of the
transactions contemplated hereby. The Seller has not received notice of any
product liability claim, warranty claim or other claim whatsoever which, if
decided adversely, would have a material adverse effect on the Assets or the
business, condition (financial or otherwise), properties or prospects of the
Business.
2.6 Insurance. Schedule 2.6 sets forth a true, correct and complete list
of all fire, theft, casualty, general liability, workers compensation, business
interruption, environmental impairment, product liability, automobile and other
insurance policies insuring the Assets or business of the Business and of all
life insurance policies maintained for any employees of the Business, specifying
the type of coverage, the amount of coverage, the premium, the insurer and the
expiration date of each such policy (collectively, the "Insurance Policies") and
all claims made under such Insurance Policies since January 1, 1993. True,
correct and complete copies of all of the Insurance Policies have been
previously delivered by the Seller to the Buyer. The Insurance Policies are in
full force and effect and are in amounts and of a nature which are adequate and
customary for the business of the Business. All premiums due on the Insurance
Policies or renewals thereof have been paid and there is no default under any of
the Insurance Policies. Except as set forth on Schedule 2.6, the Seller has not
received any notice or other
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communication from any issuer of the Insurance Policies canceling or materially
amending any of the Insurance Policies, materially increasing any deductibles or
retained amounts thereunder, or materially increasing the annual or other
premiums payable thereunder, and, to the best knowledge of the Selling Parties,
no such cancellation, amendment or increase of deductibles, retainers or
premiums is threatened.
2.7 Inventory. Schedule 2.7 sets forth a true, correct and complete list
of the Inventory as of date hereof, including a description and reasonable
estimate of the valuation thereof. At the date hereof, the Inventory will
consist of items of a quality and quantity which are usable or saleable, without
discount and at values at least equal to the values indicated on the latest
balance sheet included in the Financial Statements, in the ordinary course of
business, except as otherwise reserved or provided for in accordance with the
procedures set forth on Schedule 2.7, conducted by and within the normal
operating cycle of the Business. At the date hereof, the value of all items of
obsolete materials, excess quantities of materials and of materials of below
standard quantity will be reserved for in accordance with the procedures set
forth in Schedule 2.7, and to the extent not inconsistent, with generally
accepted accounting principles.
2.8 Fixed Assets. Schedule 2.8 sets forth a true, correct and complete
list of all Fixed Assets as of the date hereof, including a description and the
cost and accumulated depreciation on an aggregate basis with respect to all
Fixed Assets. Except as set forth in Schedule 2.8, as of the date hereof, the
Fixed Assets are in good condition and repair and are sufficiently operational
(apart from ordinary wear and tear) to enable the Buyer to conduct the business
in essentially the same manner in which it has heretofore been conducted by the
Seller.
2.9 Leases. Schedule 2.9(a) attached hereto sets forth a true, correct and
complete list as of the date hereof of all leases of real estate, identifying
separately each ground lease, to which the Seller is a party as lessee or tenant
or which the Seller uses in the operations of the Business. Schedule 2.9(b)
attached hereto sets forth a list of all leases of real estate which the Buyer
will assume pursuant to this Agreement (the "Leases"). True, correct and
complete copies of the Leases, and all amendments, modifications and
supplemental agreements thereto, have previously been delivered by the Seller to
the Buyer. The Leases are in full force and effect, are binding and enforceable
against each of the parties thereto in accordance with their respective terms
and, except as set forth on Schedule 2.9(b) attached hereto, have not been
modified or amended since the date of delivery to the Buyer. No party to any
Lease has sent written notice to the other claiming that such party is in
default thereunder, which default remains uncured. Except as set forth on
Schedule 2.9(b) attached hereto, there has not occurred any event which would
constitute a breach of or default in the performance of any material covenant,
agreement or condition contained in any Lease by either party thereto, nor has
there occurred any event which with the passage of time or the giving of notice
or both would constitute such a breach or material default. The Seller is not
obligated to pay any leasing or brokerage commission relating to any Lease and
will not have any enforceable obligation to pay any leasing or brokerage
commission upon the renewal or extension of any Lease. No material construction,
alteration or other leasehold improvement work with respect to any of the Leases
remains to be paid for or to be performed by any party under any Lease. Seller
has fulfilled all material obligations required pursuant to the Leases to have
been performed by Seller and has no reason to believe that it will
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be unable to perform, when due, all of its remaining obligations under said
Leases after the date hereof to the Closing. None of the Leases imposes any
restrictions that would materially interfere with the continued operation of the
business as currently conducted on any of the properties that are the subject of
the Leases. There is no pending or, to the best of the Selling Parties'
knowledge, threatened eminent domain taking or condemnation that will or may
affect any of the properties that are the subject of the Leases.
2.10 Change in Financial Condition and Assets. Since June 30, 1996, there
has been no change which materially and adversely affects the Assets or the
business, properties, condition (financial or otherwise) or prospects of the
Business and which has not been disclosed on the Financial Statements. The
Selling Parties have no knowledge of any existing or threatened occurrence,
event or development related to the Assets or the business, properties,
condition (financial or otherwise) or prospects of the Business which could have
a material adverse effect on the Assets or the business, properties, condition
(financial or otherwise) or prospects of the Business.
2.11 Accounts Receivable. Schedule 2.11 sets forth a true, correct and
complete list of all Accounts Receivable within two days of the Closing,
including an aging thereof as of the date hereof. All Accounts Receivable arose
out of the sales of inventory or services in the ordinary course of business and
are collectible in the values as shall be determined in accordance with Schedule
2.7.
2.12 Books and Records. The general ledgers and books of account of the
Seller with respect to the Business, all federal, state, local and foreign
income, franchise, property and other tax returns filed by the Seller, with
respect to the Assets, and all other books and records of the Seller with
respect to the Business are in all material respects complete and correct and
have been maintained in accordance with good business practice and in accordance
with all applicable procedures required by laws and regulations other than any
digression from such practice and procedures which has no material and adverse
effect on the Assets or the Business, or the valuations thereof for the purposes
of this Agreement, as conducted as of and prior to the date hereof.
2.13 Contracts and Commitments.
(a) Schedule 2.13(a) attached hereto contains a true, complete and
correct list and description of the following contracts and agreements, whether
written or oral, which relate to the Business and which are to be assigned from
the Seller to the Buyer at Closing (collectively, the "Contracts"):
(i) all material loan agreements, indentures, mortgages
and guaranties to which the Seller is a party or by which the Seller or its
property is bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, personal property leases
and lease purchase agreements
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relating to any of the Assets to which the Seller is a party or by which the
Seller or any of its property is bound;
(iii) all contracts, agreements, commitments, purchase
orders (other than merchandise deliveries to customers in the normal course of
business upon standard terms) or other understandings or arrangements to which
the Seller is a party or by which any of their respective property is bound
which (A) involve payments or receipts by any of them of more than $10,000 in
the case of any single contract, agreement, commitment, understanding or
arrangement under which full performance (including payment) has not been
rendered by all parties thereto or (B) may materially adversely affect the
condition (financial or otherwise) or the properties, Assets, business or
prospects of the Business;
(iv) all collective bargaining agreements, employment
and consulting agreements, non-competition agreements, trust agreements,
executive compensation plans, bonus, 401(k), or profit-sharing plans, deferred
compensation agreements, pension plans, retirement plans, employee stock option
or stock purchase plans and group life, health and accident insurance and other
employee benefit plans, agreements, memoranda of understanding, arrangements or
commitments to which the Seller is a party or by which the Seller or any of its
property is bound;
(v) all agency, distributor, sales representative and
similar agreements to which the Seller is a party;
(vi) all material contracts, agreements or other
understandings or arrangements, whether written or oral, between the Seller and
any shareholder, employee, officer or director of the Seller which may affect
the Business as conducted as of and prior to the date hereof or the Assets;
(vii) all leases, whether operating, capital or
otherwise, under which the Seller is lessor or lessee;
(viii) all contracts, agreements and other documents
or information relating to past disposal of waste (whether or not hazardous)
which are available;
(ix) all return policies and product warranties
relating to products or goods manufactured or distributed by the Business as the
same are currently in effect or may have been in effect from time to time since
June 30, 1995, as well as any exception to such policies, all cooperative
advertising arrangements and all rebate, discount or allowance arrangements;
(x) all contracts related to operation, maintenance or
management of the leased facilities under any Leases (the "Leased Premises")
other than immaterial contracts which do not constitute a part of Assumed
Liabilities; and
(xi) any licensing agreements, franchise agreements
and other material agreement or contract entered into by the Seller.
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(b) Except as set forth on Schedule 2.13(b) attached hereto:
(i) each Contract is a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, and the
Selling Parties have no knowledge that any Contract is not a valid and binding
agreement of the other parties thereto:
(ii) the Seller has fulfilled all material obligations
required pursuant to the Contracts to have been performed by it prior to the
date hereof, and the Seller has no reason to believe that it will not be able to
fulfill, when due, all of its obligations under the Contracts which remain to be
performed after the date hereof to the Closing;
(iii) the Seller is not in breach of or default under any
Contract, and no event has occurred which with the passage of time or giving of
notice or both would constitute such a default, result in a loss of rights or
result in the creation of any lien, charge or encumbrance, thereunder or
pursuant thereto (an "Inchoate Default"); and
(iv) to the best knowledge of the Selling Parties, there is
no existing breach or default by any other party to any Contract, and no
Inchoate Default.
(c) Except as set forth on Schedule 2.13(b), the continuation,
validity and effectiveness of each Contract would not be affected by the
transfer thereof to Buyer under this Agreement and all such Contracts are
assignable to Buyer without a consent.
(d) True, correct and complete copies of all of the foregoing
contracts and agreements (other than all unfilled purchase orders and all
unfilled customer orders), including but not limited to the Contracts, and a
list of all unfilled purchase orders and all unfilled customer orders, shall be
delivered by the Seller to the Buyer within five business days of the date
hereof other than Contracts which will be terminated as of the Closing.
2.14 Compliance with Laws. Except as set forth in Schedule 2.14, the
Seller has all requisite licenses, permits and certificates, including health
and safety permits, from federal, state, local and foreign authorities necessary
to conduct the Business and own and operate the Assets (collectively, the
"Permits"). Schedule 2.14 sets forth a true, correct and complete list of all
such Permits, copies of which previously have been (or within five business days
hereof will be) delivered by the Seller to the Buyer. The Seller has not engaged
in any activity which would cause or, to the knowledge of the Seller, permit
revocation or suspension of any such Permit and no action or proceeding looking
to or contemplating the revocation or suspension of any such Permit is pending
or threatened. There are no existing defaults or Inchoate Defaults by the Seller
under any Permit. The Selling Parties have no knowledge of any default or
claimed or purported or alleged default or Inchoate Defaults on the part of any
party in the performance of any obligation to be performed or paid by any party
under any Permit. Except as set forth in Schedule 2.14, the consummation of the
transactions contemplated by this Agreement will in no way affect the
continuation, validity or effectiveness of the Permits or require the consent of
any third party under any such Permit. The Seller is not in violation of any
law, regulation or
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ordinance (including but not limited to laws, regulations or ordinances relating
to building, zoning, land use or similar matters) relating to its properties,
the violation of which could have a material adverse effect on the Assets or the
business, properties, condition (financial or otherwise) or prospects of the
Seller. The business of the Seller does not violate, in any material respect,
and the Seller is not in violation of, any federal, state, local or foreign
laws, regulations or orders, the violation or enforcement of which would have a
material and adverse effect on the Assets, business, properties, condition
(financial or otherwise) or prospects of the Seller. Except as set forth on
Schedule 2.14, the Seller has not received any notice or communication from any
federal, state, foreign, or local governmental or regulatory authority or
otherwise of any such violation or noncompliance and has not received any notice
prior to such time of any violation that has not been cured.
2.15 Employee Relations.
(a) The Seller is in compliance with all material federal, state,
local and foreign laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practice, and there are no arrears in the payment of wages or taxes or
workers compensation assessments or penalties.
(b) Except as set forth on Schedule 2.15:
(i) none of Seller's Employees are represented by any
labor union;
(ii) there is no unfair labor practice complaint against the
Seller pending before the National Labor Relations Board or any state, foreign,
or local agency affecting the Seller;
(iii) there is no pending labor strike or other material labor
trouble affecting the Seller (including but not limited to any organizational
campaign);
(iv) there is no material labor grievance pending against
or affecting the Seller;
(v) there is no pending organizing activities respecting
the Seller's Employees;
(vi) there are no pending arbitration proceedings arising out
of or under any collective bargaining agreement to which the Seller is a party,
or to the best knowledge of the Seller, any basis for which a claim may be made
under any collective bargaining agreement to which the Seller is a party
affecting the Seller's Employees; and
(vii) there is no pending litigation, or other proceeding or
basis for an unasserted claim against the Seller by any employee or group of
employees or independent contractor or group of independent contractors which is
based on claims arising out of any employee's or group of employees' employment
relationship with the Seller or any independent contractor's or group of
independent
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contractors' independent consulting relationship with the Seller (insofar as
such relationship pertains to the Business of the Seller), including but not
limited to claims for contract, tort, discrimination, employee benefits,
commissions, wrongful termination, age discrimination, sexual harassment, sexual
discrimination and any and all common law or statutory claims.
2.16 Absence of Certain Changes or Events. Except as set forth on Schedule
2.16, since June 30, 1996, the Seller has not entered into any transaction which
is not in the usual and ordinary course of business, and, without limiting the
generality of the foregoing, the Seller has not:
(a) Mortgaged, pledged or subjected to lien, charge or other
encumbrance any of the Assets;
(b) Sold or purchased, assigned or transferred any of its
Assets (except for Inventory sold in the ordinary course of business);
(c) Made any material amendment to or termination of any
Contract or done any act or omitted to do any act which would cause the
breach of any Contract;
(d) Suffered any casualty losses, whether insured or uninsured,
and whether or not in the control of the Seller, in excess of $25,000 in the
aggregate, or waived any rights of any value unless such loss or waiver is
reflected in the Financial Statements;
(e) Authorized or issued recall notices for any of its products
relating to the Business or initiated any safety investigations relating to
the Business;
(f) Merged or consolidated with or into any corporation or
other entity;
(g) Made, accrued or become liable for any bonus, profit sharing
or incentive payment, except for accruals under existing plans, if any, or
increase the rate of compensation payable or to become payable by it to any of
its officers, or, except in accordance with past practice and the ordinary
course of business, its employees;
(h) Waived, forgiven, released or compromised any rights of
material (individually or in the aggregate) value to the Business, including
without limitation any indebtedness owed to the Seller;
(i) Failed to use best efforts to (i) preserve the possession,
control and good condition of the Assets and Business, (ii) keep in faithful
service its present officers and key employees, and (iii) preserve the goodwill
of its customers, suppliers, agents, brokers and others having business
relations with it;
(j) Failed to operate the Business and maintain its books,
accounts and records in the customary manner and in accordance with past
practice;
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(k) Materially altered the terms, status or funding condition
of any Employee Plan except as contemplated by this Agreement;
(l) Entered into any collective bargaining contract, or any
joint venture, partnership or other arrangement for the conduct of the
Business;
(m) Declared or paid any dividend or other distribution in respect
of shares of capital stock other than normal distributions for the payment of
income taxes occasioned by Subchapter S tax election;
(n) Made any purchase, redemption or other acquisition,
directly or indirectly, of any outstanding shares of its capital stock;
(o) Forgiven, released or compromised any indebtedness owed to the
Seller by any employee or other person except upon full payment or, in the case
of any customer, returns and allowances made in the ordinary course of business
consistent with past practices;
(p) Purchased any assets or securities of any person, other
than in the ordinary course of business;
(q) Commenced any legal proceeding in bankruptcy or any other
action seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect or make any other assignment for the
benefit of its creditors; or
(r) Received notice of any litigation, warranty claim or products
liability claims relating to the Business.
2.17 Customers. The Seller has heretofore provided to the Buyer a true,
correct and complete list of the names and addresses of all customers of the
Seller. None of the 15 customers which accounted for the largest dollar volume
of purchases from the Seller for the twelve-month period ended the date hereof,
has notified the Seller that it intends to discontinue its relationship with the
Seller nor, to the best of the Selling Parties' knowledge, does there exist any
actual or threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of the Seller with any such
customer nor does there exist a present condition or state of facts or
circumstances known to the Seller involving such customers which would
materially adversely affect the Business or prevent the Buyer from conducting
the Business after the consummation of the transactions contemplated by this
Agreement in essentially the same manner in which it has heretofore been
conducted by the Seller. The Seller has no consignment sales in effect as of the
date hereof and no customer has any return rights except as set forth on
Schedule 2.13(a).
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2.18 Suppliers. Schedule 2.18 sets forth a true, correct and complete list
of the names and addresses of the ten suppliers of the Seller which accounted
for the largest dollar volume of purchases by the Seller for the twelve-month
period ended the date hereof. The Seller is not a party to any requirements
contract relating to the purchase of inventory, finished goods or other property
used in the conduct of the Business. None of the Seller's suppliers has notified
the Seller that it intends to discontinue its relationship with the Seller, nor
raise its prices so as to materially adversely affect the Business nor, to the
best of the Selling Parties' knowledge, does there exist any actual or
threatened termination, cancellation or limitation of, or any modification or
change in, the business relationship of the Seller with any such supplier, nor
does there exist a present condition or state of facts or circumstances known to
the Selling Parties involving such suppliers which would materially adversely
affect the Business or prevent the Buyer from conducting the Business after the
consummation of the transactions contemplated by this Agreement in essentially
the same manner in which it has heretofore been conducted by the Seller.
2.19 Prepayments and Deposits. Except as set forth on Schedule 2.11, the
Seller has no prepayments or deposits from customers for products to be shipped,
or services to be performed, by the Seller after the date hereof.
2.20 Trade Names and Other Intangible Property.
(a) Schedule 2.20 attached hereto sets forth a true, correct and
complete list and a description of all Intangible Property. True, correct and
complete copies of all licenses and other agreements relating to the Intangible
Property have been previously delivered by the Seller to the Buyer. The Selling
Parties have no knowledge of any default or claimed or purported or alleged
default or state of facts which with notice or lapse of time or both would
constitute a default on the part of any party in the performance of any
obligation to be performed or paid by any party under any such license or
agreement. During the past two years the only name by which the Seller has been
known or which the Seller has used is its corporate name set forth in the
preamble of this Agreement.
(b) Except as otherwise disclosed in Schedule 2.20 attached hereto,
the Seller is the sole and exclusive owner, free and clear of all liens, claims
and restrictions, of all Intangible Property and all designs, permits, labels
and packages used on or in connection therewith. The Intangible Property owned
by the Seller is sufficient to conduct the Business, as presently conducted. The
Seller has received no notice of, and has no knowledge of any basis for, a claim
against it that any of its operations, activities, products or publications
infringes on any patent, trademark, trade name, copyright or other property
right of a third party, or that it is illegally or otherwise using the trade
secrets, formulae or any property rights of others. Except as otherwise
disclosed in Schedule 2.20, the Seller (i) has no disputes with or claims
against any third party for infringement by such third party of any trade name
or other Intangible Property of the Seller, and (ii) is not obligated or under
any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, trade name, copyright or other property right, with respect to the
use thereof or in connection with the conduct of the Business or otherwise. The
Seller has taken all steps
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reasonably necessary to protect its right, title and interest in and to the
Intangible Property. Except as set forth in Schedule 2.20, the consummation of
the transactions contemplated by this Agreement (including any required
financing) will in no way affect the continuation, validity or effectiveness of
the Intangible Property or require the consent of any third party in respect of
the Intangible Property.
2.21 Employee Benefit Plans.
(a) ERISA. Except as set forth on Schedule 2.21, neither the Seller
nor any person, firm, corporation or entity which is (or within the past five
years has been) a member with the Seller of a "controlled or affiliated group",
within the meaning of Section 414(b), (c), (m), (n) or (o) of the Internal
Revenue Code of 1986, as amended (the "Code"), has maintained, sponsored or
contributed to any "pension plan" within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any
"welfare plan" within the meaning of Section 3(1) of ERISA, or any other
employee benefit plan, program, practice or arrangement, whether or not subject
to ERISA (a "non-ERISA plan") (such pension plans, welfare plans and non-
ERISA plans of the Seller being herein referred to as the "Employee Plans").
Except as set forth on Schedule 2.21, the Seller has provided the Buyer with a
true, correct and complete copy of each pension plan, each welfare plan and each
non-ERISA plan listed on such Schedule, together with a copy of the most recent
summary plan description and annual report (if applicable) with respect to each
such plan. Except as set forth on Schedule 2.21, each pension plan listed on
such Schedule is a "qualified plan" within the meaning of Section 401 of the
Code. Except as set forth on Schedule 2.21, each pension plan, each welfare plan
and each non-ERISA plan listed on such Schedule has been administered in
accordance with its terms, and each pension plan and welfare plan has been
operated and administered in accordance with all applicable requirements of
ERISA and the Code. Without limiting the generality of the foregoing, no
trustee, administrator, sponsor, or other party-in-interest or disqualified
person, has engaged or participated in any "prohibited transaction", as that
term is defined in Section 4975(c)(1) of the Code, with respect to any pension
plan or welfare plan listed on Schedule 2.21. Without limiting the generality of
the foregoing, in connection with all welfare or non-ERISA plans which are
subject to continuation coverage under Section 4980B of the Code, all notices
and elections with respect to such coverage have been made in compliance with
the requirements of Section 4980B. With respect to each "defined benefit pension
plan", as defined in Section 3(35) of ERISA, identified on Schedule 2.21: (i)
the fair market value of the assets thereof as of the date hereof is as set
forth on such Schedule; (ii) the present value of all accrued benefits
thereunder, determined as if such pension plan terminated on the date hereof, is
as set forth on Schedule 2.21; (iii) if any such plan is a "multiemployer plan",
as defined in Section 3(37) of ERISA, the present value of the contingent
liability of the Seller both in the event of the termination of such plan and in
the event that the Seller withdraws therefrom is as set forth on Schedule 2.21;
(iv) no such plan has incurred an "accumulated funding deficiency", as such term
is defined in Section 302 of ERISA, and (v) no such pension plan has terminated,
nor has any "reportable event", within the meaning of Section 4043 of ERISA,
occurred with respect to such plan. All contributions for all periods ending
prior to the date hereof (including periods from the first day of the current
plan year to the date hereof) will be made prior to the date hereof by the
Seller in accordance with past practice with respect to pension plans, welfare
plans and non-
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ERISA plans. All insurance premiums (including premiums to the Pension Benefit
Guaranty Corporation) have been paid in full, subject only to normal
retrospective adjustments in the ordinary course of business, with regard to
applicable plans for policy years or other applicable policy periods ending on
or before the date hereof.
(b) Claims and Litigation. Except as set forth on Schedule 2.21, to
the best of the Selling Parties' knowledge, there are no threatened or pending
claims, suits or other proceedings by present or former employees of Seller,
plan participants, beneficiaries or spouses of any of the above, the Internal
Revenue Service, the Pension Benefit Guaranty Corporation, or any other pension
or entity involving any Employee Plan, including claims against the assets of
any trust, involving any Employee Plan, or any rights or benefits thereunder,
other than ordinary and usual claims for benefits to participants or
beneficiaries, including claims pursuant to domestic relations orders and there
is no basis for any legal action, proceeding or investigation with respect to
such plans.
2.22 Leased Premises.
(a) Schedule 2.22 contains a true, correct and complete list of the
address of all Leased Premises.
(b) Except as set forth on Schedule 2.22, no work has been performed
on or materials supplied to the Leased Premises within any applicable statutory
period which could give rise to mechanics or materialmen's liens; all bills and
claims for labor performed and materials furnished to or for the benefit of the
Leased Premises for all periods prior to the Closing shall be paid in full, and
the Selling Parties have no knowledge of any mechanic's or materialmen's liens,
whether or not perfected, on or affecting any portion of the Leased Premises.
(c) There is no pending or, to Seller's knowledge, threatened
condemnation or eminent domain proceeding with respect to the Leased Premises.
(d) Except as set forth on Schedule 2.22, and to the best of
Seller's knowledge, there are no taxes or betterment or special assessments
other than ordinary real estate taxes pending or payable against the Leased
Premises and there are no contingencies existing under which any assessment for
real estate taxes may be retroactively filed against the Leased Premises; the
Selling Parties have no knowledge of any proposed special assessment that may
affect the Leased Premises or any part thereof; there are no penalties due with
respect to real estate taxes and/or impositions, and all real estate taxes
and/or impositions (excepting those for the current year that are not yet due
and payable) with respect to the Leased Premises have been paid in full; there
are no taxes or levies, permit fees or connection fees which must be paid
respecting existing curb cuts, sewer hookups, water-main hookups or services of
a like nature.
(e) The Leased Premises comply with the requirements of all
building, zoning, subdivision, health, safety, environmental, pollution control,
waste products, sewage control and all other applicable statutes, laws, codes,
ordinances, rules, orders, regulations and decrees (collectively, the
"Government Regulations") of any and all government agencies, the
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violation of which would have a material adverse effect on the Assets or the
business, property condition (financial or otherwise) or prospects of the
Seller. To the extent set forth in Schedule 2.14, the Seller has obtained and
provided to the Buyer all consents, permits, licenses and approvals required by
such Government Regulations, such consents, permits, licenses and approvals are
in full force and effect, have been properly and validly issued, and on or prior
to the date hereof will be assigned to the Buyer by the Seller to the extent the
same are assignable. Except as set forth in Schedule 2.14, there is no uncured
breach of any condition or requirement imposed by, or pursuant to, any permit or
license issued with respect to the Leased Premises. There is no action pending
or, to the best of the Selling Parties' knowledge, threatened by any government
agencies claiming that the Leased Premises violates such Government Regulations
or threatening to shut down the Business or the use of the Assets or to prevent
the Assets from being used as presently used.
(f) Except as set forth on Schedule 2.22, there are no actions,
suits, petitions, notices or proceedings pending, given or, to the best of the
Seller's knowledge, threatened by any persons or government agencies before any
court, government agencies or instrumentalities, administrative or otherwise,
which if given, commenced or concluded would have a material adverse effect on
the value, occupancy, use or operation of the Leased Premises.
(g) To Seller's knowledge the structural components of all of the
buildings located on the Leased Premises are in good condition and repair,
normal wear and tear excepted.
(h) The Selling Parties (i) have not received notice and (ii) have
no knowledge of the existence of any outstanding notice:
(A) from any federal, state, county, municipal or foreign
authority alleging any health, safety, pollution, environmental, zoning or other
violation of law with respect to the Leased Premises or any part thereof that
has not been entirely corrected; or
(B) from any insurance company or bonding company with respect
to any defects or inadequacies in the Leased Premises or any part thereof that
would adversely affect the insurability of same or cause the imposition of
extraordinary premiums or charges therefor or any termination or threatened
termination of any policy of insurance or bond relating thereto.
If the Selling Parties obtain knowledge of any such notice prior to the date
hereof, the respective Selling Parties shall promptly notify Buyer thereof.
2.23 Bank Accounts; Securities. Set forth in Schedule 2.23 is a list of
all bank accounts, safe deposit boxes, money market funds, certificates of
deposit, stocks, bonds, notes and other securities in the names of or owned or
controlled by the Seller, all of which are included in the Assets.
2.24 Disclosure. No representation or warranty by the Selling Parties in
this Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains
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or will contain any untrue statement of a material fact or omits or will omit
any material fact necessary in order to make the statements contained therein
not misleading. The Selling Parties have disclosed to the Buyer all material
facts pertaining to the transactions contemplated by this Agreement. For
purposes of this Agreement, any disclosure made on any Schedule or Exhibit
hereto shall be deemed to have been made on any other Schedule or Exhibit to
which it may be applicable.
2.25 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Seller without the
intervention of any other person in such manner as to give rise to any valid
claim for a finder's fee, brokerage commission or other like payment.
2.26 Preservation of Assets. The Seller has not sold, assigned or
transferred any of the Assets, other than in the ordinary course of business, or
declared or paid any dividend or other distribution in respect of shares of
capital stock or made any purchase, redemption or other acquisition, directly or
indirectly, of any outstanding shares of its capital stock, since June 30, 1996.
2.27 Environmental Compliance.
(a) The Seller has obtained all permits, licenses and other
authorizations required under Federal, state and local laws, relating to
protection of the Environment (as defined below), including laws relating to any
Release (as defined below) of or presence of pollutants, contaminants, or
hazardous or toxic materials or wastes into or in soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air,
and/or any environmental medium (the "Environment") or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or waste. Schedule 2.27 hereto sets forth a complete and accurate list
of all such permits, licenses and other authorizations obtained by the Seller,
copies of which have been delivered to the Buyer. The Seller is in full
compliance with all terms and conditions of such permits, licenses and other
authorizations. To the best of the Selling Parties' knowledge, except as set
forth on Schedule 2.27, there are no proposed or pending changes in the federal,
state, county or local laws, regulations, standards, or in the Seller's permits,
licenses or authorizations relating to pollution or protection of the
Environment that would increase the present costs of compliance with such laws
or change any methods of operation.
(b) Except as indicated on Schedule 2.27 the Seller has not, and, to
the best of the Selling Parties' knowledge, after due inquiry, none of the
Seller's employees, agents, contractors or subcontractors have, used, generated,
processed, stored, transported, recycled, Released or otherwise handled any
Hazardous Materials (as defined below) except as permitted by law on or about
any real property related to the Seller's business or the Seller's contractual
relations with any such agents, contractors or subcontractors, including, but
not limited to, real property formerly owned by the Seller (collectively, the
"Seller Real Property") and the facilities now or formerly leased or operated by
the Seller (collectively, the "Seller Facilities"). As used herein, each of the
Seller's Real Property and the Seller Facilities does not include the property
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owned by the Seller located at 45 Piedmont Street in Boston, Massachusetts (the
"Piedmont Street Property"). It is understood and agreed that the Seller's
representation in this Section 2.27 is not made with respect to the Piedmont
Street Property. Additionally, except as indicated on Schedule 2.27, neither the
Seller Facilities nor the Seller Real Property is being used or has ever
previously been used for the generation, use, processing, storage,
transportation, recycling, Release or handling of any Hazardous Materials,
except as such use may have been permitted by law. In addition, except as
indicated on Schedule 2.27, neither the Seller Facilities nor the Seller Real
Property has ever been affected by any Hazardous Materials Contamination or
Environmental Condition. The Seller, in the conduct of its business, is and has
been in compliance with all Environmental Laws. Notwithstanding any statement or
representation to the contrary in any affidavit or other document, the Seller
affirmatively represents that as of the date hereof, the Seller has made all
filings required by RCRA and that there have been no failures by the Seller to
timely report under CERCLA Section 103 or RCRA Section 304. The Seller has not
received any written notice from any governmental authority or any other person
respecting or related to any actual, threatened or potential Release or presence
of any Hazardous Materials or any non-compliance with any Environmental Laws as
to which any such claimed noncompliance presently exists. Notwithstanding the
preceding sentence, the Seller has not received any notice from any governmental
authority respecting noncompliance with RCRA. No investigation, administrative
proceeding, consent order or agreement, limitation or settlement with respect to
Hazardous Materials, Hazardous Materials Contamination or Environmental
Condition is, to the best of the Selling Parties' knowledge, proposed,
threatened, anticipated or in force with respect to its business, nor has such
property ever been on any Federal or state "Superfund" or "Super Lien" list.
As used in this Section 2.27, "due inquiry" shall mean that Selling
Parties have made inquiry of all of Seller's executives, corporate officers and
directors and any employee or agent of Seller with responsibility for
environmental matters.
As used herein "Hazardous Materials" include any (i) "Hazardous Waste" as
defined by The Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.), as amended from time to time ("RCRA"), and regulations
promulgated thereunder; and "Hazardous Substance" as defined by The
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended from time to time ("CERCLA"), and
regulations promulgated thereunder; (ii) asbestos; (iii) polychlorinated
biphenyls; (iv) any substance, the presence of which on the premises of the
Seller's business, is prohibited by applicable law; (v) oil, petroleum or any
petroleum products or by-products; (vi) any other substance which, according to
applicable law, requires special handling or notification of any Federal, state
or local governmental entity in its collection, processing, handling, storage,
transport, treatment or disposal or exposure thereto; (vii) any substance, which
if not properly disposed of, may pollute, contaminate, harm or have any
detrimental effect on the Environment; (viii) underground storage tanks, whether
empty, filled or partially filled with any substance; and (ix) any other
pollutant, toxic substance, hazardous substance, hazardous waste, hazardous
material or hazardous substance as regulated by or defined in or pursuant to any
Environmental law or any other Federal, state, or local environmental law,
regulation, ordinance, rule, or by-law, whether existing on or prior to the date
hereof.
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As used herein, "Hazardous Materials Contamination" shall mean, with
respect to any premises, building or facilities or, the Environment,
contamination by a Release or the presence of Hazardous Materials.
As used herein, "Environmental Condition" shall mean any condition with
respect to the Environment on or off the Seller Real Property and Seller
Facilities, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order, or liability to or against
the parties hereto by any third party (including, without limitation, any
government entity), including, without limitation, any condition resulting from
the operation of Seller's business and/or the operation of the business of any
other property owner or operator in the vicinity of the Seller Real Property and
Seller Facilities and/or any activity or operation formerly conducted by any
person or entity on or off the Seller Real Property and Seller Facilities.
As used herein, "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing.
As used herein, "Environmental Laws" shall mean any environmental or
health and/or safety-related law, regulation, rule, ordinance, or by-law at the
Federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted, including but not limited to: (i)
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA
9601 et seq.; (ii) Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984, 42 USCA 6901 et seq.; (iii) Federal Water Pollution
Control Act of 1972 as amended by the Clean Water Act of 1977, as amended, 33
USCA 1251 et seq.; (iv) Toxic Substances Control Act of 1976, as amended, 15
USCA 2601 et seq.; (v) Emergency Planning and Community Right-to-Know Act of
1986, 42 USCA 11001 et seq.; (vi) Clean Air Act of 1966, as amended by the Clean
Air Act of 1986, as amended by the Clean Air Act Amendments of l990, 42 USCA
7401 et seq.; (vii) National Environmental Policy Act of 1970, as amended, 42
USCA 4321 et seq.; (viii) Rivers and Harbors Act of 1970, as amended, 33 USCA
401 et seq.; (ix) Endangered Species Act of 1973, as amended, 16 USCA 1531, et
seq; (x) Occupational Safety and Health Act of 1970, as amended, 29 USCA 651 et
seq.; (xi) Safe Drinking Water Act of 1974, as amended, 42 USCA 300 et seq., and
any other federal, state, or local law, regulation, rule, ordinance or order
currently in existence which governs:
(i) the existence, cleanup and/or remediation of toxic or
hazardous materials;
(ii) the Release, emission, discharge or presence of
Hazardous Materials into or in the Environment;
(iii) the control of Hazardous Materials; or
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(iv) the use, generation, transport, treatment, storage,
disposal, removal or recovery of Hazardous Materials.
2.28 Purchase for Investment. Brewer represents that he is an "accredited
investor", within the meaning of Regulation D under the Securities Act of 1933,
as amended (the "1933 Act"). Hartnett represents that he has acquired sufficient
information about Unidigital's business affairs and financial condition to reach
an informed and knowledgeable decision to acquire the Unidigital Stock. Each of
the Shareholders is acquiring the Unidigital Stock for his own account, for
investment purposes only, and not with a view to the resale or distribution of
all or any part thereof. The Shareholders have not offered or sold any portion
of the Unidigital Stock and, except as otherwise provided herein, have no
present plan or intention of dividing such Unidigital Stock with others or
reselling or otherwise disposing of any portion of the Unidigital Stock, either
currently or after the passage of a fixed or determinable period of time, or
upon the occurrence or nonoccurrence of any predetermined event or circumstance.
The Shareholders agree not to distribute or to transfer any of the Unidigital
Stock in the United States except in compliance with all applicable United
States federal and state securities laws. The Shareholders further recognize
that the Unidigital Stock will not be registered under the 1933 Act or the
securities laws of any state, and the transfer of the same will be restricted
under such laws, and the Unidigital Stock cannot be sold except pursuant to an
effective registration statement under such laws or an available exemption from
such registration, and the certificates representing the Unidigital Stock will
bear a legend to such effect. The Shareholders agree not to distribute or to
transfer any of the Unidigital Stock within two years after the date hereof.
2.29 Number of Employees. The number of employees employed by the
Seller as of the date hereof does not exceed 100.
3. Representations of the Buyer and Unidigital
Representations and warranties made by the Buyer and Unidigital
herein or in any instrument or document furnished in connection herewith shall
survive the Closing until (and including) the fifth anniversary of the date
hereof. The Buyer and Unidigital represent and warrant to the Seller as follows:
3.1 Organization and Authority. Each of the Buyer and Unidigital is duly
organized and validly existing and in good standing under the laws of the state
of its incorporation, and has requisite power and authority to own its
properties and to carry on its business as now being conducted. Each of the
Buyer and Unidigital has full power to execute and deliver this Agreement, and
the Instrument of Assumption and to consummate the transactions contemplated
hereby and thereby. The Buyer is an affiliate of, and controlled by, Unidigital.
3.2 Authorization. The execution and delivery of this Agreement by the
Buyer and Unidigital and the agreements provided for herein to which it is a
party, and the consummation by the Buyer and Unidigital of all transactions
contemplated hereby, have been duly authorized by all requisite corporate
action. This Agreement, the Note and all such other agreements and written
obligations entered into and undertaken in connection with the transactions
contemplated
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hereby constitute the respective valid and legally binding obligations of the
Buyer and Unidigital, enforceable against them in accordance with their
respective terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights generally.
Except as otherwise set forth on Schedule 3.2, the execution, delivery and
performance of this Agreement, the Note and the agreements provided for herein,
and the consummation by the Buyer and Unidigital of the transactions
contemplated hereby and thereby, will not, with or without the giving of notice
or the passage of time or both, (a) violate the provisions of any law, rule or
regulation applicable to the Buyer or Unidigital; (b) violate the provisions of
the organizational documents of the Buyer or Unidigital; (c) violate any
judgment, decree, order or award of any court, governmental body or arbitrator
applicable to the Buyer or Unidigital; or (d) conflict with or result in the
breach or termination of any term or provision of, or constitute a default
under, or cause any acceleration under, or cause the creation of any lien,
charge or encumbrance upon the properties or assets of the Buyer or Unidigital
pursuant to, any indenture, mortgage, deed of trust or other agreement or
instrument to which it or its properties is a party or by which the Buyer or
Unidigital is or may be bound. Schedule 3.2 attached hereto sets forth a true,
correct and complete list of all consents and approvals of third parties that
are required of the Buyer and Unidigital in connection with the consummation by
the Buyer and Unidigital of the transactions contemplated by this Agreement.
3.3 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and Unidigital and which are necessary for
its consummation by the Buyer and Unidigital of the transactions contemplated by
this Agreement have been, or will be prior to the date hereof, obtained and
satisfied.
3.4 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Buyer and
Unidigital without the intervention of any other person in such manner as to
give rise to any valid claim for a finder's fee, brokerage commission or other
like payment.
4. Confidentiality; Public Announcements
4.1 Confidentiality. All information not previously disclosed to the
public or not generally known to persons engaged in the business of the Seller
or the Buyer which shall have been furnished by the Buyer or the Seller to the
other party in connection with the transactions contemplated hereby shall not be
disclosed by such receiving party to any person other than their respective
employees, directors, attorneys, accountants or financial advisors or other than
as contemplated herein. In the event that the transactions contemplated by this
Agreement shall not be consummated, all such information which shall be in
writing shall be returned to the party furnishing the same, including, to the
extent reasonably practicable, all copies or reproductions thereof which may
have been prepared, and neither party shall at any time thereafter disclose to
third parties, or use, directly or indirectly, for its own benefit, any such
information, written or oral, about the business of the other party hereto.
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4.2 Public Announcements. The parties will cooperate in the issuance of
any press releases or otherwise in the making of any public statements with
respect to the transactions contemplated hereby. All public announcements or
other public communications concerning this Agreement and the purchase of the
Assets by the Buyer shall be subject to the approval of all parties hereto,
which approval shall not be unreasonably withheld.
5. Employee Matters
5.1 Seller's Employees. Seller has furnished to Buyer a list containing
the names of the Seller's Employees, including each such employee's status,
social security number and current compensation. If any such employee's
employment is terminated or status changed prior to the date hereof, Seller
shall promptly notify Buyer of such termination or status change and, in the
case of termination, if such employee is replaced, the name, date of hire and
compensation of the individual replacing such employee. The Buyer acknowledges
that the Assumed Liabilities include (i) sales commissions payable after the
date hereof and due to any of the Seller's Employees, and (ii) obligations to
any employee of the Buyer with respect to accrued vacation prior to the date
hereof.
5.2 Future Changes. Nothing in this Section 5 shall require Buyer to
retain any of Seller's Employees for any period of time after the date hereof.
Subject to requirements of applicable law, Buyer reserves the right at any time
after the date hereof to terminate such employment and amend, modify or
terminate any term or condition of employment, including without limitation, any
employee benefit plan, program, policy, practice or arrangement.
5.3 Plant Closing. None of the Selling Parties has, directly or
indirectly, taken or omitted to take any action which may result in the Seller's
or the Buyer's liability to any person or entity under the Worker Adjustment and
Retraining Notification Act of 1988 (the "WARN Act"). The term "any action" does
not include the sale and acquisition contemplated by this Agreement and the
liability under the WARN Act, if any, which results from the Seller's
termination of employees in connection with such sale and acquisition is the
sole responsibility of the Seller.
5.4 Reporting of Data. Buyer and Seller shall compile and furnish to each
other such actuarial and employee data as shall be required from time to time
for each party to perform and fulfill its obligations under this Section.
5.5 Pending Litigation. With respect to any litigation pending, or to the
knowledge of the Selling Parties threatened, as set forth in Schedule 2.21
hereto, which claim alleges violation of any nondiscrimination laws, collective
bargaining agreements, employment contract and termination thereof or wage and
hour laws, Seller shall fully defend such claim. Seller shall be responsible for
any monetary damages awarded in connection therewith. It is understood by the
parties that if Seller chooses to settle any matter relating to any of the
foregoing, including the terms and conditions thereof of any back pay claims,
such settlement shall be at the sole discretion of Seller and Seller shall be
solely responsible for the payment or performance of any such settlement terms.
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6. Best Efforts to Obtain Satisfaction of Conditions
The Selling Parties and the Buyer covenant and agree to use their
best efforts to obtain the satisfaction of the conditions specified in this
Agreement.
7. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the date hereof, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
7.1 Continued Truth of Representations and Warranties of the Selling
Parties: Compliance with Covenants and Obligations. The representations and
warranties of the Selling Parties shall be true on and as of the date hereof.
The Seller shall have performed and complied in all material respects with all
covenants required by this Agreement to be performed or complied with by it
prior to or at the date hereof.
7.2 Corporate Proceedings. All corporate and other proceedings required to
be taken on the part of the Seller to authorize or carry out this Agreement and
to convey, assign, transfer and deliver the Assets shall have been taken.
7.3 Other Governmental Approvals. All courts of law, governmental
agencies, departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law, rule,
order or regulation for the consummation by the Seller of the transactions
contemplated by this Agreement and the operation of the Seller's business by the
Buyer, shall have consented to, authorized, permitted or approved such
transactions including but not limited to, all clearance certificates required
pursuant to any applicable retail sales tax legislation required in connection
with the completion of the transactions contemplated herein.
7.4 Consents of Lenders, Lessors and Other Third Parties. The Seller shall
have received the consents and approvals of all lenders, lessors and other third
parties whose consent or approval is required in order for the Seller to
consummate the transactions contemplated by this Agreement, including without
limitation, the landlord at the premises at 451 D Street, Boston, Massachusetts
and USTrust, the Seller's senior secured creditor.
7.5 Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted by any governmental body or
person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Buyer to own or use the Assets after the date hereof.
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7.6 Opinion of Counsel. The Buyer shall have received an opinion of
Perkins, Smith and Cohen, counsel to the Seller, dated as of the date hereof,
substantially in the form attached hereto as Exhibit E (the "Opinion of Seller's
Counsel").
7.7 Board of Directors and Shareholder Approval. The directors and
shareholders of the Seller shall have duly authorized the transactions
contemplated by this Agreement.
7.8 Title to Assets. At the Closing, the Buyer shall receive good and
marketable title to all Assets, free and clear of all liens, mortgages, pledges,
security interests, restrictions, prior assignments, encumbrances and claims of
any kind or nature whatsoever.
7.9 Environmental Reports; Compliance with Laws. The Buyer shall not
have received unsatisfactory environmental reports from its environmental
consultants and at any time prior to the Closing shall not have discovered that
any Leased Premises fails to comply in any material respect with all applicable
federal, foreign, state or local environmental, zoning, land use, and wetlands
laws, rules and regulations.
7.10 Fire, Casualty or Eminent Domain. If any of the Assets are, prior to
the date hereof, either damaged by fire or other casualty insured against or
taken, in whole or in part, by eminent domain proceedings, then the Buyer shall
have the right to accept said Assets in their damaged or diminished condition
together with an assignment to Buyer of all insurance and/or condemnation
proceeds payable with respect to such fire, casualty or loss or terminate this
Agreement.
7.11 Due Diligence Review. The Buyer shall have completed a due
diligence review of the Business, the results of which review are
satisfactory to the Buyer.
7.12 Employment Agreements. Brewer shall have entered into an Employment
Agreement with the Buyer in the form attached hereto as Exhibit F, and Hartnett
shall have entered into an Employment Agreement with the Buyer in the form
attached hereto as Exhibit G (collectively, the "Employment Agreements").
7.13 Closing Deliveries. The Buyer shall have received at or prior to
the Closing each of the following documents:
(a) a bill of sale substantially in the form attached hereto as
Exhibit A, executed by the Seller;
(b) such instruments of conveyance, assignment and transfer, and
motor vehicle transfers and safety inspection certificates, if any, in form and
substance satisfactory to the Buyer, as shall be appropriate to convey, transfer
and assign to, and to vest in, the Buyer, good and marketable title to the
Assets other than the Intangible Property;
(c) such instruments of conveyance, assignment and transfer in form
and substance satisfactory to the Buyer and in a form appropriate to file, if
required, with the United
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States Office of Patents and Trademarks, sufficient to convey, transfer and
assign to, and to vest in, the Buyer, good and marketable title to the
Intangible Property;
(d) all technical data, formulations, product literature and other
documentation relating to the Seller's business, all in form and substance
reasonably satisfactory to the Buyer;
(e) such contracts, files and other data and documents pertaining to
the Assets or the Business as the Buyer may reasonably request;
(f) copies of the general ledgers and books of account of the Seller
related to the Business, and all federal, state, local and foreign income,
franchise, capital, property and other tax returns filed by the Seller with
respect to the Assets since June 30, 1995.
(g) such certificates of the Seller's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 7
as the Buyer shall reasonably request;
(h) certificate of the Secretary of the Seller attesting to the
incumbency of the Seller's officers, respectively, and the authenticity of the
resolutions authorizing the transactions contemplated by the Agreement;
(i) estoppel certificates from each lessor under the Leases set
forth in Schedule 2.9(b) attached hereto unless waived as set forth in such
schedule (i) consenting to the assignment of such Lease to the Buyer; (ii)
representing that there are no outstanding claims against the Seller under any
such Lease, and no outstanding defaults or events which, with the passage of
time, may become defaults; (iii) specifying the commencement and termination
dates under the Lease; and (iv) providing that any purchase right, purchase
option, right of first refusal, renewal right or other similar provision is
enforceable by the Buyer and specifying the rental rates under the Lease and any
other matters that Buyer may reasonably require;
(j) a cross receipt executed by the Buyer and the Seller;
(k) the originals, if in Seller's possession, of all building
permits, certificates of occupancy, and other governmental licenses, permits and
approvals, and all plans and specifications relating to the Leased Premises not
previously delivered to the Buyer;
(l) the Employment Agreements executed by each of the
Shareholders;
(m) the Opinion of Seller's Counsel;
(n) the Amendment of the Articles of Organization of the Seller
to discontinue the use of the name "Boris Image Group, Inc. " and to file any
instruments as may be necessary with any governmental authority to change
their corporate names and foreign qualifications; and
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(o) such other documents, instruments or certificates as the Buyer may
reasonably request in order to evidence the accuracy of the Selling Parties'
representations or compliance by Seller with its covenants hereunder.
8. Conditions to Obligations of the Seller
The obligations of the Seller under this Agreement are subject to
the fulfillment, at the date hereof, of the following conditions precedent, each
of which may be waived in writing at the sole discretion of the Seller:
8.1 Continued Truth of Representations and Warranties of the Buyer and
Unidigital; Compliance with Covenants and Obligations. The representations and
warranties of the Buyer and Unidigital in this Agreement shall be true on and as
of the date hereof. The Buyer and Unidigital shall have performed and complied
with all covenants required by this Agreement to be performed or complied with
by each of them prior to or at the date hereof.
8.2 Corporate Proceedings. All corporate, legal and other proceedings
required to be taken on the part of the Buyer and Unidigital to authorize or
carry out this Agreement shall have been taken.
8.3 Approvals. All other governmental agencies, departments, bureaus,
commissions and similar bodies, the consent, authorization or approval of which
is necessary under any applicable law, rule, order or regulation for the
consummation by the Buyer and Unidigital of the transactions contemplated by
this Agreement shall have consented to, authorized, permitted or approved such
transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer and
Unidigital shall have received all requisite and material consents and approvals
of all lenders, lessors and other third parties whose consent or approval is
required in order for the Buyer and Unidigital to consummate the transactions
contemplated by this Agreement, including but not limited to those set forth on
Schedule 3.2 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before any court or
other governmental body shall have been instituted by any governmental body or
person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Seller to transfer the Assets or would affect the right of the Buyer to
acquire the Assets.
8.6 The Buyer and/or Unidigital shall have assumed all of the Seller's
obligations to USTrust as set forth on Schedule 1.3(a) or discharged same, and
in any event secured a release of Brewer's guaranty or guaranties thereunder.
8.7 Unidigital shall have guaranteed all of the Buyer's obligations
hereunder (including the Note) and under the Employment Agreements.
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8.8 Closing Deliveries. The Seller shall have received at or prior
to the Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 8
as the Seller shall reasonably request;
(b) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement;
(c) such certificates of Unidigital's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 8
as the Seller may reasonably request;
(d) a certificate of the Secretary of Unidigital attesting to the
incumbency of Unidigital's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement;
(e) Instrument of Assumption executed by the Buyer and accepted
by the Seller;
(f) payment of the portion of Purchase Price due on the date
hereof, including the Cash Consideration, the Note and the Stock
Consideration;
(g) the Employment Agreements, executed by the Buyer;
(h) a Guaranty substantially in the form attached hereto as
Exhibit H executed by Unidigital;
(i) the Opinion of Buyer's Counsel; and
(j) such other documents, instruments or certificates as the
Seller may reasonably request.
9. Post-Closing Agreements
9.1 Proprietary Information.
(a) The Seller shall hold in confidence, and use its best efforts to
have all officers, shareholders, directors and personnel hold in confidence, all
knowledge and information of a secret or confidential nature with respect to the
Business, and shall not disclose, publish or make use of the same without the
consent of the Buyer, except to the extent that such information shall have
become public knowledge other than by breach of this Agreement by the Seller or
by any other persons who have agreed not to disclose, publish or make use of
such information.
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(b) The Seller agrees that the remedy at law for any breach of this
Section 9.1 would be inadequate and that the Buyer and/or Unidigital shall be
entitled to injunctive relief in addition to any other remedy it may have upon
breach of any provision of this Section 9.1.
9.2 No Solicitation or Hiring of Former Employees. Except as provided by
law or with the written consent of Buyer, for a period of two years after the
date hereof, the Seller and any persons or entities that are not natural
persons, that directly or indirectly, through one or more intermediaries,
control, are controlled by, or are under common control with, the Seller (the
"Corporate Affiliates"), shall not solicit any person who was a Seller's
Employee on the date hereof, and has been employed, and not terminated without
cause, by the Buyer, to terminate his employment with the Buyer or to become an
employee of the Seller or its Corporate Affiliates or hire any person who was
such an employee on the date hereof or on the date hereof.
9.3 Non-Competition Agreement.
(a) For a period of five (5) years after the date hereof, neither
the Seller nor any Corporate Affiliate thereof shall directly or indirectly (i)
manufacture, market or sell any product which has the same or substantially the
same function and primary application as any existing product manufactured by
the Seller on or prior to the date hereof or (ii) engage in, manage, operate, be
connected with or acquire any interest in, as an employee, consultant, advisor,
agent, owner, partner, co-venturer, principal, director, shareholder, lender or
otherwise, any business competitive with the business of the Seller as conducted
on the date hereof or on the date hereof (a "Competitive Business"), within 100
miles of the then-existing location of any Buyer or Unidigital facility in the
United States or any other country in which the Seller conducted business during
the two years prior to the date hereof, except that the Seller and its Corporate
Affiliates may own, in the aggregate, not more than 1% of the outstanding shares
of any publicly held corporation which is a Competitive Business which has
shares listed for trading on a securities exchange registered with the
Securities and Exchange Commission or through the automatic quotation system of
a registered securities association.
(b) The parties hereto agree that the duration and geographic scope
of the non-competition provision set forth in this Section 9.3 are reasonable.
In the event that any court determines that the duration or the geographic
scope, or both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that this non-competition
provision shall be deemed to be a series of separate covenants, one for each and
every county of each and every state of the United States of America and each
and every political subdivision of each and every country outside the United
States of America where this provision is intended to be effective. The Seller
agrees that damages are an inadequate remedy for any breach of this provision
and that the Buyer shall, whether or not it is pursuing any potential remedies
at law, be entitled to equitable relief in the form of preliminary and permanent
injunctions without bond or other security upon any actual or threatened breach
of this non-competition provision. If the Seller or any Corporate Affiliate
shall violate this Section 9.3, the duration of this Section 9.3 automatically
shall be extended as
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against such violating party for a period equal to the period during which such
party shall have been in violation of this Section 9.3. The covenants contained
in this Section 9.3 are deemed to be material and the Buyer is entering into
this Agreement relying on such covenants.
9.4 Sharing of Data. The Seller shall have the right for a period of seven
years following the date hereof to have reasonable access to such books, records
and accounts, including financial and tax information, correspondence,
production records, employment records and other similar information as are
transferred to the Buyer pursuant to the terms of this Agreement for the limited
purposes of concluding its involvement in the business of the Seller prior to
the date hereof and for complying with its obligations under applicable
securities, tax, environmental, employment or other laws and regulations. The
Buyer and/or Unidigital shall have the right for a period of seven years
following the date hereof to have reasonable access to those books, records and
accounts, including financial and tax information, correspondence, production
records, employment records and other records which are retained by the Seller
pursuant to the terms of this Agreement to the extent that any of the foregoing
relates to the Business transferred to the Buyer hereunder or is otherwise
needed by the Buyer and/or Unidigital in order to comply with its obligations
under applicable securities, tax, environmental, employment or other laws and
regulations.
9.5 Cooperation in Litigation. Each party hereto will fully cooperate with
the other in the defense or prosecution of any litigation or proceeding already
instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business prior to or after the
date hereof (other than litigation arising out of the transactions contemplated
by this Agreement and except as otherwise expressly provided herein). The party
requesting such cooperation shall pay the out-of-pocket expenses (including
legal fees and disbursements) of the party providing such cooperation and of its
officers, directors, employees and agents reasonably incurred in connection with
providing such cooperation, but shall not be responsible to reimburse the party
providing such cooperation for such party's time spent in such cooperation or
the salaries or costs of fringe benefits or similar expenses paid by the party
providing such cooperation to its officers, directors, employees and agents
while assisting in the defense or prosecution of any such litigation or
proceeding.
9.6 Legal Fees. The Buyer and Unidigital shall pay up to $50,000 in legal
fees and expenses incurred by the Selling Parties in connection with the Prior
Litigation, provided that such fees and expenses relate to legal services
rendered after the date hereof. The Buyer and Unidigital shall pay the Selling
Parties within 30 days after submission of reasonably detailed invoices related
to such services.
9.7 Accounting Fees. The Seller agrees to pay up to $8,000 in accounting
fees and expenses incurred after the date hereof for accounting services related
to the transactions contemplated hereby and the delivery to Unidigital of
financial statements sufficient to comply with application regulations of the
Securities and Exchange Commission.
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9.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Securities and Exchange Commission (the
"Commission") which may permit the sale of the Unidigital Stock to the public
without registration, Unidigital agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the 1933 Act, at all times after the
date hereof; and
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of Unidigital under the 1933 Act
and the Securities Exchange Act of 1934, as amended.
10. Indemnification and Reimbursement
10.1 Indemnification. The Selling Parties shall indemnify, defend and hold
harmless the Buyer and any parent, subsidiary or affiliate thereof and all
directors, officers, employees, agents and consultants of each of the foregoing
(collectively, the "Buyer Group") from and against all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities (whether
absolute, accrued, contingent or otherwise), costs and expenses, including but
not limited to, interest, penalties and reasonable attorneys' fees and expenses
(collectively, "Damages"), asserted against, imposed upon or incurred by the
Buyer Group or any member thereof, directly or indirectly, by reason of or
resulting from or relating to any of the following (but in any event excluding
the Assumed Liabilities) at such time as the Damages, whether actual or alleged,
exceed $15,000 in the aggregate:
(a) liability and obligation of the Selling Parties;
(b) misrepresentation or breach of warranty or covenant or agreement
by the Selling Parties made or contained in this Agreement or in any certificate
or other instrument furnished or to be furnished to the Buyer under this
Agreement;
(c) failure to comply with any bulk sales or similar laws
applicable to the transactions contemplated hereby; and
(d) litigation or other claim arising from acts, failures to act or
events which occurred prior to the date hereof including, without limitation,
the remediation of environmental conditions attributable to the conduct of the
Business at the manufacturing facility in Boston, Massachusetts prior to the
date hereof and claims for product failure or defect (including but not limited
to claims for personal injury, property damages and breach of warranty) which
relate to any product manufactured or sold prior to the date hereof.
It is understood and agreed that any claim for Damages hereunder must be
made by a member of the Buyer Group by the second anniversary of the date
hereof. It is further understood and agreed that the Selling Parties shall not
be liable for Damages on all matters taken in the aggregate asserted under
Section 10.1 hereof in excess of the Purchase Price, nor shall any Selling Party
be liable for more than his or its portion thereof.
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10.2 Accounts Receivable. In addition to the provisions of Section 10.1,
the Seller shall also indemnify the Buyer for the face value of all Accounts
Receivable which existed as of the Closing, but are not collected within one
hundred eighty (180) days after Closing, upon the Buyer's request therefor,
provided that the Buyer has used commercially reasonable efforts to collect such
receivables and such receivables exceed $25,000 in the aggregate. If the Buyer
shall thereafter collect any Account Receivable for which it has received an
indemnification payment from the Seller pursuant to the immediately preceding
sentence, the Buyer shall promptly remit the amount so collected to the Seller.
10.3 CERCLA. Nothing contained in this Agreement shall be deemed a waiver
of the right of the Buyer to maintain a private party cost recovery action under
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq.
10.4 Notice and Defense of Claims. The Seller's obligations and
liabilities hereunder with respect to claims resulting from the assertion of
liability by the Buyer or third parties shall be subject to the following terms
and conditions:
(a) Notice. The Buyer shall give prompt written notice to the Seller
of any claim or event known to it which does or may give rise to a claim by the
Buyer against the Seller for which the Buyer believes it is entitled to
indemnification pursuant to this Section 10 of this Agreement, stating the
nature and basis of said claims or events and the amounts thereof, to the extent
known, and in the case of any claim, action, suit or proceeding brought by any
third party, a copy of any claim, process or legal pleadings with respect
thereto promptly after any such documents are received by the indemnified party.
Such notice shall be given in accordance with Section 12 hereof.
(b) Third Party Claims or Actions.
(i) In the event any claim, action, suit or proceeding is made
or brought by any third party against the Buyer, with respect to which the
Seller may have liability for Damages under this Section 10 of this Agreement,
the Seller shall, at its own expense, be entitled to participate in and, to the
extent that it shall wish, jointly and with any other indemnifying party, to
assume the defense, with independent counsel reasonably satisfactory to the
Buyer, provided that in assuming the defense of any such third party claim,
action, suit or proceeding, the Seller acknowledges in writing to the Buyer that
the Seller shall thereafter be liable for any Damage with respect to such claim,
action, suit or proceeding.
(ii) If the Seller elects to assume control of such defense or
settlement, it shall conduct such defense or settlement in a manner reasonably
satisfactory and effective to protect the Buyer fully; such company and its
counsel will keep the Buyer fully advised as to its conduct of such defense or
settlement, and no compromise or settlement shall be agreed or made without the
written consent of the Buyer, not to be unreasonably withheld. In any case, the
Buyer shall have the right to employ its own counsel and such counsel may
participate in such action, but the reasonable fees and expenses of such counsel
shall be at the expense of the Buyer,
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when and as incurred, unless (A) the employment of counsel by the Buyer has been
authorized in writing by the Seller, (B) the Buyer shall have reasonably
concluded that there may be a conflict of interest between the Seller and the
Buyer in the conduct of the defense of such action, (C) the Seller shall not in
fact have employed independent counsel reasonably satisfactory to the Buyer to
assume the defense of such action and shall have been so notified by the Buyer,
(D) the Buyer shall have reasonably concluded and specifically notified the
Seller either that there may be specific defenses available to it which are
different from or additional to those available to it or that such claim,
action, suit or proceeding involves or could have a material adverse effect upon
it beyond the financial resources of the Seller or the scope of this Agreement,
or (E) the Seller fails to conduct such defense or settlement in a manner
reasonably satisfactory to protect the Buyer fully. If clause (B), (C), (D) or
(E) of the preceding sentence shall be applicable, then counsel for the Buyer
shall have the right to direct the defense of such claim, action, suit or
proceeding on behalf of the Buyer and the reasonable fees and disbursements of
such counsel shall constitute Damages hereunder.
(iii) If the Seller does not elect to assume the defense of
any such claim, or if it fails to conduct said defense or settlement in a manner
reasonably satisfactory to protect the Buyer fully, the Buyer may engage
independent counsel selected by the Buyer to assume the defense and may contest,
pay, settle or compromise any such claim on such terms and conditions as the
indemnified party may determine. The reasonable fees and disbursements of such
counsel shall constitute Damages hereunder.
(iv) The Buyer and the Seller, as the case may be, shall be
kept fully informed of such claim, action, suit or proceeding at all stages
thereof whether or not such party is represented by its own counsel.
10.5 Cooperation. The parties hereto agree to render to each other such
assistance as they may reasonably require of each other and to cooperate in good
faith with each other in order to ensure the proper and adequate defense of any
claim, action, suit or proceeding brought by any third party. Where counsel has
been selected by the Seller or by the Buyer pursuant to Section 10.4, the Seller
or the Buyer, as the case may be, shall be entitled to rely upon the advice of
such counsel in the conduct of the defense.
10.6 Confidentiality. The parties agree to cooperate in such a manner as
to preserve in full the confidentiality of all confidential business records and
the attorney-client and work-product privileges. In connection therewith, each
party agrees that (a) it will use its best efforts, in any action, suit or
proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records and (b) all communications between
any party hereto and counsel responsible for or participating in the defense of
any action, suit or proceeding shall, to the extent possible, be made so as to
preserve any applicable attorney-client or work-product privilege.
10.7 Offsets. The Buyer and Unidigital may offset against the amounts
payable under (i) the Note or (ii) Section 9.6 of this Agreement any and all
Damages owed by the Selling Parties to the Buyer Group pursuant to Section 10.1
hereof.
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11. Transfer and Sales Tax
The Seller shall be responsible for and pay all filing and recording
taxes and fees, and all sales, use and transfer taxes and fees, if any, upon the
sale and transfer of the Assets hereunder. The Selling Parties shall indemnify,
defend and hold harmless the Buyer Group for any such taxes and fees, including
interest and penalties, if any, incurred in connection with the transactions
contemplated hereby. It is understood and agreed that the indemnification
provision set forth in this Section 11 shall not be subject to the two-year
limitation set forth in Section 10 hereof.
12. Notices
Any notices or other communications required or permitted hereunder
shall be sufficiently given if in writing (including telecommunications) and
delivered personally or sent by telex, telecopy or other wire transmission (with
request for assurance in a manner typical with respect to communications of that
type), federal express or other overnight air courier (postage prepaid),
registered or certified mail (postage prepaid with return receipt requested),
addressed as follows or to such other address of which the parties may have
given notice:
To the Seller: Boris Image Group, Inc.
451 D Street
Boston, Massachusetts 02210
Attn: Leslie W. Brewer, II, President
Tel. No.: (617) 439-3200
Fax No.: (617) 439-6975
With a copy to: Perkins, Smith and Cohen
One Beacon Street
Boston, Massachusetts
Attn: Irving Salloway, Esq.
Tel. No.: (617) 854-4000
Fax No.: (617) 854-4040
To the Buyer: Unidigital Inc.
20 West 20th Street
New York, New York 10011
Attn: Mr. William Dye, President
Tel. No.: (212) 337-0330
Fax No.: (212) 727-3151
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With a copy to: Buchanan Ingersoll
500 College Road East
Princeton, New Jersey 08540
Attn: David J. Sorin, Esq.
Tel. No.: (609) 987-6800
Fax No.: (609) 520-0360
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or by wire
transmission; (b) on the next business day after mailing or deposit with an
overnight air courier; or (c) five business days after being sent, if sent by
registered or certified mail.
13. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Neither the Seller
nor the Buyer may assign all or a portion of its rights and obligations
hereunder without the prior written consent of the other party, except that the
Buyer may assign all or a portion of its rights and obligations hereunder to an
Affiliate of Buyer, provided that Buyer shall remain liable for the performance
of the Buyer's obligations under this Agreement. Any assignment in contravention
of this provision shall be void.
14. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties except as expressly provided herein. The Buyer and the
Seller, by the consent of their respective Boards of Directors, or officers
authorized by such Boards, may amend or modify this Agreement, in such manner as
may be agreed upon, by a written instrument executed by the Buyer and the
Seller.
(b) If the provisions of any Schedule or Exhibit to this Agreement
are inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
15. Expenses
Except as otherwise expressly provided herein, the Buyer and the
Seller shall each pay their own expenses in connection with this Agreement and
the transactions contemplated hereby.
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16. Legal Fees
In the event that legal proceedings are commenced by the Buyer
against the Seller, or by the Seller against the Buyer, in connection with this
Agreement or the transactions contemplated hereby, the party or parties which do
not prevail in such proceedings shall pay the reasonable attorneys' fees and
other costs and expenses, including investigation costs, incurred by the
prevailing party in such proceedings.
17. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to conflicts of laws rules
or principles.
18. Section Headings
The section headings are for the convenience of the parties and in
no way alter, modify, amend, limit, or restrict the contractual obligations of
the parties.
19. Severability
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
20. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
21. Currency
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in United States funds.
22. Ambiguity in Drafting
Each party shall have been deemed to have participated equally in
the drafting of this Agreement and the agreements contemplated hereby and any
ambiguity in any such contracts shall not be construed against any purported
author thereof.
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<PAGE> 40
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.
(Corporate Seal) SELLER:
ATTEST: BORIS IMAGE GROUP, INC.
_________________________ By:_____________________________
Secretary Name: Leslie W. Brewer, II
Title: President
SHAREHOLDERS:
________________________________
Leslie W. Brewer, II
________________________________
Michael Hartnett
(Corporate Seal) BUYER:
ATTEST: UNIDIGITAL/BORIS CORPORATION
_________________________ By:_____________________________
Clerk Name: William E. Dye
Title: Chairman of the Board
ATTEST: UNIDIGITAL INC.
_________________________ By:_____________________________
Secretary Name: William E. Dye
Title: President
40
<PAGE> 1
EXHIBIT 10.2
UNIDIGITAL INC.
1997 EQUITY INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this Equity Incentive Plan are
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, non-Employee
members of the Board and Consultants of the Company and its Parent and
Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be incentive stock options (as defined under Section
422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder. Stock purchase rights and SARs may also be granted under
the Plan.
2. Certain Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Award" means any award granted to a Participant under the
Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended.
(e) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Unidigital Inc., a Delaware corporation.
(h) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(i) "Continuous Status as an Employee" means the absence of
any interruption or termination of the employment relationship by the Company or
any Parent or Subsidiary. Continuous Status as an Employee shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Board, provided that such leave
is for a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
transfers between locations of the Company or between the Company, its Parent,
its Subsidiaries or its successor.
<PAGE> 2
(j) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(l) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation
the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("Nasdaq") System, its Fair Market
Value shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange
for the last market trading day prior to the time of determination as
reported in the Wall Street Journal or such other source as the
Administrator deems reliable or;
(ii) If the Common Stock is quoted on Nasdaq (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean between the high and low asked
prices for the Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(m) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the
Plan.
(p) "Optioned Stock" means the Common Stock subject to an
Option.
(q) "Optionee" means an Employee or Consultant who receives an
Option.
(r) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(s) "Participant" means an Employee or Consultant who receives
an Award under the Plan.
(t) "Plan" means this 1997 Equity Incentive Plan.
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(u) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of stock purchase rights under Section 11 below.
(v) "SAR" means a stock appreciation right, which is the right
to receive an amount equal to the appreciation, if any, in the Fair Market Value
of a Share from the date of the grant of the right to the date of its payment,
as adjusted in accordance with Section 13 of the Plan.
(w) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(x) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned,
issued or sold under the Plan is 300,000 Shares of Common Stock. The Shares may
be authorized, but unissued Shares, reacquired Shares, Shares acquired on the
open market specifically for distribution under this Plan, or any combination
thereof.
If an Option or SAR should expire or become unexercisable for
any reason without having been exercised in full, or if shares of Restricted
Stock are forfeited, the unused Shares which were subject thereto shall, unless
the Plan shall have been terminated, become available for future grant under the
Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Awards to Employees who are also
officers or directors of the Company, the Plan shall be administered by
(A) the Board, if the Board may administer the Plan in compliance with
Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify thereunder as
a discretionary plan, or (B) a Committee designated by the Board to
administer the Plan, which Committee shall be constituted in such a
manner as to permit the Plan to comply with Rule 16b-3 with respect to
a plan intended to qualify thereunder as a discretionary plan. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter directly administer
the Plan, all to the extent permitted by Rule 16b-3 with respect to a
plan intended to qualify thereunder as a discretionary plan.
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<PAGE> 4
(ii) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with
respect to directors, non-director officers and Employees who are
neither directors nor officers.
(iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Awards to Employees who are
neither directors nor officers of the Company or to Consultants, the
Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with Rule 16b-3, or (B) a Committee
designated by the Board, which Committee shall be constituted in such a
manner as to satisfy the legal requirements relating to the
administration of incentive stock option plans, if any, of Delaware
corporate law and applicable securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Awards may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options, stock purchase rights or SARs, or any combination thereof, are
granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such Award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation or waiver of forfeiture restrictions regarding any Option or
other Award and/or the shares of Common Stock relating thereto, based
in each case on such factors as the Administrator shall determine, in
its sole discretion);
(vii) to determine whether and under what
circumstances an Option or SAR may be settled in cash under subsection
9(f) instead of Common Stock;
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<PAGE> 5
(viii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with respect
to an Award under this Plan shall be deferred either automatically or
at the election of the participant (including providing for and
determining the amount, if any, of any deemed earnings on any deferred
amount during any deferral period);
(ix) to reduce the exercise price of any Option or
SAR to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or SAR shall have declined
since the date the Option or SAR was granted; and
(x) to determine the terms and restrictions
applicable to stock purchase rights and the Restricted Stock purchased
by exercising such stock purchase rights.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Participants and any other holders of any Awards granted
hereunder.
5. Eligibility.
(a) Nonstatutory Stock Options and SARs may be granted to
Employees, non-Employee Members of the Board and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has been
granted an Option or SAR may, if he is otherwise eligible, be granted additional
Options or SARs.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Participant any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as
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<PAGE> 6
described in Section 19 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 15 of the Plan.
7. Terms of Options and SARs. The term of each Option or SAR shall be
the term stated in the written agreement evidencing such Option or SAR;
provided, however, that in the case of an Incentive Stock Option, the term shall
be no more than ten (10) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement. However, in the case of an
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the written agreement evidencing such Option.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall
be no less than 110% of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant
of such Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110%
of the Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of
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<PAGE> 7
Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) authorization from the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the option is
exercised, (6) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, (7) by
delivering an irrevocable subscription agreement for the Shares which
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (8)
any combination of the foregoing methods of payment, or (9) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
9. Exercise of Options or SARs.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option or SAR granted hereunder shall be exercisable at such times and under
such conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Participant, and as shall be
permissible under the terms of the Plan.
An Option or SAR may not be exercised for a fraction
of a Share.
An Option or SAR shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option or SAR by the person entitled to exercise such Option or
SAR and, if an Option is to be exercised, full payment for the Shares with
respect to which the Option is exercised has been received by the Company. Full
payment may, as authorized by the Administrator, consist of any consideration
and method of payment allowable under Section 8(b) of the Plan. Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.
Exercise of an Option or SAR in any manner shall
result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for
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sale under the Option or SAR, by the number of Shares as to which the Option or
SAR is exercised.
(b) Termination of Employment. In the event of termination of
a Participant's consulting relationship or Continuous Status as an Employee with
the Company (as the case may be), such Participant may, but only within ninety
(90) days (or such other period of time as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding ninety (90) days) after the date of such
termination (but in no event later than the expiration date of the term of such
Option or SAR as set forth in the written agreement evidencing such Option or
SAR), exercise his Option or SAR to the extent that such Participant was
entitled to exercise it at the date of such termination. To the extent that such
Participant was not entitled to exercise the Option or SAR at the date of such
termination, or if such Participant does not exercise such Option or SAR to the
extent so entitled within the time specified herein, the Option or SAR shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of a Participant's consulting
relationship or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), such
Participant may, but only within twelve (12) months from the date of such
termination (but in no event later than the expiration date of the term of such
Option or SAR as set forth in the written agreement evidencing such Option or
SAR), exercise the Option or SAR to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that such Participant was not
entitled to exercise the Option or SAR at the date of termination, or if such
Participant does not exercise such Option or SAR to the extent so entitled
within the time specified herein, the Option or SAR shall terminate.
(d) Death of Optionee. In the event of the death of a
Participant, the Option or SAR may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the expiration
date of the term of such Option or SAR as set forth in the written agreement
evidencing such Option or SAR), by the Participant's estate or by a person who
acquired the right to exercise the Option or SAR by bequest or inheritance, but
only to the extent the Participant was entitled to exercise the Option or SAR at
the date of death. To the extent that such Participant was not entitled to
exercise the Option or SAR at the date of death, or if such Participant's estate
or any person who acquired the right to exercise the Option or SAR by bequest or
inheritance does not exercise such Option or SAR to the extent so entitled
within the time specified herein, the Option or SAR shall terminate.
(e) Rule 16b-3. Options or SARs granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
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(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option or SAR previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Participant at the time that such offer is made.
(g) Payout Provisions. At the discretion of the Company, the
payment to a Participant upon exercise of a SAR, may be in cash, in Shares of
equivalent value, or in some combination thereof, subject to the availability of
Shares to the Company under the Plan.
10. Non-Transferability of Options or SARs. The Option or SAR may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Participant, only by the Participant. The
terms of the Option or SAR shall be binding upon the executors, administrators,
heirs, successors and assigns of the Participant.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock purchase rights may be issued
either alone, in addition to, or in tandem with other Awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer stock purchase rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid (which price shall not be less than 50% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the stock purchase right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the Committee
may determine.
(c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the stock purchase right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the
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Company. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock purchase right is exercised, except
as provided in Section 13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Participants may satisfy withholding
obligations as provided in this paragraph. When a Participant incurs tax
liability in connection with an Option, stock purchase right or SAR, which tax
liability is subject to tax withholding under applicable tax laws, and the
Participant is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the Participant may satisfy the withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
upon exercise of the Option or SAR, or the Shares to be issued in connection
with the stock purchase right, if any, that number of Shares having a Fair
Market Value equal to the amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined (the "Tax Date").
In the event that the Company elects to make a payment to the
Participant in cash upon the exercise of a SAR, the Participant may satisfy the
withholding tax obligation by electing to have the Company withhold from such
payment the amount required to satisfy such withholding tax obligation.
All elections by a Participant to have Shares or cash withheld
for this purpose, as the case may be, shall be made in writing in a form
acceptable to the Administrator and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option, stock purchase right or SAR, as to which the
election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Participant is subject to Rule 16b-3, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares or cash withheld is
made by a Participant and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the Participant
shall receive the full number of Shares or full amount of cash, as the case may
be, with respect to which the Option, stock purchase right or SAR is exercised
but such Participant shall be unconditionally obligated to tender back to the
Company the proper number of Shares, or the proper amount of cash, as the case
may be, on the Tax Date.
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13. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option or SAR, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as to
which no Options or SARs have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option or SAR, as well as the
price per share of Common Stock covered by each such outstanding Option or SAR,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or SAR.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Participant at least fifteen (15) days prior
to such proposed action. To the extent it has not been previously exercised, the
Option or SAR will terminate immediately prior to the consummation of such
proposed action. In the event of a merger or consolidation of the Company with
or into another corporation or the sale of all or substantially all of the
Company's assets (hereinafter, a "merger"), the Option or SAR shall be assumed
or an equivalent option or stock appreciation right shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
In the event that such successor corporation does not agree to assume the Option
or SAR, or to substitute an equivalent option or stock appreciation right, the
Board shall, in lieu of such assumption or substitution, provide for the
Participant to have the right to exercise all Options or SARs previously granted
to such Participant, including Options or SARs which would not otherwise be
exercisable. If the Board makes an Option or SAR fully exercisable in lieu of
assumption or substitution in the event of a merger, the Board shall notify the
Participant that the Option or SAR shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or SAR will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or SAR shall be considered assumed if, following the
merger, the Option or SAR, confers the right to purchase, or receive the
appreciation in Fair Market Value, as the case may be, for each Share of stock
subject to the Option or SAR immediately prior to the merger, the consideration
(whether stock, cash, or other securities or property) received in the merger by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its Parent, the Board may,
with the consent of the successor corporation and the participant, provide for
the consideration to be received upon the
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<PAGE> 12
exercise of the Option or SAR, for each Share of stock subject to the Option or
SAR, to be solely common stock of the successor corporation or its Parent equal
in Fair Market Value to the per share consideration received by holders of
Common Stock in the merger or sale of assets.
14. Time of Granting Options. The date of grant of an Option or SAR
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option or SAR, or such other date as is determined
by the Board. Notice of the determination shall be given to each Employee or
Consultant to whom an Option or SAR is so granted within a reasonable time after
the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Participant under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or SARs already granted and
such Options or SARs shall remain in full force and effect as if this Plan had
not been amended or terminated, unless mutually agreed otherwise between the
Participant and the Board, which agreement must be in writing and signed by the
Participant and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or SAR unless the exercise of such Option
or SAR and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or SAR, the
Company may require the person exercising such Option or SAR to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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<PAGE> 13
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Agreements. Options, stock purchase rights and SARs shall be
evidenced by written agreements in such form as the Board shall approve from
time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
20. Information to Participants. The Company shall provide to each
Participant, during the period for which such Participant has one or more
Options or SARs outstanding, copies of all annual reports and other information
which are provided to all shareholders of the Company. The Company shall not be
required to provide such information if the issuance of Options or SARs under
the Plan is limited to key employees whose duties in connection with the Company
assure their access to equivalent information.
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<PAGE> 1
EXHIBIT 10.3
UNIDIGITAL INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. Purpose. This Non-Qualified Stock Option Plan, to be known as the 1997
Non-Employee Director Stock Option Plan (the "Plan"), is intended to promote the
interests of Unidigital Inc. (the "Company") by providing an inducement to
obtain and retain the services of qualified persons who are not employees or
officers of the Company to serve as members of its Board of Directors (the
"Board"), each such person hereinafter referred to as a "Non-Employee Director."
2. Available Shares. The total number of shares of Common Stock, par value
$.01 per share, of the Company (the "Common Stock") for which options may be
granted under the Plan shall not exceed 75,000 shares, subject to adjustment in
accordance with Section 10 of the Plan. Shares subject to the Plan are
authorized but unissued shares, or shares that were once issued and subsequently
reacquired by the Company. If any options granted under the Plan are surrendered
before exercise or lapse without exercise, in whole or in part, the shares
reserved therefor shall continue to be available under the Plan.
3. Administration. The Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee"). In the event the Board fails
to appoint or refrains from appointing a Committee, the Board shall have all
power and authority to administer the Plan. In such event, the word "Committee"
wherever used herein shall be deemed to mean the Board. The Committee shall,
subject to the provisions of the Plan, have the power to construe the Plan, to
determine all questions hereunder, and to adopt and amend such rules and
regulations for the administration of the Plan, as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
under it.
4. Automatic Grant of Options. Subject to the availability of shares under
the Plan:
(a) each Non-Employee Director who was a member of the Board on the
effective date of the Company's initial public offering and remains a member of
the Board on the date the Plan is approved by the stockholders of the Company
(such date hereinafter referred to as the "Approval Date") shall be
automatically granted as of the Approval Date, without further action by the
Board, an option to purchase 2,500 shares of the Common Stock, which option
shall be fully vested in the optionee as of the Approval Date; and
(b) each Non-Employee Director shall be automatically granted (i) an
option to purchase 2,500 shares of the Common Stock if such Non-Employee
Director is a member of the Board on the Approval Date; (ii) an option to
purchase 2,500 shares of the Common Stock on the date such person first becomes
a member of the Board, if such person is not a member of the Board on the
Approval Date; and (iii) an option to purchase an additional 2,500 shares of
Common Stock on the first trading day of each year commencing 1998.
<PAGE> 2
The term "Grant Date" as used hereinafter shall mean, in the case of a
grant under Sections 4(a) and 4(b)(i), the Approval Date, or, in the case of a
grant under Section 4(b)(ii), the date the optionee first becomes a member of
the Board or, in the case of a grant under Section 4(b)(iii), the first trading
day of each year commencing 1998.
The options to be granted under this Section 4 shall be the only options
ever to be granted at any time to such member under the Plan.
5. Option Price. The purchase price of the stock covered by an option
granted pursuant to the Plan shall be 100% of the fair market value of such
shares on the Grant Date. The option price will be subject to adjustment in
accordance with the provisions of Section 10 of the Plan. For purposes of the
Plan, "fair market value" shall be determined as of the last business day for
which the prices or quotes discussed in this sentence are available prior to the
date such option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then traded
on a national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the Nasdaq National Market, if the Common Stock is
not then traded on a national securities exchange; or (iii) the closing bid
price (or average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the Nasdaq National Market.
6. Period of Option. Unless sooner terminated in accordance with the
provisions of Section 8 of the Plan, an option granted hereunder shall expire on
the date which is ten (10) years after the Grant Date.
7. (a) Vesting of Shares and Non-Transferability of Options. Options
granted under the Plan shall not be exercisable until they become vested.
Options granted under the Plan shall vest in the optionee and thus become
exercisable three months from the Grant Date unless a shorter period is provided
by the Committee or another section of this Plan, and provided further that the
optionee has continuously served as a member of the Board through such vesting
date, and subject also to Subsection (b) of this Section 7.
The number of shares as to which options may be exercised shall be
cumulative, so that once the option shall become exercisable as to any shares it
shall continue to be exercisable as to said shares, until expiration or
termination of the option as provided in the Plan.
(b) Notwithstanding Subsection (a) of this Section 7, if an optionee
attends less than 80% of the Board meetings (whether regular or special) held in
any fiscal year (a "Default Year"), then either (i) the optionee shall forfeit
his exercise rights with respect to the option installment which vested on the
preceding annual vesting date, in proportion to the percentage of Board meetings
actually attended by such optionee during the Default Year; or (ii) in the event
that the optionee does not own a sufficient number of exercisable options to
satisfy the forfeiture obligation described above, the optionee shall forfeit
his right to receive the next succeeding annual installment of the option, in
proportion to the percentage of Board meetings which the optionee actually
attended in the Default Year. By way of illustration, if an optionee attends
only 50% of the actual meetings of the Board of Directors (whether regular or
special)
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<PAGE> 3
held in any fiscal year, then the optionee shall forfeit the right to exercise
50% of the option installment which became exercisable on the preceding annual
vesting date. If, however, the optionee had already exercised 75% of the
preceding option installment, and did not own any additional unexercised options
available to satisfy the forfeiture obligation, the optionee would forfeit the
remaining 25% of the prior installment, and would also forfeit the right to
receive or exercise 25% of the next succeeding annual option installment.
Attendance at Board meetings may be in person or via teleconference, or any
manner consistent with the Bylaws of the Company.
(c) Non-transferability. Any option granted pursuant to the Plan shall
not be assignable or transferable other than by will or the laws of descent and
distribution or pursuant to a domestic relations order and shall be exercisable
during the optionee's lifetime only by him or her.
8. Termination of Option Rights.
(a) In the event that an optionee ceases to be a member of the Board by
reason of his or her death or permanent disability, any option granted to such
optionee shall be immediately and automatically accelerated and become fully
vested and all unexercised options shall be exercisable by the optionee (or by
the optionee's personal representative, heir or legatee, in the event of death)
at any time prior to the scheduled expiration date of the option.
(b) In the event any optionee: (i) ceases to be a member of the Board
of Directors at the request of the Company; (ii) is removed without cause; or
(iii) otherwise does not stand for nomination or re-election as a director of
the Company at the request of the Company, then any unexercised options, to the
extent not vested at the date of the applicable event, shall immediately
terminate and become void, and to the extent any such options are vested at such
date, they shall continue to be exercisable for a period of one year from the
date of the applicable event; provided, however, that no portion of any option,
vested or unvested, may be exercised if the optionee is removed from the Board
of Directors for any one of the following reasons: (i) disloyalty, gross
negligence, dishonesty or breach of fiduciary duty to the Company; (ii) the
commission of an act of embezzlement, fraud or deliberate disregard of the rules
or policies of the Company which results in loss, damage or injury to the
Company, whether directly or indirectly; (iii) the unauthorized disclosure of
any trade secret or confidential information of the Company; (iv) the commission
of an act which constitutes unfair competition with the Company or which induces
any customer of the Company to breach a contract with the Company; or (v)
engages in any conduct or activity on behalf of any organization or entity which
is a competitor of the Company (unless such conduct or activity is approved by a
majority of the members of the Board of Directors).
9. Exercise of Option. Subject to the terms and conditions of the Plan and
the option agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written notice to the
Company by mail or in person addressed to Unidigital Inc., 20 West 20th Street,
New York, New York 10011, Attention: President, or at its then principal
executive offices, stating the number of shares with respect to which the option
is
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<PAGE> 4
being exercised, accompanied by payment in full for such shares. Payment may be
(a) in United States dollars in cash or by check, (b) in whole or in part in
shares of Common Stock of the Company already owned by the person or persons
exercising the option or shares subject to the option being exercised (subject
to such restrictions and guidelines as the Board may adopt from time to time)
valued at fair market value determined in accordance with the provisions of
Section 5, or (c) consistent with applicable law, through the delivery of an
assignment to the Company of a sufficient amount of the proceeds from the sale
of the Common Stock acquired upon exercise of the option and an authorization to
the broker or selling agent to pay that amount to the Company, which sale shall
be at the participant's direction at the time of exercise. There shall be no
such exercise at any one time as to fewer than one hundred (100) shares or all
of the remaining shares then purchasable by the person or persons exercising the
option, if fewer than one hundred (100) shares. The Company's transfer agent
shall, on behalf of the Company, prepare a certificate or certificates
representing such shares acquired pursuant to exercise of the option, shall
register the optionee as the owner of such shares on the books of the Company
and shall cause the fully executed certificate(s) representing such shares to be
delivered to the optionee as soon as practicable after payment of the option
price in full. The holder of an option shall not have any rights of a
stockholder with respect to the shares covered by the option, except to the
extent that one or more certificates for such shares shall be delivered to him
or her upon the due exercise of the option.
10. Adjustments Upon Changes in Capitalization and Other Events.
Upon the occurrence of any of the following events, an optionee's rights with
respect to options granted to him or her hereunder shall be adjusted as
hereinafter provided:
(a) Stock Dividends and Stock Splits. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) Recapitalization Adjustments. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise, each option granted under the Plan which
is outstanding but unvested as of the effective date of such event shall become
exercisable in full twenty (20) days prior to the effective date of such event.
In the event of a reorganization, recapitalization, merger, consolidation, or
any other change in the corporate structure or shares of the Company, to the
extent permitted by Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, adjustments shall be made in the number and kind of shares authorized
by the Plan and in the number of and kind of shares covered by, and the option
price of, outstanding options under the Plan, in each case, as necessary to
maintain the proportionate interest of the optionee and preserve, without
exceeding, the value of such option. Notwithstanding the foregoing, no such
adjustments shall be made which would, within the meaning of any applicable
provisions of the Internal Revenue Code of 1986, as amended, constitute a
modification, extension or renewal of any option or a grant of additional
benefits to the holder of an option.
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<PAGE> 5
(c) Issuance of Securities. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(d) Adjustments. Upon the happening of any of the foregoing events,
the class and aggregate number of shares set forth in Section 2 of the Plan that
are subject to options which previously have been or subsequently may be granted
under the Plan shall also be appropriately adjusted to reflect such events. The
Board shall determine the specific adjustments to be made under this Section 10
and its determination shall be conclusive.
11. Restrictions on Issuances of Shares. Notwithstanding the provisions of
Sections 4 and 9 of the Plan, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until one of the
following conditions shall be satisfied:
(a) The issuance of shares with respect to which the option has been
exercised is at the time of the issue of such shares registered under applicable
Federal and state securities laws as now in force or hereafter amended; or
(b) Counsel for the Company shall have given an opinion that the
issuance of such shares is exempt from registration under Federal and state
securities laws as now in force or hereafter amended; and that the Company has
complied with all applicable laws and regulations with respect thereto,
including without limitation, all regulations required by any stock exchange
upon which the Company's outstanding Common Stock is then listed.
12. Legend on Certificates. The certificate representing shares issued
pursuant to the exercise of an option granted hereunder shall carry such
appropriate legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or advisable by counsel to
the Company in order to comply with the requirements of the Securities Act of
1933, as amended, or any state securities laws.
13. Representation of Optionee. If requested by the Company, the optionee
shall deliver to the Company written representations and warranties upon
exercise of the option that are necessary to show compliance with Federal and
state securities laws, including representations and warranties to the effect
that a purchase of shares under the option is made for investment and not with a
view to their distribution (as that term is used in the Securities Act of 1933,
as amended).
14. Option Agreement. Each option granted under the provisions of the Plan
shall be evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to whom such
option is granted. The option agreement shall contain such terms, provisions and
conditions not inconsistent with the Plan as may be determined by the officer
executing it.
-5-
<PAGE> 6
15. Termination and Amendment of Plan. The Plan shall terminate on the
earlier to occur of January 30, 2007 or at such time as all shares reserved for
issuance hereunder (including any amendments hereto) shall have been issued. The
Board may at any time terminate the Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that the Board may not,
without approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and voting on such matter
at a meeting, (a) increase the maximum number of shares for which options may be
granted under the Plan (except by adjustment pursuant to Section 10), (b)
materially modify the requirements as to eligibility to participate in the Plan,
(c) materially increase benefits accruing to option holders under the Plan, or
(d) amend the Plan in any manner which would cause Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, to become inapplicable to the Plan;
and provided further that the provisions of the Plan specified in Rule
16b-3(c)(2)(ii)(A) (or any successor or amended provision thereto) under the
Securities Act of 1934, as amended (including without limitation, provisions as
to eligibility, amount, price and timing of awards) may not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act, or the rules
thereunder. Termination or any modification or amendment of the Plan shall not,
without consent of a participant, affect his or her rights under an option
previously granted to him or her.
16. Withholding of Income Taxes. Upon the exercise of an option, the
Company, in accordance with Section 3402(a) of the Internal Revenue Code, as
amended, may require the optionee to pay withholding taxes in respect of amounts
considered to be compensation includible in the optionee's gross income.
17. Compliance with Regulations. It is the Company's intent that the Plan
comply in all respects with Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and any applicable Securities and Exchange commission
interpretations thereof. If any provision of the Plan is deemed not to be in
compliance with Rule 16b-3, such provision of the Plan shall be null and void.
18. Governing Law. The validity and construction of the Plan and the
instruments evidencing options shall be governed by the laws of the State of New
York, without giving effect to the principles of conflicts of law thereof.
19. Acceleration and Vesting of Option for Business Combinations. Upon any
merger, consolidation, sale of all (or substantially all) of the assets of the
Company, or a business combination involving the sale or transfer of all (or
substantially all) of the capital stock or assets of the Company in which the
Company is not the surviving entity, or, if it is the surviving entity, does not
survive as an operating going concern in substantially the same line of
business, then the options granted under the Plan shall, immediately prior to
the consummation of any of the foregoing events, become fully vested and
immediately exercisable by the optionee.
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<PAGE> 1
EXHIBIT 10.4
CREDIT AGREEMENT
dated as of
April 3, 1997
among
UNIDIGITAL ELEMENTS (NY), INC.
UNIDIGITAL/CARDINAL CORPORATION
UNIDIGITAL ELEMENTS (SF), INC.
UNIDIGITAL/BORIS CORPORATION
and
THE CHASE MANHATTAN BANK,
as Lender
<PAGE> 2
CREDIT AGREEMENT dated as of April 3,1997, among UNIDIGITAL ELEMENTS
(NY), INC. (formerly known as Linographics Corporation), a New York
corporation, UNIDIGITAL/CARDINAL CORPORATION, a Delaware corporation,
UNIDIGITAL ELEMENTS (SF), INC. (formerly known as Linographics
(Delaware) Corp.), a Delaware corporation, and UNIDIGITAL/BORIS
CORPORATION, a Massachusetts corporation (each, a "Borrower"), and THE
CHASE MANHATTAN BANK (the "Lender").
The parties hereto agree as follows:
ARTICLE I.
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
"ABR", when used in reference to any Loan, refers to whether
such Loan bears interest at a rate determined by reference to the Alternate Base
Rate.
"Acquisition Transaction" has the meaning given to such term
in Section 5.08.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Affiliate" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"Alternate Base Rate" means, for any day, a rate per annum
equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base
CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate
in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due
to a change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective from and including the effective date of such change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate,
respectively.
<PAGE> 3
"Applicable Rate Margin" means, for any day, with respect to
any ABR Loan 0.25%, and with respect to any Eurodollar Loan 2.50%.
"Approved Subordinated Debt" means Indebtedness subordinated
to the Obligations of the Borrowers under this Agreement and the other Loan
Documents on terms approved in writing by the Lender in its sole discretion.
"Assessment Rate" means, for any day, the annual assessment
rate in effect on such day that is payable by a member of the Bank Insurance
Fund classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Lender to be representative of the cost of
such insurance to the Lender.
"Availability Period" means the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitment.
"Base CD Rate" means the sum of (a) the Three-Month Secondary
CD Rate multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve
System of the United States of America.
"Borrower" has the meaning given thereto at the heading of
this Agreement.
"Borrowing Request" means a request by a Borrower for
Revolving Loans in accordance with Section 2.03.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in dollar deposits in the London interbank
market.
"Capital Expenditures" means, for any period, the sum of all
amounts that would, in accordance with GAAP, be included as additions to
property, plant and equipment and other capital expenditures on a consolidated
statement of cash flows for
<PAGE> 4
the Company and its consolidated Subsidiaries during such period (including the
amount of assets leased under any Capital Lease Obligation).
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Change in Control" means (a) the acquisition of ownership,
directly or indirectly, beneficially or of record, by any Person or group
(within the meaning of the Securities Exchange Act of 1934 and the rules of the
Securities and Exchange Commission thereunder as in effect on the date hereof)
other than William E. Dye, of shares representing more than 20% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock of
the Company; (b) occupation of a majority of the seats (other than vacant seats)
on the board of directors of the Company by Persons who were neither (i)
nominated by the board of directors of the Company nor (ii) appointed by
directors so nominated; (c) the acquisition of direct or indirect Control of the
Company by any Person or group other than William E. Dye; (d) any change in the
ownership of capital stock of the Company such that after giving effect thereto
William E. Dye shall cease to have direct beneficial ownership of shares
representing at least 20% of the aggregate ordinary voting power represented by
the issued and outstanding capital stock of the Company; or (e) the ownership by
any Person other than the Company of any capital stock of a Borrower, or the
ownership by any Person other than the Company or a Borrower or Guarantor, of
any capital stock or other equity interest of any Person that is required to
become a Borrower or a Guarantor pursuant to Section 5.09.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof by any Governmental
Authority after the date of this Agreement or (c) compliance by the Lender (or
by such Lender's holding company) with any request, guideline or directive
(whether or not having the force of law) of any Governmental Authority made or
issued after the date of this Agreement.
"Character", when used in reference to any Loan, refers to
whether such Loan is a Revolving Loan or a Line Loan.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
<PAGE> 5
"Collateral" means any property or rights in which, pursuant
to the Security Documents, there has been granted (or purported to have been
granted) to the Lender, a security interest.
"Commitment" means the Revolving Credit Commitment.
"Company" means Unidigital Inc., a Delaware corporation.
"Consolidated Current Assets" means, at the date of
determination, all assets of the Company and its consolidated Subsidiaries that
would, in accordance with GAAP, be classified on a consolidated balance sheet of
the Company and its consolidated Subsidiaries as current assets.
"Consolidated Current Liabilities" means, at the date of
determination, all liabilities of the Company and its consolidated Subsidiaries
that would, in accordance with GAAP, be classified on a consolidated balance
sheet of the Company and its consolidated Subsidiaries as current liabilities.
"Consolidated Debt Service Coverage Ratio" means, with respect
to the Company and its Subsidiaries (a) as at the end of any of the first three
fiscal quarters of a fiscal year, the ratio of (i) the sum of Consolidated Net
Income plus depreciation, depletion and amortization of properties (including
intangible properties) of the Company and its Subsidiaries plus Consolidated
Interest Expense for the four most recent consecutive fiscal quarters to (ii)
the sum of Consolidated Interest Expense for the four most recent consecutive
fiscal quarters plus the current portion of Consolidated Funded Indebtedness as
of the end of such fiscal quarter; and (b) as at the end of the last fiscal
quarter of a fiscal year, the ratio of (i) the sum of Consolidated Net Income
plus depreciation, depletion and amortization of properties (including
intangible properties) of the Company and its Subsidiaries, plus Consolidated
Interest Expense, reduced by the amount of Capital Expenditures of the Company
and its Subsidiaries other than such Capital Expenditures funded by borrowings
(other than the Loans); all for the four most recent consecutive fiscal quarters
to (ii) the sum of Consolidated Interest Expense for the four most recent
consecutive fiscal quarters plus the current portion of Consolidated Funded
Indebtedness as of the end of such fiscal quarter.
"Consolidated Funded Indebtedness" means, as of the date of
determination, all Indebtedness of the Company and its consolidated
Subsidiaries, determined on a consolidated basis in accordance with GAAP, that
by its terms matures more than one year after the date of calculation, and any
such Indebtedness maturing within one year from such date that is renewable or
extendable at the option of the obligor to a date more than one year from such
date.
"Consolidated Interest Expense" means, for any period the
amount of interest expense, both expensed and capitalized, of the Company and
its consolidated
<PAGE> 6
Subsidiaries, for such period on the aggregate principal amount of their
Indebtedness, determined on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, for any period, net income of
the Company and its consolidated Subsidiaries, determined on a consolidated
basis in accordance with GAAP.
"Consolidated Net Worth" means, as of the date of
determination, all items which in conformity with GAAP would be included under
shareholders' equity on a consolidated balance sheet of the Company and its
consolidated Subsidiaries at such date.
"Consolidated Tangible Net Worth" means, as of the date of
determination, Consolidated Net Worth after deducting therefrom (a) any surplus
resulting from the write-up of assets subsequent to August 31, 1996, (b)
goodwill, including any amounts (however designated on the balance sheet)
representing the cost of acquisitions of the Company's Subsidiaries in excess of
underlying tangible assets, (c) patents, trademarks, copyrights and other
intangible assets, (d) leasehold improvements not recoverable at the expiration
of a lease, and (e) deferred charges (including, but not limited to, unamortized
debt discount and expense, organization expenses and experimental and
development expenses, but excluding prepaid expenses).
"Consolidated Total Liabilities" means, as of the date of
determination, all liabilities of the Company and its consolidated Subsidiaries,
determined on a consolidated basis in conformity with GAAP, including
Consolidated Current Liabilities and Consolidated Funded Indebtedness.
"Consolidated Working Capital" means, as of the date of
determination, Consolidated Current Assets at such date minus Consolidated
Current Liabilities at such date.
"Control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. "Controlling" and "Controlled" have meanings correlative thereto.
"Credit Party" means each Borrower and each Guarantor.
"Default" means any event or condition which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"dollars" or "$" refers to lawful money of the United States
of America.
<PAGE> 7
"Effective Date" means the date on which the conditions
specified in Section 4.01 are satisfied (or waived).
"Eligible Accounts Receivable" of a Borrower shall include
only those unpaid accounts receivable of such Borrower (i) which arise out of a
bona fide sale of goods or rendition of services of the kind ordinarily sold or
rendered by the Borrower in the ordinary course of its business, (ii) which are
for a liquidated amount and are made to a Person competent to contract therefor
who is not an Affiliate or controlled by an Affiliate of such Borrower, (iii) to
the extent of the amount thereof not in dispute, (iv) which are not subject to
renegotiation or redating, (v) which are subject to a first priority fully
perfected security interest in favor of the Lender under the Security Documents,
free and clear of any Lien in favor of any Person other than the Lender, (vi) to
the extent of the amount thereof not subject to any deduction, offset,
counterclaim, freight claim, rebate, claim of payment or other condition, (vii)
which do not arise with respect to any payment due from the United States
government or any agency or instrumentality thereof, (viii) which do not
represent merchandise unshipped, and (ix) which do not arise in connection with
any scrap sale. No account receivable shall be an Eligible Account if it is more
than ninety (90) days past the original due date, the amount of such Borrower's
past due accounts receivable not being subject to reduction as a result of any
credits in favor of any account debtor. Without limiting the foregoing, an
account receivable shall not be an Eligible Account (a) if the account debtor in
respect thereof has filed a case for bankruptcy or reorganization, or if any
such case has been filed against such account debtor, or if such account debtor
has made an assignment for the benefit of creditors, or if such account debtor
has failed, suspended business operations, become insolvent, or had or suffered
a receiver or a trustee to be appointed for all or a significant portion of its
assets or affairs; (b) to the extent that such account debtor is also a supplier
to or creditor of such Borrower; (c) if the sale is to an account debtor outside
the United States, unless such account receivable is supported by a letter of
credit, or banker's acceptance or otherwise is enhanced on terms acceptable to
the Lender in its sole discretion; (d) if fifty percent (50%) or more of the
accounts receivable of such account debtor to the Borrowers are ineligible for
any other reason or reasons; (e) if such account receivable is evidenced by an
instrument (as defined in Article IX of the Uniform Commercial Code) not
properly endorsed to and in the possession of the Lender; or (f) if the Lender
believes, in its sole discretion that collection of such account receivable is
insecure or that such account receivable may not be paid by reason of the
account debtor's financial inability to pay.
"Environmental Laws" means all laws, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the
<PAGE> 8
management, release or threatened release of any Hazardous Material or to health
and safety matters.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of any Credit Party or any
Subsidiary thereof directly or indirectly resulting from or based upon (a)
violation of any Environmental Law, (b) the generation, use, handling,
transportation, storage, treatment or disposal of any Hazardous Materials, (c)
exposure to any Hazardous Materials, (d) the release or threatened release of
any Hazardous Materials into the environment or (e) any contract, agreement or
other consensual arrangement pursuant to which liability is assumed or imposed
with respect to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with any Credit Party, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by any Credit Party or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by any Credit Party or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer
any Plan; (f) the incurrence by any Credit Party or any of its ERISA Affiliates
of any liability with respect to the withdrawal or partial withdrawal from any
Plan or Multiemployer Plan; or (g) the receipt by any Credit Party or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from any
Credit Party or any ERISA Affiliate of any notice, concerning the imposition of
Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.
"Eurodollar", when used in reference to any Loan, refers to
whether such Loan bears interest at a rate determined by reference to the
Adjusted LIBO Rate.
"Event of Default" has the meaning given to such term in
Article VII.
<PAGE> 9
"Excluded Taxes" means, with respect to the Lender or any
other recipient of any payment to be made by or on account of any obligation of
a Borrower hereunder, (a) income or franchise taxes imposed on (or measured by)
its net income by the United States of America, or by the jurisdiction under the
laws of which such recipient is organized or in which its principal office is
located or, in the case of the Lender, in which its applicable lending office is
located, (b) any branch profits taxes imposed on any Foreign Lender by the
United States of America or any similar tax imposed by any other jurisdiction in
which a Borrower is located and (c) in the case of a Foreign Lender, any
withholding tax that is imposed by the United States of America under Section
1441 et. seq. of the Code on amounts payable to such Person at the time such
Person becomes such a Foreign Lender or is attributable to such Person's failure
to comply with Section 8.04(f).
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Lender from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or controller of the Company or of a
Borrower, as appropriate.
"Foreign Lender" means any purchaser of, participant in, or
assignee of, a Loan or a Note under Section 8.04(b) that is organized under the
laws of a jurisdiction other than that in which the borrowers are located. For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
"GAAP" means generally accepted accounting principles in the
United States of America.
"Governmental Authority" means the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
<PAGE> 10
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"Guarantor" means each of (i) the Company, and (ii) each
Person who is required to become a Guarantor pursuant to Section 5.09.
"Guarantee Agreement" has the meaning given to such term in
Section 4.01(a).
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.
"Hedging Agreement" means any interest rate protection
agreement, foreign currency exchange agreement, commodity price protection
agreement or other interest or currency exchange rate or commodity price hedging
arrangement.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of
<PAGE> 11
credit and letters of guaranty and (j) all obligations, contingent or otherwise,
of such Person in respect of bankers' acceptances. The Indebtedness of any
Person shall include the Indebtedness of any other entity (including any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Interest Election Request" means a request by a Borrower to
convert or continue a Loan in accordance with Section 2.06.
"Interest Payment Date" means (a) with respect to any ABR
Loan, the first day of each calendar month, and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to such Loan.
"Interest Period" means, with respect to any Eurodollar Loan,
the period commencing on the date of such Loan and ending on the numerically
corresponding day in the calendar month that is one, two, or three months
thereafter, as the Borrower thereof may elect, provided, that (i) if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless such next
succeeding Business Day would fall in the next calendar month, in which case
such Interest Period shall end on the next preceding Business Day, (ii) any
Interest Period that commences on the last Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period and (iii) no Interest Period may
be selected for any Eurodollar Loan that would end later than the date that
repayment of the Loans of such Character is due hereunder. For purposes hereof,
the date of a Loan initially shall be the date on which such Loan is made and,
thereafter shall be the effective date of the most recent conversion or
continuation of such Loan.
"LIBO Rate" means, with respect to any Eurodollar Loan for any
Interest Period, the rate at which dollar deposits in the amounts comparable to
such Loan and for a maturity comparable to such Interest Period are offered by
the principal London office of the Lender in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage,
deed of trust, lien, pledge, hypothecation, encumbrance, charge or security
interest in, on or of such asset, (b) the interest of a vendor or a lessor under
any conditional sale agreement, capital lease or title retention agreement (or
any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case
<PAGE> 12
of securities, any purchase option, call or similar right of a third party with
respect to such securities.
"Line Loan" means a Loan made pursuant to Section 2.04.
"Loan Documents" means this Agreement, the Notes or any other
promissory notes delivered pursuant hereto, the Security Documents, in each case
as supplemented, amended or modified from time to time, and any document,
instrument, or agreement supplementing, amending, or modifying, or waiving any
provision of, any of the foregoing.
"Loans" means the loans made by the Lender pursuant to this
Agreement, including the Revolving Loans and the Line Loans.
"Material Adverse Effect" means, in respect of any Person, a
material adverse effect on (a) the business, assets, operations, prospects or
condition, financial or otherwise, of such Person, (b) the ability of such
Person to perform any of its obligations under this Agreement or any other Loan
Document to which it is a party or (c) the rights of or benefits available to
the Lender in respect of such Person under this Agreement or any other Loan
Document.
"Material Indebtedness" means, in respect of any Person,
Indebtedness (other than the Loans), or obligations in respect of one or more
Hedging Agreements, of any one or more of such Person and its Subsidiaries in an
aggregate principal amount exceeding $500,000. For purposes of determining
Material Indebtedness, the "principal amount" of the obligations of any Person
or any Subsidiary in respect of any Hedging Agreement at any time shall be the
maximum aggregate amount (giving effect to any netting agreements) that such
Person would be required to pay if such Hedging Agreement were terminated at
such time.
"Maturity Date" means April 30, 2000.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Notes" shall mean any notes evidencing any of the Loans,
including but not limited to the Notes referred to in Section 4.01(d).
"Obligations" has the meaning given to such term in the
Security Documents.
<PAGE> 13
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement or any other
Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA and any successor entity performing similar functions.
"Perfection Certificates" means the Perfection Certificates
delivered pursuant to Section 4.01(i) or pursuant to the Security Agreement,
prepared by the Borrowers.
"Permitted Encumbrances" means:
(a) Liens imposed by law for taxes that are not yet due or are
being contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.04;
(c) pledges or deposits made in the ordinary course of
business in compliance with workers' compensation, unemployment insurance and
other social security laws or regulations;
(d) deposits to secure the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature, in each case in the ordinary
course of business; and
(e) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of any Credit Party or any Subsidiary thereof;
provided that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness (other than Indebtedness owing to the Lender) or any Lien
(other than a Lien held by the Lender to secure Indebtedness owing to it) on any
Collateral.
<PAGE> 14
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days
from the date of acquisition thereof and having, at such date of acquisition,
the highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 180 days from the date of
acquisition thereof issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of not
less than $500,000,000; and
(d) fully collateralized repurchase agreements with a term of
not more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in clause
(c) above.
"Person" means any natural person, corporation, limited
liability company, trust, joint venture, association, company, partnership,
Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which any Credit
Party or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.
"Pledge Agreement" has the meaning given to such term in
Section 4.01(a).
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by The Chase Manhattan Bank as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective from and including the date such change is publicly announced
as being effective.
"Register" has the meaning given to such term in Section 8.04.
<PAGE> 15
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of a Credit Party or any Subsidiary thereof, any
payment (whether in cash, securities or other property), including any sinking
fund or similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any such shares of capital stock of
a Credit Party or any option, warrant or other right to acquire any such shares
of capital stock of a Credit Party, or any payment of principal, interest, or
any other amount in respect of or for the purchase of any Indebtedness of any
Credit Party that is subordinated to any obligations arising under the Loan
Documents (including Approved Subordinated Debt).
"Revolving Credit Commitment" means the commitment of the
Lender to make Revolving Loans hereunder as set forth in Section 2.01, the
amount of which on the Effective Date is $4,500,000, as the same may be reduced
from time to time pursuant to this Agreement.
"Revolving Credit Exposure" means, at any time, the sum of the
outstanding principal amount of Revolving Loans at such time.
"Revolving Loan" means a Loan made pursuant to Section 2.03.
"S&P" means Standard & Poor's.
"Security Agreement" has the meaning given to such term in
Section 4.01(a).
"Security Documents" means each of the agreements,
instruments, and documents referred to in clauses (i) through (iii) of Section
4.01(a) (including, without limitation, any guarantee or security agreement
hereafter made and given to the Lender as provided in Section 5.09).
"Statutory Reserve Rate" means a fraction (expressed as a
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves) expressed
as a decimal established by the Board to which the Lender is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed
<PAGE> 16
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to the Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"Subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity, whether domestic or foreign, the accounts of which
would be consolidated with those of the parent in the parent's consolidated
financial statements if such financial statements were prepared in accordance
with GAAP as of such date, as well as any other corporation, limited liability
company, partnership, association or other entity, whether domestic or foreign,
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Three-Month Secondary CD Rate" means, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current practices
of the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day) or, if such rate is not so reported on such
day or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day is not a Business Day, on the next preceding Business
Day) by the Lender from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Transactions" means the execution, delivery and performance
by each Credit Party of this Agreement and each other Loan Document to which
such Credit Party is a party, the creation of the security interests
contemplated by the Security Documents, the borrowing of Loans, the use of the
proceeds of Loans and the other transactions contemplated by the Loan Documents.
<PAGE> 17
"Type", when used in reference to any Loan, refers to whether
the rate of interest on such Loan is determined by reference to the Adjusted
LIBO Rate, or the Alternate Base Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Classification of Loans. For purposes of this Agreement,
Loans may be classified and referred to by Character (e.g., a "Revolving Loan",
or a "Line Loan") or by Type (e.g., a "Eurodollar Loan" or an "ABR Loan") or by
Character and Type (e.g., a "Eurodollar Revolving Loan").
SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrowers notify the Lender that the Borrowers request an amendment
to any provision hereof to eliminate the effect of any change occurring after
the date hereof in GAAP or in the application thereof on the operation of such
provision (or if the Lender notifies the Borrowers that the Lender requests an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have
<PAGE> 18
become effective until such notice shall have been withdrawn or such provision
amended in accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitment. (A) Subject to the terms and conditions set
forth herein, the Lender agrees to make Revolving Loans to any Borrower from
time to time during the Availability Period in an aggregate principal amount
that will not result in the Revolving Credit Exposure exceeding the Revolving
Credit Commitment Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrowers may borrow, prepay and reborrow
Revolving Loans.
(B) Notwithstanding anything contained elsewhere in
this Agreement, if the proceeds of any Revolving Loans are to be applied to an
Acquisition Transaction in which the overall price of the acquired property
exceeds $500,000, the making of such Revolving Loan shall require the consent of
the Lender in its sole discretion.
SECTION 2.02. Loans Generally. (A) Subject to Section 2.12, each Loan
shall be an ABR Loan or a Eurodollar Loan as the Borrower thereof may request in
accordance herewith. The Lender at its option may make any Eurodollar Loan
hereunder by causing any domestic or foreign branch or Affiliate of the Lender
to make such Loan; provided that any exercise of such option shall not affect
the obligation of the Borrowers to repay such Loan in accordance with the terms
of this Agreement.
(B) At the commencement of each Interest Period for
any Eurodollar Loan, such Loan shall be in an aggregate amount that is an
integral multiple of $100,000 and not less than $500,000. At the time that each
ABR Loan is made, such Loan shall be in an aggregate amount that is an integral
multiple of $50,000 and not less than $100,000; provided that an ABR Revolving
Loan may be in an aggregate amount that is equal to the entire unused balance of
the total Revolving Credit Commitment. Borrowings of more than one Type and
Character may be outstanding at the same time; provided that there shall not at
any time be outstanding more than a total of six (6) Eurodollar Loans or
Eurodollar Loans in an aggregate principal amount in excess of $4,000,000.
(C) Notwithstanding any other provision of this
Agreement, no Borrower shall be entitled to request, or to elect to convert or
continue, (i) any Revolving Loan if the Interest Period requested in respect
thereof would end after the Maturity Date, or (ii) to convert or continue any
Line Loan if the Interest Period requested in respect thereof would end after
January 31, 1998.
<PAGE> 19
SECTION 2.03. Requests for Revolving Loan. To request a Revolving Loan,
the Borrower thereof shall give written notice to the Lender of such request (a)
in the case of a Eurodollar Loan, not later than 11:00 a.m., New York City time,
three Business Days before the date of the proposed Loan, or (b) in the case of
an ABR Loan, not later than 11:00 a.m., New York City time, one Business Day
before the date of the proposed Loan. Each such Borrowing Request shall be
irrevocable and shall be given by hand delivery or telecopy to in a form
approved by the Lender and signed by the Borrower thereunder. Each such
Borrowing Request shall specify the following information in compliance with
Section 2.02:
(I) the aggregate amount of the requested
Loan;
(II) the date of such Loan, which shall be a
Business Day;
(III) whether such Loan is to be an ABR Loan
or a Eurodollar Loan (or, to the extent permitted hereunder, in part an
ABR Loan and in part a Eurodollar Loan, and, in such case, the
principal amounts of each Type);
(IV) in the case of a Eurodollar Loan, the
initial Interest Period to be applicable thereto, which shall be a
period contemplated by the definition of the term "Interest Period";
(V) the location and number of the
Borrower's account to which funds are to be disbursed, which shall
comply with the requirements of Section 2.05; and
(VI) a description of the Acquisition
Transaction to be financed with the proceeds of such Loan, in detail
satisfactory to the Lender.
If no election as to the Type of Revolving Loan is specified, then the requested
Revolving Loan shall be an ABR Loan. If no Interest Period is specified with
respect to any requested Eurodollar Revolving Loan, then the Borrower thereof
shall be deemed to have selected an Interest Period of one month's duration.
SECTION 2.04. Uncommitted Line. (A) The Borrowers may request from time
to time during the period commencing on the Effective Date and terminating at
5:00 p.m. New York City time on January 30, 1998 that the Lender advance to it
certain loans (each, a "Line Loan") provided, however, that notwithstanding
anything contained elsewhere in this Agreement, the making of any Line Loan
shall be at the sole and absolute discretion of the Lender, notwithstanding that
the Borrowers and the Credit Parties may have satisfied each and every term and
condition thereto.
<PAGE> 20
(B) Subject to paragraph (a), above, (i) Line Loans
shall be ABR Loans or Eurodollar Loans; and (ii) the aggregate principal amount
of Line Loans outstanding at any time shall not exceed the lesser of (x)
$3,850,000, or (y) 80% of the amount of Eligible Accounts Receivable of the
Borrowers at such time; provided, however, that for a period of at least 30
consecutive days, the outstanding principal amount of Line Loans must not exceed
$2,000,000. All Line Loans shall be due and payable, together with any accrued
and unpaid interest thereon, on January 31, 1998 or such earlier date as the
Loans shall be due and payable hereunder.
(C) Each Borrower may request a Line Loan by way of a
written notice to the Lender (i) setting forth the principal amount of the Line
Loan requested; (ii) showing the computation of Eligible Accounts Receivable;
(iii) setting forth the proposed use of the proceeds thereof; (iv) requesting
that such Line Loan be an ABR Loan or a Eurodollar Loan, and if a Eurodollar
Loan, the requested Interest Period (which must comply with all terms and
conditions of this Agreement pertaining to Eurodollar Loans and Interest Periods
in respect thereof); (v) the proposed date of such Loan, which must be at least
two Business Days after the date of receipt of such notice; and (vi) certifying
that all other conditions to the making of a Loan hereunder are satisfied.
(D) Upon the Effective Date and as a condition to the
making by the Lender of any Loans hereunder, each Borrower shall have repaid all
outstanding loans, and all accrued and unpaid interest thereon, incurred under
those certain discretionary lines of credit in the aggregate principal amount of
$2,350,000 made available by the Lender to certain of the Borrowers pursuant to
two line of credit letters, each dated November 11, 1996, between the Lender and
certain of the Borrowers, and shall also have paid any accrued and unpaid line
or other fees thereon. Such lines of credit, letters and arrangements shall be
deemed terminated as of the Effective Date upon the execution and delivery by
the Borrowers of this Agreement; provided, that, any security interests or other
Liens granted thereunder or pursuant thereto to the Lender shall survive the
Effective Date and shall supplement the security interests and other Liens
granted to the Lender under the Security Agreement and shall apply to any Loans
under this Agreement. In accordance with this Section 2.04(d), upon the
Effective Date, but subject to all terms and conditions of this Agreement, the
Borrowers may obtain Line Loans in the principal amount of the loans to be
repaid to the Lender in accordance with this Section 2.04(d) and the Lender
shall apply the proceeds of any such Line Loans thereto.
SECTION 2.05. Funding of Loans. Loans made hereunder shall be made by
crediting the amounts thereof in immediately available funds, to an account of
the Borrower thereof maintained with the Lender in New York City and (i)
designated by such Borrower in the applicable Borrowing Request, in the case of
Revolving Loans, or
<PAGE> 21
(ii) in the case of Line Loans as designated by the Borrower in a notice under
Section 2.04.
SECTION 2.06. Interest Elections. (A) Each Revolving Loan initially
shall be of the Type specified in the applicable Borrowing Request and, in the
case of a Eurodollar Loan, shall have an initial Interest Period as specified in
such Borrowing Request. Each Line Loan shall initially be of the Type agreed by
the Borrower thereof and the Bank. Thereafter, the Borrower thereof may elect to
convert such Loan to a different Type or to continue such Loan, and, in the case
of a Eurodollar Loan, may elect Interest Periods therefor, all as provided in
this Section. The Borrower thereof may elect different options with respect to
different portions of the affected Loan, in which case each such portion shall
be considered a separate Loan.
(B) To make an election pursuant to this Section, the
appropriate Borrower shall notify the Lender of such election by telephone by
the time that a Borrowing Request would be required under Section 2.03 if such
Borrower were requesting a Revolving Loan of the Type resulting from such
election to be made on the effective date of such election. Each such telephonic
Interest Election Request shall be irrevocable and shall be confirmed promptly
by hand delivery or telecopy to the Lender of a written Interest Election
Request in a form approved by the Lender and signed by the appropriate Borrower.
(C) Each telephonic and written Interest Election
Request shall specify the following information all aspects of which must also
be in compliance with Section 2.02:
(I) the Loan to which such Interest Election
Request applies and, if different options are being elected with
respect to different portions thereof, the portions thereof to be
allocated to each resulting Loan (in which case the information to be
specified pursuant to clauses (iii) and (iv) below shall be specified
for each resulting Loan);
(II) the effective date of the election made
pursuant to such Interest Election Request, which shall be a Business
Day;
(III) whether the resulting Loan is to be an
ABR Loan or a Eurodollar Loan; and
(IV) if the resulting Loan is a Eurodollar
Loan, the Interest Period to be applicable thereto after giving effect
to such election, which shall be a period contemplated by the
definition of the term "Interest Period".
<PAGE> 22
If any such Interest Election Request requests a Eurodollar Loan but does not
specify an Interest Period, then the Borrower thereof shall be deemed to have
selected an Interest Period of one month's duration.
(D) To the extent that Loans mature or are required
to be repaid in less than one month, such Loans may not be converted into or
continued as Eurodollar Loans. Any portion of a Eurodollar Loan that cannot be
converted into or continued as a Eurodollar Loan by reason of the preceding
sentence shall be automatically converted at the end of the Interest Period in
effect for such Loan into an ABR Loan.
(E) If the Borrower thereof fails to deliver a timely
Interest Election Request in accordance herewith with respect to a Eurodollar
Loan prior to the end of the Interest Period applicable thereto, then, unless
such Loan is repaid as provided herein, at the end of such Interest Period such
Loan shall be converted to an ABR Loan. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing, then, (i) no
outstanding Loan may be converted to or continued as a Eurodollar Loan and (ii)
unless repaid, each Eurodollar Loan shall be converted to an ABR Loan at the end
of the Interest Period applicable thereto.
SECTION 2.07. Termination and Reduction of Commitment. (A) Unless
previously terminated, the Revolving Credit Commitment shall terminate on the
Maturity Date.
(B) The Borrowers may at any time terminate, or from
time to time reduce, the Revolving Credit Commitment; provided that (i) each
reduction of the Revolving Credit Commitment shall be in an amount that is an
integral multiple of $100,000 and not less than $100,000 and (ii) the Borrowers
shall not terminate or reduce the Revolving Credit Commitment if, after giving
effect to any concurrent prepayment of the Revolving Loans in accordance with
Section 2.09, the Revolving Credit Exposure would exceed the Revolving Credit
Commitment.
(C) The Borrowers shall notify the Lender of any
election to terminate or reduce the Revolving Credit Commitment under paragraph
(b) of this Section at least three Business Days prior to the effective date of
such termination or reduction, specifying such election and the effective date
thereof. Any termination or reduction of the Revolving Credit Commitment shall
be permanent.
SECTION 2.08. Repayment of Loans; Evidence of Debt. (A) The Borrowers
hereby, jointly and severally, unconditionally promise to pay to the Lender (i)
the then unpaid principal amount of Revolving Loans on the Maturity Date, and
(ii) each Line Loan on January 31, 1998; such promise of each Borrower to repay
each Loan shall apply unconditionally to each Loan irrespective of which
Borrower was the Borrower of such Loan.
<PAGE> 23
(B) The Lender shall maintain in accordance with its
usual practice an account or accounts evidencing the indebtedness of the
Borrowers to the Lender resulting from each Loan made by the Lender, including
the amounts of principal and interest payable and paid to the Lender from time
to time hereunder.
(C) The entries made in the accounts maintained
pursuant to paragraph (b) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of the Lender to maintain such accounts or any error therein shall not
in any manner affect the (joint and several) obligation of the Borrowers to
repay the Loans in accordance with the terms of this Agreement.
SECTION 2.09. Prepayment of Loans. (A) The Borrowers shall have the
right at any time and from time to time to prepay any Loans in whole or in part,
without premium or penalty (except as provided in Section 2.14), subject to
prior notice in accordance with paragraph (b) of this Section.
(B) The Borrowers shall notify the Lender by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Loan, not later than 11:00 a.m., New York City time,
three Business Days before the date of prepayment, or (ii) in the case of
prepayment of an ABR Loan, not later than 11:00 a.m., New York City time, one
Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the Borrower of such Loan, the prepayment date,
whether the prepayment relates to Revolving Loans or Line Loans or both, and the
respective principal amounts of each such Loan (or portion thereof) to be
prepaid. Each partial prepayment of any Loan shall be in an amount that would be
permitted in the case of an advance of a Loan of the same Type as provided in
Section 2.02. Each prepayment of a Loan shall be applied first to ABR Loans
outstanding of the Character to be prepaid, and then to outstanding Eurodollar
Loans of that Character, subject to Section 2.14. Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.11.
SECTION 2.10. Fees. (A) The Borrowers agree, jointly and severally, to
pay to the Lender a commitment fee, which shall accrue at the rate of .25% per
annum on the daily unused amount of the Revolving Credit Commitment during the
period from and including the Effective Date to but excluding the date on which
the Revolving Credit Commitment terminates. Accrued commitment fees shall be
payable in arrears on the last day of June and December of each year and on the
Maturity Date or such earlier date on which the Revolving Credit Commitment
terminates, commencing on the first such date to occur after the date hereof.
All commitment fees shall be computed on the basis of a year of 360 days and
shall be payable for the actual number of days elapsed (including the first day
but excluding the last day).
<PAGE> 24
(B) The Borrowers have paid to the Lender an
administrative fee in the amount of $11,250 on the Effective Date in connection
with the Uncommitted Line referred to in Section 2.04 and a commitment fee of
$33,750 with respect to the Revolving Credit Commitment.
(C) All fees payable hereunder shall be paid on the
dates due, in immediately available funds, to the Lender. Fees paid shall not be
refundable under any circumstances.
SECTION 2.11. Interest. (A) Each ABR Loan shall bear interest at the
Alternate Base Rate plus the Applicable Rate Margin.
(B) Each Eurodollar Loan shall bear interest at the
Adjusted LIBO Rate for the Interest Period in effect for such Loan plus the
Applicable Rate Margin.
(C) Notwithstanding the foregoing, if any principal
of or interest on any Loan or any fee or other amount payable by the Borrowers
hereunder is not paid when due, whether at stated maturity, upon acceleration or
otherwise, such overdue amount shall bear interest, after as well as before
judgment, at a rate per annum equal to (i) in the case of overdue principal of
any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding paragraphs of this Section or (ii) in the case of any other amount, 2%
plus the rate applicable to ABR Loans as provided in paragraph (a) of this
Section.
(D) Accrued interest on each Loan shall be payable in
arrears on each Interest Payment Date for such Loan and, in the case of (x)
Revolving Loans, upon the Maturity Date or earlier termination of the Revolving
Credit Commitment, and (y) Line Loans on January 31, 1998 or, if earlier, the
termination of the Revolving Credit Commitment; provided that (i) interest
accrued pursuant to paragraph (c) of this Section shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan (other than a
prepayment of an ABR Revolving Loan prior to the end of the Availability
Period), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any Eurodollar Loan prior to the end of the current Interest
Period therefor, accrued interest on such Loan shall be payable on the effective
date of such conversion.
(E) All interest hereunder shall be computed on the
basis of a year of 360 days, and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day). The
applicable Alternate Base Rate, or Adjusted LIBO Rate or LIBO Rate shall be
determined by the Lender, and such determination shall be conclusive absent
manifest error.
<PAGE> 25
SECTION 2.12. Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Loan:
(A) the Lender determines (which determination shall
be conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period; or
(B) the Lender determines that the Adjusted LIBO Rate
or the LIBO Rate, as applicable, for such Interest Period will not adequately
and fairly reflect the cost to the Lender of making or maintaining its Loan for
such Interest Period;
then the Lender shall give notice thereof to the Borrowers by telephone or
telecopy as promptly as practicable thereafter and, until the Lender notifies
the Borrowers that the circumstances giving rise to such notice no longer exist,
(i) any Interest Election Request that requests the conversion of any Loan to,
or continuation of any Loan as, a Eurodollar Loan shall be ineffective, and (ii)
if any Borrowing Request requests a Eurodollar Loan, such Borrowing shall be
made as an ABR Loan.
SECTION 2.13. Increased Costs. (A) If any Change in Law shall:
(I) impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, the Lender
(except any such reserve requirement reflected in the Adjusted LIBO
Rate); or
(II) impose on the Lender or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by the Lender;
and the result of any of the foregoing shall be to increase the cost to the
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by the Lender hereunder (whether of principal, interest or
otherwise), then the Borrowers will pay to the Lender such additional amount or
amounts as will compensate the Lender for such additional costs incurred or
reduction suffered.
(B) If the Lender determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on the Lender's capital or on the capital of the Lender's holding
company as a consequence of this Agreement or the Loans made by the Lender to a
level below that which the Lender or the Lender's holding company could have
achieved but for such Change in Law (taking into consideration the Lender's
policies and the policies of the Lender's holding company with respect to
capital adequacy), then from time to time the
<PAGE> 26
Borrowers will pay to the Lender such additional amount or amounts as will
compensate the Lender or the Lender's holding company for any such reduction
suffered.
(C) A certificate of the Lender setting forth the
amount or amounts necessary to compensate the Lender or its holding company, as
the case may be, as specified in paragraph (a) or (b) of this Section shall be
delivered to the Borrowers and shall be conclusive absent manifest error. The
Borrowers shall pay the Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.
(D) Failure or delay on the part of the Lender to
demand compensation pursuant to this Section shall not constitute a waiver of
the Lender's right to demand such compensation.
SECTION 2.14. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto, or (c) the failure to borrow,
convert, continue or prepay any Loan on the date specified in any notice
delivered pursuant hereto then, in any such event, the Borrowers shall
compensate the Lender for the loss, cost and expense including for redeployment
of funds, attributable to such event. In the case of a Eurodollar Loan, such
loss, cost or expense to the Lender shall be deemed to include an amount
determined by the Lender to be the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount of such Loan had such event not
occurred, at the Adjusted LIBO Rate that would have been applicable to such
Loan, for the period from the date of such event to the last day of the then
current Interest Period therefor (or, in the case of a failure to borrow,
convert or continue, for the period that would have been the Interest Period for
such Loan), over (ii) the amount of interest which would accrue on such
principal amount for such period at the interest rate which the Lender would bid
were it to bid, at the commencement of such period, for dollar deposits of a
comparable amount and period from other banks in the eurodollar market. A
certificate of the Lender setting forth any amount or amounts that the Lender is
entitled to receive pursuant to this Section shall be delivered to the Borrowers
and shall be conclusive absent manifest error. The Borrowers shall pay the
Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
SECTION 2.15. Taxes. (A) Any and all payments by or on account of any
obligation of the Borrowers hereunder shall be made free and clear of and
without deduction for any Indemnified Taxes or Other Taxes; provided that if
either Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
from such payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under
<PAGE> 27
this Section) the Lender receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
(B) In addition, the Borrowers shall pay any Other
Taxes to the relevant Governmental Authority in accordance with applicable law.
(C) The Borrowers shall indemnify the Lender within
10 days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Lender on or with respect to any payment by or
on account of any obligation of the Borrowers hereunder (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrowers by the Lender, shall be conclusive absent
manifest error.
(D) As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by a Borrower to a Governmental Authority, the
Borrowers shall deliver to the Lender the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, and a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Lender.
SECTION 2.16. Payments Generally. (A) Each Borrower shall make each
payment required to be made by it hereunder (whether of principal, interest,
fees, or of amounts payable under Section 2.13, 2.14, or 2.15, or otherwise) and
under any other Loan Document prior to 12:00 noon, New York City time, on the
date when due, in immediately available funds, without set-off or counterclaim.
Any amounts received after such time on any date may, in the discretion of the
Lender, be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. All such payments shall be made to the
Lender at its offices at 600 Fifth Avenue, New York, New York 10020. If any
payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments hereunder shall be made in dollars.
(B) If at any time insufficient funds are received by
and available to the Lender to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied (i) first, towards payment
of interest and fees then due hereunder, and (ii) second, towards payment of
principal then due hereunder.
<PAGE> 28
ARTICLE III
Representations and Warranties
The Borrowers jointly and severally represent and warrant to
the Lender that:
SECTION 3.01. Organization; Powers. Each Credit Party and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect in respect of such Credit Party,
is qualified to do business in, and is in good standing in, every jurisdiction
where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions are
within the corporate powers of the Credit Parties and have been duly authorized
by all necessary corporate, and, if required, stockholder action. This Agreement
and each other Loan Document has been duly executed and delivered by each Credit
Party that is a party thereto and constitutes a legal, valid and binding
obligation of such Credit Party, enforceable in accordance with its respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.
SECTION 3.03. Governmental Approvals; No Conflicts; No Defaults. The
Transactions (a) do not require any consent or approval of, registration or
filing with, or any other action by, any Governmental Authority, except such as
have been obtained or made and are in full force and effect, (b) will not
violate any applicable law or regulation or the charter, by-laws, or other
organizational documents of any Credit Party or any of its Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a default
under any indenture, agreement or other instrument binding upon any Credit Party
or any of its Subsidiaries or its assets, or give rise to a right thereunder to
require any payment to be made by any Credit Party or any of its Subsidiaries,
and (d) will not result in the creation or imposition of any Lien (except in
favor of the Lender) on any asset now owned or hereafter acquired of any Credit
Party or any of its Subsidiaries. No Credit Party is in default in any manner
under any provision of any indenture or other agreement or instrument evidencing
Indebtedness, or any other material agreement or instrument to which it is a
party or by which it or any of its properties or assets are or may be bound.
SECTION 3.04. Financial Condition; No Material Adverse Change. (A) The
Company has heretofore furnished to the Lender (i) its consolidated balance
sheet and
<PAGE> 29
statements of income, stockholders equity and cash flows as of and for the
fiscal year ended August 31, 1996, reported on by Ernst & Young, independent
public accountants, and (ii) consolidating balance sheets of the Company and its
Subsidiaries setting forth such information separately for the Company and each
Subsidiary thereof and related consolidating statements of operations for the
Company and its Subsidiaries setting forth such information separately for the
Company and each Subsidiary thereof as of and for the fiscal year ending August
31, 1996, and including in comparative form the figures for the preceding fiscal
year, certified by its chief financial officer. Such financial statements
present fairly, in all material respects, the financial position and results of
operations and cash flows of the Company and of its Subsidiaries as of such
dates and for such periods in accordance with GAAP.
(B) Since November 30, 1996, there has been no
material adverse change in the business, assets, operations, prospects or
condition, financial or otherwise, of any Credit Party from that set forth in
the financial statements contained in SEC Form 10-Q filed for the Company and
its Subsidiaries for the six months then ended. Except as disclosed on Schedule
3.04 annexed hereto, the Credit Parties have no liabilities, contingent or
otherwise, not disclosed on the financial statements referred to in Section
3.04(a), including in respect of any leases of real or personal property, other
than in respect of goods and services arising in the ordinary course of
business.
SECTION 3.05. Properties. (A) Each Credit Party and its Subsidiaries
has good title (free of Liens except such as are permitted under Section 6.02)
to, or valid leasehold interests in, all its real and personal property material
to its business, except for minor defects in title that do not interfere with
its ability to conduct its business as currently conducted or to utilize such
properties for their intended purposes. No Credit Party is a party to any
contract, agreement, lease or instrument (other than the Loan Documents) the
performance of which, either unconditionally or upon the happening of any event,
will result in or require the creation of a Lien (except in favor of the Lender)
on any of its property or assets (now owned or hereafter acquired) or otherwise
result in a violation of any Loan Documents.
(B) Each Credit Party owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by such Credit Party and its
Subsidiaries does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect in respect of such
Credit Party.
SECTION 3.06. Litigation and Environmental Matters. (A) Except as
disclosed on Schedule 3.06 annexed hereto, there are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of any Borrower, threatened against or affecting
any Credit Party or any of its Subsidiaries (i) as to which there is a
reasonable possibility of an adverse
<PAGE> 30
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect in
respect of any Credit Party or (ii) that involve this Agreement or the
Transactions.
(B) Except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect in respect of any Credit Party, neither any Credit
Party nor any of its Subsidiaries (i) has failed to comply with any
Environmental Law or to obtain, maintain or comply with any permit, license or
other approval required under any Environmental Law, (ii) has become subject to
any Environmental Liability, (iii) has received notice of any claim with respect
to any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
(C) Since the date of this Agreement, there has been
no change in the status of the matters disclosed on Schedule 3.06 that,
individually or in the aggregate, has resulted in, or materially increased the
likelihood of, a Material Adverse Effect in respect of any Credit Party.
SECTION 3.07. Compliance with Laws and Agreements. Each Credit Party
and its Subsidiaries is in compliance with all laws, regulations and orders of
any Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.
SECTION 3.08. Investment and Holding Company Status; Margin
Regulations. No Credit Party nor any of its Subsidiaries is (a) an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935. No Credit Party is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulation U of the Board). No part of the proceeds of
any Loan will be used, directly or indirectly and whether immediately,
incidentally or ultimately, for any purpose which entails a violation of or
which is inconsistent with, the provisions of the regulations of the Board,
including, without limitation, Regulation G, T, U or X thereof.
SECTION 3.09. Taxes. Each Credit Party and its Subsidiaries has timely
filed or caused to be filed all Tax returns and reports, which to the knowledge
of such Credit Party or its Subsidiary (after due investigation) are required to
have been filed, and has paid or caused to be paid all Taxes shown to have been
due and payable on such returns or reports, except Taxes that are being
contested in good faith by appropriate proceedings and for which such Credit
Party or such Subsidiary, as applicable, has set aside on its books adequate
reserves in accordance with GAAP.
<PAGE> 31
SECTION 3.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect in respect of any Credit Party. The present
value of all accumulated benefit obligations under each Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $250,000 the fair market value of the assets
of such Plan, and the present value of all accumulated benefit obligations of
all underfunded Plans (based on the assumptions used for purposes of Statement
of Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed by more than
$250,000 the fair market value of the assets of all such underfunded Plans.
SECTION 3.11. Subsidiaries. The direct and indirect Subsidiaries of the
Company, including, without limitation, all Subsidiaries of each Borrower, and
their respective business forms, jurisdictions of organization, addresses, and
respective equity owners, are set forth on Schedule 3.11. Except as so disclosed
on Schedule 3.11, no Credit Party has any direct or indirect Subsidiaries or
investments in, or joint ventures or partnerships with, any Person as of the
Effective Date. Except as set forth on Schedule 3.11, as of the Effective Date,
the Borrowers are the only Subsidiaries of the Company.
SECTION 3.12. SEC Matters. Except as set forth in Schedule 3.12 hereto,
the Company is current in all required disclosure and otherwise in compliance in
all respects with applicable federal and state securities laws and/or rules and
regulations of the Securities and Exchange Commission, and with applicable state
securities laws and/or rules and regulations of state securities authorities and
of any stock exchanges or other self regulatory organizations having
jurisdiction of the Company and/or its securities.
SECTION 3.13. Labor Matters. There are no strikes or other material
labor disputes or grievances pending or, to the knowledge of any Borrower,
threatened, against any Credit Party. Except as set forth on Schedule 3.13
hereto, no Credit Party is a party to any collective bargaining agreement.
SECTION 3.14. Solvency. After giving effect to the Transactions to
occur on the Effective Date, (i) the fair salable value of the assets of each
Credit Party and its Subsidiaries will exceed the amount that will be required
to be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of such Credit Party and its Subsidiaries as
they mature, (ii) the assets of each Credit Party and its Subsidiaries will not
constitute unreasonably small capital to carry out their businesses as conducted
or as proposed to be conducted, including the capital needs of such Credit Party
and its Subsidiaries (taking into account the particular capital requirements of
the
<PAGE> 32
businesses conducted by such entities and the projected capital requirements and
capital availability of such businesses) and (iii) the Credit Parties do not
intend to, or intend to permit any of their Subsidiaries to, and do not believe
that they or any of their Subsidiaries will, incur debts beyond their ability to
pay such debts as they mature (taking into account the timing and amounts of
cash to be received by them and the amounts to be payable on or in respect of
their obligations).
SECTION 3.15. Security Documents. (A) The Pledge Agreement upon
execution and delivery by the parties thereto, will create in favor of the
Lender a legal, valid and enforceable security interest in the Collateral (as
such term is defined in the Pledge Agreement) and, when such Collateral
consisting of corporate stock is delivered to the Lender together with duly
executed, undated instruments of transfer, the Pledge Agreement and the Lien
created thereunder will constitute a fully perfected first priority Lien on, and
security interest in such Collateral, in each case prior and superior in right
to any other Person.
(B) The Security Agreement, upon execution and
delivery by the parties thereto, will create in favor of the Lender, a legal,
valid and enforceable security interest in the Collateral (as such term is
defined in the Security Agreement), and when financing statements in appropriate
form are filed in the offices specified therein or in the Perfection
Certificates, the Lien created under the Security Agreement will constitute a
fully perfected Lien on, and security interest in such Collateral, in each case
prior and superior in right to any other Person.
SECTION 3.16. Lock Boxes. The Credit Parties have furnished to the
Lender true and correct copies of all agreements and other documents, if any, to
which any Credit Party is a party or by which any Credit Party is bound or
affected, establishing or pertaining to lock boxes or similar arrangements
involving the collection or processing of Accounts Receivable or otherwise
dealing with the proceeds of the sale of Inventory of any Credit Party. The
Borrowers represent and warrant that on the date hereof there are no such
arrangements.
SECTION 3.17. Restrictive Agreements. No Credit Party nor any
Subsidiary thereof is a party to any agreement or other arrangement that
prohibits, restricts or imposes any condition upon (a) the ability of such
Credit Party or Subsidiary to create, incur or permit to exist any Lien upon any
of its property or assets, or (b) the ability of any Credit Party or Subsidiary
to pay dividends or other distributions with respect to any shares of its
capital stock or other equity interests; other than (i) restrictions and
conditions imposed by law or by this Agreement and (ii) restrictions and
conditions existing on the date hereof identified on Schedule 3.17.
SECTION 3.18. Disclosure. The Borrowers have disclosed to the Lender
all agreements, instruments and corporate or other restrictions to which each
Credit Party or any of its Subsidiaries is subject, and all other matters known
to it, that, individually
<PAGE> 33
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect in respect of any Credit Party. None of the reports, financial
statements, certificates or other information furnished by or on behalf of the
Borrowers or any other Credit Party to the Lender in connection with the
negotiation of this Agreement or any other Loan Document or delivered hereunder
or thereunder (as modified or supplemented by other information so furnished)
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The obligation of the Lender to make
Loans hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived):
(A) The Lender shall have received from each party
hereto a counterpart of this Agreement signed on behalf of such party (which may
include telecopy transmission of a signed signature page of this Agreement). The
Lender shall have received (i) from the Company, a duly executed Guarantee
Agreement in the form of Exhibit 4.01-1 hereto (as it may be supplemented,
amended, or modified from time to time, the "Guarantee Agreement"); (ii) from
each Credit Party other than the Company, a duly executed counterpart of the
Security Agreement in the form of Exhibit 4.01-2 hereto (as it may be
supplemented, amended, or modified from time to time, the "Security Agreement")
together with Form UCC-1 financing statements in connection therewith in proper
form for filing in the offices therein specified, and, (iii) from the Company,
the duly executed Pledge Agreement in the form of Exhibit 4.01-3 hereto (as it
may be supplemented, amended, or modified from time to time, the "Pledge
Agreement") together with certificates representing the corporate securities
pledged thereunder together with related undated stock powers endorsed in blank.
(B) The Lender shall have received a favorable
written opinion of Messrs. Buchanan Ingersoll, Princeton, New Jersey, counsel
for the Credit Parties, substantially in the form of Exhibit A, and covering
such other matters relating to the Credit Parties, this Agreement, the other
Loan Documents or the Transactions as the Lender shall reasonably request. The
Borrowers hereby request such counsel to deliver such opinion.
(C) The Lender shall have received (i) a copy of the
certificate of incorporation, including all amendments thereto, of each Credit
Party, certified as of a recent date by the Secretary of State of the state of
its organization, (ii) a certificate
<PAGE> 34
as to the good standing of each Credit Party as of a recent date, from the
Secretary of State of the state of its organization; (iii) a certificate of the
Secretary or Assistant Secretary of each Credit Party, dated the Effective Date
and certifying (A) that attached thereto is a true and complete copy of the
by-laws of such Credit Party as in effect on the Effective Date and at all times
since a date prior to the date of the resolutions described in clause (B) below,
(B) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Credit Party authorizing the
execution, delivery and performance of the Loan Documents and (in the case of
each Borrower) the borrowings hereunder, and that such resolutions have not been
modified, rescinded or amended and are in full force and effect as of the
Effective Date, (C) that the certificate of incorporation of such Credit Party
has not been amended since the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to clause (ii) above and (D) as
to the incumbency and specimen signature of each officer executing any Loan
Document or any other document delivered in connection herewith on behalf of any
Credit Party; (iv) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (iii) above; and (v) such other documents as the Lender
or its counsel may reasonably request.
(D) The Lender shall have received a duly executed
Revolving Credit Note and a duly executed Line Loan Note, in each case in a form
satisfactory to the Lender.
(E) The Lender shall have received Perfection
Certificates with respect to each of the Borrowers dated the Effective Date and
duly executed by the Chief Financial Officer of the Borrowers.
(F) The Lender shall have received a copy of the
insurance policies satisfying the requirements of Section 5.05, each of which
shall be endorsed or otherwise amended to include a lender's loss payable
endorsement (except in the case of liability policies) and to name the Lender as
a loss payee as its interest may appear and shall provide for at least thirty
(30) days' prior written notice from such insurance company to the Lender of any
change, termination or cancellation thereof, in form and substance reasonably
satisfactory to the Lender.
(G) After giving effect to the Transactions, on the
Effective Date, the Credit Parties shall have no Indebtedness other than (i)
Indebtedness under the Loan Documents and (ii) Indebtedness permitted under
Section 6.01.
(H) The Lender shall have received copies certified
by the chief financial officer of each Credit Party of all lock box or similar
arrangements involving the collection or processing of accounts receivable or
otherwise dealing with the proceeds of the sale of inventory in effect as to
such Credit Party, and the Lender shall (i) be satisfied, in its sole
discretion, with the agreements and documents pertaining
<PAGE> 35
thereto, and (ii) have received waivers of rights of set off, and such other
agreements as it shall deem satisfactory, in its sole discretion, from parties
to such arrangements.
(I) On the Effective Date, the Lender shall have
received a certificate of the chief executive officer of the Company containing
a description, satisfactory to the Lender in its discretion, of the structure of
ownership and voting relationships among the Company and the Borrowers and
attaching thereto true and correct copies of all agreements among shareholders
(including but not limited to any purchase, redemption, cross purchase or option
agreements) of each Credit Party.
(J) All legal matters incident to this Agreement and
the Loans hereunder shall be satisfactory to the Lender and its counsel.
(K) The Lender shall have received a certificate,
dated the Effective Date and signed by the President, a Vice President or a
Financial Officer of each Borrower, confirming compliance with the conditions
set forth in paragraphs (a) and (b) of Section 4.02.
(L) The Lender shall be satisfied that the
consummation of the Transactions will not (i) violate any applicable law,
statute, rule or regulation or (ii) conflict with, or result in a default or
event of default under any material agreement of any Credit Party or Subsidiary
thereof.
(M) The Lender shall have received evidence
satisfactory to it that there has been no material adverse change in the
business, assets, operations, prospects or conditions, financial or otherwise,
of any Credit Party since November 30, 1996.
(N) The Lender shall have received all fees and other
amounts due and payable on or prior to the Effective Date, including, to the
extent invoiced, reimbursement or payment of all expenses required to be
reimbursed or paid by the Borrowers hereunder.
SECTION 4.02. Each Credit Event. The obligation of the Lender to make
each Loan or to continue or convert any Loan, is subject to the satisfaction of
the following conditions:
(A) The representations and warranties of the
Borrowers set forth in this Agreement shall be true and correct on and as of the
date of such disbursement of a Loan or the date of such continuation or
conversion of a Loan, as applicable.
<PAGE> 36
(B) At the time of and immediately after giving
effect to such disbursement of a Loan or such continuation or conversion of a
Loan, as applicable, no Default shall have occurred and be continuing.
Each request for a Loan, and each disbursement continuation or conversion of any
Loan, shall be deemed to constitute a representation and warranty by the
Borrowers on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.
ARTICLE V
Affirmative Covenants
Until the Commitment has expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, the Borrowers covenant and agree, jointly and severally, with
the Lender that:
SECTION 5.01. Financial Statements and Other Information. The Borrowers
will furnish or cause to be furnished to the Lender:
(A) within 120 days after the end of each fiscal year
of the Company, (i) its audited consolidated balance sheet and related
statements of operations, stockholders' equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, all reported on by Ernst & Young or other
independent public accountants satisfactory to the Lender (without a "going
concern" or like qualification or exception and without any qualification or
exception as to the scope of such audit) to the effect that such consolidated
financial statements present fairly in all material respects the financial
condition and results of operations of the Company and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, and (ii) consolidating balance sheets setting forth such information
separately for the Company and for each Borrower as of the end of such fiscal
year and consolidating statements of operations setting forth such information
separately for the Company and for each Borrower for such fiscal year, such
consolidating balance sheet and consolidating financial statements to be
certified by the Chief Financial Officer of the Company as fairly presenting the
financial condition and results of operations of the Company and each Borrower
as of the end of, and for, such fiscal period in accordance with GAAP;
(B) within 60 days after the end of each of the first
three fiscal quarters of each fiscal year of the Company, (i) its consolidated
balance sheet and related statements of operations, stockholders' equity and
cash flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form the
figures for the corresponding period or periods of (or, in the case of the
balance sheet, as of the end of) the previous fiscal year, all
<PAGE> 37
certified by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Company and
its consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes, and (ii) consolidating balance sheets of the Company and
of each Borrower setting forth such information separately for the Company and
for each Borrower and related consolidating statements of operation of the
Company and of each Borrower setting forth such information separately for the
Company and each Borrower as of the end of and for such quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or in the case of
the balance sheets, as of the end of) the previous fiscal year, all of which
shall be certified by the Chief Financial Officer of the Company as fairly
presenting the financial condition and results of operations therein shown in
accordance with GAAP consistently applied subject to normal year-end adjustments
and the absence of footnotes;
(C) concurrently with any delivery of financial
statements under clause (a) or (b) above, a certificate of a Financial Officer
of the Company (i) certifying as to whether a Default has occurred and, if a
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 6.06 and (iii)
stating whether any change in GAAP or in the application thereof has occurred
since the date of the audited financial statements referred to in Section
3.04(a) and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;
(D) concurrently with any delivery of financial
statements under clause (a) above, a certificate of the accounting firm that
reported on such financial statements stating whether they obtained knowledge
during the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by accounting
rules or guidelines), and promptly after receipt by the Company, a copy of each
management letter (if prepared) of such accounting firm (together with any
response thereto prepared by the Company);
(E) promptly (i) after the same become publicly
available, copies of all periodic and other reports, proxy statements and other
materials filed by the Company or any Subsidiary thereof with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities exchange, or
distributed by the Company to its shareholders generally, as the case may be;
and (ii) copies of any documents and information furnished to any other
Government Authority (except if in the ordinary course of business), including
the Internal Revenue Service;
<PAGE> 38
(F) within twenty (20) days after the end of each
calendar month, (i) accounts receivables aging schedules of each Borrower,
certified to be true, complete and correct in all material respects by the
president, secretary or chief financial officer of the Company, in form and
substance satisfactory to the Lender;
(G) within five (5) days after the occurrence of any
transaction of the type referred to in Section 6.01(c), notice thereof
describing the same in reasonable detail;
(H) promptly, a copy of any amendment or waiver of
any provision of any agreement or instrument referred to in Section 6.09;
(I) at least 30 days before the end of the Company's
fiscal year, a revised budgeted operating statement and cash flow projection for
the ensuing fiscal year; and
(J) promptly following any request therefor, such
other information regarding the operations, business affairs and financial
condition of each Credit Party or any Subsidiary thereof, or compliance with the
terms of this Agreement or the other Loan Documents, as the Lender may
reasonably request.
SECTION 5.02. Notices of Certain Events. The Borrowers will furnish to
the Lender written notice not more than three (3) days after the following:
(A) the occurrence of any Default;
(B) the filing or commencement of any action, suit or
proceeding by or before any arbitrator or Governmental Authority against or
affecting any Credit Party or any Affiliate thereof that, if adversely
determined, could reasonably be expected to result in a Material Adverse Effect
in respect of such Credit Party;
(C) the occurrence of any ERISA Event that, alone or
together with any other ERISA Events that have occurred, could reasonably be
expected to result in liability of any Credit Party and its Subsidiaries in an
aggregate amount exceeding $250,000; and
(D) any other development that results in, or could
reasonably be expected to result in, a Material Adverse Effect in respect of any
Credit Party.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of a Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
<PAGE> 39
SECTION 5.03. Existence; Conduct of Business. Except as otherwise
expressly permitted under Section 6.03, each Credit Party will, and will cause
each of its Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business.
SECTION 5.04. Payment of Obligations. Each Credit Party will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect in
respect of such Credit Party before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) such Credit Party or such Subsidiary
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP, (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect in respect of such
Credit Party, and (d) the same shall be paid or discharged or fully and
adequately bonded before it might become a Lien upon any property or asset of
such Credit Party or Subsidiary.
SECTION 5.05. Maintenance of Properties; Insurance. Each Credit Party
will, and will cause each of its Subsidiaries to, (a) keep and maintain all
property material to the conduct of its business in good working order and
condition, ordinary wear and tear excepted, and (b) maintain, with financially
sound and reputable insurance companies, insurance in such amounts and against
such risks as are customarily maintained by companies engaged in the same or
similar businesses operating in the same or similar locations, including,
without limitation, insurance against fire, and public liability insurance
against such risks and in such amounts, and having such deductible amounts as
are customary, with companies in the same or similar businesses and which is no
less than may be required by law, which insurance policies shall name the Lender
as loss payee as its interest may appear and shall provide for at least thirty
(30) days' prior written notice from such insurance company to the Lender of any
change, termination or cancellation thereof.
SECTION 5.06. Books and Records; Inspection Rights; Lock Boxes. (A)
Each Credit Party will, and will cause each of its Subsidiaries to, keep proper
books of record and account in which full, true and correct entries are made of
all dealings and transactions in relation to its business and activities. Each
Credit Party will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, and to verify the status of any Collateral, all at
such reasonable times and as often as reasonably requested.
(B) Prior to the amendment or modification of any
arrangement referred to in Section 3.16, or the establishment after the
Effective Date of any such
<PAGE> 40
arrangement, the Lender shall have been furnished with copies of such proposed
amendment or modification, or agreements establishing such arrangement and
shall, in its sole discretion, have consented thereto. In connection with the
foregoing, the Credit Parties shall cause the receipt by the Lender of waivers
of rights of set off and other documentation satisfactory to the Lender, in its
sole discretion, from the parties to such arrangements as amended, modified, or
established.
SECTION 5.07. Compliance with Laws; Environmental Laws. (A) Each Credit
Party will, and will cause each of its Subsidiaries to, comply with all laws,
rules, regulations and orders of any Governmental Authority applicable to it or
its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect in respect of such Credit Party.
(B) Without limiting the preceding paragraph, each
Credit Party will, and will cause each of its Subsidiaries to (i) comply in all
material respects with, and use reasonable best efforts to require compliance in
all material respects by all tenants and subtenants, if any, with, all
applicable Environmental Laws; and (ii) conduct and complete (or cause to be
conducted and completed) all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under Environmental Laws and in
a timely fashion comply in all material respects with all lawful orders and
directives of all Governmental Authorities regarding Environmental Laws except
to the extent that the same are being contested in good faith by appropriate
proceedings and the pendency of such proceedings could not be reasonably
expected to have a Material Adverse Effect in respect of any Credit Party;
SECTION 5.08. Use of Proceeds. The proceeds of the Line Loans will be
used only to fund working capital. The proceeds of the Revolving Loans will be
used only for acquisitions of the assets, business, or capital stock (or other
equity interests) of other Persons ("Acquisition Transactions"). No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations G, T, U and X.
SECTION 5.09. Subsidiaries Bound as Borrowers or Guarantors. If any
Person after the date hereof becomes (whether upon its formation, by acquisition
of stock or other interests therein, or otherwise) a Subsidiary of any Credit
Party (a "New Subsidiary"), the Borrowers shall promptly furnish notice in
writing of such facts to the Lender, and if the Lender shall so elect, (i) cause
such New Subsidiary to become a Borrower hereunder, or a Guarantor, pursuant to
an instrument in form, scope, and substance satisfactory to the Lender, (ii)
deliver or cause to be delivered, to the Lender subject to the Lien in favor of
the Lender under the Pledge Agreement, any certificates representing shares of
stock or other interests of the New Subsidiary owned by a Credit Party (or
Subsidiary thereof), together with appropriate instruments of transfer required
under the Pledge Agreement, (iii) execute and deliver to the Lender an amendment
to
<PAGE> 41
the Pledge Agreement, reflecting the Lien and security interest of the Lender in
the stock or other equity interests of such New Subsidiary in a manner
satisfactory to the Lender (including any consents of third parties in respect
thereof as the Lender shall require); and (iv) cause such New Subsidiary
otherwise to become a party to the Security Documents pursuant to one or more
instruments or agreements satisfactory in form and substance to the Lender, the
effect of which shall be to secure the Obligations by a first priority Lien on
and security interest of the Lender in the personal property of such New
Subsidiary.
SECTION 5.10. Further Assurances. (A) Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including, without limitation, filing Uniform Commercial Code
and other financing statements and the establishment of and deposit of
Collateral into custody accounts) that may be required under applicable law, or
that the Lender may request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the Liens and security interests
created or intended to be created by the Security Documents, it being understood
that it is the intent of the parties that the Obligations shall be secured by,
among other things, all the personal property of each Borrower and each
Guarantor (other than the Company), including any such personal property
acquired subsequent to the Effective Date. Such security interests and Liens
will be created under the Security Documents and other security agreements, and
other instruments and documents in form and substance satisfactory to the
Lender, and the Borrowers shall deliver or cause to be delivered to the Lender
all such instruments and documents (including legal opinions, and lien searches)
as the Lender shall reasonably request to evidence compliance with this Section
5.10. The Borrowers agree to provide such evidence as the Lender shall
reasonably request as to the perfection and priority status of each such
security interest and Lien.
ARTICLE VI
Negative Covenants
Until the Commitment has expired or terminated and the
principal of and interest on each Loan and all fees payable hereunder have been
paid in full the Borrowers covenant and agree, jointly and severally, with the
Lender that:
SECTION 6.01. Indebtedness. No Credit Party will, nor will it permit
any of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness, except:
(A) Indebtedness created hereunder or under the other
Loan Documents, and other Indebtedness to the Lender;
<PAGE> 42
(B) Indebtedness existing on the date hereof and set
forth in Schedule 6.01, but not any extensions, increases, renewals,
refinancing, or replacements of any such Indebtedness;
(C) Indebtedness of a Borrower or any Subsidiary
thereof incurred to finance the acquisition, construction or improvement of any
fixed or capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such assets or
secured by a Lien on any such assets prior to the acquisition thereof, and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof; provided that (i) such
Indebtedness is incurred prior to or within 90 days after such acquisition or
the completion of such construction or improvement and (ii) the aggregate
principal amount of Indebtedness incurred as permitted by this clause (c) shall
not exceed $3,000,000 in the aggregate for the Company and its Subsidiaries for
any fiscal year of the Company.
(D) liabilities under operating leases of equipment
not in excess of (i) $2,500,000 in the aggregate for the Company and its
Subsidiaries for the fiscal year ending August 31, 1997, and (ii) $2,000,000 in
the aggregate for the Company and its Subsidiaries for any fiscal year of the
Company and its Subsidiaries thereafter;
(E) Approved Subordinated Debt;
(F) Consolidated Total Liabilities not exceeding
$23,000,000 in the aggregate at any time outstanding;
(G) Open account Indebtedness (not evidenced by any
separate writing) due from (i) one Borrower to another Borrower; (ii) the
Company to a Borrower; or (iii) a Borrower to the Company; and
(h) Indebtedness of a corporation which is acquired
and becomes a Subsidiary after the date hereof, provided that (i) such
Indebtedness existed at the time such corporation became a Subsidiary and was
not created in anticipation of the acquisition, and (ii) immediately after
giving effect to the acquisition of such corporation by any Credit Party or any
Subsidiary thereof no Default or Event of Default shall have occurred and be
continuing (whether or not the same shall occur as a result of the inclusion of
such corporation as a Subsidiary of the Credit Party for all purposes of this
Agreement or otherwise).
SECTION 6.02. Liens. No Credit Party will, nor will it permit any
Subsidiary thereof to, create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of any
thereof, except:
<PAGE> 43
(A) Liens arising under the Loan Documents and other
Liens in favor of the Lender;
(B) Permitted Encumbrances;
(C) any Lien on any property or asset of the Borrower
or any Subsidiary existing on the date hereof and set forth in Schedule 6.02;
provided that (i) such Lien shall not apply to any other property or asset of
any Credit Party or any Subsidiary thereof and (ii) such Lien shall secure only
those obligations which it secures on the date hereof, which shall not be
extended, increased, renewed, refinanced, or replaced;
(D) any Lien existing on any property or asset prior
to the permitted acquisition thereof by the Borrower or any Subsidiary or
existing on any property or asset of any Person that becomes a Subsidiary after
the date hereof prior to the time such Person becomes a Subsidiary; provided
that (i) such Lien is not created in contemplation of or in connection with such
acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such
Lien shall not apply to any other property or assets of the Borrower or any
Subsidiary and (iii) such Lien shall secure only those obligations which it
secures on the date of such acquisition or the date such Person becomes a
Subsidiary, as the case may be and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof; and
(E) Liens on fixed or capital assets acquired,
constructed or improved; provided that (i) such security interests secure
Indebtedness permitted by clause (c) of Section 6.01, (ii) such security
interests and the Indebtedness secured thereby are incurred prior to or within
90 days after such acquisition or the completion of such construction or
improvement, (iii) the Indebtedness secured thereby does not exceed 85% of the
cost of acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or assets of
the Borrower or any Subsidiary.
SECTION 6.03. Certain Changes; Prohibited Transactions. (A) No Credit
Party will, nor will it permit any Subsidiary thereof to (i) liquidate or
dissolve, or merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it (except that any Borrower may
merge into another Borrower, provided, however, that the Lender shall receive
appropriate prior written notice of such merger if the filing by the Lender of
financing statements against the surviving Borrower in any new locations would
be required as a result of such merger to continue the perfection of any Lien of
the Lender), or (ii) (except with respect to transactions described in (x) and
solely between the Borrowers) sell, transfer, lease or otherwise dispose of (in
one transaction or in a series of transactions): (x) assets in an amount such
that after giving effect thereto the aggregate of all such sales, transfers,
leases, or other dispositions by all Credit Parties in any fiscal year of the
Company (A)
<PAGE> 44
shall have equalled or exceeded 5% of Consolidated Tangible Net Worth (as of the
most recent quarterly financial statements furnished hereunder), or (B) involve
assets that generated 5% or more of the consolidated revenues of the Company and
its Subsidiaries (during such fiscal period); or (y) any stock of any of its
Subsidiaries; (in the case of both clauses (i) and (ii), as to all such assets,
including stock, whether now owned or hereafter acquired). Transactions
otherwise prohibited by this Section 6.03(a) shall be permitted to the extent
that all of the parties to any of such transactions consist solely of
Subsidiaries (x) not incorporated in any jurisdiction within the United States
or its possessions, (y) which are, directly or indirectly, wholly owned
Subsidiaries of the Company (but not of any of the Borrowers) and (z) are not
Credit Parties.
(B) No Credit Party will, nor will it permit any of
its Subsidiaries to (i) change its accounting policies in any way that could
have a material effect on the presentation of financial reports, (ii) alter in
any material respect the nature of the business of such Credit Party or
Subsidiary thereof from that conducted on the Effective Date (or, if subsequent
thereto, the date such Person became a Credit Party or Subsidiary thereof), or
(iii) change the fiscal year of any Credit Party or any Subsidiary thereof from
the fiscal year in effect on the Effective Date (or such later date on which
such Person became a Credit Party or Subsidiary thereof); provided that such
accounting policies may change to accord with a change in GAAP; provided further
that in the event of any such change, all financial reports required hereunder
that are thereby affected shall, following such change, be presented in two
formats, one of which shall reflect such change and the other of which shall
reflect the original accounting policy.
(C) No Credit Party or Subsidiary thereof will sell,
assign, discount or otherwise dispose of notes, accounts receivable or other
rights to receive payment, with or without recourse, except for collections and
credits (to the extent permitted under the Security Documents) in the ordinary
course of business.
(D) No Credit Party or any Subsidiary thereof will
enter into any arrangement, directly or indirectly, with any Person whereby it
shall sell or transfer any property, real or personal, and used or useful in its
business, whether now owned or hereafter acquired, and thereafter rent or lease
such property or other property that it intends to use for substantially the
same purpose or purposes as the property being sold or transferred.
(E) Subject to Article VII(k), notwithstanding
anything contained herein to the contrary, the Company shall not be prohibited
from issuing and selling its equity securities (to the extent the same would not
constitute Indebtedness) in a private or public offering.
<PAGE> 45
SECTION 6.04. Investments, Loans, Advances, Guarantees and
Acquisitions. No Credit Party will, nor will it permit any of its Subsidiaries
to, purchase, hold or acquire (including pursuant to any merger with any Person
that was not a wholly owned Subsidiary prior to such merger) any capital stock,
evidences of indebtedness or other securities (including any option, warrant or
other right to acquire any of the foregoing) of, make or permit to exist any
loans or advances to, Guarantee (except pursuant to the Guarantee Agreements)
any obligations of, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other Person
constituting a business unit, except:
(A) Permitted Investments;
(B) investments existing on the date hereof in the
capital stock of its Subsidiaries;
(C) permitted Acquisition Transactions, provided that
the Chief Financial Officer of the Company certifies to the Lender that the fair
market value of the acquired stock, assets, or business is equal to or greater
than the investment therein, and provided further that the aggregate of all such
investments does not, without the consent of the Lender, exceed $5,500,000 in
any fiscal year of the Company (provided, however, that only cash payments made,
the principal amount of any Indebtedness issued, and the value of any stock
issued, during a fiscal year by the Company and its Subsidiaries shall be
counted toward such $5,500,000 limit on "investments"); and
(D) the loans and investments listed on Schedule
6.04, provided that the same shall not be increased or the repayment or return
thereof deferred.
SECTION 6.05. Restricted Payments. (a) No Credit Party will, nor will
it permit any of its Subsidiaries to, pay, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, other than cash dividends,
from an indirect Subsidiary of the Company to a Subsidiary of the Company or
from a Subsidiary of the Company to the Company.
(b) No Credit Party will, nor will it permit any of
its Subsidiaries to, if a Default or an Event Default has occurred and is
continuing, make any payment to Boris (as hereinafter defined) or its successors
or assigns under or in respect of: (i) the Asset Purchase Agreement (the "APA")
executed or to be executed hereafter among Unidigital/Boris Corporation ("UBC"),
Boris Image Group, Inc., a Massachusetts corporation ("Boris"), and certain
other Persons, (ii) the $150,000 promissory note to be given by UBC to Boris
pursuant to the APA (the "Boris Note"), or the Guaranty to be given by the
Company to Boris and certain other Persons pursuant to the APA (the "Boris
Guaranty"); nor will any Credit Party or any of its
<PAGE> 46
Subsidiaries prepay to Boris or its successors or assigns any amounts owing to
Boris under the APA, the Boris Note or the Boris Guaranty, whether or not a
Default or an Event of Default has occurred and is continuing. Nothing in this
Section 6.05(b) shall apply to payments under an employment agreement between
Boris and Leslie Brewer, II, for the compensation thereunder as heretofore
disclosed to the Lender.
SECTION 6.06. Certain Financial Covenants.
(A) The Company and its Subsidiaries shall not make
or permit to be made Capital Expenditures exceeding, in the aggregate, during
any fiscal year of the Company, $2,500,000 (the "permitted amount"); provided,
however, that up to 25 percent of any such permitted amount, if not expended in
the fiscal year for which it was such a permitted amount, may be carried forward
and added to the permitted amount for the immediately succeeding fiscal year
(but shall not be carried forward directly or indirectly to any subsequent
fiscal year and, accordingly, any Capital Expenditures incurred in such
succeeding fiscal year shall be charged first against the permitted amount for
such fiscal year without regard to any such carryforward amount).
(B) The Company and its Subsidiaries shall not:
(I) Permit the ratio of Consolidated Current
Assets to Consolidated Current Liabilities to be less than 1.10 to 1.00
at the end of any fiscal quarter of the Company during the fiscal year
of the Company ending August 31, 1997, or 1.25 to 1.00 at the end of
any fiscal quarter of the Company thereafter;
(II) Permit Consolidated Net Worth to be
less than $7,900,000 at the end of any fiscal year of the Company;
(III) Permit the Consolidated Debt Service
Coverage Ratio to be less than 1.25 to 1.00 at the end of any fiscal
year of the Company; or
(IV) Permit Consolidated Net Income to be
less than zero for any fiscal year of the Company or for any two
consecutive fiscal quarters of the Company.
SECTION 6.07. Transactions with Affiliates. No Credit Party will, nor
will it permit any of its Subsidiaries to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) as may otherwise be expressly permitted in this Agreement
or (b) in the ordinary course of business at prices and on terms and conditions
not less favorable to such Credit Party or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties.
<PAGE> 47
SECTION 6.08. Restrictive Agreements. No Credit Party will, nor will it
permit any of its Subsidiaries to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of such Credit Party or Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets, or
(b) the ability of any Credit Party or Subsidiary to pay dividends or other
distributions with respect to any shares of its capital stock or other equity
interests; provided that (i) the foregoing shall not apply to restrictions and
conditions imposed by law or by this Agreement, and (ii) the foregoing shall not
apply to restrictions and conditions existing on the date hereof identified on
Schedule 3.17 (but shall apply to any extension or renewal of, or any amendment
or modification expanding the scope of, any such restriction or condition).
SECTION 6.09. Amendment of Certain Documents. Permit the termination
of, or any amendment, waiver or modification to, the Certificate of
Incorporation or By-Laws, of any Credit Party or Subsidiary thereof except for
amendments, modifications or waivers that are not adverse in any respect to the
Lender or any of its security interests or other Liens.
ARTICLE VII
Events of Default
If any of the following events ("Events of Default") shall
occur:
(A) the Borrowers shall fail to pay any principal of
any Loan when and as the same shall become due and payable in accordance with
the terms hereof, whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;
(B) the Borrowers shall fail to pay any interest on
any Loan or any fee or any other amount (other than an amount referred to in
clause (a) of this Article) payable under this Agreement, when and as the same
shall become due and payable in accordance with the terms hereof;
(C) any representation or warranty made or deemed
made by or on behalf of any Credit Party or any Subsidiary thereof in or in
connection with this Agreement or any other Loan Document, or in any report,
certificate, financial statement or other document furnished pursuant to or in
connection with this Agreement or any other Loan Document, shall prove to have
been incorrect in any material respect when made or deemed made;
(D) any Credit Party shall fail to observe or perform
any other covenant, condition or agreement contained herein or in any other Loan
Document and
<PAGE> 48
such default shall continue unremedied for a period of 30 days (excluding from
such grace period (i) any covenant, condition or agreement to which clauses (e)
through (m) below relate in any manner, and (ii) Section 7 of the Pledge
Agreement, Sections 2.02, 2.06 and 2.07(a) of the Security Agreement and Section
2.01 of the Guarantee, as to all of which any failure to observe or perform the
same shall not be the subject of any grace period);
(E) any Credit Party or any Subsidiary thereof shall
fail to make any payment (whether of principal or interest and regardless of
amount) in respect of any Material Indebtedness, when and as the same shall
become due and payable or any event or condition occurs that results in any
Material Indebtedness becoming due prior to its scheduled maturity or that
enables or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or agent
on its or their behalf to cause any Material Indebtedness to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof, prior to
its scheduled maturity;
(F) an involuntary proceeding shall be commenced or
an involuntary petition shall be filed seeking (i) liquidation, reorganization
or other relief in respect of any Credit Party or any Subsidiary thereof or its
debts, or of a substantial part of its assets, under any Federal, state or
foreign bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Credit Party or any Subsidiary thereof
or for a substantial part of its assets, and, in any such case, such proceeding
or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(G) any Credit Party or any Subsidiary thereof shall
(i) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(ii) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or petition described in clause (h) of this
Article, (iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for such Credit Party
or any Subsidiary thereof or for a substantial part of its assets, (iv) file an
answer admitting the material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the benefit of creditors or
(vi) take any action for the purpose of effecting any of the foregoing;
(H) any Credit Party or any Subsidiary thereof shall
become unable, admit in writing or fail generally to pay its debts as they
become due;
(I) one or more judgments for the payment of money in
an aggregate amount in excess of $50,000 (which shall not have fully paid or
been fully
<PAGE> 49
covered by insurance as to which the carrier shall not have disclaimed or
reserved coverage or liability in any manner) shall be rendered against any
Credit Party and/or any Subsidiary thereof and the same shall not have been
vacated, stayed or bonded pending appeal within 30 days after the entry thereof,
or any action shall be legally taken by a judgment creditor to attach or levy
upon any assets of any Credit Party or any Subsidiary thereof to enforce any
such judgment;
(J) an ERISA Event shall have occurred that, in the
opinion of the Lender, when taken together with all other ERISA Events that have
occurred, could reasonably be expected to result in liability of any Credit
Party in an aggregate amount exceeding (i) $250,000 in any year or (ii) $250,000
for all periods; or
(K) a Change in Control shall occur;
(L) the current management of the Company shall cease
to be actively involved in the management of the Company's operations on a full
time day to day basis; or
(M) (i) any security interest in favor of the Lender
created or purported to be created under any Security Document shall no longer
provide the lien or priority contemplated by such Security Document or any party
having granted any such security interest (or any successor thereto or
representative thereof) shall make any claim or assertion to such effect, or
(ii) any Credit Party (or any successor thereto or representative thereof) shall
claim or assert that this Agreement or any other Loan Document, or any right or
remedy of the Lender hereunder or under any other Loan Document, shall not be
enforceable in accordance with its terms;
then, and in every such event (other than an event described in clause (f) or
(g) of this Article), and at any time thereafter during the continuance of such
event, the Lender may, by notice to the Borrowers, take any of the following
actions, at the same or different times: (i) terminate the Commitment, and
thereupon the Commitment shall terminate immediately, (ii) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrowers accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrowers, and (iii) exercise or cause the
exercise of any remedies available hereunder or any other Loan Document or
otherwise; and in case of any event described in clause (f) or (g) of this
Article, the Commitment shall automatically terminate and the principal of the
Loans then outstanding, together with accrued interest thereon and all fees and
other obligations of the Borrowers accrued hereunder, shall automatically become
due and payable, without
<PAGE> 50
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers.
ARTICLE VIII
Miscellaneous
SECTION 8.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(A) if to the Borrowers or to any Borrower, to the
Borrowers c/o the Company at 20 W. 20th Street, New York, New York 10011,
Attention of the Chairman (Telecopy No. 212-727-3151);
(B) if to the Lender, to it at its address at 600
Fifth Avenue New York, New York, 10020, Attention of Donald Furrer, Vice
President (Telecopy No. 212-332-4369).
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt if
delivered by hand, by courier, or given by telecopy, or five (5) days after
mailing postage prepaid (first class) with the United States mail.
SECTION 8.02. Waivers; Amendments. (A) No failure or delay by the
Lender in exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Lender hereunder or under any other Loan Document are cumulative and are not
exclusive of any rights or remedies that it would otherwise have. No waiver of
any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrowers or any other Credit Party therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this
Section, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. Without limiting the generality of
the foregoing, the making of a Loan shall not be construed as a waiver of any
Default, regardless of whether the Lender may have had notice or knowledge of
such Default at the time.
<PAGE> 51
(B) Neither this Agreement or any of the other Loan
Documents nor any provision hereof or thereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the
Credit Party or Parties party thereto and the Lender.
SECTION 8.03. Expenses; Indemnity; Damage Waiver. (A) The Borrowers
shall pay (i) all reasonable out-of-pocket expenses incurred by the Lender and
its Affiliates, including the reasonable fees, charges and disbursements of
counsel for such Persons, in the preparation and administration of this
Agreement and the other Loan Documents, or of any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket
expenses incurred by the Lender, including the fees, charges and disbursements
of any counsel, in connection with the enforcement or preservation of any rights
under this Agreement or the other Loan Documents, including its rights under
this Section, or in connection with the Loans made hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans.
(B) The Borrowers shall indemnify the Lender, and
each Related Party of the Lender (each such Person being called an "Indemnitee")
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Loan Document, or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto or thereto of their respective obligations hereunder or
thereunder or the consummation of the Transactions or any other transactions
contemplated hereby or thereby, (ii) any Loan or the use of the proceeds
therefrom; (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by any Credit Party or any
of its Subsidiaries, or any Environmental Liability related in any way to any
Credit Party or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(C) To the extent permitted by applicable law, the
Borrowers shall not assert, and each Borrower hereby waives, any claim against
any Indemnitee, on any theory of liability, for special, indirect, consequential
or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result
<PAGE> 52
of, this Agreement, any other Loan Document, or any agreement or instrument
contemplated hereby or thereby, the Transactions, any Loan or the use of the
proceeds thereof.
(D) All amounts due under this Section shall be
payable promptly after written demand therefor.
SECTION 8.04. Successors and Assigns; Assignment of Loans; Sale of
Participations.
(A) Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the successors
and assigns of such party; and all covenants, promises and agreements by or on
behalf of any Borrower, any other Credit Party, or the Lender that are contained
in this Agreement shall bind and inure to the benefit of their respective
successors and assigns. No Credit Party may assign or transfer any of its rights
or obligations hereunder without the written consent of the Lender.
(B) The Lender reserves the right to sell, assign, or
participate the Loans and the Commitment hereunder to any financial
institution(s) without limitation, provided that no such participation, but only
an assignment to another financial institution, shall relieve the Lender of its
obligations hereunder and the Lender shall remain as the agent for any such
assignees or participants. Without limiting the foregoing, each assignee and
participant shall be entitled to the benefits of this Agreement and the other
Loan Documents, and the obligations of the Credit Parties hereunder and under
the other Loan Documents shall survive, without being impaired in any way
regardless of any assignments and participations hereunder.
(C) Notwithstanding any other provision hereof, the
Lender may, in connection with any assignment or participation or proposed
assignment or participation pursuant to this Section, disclose to the assignee
or participant or proposed assignee or participant, any information relating to
any Credit Party furnished to the Lender by or on behalf of any Credit Party in
connection with this Agreement.
(D) Within five (5) Business Days after notice
thereof by the Lender to the Borrowers, the Borrowers shall execute and deliver
to the Lender in exchange for the surrendered Note or Notes of the assignor a
new Note or Notes to the order of such assignee in an amount equal to its
assigned portion pursuant to such assignment and, with respect to the assignor
in an amount equal to the portion retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such assignment and shall otherwise be in substantially the form of the
surrendered Note or Notes. Cancelled Notes shall be returned promptly to the
Borrowers.
<PAGE> 53
(E) The Lender shall maintain at its address referred
to in Section 8.01 hereof a copy of each agreement of assignment delivered to it
and a register for the recordation of the names and addresses of the assignees
and principal amounts of the Loans owing to each assignee from time to time (the
"Register"). The entries in the Register shall be conclusive, in the absence of
manifest error. The Register shall be available for inspection by the Borrowers
at any reasonable time and from time to time upon reasonable prior notice.
(F) Any purchaser, participant or assignee under
Section 8.04(b) which is a Foreign Lender that is entitled to an exemption from,
or reduction of, withholding tax under the law of the jurisdiction in which the
Borrowers are located, or under any treaty to which such jurisdiction is a
party, with respect to payments under this Agreement, shall deliver to the
Lender (with a copy to the Borrowers), at the time or times prescribed by
applicable law, such properly completed and executed documentation prescribed by
applicable law or reasonably requested by the Lender or the Borrowers as will
permit such payments to be made to such Foreign Lender without withholding or at
a reduced rate.
SECTION 8.05. Survival. All covenants, agreements, representations and
warranties made by the Borrowers herein and by the Borrowers and the other
Credit Parties in the other Loan Documents and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement or any
other Loan Documents shall be considered to have been relied upon by the Lender
and shall survive the execution and delivery of this Agreement and the making of
any Loans, regardless of any investigation made by the Lender or on its behalf
and notwithstanding that the Lender may have had notice or knowledge of any
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as the
principal of or any accrued interest on any Loan or any fee or any other amount
payable under this Agreement is outstanding and unpaid and for so long as the
Commitment has not expired or terminated. The provisions of Sections 2.13, 2.14,
2.15 and 8.03 shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Commitment or the termination of
this Agreement or any provision hereof.
SECTION 8.06. Counterparts; Integration; Effectiveness. This Agreement
may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement, the other
Loan Documents, and any separate letter agreements with respect to fees payable
to the Lender constitute the entire contract among the parties thereto relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 4.01, this Agreement shall
<PAGE> 54
become effective when it shall have been executed by the Lender and when the
Lender shall have received counterparts hereof which, when taken together, bear
the signatures of each of the other parties hereto, and thereafter shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 8.07. Severability. Any provision of this Agreement or any
other Loan Document held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.
SECTION 8.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, the Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by the Lender or any Affiliate thereof to or for the credit or the account
of any Borrower against any of and all the obligations of the Borrowers now or
hereafter existing under this Agreement or any other Loan Document, irrespective
of whether or not the Lender shall have made any demand under this Agreement or
such other Loan Document and although such obligations may be unmatured. The
rights of the Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which the Lender may have. The
Lender agrees promptly to notify the appropriate Borrower after any such set-off
and as to the application thereof; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and/or application
thereof.
SECTION 8.09. Governing Law; Jurisdiction; Consent to Service of
Process. (A) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(B) Each Borrower hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.
<PAGE> 55
Nothing in this Agreement shall affect any right that the Lender may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against any Borrower or its properties in the courts of any
jurisdiction.
(C) Each Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any court referred to in paragraph (b) of this
Section. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(D) Each party to this Agreement irrevocably consents
to service of process in the manner provided for notices in Section 8.01.
Nothing in this Agreement will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.
SECTION 8.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.
SECTION 8.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 8.12. Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender in accordance with applicable law, the
rate of interest payable in respect of such Loan hereunder, together with all
Charges payable in respect thereof, shall be
<PAGE> 56
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to the Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by the Lender.
ARTICLE IX
Multiple Borrowers
Each Borrower agrees that the representations and warranties made by,
and the liabilities, obligations, and covenants of and applicable to any of the
Borrowers under this Agreement, shall in every case (whether or not specifically
so stated in each such case herein) be joint and several. Every notice by or to
any Borrower shall be deemed also to constitute notice by and to the other
Borrowers, every act or omission by any Borrower also shall be binding upon the
other Borrowers, and the Lender is fully authorized by each Borrower to act and
rely also upon the representations and warranties, covenants, notices, acts, and
omissions of each other Borrower.
<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
UNIDIGITAL ELEMENTS (NY), INC.
By: ________________________________
Name:
Title:
UNIDIGITAL/CARDINAL CORPORATION
By: ________________________________
Name:
Title:
UNIDIGITAL ELEMENTS (SF), INC.
By: ________________________________
Name:
Title:
UNIDIGITAL/BORIS CORPORATION
By: ________________________________
Name:
Title:
<PAGE> 58
THE CHASE MANHATTAN BANK,
as Lender,
By: ________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 10.5
REVOLVING CREDIT NOTE
$4,500,000 New York, New York
April 3, 1997
FOR VALUE RECEIVED, the undersigned, UNIDIGITAL ELEMENTS (NY), INC.,
a New York corporation, UNIDIGITAL/CARDINAL CORPORATION, a Delaware corporation,
UNIDIGITAL ELEMENTS (SF), INC., a Delaware corporation, and UNIDIGITAL/BORIS
CORPORATION, a Massachusetts corporation (the "Borrowers"), hereby jointly and
severally, unconditionally promise to pay to the order of THE CHASE MANHATTAN
BANK (the "Lender"), at its office at 600 Fifth Avenue, New York, New York 10020
on the Maturity Date in lawful money of the United States of America and in
immediately available funds, the principal amount of (a) FOUR MILLION FIVE
HUNDRED THOUSAND DOLLARS ($4,500,000), or, if less, (b) the aggregate unpaid
principal amount of all Revolving Loans made by the Lender pursuant to the
Credit Agreement (referred to below). The Borrowers further agree, jointly and
severally, to pay interest on the unpaid principal amount outstanding hereunder
from time to time from the date hereof in like money at such office at the rates
and on the dates specified in the Credit Agreement.
The holder of this Note is authorized to record on the schedule
annexed hereto or on a continuation thereof the date, Type and amount of each
Revolving Loan made pursuant to the Credit Agreement, each continuation thereof,
each conversion of all or a portion thereof to another Type, the date and amount
of each payment or repayment of principal thereof and, in the case of Eurodollar
Loans, the length of each Interest Period with respect thereto (which
recordation shall, in accordance with Section 2.08(c) of the Credit Agreement,
constitute prima facie evidence of the accuracy of the information recorded);
provided, however, that the failure to make any such recordation shall not
affect the obligations of the Borrowers in respect of such Revolving Loans.
This Note is the Revolving Credit Note referred to in the Credit
Agreement dated as of April 3, 1997 (the "Credit Agreement"), among the
Borrowers and the Lender, and is secured as provided therein and in the Security
Documents and is subject to optional and mandatory prepayment as set forth in
the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
<PAGE> 2
Terms defined in the Credit Agreement are used herein with their
defined meanings unless otherwise defined herein. This Note shall be governed
by, and construed and interpreted in accordance with, the laws of the State of
New York.
UNIDIGITAL ELEMENTS (NY), INC.
By:___________________________________
Name:
Title:
UNIDIGITAL/CARDINAL CORPORATION
By:___________________________________
Name:
Title:
UNIDIGITAL ELEMENTS (SF), INC.
By:___________________________________
Name:
Title:
UNIDIGITAL/BORIS CORPORATION
By:___________________________________
Name:
Title:
<PAGE> 3
SCHEDULE 1
TO REVOLVING CREDIT NOTE
LOANS, CONVERSIONS AND PAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
================================================================================================
Amount of Amount of Unpaid
ABR Loans Eurodollars Principal
Date Amount of Amount of Converted to Loans Balance Notation
ABR Loans Principal Eurodollar Loans Converted to of Made By
Repaid ABR Loans ABR Loans
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
================================================================================================
</TABLE>
<PAGE> 4
SCHEDULE 2
TO REVOLVING CREDIT NOTE
LOANS, CONVERSIONS AND PAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
=========================================================================================================
Amount of Amount of Unpaid
Date Amount of Amount of Eurodollar Loan ABR Loans Principal
Eurodollar Principal Converted to Converted to Balance of Notation
Loans Repaid ABR Loan Eurodollar Loans Eurodollar Loans Made By
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.6
LINE LOAN NOTE
$3,850,000 New York, New York
April 3, 1997
FOR VALUE RECEIVED, the undersigned, UNIDIGITAL ELEMENTS (NY),
INC., a New York corporation, UNIDIGITAL/CARDINAL CORPORATION, a Delaware
corporation, UNIDIGITAL ELEMENTS (SF), INC., a Delaware corporation, and
UNIDIGITAL/BORIS CORPORATION, a Massachusetts corporation (the "Borrowers"),
hereby jointly and severally, unconditionally promise to pay to the order of THE
CHASE MANHATTAN BANK (the "Lender"), at its office at 600 Fifth Avenue, New
York, New York 10020 on January 31, 1998 in lawful money of the United States of
America and in immediately available funds, the principal amount of (a) THREE
MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS ($3,850,000), or, if less, (b) the
aggregate unpaid principal amount of all Line Loans made by the Lender pursuant
to the Credit Agreement (referred to below). The Borrowers further agree,
jointly and severally, to pay interest on the unpaid principal amount
outstanding hereunder from time to time from the date hereof in like money at
such office at the rates and on the dates specified in the Credit Agreement.
The holder of this Note is authorized to record on the
schedule annexed hereto or on a continuation thereof the date, Type and amount
of each Line Loan made pursuant to the Credit Agreement, each continuation
thereof, each conversion of all or a portion thereof to another Type, the date
and amount of each payment or repayment of principal thereof and, in the case of
Eurodollar Loans, the length of each Interest Period with respect thereto (which
recordation shall, in accordance with Section 2.08(c) of the Credit Agreement,
constitute prima facie evidence of the accuracy of the information recorded);
provided, however, that the failure to make any such recordation shall not
affect the obligations of the Borrowers in respect of such Line Loans.
This Note is the Line Loan Note referred to in the Credit
Agreement dated as of April 3, 1997 (the "Credit Agreement"), among the
Borrowers and the Lender, and is secured as provided therein and in the Security
Documents and is subject to optional and mandatory prepayment as set forth in
the Credit Agreement.
Upon the occurrence of any one or more of the Events of
Default specified in the Credit Agreement, all amounts then remaining unpaid on
this Note shall become, or may be declared to be, immediately due and payable,
all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
<PAGE> 2
Terms defined in the Credit Agreement are used herein with
their defined meanings unless otherwise defined herein. This Note shall be
governed by, and construed and interpreted in accordance with, the laws of the
State of New York.
UNIDIGITAL ELEMENTS (NY), INC.
By:___________________________________
Name:
Title:
UNIDIGITAL/CARDINAL CORPORATION
By:___________________________________
Name:
Title:
UNIDIGITAL ELEMENTS (SF), INC.
By:___________________________________
Name:
Title:
UNIDIGITAL/BORIS CORPORATION
By:___________________________________
Name:
Title:
<PAGE> 3
SCHEDULE 1
TO LINE LOAN NOTE
LOANS, CONVERSIONS AND PAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
==================================================================================================================================
Amount of Amount of Unpaid
ABR Loans Eurodollars Loans Principal
Amount of Amount of Converted to Converted to Balance of Notation
Date ABR Loans Principal Repaid Eurodollar Loans ABR Loans ABR Loans Made By
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
</TABLE>
<PAGE> 4
SCHEDULE 2
TO LINE LOAN NOTE
LOANS, CONVERSIONS AND PAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
==================================================================================================================================
Amount of Amount of Unpaid
Amount of Amount of Eurodollar Loan ABR Loans Principal
Eurodollar Principal Converted to Converted to Balance of Notation
Date Loans Repaid ABR Loan Eurodollar Loans Eurodollar Loans Made By
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
==================================================================================================================================
</TABLE>
<PAGE> 1
EXHIBIT 10.7
SECURITY AGREEMENT dated as of April 3, 1997, among Unidigital
Elements (NY), Inc. (formerly known as Linographics Corporation), a New York
corporation, Unidigital/Cardinal Corporation, a Delaware corporation, Unidigital
Elements (SF), Inc. (formerly known as Linographics (Delaware) Corp.), a
Delaware corporation, and Unidigital/Boris Corporation, a Massachusetts
corporation (each, a "Debtor" and collectively, the "Debtors"), and The Chase
Manhattan Bank, as lender (the "Bank").
Reference is hereby made to the Credit Agreement dated as of
April 3, 1997 (as amended, supplemented, or modified from time to time, the
"Credit Agreement") among the Borrowers and the Bank. Terms used herein as
defined terms and not otherwise defined herein shall have the meanings given
thereto in the Credit Agreement.
The Bank has agreed to make Loans to the Debtors, all upon the
terms and subject to the conditions specified in the Credit Agreement. The
obligations of the Bank to make Loans is conditioned on, among other things, the
execution and delivery by the Debtors of a security agreement in the form
hereof.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I.
Section 1.01. Definitions. In addition to the terms defined above, the
following words and terms shall have the respective meanings, and it is hereby
agreed with respect thereto, as follows:
"Account Debtor" shall mean any Person who is or may become
obligated under, with respect to or on account of an Account Receivable.
"Accounts Receivable" shall mean in respect of any Debtor, (i)
all present and future "accounts", "chattel paper" and "documents", as such
terms are defined in the Uniform Commercial Code, of such Debtor, (ii) without
limiting the foregoing, all right, title and interest, and all the rights,
remedies, security and Liens, in, to and in respect of any Accounts Receivable
of such Debtor, including, without limitation, all right, title and interest of
such Person in any returned goods, all guaranties or other contracts of
suretyship with respect to Accounts Receivable, deposits, or other security for
the obligation of any Account Debtor, any credit or other insurance, any rights
to stoppage in transit, replevin, reclamation, or resale, and (iii) without
limiting the foregoing, all right, title and interest of such Debtor in, to and
in respect of invoices or other documents or instruments with respect to, or
otherwise representing or evidencing, any Account Receivable.
"Agreement" shall mean this Security Agreement, as it shall be
amended, supplemented or otherwise modified from time to time.
"Collateral" shall mean and collectively refer to all of the
present and future right, title and interest of each Debtor in (i) all of its
Accounts Receivable, General Intangibles,
-1-
<PAGE> 2
Inventory, Equipment and Records, and all other personal property of such Debtor
and (ii) all Proceeds, rent, issues, profits, and products of, and all
distributions and collections in respect of, the foregoing property described in
clause (i); in each case whether now owned or hereafter acquired and wherever
located.
"Equipment" shall mean, in respect of any Debtor, all present
and future machinery, equipment (including, without limitation, all
manufacturing, warehouse, and office equipment), fixtures, trade fixtures,
engineering drawings and diagrams, tools and tooling (including any rights in
respect of tools or tooling in the possession of others), computer and other
data processing equipment, furniture, office, production or data processing
supplies on hand or in transit, other miscellaneous supplies and other tangible
property of any kind now owned or hereafter acquired by such Debtor or in which
such Debtor now has or may hereafter acquire any right, title or interest and
wheresoever located, in all its forms, including, without limitation, all
"equipment" of such Debtor within the meaning of the Uniform Commercial Code and
all such property located in any plant, warehouse, office or other space leased,
owned or occupied by such Debtor and all of such Debtor's interest in all
leasehold improvements and any and all additions, accessions and appurtenances
thereto, substitutions therefor and replacements thereof, together with all
attachments, components, parts and accessories installed thereon or affixed
thereto.
"General Intangibles" shall mean, in respect of any Debtor,
all general intangibles of such Person of every nature, whether now existing or
hereafter acquired, arising or created, and shall include, in any event, all
"general intangibles" within the meaning of the Uniform Commercial Code, and,
without limiting the foregoing, all Intellectual Property, all goodwill and
deposit accounts and all contracts, causes of action and choses in action,
suits, judgments, statutory and other claims and demands, whether or not now
known to exist, including in respect of intercompany loans, and including all
Federal, state and other income tax refunds of such Person and all rights and
claims of subrogation, recoupment, contribution or indemnity (whether in equity,
at law, by contract or otherwise) of such Person against any other Person,
including, without limitation, any letter of credit, guarantee, claim, security
interest, or other security held to secure payment by an Account Debtor of any
Account Receivable.
"Intellectual Property" shall mean, in respect of any Debtor,
all intellectual and similar property of such Debtor of every kind and nature
now owned or hereafter acquired by such Debtor, including inventions, designs,
patents, patent applications, copyrights, copyright registrations, applications
to register copyrights, licenses, trademarks (including service marks),
trademark or service mark applications, trade names, trade secrets, confidential
or proprietary technical and business information, know-how, show-how or other
data or information, software and databases and all embodiments or fixations
thereof and related documentation, registrations and franchises, and all
additions, improvements and accessions to, and books and records describing or
used in connection with, any of the foregoing.
"Inventory" shall mean, in respect of any Debtor, all present
and future inventory of such Debtor of every type or description, including,
without limitation, all goods now owned or hereafter acquired, held for sale or
lease, or furnished or to be furnished under contracts of service or consumed in
such Person's business (including all such goods that have been returned or
repossessed), whether raw, in process or finished, all materials or equipment
useable in processing the same, scrap inventory, spare parts, all supplies, all
packaging
-2-
<PAGE> 3
materials, all documents of title covering any inventory and all additions and
accessions thereto, and shall include, in any event, all "inventory" within the
meaning of the Uniform Commercial Code, wherever located.
"Obligations" shall mean, collectively, (a) the due and
punctual payment of (i) the principal of and premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans when and as due, whether at maturity,
by acceleration, upon one or more dates set for repayment or prepayment or
otherwise, (ii) all other monetary obligations, including fees, costs, expenses
and indemnities, whether primary, secondary, direct, contingent, fixed or
otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Debtors to the Bank
under the Credit Agreement, of the Guarantor under the Guarantee Agreement, and
of the Debtors and of the other Credit Parties under any other Loan Documents
(including this Agreement) to which the Debtors or such other Credit Parties are
or are to be parties, and (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of the Debtors under or pursuant to the
Credit Agreement and of the Borrowers and of the other Credit Parties under the
other Loan Documents (including the Guarantee Agreements and this Agreement).
"Proceeds" shall have the meaning assigned to it under the
Uniform Commercial Code and, in any event, shall include but not be limited to
any consideration received from the sale, exchange, lease or other disposition
of any asset or property which constitutes Collateral, any distribution in
respect thereof or payment or collection thereon, and any payment received from
any insurer or other Person as a result of the destruction, loss, theft or other
involuntary conversion of whatever nature of any asset or property that
constitutes Collateral, and shall include, without limitation, all cash and
negotiable instruments received or held by the Bank pursuant to any lockbox or
similar arrangement relating to the payment of Accounts Receivable.
"Records" shall mean, in respect of any Debtor, all
instruments, files, ledgers and books of account and other records of such
Debtor, including, without limitation, all customer lists, computer programs,
computer disks and tapes, printouts and other materials upon which is stored any
information relating to such Debtor's business, now owned or hereafter acquired,
wherever located.
Section 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits, and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. References to
provisions of statutes, rules, regulations, and other documents shall be deemed
to include successor provisions thereto. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time.
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ARTICLE II.
Section 2.01. Security Interest. As security for the due and punctual
payment and performance of its Obligations, each Debtor hereby mortgages,
pledges, assigns, transfers, sets over, hypothecates conveys, grants and
delivers to the Bank, its successors and its assigns, a first priority security
interest in all of such Debtor's right, title, and interest in, to, and under
the Collateral.
Section 2.02. Representations, Warranties and Covenants. Each Debtor
hereby represents and warrants to, and covenants with, the Bank, as follows:
(A) Except for the foregoing security interest
granted to the Bank, such Debtor is and will at all times continue to be the
direct owner of, and have good and marketable title to the Collateral in respect
of which it has purported to grant a security interest hereunder, free and clear
of all Liens (other than Permitted Encumbrances), and has not made and will not
make any assignment, pledge, hypothecation or transfer of, or create or suffer
to exist any Lien, on any such Collateral other than (i) Permitted Encumbrances
and (ii) Liens in favor of the Bank.
(B) Such Debtor (i) has, and at all times will have,
good right and full legal power and authority to grant, confirm and continue the
security interest granted hereunder and to execute, deliver, and perform its
obligations hereunder, all without the consent or approval of any party, other
than any such consent or approval as has been obtained and (ii) will defend its
title and interest to the Collateral and the security interest (and priority
thereof) of the Bank against any and all attachments, Liens, or other
impediments of any nature, however arising, of all persons whomsoever.
(C) The Perfection Certificate in the form of Exhibit
2.02 hereto has been duly prepared, completed and executed and the information
set forth therein is correct and complete. Fully executed Uniform Commercial
Code financing statements or other appropriate filings, recordings or
registrations (other than, in respect of copyrights, such as would be made in
the United States Copyright Office) containing a description of the Collateral
have been delivered to the Bank for filing in each governmental, municipal or
other office specified in Schedule 4 to the Perfection Certificate, which are
all the filings, recordings and registrations that are necessary to publish
notice of and protect the validity of and to establish a valid and perfected
security interest in favor of the Bank in respect of all Collateral (other than
copyrights, to the extent that recordings and registration in the United States
Copyright Office may be necessary) in which the security interest granted
hereunder may be perfected by filing, recording or registration in the United
States (or any political subdivision thereof) and its territories and
possessions, and no further or subsequent filing, refiling, recording,
rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements (and except that recordation in addition to
registration of any unregistered copyrights in the United States Copyright
Office may be necessary with respect to Collateral consisting of copyrights).
(D) Such Debtor will not (i) change its chief
executive office or Taxpayer Identification Number or remove its records, except
if otherwise permitted hereunder and if to a location within the continental
United States of America and upon at least thirty (30) days' prior written
notice to the Bank thereof or (ii) change its name (or do business under
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other names), identity or structure (including, without limitation, by merger or
consolidation, whether or not permitted under the Credit Agreement) unless the
Bank shall have received at least thirty (30) days' prior notice thereof and (in
any such case under clause (i) or (ii)) prior to effecting or permitting any
such change such Debtor shall have taken such action, satisfactory to the Bank,
to maintain the security interest of the Bank in all the Collateral granted
hereunder at all times valid, fully perfected and in full force and effect.
(E) Such Debtor shall not permit or suffer any of the
Equipment or Inventory to be located at any place other than the locations
specified in the Perfection Certificate (except in connection with sales of such
Inventory permitted in the ordinary course of business) unless the Bank shall
have received thirty (30) days' prior written notice thereof and such Debtor
shall have taken such action, satisfactory to the Bank, to maintain the security
interest in such Equipment or Inventory at all times following such change of
location valid, fully perfected and in full force and effect.
(F) Such Debtor shall at all times keep such accurate
and complete accounting records with respect to the Collateral as is consistent
with its current practices and in accordance with such prudent and standard
practices used in industries that are the same as or similar to those in which
such Debtor is engaged and, at such time or times as the Bank may reasonably
request, promptly prepare and deliver to the Bank a duly certified schedule or
schedules in form and detail reasonably satisfactory to the Bank showing the
identity, amount and location of any and all Collateral.
(G) The security interest of the Bank hereunder
constitutes a valid security interest in all the Collateral, and such security
interest secures the payment and performance of the Obligations, prior to any
other Lien in any of the Collateral.
(H) Upon appropriate filing of completed Uniform
Commercial Code financing statements as contemplated by paragraph (c) above, the
security interest of the Bank shall be a fully perfected security interest in
all of the Collateral in which a security interest may be perfected by filing or
recording (except for recordation or registration in respect of copyrights).
(I) Such Debtor has not and will not consent to the
filing or recording by any Person of, or in respect of, any Lien in any
Collateral (except by or on behalf of the Bank in respect of its security
interest hereunder).
Section 2.03. No Assumption of Liability. The security interest of the
Bank is granted as security only and shall not subject the Bank to, or in any
way alter or modify, any obligation or liability of any Debtor with respect to
or arising out of any of the Collateral. Each Debtor shall remain liable to, at
its own cost and expense, duly and punctually observe and perform all the
conditions and obligations to be observed and performed by it under each
contract, agreement or instrument relating to the Collateral, all in accordance
with the terms and conditions thereof, and each Debtor agrees to indemnify and
hold harmless the Bank from and against any and all liability for such
performance.
Section 2.04. Periodic Certification. Each year, at the time that
delivery of annual financial statements with respect to the preceding fiscal
year is required pursuant to the Credit Agreement, each Debtor shall deliver to
the Bank a certificate executed by the chief financial
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<PAGE> 6
officer of such Debtor setting forth the information required pursuant to
Section 2 of the Perfection Certificate.
Section 2.05. Matters Relating to Collateral.
(A) Each Debtor agrees, at its expense, to execute,
acknowledge, deliver and cause to be duly filed all such further instruments and
documents and take all such actions as the Bank may from time to time reasonably
request to better assure, preserve, protect and perfect the security interest
and the rights and remedies created hereby, including the payment of any fees
and taxes required in connection with the execution and delivery of this
Agreement, the granting of the security interest hereunder and the filing of any
financing statements or other documents in connection herewith. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any promissory note or other instrument (other than a check issued
in payment in the ordinary course of business and timely deposited), such note
or instrument shall be immediately pledged and delivered to the Bank, duly
endorsed in a manner satisfactory to the Bank (and shall be received, and held
uncommingled in trust for the benefit of the Bank pending such endorsement and
delivery).
(B) The Bank and such persons as the Bank may
reasonably designate shall have the right, at any reasonable time or times upon
reasonable notice and at the Debtor's own cost and expense, to inspect the
Collateral, all Records related thereto (and to make extracts and copies from
such Records) and the premises upon which any of the Collateral is located, to
discuss any Debtor's affairs with the officers of such Debtor and its
independent accountants and to verify under reasonable procedures the validity,
amount, quality, quantity, value, condition and status of or any other matter
relating to, the Collateral, including, in the case of Accounts Receivable or
Collateral in the possession of any third party, by contacting Account Debtors
or the third party in possession of such Collateral for the purpose of making
such a verification.
(C) At its option, the Bank may discharge past due
taxes, assessments, charges, fees or Liens, at any time levied or placed on the
Collateral (or any part thereof), and may pay for the maintenance and
preservation of the Collateral to the extent any Debtor fails to do so as
required by this Agreement or the other Loan Documents, and such Debtor agrees
to reimburse the Bank on demand for any payment made or any reasonable and
documented expense incurred by the Bank pursuant to the foregoing authorization;
provided, however, that nothing in this paragraph shall be interpreted as
excusing any Debtor from the performance of, or imposing any obligation on the
Bank to cure or perform, any covenants or other promises of any Debtor with
respect to taxes, assessments, charges, fees or Liens or maintenance as set
forth herein or in the other Loan Documents.
(D) If at any time any Debtor shall take and perfect
a security interest in any property of an Account Debtor or any other Person to
secure payment and performance of an Account Receivable, such Debtor shall
promptly assign such security interest to the Bank. Such assignment need not be
filed of public record unless necessary to continue the perfected status of the
security interest against creditors of and transferees from the Account Debtor
or other person granting the security interest.
Section 2.06. Use of Collateral. The Debtors may use but not dispose of
the Collateral in any lawful manner not inconsistent with the provisions of this
Agreement, the
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Credit Agreement or any other Loan Document, except that the Debtors may dispose
of Collateral (including sale of Inventory in the ordinary course of business)
to the extent expressly permitted by provisions of the Loan Documents. Without
limiting the generality of the foregoing, each Debtor agrees that it shall not
permit any Inventory to be in the possession or control of any warehouseman,
bailee, agent or processor at any time unless such warehouseman, bailee, agent
or processor shall have been notified of the security interest hereunder and
shall have agreed in a writing in form and substance reasonably satisfactory to
the Bank to hold the Inventory subject to the security interest hereunder and
the instructions of the Bank and to waive and release any Lien held by it with
respect to such Inventory, whether arising by operation of law or otherwise.
Section 2.07. Modifications, etc.
(A) None of the Debtors will, without the Bank's
prior written consent, grant any extension of the time of payment of any of the
Accounts Receivable, compromise, compound or settle the same for less than the
full amount thereof, release, wholly or partly, any person liable for the
payment thereof or allow any credit or discount whatsoever thereon, other than
extensions, credits, discounts, compromises or settlements granted or made in
the ordinary course of business and consistent with prior practice. After a
default or an Event of Default shall have occurred and during the continuation
thereof, the Bank may notify the Debtors not to grant or make any such
extension, credit, discount, compromise, or settlement under any circumstances
without its prior written consent.
(B) Without limiting any other provisions of this
Agreement, upon the occurrence and during the continuation of an Event of
Default, the Bank may, in its sole discretion, in its name or in the name of any
Debtor, or otherwise, demand, sue for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable with respect to, any of the
Collateral, but shall be under no obligation to do so, and the Bank may extend
the time of payment, arrange for payment in installments, or otherwise modify
the terms of, or release, any of the Collateral, without thereby incurring
responsibility to, or discharging or otherwise affecting any liability of, any
Debtor. The Bank will not be required to take any steps to preserve any rights
against prior parties to the Collateral. The Bank may (but shall not be
obligated to) after notice to any Debtor, make such payments and take all such
other action as the Bank deems necessary to protect its security interest in the
Collateral hereunder and/or the value thereof, and the Bank is hereby authorized
(without limiting the general nature of any authority elsewhere herein
conferred) to pay, purchase, contest, or compromise Lien on any of the
Collateral.
ARTICLE III.
Section 3.01. Remedies, Possession, Sale of Collateral, etc.
(A) Upon the occurrence and during the continuation
of an Event of Default, each Debtor agrees to deliver each item of Collateral to
the Bank on demand, and it is agreed that the Bank shall have the right (subject
to applicable law) to take any of or all the following actions at the same or
different times: (i) in respect of any Collateral consisting of Intellectual
Property, on demand, to cause the security interest hereunder therein to become
an
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assignment, transfer and conveyance of any of or all such Collateral by such
Debtor to the Bank, and in connection therewith to affix a date to and file with
the United States Patent and Trademark Office any instrument of assignment held
by the Bank for such purpose; or to license or, to the extent permitted by
applicable law, sublicense, whether general, special or otherwise, and whether
on an exclusive or non-exclusive basis, any such Collateral throughout the world
on such terms and conditions and in such manner as the Bank shall determine
(other than in violation of any then-existing licensing arrangements to the
extent that waivers cannot be obtained), and (ii) with or without legal process
and with or without previous notice or demand for performance, to take
possession of the Collateral and without liability for trespass to enter any
premises where the collateral may be located for the purpose of taking
possession of or removing the Collateral, to demand and receive Collateral from
any Person in possession thereof, to take such measures as it may deem necessary
or proper for the care or protection thereof, and, generally, to exercise any
and all rights afforded to a secured party under the Uniform Commercial Code or
other applicable law. Without limiting the generality of the foregoing, the Bank
may sell or cause to be sold, whenever it shall decide, in one or more sales or
parcels, at such prices as it may deem best, and for cash, on credit or for
future delivery, without assumption of any credit risk, all or any portion of
the Collateral, at any broker's board or at public or private sale, without
demand of performance or notice of intention to sell or of time or place of sale
(except ten (10) days' written notice to the Debtors of the time and place of
such sale, which the Debtors hereby agree to be commercially reasonable, and
such other notices as may be required by applicable statute and cannot be
waived), the Bank shall have the right to assign, transfer and deliver to the
purchaser or purchasers thereof the Collateral so sold, and any Person may be
the purchaser of all or any portion of the Collateral so sold and thereafter
hold the same absolutely, free from any claim or right of whatever kind,
including any equity of redemption of any Debtor, any such demand, notice,
claim, right or equity being hereby expressly waived and released. At any sale
or sales made pursuant to this Agreement, the Bank may bid for or purchase, free
from any claim or right of whatever kind, including any equity of redemption of
any Debtor, any such demand, notice, claim, right or equity being hereby
expressly waived and released, all or any portion of the Collateral offered for
sale, and may make any payment on account thereof by using any claim for money
then due and payable to the Bank from any Debtor as a credit against the
purchase price, and may hold, retain, and dispose of such property without
further accountability to such Debtor in respect thereof. At any such sale, the
Collateral, or portion thereof, to be sold may be sold in one lot as an entirety
or in separate parcels, as the Bank may (in its sole and absolute discretion)
determine. The Bank shall not be obligated to make any sale of any Collateral if
it shall determine not to do so, regardless of the fact that notice of sale of
such Collateral shall have been given. The Bank may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case any sale of all or any part of the
Collateral is made on credit or for future delivery, the Collateral so sold may
be retained by the Bank until the sale price is paid in full by the purchaser or
purchasers thereof, but the Bank shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again as if not
previously so sold. For purposes hereof, (i) a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof, (ii) the
Bank shall be free to carry out such sale pursuant to such agreement and (iii)
no Debtor shall be entitled to the return of the Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Bank shall have
entered into such an agreement all Events of Default shall have been remedied
and the Obligations paid in full.
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The Bank shall in any such sale have no obligations or responsibility whatsoever
to make any representations or warranties with respect to the Collateral or any
part thereof, and shall not be chargeable with any of the obligations or
liabilities of any Debtor. As an alternative to exercising the power of sale
herein conferred upon it, the Bank may proceed by a suit or suits at law or in
equity to foreclose upon the Collateral and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver. Any sale pursuant to the provisions of this Section shall be deemed to
conform to the commercially reasonable standards as provided in Section 9-504(3)
of the Uniform Commercial Code as in effect in the State of New York or its
equivalent in other jurisdictions.
(B) Each Debtor hereby agrees that it will indemnify
and hold the Bank, and its officers, directors, employees, agents, and
representatives harmless (except for its or their own wilful misconduct or gross
negligence) from and against any and all claims with respect to the Collateral
asserted both before and after the taking of actual possession or control of the
Collateral by the Bank pursuant to this Agreement, or arising out of any act or
omission of any party other than the Bank prior to such taking of actual
possession or control by the Bank, or arising out of any act or omission of such
Debtor, or any agents thereof, before or after the commencement of such actual
possession or control by the Bank. In any action hereunder the Bank shall be
entitled to the appointment, without notice, of a receiver to take possession of
all or any portion of the Collateral and to exercise such powers as the court
shall confer upon such receiver. Notwithstanding the foregoing, upon the
occurrence of an Event of Default, and during the continuation of such Event of
Default, the Bank shall be entitled to apply, without prior notice to any
Debtor, any cash or cash items constituting Collateral in the possession of the
Bank to payment of the Obligations.
Section 3.02. Grant of License to Use Intellectual Property. For the
purpose of enabling the Bank to exercise its rights and remedies hereunder, each
Debtor hereby grants to the Bank an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such Debtor) to
use, license or sub-license any of the Collateral consisting of Intellectual
Property now owned or hereafter acquired by such Debtor to the extent of the
interest of such Debtor therein at such time, and wherever the same may be
located, and including in such license reasonable access to all media in which
any of the licensed items may be recorded or stored and to all computer software
and programs used for the compilation or printout thereof. The use of such
licenses by the Bank shall be exercised, at the option of the Bank upon the
occurrence and during the continuation of an Event of Default, provided that any
license, sub-license or other transaction entered into by the Bank in accordance
herewith shall be binding upon each Debtor notwithstanding any subsequent cure
of an Event of Default. In operating under the license granted by each Debtor
pursuant to this Section, the Bank agrees that the goods sold and services
rendered under the trademarks included in the Intellectual Property shall be of
a nature and quality substantially consistent with those theretofore offered
under the trademarks by such Debtor and such Debtor shall have the right to
inspect during the term of such license, at any reasonable time or times upon
reasonable notice to the Bank, and at such Debtor's own cost and expense,
representative samples of goods sold and services rendered under the trademarks.
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Section 3.03. Application of Proceeds Upon Default
(A) Each Debtor hereby agrees that it shall upon the
occurrence and during the continuation of an Event of Default, (i) immediately
turn over to the Bank any instruments (with appropriate endorsements) or other
items constituting Collateral not then in the possession of the Bank, the
possession of which is required for the perfection of the Bank's security
interest, all of which shall be held in trust and not commingled prior to its
coming into the Bank's possession, and (ii) take all steps necessary to cause
all sums, monies, royalties, fees, commissions, charges, payments, advances,
income, profits, and other amounts constituting Proceeds of any Collateral to be
deposited directly in an account of the Debtors (or any of them) with the Bank
and to cause such sums to be applied to the satisfaction of the Obligations (in
such order as the Bank shall in its sole discretion determine).
(B) Upon the occurrence and during the continuation
of an Event of Default, all income on the Collateral, all proceeds from any sale
of the Collateral pursuant hereto and all deposits in accounts of any Debtor
with the Bank shall be applied (in such order as the Bank shall in its sole
discretion determine) to the payment of the fees and expenses of the Bank
incurred pursuant to this Agreement or any other Loan Document (including,
without limitation, reasonable fees and disbursements of counsel), and to the
payment of the Obligations. Any amounts remaining after such applications shall
be remitted to the Debtors or as a court of competent jurisdiction may otherwise
direct.
Section 3.04. Power of Attorney.
(A) Each Debtor does hereby irrevocably make,
constitute and appoint the Bank or any officer or designee thereof its true and
lawful attorney-in-fact with full power in the name of the Bank, and of such
Debtor, with power of substitution, to, upon the occurrence and during the
continuation of an Event of Default, receive, open and dispose of all mail
addressed to such Debtor, to endorse any note, check, draft, money order, or
other evidence of payment relating to the Collateral that may come into the
possession of the Bank, with full power and right to cause the mail of such
Debtor to be transferred to the Bank's own offices or otherwise; to communicate
with any Account Debtor in respect of any Accounts Receivable; to commence or
prosecute any suits, actions or proceedings to collect or otherwise realize upon
any Collateral or enforce any rights in respect thereof; to settle, compromise,
adjust or defend any claims in respect of any Collateral; to notify any Account
Debtors or otherwise require them to make payment directly to the Bank; to use,
sell, assign, transfer, pledge, make any agreement with respect to or otherwise
deal with all or any of the Collateral, and to do any and all other acts
necessary or proper to carry out the intent of this Agreement and each other
Loan Document and the grant, confirmation and continuation of the security
interests of the Bank hereunder or thereunder. Such power of attorney is coupled
with an interest and is irrevocable, and shall survive the bankruptcy,
insolvency or dissolution of any or all of the Debtors. Nothing herein contained
shall be construed as requiring or obligating the Bank to make any commitment or
to make any inquiry as to the nature or sufficiency of any payment received by
the Bank, or to present or file any claim or notice, or to take any action with
respect to the Collateral or any part thereof or the moneys due or to become due
in respect thereof or any property covered thereby. The Bank shall be
accountable only for amounts actually received as a result of the exercise of
the powers granted to it herein, and neither it nor its officers, directors,
employees or agents shall be responsible to any Debtor for any act or failure to
act hereunder, except for its or their own gross negligence or willful
misconduct.
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The provisions of this Section shall in no event relieve any Debtor of any of
its obligations hereunder or under the other Loan Documents with respect to the
Collateral or any part thereof or impose any obligation on the Bank to proceed
in any particular manner with respect to the Collateral or any part thereof, or
in any way limit the exercise by the Bank of any other or further right that it
may have on the date of this Agreement or hereafter, whether hereunder, under
any other Loan Document, by law or otherwise. Any sale of Collateral pursuant to
the provisions of this Section and in accordance with the other terms hereof
shall be deemed to conform to the commercially reasonable standards as provided
in Section 9-504(3) of the Uniform Commercial Code as in effect in the State of
New York or its equivalent in other jurisdictions.
(B) Without limiting the preceding paragraph, each
Debtor does hereby further irrevocably make, constitute and appoint the Bank or
any officer or designee thereof its true and lawful attorney-in-fact with full
power in the name of the Bank, and of such Debtor, with power of substitution,
(i) to enforce all of such Debtor's rights under and pursuant to all agreements
with respect to the Collateral, all for the sole benefit of the Bank, (ii) to
enter into and perform such agreements as may be reasonably necessary in order
to carry out the terms, covenants and conditions of this Agreement that are
required to be observed or performed by such Debtor, (iii) to execute such other
and further mortgages, pledges and assignments of the Collateral and filings or
recordations in respect thereof as the Bank may require for the purpose of
protecting, maintaining or enforcing the security interest of the Bank
hereunder, (iv) to act as authorized in Section 3.05 hereof, and (v) to do any
and all other things reasonably necessary or proper to carry out the intention
of this Agreement and the grant, confirmation, continuation and perfection of
the security interests of the Bank hereunder. Such power of attorney is coupled
with an interest and is irrevocable, and shall survive the insolvency,
bankruptcy, or dissolution of any or all of the Debtors.
Section 3.05. Financing Statements, Direct Payments, Confirmation of
Receivables and Audit Rights. Each Debtor hereby authorizes the Bank to file
Uniform Commercial Code financing statements (and any other filings required in
connection with the perfection or preservation of the security interest
hereunder of the Bank in respect of all or any part of the Collateral), and
amendments thereto and continuations thereof with regard to such Collateral,
without its signature, or, in the alternative, to execute such items on behalf
of such Debtor pursuant to the powers of attorney granted in the preceding
Section. Each Debtor further authorizes the Bank to confirm with any Account
Debtor the amounts payable to such Debtor with regard to the Collateral and to
participate with such Debtor in the audits of its respective Account Debtors.
Each Debtor hereby further authorizes the Bank upon the occurrence and during
the continuation of an Event of Default to notify any Account Debtor that all
sums payable to such Debtor relating to the Collateral shall be paid directly to
the Bank.
Section 3.06. Termination. The security interest granted hereunder
shall terminate when all the Obligations have been fully, finally and
indefeasibly paid and performed, the Revolving Credit Exposure of the Bank shall
be zero, and when the Commitment of the Bank, shall have terminated. Thereupon,
the Bank will execute and deliver, at each Debtor's expense, Uniform Commercial
Code termination statements reasonably requested by such Debtor evidencing the
release of the security interest hereunder, all without recourse to or warranty
by the Bank, and shall also at each Debtor's expense execute and deliver such
documentation as the Debtor may reasonably request to release and cancel
(without recourse or warranty) all licenses and rights referred to in Section
3.02.
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Section 3.07. Remedies Not Exclusive. The remedies conferred upon or
reserved to the Bank in this Article and elsewhere in this Agreement are
intended to be in addition to, and not in limitation of, any other remedy
available to the Bank.
ARTICLE IV.
MISCELLANEOUS
Section 4.01. No Discharge. All rights of the Bank hereunder, the
security interest granted hereunder, and the obligations of each Debtor under
this Agreement shall be absolute and unconditional and shall remain in full
force and effect without regard to, and shall not be released, discharged or in
any way diminished by (i) any lack of validity or enforceability of the Credit
Agreement, any other Loan Document (including this Agreement and each Guarantee
Agreement), any other agreement with respect to any of the Obligations or any
other agreement or instrument relating to any of the foregoing, (ii) any change
in the time, manner or place of payment of, or in any other term of, all or any
of the Obligations or any other amendment or waiver of or any consent to any
departure from the Credit Agreement, any other Loan Document or any other
agreement or instrument relating to the foregoing, (iii) any exchange, release
or nonperfection of any other collateral, or any release or amendment or waiver
of or consent to or departure from any guaranty, for all or any of the
Obligations, (iv) any exercise or nonexercise by the Bank of any right, remedy,
power or privilege under or in respect of this Agreement, any other Loan
Document or applicable law, including, without limitation, any failure by the
Bank to setoff or release in whole or in part any balance of any deposit account
or credit on its books in favor of any Credit Party or any waiver, consent,
extension, indulgence or other action or inaction in respect of any thereof, or
(v) any other act or thing or omission or delay to do any other act or thing
which may or might in any manner or to any extent vary the risk of any Credit
Party or would otherwise, but for this specific provision to the contrary,
operate as a discharge of or exonerate any Credit Party as a matter of law.
Section 4.02. Amendment; Waiver. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by any Debtor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Bank. Any such waiver, consent or approval shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on any Debtor in any case shall entitle any Debtor to any other or
further notice or demand in the same, similar or other circumstances. No waiver
by any Secured Party of any breach or default of or by any Debtor under this
Agreement shall be deemed a waiver of any other previous breach or default or
any thereafter occurring.
Section 4.03. Survival; Severability.
(A) All covenants, agreements, representations and
warranties made by the Debtors herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement, the Credit Agreement or any other Loan Document shall be considered
to have been relied upon by the Bank and shall survive the making by the Bank of
the Loans, and the execution and delivery to the Bank of any Notes evidencing
such Loans, regardless of any investigation made by the Bank or on its behalf,
and shall continue in
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<PAGE> 13
full force and effect as long as the principal of or any accrued interest on any
Loan or any other fee or amount payable under this Agreement, the Credit
Agreement or any other Loan Document is outstanding and unpaid and as long as
the Commitment has not been terminated and the Bank's Revolving Credit Exposure
is not zero.
(B) Any provision of this Agreement that is illegal,
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such illegality, invalidity or unenforceability
without invalidating the remaining provisions hereof or affecting the legality,
validity or enforceability of such provisions in any other jurisdiction. The
parties hereto agree to negotiate in good faith to replace any illegal, invalid
or unenforceable provision of this Agreement with a legal, valid and enforceable
provision that, to the extent possible, will preserve the economic bargain of
this Agreement, or to otherwise amend this Agreement to achieve such result.
Section 4.04. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Debtor, or the Bank that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
No Debtor may assign or transfer any of its rights or obligations hereunder or
any interest herein or in the Collateral except as expressly contemplated by
this Agreement or the other Loan Documents (and any such attempted assignment
shall be void).
Section 4.05. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
Section 4.06. Headings. The Article and Section headings in this
Agreement are for convenience only and shall not affect the construction hereof.
Section 4.07. Notices. Notices, consents and other communications
provided for herein shall (except as otherwise expressly permitted herein) be in
writing and given as provided in Section 8.01 of the Credit Agreement.
Communications and notices to any Debtor shall be given to it at its address set
forth in the Credit Agreement or herein.
Section 4.08. Reimbursement of the Bank.
(A) The Debtors jointly and severally agree to pay
upon demand to the Bank the amount of any and all reasonable and documented
expenses, including the reasonable and documented fees and expenses of its
counsel and of any experts or agents, that the Bank may incur in connection with
(i) the administration of the Agreement (including the customary fees and
expenses of the Bank for any audits conducted by it with respect to the Accounts
Receivable or Inventory), (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Bank hereunder, or (iv) the
failure by any Debtor to perform or observe any of the provisions hereof. If the
Debtors shall fail to do any act or thing that they have covenanted to do
hereunder or any representation or warranty of the Debtors hereunder shall be
breached, the Bank may (but shall not be obligated to) do the same or cause it
to be done or remedy any such
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<PAGE> 14
breach and there shall be added to the Obligations the cost or expense incurred
by the Bank in so doing.
(B) Without limitation of their indemnification
obligations under the other Loan Documents, the Debtors jointly and severally
agree to indemnify the Bank and its officers, directors, employees, agents,
attorneys, and representatives ("Indemnitees") against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees and expenses, incurred by or
asserted against any of them arising out of, in any way connected with, or as a
result of, the execution, delivery or performance of this Agreement or any
claim, litigation, investigation or proceeding relating hereto or to the
Collateral, whether or not any Indemnitee is a party thereto, provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses have resulted from the
gross negligence or willful misconduct of such Indemnitee.
(C) Any amounts payable as provided hereunder shall
be additional Obligations secured hereby and by the other Security Documents.
The provisions of this Section shall remain operative and in full force and
effect regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this Agreement, the
Credit Agreement or any other Loan Document or any investigation made by or on
behalf of the Bank. All amounts due under this Section shall be payable on
written demand therefor and shall bear interest at the default rate (as provided
in the Credit Agreement).
Section 4.09. Counterparts. This Agreement may be executed in separate
counterparts (telecopy of any executed counterpart having the same effect as
manual delivery thereof), each of which shall constitute an original, but all of
which, when taken together, shall constitute but one Agreement.
Section 4.10. Entire Agreement; Waiver of Jury Trial, etc.
(A) Except as expressly herein provided, this
Agreement, the Credit Agreement and the other Loan Documents constitute the
entire agreement among the parties relating to the subject matter hereof. Any
previous agreement among the parties with respect to the transactions
contemplated hereunder is superseded by this Agreement, the Credit Agreement and
the other Loan Documents. Except as expressly provided herein, the Credit
Agreement or in the other Loan Documents, nothing in this Agreement, the Credit
Agreement or in any other Loan Document, expressed or implied, is intended to
confer upon any party, other than the parties hereto, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, the Credit
Agreement or such other Loan Documents.
(B) Each Debtor hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State
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<PAGE> 15
or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Bank may otherwise have to bring any action or proceeding
relating to this Agreement against any Debtor or its properties in the courts of
any jurisdiction.
(C) Each Debtor hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any court referred to in the preceding paragraph. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(D) Each party to this Agreement irrevocably consents
to service of process in the manner provided for notices in Section 4.07 hereof
or in Section 8.01 of the Credit Agreement. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.
(E) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their duly authorized officers
and delivered as of the day and year first above written.
THE CHASE MANHATTAN BANK UNIDIGITAL ELEMENTS (NY), INC.
By:_______________________________ By:_____________________________
Name: Name:
Title: Title:
UNIDIGITAL/CARDINAL CORPORATION
By:_____________________________
Name:
Title:
UNIDIGITAL ELEMENTS (SF), INC.
By:_____________________________
Name:
Title:
UNIDIGITAL/BORIS CORPORATION
By:_____________________________
Name:
Title:
-16-
<PAGE> 1
EXHIBIT 10.8
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (as it may be amended, supplemented or modified
from time to time, this "Agreement") dated as of April 3, 1997, made by
UNIDIGITAL INC., a Delaware corporation (the "Pledgor"), in favor of THE CHASE
MANHATTAN BANK (the "Bank").
R E C I T A L S:
WHEREAS, the Pledgor is the legal and beneficial owner of all the
issued and outstanding shares (the "Pledged Shares") of capital stock of each of
Unidigital Elements (NY), Inc. (formerly known as Linographics Corporation), a
New York corporation, Unidigital/Cardinal Corporation, a Delaware corporation,
Unidigital Elements (SF), Inc. (formerly known as Linographics (Delaware)
Corp.), a Delaware corporation, and Unidigital/Boris Corporation, a
Massachusetts corporation (each, a "Borrower"); and
WHEREAS, the Borrowers and the Bank have entered into a Credit
Agreement dated as of the date hereof (as it may be amended, supplemented or
modified from time to time, the "Credit Agreement"; terms used herein as defined
terms and not otherwise defined herein being used herein as therein defined);
and
WHEREAS, it is a requirement of the Credit Agreement that the Pledgor
execute and deliver to the Bank this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises the parties
hereto agree as follows:
Section 1. Pledge. The Pledgor hereby pledges to the Bank and grants to
the Bank a first priority security interest in all of its right, title and
interest in and to the following property (the "Pledged Collateral") to secure
its Secured Obligations (as defined in Section 2 hereof):
(I) The Pledged Shares and the certificates
representing the Pledged Shares and any interest of the Pledgor in the
entries on the books of any Person pertaining to its respective Pledged
Shares and, subject to
<PAGE> 2
Section 6 hereof, all dividends, cash, options, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such Pledged Shares;
(II) all additional shares of stock of any
issuer of the Pledged Shares from time to time acquired by the Pledgor
in any manner (which T 36 shares shall be deemed to be part of the
Pledged Shares), and the certificates representing or evidencing such
additional shares and any interest of the Pledgor in the entries on the
books of any Person pertaining to such additional shares, and, subject
to Section 6 hereof, all dividends, cash, options, warrants, rights,
instruments and other property or proceeds from time to time received,
receivable or otherwise distributed in respect of or in exchange for
any or all of such shares; and
(III) subject to the provisions hereof, all
proceeds of the property described in clauses (i) and/or (ii) above.
Section 2. Secured Obligations. This Agreement secures, and the Pledged
Collateral of the Pledgor is collateral security for, the prompt payment or
performance in full when due, whether at stated maturity, by acceleration or
otherwise, of all obligations of the Borrowers under the Credit Agreement, all
obligations of the Pledgor under the Guarantee Agreement made by it as required
by the Credit Agreement, and all obligations of the Pledgor under this Agreement
(collectively, the "Secured Obligations").
Section 3. Delivery of Pledged Collateral. The Pledgor represents and
warrants that all certificates or instruments representing or evidencing its
Pledged Collateral have been delivered to the Bank and are in suitable form for
transfer, accompanied by duly executed undated instruments of transfer or
assignment in blank. The Bank shall have the right, at any time or after the
occurrence of an Event of Default upon two days' notice to the Pledgor, to
transfer to or to register in the name of the Bank or any nominee(s) thereof any
or all of the Pledged Collateral. In addition, the Bank shall have the right at
any time to exchange certificates or instruments representing or evidencing
Pledged Collateral for certificates or instruments of smaller or larger
denominations.
Section 4. Further Representations and Warranties. The Pledgor
represents and warrants as follows:
(I) the Pledgor is, and at the time of
delivery of the Pledged Collateral to the Bank pursuant to Section 3 of
this Agreement will be, the legal and beneficial owner of the Pledged
Collateral pledged by it, free and clear of any Lien except for the
Lien created by this Agreement;
<PAGE> 3
(II) the Pledgor has full power, authority
and legal right to pledge all the Pledged Collateral pledged by it
pursuant to this Agreement;
(III) no consent of any other party, other
than such as have been obtained (including, without limitation, of
stockholders, or parties to any agreements with the Pledgor) and no
consent, authorization, approval, or other action by, and no notice to
or filing with, any Governmental Authority is required either (x) for
the pledge by the Pledgor of the Pledged Collateral pursuant to this
Agreement or for the execution, delivery or performance of this
Agreement by the Pledgor or (y) for the exercise by the Bank of the
voting or other rights provided for in this Agreement or the remedies
in respect of the Pledged Collateral pursuant to this Agreement; except
as may be required (a) in connection with such disposition by laws
affecting the offering and sale of securities generally, or (b) under
applicable federal and state laws, rules and regulations, and
applicable interpretations thereof, providing for the supervision or
regulation of banking or trust businesses generally, and applicable to
the Bank.
(IV) all of the Pledged Shares have been
duly authorized and validly issued and are fully paid and
non-assessable;
(V) as of the date hereof, the Pledged
Shares consisting of capital stock of the Persons identified in the
Recitals hereto constitutes one hundred percent (100%) of the issued
and outstanding shares of stock of such Persons. There are no
certificates or instruments representing the Pledged Shares other than
those delivered as described in Section 3. There are no outstanding
options, warrants or other agreements with respect to the Pledged
Shares; and
(VI) all information set forth herein
relating to the Pledged Shares is accurate and complete in all material
respects.
Section 5. Supplements; Further Assurances. The Pledgor agrees that at
any time and from time to time, at the expense of the Pledgor, the Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or that the Bank may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Bank to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Shares. The Pledgor further
agrees that it will, upon obtaining shares or additional shares or other equity
interests not delivered in pledge hereunder of any Person that is, or is
required to become, a Borrower or a Guarantor pursuant to Section 5.09 of the
Credit Agreement, promptly (and in any event within five (5) Business Days)
deliver to the Bank a pledge amendment, duly executed by the Pledgor, in such
form as the Bank shall require (a "Pledge Amendment"), in respect of the
additional
<PAGE> 4
Pledged Shares interests that are to be pledged pursuant to this Agreement. The
Pledgor hereby authorizes the Bank to attach each Pledge Amendment to this
Agreement and agrees that all shares or interests listed on any Pledge Amendment
delivered to the Bank shall for all purposes hereunder be considered Pledged
Shares.
Section 6. Voting Rights; Dividends; Etc.
(A) As long as no Event of Default shall have
occurred and be continuing:
(I) the Pledgor shall be entitled to
exercise any and all voting and other consensual rights pertaining to
the Pledged Shares or any part thereof for any purpose not inconsistent
with the terms of this Agreement or the Credit Agreement; provided,
however, that the Pledgor shall give the Bank prompt written advice of
the manner in which it has exercised any such right. It is agreed,
however, that the Pledgor shall not vote or consent to any action that
is inconsistent with the security interest of the Bank hereunder or any
rights intended to be afforded to the Bank hereunder or under the
Credit Agreement; and
(II) the Pledgor shall be entitled to
receive and retain, and to utilize free and clear of the lien of this
Agreement, any and all dividends paid in respect of the Pledged Shares
(subject to the limitations on such payments in the Credit Agreement);
provided, however, that (i) any and all stock dividends or instruments
and other property received, receivable or otherwise distributed in
exchange for, any Pledged Shares and (ii) any liquidating dividend or
distribution in respect of the Pledged Shares or any other distribution
or other property received or receivable in respect of a distribution
in liquidation, or upon a merger or consolidation, or in respect of a
disposition of assets other than in the ordinary course of business, or
in connection with any insolvency proceeding, shall be, and shall be
forthwith delivered to the Bank to hold as collateral hereunder and
shall, if received by the Pledgor, be received in trust for the benefit
of the Bank, be segregated from the other property or funds of the
Pledgor, and be forthwith delivered to the Bank as collateral hereunder
in the same form as so received (in the case of instruments, securities
or similar property, together with any necessary endorsement, stock
power or other instrument of transfer).
(B) upon the occurrence and during the continuance of
an Event of Default:
(I) upon written notice from the Bank to the
Pledgor, all rights of the Pledgor to exercise the voting and other
consensual rights it would otherwise be entitled to exercise pursuant
to Section 6(a)(i) above shall cease, and all such rights shall
thereupon become vested in the Bank. The Bank
<PAGE> 5
shall thereupon have the sole right to exercise such voting and other
consensual rights during the continuance of such Event of Default; and
(II) all rights of the Pledgor to receive
the dividends and distributions it would otherwise be authorized to
receive and retain pursuant to Section 6(a)(ii), above, shall cease and
all such rights shall thereupon become vested in the Bank. The Bank
shall thereupon have the sole right to receive and hold such dividends
and distributions and other payments during the continuance of such
Event of Default (provided, that if such Event of Default is cured or
waived (to the extent such cure or waiver is permitted in the Credit
Agreement) such dividends, distributions or other payments shall be
returned to the Pledgor to the extent not theretofore applied by the
Bank in its sole discretion to the Secured Obligations).
(C) In order to permit the Bank to exercise the
voting and other consensual rights it may be entitled to exercise pursuant to
Section 6(b)(i) above, and to receive all dividends, distributions, and other
payments it may be entitled to receive under Section 6(b)(ii) above, the Pledgor
shall, if necessary, upon written notice from the Bank from time to time execute
and T 27 0 deliver to the Bank appropriate proxies, dividend or distribution
payment orders and other instruments as the Bank may reasonably request.
(D) All dividends, distributions, and other payments
received by the Pledgor contrary to the provisions of Section 6(b)(ii) above
shall be received in trust for the benefit of the Bank, shall be segregated from
other funds of the Pledgor and shall be forthwith paid over to the Bank as
collateral hereunder in the same form as so received (with any necessary
endorsement).
Section 7. Transfers and Other Liens; Additional Shares.
The Pledgor agrees that it will not (i) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the Pledged
Collateral or (ii) (except for any Permitted Encumbrance) create or permit to
exist any lien, claim, or encumbrance upon or with respect to any of the Pledged
Collateral. The Pledgor agrees that it will (i) cause each issuer of Pledged
Collateral not to issue any stock, or other securities in addition to or in
substitution for the Pledged Shares issued by such issuer, except to the
Pledgor, (ii) pledge hereunder, immediately upon its acquisition (directly or
indirectly) thereof, any and all additional shares of stock, or other equity
securities of each issuer of Pledged Collateral; and (iii) pledge hereunder,
immediately upon its acquisition (directly or indirectly) thereof, any and all
shares of stock or equity interests of any Person required to become a Guarantor
in accordance with Section 5.09 of the Credit Agreement.
<PAGE> 6
Section 8. Power of Attorney.
(A) The Pledgor hereby irrevocably makes, constitutes
and appoints the Bank, or any officer or designee whom the Bank shall designate,
as thereof its true and lawful attorney-in-fact with full power in the name of
the Bank, and of the Pledgor, upon the occurrence and during the continuation of
an Event of Default, to receive, open and dispose of all mail addressed to the
Pledgor, and to receive, collect and endorse any note, check, draft, money
order, other instrument or other evidence of payment representing any dividend,
distribution, or other payment in respect of, or otherwise relating to, the
Pledged Collateral that may come into the possession of the Bank, with full
power and right to cause the mail of the Pledgor to be transferred to the Bank's
own offices or otherwise; and to do any and all other acts reasonably necessary
or proper to carry out the intent of this Agreement and the pledge hereunder.
(B) The Pledgor hereby further irrevocably makes,
constitutes and appoints the Bank, or any officer or designee whom the Bank
shall designate, as its true and lawful attorney-in-fact with full power in the
name of the Bank, and of the Pledgor (i) to enforce all of the Pledgor's rights
under and with respect to the Pledged Collateral, all for the sole benefit of
the Bank, (ii) to enter into and perform any agreements as may be reasonably
necessary in order to carry out the terms, covenants and conditions of this
Agreement that are required to be observed or performed by the Pledgor, (iii) to
execute such other and further mortgages, pledges and assignments of the Pledged
Collateral as the Bank may reasonably require for the purpose of protecting,
maintaining or enforcing the security interests granted to the Bank hereunder,
(iv) to act as authorized in Section 11, and (v) to do any and all other things
reasonably necessary or proper to carry out the intention of this Agreement and
the pledge hereunder.
Section 9. Bank May Perform. If the Pledgor fails to perform any
agreement contained herein after receipt of a written request to do so from the
Bank, the Bank may itself perform, or cause performance of such agreement, and
the reasonable expenses of the Bank, including the reasonable fees and expenses
of its counsel, incurred in connection therewith shall be payable by the Pledgor
under Section 13 hereof.
Section 10. Reasonable Care. The Bank shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially
equivalent to that which the Bank in its individual capacity accords its own
property consisting of non-negotiable securities, it being understood that the
Bank shall not have responsibility for (i) ascertaining or taking action with
respect to calls, conversions, exchanges, maturities, tenders or to other
matters relating to any Pledged Collateral, whether or not the Bank has or is
deemed to have knowledge of such matters, or (ii) taking any
<PAGE> 7
necessary steps (other than steps taken in accordance with the standard of care
set forth above to maintain possession of the Pledged Collateral) to preserve
rights against any Person with respect to any Pledged Collateral absent its
willful misconduct.
Section 11. Remedies upon Default; Decisions Relating to Exercise of
Remedies.
If an Event of Default shall have occurred and be continuing,
then:
(I) The Bank may exercise in respect of the
Pledged Collateral, in addition to other rights and remedies provided
for herein or otherwise available to it, all the rights and remedies of
a secured party on default under the Uniform Commercial Code in effect
in the State of New York at that time, and the Bank may also in its
sole discretion, upon ten (10) days' notice to the Pledgor thereof,
sell the Pledged Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of
the Bank's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Bank may deem commercially reasonable, irrespective of the impact of
any such sales on the market price of such Pledged Collateral at any
such sale. The Bank may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all
or any portion of the Pledged Collateral sold at such sale, to use and
apply any of the Secured Obligations as a credit on account of the
purchase price of any Pledged Collateral payable at such sale. Each
purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of the Pledgor, and the Pledgor
hereby waives (to the fullest extent permitted by law) all rights of
redemption, stay and/or appraisal that it now has or may at any time in
the future have under any rule of law or statute now existing or
hereafter enacted. The Pledgor agrees that, to the extent notice of
sale shall be required by law, ten (10) days' notice to the Pledgor of
the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notice. The Bank
shall not be obligated to make any sale of Pledged Collateral
regardless of notice of sale having been given. The Bank may adjourn
any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. The
Pledgor hereby waives any claims against the Bank arising by reason of
the fact that the price at which any Pledged Collateral may have been
sold at such a private sale was less than the price that might have
been obtained at a public sale, even if the Bank accepts the first
offer received and does not offer such Pledged Collateral to more than
one offeree.
(II) The Pledgor recognizes that, by reason
of certain prohibitions contained in the Securities Act of 1933, as
amended (the "Securities
<PAGE> 8
Act") and applicable state securities laws, the Bank may be compelled,
with respect to any sale of all or any part of the Pledged Collateral,
to limit purchasers to those who will agree, among other things, to
acquire such Pledged Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. The Pledgor
acknowledges that any such private sales may be at prices and on terms
less favorable to the Bank than those obtainable through a public sale
without such restrictions (including, without limitation, a public
offering made pursuant to a registration under the Securities Act),
and, notwithstanding such circumstances, agrees that any such private
sale shall be deemed to have been made in a commercially reasonable
manner and that the Bank shall have no obligation to engage in public
sales and no obligation to delay the sale of any Pledged Collateral for
the period of time necessary to permit the issuer thereof to register
it for a form of public sale requiring registration under the
Securities Act or under applicable state securities laws, even if the
issuer would agree to do so.
(III) If the Bank determines to exercise its
right to sell any or all of the Pledged Collateral pursuant to this
Agreement or otherwise in accordance with law, then upon written
request, the Pledgor thereof shall, and shall cause each issuer of such
Pledged Collateral to be sold hereunder from time to time to, furnish
to the Bank all such information as the Bank may reasonably request (A)
in order to determine the number of shares and the amount of the
interests included in the Pledged Collateral that may be sold by the
Bank as exempt transactions or exempt securities under the Securities
Act and the rules of the Securities and Exchange Commission thereunder,
or under applicable state laws, as the same are from time to time in
effect and (B) in order to otherwise facilitate any such sale.
Section 12. Application of Proceeds. Any cash held by the Bank as
Pledged Collateral and all cash proceeds received by the Bank in respect of any
sale of, collection from, or other realization upon all or any part of the
Pledged Collateral pursuant to the exercise by the Bank of its remedies as a
secured creditor as provided in Section 11 of this Agreement shall be applied
promptly from time to time by the Bank (in such order as the Bank shall in its
sole discretion determine) to the payment of the reasonable fees and expenses of
the Bank incurred pursuant to this Agreement or any other Loan Document and to
the payment of the Secured Obligations. Any amounts remaining after such
applications shall be remitted to the Pledgor or as a court of competent
jurisdiction may otherwise direct.
Section 13. Expenses. The Pledgor will upon demand pay to the Bank the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and of any experts and agents, that the Bank may incur
in connection with (i) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Pledged Collateral
pursuant to this Agreement or otherwise in accordance with law, (ii) the
preservation, exercise or enforcement of any of the
<PAGE> 9
rights of the Bank hereunder or (iii) the failure by the Pledgor to perform or
observe any of the provisions hereof.
Section 14. Security Interest Absolute. All rights of the Bank and its
lien and security interest hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:
(I) any lack of validity or enforceability
of any provision of the Guarantee Agreement, the Credit Agreement or
any other Loan Document;
(II) any change in the amount, time, manner
or place of payment of, or in any other term of, all or any of the
Secured Obligations, or any other amendment or waiver of or any consent
to any departure from the Guarantee Agreement, the Credit Agreement, or
any other Loan Document;
(III) any exchange, release or
non-perfection of any other collateral, or any release or amendment or
waiver of or consent to any departure from any guarantee, for all or
any of the Secured Obligations; or
(IV) any other circumstance that might
otherwise, but for the specific provisions of this Section 14,
constitute a defense available to, or a discharge of, or exonerate the
Pledgor.
Section 15. No Waiver. No failure on the part of the Bank to exercise,
and no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the Bank of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein provided are to the fullest extent
permitted by law cumulative and are not exclusive of any remedies provided by
law.
Section 16. Indemnification. The Pledgor shall be liable for and shall
pay or reimburse (i) all reasonable out-of-pocket expenses incurred by the Bank
in connection with the preparation of this Agreement, and with any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby shall be consummated), (ii) all reasonable
expenses incurred by the Bank in connection with the enforcement of the rights
of the Bank in connection with this Agreement and (iii) except to the extent
resulting from the Bank's intentional misconduct, all reasonable expenses
incurred by the Bank or any officer, director, agent, counsel, or representative
thereof (each, an "Indemnitee") including, without limitation, in respect of any
action which may be instituted by any Person against the Bank or any Indemnitee
in respect of or in connection with this Agreement or as a result of any
transaction, action or nonaction arising from this Agreement; including, in each
such case, without limitation, the reasonable fees and disbursements of counsel
for the Bank
<PAGE> 10
and any such Indemnitee and excluding, in each such case, those expenses, claims
and liabilities which arise from the willful misconduct of the Indemnitee.
Section 17. Termination. When all Secured Obligations have been finally
and indefeasibly paid in full, the Revolving Credit Exposure of the Bank shall
be zero and the Commitment shall have terminated, this Pledge Agreement shall
terminate, and the Bank shall, upon the request and at the expense of the
Pledgor, forthwith assign, transfer and deliver, against receipt and without
recourse to the Bank, such of the Pledged Collateral as shall not have been sold
or otherwise applied pursuant to the terms hereof, to or on the order of the
Pledgor.
Section 18. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and shall be given in the manner
provided in Section 8.01 of the Credit Agreement. Notices to the Pledgor shall
be given to it at its address set forth on the signature page(s) hereof.
Section 19. Continuing Security Interest; Transfer Of Notes. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) remain in full force and effect until terminated as provided above
(ii) be binding upon the Pledgor, its successors and assigns, and (iii) inure,
together with the rights and remedies of the Bank hereunder, to the benefit of
the Bank and each of its respective successors, transferees, assignees, and
participants. Without limiting the generality of the foregoing clause (iii) and
subject to the provisions of the Credit Agreement, the Bank may assign,
participate, or otherwise transfer any indebtedness held by it to any other
person or entity, and such other person or entity shall thereupon become vested
with all the benefits in respect thereof granted to the Bank herein or
otherwise.
Section 20. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 21. Consent to Jurisdiction and Service of Process. All
judicial proceedings brought against the Pledgor with respect to this Agreement
may be brought in any state or federal court of competent jurisdiction in the
Southern District of New York and by execution and delivery of this Agreement,
the Pledgor accepts for itself and in connection with its properties, generally
and unconditionally, the nonexclusive jurisdiction of the aforesaid courts,
waives any claim that any such court is an inconvenient forum, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. TO THE FULLEST EXTENT PERMITTED BY LAW ALL PARTIES TO THIS AGREEMENT
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREUNDER. Nothing herein shall affect the right of the Bank to
bring proceedings against the Pledgor or its properties in the courts of any
other jurisdiction.
<PAGE> 11
IN WITNESS WHEREOF, the Pledgor and the Bank have caused this
Agreement to be duly executed and delivered by their officers thereunto duly
authorized as of the date first above written.
UNIDIGITAL INC. THE CHASE MANHATTAN BANK
By:_________________________ By:____________________________________
Name: Name:
Title: Title:
Address for Notice:
Unidigital Inc.
20 West 20th Street
New York, New York 10011
Attention: The Chairman
Telecopier: (212) 727-3151
<PAGE> 1
EXHIBIT 10.9
GUARANTEE AGREEMENT dated as of April 3, 1997, made by UNIDIGITAL
INC., a Delaware corporation (the "Guarantor"), with and in favor of THE CHASE
MANHATTAN BANK, a New York banking corporation (the "Lender").
Reference is hereby made to the Credit Agreement dated as of April
3, 1997 (as amended, supplemented, or modified from time to time, the "Credit
Agreement") among Unidigital Elements (NY), Inc. (formerly known as Linographics
Corporation), a New York corporation, Unidigital/Cardinal Corporation, a
Delaware corporation, Unidigital Elements (SF), Inc. (formerly known as
Linographics (Delaware) Corp.), a Delaware corporation, and Unidigital/Boris
Corporation, a Massachusetts corporation, as Borrowers (the "Borrowers"), and
The Chase Manhattan Bank. Terms used herein as defined terms and not otherwise
defined herein shall have the meanings given thereto in the Credit Agreement.
The Lender has agreed to make Loans to the Borrowers upon the terms
and subject to the conditions specified in the Credit Agreement. The Guarantor
is the owner of all the issued and outstanding capital stock of each of the
Borrowers. The obligation of the Lender to make Loans is conditioned on, among
other things, the execution and delivery by the Guarantor hereunder of a
guarantee agreement in the form hereof.
NOW, THEREFORE, in consideration of the foregoing, and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1.01. Definitions; Terms. References to this "Agreement" shall be
to this Guarantee Agreement as amended, supplemented, or otherwise modified from
time to time. The term "Obligations" shall mean, collectively, (a) the due and
punctual payment of (i) the principal of and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding) on the Loans when and as due, whether at maturity, by acceleration,
upon one or more dates on which repayment or prepayment is required, or
otherwise, and (ii) all other monetary obligations, including fees, costs,
expenses and indemnities, whether primary, secondary, direct, contingent, fixed
or otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of the Borrowers to the Lender
under the Credit Agreement or any of the other Loan Documents, and (b) the due
and punctual performance of all covenants, agreements, obligations and
liabilities of the Borrowers under or pursuant to the Credit Agreement and the
other Loan Documents. References to a "guarantor" shall include the
<PAGE> 2
Guarantor hereunder, and any other Person that is a guarantor of any or all of
the Obligations, and references to a "guarantee" shall include this Agreement,
and any other guarantee of any or all of the Obligations by any other Person.
Section 2.01. Guarantee.
(A) The Guarantor hereby, unconditionally, absolutely, and
irrevocably guarantees, as a primary obligor and not merely as a surety, the due
and punctual payment and performance in full of the Obligations, in each case
strictly in accordance with the terms thereof. In furtherance of the foregoing
and not in limitation of any other right that the Lender may have at law or in
equity against the Guarantor by virtue hereof, the Guarantor agrees that upon
failure of the Borrowers to pay any Obligations when and as the same shall
become due, whether at maturity, by acceleration, on one or more dates on which
prepayment or repayment is required, or otherwise, the Guarantor will, without
any demand or notice whatsoever, forthwith pay or cause to be paid to the Lender
in cash in immediately available funds, an amount equal to the unpaid amount of
such Obligations. The Guarantor further agrees that the Obligations guaranteed
by it hereunder may be increased in amount, extended or renewed, or otherwise
amended or modified in any respect, including, without limitation, as to
principal, scheduled repayment, prepayment, interest, fees, indemnification,
compensation, and in any other respect whatsoever, in whole or in part, without
notice or further assent from it, and that it will remain bound upon this
guarantee in respect of such Obligations as so increased, extended, renewed,
amended or modified. Payments by the Guarantor hereunder may be required on any
number of occasions.
(B) The Guarantor waives presentation to, demand for payment
from and protest to the Borrowers or any other guarantor, and also waives notice
of acceptance of its guarantee and notice of protest for nonpayment. The
obligations of the Guarantor hereunder shall not be affected by (i) the failure
of the Lender to assert any claim or demand or to enforce any right or remedy
against any Credit Party or any other Person under the provisions of any Loan
Document or any other agreement or otherwise; (ii) any rescission, waiver,
forbearance, compromise, acceleration, amendment or modification of, or any
release of any party from any of the terms or provisions of, this Agreement, any
other Loan Document, any Obligation or any other guarantee or any security
interest in respect of the Obligations (including, without limitation, in
respect of any other guarantor); (iii) any change in respect of any Credit
Party, including, without limitation, as a result of any merger, consolidation,
dissolution, liquidation, recapitalization, or other change of legal form or
status, whether or not permitted under the Loan Documents; (iv) the release,
exchange, waiver or foreclosure of any security held by the Lender for any
Obligations or the invalidity or nonperfection of any security interest securing
the Obligations or the guarantee
<PAGE> 3
hereunder, or any other defect of any kind pertaining to any Obligations or any
guarantee or collateral security in respect thereof; (v) the failure of the
Lender to exercise any right or remedy in respect of any collateral security for
any Obligations or against any Credit Party, or against any other guarantor of
any Obligations; or (vi) the release or substitution of one or more of the
Borrowers or any guarantor; (vii) the failure of any Person to become a
guarantor pursuant to any other Loan Document, whether or not required under the
Credit Agreement; or (viii) any other circumstance that might otherwise, but for
this specific agreement of the Guarantor to the contrary, result in a discharge
of or the exoneration of the Guarantor hereunder, it being the intent of the
parties hereto that the obligations of the Guarantor hereunder shall be absolute
and unconditional under any and all circumstances.
(C) The Guarantor agrees that this guarantee constitutes a
guarantee of performance and of payment when due and not just of collection,
that it is a primary obligation of the Guarantor, and that the Guarantor waives
any right to require that any resort be had by the Lender to any security held
for this guarantee or for payment of any Obligations, or to any balance of any
deposit, account, or credit on the books of the Lender in favor of any Credit
Party, or to any other Person or property. To the fullest extent permitted by
law, the Guarantor hereby expressly waives any and all rights or defenses
arising by reason of (i) any "one action" or "anti-deficiency" law that would
otherwise prevent the Lender from bringing any action, including any claim for a
deficiency, or exercising any right or remedy (including any right of set-off)
against the Guarantor before or after the commencement or completion of any
foreclosure action or sale of collateral, whether judicially, by exercise of
power of sale or otherwise, or (ii) any other law that in any other way would
otherwise require any election of remedies by the Lender.
(D) No demand hereunder or enforcement hereof against the
Guarantor shall require any demand or enforcement against any other Credit
Party.
Section 2.02. No Impairment of Guarantee. The obligations of the Guarantor
hereunder shall remain absolute and unconditional and shall not be subject to
any reduction, limitation, impairment or termination for any reason, including
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or set-off, counterclaim,
recoupment or termination whatsoever, by reason of the invalidity, illegality or
unenforceability of the Obligations or of this guarantee (or any portion or
provision thereof or hereof) or otherwise. Without limiting the generality of
the foregoing, the Guarantor specifically agrees that it shall not be discharged
or exonerated, nor shall its obligations hereunder be limited or otherwise
affected by the failure of the Lender to exercise any right, remedy, power, or
privilege or to assert any claim or demand or to enforce any remedy under any
Loan Document or applicable law, including, without limitation, any failure by
the Lender to
<PAGE> 4
setoff or release in whole or in part any balance of any deposit account or
credit on its books in favor of any Credit Party, or by any waiver, consent,
extension, indulgence, modification, or other action or inaction in respect of
any thereof, or by any default, failure or delay, willful or otherwise, in the
performance of any Obligations, or by any other act or thing or omission or
delay to do any other act or thing, by any Person, that might in any manner or
to any extent vary the risk of the Guarantor or that might but for the specific
provisions hereof to the contrary otherwise operate as a discharge or
exoneration of the Guarantor, unless and until the Obligations are fully,
finally and indefeasibly paid in cash.
Section 2.03. Security; Waiver. The Guarantor authorizes the Lender to (i)
take and hold security for the payment of this guarantee and/or the Obligations
and exchange, enforce, waive and release any such security, (ii) apply such
security and direct the order or manner of sale thereof as it in its sole
discretion may determine and (iii) release or substitute any one or more
endorsees, other guarantors or other obligors or any collateral. The Lender may,
at its election, foreclose on any security held by it by one or more judicial or
non-judicial sales, or exercise any other right or remedy available to it
against the Borrowers or any guarantor, or any security, without affecting or
impairing in any way the liability of the Guarantor hereunder except to the
extent that the Obligations have been fully, finally and indefeasibly paid in
cash. The Guarantor waives any defense arising out of any such election even
though such election operates to impair or to extinguish any right of
reimbursement or subrogation or other right or remedy of the Guarantor against
the Borrowers or any other guarantor, as the case may be, or any security.
Section 2.04. Continuation and Reinstatement, etc. The Guarantor agrees
that the guarantee hereunder shall continue to be effective or shall be
reinstated, as the case may be, if at any time payment, or any part thereof, in
respect of any Obligation is rescinded or must otherwise be restored by the
Lender upon the bankruptcy or reorganization of any Credit Party, or otherwise.
Section 2.05. Subrogation. The Guarantor agrees that throughout the period
referred to in clause (ii) of Section 4.02(a) hereof the Guarantor shall not (i)
exercise, and hereby waives, any rights against the Borrowers and any other
guarantor arising as a result of payment by the Guarantor hereunder, by way of
subrogation, reimbursement, restitution, contribution or otherwise, (ii) prove
any claim in competition with the Lender in respect of any payment hereunder in
any bankruptcy, insolvency or reorganization case or proceeding of any nature,
or (iii) have any benefit of or any right to participate in any collateral
security that may be held by the Lender for the Obligations.
<PAGE> 5
Section 2.06. Subordination. The payment of any amounts due with respect
to any indebtedness of any Credit Party now or hereafter owed to the Guarantor
(including, without limitation, any such indebtedness arising by way of
subrogation, reimbursement, restitution, contribution or otherwise in respect of
performance by the Guarantor hereunder) is hereby subordinated to the prior
full, final, and indefeasible payment in cash of all Obligations. If,
notwithstanding the foregoing sentence, the Guarantor shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by the Guarantor as trustee for the Lender and
be paid over to the Lender on account of and to be applied against the
Obligations, without affecting in any manner the liability of the Guarantor
under the other provisions of this Agreement.
Section 2.07. Remedies. The Guarantor agrees that, as between the
Guarantor and the Lender, the obligations of the Borrowers under the Credit
Agreement may be declared to be forthwith due and payable as provided in Article
VII of the Credit Agreement (and shall be deemed to have become automatically
due and payable in the circumstances provided in clause (f) or (g) of said
Article VII) for purposes of the guarantee hereunder notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against the Borrowers and that,
in the event of such declaration (or such obligations' being deemed to have
become automatically due and payable), such obligations (whether or not due and
payable by the Borrowers) shall forthwith become due and payable by the
Guarantor for purposes hereof.
Section 2.08. Payment. The Guarantor hereby agrees that the Lender, at its
sole option, in the event of a dispute by the Guarantor in the payment of any
moneys due hereunder, shall have the right to proceed under New York CPLR
Section 3213.
Section 2.09. Continuing Guarantee. The guarantee hereunder is a
continuing guarantee, and shall apply to all Obligations whenever arising.
Section 2.10. Other Guarantors. This Agreement shall remain the
unconditional, absolute, and irrevocable obligation of the Guarantor regardless
of whether any other Person (i) becomes guarantor in respect of the Obligations
(whether or not the Credit Agreement requires that such Person be or become a
guarantor) or (ii) fails to become or ceases to be a guarantor of the
Obligations (whether or not the Credit Agreement requires that such Person be or
become a guarantor).
<PAGE> 6
Section 2.11. Information. The Guarantor assumes all responsibility for
being and keeping itself informed of the financial condition and assets of the
Borrowers, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that the Guarantor
assumes and incurs hereunder, and agrees that the Lender does not have any duty
to advise the Guarantor of information regarding such circumstances or risks.
Section 3.01. Representation and Warranties The Guarantor represents and
warrants that all representations and warranties relating to it in the Credit
Agreement are true and correct.
Section 4.01. Amendment; Waiver. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Guarantor therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Lender. Any such waiver, consent or approval shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on the Guarantor in any case shall entitle the Guarantor to any other or
further notice or demand in the same, similar or other circumstances. No waiver
by the Lender of any breach or default of or by the Guarantor under this
Agreement shall be deemed a waiver of any other previous breach or default or
any thereafter occurring.
Section 4.02. Survival; Severability.
(A) All covenants, agreements, representations and warranties
made by the Guarantor herein and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement or any
other Loan Document (i) shall be considered to have been relied upon by the
Lender and shall survive the making by the Lender of the Loans, and the
execution and delivery to the Lender of any Notes evidencing such Loans,
regardless of any investigation made by or on behalf of the Lender, and (ii)
shall continue in full force and effect as long as any of the Obligations is
outstanding and unpaid and as long as the Commitment has not been terminated.
(B) Any provision of this Agreement that is illegal, invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such illegality, invalidity or unenforceability
without invalidating the remaining provisions hereof or affecting the legality,
validity or enforceability of such provisions in any other jurisdiction. The
parties hereto agree to negotiate in good faith
<PAGE> 7
to replace any illegal, invalid or unenforceable provision of this Agreement
with a legal, valid and enforceable provision that, to the extent possible, will
preserve the economic bargain of this Agreement, or to otherwise amend this
Agreement to achieve such result.
Section 4.03. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of any Credit Party that are contained in this Agreement shall
bind and inure to the benefit of each party hereto and their respective
successors and assigns. No Credit Party may assign or transfer any of its rights
or obligations hereunder except as expressly contemplated by this Agreement or
the other Loan Documents (and any such attempted assignment shall be void).
Section 4.04. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
Section 4.05. Headings; Interpretation. The Article and Section headings
in this Agreement are for convenience only and shall not affect the construction
hereof. The rules of interpretation of Section 1.03 of the Credit Agreement
shall apply to this Agreement.
Section 4.06. Notices. Notices, consents and other communications provided
for herein shall (except as otherwise expressly permitted herein) be in writing
and given as provided in Section 8.01 of the Credit Agreement. Communications
and notices to the Guarantor shall be given to it at 20 West 20th Street, New
York, New York 10011; Attention: The Chairman; Telecopy: (212) 727-3151.
Section 4.07. Counterparts. This Agreement may be executed in separate
counterparts (telecopy of any executed counterpart having the same effect as
manual delivery thereof), each of which shall constitute an original, but all of
which, when taken together, shall constitute but one Agreement.
Section 4.08. Right of Setoff. The Guarantor hereby agrees that if an
Event of Default shall have occurred and be continuing, the Lender and each of
its Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by
<PAGE> 8
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by the Lender or any such Affiliate to or for the credit or the account of
the Guarantor against any of and all the obligations of the Guarantor now or
hereafter existing under this Agreement or any other Loan Document held by the
Lender, irrespective of whether or not the Lender shall have made any demand
under this Agreement or such other Loan Document and although such obligations
may be unmatured. The rights of the Lender under this Section are in addition to
other rights and remedies (including other rights of setoff) that the Lender may
have.
Section 4.09. Waiver of Jury Trial, etc.
(A) The Guarantor hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court of the Southern District of New York, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement, or for recognition or enforcement of any judgment,
and each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Lender may otherwise
have to bring any action or proceeding relating to this Agreement against the
Guarantor or its properties in the courts of any jurisdiction.
(B) The Guarantor hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in the preceding paragraph. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(C) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 4.06. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
(D) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE
<PAGE> 9
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee
Agreement to be duly executed and delivered by their duly authorized officers
and delivered as of the day and year first above written.
UNIDIGITAL INC.
By: __________________________
Name:
Title:
THE CHASE MANHATTAN BANK
By: __________________________
Name:
Title:
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Unidigital Elements (NY), Inc., a New York corporation
Unidigital Elements (SF), Inc., a Delaware corporation, doing business as TX and
Unidigital California, Inc. in California
Unidigital/Cardinal Corporation, a Delaware corporation
Unidigital/Boris Corporation, a Massachusetts corporation
Elements (UK) Limited, a United Kingdom corporation
Regent Communications (UK) Limited, a United Kingdom corporation, a wholly-owned
subsidiary of Elements (UK) Limited
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS AT FEBRUARY 28, 1997 AND FOR THE
SIX MONTH PERIOD ENDED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 2,458,704
<SECURITIES> 0
<RECEIVABLES> 5,555,531
<ALLOWANCES> 233,058
<INVENTORY> 0
<CURRENT-ASSETS> 9,567,703
<PP&E> 12,719,714
<DEPRECIATION> 2,903,946
<TOTAL-ASSETS> 20,389,012
<CURRENT-LIABILITIES> 7,217,102
<BONDS> 0
0
0
<COMMON> 31,978
<OTHER-SE> 8,086,486
<TOTAL-LIABILITY-AND-EQUITY> 20,389,012
<SALES> 10,493,635
<TOTAL-REVENUES> 10,571,811
<CGS> 5,385,626
<TOTAL-COSTS> 5,385,626
<OTHER-EXPENSES> 3,744,364
<LOSS-PROVISION> 10,112
<INTEREST-EXPENSE> 298,739
<INCOME-PRETAX> 1,058,523
<INCOME-TAX> 353,216
<INCOME-CONTINUING> 705,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 705,307
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
