SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) October 30, 1998
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Unidigital Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-27664 13-3856672
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
229 West 28th Street, New York, New York 10001
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 244-7820
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OF ASSETS.
On October 30, 1998, Unidigital Inc., a Delaware corporation (the
"Company"), consummated the merger (the "Merger") of Hy Zazula Associates, Inc.,
a New York corporation ("Zazula"), with and into the Company's wholly-owned
subsidiary, Unison (NY), Inc., a Delaware corporation ("Unison"). Zazula
provided retouching and prepress services, primarily to advertising agencies.
The Company and Unison intend to continue such line of business. The purchase
price included an aggregate cash payment of $2,275,000 and the issuance of
$2,275,000 in restricted Common Stock of the Company (433,076 shares). Of the
purchase price, $150,000 in cash and $150,000 of restricted Common Stock of the
Company (28,552 shares) is being held in escrow for a period of two years to
satisfy any indemnification claims.
In determining the purchase price, the Company considered, among other
factors: (i) the composition of Zazula's assets, in particular, the strength of
Zazula's balance sheet; (ii) the business, operations and prospects of Zazula;
(iii) the financial statements and other relevant financial and operating data
of Zazula; (iv) the historical and projected financial information prepared by
the management of Zazula; and (v) the past and projected revenues generated from
the customers of Zazula.
The Company funded the cash portion of the purchase price from proceeds of
a revolving credit loan from Canadian Imperial Bank of Commerce ("CIBC"). See
"Item 5. Other Events." below.
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ITEM 5. OTHER EVENTS.
In order to consummate the Merger, the Company amended its credit facility
with CIBC to increase its revolving line of credit from $10,000,000 to
$15,000,000. As a result, the Company's aggregate credit facilities with CIBC
increased from $40,000,000 to $45,000,000. In addition, the Company amended its
security agreement with CIBC such that the assets of Zazula acquired in the
Merger will be included as collateral for the Company's credit facilities with
CIBC.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Information of Business Acquired.
To be filed by amendment, if required. The Company believes that it is
impracticable to provide such financial information as of the date hereof. Such
information shall be filed with the Commission no later than January 13, 1999.
(b) Pro Forma Financial Information (unaudited).
To be filed by amendment, if required. The Company believes that it is
impracticable to provide such financial information as of the date hereof. Such
information shall be filed with the Commission no later than January 13, 1999.
(c) Exhibits.
Exhibit No. Description of Exhibit
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10.1 Agreement and Plan of Merger dated as
of October 30, 1998 by and among
Unidigital Inc., Unison (NY), Inc.,
Hy Zazula Associates, Inc., Hyman
Zazula, Steven Zazula, David Zazula
and Gary Feigenbaum.
10.2 Amendment No. 2 to Credit Agreement
dated as of October 30, 1998 by and
among Unidigital Inc., the several
lenders from time to time parties
thereto and Canadian Imperial Bank
of Commerce.
10.3 Amendment to Security Agreement
dated as of October 30, 1998 made
by Unidigital Inc. in favor of
Canadian Imperial Bank of Commerce.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Unidigital Inc.
By: /s/William E. Dye
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William E. Dye, Chairman of
the Board and Chief
Executive Officer (Principal
Executive, Financial and
Accounting Officer)
Date: November 16, 1998
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AGREEMENT AND PLAN OF MERGER
by and among
UNIDIGITAL INC.,
UNISON (NY), INC.,
HY ZAZULA ASSOCIATES, INC.,
and
THE STOCKHOLDERS OF HY ZAZULA ASSOCIATES, INC.
Dated as of October 30, 1998
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TABLE OF EXHIBITS
Exhibit A Form of Consulting Agreement with Hyman Zazula
Exhibit B-1 Form of Employment Agreement with Steven Zazula
Exhibit B-2 Form of Employment Agreement with David Zazula
Exhibit B-3 Form of Employment Agreement with Gary Feigenbaum
Exhibit C Form of Escrow Agreement
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AGREEMENT AND PLAN OF MERGER dated as of October 30, 1998 (the
"Agreement"), among Unidigital Inc., a Delaware corporation ("Unidigital"),
Unison (NY), Inc., a Delaware corporation ("Sub"), Hy Zazula Associates, Inc., a
New York corporation ("Zazula"), and Hyman Zazula, Steven Zazula, David Zazula
and Gary Feigenbaum, the holders of all the issued and outstanding capital stock
of Zazula (collectively, the "Stockholders").
WITNESSETH:
WHEREAS, the Boards of Directors of Unidigital, Sub and Zazula have
determined that it is advisable and in the best interests of their respective
stockholders for Unidigital, Sub and Zazula to enter into a business combination
upon the terms and subject to the conditions set forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Unidigital, Sub and Zazula have each approved the merger of Zazula with and into
Sub (the "Merger"), upon the terms and subject to the conditions set forth
herein, in accordance with the applicable provisions of the New York Business
Corporation Law (the "NYBCL"), in the case of Zazula, and the Delaware General
Corporation Law (the "DGCL"), in the case of Sub and Unidigital;
WHEREAS, Unidigital, Sub and Zazula intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
and that the Merger qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Unidigital, Sub, Zazula and the Stockholders hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Defined Terms.
As used herein, the terms below shall have the following meanings:
"Affiliate" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Ancillary Agreements" means the Employment Agreements, the Consulting
Agreement, the Escrow Agreement and all other agreements required hereunder to
consummate the Merger (including, but not limited to, employment agreements
entered into with certain key Employees of Zazula).
"Assets" means the right, title and interest of Zazula in and to each of
its properties, assets and rights of any kind, whether tangible or intangible,
real or personal, including without limitation the right, title and interest in
the following:
(a) all Contracts and Contract Rights;
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(b) all Fixtures and Equipment;
(c) all Inventory;
(d) all Books and Records;
(e) all Intellectual Property;
(f) all Permits;
(g) all return and other rights under or pursuant to all warranties,
representations and guarantees made by suppliers and other third parties in
connection with the Assets or services furnished to such Person;
(h) all cash, accounts receivable, deposits and prepaid expenses; and
(i) all goodwill and other intangible assets.
"Average Bid Price" means, as of any date of determination, the average of:
(a) the closing bid prices, if available (or the low bid prices, if
closing bid prices are not available) of Unidigital Stock as reported by Nasdaq
or the National Quotation Bureau (or such quotation system upon which Unidigital
Stock is then reported), or
(b) if Unidigital Stock is then traded on a securities exchange, the
closing prices of Unidigital Stock on such securities exchange,
in either case on the thirty (30) consecutive trading days ending on
the date of determination.
"Average Closing Price" means, as of any date of determination, the average
of the closing prices of Unidigital Stock as reported by Nasdaq or the National
Quotation Bureau (or such other quotation system or securities exchange upon
which Unidigital Stock is then reported) on the twenty (20) consecutive trading
days preceding the ten (10) days prior to the date of determination.
"Books and Records" means including, without limitation, (a) all product,
business and marketing plans, sales and promotional literature and artwork
relating to the Assets or the Business, (b) all books, records, lists, ledgers,
financial data, files, reports, product and design manuals, plans, drawings,
technical manuals and operating records of every kind relating to the Assets or
the Business (including records and lists of customers, distributors, suppliers
and personnel) and (c) all telephone and fax numbers used in the Business, in
each case whether maintained as hard copy or stored in computer memory and
whether owned by Zazula.
"Business" means the business and operations of Zazula, consisting of
providing electronic and hand retouching services to its customers, primarily
consisting of advertising agencies.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
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"Confidentiality Agreement" means that certain Confidentiality and Non-Use
Agreement dated as of May 11, 1998 between Unidigital and Zazula.
"Consents" means any and all Permits and any and all consents, approvals or
waivers from third parties that are required for the consummation of the
transactions contemplated by this Agreement.
"Consulting Agreement" means the agreement to be entered into between Sub
and Hyman Zazula substantially in the form of Exhibit A attached hereto.
"Contract Rights" means all rights and obligations under the Contracts.
"Contracts" means all written agreements, contracts, leases (whether for
real or personal property), purchase orders, undertakings, covenants not to
compete, employment agreements, confidentiality agreements, licenses,
instruments, obligations and commitments to which Zazula is a party or by which
Zazula or any of the Assets or the Business are bound or affected.
"Court Order" means any judgment, decision, consent decree, injunction,
ruling or order of any foreign, federal, state or local court or governmental
agency, department or authority that is binding on any Person or its property
under applicable law.
"Default" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"Effective Time" has the meaning set forth in Section 2.2.
"Employees" means all officers and directors of Zazula and all other
Persons employed by Zazula on a full or part-time basis as of the relevant date.
"Employment Agreements" means the agreements to be entered into between Sub
and each of Steven Zazula, David Zazula and Gary Feigenbaum substantially in the
form of Exhibits B-1, B-2 and B-3 attached hereto.
"Encumbrance" means any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment,
building, lease or use restriction, conditional sales agreement, subordination
agreement, warranty, encumbrance or other right of the Stockholders or third
parties, whether voluntarily incurred or arising by operation of law, and
includes any agreement to give any of the foregoing in the future, and any
contingent sale or other title retention agreement or lease in the nature
thereof.
"Environmental Claims" means all notices of violation, liens, claims,
demands, suits, or causes of action for any damage (including, without
limitation, any damages incurred on on-site or off-site properties), including,
without limitation, personal injury, property damage (including, without
limitation, any depreciation or diminution of property values), lost use of
property or consequential damages, arising directly or indirectly out of
Environmental Conditions or Environmental Laws. By way of example only (and not
by way of limitation), Environmental Claims include (i) violations of, or
obligations under any contract related to, Environmental Laws or Environmental
Conditions between Zazula and any other person, (ii) actual or threatened
damages to natural resources, (iii) actual or threatened claims for nuisance or
its statutory equivalent, (iv) actual or threatened claims for the recovery of
response costs, or administrative or judicial orders directing the performance
of investigations, responses or remedial actions
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under any Environmental Laws,(v) requirements to implement "corrective action"
pursuant to any order or permit issued pursuant to the Resource Conservation and
Recovery Act, as amended ("RCRA"), or similar provisions of applicable state
law, (vi) actual or threatened claims related to Environmental Laws or
Environmental Conditions for restitution, contribution, or indemnity, (vii)
actual or threatened fines, penalties or liens of any kind against property
related to Environmental Laws or Environmental Conditions, (viii) actual or
threatened claims related to Environmental Laws or Environmental Conditions for
injunctive relief or other orders or notices of violation from federal, state or
local agencies or courts, and (ix) with regard to any present or former
employees or other third parties, claims relating to exposure to or injury from
Environmental Conditions.
"Environmental Conditions" means the state of the environment, including
natural resources (e.g., flora and fauna), soil, surface water, ground water,
any drinking water supply, subsurface strata or ambient air, relating to or
arising out of the use, handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring, emptying,
discharging, injecting, escaping, leaching, disposal, dumping or threatened
release of Hazardous Substances by Zazula or any of its predecessors in interest
(which shall consist of Persons acquired by Zazula prior to the Closing Date),
or by their respective agents, representatives, employees or independent
contractors when acting in such capacity on behalf of Zazula. With respect to
Environmental Claims by third parties, Environmental Conditions also include,
without limitation, (i) the exposure of Persons to Hazardous Substances at the
work place, (ii) the exposure of Persons or property to Hazardous Substances
located on or migrating from or otherwise emanating from property currently or
formerly owned, occupied, used or on which operations were conducted by Zazula
and (iii) any off-site location or other Person or property which has directly
or indirectly been affected by any Environmental Condition.
"Environmental Laws" means, without limitation, all applicable federal,
state, district and local laws, all rules or regulations promulgated thereunder,
and all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface, or subsurface strata), including,
without limitation, (i) laws relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment and (ii) laws
relating to the identification, generation, manufacture, processing,
distribution, use, treatment, storage, disposal, recovery, transport or other
handling of Hazardous Substances. Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), the Toxic Substances Control Act, as
amended, the Hazardous Materials Transportation Act, as amended, RCRA, the Clean
Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air
Act, as amended, the Occupational Safety and Health Act, as amended, and all
analogous laws promulgated or issued by any federal, state or local or other
governmental authority.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means the escrow agent under the Escrow Agreement, or any
successor agent designated in accordance with the terms of the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement to be entered into among
Unidigital, Zazula, the Escrow Agent and the Stockholders substantially in the
form of Exhibit D hereof.
"Escrow Fund" has the meaning set forth in Section 2.12.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Financial Statements" means (a) the audited balance sheet of Zazula as of
December 31, 1997 and the related statement of income and statement of cash
flows (including notes to such Financial Statements) of Zazula for the year then
ended, together with the report of Frendel Brown & Weissman thereon (the
"Audited Financial Statements"), and (b) the unaudited balance sheet of Zazula
as of June 30, 1998 (the "Balance Sheet") and the related statement of income
and statement of cash flows (including notes to such Financial Statements) of
Zazula for the six (6) months then ended.
"Facilities" means all plants, offices, manufacturing and production
facilities, stores, warehouses, administration buildings and all real property
and related facilities owned, leased or operated by Zazula, all as identified or
listed on Schedule 3.8.
"Fixtures and Equipment" means all of the furniture, fixtures, furnishings,
machinery, computer hardware, and other tangible personal property owned by
Zazula, wherever located and including any such Fixtures and Equipment in the
possession of any of Zazula's respective suppliers or other vendors.
"Former Properties" means all plants, offices, manufacturing and production
facilities, stores, warehouses, administration buildings and all real property
and related facilities owned, leased or operated by Zazula prior to the date
hereof, but excluding Facilities.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession, which are applicable to the facts and
circumstances on the date of determination.
"Governmental Entity" shall mean any court, arbitral, tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency.
"Hazardous Substances" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws. By way
of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos, sludge, slag, acids, metals, solvents and waste waters.
"Intellectual Property" includes all of the following: (a) "patents" means
all U.S. and foreign patents, patent applications, patent disclosures and
improvements thereon; (b) "trademarks" means all U.S. and foreign trademarks and
service marks, whether registered or applied for, trade dress, logos, trade
names and corporate names and the goodwill associated therewith; (c)
"copyrights" means all U.S. and foreign copyrights and registrations and
applications for registration thereof; (d) Trade Secrets; (e) inventions; and
(f) "licenses" means any licenses granting any rights with respect to any of the
following.
"Inventory" means all merchandise owned and intended for resale and all raw
materials, work in process, finished goods, wrapping, supply and packaging items
and similar items, whether or not located on the premises, on consignment to a
third party, or in transit or storage.
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"Knowledge" or "to the knowledge" of a party (or similar phrases) means to
the extent of matters (i) which are actually known by such party or (ii) which,
based on facts of which such party is aware, would be known to a reasonable
Person of similar background and experience in similar circumstances, except
that "knowledge" or "to the knowledge" (or similar phrases) of each (x)
Stockholder pursuant to Article 3 or Article 3A means to the extent of matters
which are actually known by such Stockholder and (y) corporate entity hereunder
means to the extent of matters (A) actually known by a responsible officer or
director of such corporate entity or (B) which, based on facts of which such
responsible officer or director is aware, would or should be known to a
reasonable Person of similar background and experience in similar circumstances.
"Liability" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, unaccrued, absolute or
contingent.
"Material Adverse Effect" or "Material Adverse Change" or a similar phrase
means, with respect to any Person, (a) any material adverse effect on or change
with respect to (i) the business, operations, assets (taken as a whole),
liabilities (taken as a whole), condition (financial or otherwise) or results of
operations, of such Person and its Subsidiaries, taken as a whole, or (ii) the
right or ability of such Person or any of its Subsidiaries to consummate any of
the transactions contemplated hereby or (b) any event or condition which, with
the passage of time, the giving or receipt of notice or the occurrence or
nonoccurrence of any other circumstance, action or event, would reasonably be
expected to constitute a "Material Adverse Effect" on or "Material Adverse
Change" with respect to such Person.
"Permitted Encumbrances" means (a) liens for Taxes or governmental charges
or claims (i) not yet due and payable, or (ii) being contested in good faith, if
a reserve or other appropriate provision as shall be required by GAAP shall have
been made therefor, (b) statutory liens of landlords, liens of carriers,
warehousepersons, mechanics and materialpersons and other liens imposed by law
incurred in the ordinary course of business for sums (i) not yet due and
payable, or (ii) being contested in good faith, if a reserve or other
appropriate provision as shall be required by GAAP shall have been made
therefor, (c) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, (d) easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case, which do
not interfere with the ordinary conduct of business of Zazula and do not
materially detract from the value of the property upon which such encumbrance
exists, and (e) security interests of lessors under personal property leases
which do not interfere with the ordinary conduct of business of Zazula.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the Business or
ownership of the Assets of such Person.
"Person" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"Regulations" means any laws, statutes, ordinances, regulations, rules,
notice requirements, court decisions, agency guidelines, principles of law and
orders of any foreign, federal, state or local government
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and any other governmental department or agency, including without limitation
energy, motor vehicle safety, public utility, Taxes, zoning, building and health
codes, Environmental Laws, ERISA, occupational safety and health and laws
respecting labor and employment practices, employee documentation, terms and
conditions of employment and wages and hours.
"Related Party" means (i) any Affiliate of Zazula or the Stockholders, (ii)
any of Zazula's officers, directors and Stockholders, and (iii) any member of
such officer's, director's and Stockholder's immediate family.
"Representative" of any Person means any officer, director, principal,
attorney, agent, employee or other representative of such Person.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means all material forms, statements, reports and documents
(including all exhibits, amendments and supplements thereto) required to be
filed with respect to the business and operations of Unidigital under each of
the Securities Act and the Exchange Act, and the respective rules and
regulations thereunder.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members to the board of directors, or other
persons performing similar functions with respect to such corporation, is held,
directly or indirectly, by such Person, (b) any partnership or limited liability
company of which (i) such Person is a general partner or managing member or (ii)
such person possesses a 50% or greater interest in the total capital or total
income of such partnership or limited liability company.
"Tax Benefit" means the present value of any refund, credit or reduction in
otherwise required tax payments including any interest payable thereon, which
present value shall be computed as of the Closing Date or the first date on
which the right to the refund, credit or other Tax reduction arises or otherwise
becomes available to be utilized, whichever is later, (i) using the Tax rate
applicable to the highest level of income with respect to such Tax under the
applicable Tax law on such date, and (ii) using the interest rate on such date
imposed on corporate deficiencies paid within 30 days of a notice of proposed
deficiency under the Code or other applicable Tax law. Any Tax Benefit shall be
computed net of any related Tax cost ("Tax Cost") (which shall be computed in
the same manner in which Tax Benefits are otherwise computed pursuant to this
definition).
"Tax Return" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
"Taxes" mean any and all taxes, charges, fees, levies or other assessments,
including, but not limited to, income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, service, license, net worth, payroll, franchise and transfer
and recording, imposed by the Internal Revenue Service or any taxing authority
(whether domestic or foreign, including, but not limited to, any federal, state,
county, local or foreign government or any subdivision or
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taxing agency thereof (including a U.S. possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments.
"Trade Secrets" of a Person means all trade secrets and confidential
business information of such Person (including formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, research and development information, software, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information) which are
treated as confidential and proprietary by such Person.
"Unidigital Stock" means the common stock, par value $.01 per share, of
Unidigital.
"Voting Debt" means bonds, debentures, notes or other indebtedness having
general voting rights (or convertible into securities having such rights) of
Unidigital issued and outstanding.
"Zazula Stock" means the common stock, no par value per share of Zazula.
1.2 Interpretation Provisions.
(a) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The meaning
of defined terms shall be equally applicable to the singular and plural forms of
the defined terms. The term "or" is disjunctive but not necessarily exclusive.
The terms "include" and "including" are not limiting and mean "including without
limitation."
(b) References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(e) The language used in this Agreement shall be deemed to be the
language chosen by the parties to express their mutual intent, and no rule of
strict construction shall be applied against either party.
(f) The schedules and exhibits to this Agreement are a material part
hereof and shall be treated as if fully incorporated into the body of the
Agreement.
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ARTICLE 2.
THE MERGER
2.1 The Merger.
(a) At the Effective Time (as defined in Section 2.2 hereof), and
subject to and upon the terms and conditions of this Agreement and the DGCL,
Zazula shall be merged with and into Sub, the separate corporate existence of
Zazula shall cease, and Sub shall continue as the surviving corporation;
provided, however, that the Business will continue to operate (including all
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promotion and marketing of the Business) as a division of Sub under the name
"KWIK/Zazula." Sub as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation." At the Effective Time, all
of the rights, privileges, immunities, powers and franchises of Zazula shall
vest in the Surviving Corporation and all obligations, duties, debts and
liabilities of Zazula shall become obligations, duties, debts and liabilities of
the Surviving Corporation.
(b) Subject to the satisfaction or waiver, if permissible, of the
conditions set forth in Articles 5 and 6, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place simultaneously
with the execution hereof by October 30, 1998 (i) at the offices of Esanu Katsky
Korins & Siger, LLP, 605 Third Avenue, New York, New York, as promptly as
practicable (and in any event within five business days) after satisfaction or
waiver, if permissible, of the conditions set forth in Articles 5 and 6 or (ii)
at such other time, date or place as Unidigital and Zazula may mutually agree.
2.2 Effective Time.
At the Closing, the parties hereto shall cause the Merger to be consummated
by filing the certificate of merger (the "Certificate of Merger") as
contemplated by the Delaware General Corporation Law (the "DGCL"), together with
any required related documents, with the appropriate administrator, as indicated
in the DGCL and/or the New York Business Corporation Law (the "NYBCL"), in such
form as required by, and executed in accordance with the relevant provisions of,
the DGCL and the NYBCL. The Merger shall be effective at the time indicated in
such Certificate of Merger (the "Effective Time").
2.3 Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in
this Agreement, the Certificate of Merger and the applicable provisions of the
DGCL and the NYBCL.
2.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Sub, as
in effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter duly amended in
accordance with applicable law and such Certificate of Incorporation.
(b) At the Effective Time, the Bylaws of Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter duly amended in accordance with applicable law, the Certificate
of Incorporation of the Surviving Corporation and such Bylaws.
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(c) At the Effective Time, Sub shall continue to be a wholly-owned
subsidiary of Unidigital.
2.5 Directors and Officers.
The director of Sub immediately prior to the Effective Time shall be the
initial director of the Surviving Corporation, and shall hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, and the officers of Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation and in accordance with applicable law. Upon consummation of the
Merger, each of Steven Zazula, David Zazula and Gary Feigenbaum will be
appointed as executive officers of the KWIK/Zazula division (formerly known as
the KWIK division) of Sub, and Steven Zazula will be appointed to the management
committee of the KWIK/Zazula division (formerly known as the KWIK division) of
Sub.
2.6 Merger Consideration.
(a) In consideration of the Merger and subject to Section 2.12, at the
Effective Time, Unidigital shall pay to the Stockholders aggregate consideration
(the "Aggregate Merger Consideration") equal to (i) $2,275,000 in cash (the
"Aggregate Cash Consideration") and (ii) $2,275,000 in shares of restricted
Unidigital Stock, such amount to be paid by the issuance of such number of
shares of Unidigital Stock, which when multiplied by the Average Closing Price
shall have a market value of $2,275,000 (the "Aggregate Stock Consideration").
Each holder of Zazula Stock shall receive the number of shares constituting such
Stockholder's pro rata portion of the Aggregate Stock Consideration and the cash
payment constituting such Stockholder's pro rata portion of the Aggregate Cash
Consideration as set forth opposite his name as listed on Schedule 2.6(a).
References hereinafter to the "Merger Consideration", the "Stock
Consideration" and the "Cash Consideration" shall refer, with respect to any
Stockholder, to the pro rata portion of the Aggregate Merger Consideration, the
Aggregate Stock Consideration, and the Aggregate Cash Consideration,
respectively, as set forth opposite his name on Schedule 2.6(a). The issuance of
the Stock Consideration shall be in accordance with Section 2.8 and the payment
of the Cash Consideration shall be in accordance with Section 2.9.
(b) It is understood and agreed that prior to the Closing Date, (i)
Zazula may make a distribution to the Stockholders out of its Assets of an
amount equal to fifty percent (50%) of its net income for the period commencing
on January 1, 1998 and ending on the day before the Closing Date (but in no
event shall such distribution exceed $25,000 without the prior approval of
Unidigital), and (ii) Zazula may distribute an amount in cash or in notes
payable at the Closing up to an amount equal to the accumulated adjustments
account of the Company, as of December 31, 1997, less the cash surrender value
of the life insurance policies set forth in Schedule 2.6(b). The amount
distributed pursuant to clause (ii) hereof shall reduce the amount of the
Aggregate Cash Consideration payable pursuant to Section 2.6(a). At or prior to
the Closing, the insurance policies held by Zazula on the life of any of the
Stockholders, as set forth on Schedule 2.6(b), shall be assigned to such
Stockholders.
(c) In the event that the Average Bid Price on the third anniversary of
the Closing Date, or the next succeeding business day if said anniversary is a
weekend or holiday, is less than one hundred percent (100%) of the Average
Closing Price (determined as of the Closing Date) of the Unidigital
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Stock delivered to the Stockholders pursuant to Section 2.6(a)(ii) (as
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Unidigital Stock resulting from each stock split,
stock dividend, combination or reclassification of Unidigital Stock), Unidigital
shall make an additional payment to each Stockholder within ten (10) days after
such anniversary in an amount equal to the deficiency on a per share basis
multiplied by the number of shares of Unidigital Stock delivered to each such
Stockholder pursuant to Section 2.6(a)(ii) (as proportionately adjusted as
described above) (the "Post-Closing Adjustment"). Unidigital shall not be
obligated to pay any portion of the Post-Closing Adjustment to any Stockholder
that sells any shares of Unidigital Stock acquired hereunder within three (3)
years from the Closing Date (the "Restrictive Period"), but in no event shall
any such sale by Hyman Zazula constitute a breach under this Agreement; and
provided further that in no event shall any of the following be deemed to
constitute a sale by a Stockholder: (i) a disposition of Unidigital Stock to
satisfy an indemnity claim hereunder (pursuant to Section 2.12, Article 8, the
Escrow Agreement or otherwise); or (ii) any involuntary disposition of
Unidigital Stock, including, without limitation, a transfer to a judgment
creditor or trustee in bankruptcy in connection with the bankruptcy of a
Stockholder, a disposition by a Stockholder pursuant to a divorce decree or
settlement, or a stock swap, or other disposition in connection with a merger or
other business combination of Unidigital. Notwithstanding the foregoing, in the
event a Stockholder is terminated by Unidigital or Sub "without cause" or such
Stockholder terminates his Employment Agreement or Consulting Agreement, as
applicable, for "good reason" or such Stockholder's Employment or Consulting
Agreement, as applicable, is terminated because of death or disability (as such
terms are defined in the Employment Agreements or the Consulting Agreement, as
applicable), (i) the Restrictive Period (for that Stockholder only) shall lapse,
(ii) the measuring period for the determination of the Average Bid Price will
commence as of the date of termination of the Employment Agreement or the
Consulting Agreement, as the case may be, and (iii) the Post Closing Adjustment,
if any, shall be paid within ten (10) days following the end of the applicable
measuring period. It is understood and agreed that any Stockholder who is not
employed, or engaged as a consultant, by the Company on the third anniversary of
the Closing Date shall not be entitled to any portion of the Post-Closing
Adjustment, unless the Stockholder's Employment or Consulting Agreement has been
terminated by reason of death or disability, or by the Company without cause or
by the Stockholder for good reason. All shares issued pursuant to the
Post-Closing Adjustment shall be treated as issued pursuant to the plan of
reorganization as defined in Section 2.11 hereof. No portion of the Post-Closing
Adjustment shall be treated as compensation for services and all tax returns
filed by Unidigital and Sub shall be consistent with such treatment.
(d) The Post-Closing Adjustment shall be payable to the Stockholders in
shares of Unidigital Stock which for these purposes shall be valued based on the
Average Bid Price and shall otherwise be determined as provided in Section
2.6(c). Such shares of Unidigital Stock shall be delivered to the Stockholders
within thirty (30) days of (i) the third anniversary of the Closing Date or (ii)
such earlier date upon which the measuring period shall conclude pursuant to
Section 2.6(c).
2.7 Conversion of Shares.
As of the Effective Time, by virtue of the Merger and without any action on
the part of Unidigital, the holders of Unidigital Stock, Sub or the
Stockholders:
(a) Each issued and outstanding share of Zazula Stock shall be
converted into the right to receive the Merger Consideration.
(b) All shares of Zazula Stock that are owned by Zazula shall be
cancelled and retired and shall cease to exist and no consideration shall be
delivered in exchange therefor.
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(c) Each share of Sub common stock issued and outstanding immediately
prior to the Effective Time shall remain an issued and outstanding share of Sub
common stock and shall not be affected by the Merger.
(d) All of the shares of Zazula Stock shall no longer be outstanding
and shall automatically be cancelled and shall cease to exist as of the
Effective Time, and each certificate (each, a "Certificate") previously
representing such shares of Zazula Stock shall thereafter represent the right to
receive (i) a certificate or certificates representing the number of whole
shares of Unidigital stock payable as the Stock Consideration and (ii) the Cash
Consideration.
(e) Upon consummation of the Merger, Unidigital will be the sole and
exclusive owner of the outstanding capital stock of the Surviving Corporation.
2.8 Exchange of Certificates.
(a) As soon as possible after the Effective Time, upon surrender by
each holder of record of a Certificate or Certificates representing Zazula Stock
that upon the Effective Time was converted pursuant to Section 2.7 into the
right to receive the Merger Consideration, Unidigital shall issue to each such
holder of record of Certificates a certificate or certificates representing the
Stock Consideration, and the Certificates so surrendered shall forthwith be
cancelled. Until surrendered as contemplated by this Section 2.8, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive the Merger Consideration as contemplated by Section
2.7.
(b) At the Effective Time, the stock transfer books of Zazula shall be
closed and thereafter there shall be no further registration of transfers of
shares of Zazula Stock on the records of Zazula. From and after the Effective
Time, the holders of record of Certificates evidencing ownership of the Zazula
Stock outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to such Zazula Stock, except as otherwise provided for
herein or by applicable law. If, after the Effective Time, any Certificates are
presented to the Surviving Corporation for any reason, they shall be cancelled
as provided for in this Article 2.
2.9 Payment of Cash Consideration.
As soon as possible after the Effective Time, and, in any event, no later
than the end of the same business day if the Effective Time occurs prior to 2:00
p.m., or the immediately following business day if the Effective Time occurs
after 2:00 p.m., Unidigital will pay, to each holder of record of Zazula Stock,
the Cash Consideration in immediately available funds by wire transfer to an
account designated by such Stockholder.
2.10 Lost, Stolen or Destroyed Certificates.
In the event any Certificates shall have been lost, stolen or destroyed,
Unidigital shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder
thereof, the Merger Consideration pursuant to Section 2.6; provided, however,
that Unidigital may, in its discretion and as a condition precedent to the
delivery thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Unidigital with respect to
the Certificates alleged to have been lost, stolen or destroyed.
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2.11 Tax Consequences.
It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code. The parties
hereto hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the U.S. Treasury Regulations.
2.12 Escrow Fund.
Notwithstanding the other provisions of this Article 2, at the Closing,
Unidigital shall deliver to the Escrow Agent (i) $150,000 of the Cash
Consideration and (ii) that number of shares of the Stock Consideration as
equals $150,000 of the Stock Consideration (determined in accordance with
Section 2.6(a)) (collectively, the "Escrow Fund"). The Escrow Fund together with
any earnings on or accretions thereto shall be held by the Escrow Agent pursuant
to the terms of the Escrow Agreement. Any Unidigital Indemnified Party (as
defined in Section 8.2(a) hereof) shall be entitled to delivery from the Escrow
Agent of such portion of the Escrow Fund as shall have a value equal to the
amount due such Unidigital Indemnified Party pursuant to Article 8 hereof. For
purposes of this Section 2.12, the value of shares of Unidigital Stock so
delivered to any Unidigital Indemnified Party shall be equal to the Average
Closing Price as of the date of notice provided to the Escrow Agent pursuant to
the terms of the Escrow Agreement. Except for that portion of the Escrow Fund
with a value (determined in accordance with this Section 2.12) equal to the
amount of any Claims by Unidigital Indemnified Parties that may be pending at
such time, the Stockholders shall be entitled to delivery from the Escrow Agent
on the second anniversary of the Closing Date of any portion of the Escrow Fund
that has not been delivered to, and is not subject to outstanding Claims or
required to have been delivered to, Unidigital Indemnified Parties pursuant to
this Section 2.12, Article 8 hereof or the Escrow Agreement on or prior to such
date.
2.13 Severance Payments.
In the event that Unidigital and Zazula mutually agree to terminate any of
Zazula's Employees in connection with the Merger, such parties will mutually
agree as to the appropriate severance packages or alternative employment
arrangements for such Employees.
2.14 Taking of Necessary Action; Further Action.
Each of Unidigital, Sub, Zazula and the Stockholders will take all such
reasonable lawful action as may be necessary or appropriate in order to effect
the Merger in accordance with this Agreement as promptly as practicable. If, at
any time after the Effective Time, any such further action is necessary or
desirable to carry out the purposes of this Agreement, to vest Unidigital with
full right, title and possession to all the property, rights, privileges, power
and franchises of Zazula and to vest the Stockholders with full right, title and
possession of the shares of Unidigital Stock and the other Merger Consideration,
the officers and directors of Unidigital, Sub, and Zazula immediately prior to
the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
2.15 Legend.
Each certificate evidencing shares of Unidigital Stock delivered to the
Stockholders hereunder shall contain a legend substantially similar to the
following:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR STATE SECURITIES LAWS. THEY
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MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER
SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED. NO DISTRIBUTION, SALE, OFFER FOR SALE,
TRANSFER, DELIVERY, PLEDGE OR OTHER DISPOSITION OF THESE SECURITIES MAY BE
EFFECTED EXCEPT IN COMPLIANCE WITH THE ACT, ANY APPLICABLE STATE LAWS, AND
THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION AND
STATE AGENCIES PROMULGATED THEREUNDER.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF
ZAZULA AND THE STOCKHOLDERS
As an inducement to Unidigital and Sub to enter into this Agreement, Zazula
and the Stockholders hereby make, jointly and severally, as of the Closing Date,
the following representations and warranties to Unidigital and Sub, except as
otherwise set forth in written disclosure schedules (the "Schedules") delivered
to Unidigital and Sub prior to the Closing Date, a copy of which is attached
hereto. The Schedules are numbered to correspond to the various sections of this
Article 3 setting forth certain exceptions to the representations and warranties
contained in this Article 3 and certain other information called for by this
Agreement.
3.1 Organization of Zazula.
Zazula is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York. Zazula has full corporate
power and authority to conduct the Business as it is presently being conducted
and to own or lease, as applicable, the Assets owned or leased by it. Zazula is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which such qualification is necessary under applicable
law as a result of the conduct of the Business or the ownership of its
properties, except where the failure to be so qualified would not have a
Material Adverse Effect. Each jurisdiction in which Zazula is qualified to do
business as a foreign corporation is set forth in Schedule 3.1.
3.2 Capitalization of Zazula.
(a) As of the date of this Agreement, there are 200 shares of Zazula
Stock authorized under its Certificate of Incorporation, 100 of which are issued
and outstanding. Zazula has no other capital stock authorized, issued or
outstanding. Schedule 3.2 sets forth the name of each holder of shares of Zazula
Stock, as well as the number of shares of Zazula Stock held by each such holder.
(b) There are no outstanding options, warrants, convertible securities
or rights of any kind to purchase or otherwise acquire any shares of capital
stock or other securities of Zazula obligating Zazula to issue or sell any
securities of Zazula (or other consideration in lieu thereof) and no shares of
capital stock of Zazula are reserved for issuance.
(c) All outstanding shares of Zazula Stock are validly issued, fully
paid and non-assessable and not subject to any preemptive rights created by
statute, Zazula's Certificate of Incorporation or Bylaws or any Contract. The
shares of Zazula Stock have been issued in compliance with applicable
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federal and state securities laws, except for such non-compliance which is not
likely to result in a Material Adverse Effect on Zazula.
(d) Other than the transactions contemplated by this Agreement, there
is no outstanding vote, plan, pending proposal or contractual right of any
Person to cause any redemption of Zazula Stock or the merger or consolidation of
Zazula with or into any other entity.
3.3 Stockholders' Agreements, Etc.
Except as set forth on Schedule 3.3, there are no stockholder agreements,
voting trusts, proxies or other agreements or understandings to which Zazula or
any of the Stockholders is a party with respect to or concerning the purchase,
sale or voting of the capital stock of Zazula.
3.4 Authorization.
Zazula has all necessary corporate power and authority to enter into this
Agreement and the Ancillary Agreements to which it is a party and has taken all
actions necessary to consummate the transactions contemplated hereby and thereby
and to perform its obligations hereunder and thereunder. This Agreement has been
duly executed and delivered by Zazula and this Agreement is, and upon execution
and delivery each of the Ancillary Agreements to which Zazula is a party will
be, a valid and binding obligation of Zazula, enforceable against Zazula in
accordance with its terms, except that enforceability may be limited by the
effect of (a) bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting the rights of
creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
3.5 Officers and Directors.
Schedule 3.5 contains a true, correct and complete list of all the officers
and directors of Zazula.
3.6 Bank Accounts.
Schedule 3.6 contains a list of all of Zazula's bank accounts, safe deposit
boxes, and persons authorized to draw thereon or have access thereto.
3.7 Subsidiaries, Etc.
Except as set forth on Schedule 3.7, Zazula has no present or former
Subsidiaries.
3.8 Real Property.
(a) Zazula leases all real property necessary for the conduct of its
business as presently conducted.
(b) Zazula does not currently own, nor did it formerly own, any real
property.
(c) Schedule 3.8 sets forth all Leases pursuant to which Facilities are
leased by Zazula (as lessee), true and correct copies of which have been
delivered to Unidigital. Such Leases constitute all Leases, subleases or other
occupancy agreements pursuant to which Zazula occupies or uses Facilities.
Zazula has good and valid leasehold title to, and enjoy peaceful and undisturbed
possession of, all leased property described in such Leases (the "Leased
Property"), free and clear of any and all Encumbrances other
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than any Permitted Encumbrances which would not permit the termination of the
Lease therefor by the lessor. With respect to each such parcel of Leased
Property (i) there are no pending or, to the knowledge of Zazula, threatened
condemnation proceedings relating to, or any pending or, to the knowledge of
Zazula, threatened Actions relating to, such Leased Property or any portion
thereof, (ii) Zazula or, to its knowledge, any third party, has not entered into
any sublease, license, option, right, concession or other agreement or
arrangement, written or oral, granting to any person the right to use or occupy
such Leased Property or any portion thereof or interest therein and (iii)
neither Zazula nor the Stockholders has received written notice of any pending
or threatened special assessment relating to such Leased Property or otherwise
has any knowledge of any pending or threatened special assessment relating
thereto. Each leased Facility is supplied with utilities necessary for the
operation of such Facility.
With respect to each Lease listed on Schedule 3.8, and except as set forth
on Schedule 3.8, (i) there has been no material default under any such Lease by
Zazula or, to the knowledge of Zazula, by any other party, (ii) the execution,
delivery and performance of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby will not cause
a material default under any such Lease, (iii) such Lease is a valid and binding
obligation of Zazula, is in full force and effect with respect to Zazula and is
enforceable against Zazula in accordance with its terms, except as the
enforceability thereof may be limited by (1) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors' rights generally or (2) general
principles of equity, whether considered in a proceeding at law or in equity,
(iv) no action has been taken by Zazula, and no event has occurred which, with
notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto other than Zazula without the consent of Zazula
under any such Lease that is material to Zazula, (v) no party has repudiated in
writing any term thereof or, to the knowledge of Zazula or the Stockholders,
threatened to terminate, cancel or not renew any such Lease that is material to
Zazula and (vi) Zazula has not assigned, transferred, conveyed, mortgaged or
encumbered any interest therein or in any leased property subject thereto (or
any portion thereof).
3.9 Personal Property.
(a) Zazula owns or leases all personal property Assets necessary for or
currently used in the conduct of its business as presently conducted, and the
personal property Assets (taken as a whole) are in such operating condition and
repair (subject to normal wear and tear) as is necessary for the conduct of its
business as presently conducted.
(b) Zazula has good and marketable title to all such material personal
property owned by it, free and clear of any and all Encumbrances other than
Permitted Encumbrances. With respect to each such item of personal property and
except to Permitted Encumbrances (i) there are no Leases, subleases, licenses,
options, rights, concessions or other agreements, written or oral, granting to
any party or parties the right of use of any portion of such item of personal
property (except licenses of Intellectual Property in the ordinary course of
business, if any), (ii) there are no outstanding options or rights of first
refusal in favor of any other party to purchase any such item of personal
property or any portion thereof or interest therein and (iii) there are no
parties (other than Zazula) who are in possession of or who are using any such
item of personal property.
(c) Zazula has good and valid leasehold title to all of such Fixtures
and Equipment, vehicles and other tangible personal property Assets leased by it
from third parties, free and clear of any and all Encumbrances other than
Permitted Encumbrances which would not permit the termination of the lease
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therefor by the lessor. Except as set forth on Schedule 3.9, Zazula is not a
party to any Lease for personal property involving annual payments in excess of
$25,000.
With respect to each Lease listed on Schedule 3.9, (i) there has been no
material default under any such Lease by Zazula or, to the knowledge of Zazula,
by any other party, (ii) except as set forth on Schedule 3.12, the execution,
delivery and performance of this Agreement and the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby will not cause
a material default under any such Lease, (iii) such Lease is a valid and binding
obligation of Zazula is in full force and effect with respect to Zazula and is
enforceable against Zazula in accordance with its terms, except as the
enforceability thereof may be limited by (1) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors' rights generally or (2) general
principles of equity, whether considered in a proceeding at law or in equity,
(iv) no action has been taken by Zazula and, to the knowledge of Zazula or the
Stockholders, no event has occurred which, with notice or lapse of time or both,
would permit termination, modification or acceleration by a party thereto other
than Zazula without the consent of Zazula under any such Lease that is material
to Zazula, (v) no party has repudiated in writing any term thereof or, to the
knowledge of Zazula or the Stockholders, threatened to terminate, cancel or not
renew any such Lease that is material to Zazula and (vi) except as set forth on
Schedule 3.9, Zazula has not assigned, transferred, conveyed, mortgaged or
encumbered any interest therein or in any leased property subject thereto (or
any portion thereof).
3.10 Environmental Matters.
(a) Zazula is in compliance with all Environmental Laws, including,
without limitation, all Permits required thereunder to conduct their business as
currently being conducted or proposed to be conducted, except for non-compliance
which would not have a Material Adverse Effect on Zazula. All such Permits are
listed on Schedule 3.10. During the previous five years, Zazula has not received
any written notice from any Governmental Entity or Person to the effect that, or
otherwise has knowledge that, (i) Zazula or any predecessor in interest is not
now, or has not always been, in compliance in any material respect with, or is,
or was, in violation of, any such Environmental Laws or Permits required
thereunder or (ii) any currently or formerly existing circumstances are likely
to result in a failure of Zazula or any predecessor in interest to comply in any
material respect with, or result in a violation by Zazula of, any such
Environmental Laws or Permits required thereunder. Zazula has not taken any
action during the previous five years that would constitute a violation of any
Environmental Laws.
(b) There are no existing or, to the knowledge of Zazula, potential,
Environmental Claims against Zazula or any of its predecessors in interest, nor
has any of them received any written notification or otherwise has any knowledge
of any allegation of any actual, or potential responsibility for, or any inquiry
or investigation regarding, any disposal, release or threatened release at any
on-site or off-site location of any Hazardous Substance used, processed,
generated, disposed or transported by Zazula or any of its predecessors in
interest.
(c) To the knowledge of Zazula, (i) no underground tank or other
underground storage receptacle for Hazardous Substances is currently located on
the Facilities, and there have been no releases of any Hazardous Substances from
any such underground tank or related piping and (ii) there have been no releases
(i.e., any past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping) of Hazardous Substances in quantities exceeding the reportable
quantities as defined under any Environmental Law by Zazula or any of its
predecessors in interest, on, upon or into the Facilities or any off-site
location other than those authorized by Environmental Laws including, without
limitation, the Permits required thereunder.
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(d) To the knowledge of Zazula or the Stockholders, there are no PCBs
or asbestos-containing materials located at or on the Facilities.
(e) To the knowledge of Zazula or the Stockholders, Zazula is not a
party, whether as a direct signatory or as successor, assign or third-party
beneficiary, or otherwise bound, to any Lease or other Contract (excluding
insurance policies disclosed on the Schedules) under which Zazula is obligated
by or entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
(f) Zazula has not released any other person from any claim under any
Environmental Law or waived any rights concerning any Environmental Condition.
(g) There are no consent decrees, consent orders, judgments, judicial
or administrative orders or agreements (other than Permits) with or liens by,
any governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate or bind Zazula.
(h) Zazula has not been deemed a "potentially responsible party" as
such term is defined under any Environmental Law.
3.11 Contracts.
(a) Schedule 3.11 sets forth a complete and accurate list of all of the
Contracts, except those Contracts (i) entered into in the ordinary course of
business and which may be terminated by Zazula upon less than thirty (30) days'
notice without further liability; (ii) for the purchase by Zazula of any
material, supplies, equipment or services for less than $5,000 as to any
individual item in one transaction or a series of related transactions; (iii)
for the sale by Zazula of any products or service for less than $5,000 as to any
individual item in one transaction or a series of related transactions; (v) for
the sale of any fixed or capital assets after December 31, 1997 for less than
$5,000 as to any individual item in one transaction or a series of related
transactions; (vi) listed in Schedule 3.19; or (vii) obligating Zazula to pay
not more than $5,000 in remaining payment obligations and containing no material
non-monetary obligations of, or restrictions applicable to, Zazula. Complete and
accurate copies of all of the Contracts listed on Schedule 3.11, including all
amendments and supplements thereto, have been made available to Unidigital.
Zazula has included as part of Schedule 3.11 a brief summary of the material
terms of each oral Contract, except for Contracts in the ordinary course of
Zazula's business and oral agreements set forth on Schedule 3.18(c) or Schedule
3.19.
(b) All of the Contracts set forth on Schedule 3.11 are valid, binding
and enforceable in accordance with their terms. Zazula has fulfilled, or taken
all action necessary to enable it to fulfill when due, all of its material
obligations under each of such Contracts. To the knowledge of Zazula or the
Stockholders, all parties to such Contracts have complied in all material
respects with the provisions thereof, no party is in Default thereunder and no
notice of any claim of Default has been given to Zazula or the Stockholders.
None of the Stockholders or Zazula has any reason to believe that the products
or services called for by any executory Contract cannot be supplied in
accordance with the terms of such Contract, including time specifications, and
has no reason to believe that any unfinished Contract will, upon performance by
Zazula result in a loss to Zazula, except where such failure to supply or such
loss, individually or in the aggregate, would not have a Material Adverse Effect
on Zazula.
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3.12 No Conflict or Violation; Consents.
Except as set forth on Schedule 3.12, none of the execution, delivery or
performance of this Agreement or any Ancillary Agreement, the consummation of
the transactions contemplated hereby or thereby, nor compliance by Zazula or the
Stockholders with any of the provisions hereof or thereof, will (a) violate or
conflict with any provision of the governing documents of Zazula, (b) violate,
conflict with, or result in a breach of or constitute a default (with or without
notice of passage of time) under, or result in the termination of, or accelerate
the performance required by, or result in a right to terminate, accelerate,
modify or cancel under, or require a notice under, or result in the creation of
any Encumbrance upon any of its Assets under, any Contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest or other
arrangement to which Zazula or the Stockholders is a party or by which Zazula or
the Stockholders is bound or to which any of their respective assets are
subject, (c) violate any applicable Regulation (to the knowledge of Zazula or
the Stockholders) or Court Order applicable to Zazula or the Stockholders or (d)
impose any Encumbrance on any Assets of Zazula or the Business. Except as set
forth on Schedule 3.12, no notices to, declaration, filing or registration with,
approvals or Consents of, or assignments by, any Persons (including any federal,
state or local governmental or administrative authorities) are necessary to be
made or obtained by Zazula or the Stockholders in connection with the execution,
delivery or performance of this Agreement or any Ancillary Agreement or the
consummation of the transactions contemplated hereby or thereby, except that
there shall be excluded from clauses (b), (c) and (d) of the first sentence of
this Section 3.12 and from the second sentence of this Section 3.12 such
violations, breaches or defaults which would not, individually or in the
aggregate, have a Material Adverse Effect on Zazula and which will not
materially impair the ability of Zazula or the Stockholders to consummate the
transactions contemplated herein. The foregoing representations in this Section
3.12 are being made (i) by all of the Stockholders, jointly and severally, with
respect to Zazula and (ii) by each Stockholder severally with respect to himself
only (and not with respect to any other Stockholder).
3.13 Permits.
Schedule 3.13 sets forth a complete list of all Permits, all of which are
as of the date hereof, and will be as of the Closing Date, in full force and
effect. Zazula has, and during the last five (5) years has had, all Permits
required under any applicable Regulation in its operation of the Business or in
its ownership of the Assets, and owns or possesses such Permits free and clear
of all Encumbrances; and Zazula is not in default, nor has Zazula or the
Stockholders received any written notice of any claim of default, with respect
to any such Permit, except where the failure to hold such Permit or such default
would not individually, or in the aggregate, have a Material Adverse Effect on
Zazula. Except as otherwise governed by law, such permits will not be adversely
affected by the completion of the transactions contemplated by this Agreement or
the Ancillary Agreements.
3.14 Financial Statements; Books and Records.
(a) The Financial Statements are complete, are in accordance with the
Books and Records, fairly present the financial condition and results of
operations indicated thereby and were prepared in accordance with GAAP,
consistently applied (except as otherwise noted therein or in the notes
thereto), as of the respective dates and for the periods covered thereby.
Notwithstanding the foregoing, the unaudited balance sheet, statement of income
and statement of cash flow of Zazula for the period ended June 30, 1998 shall be
subject to normal year-end audit adjustments and accruals that are necessary for
the fair presentation of Zazula's financial position as of June 30, 1998 and the
results of operations for the one and six month periods then ended.
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(b) The Financial Statements and the Books and Records accurately,
fully and fairly reflect the operations and activities of Zazula and the
Business and have been provided to Unidigital for its inspection.
(c) Zazula has not engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions, bank accounts or
funds which have been and are reflected in the Books and Records.
(d) Zazula has made available to Unidigital (i) subject to Schedule
3.14(d), the stock records and minute books of Zazula that fully reflect all
minutes of meetings, resolutions and other material actions and proceedings of
their respective stockholders and boards of directors and all committees
thereof, all issuances, transfers and redemptions of capital stock of which
Zazula or the Stockholders are aware and (ii) true, correct and complete copies
of its Certificate of Incorporation and Bylaws and all amendments thereto
through the Closing Date.
3.15 Absence of Certain Changes or Events.
Except as set forth on Schedule 3.15, since December 31, 1997 there has not
been any:
(a) Material Adverse Change with respect to Zazula or the Business;
(b) failure to operate the Business in the ordinary course so as to use
its commercially reasonable efforts to preserve the Business intact and to
preserve the continued services of its Employees and the goodwill of suppliers,
customers and others having business relations with Zazula or its
Representatives;
(c) resignation or termination of any officer, or, except as set forth
in the Salary Table (as hereinafter defined), any increase in the rate of
compensation payable or to become payable to any officer or Employee of Zazula
other than in the ordinary course of business, including, but not limited to,
the making, guaranteeing or forgiving of any loan to, or the payment, grant or
accrual of any bonus, incentive compensation, service award or other similar
benefit to, any such Person, or the addition to, modification of, or
contribution to any Plan (as hereinafter defined);
(d) payment, loan or advance of any amount to or in respect of, or the
sale, transfer or lease of any properties or the Assets to, or entering into of
any Contract with, any Related Party except (i) directors' fees, (ii)
compensation to Employees at the rates disclosed pursuant to Section 3.18(d) and
(iii) forgiveness of loans in the amounts and to the individuals set forth on
Schedule 3.15;
(e) sale, assignment, license, transfer or Encumbrance (other than
Permitted Encumbrances) of any of the Assets, tangible or intangible, singly or
in the aggregate, other than sales of products and services in the ordinary
course of business and consistent with past practice (except as otherwise
provided herein);
(f) new Contracts, or extensions, modifications, terminations,
expirations or renewals thereof, except for Contracts entered into, modified or
terminated in the ordinary course of business or disclosed in Schedule 3.11;
(g) actual or, to the knowledge of Zazula or Stockholders, threatened
termination of any material customer account or group of accounts or actual or,
to the knowledge of Zazula or
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Stockholders, threatened material reduction in purchases or royalties payable by
any such customer or occurrence of any event that is likely to result in any
such termination or reduction;
(h) disposition or lapsing of any Intellectual Property of Zazula, in
whole or in part, or any disclosure of any trade secret, process or know-how to
any Person not an Employee;
(i) change in accounting methods or practices by Zazula;
(j) revaluation by Zazula of any of the Assets or Liabilities,
including, but not limited to, writing off notes or accounts receivable other
than for which adequate reserves have been established prior to December 31,
1997;
(k) damage, destruction or loss (whether or not covered by insurance)
which has a Material Adverse Effect on Zazula;
(l) declaration, setting aside or payment of dividends or distributions
in respect of any capital stock of Zazula or any redemption, purchase or other
acquisition of any equity securities of Zazula, except as contemplated by this
Agreement;
(m) issuance or reservation for issuance by Zazula of, or commitment of
it to issue or reserve for issuance, any shares of capital stock or other equity
securities or obligations or securities convertible into or exchangeable for
shares of capital stock or other equity securities;
(n) increase, decrease or reclassification of the capital stock of
Zazula;
(o) amendment of the Certificate of Incorporation or Bylaws of Zazula;
(p) capital expenditure or execution of any lease or any incurring of
liability therefor by Zazula, involving payments in excess of $10,000 in the
aggregate;
(q) failure to pay any material obligation of Zazula when due;
(r) cancellation of any indebtedness or waiver of any rights of
substantial value to Zazula, except in the ordinary course of business and
consistent with past practice;
(s) indebtedness incurred by Zazula for borrowed money or any
commitment to borrow money entered into by Zazula, or any loans, guaranties or
pledges made or agreed to be made by Zazula; other than in the ordinary course
of business;
(t) Liability incurred by Zazula except in the ordinary course of
business and consistent with past practice, or any material increase or material
change in any assumptions underlying or methods of calculating any bad debt,
contingency or other reserves;
(u) payment, discharge or satisfaction of any Liabilities of Zazula
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of Liabilities reflected or reserved
against in the Financial Statements or incurred in the ordinary course of
business and consistent with past practice since June 30, 1998;
(v) acquisition of any equity interest in any other Person; or
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(w) agreement by Zazula to do any of the foregoing.
3.16 Liabilities.
Zazula has no Liabilities or obligations (absolute, accrued, contingent or
otherwise) except (i) Liabilities which are fully reflected and properly and
fully reserved against in the Financial Statements and the Books and Records,
(ii) Liabilities incurred in the ordinary course of business and consistent with
past practice since December 31, 1997 and (iii) liabilities arising under the
Contracts (other than obligations which are reflected on a balance sheet
prepared in accordance with GAAP) set forth on Schedule 3.11 or which are not
required to be disclosed on such Schedule and which have arisen or been incurred
in the ordinary course of business. Except as set forth on Schedule 3.16, none
of the Liabilities described in this Section 3.16 relates to any breach of
Contract, breach of warranty, tort, infringement or violation of any Regulation
or arose out of any action, order writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, investigation or dispute
(collectively, "Actions"). The reserves set forth on the balance sheets as of
December 31, 1997 and June 30, 1998 for liabilities are recorded in accordance
with GAAP. Except as set forth in Schedule 3.16, Zazula does not have any
contingent liabilities.
3.17 Litigation.
Schedule 3.17 contains a brief description of all Actions pending
subsequent to December 31, 1997 which, if adversely determined, could reasonably
be expected to result in a loss to Zazula in excess of $10,000, or would have a
Material Adverse Effect on Zazula, to which Zazula has been a party or which
relate to any of the Assets or its officers, directors, employees or agents as
such, including any such Actions which were settled prior to the institution of
formal proceedings, other than Actions brought by Zazula for collection of
monies owed in the ordinary course of business. There is no Action, pending or,
to the knowledge of Zazula or the Stockholders, threatened (i) against Zazula or
affecting any of the Assets or against any of Zazula's officers, directors,
employees or agents as such which, if adversely determined, could reasonably be
expected to result in a loss to Zazula in excess of $10,000, or would
individually or in the aggregate have a Material Adverse Effect on Zazula, (ii)
which seeks to enjoin or obtain damages in respect of the transactions
contemplated hereby or by the Ancillary Agreements or (iii) with respect to
which there is a reasonable likelihood of a determination which would prevent
Zazula or the Stockholders from consummating the transactions contemplated
hereby. Except as set forth on Schedule 3.17, there are presently no outstanding
judgments, decrees or orders of any court or any governmental or administrative
agency against or affecting Zazula, the Business or any of the Assets.
3.18 Labor Matters.
(a) Schedule 3.18(a) contains a complete list of Employees. Zazula is
not a party to any labor agreement with respect to its Employees with any labor
organization, group or association and there is no pending organization
activities respecting Zazula's Employees. There is no unfair labor practice
charge or complaint against Zazula pending before the National Labor Relations
Board or any other governmental agency arising out of Zazula's activities, and
none of Zazula or the Stockholders has any knowledge of any facts or information
which would give rise thereto; there is no labor strike or labor disturbance
pending or, to the knowledge of Zazula or the Stockholders, threatened against
Zazula nor is any grievance currently being asserted against it; and during the
previous five years Zazula has not experienced a work stoppage or other labor
difficulty. There are no material claims pending or, to the knowledge of Zazula
or the Stockholders, threatened by any of Zazula's Employees arising out of
their employment relationship with Zazula, and neither Zazula nor the
Stockholders has knowledge of any facts which could reasonably result in any
such claim.
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(b) Zazula is in compliance with all applicable Regulations respecting
employment practices, terms and conditions of employment, wages and hours, equal
employment opportunity, and the payment of social security and similar taxes,
and is not engaged in any unfair labor practice, except where the failure to do
so would not have a Material Adverse Effect on Zazula. No claims for past due
wages or any penalties for failure to comply with any of the foregoing are
pending against Zazula.
(c) Except with respect to the employment agreements set forth on
Schedule 3.18(c) (the "Existing Employment Agreements"), Zazula has not entered
into any severance or similar arrangement in respect of any present or former
Employee that will result in any obligation (absolute or contingent) on or after
the date hereof of Unidigital, Sub or Zazula to make any payment to, or on
behalf of, any present or former Employee or any other Person following
termination of employment or upon consummation of the transactions contemplated
by this Agreement. Neither the execution and delivery of this Agreement or any
Ancillary Agreement nor the consummation of the transactions contemplated hereby
or thereby will result in the acceleration or vesting of any other rights of any
Person to benefits under any Plans.
(d) Zazula has provided Unidigital with a table setting forth the
current salary or hourly wages and other compensation payable by Zazula to each
of such Employees (the "Salary Table").
(e) Except as set forth on Schedule 3.18(e), Zazula does not engage,
and has not engaged, any independent contractors.
3.19 Employee Benefit Plans.
Except as set forth on Schedule 3.19, neither Zazula nor any member of the
"controlled group of corporations" within the meaning of Sections 414(b) and (c)
of the Code, of which Zazula has been a member during the five year period
preceding the date hereof, presently, or during such five year period, has been
a sponsor of, party to or obligated to contribute to any employee benefit plan
(as defined in Section 3(3) of ERISA), or any employment contract, employee
loan, incentive compensation, bonus, deferred compensation, severance,
termination pay, stock option or purchase plan, guaranteed annual income plan,
fund or arrangement, payroll incentive, policy, fund, agreement or arrangement,
noncompetition or consulting agreement, or other employee fringe benefit program
or plan, or any other plan, payroll practice, policy, fund, agreement or
arrangement similar to or in the nature of the foregoing, oral or written
("Plans"). None of the Plans is a multiemployer plan (as defined in Section 3.18
of ERISA) or a defined benefit plan subject to the provisions of Title IV of
ERISA. Complete and correct copies of all written Plans, and summary plan
descriptions thereof, if any, and summaries of all oral Plans have been
delivered to Unidigital. All of the Plans which are intended to be tax qualified
are (and for all prior periods have been) tax qualified, except where the
failure to be tax qualified would not have a Material Adverse Effect on Zazula.
All of the Plans have been operated in compliance with their respective terms
and all legal requirements, except where the failure to do so would not have a
Material Adverse Effect on Zazula.
3.20 Transactions with Related Parties.
Except for employment agreements and other compensation arrangements
disclosed on Schedule 3.20, no Related Party has (a) borrowed or loaned money or
other property to or from Zazula which has not been repaid or returned, (b) to
the knowledge of Zazula or the Stockholders, any contractual or other claims,
express or implied, of any kind whatsoever against Zazula or (c) to the
knowledge of Zazula or the Stockholders, any interest in any property or Assets
used or owned by Zazula.
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3.21 Compliance with Law.
Zazula has conducted the Business in compliance with all applicable
Regulations and Court Orders, except for such non-compliance which would not
result in a Material Adverse Effect on Zazula. Neither Zazula nor the
Stockholders has received any written notice from any Governmental Entity to the
effect that, or has otherwise been advised by a Governmental Entity that, Zazula
is not in compliance with any such Regulations or Court Orders (which
non-compliance remains uncured), and none of Zazula nor the Stockholders has any
knowledge of any existing circumstances that are reasonably likely to result in
any material violation of any of the foregoing.
3.22 Intellectual Property.
Schedule 3.22 contains a true and complete list of all patents, trademarks,
copyrights, inventions and licenses, if any, owned by Zazula or in which Zazula
has any rights, together with a brief description of each. Except as disclosed
on Schedule 3.22 or as provided in any agreement listed on Schedule 3.22, Zazula
owns or has the right to use, without payment to any other party, the
Intellectual Property used in or necessary for the conduct of the Business and
the consummation of the transactions contemplated hereby will not, by itself,
materially alter or impair any such rights. Except as disclosed on Schedule
3.22, all Intellectual Property owned or used by Zazula is free and clear of all
liens, claims and restrictions arising through actions of Zazula. Except as
disclosed on Schedule 3.22, no claims or other proceedings are pending or, to
the knowledge of Zazula or the Stockholders, threatened against Zazula by any
third party, person or entity with respect to the ownership, validity,
enforceability or the right to use any Intellectual Property.
3.23 Tax Matters.
(a) Zazula has timely filed with the appropriate taxing authorities all
Tax Returns in respect of Taxes required to be filed through the date hereof.
The Tax Returns filed are complete and accurate in all material respects. Except
as specified in Schedule 3.23, Zazula has not requested any extension of time
within which to file Tax Returns in respect of any Taxes. Zazula has delivered
to Unidigital complete and accurate copies of federal, state and local Tax
Returns of Zazula for the years ended December 31, 1997 and 1996. Schedule 3.23
sets forth a list of such Tax Returns as delivered hereunder.
(b) All Taxes due from Zazula in respect of periods (or portions
thereof) beginning before the Closing Date have been timely paid or an adequate
reserve (in conformity with GAAP) has been established therefor, as set forth in
Schedule 3.23 or the Financial Statements, and Zazula has no material Liability
for Taxes in excess of the amounts so paid or reserves so established. All Taxes
that Zazula is required by law to withhold or collect have been duly withheld or
collected and have been timely paid over to the appropriate governmental
authorities to the extent due and payable.
(c) No deficiencies for Taxes of Zazula have been claimed, proposed or
assessed by any taxing or other governmental authority. There are no pending or,
to the knowledge of Zazula or the Stockholders, threatened audits, assessments
or other Actions for or relating to any Liability in respect of Taxes of Zazula,
any of its predecessors in interest or the Stockholders, and there are no
matters under discussion with any governmental authorities, or known to Zazula
or the Stockholders, with respect to Taxes that are likely to result in an
additional Liability for Taxes. Audits of federal, state and local Tax Returns
by the relevant taxing authorities have been completed for the periods set forth
on Schedule 3.23
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and, except as set forth in such Schedule, Zazula has not been notified that any
taxing authority intends to audit a Tax Return for any other period. No
extension of a statute of limitations relating to Taxes is in effect with
respect to Zazula.
(d) There are no Encumbrances for Taxes (other than for current Taxes
not yet due and payable) on any of the Assets.
(e) Zazula (i) has not consented at any time under Section 341(f)(1) of
the Code to have the provisions of Section 341(f)(2) of the Code apply to any
disposition of any Assets; (ii) has not agreed, or is not required, to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise; (iii) has not made an election, or is not required, to
treat any Asset as owned by another Person pursuant to the provisions of Section
168(f) of the Code or as tax-exempt bond financed property or tax-exempt use
property within the meaning of Section 168 of the Code; (iv) does not directly
or indirectly secure any debt the interest on which is tax exempt under Section
103(a) of the Code; or (v) has not made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
Tax provision.
(f) Zazula has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code or any group that
has filed a combined consolidated or unitary state or local return.
(g) There are no Tax-sharing agreements or similar arrangements
(including indemnity arrangements) with respect to or involving Zazula, and,
after the Closing Date, Zazula shall not be bound by any such Tax-sharing
agreements or similar arrangements or have any Liability thereunder for amounts
due in respect of periods prior to the Closing Date.
(h) Zazula has no interest in or is not subject to any joint venture,
partnership, or other arrangement or contract which is treated as a partnership
for federal, state or local income tax purposes. Except as set forth on Schedule
3.23, Zazula is not a successor to any other Person by way of merger,
reorganization or similar transaction.
(i) The transaction contemplated herein is not subject to the tax
withholding provisions of Section 3406 of the Code, or of Subchapter A of
Chapter 3 of the Code or of any other provision of law.
3.24 Insurance.
Schedule 3.24 contains a complete and accurate list of all policies
(including retrospective policies that remain open) or binders of insurance
(showing as to each policy or binder the carrier, policy number, coverage
limits, expiration dates, annual premiums, a general description of the type of
coverage provided and any pending claims thereunder) of which Zazula is the
owner, insured or beneficiary (the "Insurance Policies"). 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 and the Contracts. 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 3.24, Zazula has not received any notice or other 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 Zazula or the Stockholders, no such
cancellation, amendment or increase of deductibles, retainers or premiums is
threatened.
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3.25 Accounts Receivable.
The accounts and notes receivable reflected in the Balance Sheet at June
30, 1998, and all accounts or notes receivable arising since June 30, 1998,
represent bona fide claims against debtors for sales, services performed or
other charges arising on or before the date of recording thereof, and all the
goods delivered and services performed which gave rise to said accounts were
delivered or performed in the ordinary course of business. To the knowledge of
Zazula or the Stockholders, all such receivables are fully collectible in the
ordinary course of business except to the extent of an amount not in excess of
the reserve for doubtful accounts reflected on the Balance Sheet and additions
to such reserves as reflected on the Books and Records.
3.26 Intentionally Omitted.
3.27 Customers and Suppliers.
Schedule 3.27 sets forth a complete and accurate list of the names and
addresses of (i) the ten customers who purchased from Zazula the greatest dollar
volume of products or services during its last fiscal year and last fiscal
quarter, showing the approximate total sales in dollars to each such customer
during such fiscal year and quarter; and (ii) the ten suppliers with the
greatest dollar volume of sales to Zazula during the last fiscal year and during
the last fiscal quarter, showing the approximate total purchases in dollars by
Zazula from each such supplier during such fiscal year. Since December 31, 1997,
(a) there has been no Material Adverse Change in the business relationship of
Zazula with any customer or supplier named on Schedule 3.27 and (b) Zazula has
not received any written communication from any customer or supplier named on
Schedule 3.27 of any intention to return, terminate or materially reduce
purchases from or supplies to Zazula.
3.28 Brokers; Transaction Costs.
Except as set forth on Schedule 3.28, neither Zazula nor the Stockholders
has entered into or will enter into any contract, agreement, arrangement or
understanding with any Person which will result in the obligation of Unidigital,
Zazula or the Stockholders to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
3.29 No Other Agreements to Sell Zazula or the Assets.
Neither Zazula nor the Stockholders has any legal obligation, absolute or
contingent, to any other Person to sell the Assets (other than Inventory in the
ordinary course of business) or to sell any capital stock of Zazula or to effect
any merger, consolidation or other reorganization of Zazula or to enter into any
agreement with respect thereto, except pursuant to this Agreement.
3.30 Material Misstatements or Omissions.
No representations or warranties by Zazula or the Stockholders in this
Agreement or any Ancillary Agreement to which either is a party or in any
document, certificate or schedule furnished by Zazula or the Stockholders to
Unidigital or Sub pursuant to this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state any material
fact necessary to make the statements or facts contained herein or therein, in
light of the circumstances under which they were made, not misleading.
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3.31 Year 2000 Compliance.
Zazula has reviewed its accounting and order entry computer software (the
"Software") to assess the risk that computer applications used by Zazula may be
unable to recognize and properly perform date-sensitive functions involving
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). To the
best knowledge of Zazula and the Stockholders, the Software is Year 2000
compliant in all material respects when used in combination with hardware,
software, firmware and other products that properly exchange data in a compliant
manner, but Zazula recognizes that deficiencies may exist as to which Zazula has
no current knowledge or over which it has no control. With respect to the
Software, the Year 2000 Problem has not resulted in, and, to the knowledge of
Zazula and the Stockholders, is not reasonably expected to have, a Material
Adverse Effect on Zazula or the Business when used in combination with hardware,
software, firmware and other products that properly exchange data in a compliant
manner.
ARTICLE 3A.
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
As an inducement to Unidigital and Sub to enter into this Agreement, each
of the Stockholders hereby makes, severally, and not jointly, with respect to
himself only, as of the Closing Date, the following representations and
warranties to Unidigital and Sub, except as otherwise set forth in the Schedules
delivered to Unidigital and Sub prior to the Closing Date, a copy of which is
attached hereto. The Schedules are numbered to correspond to the various
sections of this Article 3A setting forth certain exceptions to the
representations and warranties contained in this Article 3A and certain other
information called for by this Agreement.
3A.1. Authorization.
Each Stockholder has the capacity to enter into this Agreement and the
Ancillary Agreements to which it is a party and has taken all actions necessary
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. This Agreement has been duly executed
and delivered by each Stockholder and is, and upon the execution and delivery
thereof each Ancillary Agreement to which it is a party will be, a valid and
binding obligation of each Stockholder, enforceable against each Stockholder in
accordance with its terms, except that enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors or (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
3A.2. No Conflict or Violation; Consents.
None of the execution, delivery or performance of this Agreement or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by any Stockholder with any of the provisions hereof or
thereof, will (a) violate, conflict with, or result in a breach of or constitute
a default (with or without notice of passage of time) under, or result in the
termination of, or accelerate the performance required by, or result in a right
to terminate, accelerate, modify or cancel under, or require a notice under, or
result in the creation of any Encumbrance upon any of its respective assets
under, any contractual obligations of such Stockholder, (b) to the knowledge of
the Stockholder, violate any applicable Regulation or Court Order applicable to
such Stockholder, or (c) to the best knowledge of the Stockholder, require any
governmental authorization or filing.
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3A.3. Ownership of Zazula Stock; Title.
The number of shares of Zazula Stock held by each Stockholder is accurately
set forth on Schedule 3.2 and all of such shares of Zazula Stock are lawfully
owned of record and beneficially owned by such Stockholder, free and clear of
any Encumbrances.
3A.4. Investment Representations.
Each Stockholder represents as follows with respect to the shares of
Unidigital Stock to be acquired in connection with the Merger:
(i) such Stockholder has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
the investment in the shares;
(ii) such Stockholder is receiving such shares for investment for his
own account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof;
(iii) such Stockholder has been given the opportunity to obtain any
information or documents relating to, and to ask questions and receive answers
about, Unidigital and the business and prospects of Unidigital which he deems
necessary to evaluate the merits and risks related to his investment in such
shares and to verify the information received, and such Stockholder's knowledge
and experience in financial and business matters are such that he is capable of
evaluating the merits and risks of its receipt of the shares;
(iv) such Stockholder's financial condition is such that he can
afford to bear the economic risk of holding the shares for an indefinite period
of time and has adequate means for providing for such Stockholder's current
needs and contingencies and to suffer a complete loss of his investment in the
shares; or
(v) such Stockholder has been advised that (A) Unidigital's issuance
of the shares to the Stockholder will not have been registered under the
Securities Act, (B) such shares may need to be held indefinitely, and such
Stockholder must continue to bear the economic risk of the investment in such
shares unless they are subsequently registered under the Securities Act or an
exemption from such registration is available, (C) there may not be a public
market for such shares, (D) when and if such shares may be disposed of without
registration in reliance on Rule 144 promulgated under the Securities Act, such
disposition can be made only in limited amounts in accordance with the terms and
conditions of such Rule, (E) if the Rule 144 exemption is not available, public
sale without registration will require compliance with an exemption under the
Securities Act and (F) a restrictive legend shall be placed on the certificates
representing the shares.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF UNIDIGITAL AND SUB
As an inducement to Zazula and the Stockholders to enter into this
Agreement, Unidigital and Sub hereby make, jointly and severally, as of the
Closing Date, the following representations and warranties to Zazula and the
Stockholders, except as otherwise set forth on the Schedules delivered to Zazula
and the Stockholders prior to the Closing Date, a copy which is attached hereto.
The Schedules are numbered to correspond to the various sections of this Article
4 setting forth certain exceptions to the representations and warranties
contained in this Article 4 and certain other information called for by this
Agreement.
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4.1 Organization.
Unidigital is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Unidigital has full corporate
power and authority to conduct its business as it is presently being conducted
and to own or lease, as applicable, the assets owned or leased by it. Unidigital
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of its business or the ownership of
its properties, except where the failure to be so qualified would not have a
Material Adverse Effect on Unidigital. Each jurisdiction in which Unidigital is
qualified to do business as a foreign corporation is set forth in Schedule 4.1.
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. Unidigital owns all the issued and
outstanding shares of capital stock of Sub.
4.2 Authorization.
Each of Unidigital and Sub has all necessary corporate power and authority
to enter into this Agreement and the Ancillary Agreements to which it is a party
and has taken all action necessary to consummate the transactions contemplated
hereby and thereby and to perform its respective obligations hereunder and
thereunder. This Agreement has been duly executed and delivered by each of
Unidigital and Sub, and this Agreement is, and upon execution and delivery each
of the Ancillary Agreements to which each of Unidigital and Sub is a party will
be, a valid and binding obligation of each of Unidigital and Sub enforceable
against each of Unidigital and Sub in accordance with its terms, except that
enforceability may be limited by the effect of (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.3 No Conflict or Violation; Consents.
None of the execution, delivery or performance of this Agreement or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by Unidigital or Sub with any of the provisions hereof
or thereof, will (a) violate or conflict with any provision of Unidigital's or
Sub's governing documents to the extent applicable, (b) violate, conflict with,
or result in a breach of or constitute a default (with or without notice of
passage of time) under, or result in the termination of, or accelerate the
performance required by, or result in a right to terminate, accelerate, modify
or cancel under, or require a notice under, or result in the creation of any
Encumbrance upon any of its assets under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest or other
arrangement to which Unidigital or Sub is a party or by which Unidigital or Sub
is bound or to which any of their respective assets are subject, (c) violate any
Regulation or Court Order applicable to Unidigital or Sub or (d) impose any
Encumbrance on any assets of Unidigital or Sub. Except as set forth on Schedule
4.3, no notices to, declaration, filing or registration with, approvals or
Consents of, or assignments by, any Persons (including any federal, state or
local governmental or administrative authorities) are necessary to be made or
obtained by Unidigital or Sub in connection with the execution, delivery or
performance of this Agreement or any Ancillary Agreement or the consummation of
the transactions contemplated hereby or thereby, except that there shall be
excluded from clauses (b), (c) and (d) of the first sentence of this Section 4.3
and from the second sentence of this Section 4.3 such violations, breaches or
defaults which would not, individually or in the aggregate, have a Material
Adverse Effect on Unidigital and which will not materially impair the ability of
Unidigital or the Sub to consummate the transactions contemplated herein.
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4.4 Material Misstatements or Omissions.
No representations or warranties by Unidigital or Sub in this Agreement or
in any Ancillary Agreement to which either is a party or in any document,
certificate, or schedule delivered pursuant to this Agreement, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
4.5 Capitalization of Unidigital.
(a) Information concerning the capitalization of Unidigital, including
its authorized capital stock, the number of shares issued and outstanding, and
the number of shares of treasury stock, has previously been furnished to Zazula
in Unidigital's annual report for 1997. As of the date hereof, 4,656,782 shares
of Unidigital Stock are issued and outstanding and no shares of Unidigital Stock
are held in the treasury of Unidigital. All of the outstanding shares of
Unidigital's capital stock are, and shares of Unidigital's which may be issued
pursuant to the exercise of outstanding employee stock options will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable. There is no Voting Debt of Unidigital
issued and outstanding. Except as set forth above and in the SEC Documents
listed on Schedule 4.5 as of the date hereof, (i) there are no shares of capital
stock of Unidigital authorized, issued or outstanding, and (ii) there are no
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character, relating to
the issued and unissued capital stock of Unidigital, obligating Unidigital to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of Unidigital or securities convertible into or
exchangeable for such shares or equity interests, or obligating Unidigital to
grant, extend or enter into any such option, warrant, call, subscription or
other right, agreement, arrangement or commitment.
(b) Except as set forth on Schedule 4.5, there are no stockholders
agreements, voting trusts or other agreements or understandings to which
Unidigital is a party with respect to the voting of the capital stock of
Unidigital.
(c) Unidigital is not required to redeem, repurchase or otherwise
acquire shares of capital stock of Unidigital as a result of the transactions
contemplated by this Agreement.
(d) No dividend has been declared by Unidigital which is unpaid as of
the date of this Agreement.
4.6 SEC Documents.
Unidigital has filed, pursuant to the Securities Act or the Exchange Act,
as the case may be, all SEC Documents required to be filed with respect to the
business and operations of Unidigital under each of the Securities Act and
Exchange Act, and the respective rules and regulations thereunder, and all of
the SEC Documents complied in all material respects with all applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the appropriate act and the rules and regulations thereunder in effect on the
date each such report was filed. At the respective dates they were filed, none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of Unidigital
included in the SEC Documents complied as to the form in all material respects
with the applicable accounting requirements and the
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published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP consistently applied throughout the period
involved (except as may be indicated therein or in the notes thereto) and fairly
present the consolidated financial position, results of operations and cash
flows of Unidigital as of the dates or for the periods indicated therein,
subject, in the case of the unaudited statements, to normal year-end adjustments
and the absence of certain footnote disclosures. Schedule 4.5 sets forth a list
of all SEC Documents filed by Unidigital since August 31, 1997.
4.7 Absence of Certain Changes or Events.
Except as set forth in Schedule 4.7, since August 31, 1997, there has not
been any Material Adverse Effect on Unidigital.
4.8 Legal Proceedings.
(a) As of the date hereof, except as set forth in Schedule 4.8,
Unidigital is not a party to any, and there are no pending or, to the best of
Unidigital's knowledge, threatened, material legal, administrative, arbitral or
other proceedings, claims, actions or governmental or regulatory investigations
of any nature against Unidigital or challenging the validity or propriety of the
transactions contemplated by this Agreement as to any of which there is a
reasonable probability of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on Unidigital.
(b) There is no injunction, order, judgment or decree imposed upon
Unidigital or the assets of Unidigital which has had, or might reasonably be
expected to have, a Material Adverse Effect on Unidigital.
4.9 Arrangements with Directors, Officers and Affiliates.
Except as disclosed in the SEC Documents listed on Schedule 4.5, as of the
date hereof, there are no agreements or other arrangements between Unidigital,
on the one hand, and any director, officer, employee, stockholder or other
affiliate, as defined in Rule 405 under the Securities Act, of Unidigital, on
the other hand, including, without limitation, management agreements and loans
to or by Unidigital from or to any of such persons. Except as disclosed in the
SEC Documents, since August 31, 1997, none of the officers or directors of
Unidigital, or, to the best knowledge of, and after due inquiry by, Unidigital,
any spouse or immediate family relative of any of such persons, has been a
director or officer of, or has had any direct interest in, any firm,
corporation, association or business enterprise which during such period has
been a supplier, customer or sales agent of Unidigital or has competed with or
been engaged in any business of the kind being conducted by Unidigital. Except
as disclosed in the SEC Documents, no affiliate of Unidigital owns or has any
rights in or to any of the assets, properties or rights used by Unidigital in
its ordinary course of business.
4.10 Capitalization of Sub.
(a) The authorized capital stock of Sub consists of 1,000 shares of
common stock. As of the date hereof, 100 shares of common stock are issued and
outstanding and no shares of common stock are held in the treasury of Sub. All
of the outstanding shares of Sub's capital stock are duly authorized, validly
issued, fully paid and non-assessable, and are owned beneficially and of record
by Unidigital. There is no Voting Debt of Sub issued and outstanding. Except as
set forth above, as of the date hereof, (i) there are no shares of capital stock
of Sub authorized, issued or outstanding and (ii) there are no existing options,
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warrants, calls, preemptive rights, subscriptions or other rights, agreements,
arrangements or commitments of any character, relating to the issued or unissued
capital stock of Sub, obligating Zazula to issue, transfer or sell or cause to
be issued, transferred or sold any shares of capital stock or Voting Debt of Sub
or securities convertible into or exchangeable for such shares or equity
interests, or obligating Sub to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment.
(b) There are no stockholders agreements, voting trusts or other
agreements or understandings to which Sub is a party with respect to the voting
of the capital stock of Sub.
(c) Sub is not required to redeem, repurchase or otherwise acquire
shares of capital stock of Sub as a result of the transactions contemplated by
this Agreement.
4.11 Consents and Approvals; No Violations.
Except for the filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the DGCL, the NYBCL
and the Exchange Act, neither the execution, delivery or performance of this
Agreement by Sub nor the consummation by Sub of the transactions contemplated
hereby nor compliance by Sub with any of the provisions hereof will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws of Sub, or (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity.
4.12 Brokers; Transaction Costs.
Neither Unidigital nor Sub has entered into or will enter into any
contract, agreement, arrangement or understanding with any Person which will
result in the obligation of Unidigital, Sub, Zazula or the Stockholders to pay
any finder's fee, brokerage commission or similar payment in connection with the
transactions contemplated hereby.
4.13 Press Release; Nasdaq Correspondence.
Unidigital has previously delivered to Zazula copies of all (i) press
releases and (ii) correspondence between Unidigital and/or its representatives
and Nasdaq, in each case, since August 31, 1997.
ARTICLE 5.
CONDITIONS TO ZAZULA'S AND THE STOCKHOLDERS' OBLIGATIONS
The obligations of Zazula and the Stockholders to effect the Merger and
complete the related transactions contemplated by this Agreement are subject, in
the discretion of Zazula and the Stockholders, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions or the waiver of such
conditions by Zazula and the Stockholders:
5.1 Representations, Warranties and Covenants.
All representations and warranties of Unidigital and Sub contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date, and Unidigital and Sub shall have performed in all material
respects all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date. There shall be delivered to Zazula and the
Stockholders a certificate signed by a senior officer of Unidigital and Sub to
the foregoing effect ("Unidigital Closing Certificate").
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5.2 Consents.
All Consents, approvals and waivers from governmental authorities and other
parties necessary to permit Unidigital and Sub to consummate the Merger as
contemplated hereby and by the Ancillary Agreements shall have been obtained in
writing. Zazula and the Stockholders shall be satisfied that all approvals
required under any Regulations to permit Unidigital and Sub to carry out the
transactions contemplated by this Agreement and the Ancillary Agreements shall
have been obtained.
5.3 No Actions or Court Orders.
No Action by any court, governmental authority or other Person shall have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby and by the Ancillary Agreements. There shall
not be any Regulation or Court Order that makes the acquisition of the Zazula
Stock contemplated hereby illegal or otherwise prohibited.
5.4 Closing Documents.
Unidigital shall have delivered to Zazula and the Stockholders the
documents and other items described in Section 7.2 and such other documents and
items as Zazula or the Stockholders may reasonably require.
5.5 Material Adverse Change.
There shall not have been any Material Adverse Change with respect to
Unidigital or Sub.
ARTICLE 6.
CONDITIONS TO UNIDIGITAL'S OBLIGATIONS
The obligations of Unidigital to effect the Merger and complete the related
transactions contemplated by this Agreement are subject, in the discretion of
Unidigital, to the satisfaction, on or prior to the Closing Date, of each of the
following conditions, or the waiver of such conditions by Unidigital:
6.1 Representations, Warranties and Covenants.
All representations and warranties of Zazula and the Stockholders contained
in this Agreement shall be true and correct at and as of the Closing Date, and
Zazula and the Stockholders shall have performed in all material respects all
agreements and covenants required hereby to be performed prior to or at the
Closing Date. There shall be delivered to Unidigital a certificate signed by the
President and the Chief Financial Officer of Zazula ("Zazula Closing
Certificate") and the Stockholders to the foregoing effect (the "Stockholders'
Closing Certificate").
6.2 Consents.
All Consents, approvals and waivers from governmental authorities and other
parties necessary to permit Zazula and the Stockholders to consummate the Merger
as contemplated hereby and by the Ancillary Agreements and for the operation of
the Business after the Closing (including all required third party consents
under the Contracts) shall have been obtained in writing. Unidigital shall be
satisfied that all approvals required under any Regulations to permit Zazula and
the Stockholders to carry out the transactions contemplated by this Agreement
and the Ancillary Agreements shall have been obtained.
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6.3 No Actions or Court Orders.
No Action by any court, governmental authority or other Person shall have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby and by the Ancillary Agreements and which could
reasonably be expected to damage Unidigital, the Assets or the Business
materially if the transactions contemplated hereby or thereby are consummated,
including any material adverse effect on the right or ability of Unidigital to
own, operate or transfer Zazula after the Closing. There shall not be any
Regulation or Court Order that makes the merger contemplated hereby illegal or
otherwise prohibited or that otherwise may have a Material Adverse Effect upon
Zazula.
6.4 Closing Documents.
Zazula and/or the Stockholders, as the case may be, shall have delivered to
Unidigital the documents and other items described in Section 7.1 and such other
documents and items as Unidigital may reasonably require.
6.5 Exemption under Federal and State Securities Laws.
The issuance of shares of Unidigital Stock in the Merger shall not violate
any federal or state securities laws.
6.6 Zazula Balance Sheet.
On the Closing Date, immediately prior to the Closing, there shall be no
indebtedness on Zazula's balance sheet other than trade payables incurred by
Zazula in the ordinary course of business consistent with past practice, capital
leases and the note (if any) with respect to the accumulated adjustments account
contemplated by Section 2.6(c). In addition, the aggregate amount of cash, cash
equivalents and net accounts receivable on Zazula's balance sheet as of the
Closing Date shall exceed its accounts payable, accrued expenses, income taxes
payable and other current liabilities, excluding the notes payable to the
Stockholders described in Section 2.6(b).
6.7 Completion of Unidigital Due Diligence.
Unidigital shall have completed its business and legal due diligence to its
satisfaction, in its sole judgment.
6.8 Consents.
Zazula and the Stockholders shall have taken all further actions related to
the due authorization of the Merger as may be required under the DGCL and the
NYBCL.
6.9 Delivery of Certificates.
Each Stockholder shall have delivered to Unidigital the Certificate or
Certificates representing the shares of Zazula Stock held by such Stockholder.
6.10 Board of Directors Approval.
The Merger shall have been approved by appropriate action of the Board of
Directors of Unidigital.
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6.11 Tax Matters.
(a) No new elections with respect to Taxes, or changes in current
elections with respect to Taxes, affecting Zazula shall have been made after the
date of this Agreement without the prior written consent of Unidigital, which
consent shall not be unreasonably withheld.
(b) Zazula and the Stockholders shall have provided Unidigital with all
forms, certificates and/or other instruments required to pay the transfer and
recording taxes and charges arising from the transactions contemplated by this
Agreement, together with evidence satisfactory to Unidigital that such transfer
taxes and charges have been paid by Zazula or the Stockholders.
6.12 Material Adverse Change.
There shall not have been any Material Adverse Change with respect to
Zazula or the Business.
ARTICLE 7.
CLOSING
On the Closing Date at the Closing location:
7.1 Deliveries by Zazula and the Stockholders to Unidigital.
Zazula and the Stockholders, as applicable, shall deliver (or cause to be
delivered) to Unidigital:
(a) the Ancillary Agreements, duly executed by each party thereto other
than Unidigital and Sub;
(b) any Consents required to be obtained by Zazula or the Stockholders;
(c) the Zazula Closing Certificate and the Stockholders' Closing
Certificate;
(d) an opinion of Esanu Katsky Korins & Siger, LLP, counsel to Zazula
and the Stockholders, dated as of the Closing Date, in a form reasonably
satisfactory to Unidigital;
(e) a consent of stockholders duly executed by the Stockholders;
(f) all Certificates representing the shares of Zazula Stock to be
canceled in connection with the Merger on the Closing Date in accordance with
Section 2.7(b);
(g) the Financial Statements; and
(h) such other documents and certificates duly executed as may
reasonably be requested by Unidigital or Sub prior to the Closing Date.
7.2 Deliveries by Unidigital.
Unidigital shall deliver to Zazula and the Stockholders, or any other
appropriate Persons:
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(a) the Ancillary Agreements to which Unidigital or Sub is a party,
duly executed by them;
(b) any Consents required to be obtained by Unidigital;
(c) the Unidigital Closing Certificate;
(d) an opinion of Buchanan Ingersoll Professional Corporation, counsel
to Unidigital, dated as of the Closing Date, in a form reasonably satisfactory
to Zazula;
(e) the Merger Consideration; and
(f) such other documents and certificates duly executed as may
reasonably be requested by Zazula or the Stockholders prior to the Closing Date.
ARTICLE 8.
INDEMNIFICATION
8.1 Survival of Representations, Etc.
All statements contained in this Agreement, any schedule or in any
certificate delivered by or on behalf of the parties pursuant to this Agreement
shall be deemed to be representations and warranties by such party hereunder.
The representations and warranties contained herein shall survive the Closing
Date until (and claims based upon or arising out of such representations and
warranties, as well as any claims based upon or arising out of any covenants and
agreements herein or made hereunder, may be asserted at any time before the date
which shall be) the second anniversary of the Closing Date; provided, however,
(a) Zazula's and the Stockholders' representations and warranties in (i) Section
3.10 (Environmental Matters) shall survive the Closing Date until the third
anniversary of the Closing Date and (ii) Section 3.23 (Tax Matters) shall
survive the Closing until the expiration of the relevant statute of limitation
and (b) the Stockholders' representations and warranties set forth in Section
3A.3 (Ownership of Zazula Stock; Title) shall survive the Closing Date until the
third anniversary of the Closing Date. No investigation made by any of the
parties hereto (whether prior to, on or after the Closing Date) shall in any way
limit the representations and warranties of the parties. On the Closing Date all
representations and warranties contained in this Agreement and made by Zazula
and the Stockholders shall expire as to Zazula and thereafter will be deemed to
have been made exclusively by the Stockholders. The termination of the
representations and warranties provided herein shall not affect the rights of a
party in respect of any claim made by such party in a writing received by the
other party prior to the expiration of the applicable survival period provided
herein.
8.2 Indemnification.
(a) General.
-------
(i) Subsequent to the Closing, the Stockholders shall indemnify
Unidigital, Sub, and each of their respective officers and directors (in their
capacity as officers and directors), ("Unidigital Indemnified Parties") against,
and hold each of the Unidigital Indemnified Parties harmless from any and all
damage, claim, loss, cost, cause of action, liability or expense, including
without limitation, interest, penalties, reasonable attorneys' fees and expenses
of investigation (collectively "Damages") incurred by any such Unidigital
Indemnified Party, that arise out of or relate to, the breach of
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any warranty, representation, covenant or agreement of Zazula or the
Stockholders contained in this Agreement or any schedule hereto or in any
certificate delivered by or on behalf of Zazula or any such holder pursuant to
this Agreement; provided that the foregoing indemnity shall be several and not
joint with respect to the breach of any representation or warranty contained in
Article 3A, or which is otherwise expressly stated to be made severally by the
Stockholders, and shall apply only to Damages arising out of breach of a
representation or warranty made by the indemnifying Stockholder. Notwithstanding
the foregoing, the Stockholders shall not have any liability under Section
8.2(a)(i) in respect of any claim for indemnification with respect to any Taxes
imposed upon Zazula attributable to the payment of the Merger Consideration in
connection with the Merger.
(ii) Subsequent to the Closing, Unidigital shall indemnify the
Stockholders against, and hold the Stockholders harmless from, (A) any Damages
incurred by the Stockholders, that arise out of or relate to, the breach of any
warranty, representation, covenant or agreement of Unidigital or Sub contained
in this Agreement, any schedule or in any certificate delivered by or on behalf
of Unidigital or Sub pursuant to this Agreement and (B) any taxes imposed upon
Zazula attributable to the Merger. Notwithstanding the foregoing, Unidigital and
Sub shall not have any liability under this Section 8.2(a)(ii) in respect of any
claim for indemnification with respect to any Taxes imposed upon the
Stockholders attributable to the payment of the Merger Consideration in
connection with the Merger, provided that Unidigital and Sub comply with the
covenants contained in Section 9.2 hereof.
(iii) Notwithstanding Section 8.2(a)(i), the Stockholders shall not
have any liability under Section 8.2(a)(i) in respect of any claim for
indemnification until the aggregate amount of all Damages otherwise subject to
indemnification equals or exceeds $75,000, at which time only those Damages in
excess of $75,000 shall be recoverable; provided, however, that in no event
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shall the aggregate liability of all the Stockholders under Section 8.2(a)(i)
exceed $2,275,000 and, provided, further, however, that in no event shall the
-------- ------- -------
maximum liability of a Stockholder exceed that portion of the Cash Consideration
received by him pursuant to Section 2.6.
(iv) Notwithstanding Section 8.2(a)(ii), Unidigital shall not have
any liability under Section 8.2(a)(ii) in respect of any claim for
indemnification until the aggregate amount of all Damages otherwise subject to
indemnification equals or exceeds $75,000, at which time only those Damages in
excess of $75,000 shall be recoverable; provided, however, that in no event
-------- -------
shall the aggregate liability of Unidigital under Section 8.2(a)(ii) exceed
$2,275,000.
(v) The term "Damages" as used in this Section 8.2 is not limited to
matters asserted by third parties against the Stockholders or Unidigital
Indemnified Parties, but includes Damages incurred or sustained by such persons
in the absence of third party claims.
(b) Procedure for Claims. If a claim for Damages (a "Claim") is to be
---------------------
made by a person entitled to indemnification hereunder, the person claiming such
indemnification (the "Indemnified Party"), shall give written notice (a "Claim
Notice") to the indemnifying person (the "Indemnifying Party") as soon as
practicable after the Indemnified Party becomes aware of any fact, condition or
event which may give rise to Damages for which indemnification may be sought
under this Section 8.2. The failure of any Indemnified Party to give timely
notice (within five (5) business days) hereunder shall not affect rights to
indemnification hereunder, except and only to the extent that, the Indemnifying
Party demonstrates actual material damage or prejudice caused by such failure
(except that the Indemnifying Party shall not be liable for any expenses
incurred during the period in which the Indemnified Party failed to give such
notice). In the case of a Claim involving the assertion of a claim by a third
party (whether pursuant to a lawsuit or other legal action or otherwise, a
"Third-Party Claim"), if the Indemnifying Party shall acknowledge in writing to
37
<PAGE>
the Indemnified Party that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party under the terms of its indemnity hereunder in
connection with such Third-Party Claim, then (A) the Indemnifying Party shall be
entitled and, if it so elects, shall be obligated at its own cost and expense
(1) to take control of the defense and investigation of such Third-Party Claim
and (2) to pursue the defense thereof in good faith by appropriate actions or
proceedings promptly taken or instituted and diligently pursued, including,
without limitation, to employ and engage attorneys of its own choice reasonably
acceptable to the Indemnified Party to handle and defend the same, and (B) the
Indemnifying Party shall be entitled (but not obligated), if it so elects, to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to be
unreasonably withheld or delayed. In the event the Indemnifying Party elects to
assume control of the defense and investigation of such lawsuit or other legal
action in accordance with this Section 8.2(b), the Indemnified Party may, at its
own cost and expense, participate in the investigation, trial and defense of
such Third-Party Claim; provided that, if the named persons to a lawsuit or
other legal action include both the Indemnifying Party and the Indemnified Party
and the Indemnified Party has been advised in writing by counsel and such
counsel reasonably determines that there may be one or more legal defenses
available to such Indemnified Party that are different from or additional to
those available to the Indemnifying Party, the Indemnified Party shall be
entitled to separate counsel reasonably acceptable to the Indemnifying Party and
at the Indemnifying Party's reasonable cost and expense (including the
reasonable fees and expenses of counsel). If the Indemnifying Party fails to
assume the defense of such Third-Party Claim in accordance with this Section 8.2
within 15 calendar days after receipt of the Claim Notice, the Indemnified Party
against which such Third-Party Claim has been asserted shall (upon delivering
notice to such effect to the Indemnifying Party) have the right to engage
counsel reasonably acceptable to the Indemnifying Party to undertake the
defense, compromise and settlement of such Third-Party Claim on behalf of and
for the account of the Indemnifying Party at the Indemnifying Party's reasonable
cost and expense (including the reasonable fees and expenses of counsel);
provided that such Third-Party Claim shall not be compromised or settled without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. In the event the Indemnifying Party assumes
the defense of the claim, the Indemnifying Party shall keep the Indemnified
Party reasonably informed of the progress of any such defense, compromise or
settlement, and in the event the Indemnified Party assumes the defense of the
claim, the Indemnified Party shall keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement. The
parties shall use commercially reasonable efforts to minimize Damages from
Third-Party Claims shall act in good faith in responding to, defending against,
settling or otherwise dealing with such claims, notwithstanding any dispute as
to liability as between the parties under this Section 8.2. The parties shall
also cooperate in any such defense, give each other reasonable access to all
information relevant thereto and use commercially reasonable efforts to make
employees and other representatives available on a mutually convenient basis to
provide additional information and explanation of any material provided in
connection therewith. The Indemnifying Party shall be liable for any settlement
of any Third-Party Claim effected pursuant to and in accordance with this
Section 8.2 and for any final judgment (subject to any right of appeal), and the
Indemnifying Party agrees to indemnify and hold harmless each Indemnified Party
from and against any and all Damages by reason of such settlement or judgment.
(c) Indemnification Amounts. Any Damages for which indemnification is
------------------------
provided under this Agreement shall be (i) increased to take account of any net
Tax Cost incurred by the Indemnified Party arising from the receipt or indemnity
payments hereunder (i.e., grossed-up for any Tax incurred on such increase),
(ii) reduced to take account of any net Tax Benefit realized by the Indemnified
Party arising from the incurrence or payment of any such Damages, (iii) reduced
to take account of any insurance proceeds or other third-party recoveries
realized by the Indemnified Party arising from the incurrence or payment of any
such Damages, (iv) in the case of any payment to Unidigital Indemnified Parties,
reduced to take account of any net Tax Benefit realized by Sub arising from the
incurrence or payment of any such Tax
38
<PAGE>
or other amount, and (v) in the case of any payment to Unidigital Indemnified
parties, increased to take account of any net Tax Cost incurred by Sub or any
Affiliate arising from the receipt of indemnity payments hereunder. In the event
Unidigital or any Affiliate thereof (including, without limitation, Sub) obtains
an increase in the basis of any asset (other than stock) directly or indirectly
as a result of any event giving rise to any Tax for which such Unidigital
Indemnified Party would be entitled to indemnification if it paid or otherwise
incurred the economic burden associated therewith, Unidigital shall be deemed to
have received a net Tax Benefit.
(d) Characterization of Indemnifying Payments. The parties agree that
------------------------------------------
any indemnification payments (and/or adjustments) made pursuant to this
Agreement shall be treated for all Tax purposes as an adjustment to the Merger
Consideration, unless otherwise required by applicable law.
8.3 No Right of Contribution.
After the Closing, the Stockholders shall not have any right of
contribution against the Surviving Corporation for any breach of any
representation, warranty, covenant or agreement of Zazula. The Stockholders and
Unidigital shall be entitled to specific performance and injunctive relief,
without posting bond or other security, for the purpose of asserting their
respective rights under this Article 8. The remedies described in this Article 8
shall be in addition to, and not in lieu of, any other remedies at law or in
equity that the parties may elect to pursue.
8.4 Escrow; Right of Offset.
If the Escrow Agreement is in effect at the time an assertion of
indemnification is made by a Unidigital Indemnified Party, the obligations of
the Stockholders hereunder with respect to the Damages shall be satisfied first
by the distribution to the Unidigital Indemnified Party of the appropriate
portion of the Escrow Fund held pursuant to the Escrow Agreement and, only
thereafter, by the Stockholders directly. Neither the exercise nor the failure
to exercise such rights under this Agreement or the Escrow Agreement shall
constitute an election of remedies or limit Unidigital or Sub in any manner in
the enforcement of any legal or equitable remedies that may be available to such
parties.
ARTICLE 9.
POST-CLOSING AGREEMENTS
9.1 Guaranty.
In the event that Sub fails to duly and properly and/or promptly perform
and satisfy its obligations under this Agreement and the Ancillary Agreements to
which it is a party in accordance with the terms and conditions hereof and
thereof, Unidigital will, upon written demand of Zazula or the Stockholders, as
the case may be, setting forth the specific failure of Sub, unconditionally and
promptly perform and satisfy those obligations of Sub set forth in such written
demand in accordance with the terms and conditions of this Agreement or any
Ancillary Agreement, as applicable.
9.2 Covenants with Respect to Tax-Free Reorganization.
Following the Closing Date, Unidigital and Sub covenant that:
(a) Sub will hold at least ninety percent of the fair market value of
Zazula's net assets and at least seventy-five percent of the fair market value
of Zazula's gross assets held immediately prior to
39
<PAGE>
the transaction. For purposes of this covenant, the assets of Zazula shall
include only the assets of Zazula immediately prior to the transaction.
(b) Unidigital will not reacquire any of its stock issued in the
transaction.
(c) Sub will not issue additional shares of its stock that would result
in Unidigital losing control of Sub within the meaning of Section 368(c) of the
Code.
(d) Unidigital will not liquidate Sub; merge Sub with or into another
corporation; sell or otherwise dispose of the stock of Sub except transfers of
stock to corporations controlled by Unidigital; or cause Sub to sell or
otherwise dispose of any of its assets or of any of the assets acquired from
Zazula, except for dispositions made in the ordinary course of business or
transfers of assets to a corporation controlled by Sub.
(e) Unidigital will cause Sub to continue the historic business of
Zazula or to use a significant portion of Zazula's historic business assets in a
business.
9.3 Preparation of Returns.
The Stockholders shall designate the accountants to prepare the federal and
state S corporation Tax Returns of Zazula for the period commencing January 1,
1998 and ending on or before the Closing Date and Unidigital and the
Stockholders shall have a reasonable opportunity to review such Tax Returns and
related workpapers. The income of Zazula will be computed on a "closing of the
books" method for this period and, if necessary, each of the parties hereto
shall consent to the preparation of the return on such basis. Unidigital and its
Affiliates shall not file an amended tax return for Zazula for any period ending
on or prior to the Closing Date without the consent of the Stockholders which
consent shall not be unreasonably withheld or delayed.
ARTICLE 10
MISCELLANEOUS
10.1 Assignment.
Neither this Agreement nor any of the rights or obligations hereunder may
be assigned (a) by Zazula or the Stockholders without the prior written consent
of Unidigital (except that notwithstanding the foregoing, the rights of the
Stockholders hereunder shall inure to the benefit of their heirs and legal
representatives), or (b) by Unidigital or Sub without the prior written consent
of Zazula or the Stockholders (including any transfer by Unidigital or Sub to
any successor by operation of law or otherwise). Subject to the foregoing, the
rights and obligations of the parties shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective permitted
successors and assigns, and their respective heirs and legal representatives. In
furtherance thereof, any permitted successor or assignee of Unidigital and/or
Sub shall expressly assume in writing all obligations of Unidigital and/or Sub,
as applicable, to the Stockholders hereunder.
10.2 Notices.
All notices provided for in this Agreement shall be in writing signed by
the party giving such notice, and delivered personally or sent by overnight
courier, mail or messenger against receipt thereof or sent by registered or
certified mail (air mail if overseas), return receipt requested, or by facsimile
40
<PAGE>
transmissions or similar means of communication if receipt is confirmed or if
transmission of such notice is confirmed by mail as provided in this Section
10.2. Notices shall be deemed to have been received on the date of personal
delivery or telecopy or, if sent by certified or registered mail, return receipt
requested shall be deemed to be delivered on the fifth (5th) business day after
the date of mailing. Notices shall be sent to the parties at the following
addresses:
If to any of the Stockholders, to the address of such Stockholder as set
forth on the signature page hereto.
If prior to the Closing, to Zazula:
Hy Zazula Associates, Inc.
2 West 46th Street
New York, New York 10036
Fax: (212) 768-0819
Attention: Steven Zazula, Vice President
With a copy to:
Esanu Katsky Korins & Siger, LLP
605 Third Avenue
New York, New York 10158
Fax: (212) 953-6899
Attention: Meryl Lynn Unger, Esq. and
Roy M. Korins, Esq.
If to Unidigital or Sub or, if after the Closing, to the Surviving
Corporation:
Unidigital Inc.
229 West 28th Street, 10th Floor
New York, New York 10001
Fax: (212) 244-7815
Attention: William E. Dye, Chief Executive Officer
With a copy to:
Buchanan Ingersoll Professional Corporation
500 College Road East
Princeton, New Jersey 08540
Fax: (609) 520-0360
Attention: David J. Sorin, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.3 Choice of Law.
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the State of New York without
giving regard to conflicts of law principles.
10.4 Descriptive Headings.
The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
41
<PAGE>
10.5 Entire Agreement; Amendments and Waivers.
This Agreement, together with all exhibits and schedules hereto, and the
Confidentiality Agreement, constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
10.6 Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
10.7 Invalidity.
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.8 Expenses.
Except as otherwise provided in this Agreement, Unidigital will be liable
for its and Sub's expenses, and Zazula will be liable for its and the
Stockholders' expenses, incurred in connection with the negotiation,
preparation, execution and performance of this Agreement. Notwithstanding the
foregoing, Unidigital shall be responsible for paying and filing all recording
taxes and fees, and all sales, use and transfer taxes and fees, if any, in
connection with the Merger.
10.9 Publicity.
Except as required by law or on advice of counsel, neither party shall
issue any press release or make any public statement regarding the transactions
contemplated hereby without the prior approval of the other parties, and the
parties hereto shall issue a mutually acceptable press release as soon as
practicable after the date hereof and after the Closing Date. Notwithstanding
the foregoing, Unidigital shall be permitted to make any public statement
without obtaining the consent of any other party hereto if the disclosure is
required by law.
10.10 No Third Party Beneficiaries.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, including,
without limitation, by way of subrogation, except as specifically set forth in
Article 8 hereof.
[SIGNATURE PAGE FOLLOWS]
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
UNIDIGITAL INC.
By: /s/ William E. Dye
--------------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNISON (NY), INC.
By: /s/ William E. Dye
--------------------------------
Name: William E. Dye
Title: Chief Executive Officer
HY ZAZULA ASSOCIATES, INC.
By: /s/ Steven Zazula
--------------------------------
Name: Steven Zazula
Title: Vice President
STOCKHOLDERS
/s/ Hyman Zazula
----------------------------------
Name: Hyman Zazula
Address: 6777 Versailles Court
Lake Worth, Florida 33467
/s/ Steven Zazula
----------------------------------
Name: Steven Zazula
Address: 14 Prince Street
New York, New York 10012
/s/ David Zazula
----------------------------------
Name: David Zazula
Address: 14 Prince Street
New York, New York 10012
/s/ Gary Feigenbaum
----------------------------------
Name: Gary Feigenbaum
Address: 55 Old Orchard Road
New Rochelle, New York 10804
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT NO. 2, dated as of October 30, 1998 (this "Amendment"), to the
---------
Credit Agreement, dated as of March 24, 1998 (as amended, supplemented or
otherwise modified prior to the date hereof, the "Credit Agreement"), among
-----------------
UNIDIGITAL INC., a Delaware corporation (the "Borrower"), the various lenders
--------
from time to time a party thereto (the "Lenders"), CANADIAN IMPERIAL BANK OF
-------
COMMERCE, as administrative agent (in such capacity, the "Administrative Agent")
--------------------
for the Lenders and CANADIAN IMPERIAL BANK OF COMMERCE (in such capacity, the
"Issuing Lender.").
--------------
RECITALS
The Borrower has advised the Administrative Agent and the Lenders that it
will acquire (the "Zazula Acquisition") all of the assets and liabilities of Hy
-------------------
Zazula Associates, Inc., a New York corporation ("Zazula") by means of the
------
merger (the "Zazula Merger") of Zazula with and into Unison (NY), Inc., a
--------------
Delaware corporation ("Unison (NY)") pursuant to the Agreement and Plan of
------------
Merger, dated as of October 30, 1998 (the "Zazula Acquisition Agreement"), among
----------------------------
the Borrower, Unison (NY), Zazula, and Hyman Zazula, Steven Zazula, David Zazula
and Gary Feigenbaum, the holders of all the issued and outstanding capital stock
of Zazula (collectively, the "Stockholders"). The Borrower has further advised
------------
the Administrative Agent that it intends to use borrowings under the Revolving
Credit Commitments (as increased hereby) to finance the Zazula Acquisition and
the payment of fees and expenses incurred in connection therewith. In connection
with the Zazula Acquisition and the borrowings referenced above, the Borrower
has requested the Administrative Agent and the Lenders to agree to amend certain
provisions of the Credit Agreement as set forth in this Amendment. The
Administrative Agent and the Lenders parties hereto are willing to agree to such
amendments, but only on the terms and subject to the conditions set forth in
this Amendment.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Administrative Agent and the Lenders parties
hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
-------------
Credit Agreement are used herein as therein defined including, in Section 3, as
defined in the Credit Agreement as amended by this Amendment.
<PAGE>
2. Amendments.
----------
(a) Section 1.1 of the Credit Agreement is hereby amended by adding the
following new definitions thereto in the appropriate alphabetical order:
"Amendment No. 2": Amendment No. 2, dated as of October 30, 1998, to
----------------
the Credit Agreement.
"Mega Art Acquisition": as defined in the Waiver, dated as of
----------------------
September 1, 1998.
"Stockholders": as defined in the Zazula Acquisition Agreement.
------------
"Supplemental Closing Date": the date on which the conditions
----------------------------
precedent to the effectiveness of Amendment No. 2 set forth in Section 3 of
Amendment No. 2 shall have been satisfied.
"Supplemental Revolving Credit Note Endorsement": with respect to the
-----------------------------------------------
Revolving Credit Note of each Lender, the promissory note endorsement made
by the Borrower, substantially in the form of Exhibit A to Amendment No. 2,
modifying the Revolving Credit Note of such Lender (as in effect prior to
the Supplemental Closing Date) to take account of the Revolving Credit
Commitment of such Lender as such Revolving Credit Commitment is modified
pursuant to Amendment No. 2.
"Zazula": Hy Zazula Associates, Inc., a New York corporation.
------
"Zazula Acquisition": the acquisition by Unison (NY), Inc., a Delaware
------------------
corporation and wholly owned subsidiary of the Borrower ("Unison (NY)"), of
-----------
all of the assets and liabilities of Zazula pursuant to the Zazula
Acquisition Documents by means of the Merger (as defined in the Zazula
Acquisition Agreement) of Zazula with and into Unison (NY), with Unison
(NY) being the surviving entity in such Merger.
"Zazula Acquisition Agreement": the Agreement and Plan of Merger,
------------------------------
dated as of October 30, 1998, among the Borrower, Unison (NY), Zazula and
the Stockholders.
"Zazula Acquisition Documents": collectively, the Zazula Acquisition
----------------------------
Agreement, the other documents listed in Schedule 1.2 to Amendment No. 2
and any other documents executed in connection with the Zazula Acquisition.
(b) Section 1.1 of the Credit Agreement is hereby amended by amending the
following definitions in their entirety to read as follows:
"Consolidated EBITDA": for any period, the sum, for the Borrower and
--------------------
its Subsidiaries (determined on a consolidated basis without duplication in
2
<PAGE>
accordance with GAAP), for such period of (a) Consolidated Net Income for
such period, (b) the sum of provisions for such period for income taxes,
interest expense, and depreciation and amortization expense used in
determining such Consolidated Net Income, (c) amounts deducted in such
period in respect of non-cash expenses in accordance with GAAP, (d)
non-capitalized transaction costs deducted in such period in connection
with the Kwik Acquisition, the Mega Art Acquisition, the Zazula Acquisition
and any Permitted Acquisitions and the financings relating thereto, (e) the
amount of any aggregate net loss (or minus the amount of any gain) during
such period arising from the sale, exchange or other disposition of capital
assets, (f) non-cash expenses deducted in such period in connection with
any earn-out agreements, stock appreciation rights, "phantom" stock plans,
employment agreements, non-competition agreements, subscription and
stockholders agreements and other incentive and bonus plans and similar
arrangements made in connection with acquisitions of Persons or businesses
by the Borrower or its Subsidiaries or the retention of executives,
officers or employees by the Borrower or its Subsidiaries, including (but
without duplication) any Person that has become a Subsidiary during such
specified period, on a pro forma basis as if such acquisition had occurred
--- -----
on the first day of such period plus other non-recurring, non-operating
expenses as shall have been approved by the Administrative Agent as
exclusions from the determination of Consolidated EBITDA; provided, that
--------
Consolidated EBITDA shall in any event exclude, from and after the Closing
Date, (x) the effect of any write-up of the assets of Kwik, Mega Art,
Zazula or any of its Subsidiaries or any other assets acquired in any
Permitted Acquisitions and (y) the amount of any non-cash income recognized
during any period for which Consolidated EBITDA is determined.
"Revolving Credit Commitment": as to any Lender, the obligation of
-----------------------------
such Lender to make Revolving Credit Loans to the Borrower pursuant to
Section 4.1 and/or to issue or participate in Letters of Credit issued on
behalf of the Borrower hereunder in an aggregate principal and/or face
amount at any one time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.0 under the caption "Revolving
Credit Loan" or in an Assignment and Acceptance, as such amount may be
reduced from time to time in accordance with the provisions of this
Agreement. The original aggregate principal amount of the Revolving Credit
Commitment (after giving effect to Amendment No. 2) is $15,000,000.
(c) Section 4.2 of the Credit Agreement is hereby amended by deleting the
parenthetical phrase "(a "Revolving Credit Note")" and substituting in lieu
----------------------
thereof the phrase "(such promissory note, as the same may be supplemented from
time to time (including by a Supplemental Revolving Credit Note Endorsement), a
"Revolving Credit Note")".
---------------------
3
<PAGE>
(d) Section 7.3 of the Credit Agreement is hereby amended by deleting the
first word of such section, "Each", and substituting in lieu thereof the phrase
"Except as set forth on Schedule 7.3, each".
(e) Section 7.18 (c) of the Credit Agreement is hereby amended by
inserting the words "except as set forth on Schedule 7.18", immediately
following the phrase; "and (c)".
(f) Section 7.21 of the Credit Agreement is hereby amended by deleting the
second sentence therein and substituting in lieu thereof the following new
sentence:
"The proceeds of the Revolving Credit Loans shall be used for the
following purposes: (i) to finance in part the Refinancing; (ii) for the
working capital requirements of the Borrower, and its subsidiaries, in the
ordinary course of business; (iii) to pay fees and expenses incurred in
connection herewith; and (iv) in an aggregate amount not to exceed
2,500,000, to finance the Zazula Acquisition and the fees and expenses
incurred in connection therewith."
(g) Section 9.11 of the Credit Agreement is hereby amended by deleting
such section in its entirety and substituting in lieu thereof a new Section 9.11
to read as follows:
"9.11. Filing of Mortgage. In the event that the Borrower or any of
-------------------
its Subsidiaries is the beneficial owner of the real property located at
545 West 45th Street, New York, New York as of December 31, 1998, the
Mortgage which has been executed and delivered to the Administrative Agent
pursuant to Section 8.1(a)(viii) of this Credit Agreement shall be filed in
the appropriate recording office, the Borrower shall cause to be provided
title insurance of the type called for by Section 9.12 hereof and a legal
opinion with respect to the Mortgage acceptable to the Administrative
Agent, and the Borrower shall pay all applicable recording taxes and other
fees and expenses in connection therewith."
(h) Section 9.13 of the Credit Agreement is hereby amended by deleting
such section in its entirety and substituting in lieu thereof a new Section 9.13
to read as follows:
"9.13. Execution of Leasehold Mortgages. On or before December 31,
---------------------------------
1998 and in accordance with Section 9.12, the Borrower shall cause
Leasehold Mortgages, substantially in the form of Exhibit G to be executed
for each of the four leases of real property at 28th Street, New York, New
York, as more fully described on Schedule 9.13."
(i) Section 10.2 of the Credit Agreement is hereby amended by inserting in
clause (f) thereof, immediately following the phrase "on the date hereof," the
phrase "or the Supplemental Closing Date".
4
<PAGE>
(j) Section 10.3 of the Credit Agreement is hereby amended by inserting in
clause (f) thereof, immediately following the phrase "on the date hereof," the
phrase "or the Supplemental Closing Date".
(k) Section 10.5 of the Credit Agreement is hereby amended by deleting
"and" from the end of clause (a) thereof, by deleting "." from the end of clause
(b) thereof and substituting in lieu thereof "; and," and by adding at the end
thereof the following new clause (c) to read in its entirety as follows:
"(c) the Zazula Acquisition, on the terms and subject to the
conditions set forth in the Zazula Acquisition Documents."
(l) Section 10.10 of the Credit Agreement is hereby amended by inserting
in clause (c) thereof immediately prior to the semicolon the phrase "and the
Zazula Acquisition."
(m) Section 10.11 of the Credit Agreement is hereby amended by inserting
in clause (c) thereof, immediately after the phrase "any Kwik Acquisition
Document," the phrase "any Zazula Acquisition Document,".
(n) Schedules 1.0, 7.2, 7.6, 7.15, 10.2, 10.3, 10.4 and 10.6, to the
Credit Agreement are hereby amended by deleting such Schedules in their entirety
and substituting in lieu thereof Schedules 1.0, 7.2, 7.6, 7.15, 10.2, 10.3, 10.4
and 10.6 to this Amendment, respectively.
(o) The Credit Agreement is hereby amended by adding thereto Schedules 7.3
and 7.18 to this Amendment as new Schedules to the Credit Agreement.
3. Effectiveness. The effectiveness of this Amendment, and the obligation
of the Lenders to make their Revolving Credit Loans under the Revolving Credit
Commitments as increased hereby (such Revolving Credit Loans, the "Supplemental
------------
Revolving Credit Loans"), is subject to the satisfaction of the following
- ------------------------
conditions precedent (the date of such satisfaction being herein referred to as
the "Supplemental Closing Date"):
-------------------------
(a) Amendment Documents. The Administrative Agent shall have received:
(i) this Amendment, executed and delivered by a duly authorized
officer of the Borrower and each Subsidiary of the Borrower party to
the Subsidiaries Guarantee, with a counterpart for each Lender,
(ii) for the account of each Lender, the Revolving Credit
Commitment of which is to be increased pursuant to this Amendment, a
Supplemental Revolving Credit Note Endorsement of the Borrower
conforming to the requirements hereof and executed by a duly
authorized officer of the Borrower, and
5
<PAGE>
(iii) an Amendment to Security Agreement, substantially in the
form of Exhibit B to this Amendment, executed and delivered by a duly
authorized officer of Unison (NY), with a counterpart or a conformed
copy for each Lender.
Collectively, the documents referenced in clauses (i) through (iii) of
this Section 3(a) are referred to herein as the "Amendment Documents".
-------------------
(b) Zazula Acquisition Documents.
----------------------------
(i) The Administrative Agent shall have received, with a copy
for each Lender, true and correct copies, certified as to authenticity
by the Borrower, of each Zazula Acquisition Document and such other
documents or instruments as may be reasonably requested by the
Administrative Agent, including, without limitation, a copy of any
debt instrument, security agreement or other material contract to
which Zazula or Unison (NY) may be a party.
(ii) The Administrative Agent shall have received a certificate
from a duly authorized officer of each of the Loan Parties party to
such Zazula Acquisition Documents and each of the Persons which are
sellers in the Zazula Acquisition, addressed to the Administrative
Agent and the Lenders, to the effect that none of the Zazula
Acquisition Documents as delivered to the Administrative Agent has
been amended, supplemented or otherwise modified except as approved by
the Administrative Agent, that each of the representations and
warranties set forth in such Acquisition Documents continue to be
true, complete and correct in all material respects as of the
Supplemental Closing Date as if made on and as of the Supplemental
Closing Date, that the Administrative Agent and the Lenders may rely
on such representations and warranties as if such representations and
warranties were made to the Administrative Agent and Lenders directly,
and that no default, breach or violation of any of the Zazula
Acquisition Documents has occurred and is continuing.
(c) Concurrent Transactions. The Zazula Acquisition shall have been
------------------------
or, concurrently with the making of the Supplemental Revolving Credit Loans
shall be, consummated in accordance with the terms of the Zazula
Acquisition Documents, for such total consideration (including fees) as set
forth in the Zazula Acquisition Documents, in each case without any
amendment, modification or waiver thereof except with the consent of the
Required Lenders, and the Administrative Agent shall have received evidence
satisfactory to it to that effect. The Administrative Agent shall have
received evidence satisfactory to it that the aggregate amount of fees and
expenses incurred by the Borrower and the other Loan Parties in connection
with the Zazula Acquisition shall not exceed $225,000.
(d) Secretary's Certificates. The Administrative Agent shall have
-------------------------
received, with a counterpart for each Lender, a certificate, signed by the
secretary or an assistant
6
<PAGE>
secretary of each of the Borrower and Unison (NY), substantially in the
form of Exhibit M-1 or M-2 to the Credit Agreement, as applicable, with
appropriate insertions and attachments, satisfactory in form and substance
to the Administrative Agent.
(e) Proceedings of the Borrower. The Administrative Agent shall have
---------------------------
received, with a counterpart for each Lender, a copy of the resolutions, in
form and substance satisfactory to the Administrative Agent, of the
Borrower authorizing (i) the execution, delivery and performance of this
Amendment and the other Amendment Documents to which it is a party, (ii)
the borrowings contemplated hereunder and thereunder, and under the Loan
Documents as amended thereby, and (iii) the granting by it of the Liens
created pursuant to the Security Agreements, certified by the Secretary or
an Assistant Secretary of the Borrower as of the Supplemental Closing Date,
which certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded. Such resolutions may
be included as attachments to the Secretary's Certificate delivered by the
Borrower pursuant to Section 3(d) of this Amendment.
(f) Borrower Incumbency Certificate. The Administrative Agent shall
--------------------------------
have received, with a counterpart for each Lender, a certificate of the
Borrower, dated the Supplemental Closing Date, as to the incumbency and
signature of the officers of the Borrower executing this Amendment or the
other Amendment Documents to which the Borrower is a party, satisfactory in
form and substance to the Administrative Agent, executed by the President
or any Vice President and the Secretary or any Assistant Secretary of the
Borrower. Such incumbency certificate may be included in the Secretary's
Certificate delivered by the Borrower pursuant to Section 3(d) of this
Amendment.
(g) Proceedings of Unison (NY). The Administrative Agent shall have
--------------------------
received, with a counterpart for each Lender, a copy of the resolutions, in
form and substance satisfactory to the Administrative Agent, of the Board
of Directors of Unison (NY) authorizing (i) the execution, delivery and
performance of the Amendment Documents to which it is or will become a
party pursuant to this Amendment, and (ii) the granting by it of the Liens
created pursuant to the Subsidiaries Security Agreement, certified by the
Secretary or an Assistant Secretary of Unison (NY) as of the Supplemental
Closing Date, which certificate shall be in form and substance satisfactory
to the Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded. Such
resolutions may be included as attachments to the Secretary's Certificate
delivered by Unison (NY) pursuant to Section 3(d) of this Amendment.
(h) Unison (NY) Incumbency Certificate. The Administrative Agent shall
----------------------------------
have received, with a counterpart for each Lender, a certificate of Unison
(NY), dated the Supplemental Closing Date, as to the incumbency and
signature of the officers of Unison (NY) executing the Amendment Documents
to which it is a party, satisfactory
7
<PAGE>
in form and substance to the Administrative Agent, executed by the
President or any Vice President and the Secretary or any Assistant
Secretary of Unison (NY). Such incumbency certificate may be included in
the Secretary's Certificate delivered by Unison (NY) pursuant to Section
3(d) of this Amendment.
(i) Governing Documents of the Borrower. The Administrative Agent
-------------------------------------
shall have received, with a counterpart for each Lender, true and complete
copies of the certificate of incorporation, by-laws or other constituent
documents of the Borrower, certified as of the Supplemental Closing Date as
complete and correct copies thereof by the Secretary or an Assistant
Secretary of the Borrower. Such governing documents may be included as
attachments to the Secretary's Certificate delivered by the Borrower
pursuant to Section 3(d) of this Amendment.
(j) Governing Documents of Unison (NY). The Administrative Agent shall
----------------------------------
have received, with a counterpart for each Lender, true and complete copies
of the certificate of incorporation, by-laws or other constituent documents
of Unison (NY), certified as of the Supplemental Closing Date as complete
and correct copies thereof by the Secretary or an Assistant Secretary of
Unison (NY). Such governing documents may be included as attachments to the
Secretary's Certificate delivered by Unison (NY) pursuant to Section 3(d)
of this Amendment.
(k) Good Standing Certificates. The Administrative Agent shall have
---------------------------
received, with a copy for each Lender, certificates dated as of a recent
date from the Secretary of State or other appropriate authority, evidencing
the good standing of each of the Borrower and Unison (NY) (i) in the
jurisdiction of its organization and (ii) in each other jurisdiction where
its ownership, lease or operation of property or the conduct of its
business requires it to qualify as a foreign Person except, as to this
subclause (ii), where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect.
(l) Consents, Licenses and Approvals. The Administrative Agent shall
---------------------------------
have received, with a counterpart for each Lender, a certificate of a
Responsible Officer of Unison (NY) (i) attaching copies of any consents,
authorizations and filings referred to in Section 7.4 of the Credit
Agreement (as amended hereby) relative to Unison (NY), and (ii) stating
that such consents, licenses and filings are in full force and effect, and
each such consent, authorization and filing shall be in form and substance
satisfactory to the Administrative Agent.
(m) Fees. The Administrative Agent shall have received the fees to be
----
received on the Supplemental Closing Date referred to in the Supplemental
Fee Letter.
(n) Legal Opinions. The Administrative Agent shall have received, with
--------------
a counterpart for each Lender, the executed legal opinion of Buchanan
Ingersoll Professional Corporation, counsel to the Borrower and the other
Loan Parties, substantially in the form of Exhibit C to this Amendment.
Such legal opinion shall
8
<PAGE>
cover such other matters incident to the transactions contemplated by this
Amendment as the Administrative Agent may reasonably require.
(o) Lien Searches. The Administrative Agent shall have received the
-------------
results of a recent search by a Person satisfactory to the Administrative
Agent, of the Uniform Commercial Code, judgment and tax lien filings which
may have been filed with respect to personal property of Zazula, and the
results of such search shall be satisfactory to the Administrative Agent.
(p) Insurance. The Administrative Agent shall have received evidence
---------
in form and substance satisfactory to it that all of the requirements of
Section 9.5 of the Credit Agreement shall have been satisfied.
(q) Representations and Warranties. Each of the representations and
-------------------------------
warranties made by the Borrower and the other Loan Parties in or pursuant
to the Loan Documents shall be true and correct in all material respects on
and as of the Supplemental Closing Date as if made on and as of
Supplemental Closing Date (and after giving effect to the amendments
provided for in this Amendment) (or, if any such representation or warranty
is expressly stated to have been made as of a specific date, as of such
specific date).
(r) No Default. No Default or Event of Default shall have occurred and
----------
be continuing on the Supplemental Closing Date or after giving effect to
the amendments provided for in this Amendment or the Loans to be made on
such date.
(s) Additional Matters. All corporate and other proceedings, and all
------------------
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement, the other Loan Documents and
the Acquisition Documents shall be satisfactory in form and substance to
the Administrative Agent, and the Administrative Agent shall have received
such other documents and legal opinions in respect of any aspect or
consequence of the transactions contemplated hereby or thereby as it shall
reasonably request.
4. Representations and Warranties. To induce the Administrative Agent and
------------------------------
the Lenders to enter into this Amendment, the Borrower hereby represents and
warrants to the Administrative Agent and the Lenders that, after giving effect
to the amendments provided for herein and the additional Loans contemplated
hereby, the representations and warranties contained in the Credit Agreement and
the other Loan Documents will be true and correct in all material respects as if
made on and as of the date hereof and that no Default or Event of Default will
have occurred and be continuing (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date).
5. No Other Amendments. Except as expressly amended hereby, the Credit
--------------------
Agreement, the Notes and the other Loan Documents shall remain in full force and
effect in accordance with their respective terms, without any waiver, amendment
or modification of any provision thereof.
9
<PAGE>
6. Counterparts. This Amendment may be executed by one or more of the
------------
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. Expenses. The Borrower agrees to pay and reimburse the Administrative
--------
Agent for all of the out-of-pocket costs and expenses incurred by the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment, including, without limitation, the reasonable fees and
disbursements of Cadwalader, Wickersham & Taft, counsel to the Administrative
Agent.
8. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
---------------
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[SIGNATURE PAGES FOLLOW]
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
UNIDIGITAL INC.
By: /s/ William E. Dye
==============================
Name: William E. Dye
Title: Chief Executive Officer
CANADIAN IMPERIAL BANK
OF COMMERCE
as Administrative Agent and as a Lender
By: /s/ E. Lindsay Gordon
==============================
Name: E. Lindsay Gordon
Title: Executive Director
CIBC Oppenheimer Corp., as Agent
MARINE MIDLAND BANK
By: /s/ Gina Sidorsky
==============================
Name: Gina Sidorsky
Title: Authorized Signatory
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ David E. Yewer
=============================
Name: David E. Yewer
Title: Vice President
By: /s/ Richard P. Buckanavage
===========================
Name: Richard P. Buckanavage
Title: Vice President
<PAGE>
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES, INC.
By: /s/ Daniel J. McHugh
-----------------------------
Name: Daniel J. McHugh
Title: Vice President
By:
-----------------------------
Name:
Title:
<PAGE>
The undersigned guarantors hereby consent and agree to the foregoing
Amendment:
UNIDIGITAL ELEMENTS (NY), INC.
By: /s/ William E. Dye
------------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNIDIGITAL ELEMENTS (SF), INC.
By: /s/ William E. Dye
------------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNISON (NY), INC.
By: /s/ William E. Dye
------------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNISON (MA), INC.
By: /s/ William E. Dye
------------------------------
Name: William E. Dye
Title: Chief Executive Officer
MEGA ART CORP.
By: /s/ William E. Dye
------------------------------
Name: William E. Dye
Title: Chief Executive Officer
AMENDMENT TO SECURITY AGREEMENT
AMENDMENT, dated as of October 30, 1998 (this "Amendment") to that Security
---------
Agreement, dated as of March 24, 1998 (as amended, supplemented or otherwise
modified, the "Security Agreement"), made by UNIDIGITAL INC., a Delaware
-------------------
corporation (the "Borrower") and each subsidiary of the Borrower which is a
--------
signatory thereto (together with the Borrower, collectively, the "Loan Parties")
------------
in favor of CANADIAN IMPERIAL BANK OF COMMERCE, as administrative agent (in such
capacity, the "Administrative Agent") for the various lenders (the "Lenders")
--------------------- -------
and CANADIAN IMPERIAL BANK OF COMMERCE, as issuing lender (in such capacity, the
"Issuing Lender"), parties to that Credit Agreement, dated as of March 24, 1998
--------------
(as amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Borrower, the Lenders, the Issuing Lender and the
- ---------
Administrative Agent.
RECITALS
The Loan Parties party to the Security Agreement have notified the
Administrative Agent that Hy Zazula Associates, Inc., a New York corporation
("Zazula"), will merge with and into Unison (NY), Inc., a Delaware corporation,
with Unison (NY), Inc. being the surviving corporation in such merger. The Loan
Parties party to the Security Agreement have requested that the Security
Agreement be amended to take account of the assets and liabilities of Zazula
being acquired by Unison (NY), Inc. in connection with such acquisition. The
Administrative Agent and the Required Lenders are willing to agree to such
amendment, but only on the terms and subject to the conditions set forth in this
Amendment.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Administrative Agent and the Required Lenders
hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
-------------
Security Agreement are used herein as therein defined.
2. Amendment. (a) The Security Agreement is hereby amended by supplementing
---------
Schedules I, VI and VII thereto by adding to such Schedules the material set
forth on the corresponding Schedules I, VI and VII to this Amendment.
(b) Section 4(l) of the Security Agreement is hereby amended by adding
the words: "Except as set forth on Schedule VII hereto," to the beginning of the
sentence.
3. Effectiveness. This Amendment shall become effective on the date that
-------------
the Administrative Agent shall have received this Amendment, executed and
delivered by duly authorized officers of the Borrower and the Required Lenders.
1
<PAGE>
4. Representations and Warranties. To induce the Administrative Agent and
------------------------------
the Required Lenders to enter into this Amendment, the Borrower hereby
represents and warrants to the Administrative Agent that the representations and
warranties contained in the Security Agreement and are true and correct in all
material respects as if made on and as of the date hereof and that no Default or
Event of Default will have occurred and be continuing.
5. No Other Amendments. Except as expressly amended hereby, the Security
-------------------
Agreement shall remain in full force and effect in accordance with their
respective terms, without any waiver, amendment or modification of any provision
thereof.
6. Counterparts. This Amendment may be executed by one or more of the
------------
parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
7. Expenses. The Borrower agrees to pay and reimburse the Administrative
--------
Agent for all of the out-of-pocket costs and expenses incurred by the
Administrative Agent in connection with the preparation, execution and delivery
of this Amendment, including, without limitation, the fees and disbursements of
Cadwalader, Wickersham & Taft, counsel to the Agent.
8. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
---------------
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[SIGNATURE PAGES FOLLOW]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the date and year first above written.
CANADIAN IMPERIAL BANK OF
COMMERCE, as Administrative Agent and as a
Lender
By: /s/ E. Lindsay Gordon
-----------------------------------
Name: E. Lindsay Gordon
Title: Executive Director
CIBC Oppenheimer Corp., as Agent
MARINE MIDLAND BANK
By: /s/ Gina Sidorsky
----------------------------------
Name: Gina Sidorsky
Title: Authorized Signatory
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ David E. Yewer
----------------------------------
Name: David E. Yewer
Title: Vice President
By: /s/ Maura K. Connor
----------------------------------
Name: Maura K. Connor
Title: Senior Associate
3
<PAGE>
MERRILL LYNCH BUSINESS FINANCIAL
SERVICES, INC.
By: /s/ Daniel J. McHugh
----------------------------------
Name: Daniel J. McHugh
Title: Vice President
By:
----------------------------------
Name:
Title:
UNIDIGITAL INC.
By: /s/ William E. Dye
----------------------------------
William Dye
Chief Executive Officer
UNIDIGITAL ELEMENTS (NY), INC.
By: /s/ William E. Dye
----------------------------------
William Dye
Chief Executive Officer
UNIDIGITAL ELEMENTS (SF), INC.
By: /s/ William E. Dye
----------------------------------
William Dye
Chief Executive Officer
4
<PAGE>
UNISON (NY), INC.
By: /s/ William E. Dye
----------------------------------
William Dye
Chief Executive Officer
UNISON (MA), INC.
By: /s/ William E. Dye
----------------------------------
William Dye
Chief Executive Officer
MEGA ART CORP.
By: /s/ William E. Dye
----------------------------------
William Dye
Chief Executive Officer
1
