SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1999
Commission File No. 1-14126
UNIDIGITAL INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3856672
- ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
229 West 28th Street, New York, New York 10001
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(Address of Principal Executive Offices)
(212) 244-7820
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(Issuer's Telephone Number,
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:
----- -----
State the number of shares outstanding of each of the Issuer's classes of
common stock, as of June 30, 1999:
Class Number of Shares
- ----- ----------------
Common Stock, $.01 par value 5,493,002
Transitional Small Business Disclosure Format (check one):
Yes: No: X
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements..........................................1
CONSOLIDATED BALANCE SHEETS
as at May 31, 1999 (unaudited)
and August 31, 1998 (audited)......................................2
CONSOLIDATED INCOME STATEMENTS
For the Three Months and Nine
Months Ended May 31, 1999 and
May 31, 1998 (unaudited)...........................................3
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
May 31, 1999 and May 31, 1998
(unaudited)........................................................4
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (unaudited).............................................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................12
General............................................................12
Results of Operations..............................................12
Liquidity, Capital Resources and Other Matters.....................16
Year 2000 Compliance...............................................18
Item 3. Quantitative and Qualitative Disclosure
About Market Risk.............................................19
PART II OTHER INFORMATION
Item 1. Legal Proceedings.............................................20
Item 2. Changes in Securities and Use of Proceeds.....................20
Item 5. Other Information.............................................21
Item 6. Exhibits and Reports on Form 8-K..............................22
SIGNATURES...................................................................24
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<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-1-
<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
1999 1998
-------- ------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents...................................... $ 321,000 $ 287,000
Accounts receivable (less allowance for doubtful
accounts of $877,000 and $581,000 at
May 31, 1999 and August 31, 1998, respectively).............. 25,530,000 16,917,000
Deferred financing costs, net.................................. 2,910,000 1,013,000
Prepaid expenses............................................... 5,423,000 2,727,000
Other current assets........................................... 3,035,000 3,360,000
-------------- -------------
Total current assets....................................... 37,219,000 24,304,000
Property and equipment, net....................................... 20,188,000 14,591,000
Intangible assets, net............................................ 61,361,000 28,107,000
Other assets...................................................... 803,000 313,000
-------------- -------------
Total assets............................................... $ 119,571,000 $ 67,315,000
============== =============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses.......................... $ 8,606,000 $ 8,571,000
Current portion of capital lease obligations................... 3,329,000 1,935,000
Current portion of long-term debt.............................. 550,000 3,610,000
Income taxes payable........................................... 1,650,000 887,000
Deferred income taxes.......................................... -- 249,000
Loans and notes payable to stockholders........................ 592,000 155,000
-------------- -------------
Total current liabilities.................................. 14,727,000 15,407,000
Capital lease obligations, net of current portion................. 5,684,000 2,830,000
Long-term debt, net of current portion............................ 72,432,000 33,978,000
Deferred income taxes............................................. 833,000 500,000
Loans and notes payable to stockholders, net of current portion... 207,000 207,000
-------------- -------------
Total liabilities.......................................... 93,883,000 52,922,000
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 10,000,000 shares at
May 31, 1999 and 5,000,000 shares at August 31, 1998,
respectively, $.01 par value each; none issued
or outstanding............................... -- --
Common stock -- authorized 25,000,000 shares at
May 31, 1999 and 10,000,000 shares at August 31, 1998,
respectively, $.01 par value each; 5,493,002 and 3,902,634
shares issued and outstanding at May 31, 1999 and
August 31, 1998, respectively.................................. 55,000 39,000
Additional paid-in capital........................................ 20,209,000 9,865,000
Retained earnings................................................. 5,724,000 4,374,000
Cumulative foreign translation adjustment......................... (300,000) 115,000
-------------- -------------
Total stockholders' equity................................. 25,688,000 14,393,000
-------------- -------------
Total liabilities and stockholders' equity................. $ 119,571,000 $ 67,315,000
============== =============
</TABLE>
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED INCOME STATEMENTS
------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED, NINE MONTHS ENDED,
------------------------------- ------------------------------------
MAY 31, MAY 31, MAY 31, MAY 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Net sales......................... $ 21,787,000 $ 13,995,000 $ 56,165,000 $32,845,000
------------ ------------ ------------ -----------
EXPENSES
Cost of sales..................... 10,663,000 7,693,000 27,980,000 17,598,000
Selling, general and administrative
expenses........................ 7,468,000 4,204,000 19,906,000 10,943,000
Expenses incurred due to
restructuring................... -- 247,000 287,000 247,000
------------ ------------ ------------ -----------
Total operating expenses.......... 18,131,000 12,144,000 48,173,000 28,788,000
------------ ------------ ------------ -----------
Income from operations............ 3,656,000 1,851,000 7,992,000 4,057,000
Interest expense.................. 1,786,000 840,000 4,587,000 1,388,000
Interest expense - deferred
financing costs................. 140,000 220,000 331,000 696,000
Interest and other expenses
(income)........................ 110,000 41,000 (77,000) 127,000
------------ ------------ ------------- -----------
Income before income taxes........ 1,620,000 750,000 3,151,000 1,846,000
Provision for income taxes........ 566,000 307,000 1,259,000 704,000
------------ ------------ ------------ -----------
Net income before extraordinary
item............................ 1,054,000 443,000 1,892,000 1,142,000
Extraordinary item-loss on early
retirement of debt (net of income
tax benefit of $460,000 at May 31,
1999 and $137,000 at May 31, 1998,
respectively)................... 542,000 143,000 542,000 143,000
------------ ------------ ------------ -----------
Net income........................... $ 512,000 $ 300,000 $ 1,350,000 $ 999,000
============ ============ ============ ===========
Basic earnings (loss) per common share:
Earnings before extraordinary
item............................ $ 0.20 $ 0.12 $ 0.37 $ 0.34
Extraordinary item................ (0.10) (0.04) (0.11) (0.04)
------------ ------------ ------------ -----------
Net income........................ $ 0.10 $ 0.08 $ 0.26 $ 0.30
============ ============ ============ ===========
Diluted earnings (loss) per common
share:
Earnings before extraordinary
item............................ $ 0.19 $ 0.11 $ 0.36 $ 0.31
Extraordinary item................ (0.10) (0.04) (0.10) (0.04)
------------ ------------ ------------ -----------
Net income........................ $ 0.09 $ 0.07 $ 0.26 $ 0.27
============ ============ ============ ===========
Shares used to compute net income
per share:
Basic............................. 5,367,975 3,724,459 5,140,197 3,403,721
============ ============ ============ ===========
Diluted........................... 5,461,352 4,036,427 5,242,682 3,640,752
============ ============ ============ ===========
</TABLE>
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED,
MAY 31, MAY 31,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income......................................................... $ 1,350,000 $ 999,000
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization............................... 5,447,000 2,684,000
Provision for deferred income taxes......................... 89,000 91,000
Provision for bad debts..................................... 315,000 32,000
Gain on sale of assets...................................... (191,000) --
Extraordinary item.......................................... 1,002,000 --
Changes in assets and liabilities:
Accounts receivable......................................... (5,258,000) (3,272,000)
Prepaid expenses and other current assets................... (480,000) (3,494,000)
Other assets................................................ (324,000) (91,000)
Accounts payable and accrued expenses....................... (4,711,000) 776,000
Income taxes payable........................................ 376,000 317,000
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Net cash used in operating activities.............................. (2,385,000) (1,958,000)
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INVESTING ACTIVITIES
Proceeds of sale of fixed assets................................... 945,000 --
Additions to property and equipment................................ (1,032,000) (837,000)
Business acquisitions.............................................. (27,259,000) (21,245,000)
------------ -----------
Net cash used in investing activities.............................. (27,346,000) (22,082,000)
------------ -----------
FINANCING ACTIVITIES
Net proceeds from bank borrowings.................................. 90,350,000 22,386,000
Payments of capital lease obligations.............................. (2,091,000) (1,422,000)
Payments of long-term debt......................................... (58,413,000) --
Stockholder loans.................................................. (173,000) --
Common stock issued................................................ 92,000 20,000
------------ -----------
Net cash provided by financing activities.......................... 29,765,000 20,984,000
------------ -----------
Effect of foreign exchange rates on cash........................... -- 15,000
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Net increase (decrease) in cash and cash equivalents............... 34,000 (3,041,000)
Cash and cash equivalents at beginning of period................... 287,000 3,203,000
------------ -----------
Cash and cash equivalents at end of period......................... $ 321,000 $ 162,000
============ ===========
SUPPLEMENTAL DISCLOSURES
Interest paid...................................................... $ 4,423,000 $ 407,000
============ ===========
Income taxes paid.................................................. $ 438,000 $ 159,000
============ ===========
Noncash transactions:
Equipment acquired under capital lease obligations................. $ 4,344,000 $ 1,310,000
============ ===========
Value of warrants issued - business acquisitions................... $ 931,000 $ --
============ ===========
Value of warrants - additional financing........................... $ 308,000 $ --
============ ===========
Business acquisitions (net of liabilities of $8,682,000)........... $ 2,939,000 $ --
============ ===========
Stock issued for business acquisitions............................. $ 9,029,000 $ --
============ ===========
</TABLE>
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE A - BASIS OF PRESENTATION:
The information presented for May 31, 1999, and for the three-month and the
nine-month periods ended May 31, 1999 and May 31, 1998, is unaudited, but, in
the opinion of the management of Unidigital Inc., its wholly-owned subsidiaries
and its and their subsidiaries, affiliated companies and predecessors
(collectively, the "Company"), the accompanying unaudited consolidated financial
statements contain all adjustments (consisting only of normal recurring
accruals) which the Company considers necessary for the fair presentation of the
Company's financial position as of May 31, 1999, the results of their operations
for the three-month and the nine-month periods ended May 31, 1999 and May 31,
1998 and their cash flows for the nine-month periods ended May 31, 1999 and May
31, 1998.
The consolidated financial statements included herein have been prepared by
the Company in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
Company's audited financial statements for the year ended August 31, 1998, which
were included as part of the Company's Annual Report on Form 10-KSB.
The consolidated financial statements include the accounts of Unidigital
Inc. and its direct and indirect subsidiaries. All significant intercompany
balances have been eliminated.
Interim results are not necessarily indicative of results that may be
expected for the full fiscal year.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BUSINESS:
The Company is a media services company that provides large and grand
format digital image solutions combined with a full suite of digital "premedia"
(previously referred to as prepress) services to advertising agencies,
retailers, publishers, graphic design firms, consumer product companies,
government agencies, individual graphic artists and marketing and communications
firms in both the United States and the United Kingdom. In the third quarter of
fiscal 1999, the Company began delivering its services through two principal
business divisions. The Media Solutions division creates and produces large and
grand format images for out-of-home advertising and develops new media concepts.
The Premedia Services division provides digital premedia, including retouching
and short-run digital printing services.
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
FOREIGN CURRENCY TRANSLATION:
The portion of the Company's financial statements relating to the Company's
United Kingdom operations are translated into United States Dollars using
period-end exchange rates ((pound)1.00 = $1.67 at August 31, 1998 and $1.60 at
May 31, 1999, respectively, for balance sheet accounts) and average exchange
rates ((pound)1.00 = $1.61 and $1.68 for the three month periods ended May 31,
1999 and May 31, 1998, respectively, and $1.64 and $1.68 for the nine month
periods ended May 31, 1999 and May 31, 1998, respectively, for income statement
accounts). The translation difference is reflected as a separate component of
stockholders' equity.
EARNINGS PER SHARE:
The following table sets forth the computation of basic and dilutive
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED, NINE MONTHS ENDED,
---------------------------------- ----------------------------------
MAY 31, MAY 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per
share-net income available for common
stockholders............................... $ 512,000 $ 300,000 $ 1,350,000 $ 999,000
=========== =========== ============ ===========
Denominator:
Denominator for basic earnings per share-
Weighted average shares.................... 5,367,975 3,724,459 5,140,197 3,403,721
Effect of dilutive securities:
Stock options.............................. 21,880 109,555 17,483 64,896
Warrants................................... 71,497 202,413 85,002 172,135
----------- ----------- ------------ -----------
Denominator for diluted earnings per
share-adjusted weighted-average shares and
assumed conversions........................ 5,461,352 4,036,427 5,242,682 3,640,752
=========== =========== ============ ===========
</TABLE>
The following securities have been excluded from the dilutive per share
computation as they are antidilutive:
<TABLE>
<CAPTION>
THREE MONTHS ENDED, NINE MONTHS ENDED,
--------------------------------------------------------------------------------
MAY 31, MAY 31,
1999 1998 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock options.................................. 564,999 11,000 564,999 11,000
Warrants....................................... 342,000 25,000 342,000 117,000
</TABLE>
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
NOTE C - AMENDMENT TO CERTIFICATE OF INCORPORATION:
On May 14, 1999, the Company filed an amendment to its Certificate of
Incorporation increasing the Company's authorized shares of Common Stock from
10,000,000 to 25,000,000 and the Company's authorized shares of Preferred Stock
from 5,000,000 to 10,000,000.
NOTE D - STOCK OPTION PLANS:
Pursuant to the 1997 Equity Incentive Plan, as amended, the Company granted
options to purchase an aggregate of 241,650 shares of its Common Stock during
the three months ended May 31, 1999. All options were granted at their fair
market value.
NOTE E - LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
FACILITY
AMOUNT AMOUNT OUTSTANDING
----------------------------------------
MAY 31, MAY 31, AUGUST 31,
1999 1999 1998
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revolving line of credit; interest at the Prime Rate or
at the Eurodollar Rate, as defined, plus an Applicable
Margin, as defined, ranging from 1.0% to 3.25%........... $ 65,000,000 $ 60,850,000 $ --
Credit facility in the United Kingdom interest at the
bank's overdraft rate plus 2.75%; facility amount is
(pound)150,000 ($240,000)............................... 240,000 165,000 --
Credit facilities in the United Kingdom; interest at
either the bank's overdraft rate plus 2% or 2.5%,
including a temporary facility of approximately
(pound)450,000 ($720,000) renewable April 30, 1999;
facility amount is approximately (pound)2,650,000
($4,248,000)............................................ -- -- 2,135,000
Term loan, matures in March 2003; payable in sixteen
quarterly installments ranging from $960,000 to
$1,920,000 in March 2003, plus interest at the Base
Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined, ranging from 0.75% to
3....0%................................................. -- -- 25,000,000
Revolving line of credit; matures in March 2003,
interest at the Base Rate or at the Eurodollar Rate,
as defined, plus an Applicable Margin, as defined,
ranging from 0.75% to 3.0%............................... -- -- 8,435,000
Subordinated loan matures in March 2004; base interest
of 12 1/2%; plus 0.25% the first day after the first
anniversary of the Note; plus 0.25% following the
last day of each 90 day period until payment in full.... 10,000,000 10,000,000 --
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
FACILITY
AMOUNT AMOUNT OUTSTANDING
----------------------------------------
MAY 31, MAY 31, AUGUST 31,
1999 1999 1998
------------------------------------------------------------
Installment note due seller of Elements (SF); payable
in eight quarterly installments of $11,600,
including interest at 6.0%.............................. -- -- 11,000
Installment note due seller of Unison (MA); matures in
January 1999, payable in two annual installments of
$75,000 including interest at 8%........................ -- -- 75,000
Notes payable for certain equipment, maturing on dates
between October 1998 and September 2003, payable in
monthly installments of $22,000 until October 1998
and $14,000 thereafter, including interest at 8.54%
and 8.4%, respectively.................................. -- 499,000 618,000
Treasury loan facility in United Kingdom; matures in
July 2001, payable in monthly installment of $19,000
plus interest of LIBOR, as defined, plus the Banks
Margin of 2.4%.......................................... -- -- 651,000
Note payable, payable in monthly installments of
approximately $1,000 including interest at 10.35%....... -- 10,000 17,000
Investment fee due May 2001, senior subordinated note......
-- 1,000,000 --
Installment note due seller of Kwik International;
matures in April 2001, payable in thirty-six monthly
installments of approximately $21,000 including
interest at 5.7%........................................ -- 458,000 646,000
-----------------------------------------------------------
72,982,000 37,588,000
Less current portion 550,000 3,610,000
-----------------------------------------------------------
72,432,000 $33,978,000
===========================================================
</TABLE>
On May 12, 1999, the Company terminated its existing financing facilities
and entered into a new borrowing arrangement consisting of a $65,000,000
revolving line of credit facility. The revolving line of credit facility may be
increased to $80,000,000 in the event the Company raises subordinated debt with
net proceeds of at least $20,000,000. The borrowings are guaranteed by the
Company's subsidiaries and the Company pledged all of its equity interests in
its United States subsidiaries and 65% of its equity interests in its United
Kingdom subsidiaries as collateral for such credit facility. Interest under such
credit facility is, at the Company's option, at the Prime Rate or at the
Eurodollar Rate, as defined, plus an Applicable Margin, as defined, ranging from
1.0% to 3.25% depending on the Company's consolidated debt to earnings ratio and
the type of loan. As of May 31, 1999, the Company had an outstanding balance of
$60,850,000 under the revolving credit facility.
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UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
The following table shows the required future repayments under the
Company's revolving credit facility:
AMOUNT (IF PRIOR TO AMOUNT (IF AFTER
REVOLVING CREDIT REVOLVING CREDIT
FACILITY INCREASE) FACILITY INCREASE)
-----------------------------------------------
Fiscal years ending:
1999 $ -- $ --
2000 -- --
2001 1,250,000 1,250,000
2002 5,000,000 6,250,000
2003 7,500,000 11,250,000
Thereafter 47,100,000 42,100,000
---------------------------------------------
60,850,000 60,850,000
=============================================
The credit facility contains covenants that require the Company to maintain
certain earnings and debt to earnings ratio requirements based on the combined
operations of the Company and its subsidiaries. The credit facility is secured
by a first priority lien on all of the assets of the Company and its
subsidiaries and restricts the Company's ability to pay certain dividends
without the bank's prior written consent.
In November 1998, the Company borrowed a principal amount of $10,000,000
pursuant to a subordinated unsecured loan (the "Subordinated Loan"). The
Subordinated Loan matures on March 31, 2004 and bears interest at a rate per
annum equal to the sum of (i) 12.50% plus (ii) an additional percentage amount
equal to 0.25% commencing on November 30, 1999 and increasing by 0.25% following
the last day of each 90-day period thereafter. Until November 30, 1999, at the
option of the lender, interest is payable in additional notes, Common Stock of
the Company or warrants to purchase Common Stock of the Company. Thereafter,
interest is payable in either additional notes or cash, depending on certain
coverage ratios and, in the case of cash interest payments, the approval of the
senior lender. The Company will incur an additional premium of 5.0% on any
prepayments of the Subordinated Loan made prior to November 30, 1999. Such
additional premium will be reduced by 100 basis points on December 1, 1999 and
shall be reduced by such amount on each December 1st thereafter until December
1, 2003. In connection with the Subordinated Loan, the Company issued ten-year
warrants to the lender to purchase 440,000 shares of the Company's Common Stock
at an exercise price not to exceed $5.00 per share. In the event the Company has
not paid the loan in full by November 30, 1999 (subject to extension in certain
instances), the Company will issue ten-year warrants to the lender to purchase
an additional 200,000 shares of the Company's Common Stock at an exercise price
not to exceed $5.00 per share. In the event the Subordinated Loan has not been
paid in full by May 31, 2001, the exercise price of such warrants shall be
reduced by $1.00 per share and, on each anniversary
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
of such date, such exercise price shall be reduced by an additional $1.00 per
share. In addition, subject to certain limitations, the Company granted
registration rights, including "demand" registration rights, to such lender.
The warrants issued in connection with the Subordinated Loan, which were
deemed to have a value of approximately $308,000, have been recorded as deferred
financing costs, and are being amortized on a straight-line basis over
approximately five years.
NOTE F - ACQUISITIONS AND PRO FORMA FINANCIAL INFORMATION:
On April 7, 1999, the Company, through its wholly-owned subsidiary Unison
(NY), Inc., a Delaware corporation ("Unison (NY)"), consummated the acquisition
(the "X+C Acquisition") of substantially all of the assets of Peter X(+C)
Limited, a New York corporation ("X+C"), located in New York City. The purchase
price included an initial cash payment of $70,000 and the issuance of 40,000
shares of restricted Common Stock of the Company to the sole shareholder of X+C.
In addition, the purchase price includes a deferred cash payment of $100,000
payable on April 1, 2000, and an earn-out payment of up to $1,000,000 in cash or
in some combination of cash and restricted Common Stock of the Company in the
event X+C achieves certain financial performance objectives.
On April 22, 1999, the Company, through Unison (NY), consummated the
acquisition (the "Progress Acquisition") of substantially all of the assets of
Progress Graphics, Inc., a New Jersey corporation ("Progress"), located in
Jersey City, New Jersey. The purchase price included the issuance of 86,059
shares ($500,000) of restricted Common Stock of the Company to the sole
shareholder of Progress. In addition, the purchase price includes earn-out
payments in cash, restricted Common Stock of the Company or some combination
thereof in the event Progress attains revenues in excess of $3,000,000 in any of
the first three years following the closing.
On April 30, 1999, the Company, through Elements (UK) Limited, a United
Kingdom corporation ("Elements (UK)"), consummated the acquisition (the
"Interface Acquisition") of all the issued and outstanding shares of capital
stock of Interface Graphics Limited, a company registered in Scotland
("Interface"), located in Edinburgh, Scotland. The initial aggregate purchase
price was (pound)425,000 which included the issuance of 49,695 shares
(approximately (pound)132,000 or $218,000) of restricted Common Stock of the
Company to the shareholders of Interface. In addition, the purchase price
includes deferred cash payments of (pound)20,000 payable on each of January 31,
2000 and January 31, 2001, and earn-out payments of up to (pound)55,000 per year
in the event Interface achieves certain financial performance objectives in any
of the first two years following the closing.
All of the foregoing acquisitions have been accounted for under the
purchase method of accounting and, therefore, results of operations from such
acquisitions are included in the Company's consolidated financial statements
from the date of the respective acquisition.
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<PAGE>
UNIDIGITAL INC. AND SUBSIDIARIES
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
(unaudited)
The following supplemental pro forma information is presented as if the
Company had completed the Kwik Acquisition, the Mega Art Acquisition, the Zazula
Acquisition, the SuperGraphics Acquisition (each as hereinafter defined in Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations), the X+C Acquisition, the Progress Acquisition and the Interface
Acquisition, as of September 1, 1998 and 1997, respectively:
NINE MONTHS ENDED MAY 31,
---------------------------------------
1999 1998
---------------------------------------
Net sales............................. 62,655,000 54,238,000
Income from operations................ 7,160,000 5,318,000
Net income............................ 106,000 1,581,000
Net income per share - basic.......... $0.02 $0.29
Net income per share - diluted........ $0.02 $0.27
NOTE G - LEGAL PROCEEDINGS:
On March 31, 1999, the Chapter 7 Trustee (the "Trustee") for Cardinal
Communications Group, Inc. ("Cardinal") filed an adversary proceeding against
the Company in Cardinal's Chapter 7 bankruptcy proceeding pending in the United
States Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). In June 1999, the Company and the Trustee amicably resolved the dispute
on the following items: the Company shall pay to the bankruptcy estate the sum
of $150,000 in full and final satisfaction of any and all claims of the
bankruptcy estate against the Company. The Trustee shall dismiss the adversary
proceeding with prejudice and waive any and all claims against the Company under
the bankruptcy code and that certain Asset Purchase Agreement dated as of August
2, 1996 between the Company and Cardinal (the "Cardinal Purchase Agreement"),
including, without limitation, any and all claims to the proceeds from the sale
of the real estate acquired by the Company pursuant to the Cardinal Purchase
Agreement (the "Real Estate"). The settlement is subject to the approval of the
Bankruptcy Court.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company is a media services company that provides large and grand
format digital image solutions combined with a full suite of digital "premedia"
(previously referred to as prepress) services to advertising agencies,
retailers, publishers, graphic design firms, consumer product companies,
government agencies, individual graphic artists and marketing and communications
firms in both the United States and the United Kingdom. In the Third Quarter of
Fiscal 1999 (as defined below), the Company began delivering its services
through two principal business divisions. The Media Solutions division creates
and produces large and grand format images for out-of-home advertising and
develops new media concepts. The Premedia Services division provides digital
premedia, including retouching and short-run digital printing services.
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Securities and Exchange Commission, or press releases or
oral statements made by or with the approval of an authorized executive officer
of the Company. These forward-looking statements, such as statements regarding
anticipated future revenues, capital expenditures, Year 2000 compliance and
other statements regarding matters that are not historical facts, involve
predictions. The Company's actual results, performance or achievements could
differ materially from the results expressed in, or implied by, these
forward-looking statements. Potential risks and uncertainties that could affect
the Company's future operating results include, but are not limited to: (i)
economic conditions, including economic conditions related to the media services
industry; (ii) the availability of equipment from the Company's vendors at
current prices and levels; (iii) the intense competition in the markets for the
Company's products and services; (iv) the Company's ability to integrate
acquired companies and businesses in a cost-effective manner; (v) the Company's
ability to effectively implement its branding strategy; (vi) the Company's
ability to obtain additional financing at favorable rates; and (vii) the
Company's ability to develop, market, provide, and achieve market acceptance of
new service offerings to new and existing clients.
RESULTS OF OPERATIONS
The consolidated financial information includes both the Company's United
States operations and its United Kingdom operations. On March 25, 1998, the
Company acquired substantially all of the assets of Kwik International, Ltd.
(the "Kwik Acquisition"). As a result of such acquisition the Company has
expanded its color separation and large format printing services in the New York
and surrounding area. On September 2, 1998, the Company consummated the
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Mega Art Acquisition (the "Mega Art Acquisition") resulting in the expansion of
its wide format, digital premedia and printing services. On October 30, 1998,
the Company consummated the Zazula Acquisition (the "Zazula Acquisition")
resulting in the expansion of its retouching and premedia services, primarily to
advertising agencies. On November 30, 1998, the Company completed the
SuperGraphics Acquisition (the "SuperGraphics Acquisition") resulting in the
expansion of its large format services. During the Third Quarter of Fiscal 1999,
the Company consummated the X+C Acquisition, the Progress Acquisition and the
Interface Acquisition. Such acquisitions have further enhanced the Company's
creative and technical capabilities, broadened its client base within the
high-end digital premedia market and expanded the Company's premedia services
into the music industry and into the United Kingdom market. All of the foregoing
acquisitions have been accounted for under the purchase method of accounting
and, therefore, results of operations from such acquisitions are included in the
Company's consolidated financial statements from the date of the respective
acquisition.
THREE MONTHS ENDED MAY 31, 1999 AND MAY 31, 1998
NET SALES. Net sales for the three months ended May 31, 1999 ("Third
Quarter of Fiscal 1999") increased by 56%, or $7,792,000, to $21,787,000 from
$13,995,000 for the three months ended May 31, 1998 ("Third Quarter of Fiscal
1998"). Net sales for the Company's United States operations increased by 81%,
or $7,775,000, from $9,612,000 in the Third Quarter of Fiscal 1998 to
$17,387,000 in the Third Quarter of Fiscal 1999. This increase was attributable
primarily to an increase in net sales resulting from the Mega Art Acquisition,
the Zazula Acquisition and the SuperGraphics Acquisition, a full three months of
net sales resulting from the Kwik Acquisition and, to a lesser extent, an
increase in net sales in the Company's other United States subsidiaries and net
sales resulting from the X+C Acquisition. Net sales for the Company's United
Kingdom operations increased slightly by $17,000 from $4,383,000 in the Third
Quarter of Fiscal 1998 to $4,400,000 in the Third Quarter of Fiscal 1999. This
increase was attributable primarily to an increase in net sales relating to the
large format and digital print businesses offset in part by a market-driven
downturn in the financial printing industry in the United Kingdom.
COST OF SALES. Cost of sales for the Third Quarter of Fiscal 1999 increased
by 39%, or $2,970,000, to $10,663,000 from $7,693,000 for the Third Quarter of
Fiscal 1998. As a percentage of net sales, cost of sales decreased as a
percentage of net sales from 55% for the Third Quarter of Fiscal 1998 to 49% for
the Third Quarter of Fiscal 1999. Cost of sales for the Company's United States
operations decreased slightly as a percentage of net sales from 51% for the
Third Quarter of Fiscal 1998 to 50% for the Third Quarter of Fiscal 1999. Such
decrease was attributable primarily to the change in product mix to include more
large format services. Cost of sales for the Company's United Kingdom operations
decreased as a percentage of net sales from 63% for the Third Quarter of Fiscal
1998 to 43% for the Third Quarter of Fiscal 1999. Such decrease was attributable
primarily to the change in product mix to include less financial and traditional
printing services as well as the renegotiation of certain of the Company's
vendor contracts resulting in reduced supply costs to the Company.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") increased by 78%, or $3,264,000, from
$4,204,000 for the Third Quarter of Fiscal 1998 to $7,468,000 for the Third
Quarter of Fiscal 1999. Such increase was attributable
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primarily to the increased level of operations and costs associated with the
Company's acquisitions and the hiring of additional management and
administrative personnel. As a percentage of net sales, SG&A increased from 30%
for the Third Quarter of Fiscal 1998 to 34% for the Third Quarter of Fiscal
1999. SG&A increased as a percentage of net sales as a result of increased
salary expenses.
RESTRUCTURING EXPENSES. In connection with the Kwik Acquisition, the
Company consolidated its New York operations. As a result of such consolidation,
the Company incurred restructuring expenses of $247,000 in the Third Quarter of
Fiscal 1998.
INCOME FROM OPERATIONS. Income from operations for the Third Quarter of
Fiscal 1999 increased by 98%, or $1,805,000, to $3,656,000 from $1,851,000 for
the Third Quarter of Fiscal 1998. Of this amount, $2,381,000 was contributed by
the Company's United States operations and $1,275,000 by the Company's United
Kingdom operations. This increase resulted from higher net sales offset in part
by higher operating costs associated with such net sales.
NET INTEREST EXPENSE. Net interest expense for the Third Quarter of Fiscal
1999 increased by 85%, or $935,000, to $2,036,000 from $1,101,000 for the Third
Quarter of Fiscal 1998. This increase resulted from increased borrowings under
the Company's credit facilities and capital leases assumed by the Company as
part of the Company's acquisitions.
INCOME TAXES. Income taxes for the Third Quarter of Fiscal 1999 increased
by 84%, or $259,000, to $566,000 from $307,000 for the Third Quarter of Fiscal
1998.
EXTRAORDINARY ITEM. In connection with the prepayment of $4,000,000 of
loans from private investors, the Company recorded an extraordinary loss of
$143,000, net of income tax benefit of $137,000 related to the write-off of
deferred financing costs in the Third Quarter of Fiscal 1998. In connection with
the refinancing of senior debt, the Company recorded an extraordinary loss of
$542,000, net of income tax benefit of $460,000 related to the write-off of
deferred financing costs in the Third Quarter of Fiscal 1999.
NET INCOME. As a result of the factors described above, net income for the
Third Quarter of Fiscal 1999 increased by 71%, or $212,000, to $512,000 as
compared to a net income of $300,000 for the Third Quarter of Fiscal 1998.
NINE MONTHS ENDED MAY 31, 1999 AND MAY 31, 1998
-----------------------------------------------
NET SALES. Net sales for the nine months ended May 31, 1999 increased by
71%, or $23,220,000, to $56,165,000 from $32,845,000 for the nine months ended
May 31, 1998. Net sales for the Company's United States operations increased by
128%, or $25,239,000, from $19,712,000 in the nine months ended May 31, 1998 to
$44,951,000 in the nine months ended May 31, 1999. This increase was
attributable primarily to an increase in net sales resulting from the Mega Art
Acquisition, the Zazula Acquisition and the SuperGraphics Acquisition, a full
nine months of net sales resulting from the Kwik Acquisition and, to a lesser
extent, an increase in net sales in the Company's other United States
subsidiaries and net sales resulting from the X+C Acquisition. Net sales for the
Company's United Kingdom operations decreased by 15%, or
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$1,919,000, from $13,133,000 in the nine months ended May 31, 1998 to
$11,214,000 in the nine months ended May 31, 1999. This decrease was
attributable primarily to a market-driven downturn in the financial printing
industry in the United Kingdom.
COST OF SALES. Cost of sales for the nine months ended May 31, 1999
increased by 59%, or $10,382,000, to $27,980,000 from $17,598,000 for the nine
months ended May 31, 1998. As a percentage of net sales, cost of sales decreased
from 54% for the nine months ended May 31, 1998 to 50% for the nine months ended
May 31, 1999. Cost of sales for the Company's United States operations remained
constant as a percentage of net sales at 49% for the nine months ended May 31,
1998 and May 31, 1999. Cost of sales for the Company's United Kingdom operations
decreased as a percentage of net sales from 61% for the nine months ended May
31, 1998 to 52% for the nine months ended May 31, 1999. Such decrease was
attributable primarily to the change in product mix to include less financial
and traditional printing services as well as the renegotiation of certain of the
Company's vendor contracts resulting in reduced supply costs to the Company.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A increased by 82%, or
$8,963,000, from $10,943,000 for the nine months ended May 31, 1998 to
$19,906,000 for the nine months ended May 31, 1999. Such increase was
attributable primarily to the increased level of operations and costs associated
with the Company's acquisitions and the hiring of additional management and
administrative personnel. As a percentage of net sales, SG&A increased from 33%
for the nine months ended May 31, 1998 to 35% for the nine months ended May 31,
1999. SG&A increased as a percentage of net sales as a result of increased
salary expenses.
RESTRUCTURING EXPENSES. In connection with the Kwik Acquisition, the
Company consolidated its New York operations. As a result of such consolidation,
the Company incurred restructuring expenses of $247,000 in the nine months ended
May 31, 1998 and $287,000 in the nine months ended May 31, 1999.
INCOME FROM OPERATIONS. Income from operations for the nine months ended
May 31, 1999 increased by 97%, or $3,935,000, to $7,992,000 from $4,057,000 for
the nine months ended May 31, 1998. Of this amount, $6,408,000 was contributed
by the Company's United States operations and $1,584,000 by the Company's United
Kingdom operations. This increase resulted from higher net sales offset in part
by higher operating costs associated with such net sales.
NET INTEREST EXPENSE. Net interest expense for the nine months ended May
31, 1999 increased by 119%, or $2,630,000, to $4,841,000 from $2,211,000 for the
nine months ended May 31, 1998. This increase resulted from increased borrowings
under the Company's credit facilities and capital leases assumed by the Company
as part of the Company's acquisitions.
INCOME TAXES. Income taxes for the nine months ended May 31, 1999 increased
by 79%, or $555,000, to $1,259,000 from $704,000 for the nine months ended May
31, 1998.
EXTRAORDINARY ITEM. In connection with the prepayment of $4,000,000 of
loans from private investors, the Company recorded an extraordinary loss of
$143,000, net of income tax
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benefit of $137,000 related to the write-off of deferred financing costs in the
nine months ended May 31, 1998. In connection with the refinancing of senior
debt, the Company recorded an extraordinary loss of $542,000, net of income tax
benefit of $460,000 related to the write-off of deferred financing costs in the
nine months ended May 31, 1999.
NET INCOME. As a result of the factors described above, net income for the
nine months ended May 31, 1999 increased by 35%, or $351,000, to $1,350,000 as
compared to a net income of $999,000 for the nine months ended May 31, 1998.
LIQUIDITY, CAPITAL RESOURCES AND OTHER MATTERS
CASH FLOW. Net cash used in operations was $2,385,000 for the first nine
months of fiscal 1999 and $1,958,000 for the first nine months of fiscal 1998.
Net cash used in investing activities for the acquisition of property and
equipment was $1,032,000 for the first nine months of fiscal 1999 and $837,000
for the first nine months of fiscal 1998. For the first nine months of fiscal
1999 and fiscal 1998, the Company acquired equipment under capital leases of
$4,344,000 and $1,310,000, respectively, and made payments under capital leases
of $2,091,000 and $1,422,000, respectively. Net bank borrowings provided funds
of $31,937,000 and $22,386,000 for the first nine months of fiscal 1999 and
fiscal 1998, respectively.
BANK CREDIT FACILITIES. On May 12, 1999, the Company terminated its
existing financing facilities and entered into a new borrowing arrangement
consisting of a $65,000,000 revolving line of credit facility. The revolving
line of credit facility may be increased to $80,000,000 in the event the Company
raises subordinated debt with net proceeds of at least $20,000,000. The
borrowings are guaranteed by the Company's subsidiaries and the Company pledged
all of its equity interests in its United States subsidiaries and 65% of its
equity interests in its United Kingdom subsidiaries as collateral for such
credit facility. Interest under such credit facility is, at the Company's
option, at the Prime Rate or at the Eurodollar Rate, as defined, plus an
Applicable Margin, as defined, ranging from 1.0% to 3.25% depending on the
Company's consolidated debt to earnings ratio and the type of loan. As of May
31, 1999, the Company had an outstanding balance of $60,850,000 under the
revolving credit facility.
The credit facility contains covenants that require the Company to maintain
certain earnings and debt to earnings ratio requirements based on the combined
operations of the Company and its subsidiaries. The credit facility is secured
by a first priority lien on all of the assets of the Company and its
subsidiaries and restricts the Company's ability to pay certain dividends
without the bank's prior written consent.
In November 1998, the Company entered into the Subordinated Loan. The
Subordinated Loan matures on March 31, 2004 and bears interest at a rate per
annum equal to the sum of (i) 12.50% plus (ii) an additional percentage amount
equal to 0.25% commencing on November 30, 1999 and increasing by 0.25% following
the last day of each 90-day period thereafter. Until November 30, 1999, at the
option of the lender, interest is payable in additional notes, Common Stock of
the Company or warrants to purchase Common Stock of the Company. Thereafter,
interest is payable in either additional notes or cash, depending on certain
coverage ratios and, in the case of cash interest payments, the approval of the
senior lender. The Company will incur an
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additional premium of 5.0% on any prepayments of the Subordinated Loan made
prior to November 30, 1999. Such additional premium will be reduced by 100 basis
points on December 1, 1999 and shall be reduced by such amount on each December
1st thereafter until December 1, 2003. In connection with the Subordinated Loan,
the Company issued ten-year warrants to the lender to purchase 440,000 shares of
the Company's Common Stock at an exercise price not to exceed $5.00 per share.
In the event the Company has not paid the loan in full by November 30, 1999
(subject to extension in certain instances), the Company will issue ten-year
warrants to the lender to purchase an additional 200,000 shares of the Company's
Common Stock at an exercise price not to exceed $5.00 per share. In the event
the Subordinated Loan has not been paid in full by May 31, 2001, the exercise
price of such warrants shall be reduced by $1.00 per share and, on each
anniversary of such date, such exercise price shall be reduced by an additional
$1.00 per share. In addition, subject to certain limitations, the Company
granted registration rights, including "demand" registration rights, to such
lender.
The warrants issued in connection with the Subordinated Loan, which were
deemed to have a value of approximately $308,000, have been recorded as deferred
financing costs, and are being amortized on a straight-line basis over
approximately five years.
The Company expects that anticipated cash flow from operations and
available borrowings will be sufficient to fund its capital lease obligations,
debt service payments, potential earn-outs, capital expenditures and operations
for at least 12 months. The Company may require additional financing to
consummate future acquisitions. There can be no assurance that the Company will
be able to secure such additional financing on terms favorable to the Company.
WORKING CAPITAL. The Company's working capital increased by $13,595,000
from $8,897,000 at August 31, 1998 to $22,492,000 at May 31, 1999.
ACQUISITIONS. On April 7, 1999, the Company, through its wholly-owned
subsidiary Unison (NY), consummated the X+C Acquisition. The purchase price
included an initial cash payment of $70,000 and the issuance of 40,000 shares of
restricted Common Stock of the Company to the sole shareholder of X+C. In
addition, the purchase price includes a deferred cash payment of $100,000
payable on April 1, 2000, and an earn-out payment of up to $1,000,000 in cash or
in some combination of cash and restricted Common Stock of the Company in the
event X+C achieves certain financial performance objectives.
On April 22, 1999, the Company, through Unison (NY), consummated the
Progress Acquisition. The purchase price included the issuance of 86,059 shares
($500,000) of restricted Common Stock of the Company to the sole shareholder of
Progress. In addition, the purchase price includes earn-out payments in cash,
restricted Common Stock of the Company or some combination thereof in the event
Progress attains revenues in excess of $3,000,000 in any of the first three
years following the closing.
On April 30, 1999, the Company, through Elements (UK), consummated the
Interface Acquisition. The initial aggregate purchase price was (pound)425,000
which included the issuance of 49,695 shares (approximately (pound)132,000 or
$218,000) of restricted Common Stock of the Company to the shareholders of
Interface. In addition, the purchase price includes deferred cash
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payments of (pound)20,000 payable on each of January 31, 2000 and January 31,
2001, and earn-out payments of up to (pound)55,000 per year in the event
Interface achieves certain financial performance objectives in any of the first
two years following the closing.
INFLATION, FOREIGN CURRENCY FLUCTUATIONS AND INTEREST RATE CHANGES.
Although the Company cannot accurately determine the precise effect thereof on
its operations, it does not believe inflation, currency fluctuations or interest
rate changes have historically had a material effect on revenues, sales or
results of operations. Inflation, currency fluctuations and changes in interest
rates have, however, at various times, had significant effects on the economies
of the United States and the United Kingdom and could adversely impact the
Company's revenues, sales and results of operations in the future. If there is a
material adverse change in the relationship between the Pound Sterling and the
United States Dollar, such change would adversely affect the results of the
Company's United Kingdom operations as reflected in the Company's financial
statements. The Company has not hedged its exposure with respect to this
currency risk, and does not expect to do so in the future, since it does not
believe that it is practicable for it to do so at a reasonable cost.
YEAR 2000 COMPLIANCE
The Company believes that it has sufficiently assessed its state of
readiness with respect to its Year 2000 compliance. The Company has developed or
is developing a program to address on a timely basis the risk that computer
applications developed, marketed, sold and delivered or used by the Company may
be unable to recognize and properly perform date-sensitive functions involving
dates prior to and after December 31, 1999 (the "Year 2000 Problem"). The
Company does not believe that Year 2000 compliance will result in material
investments by the Company, nor does the Company anticipate that the Year 2000
Problem will have any adverse effects on the business operations or financial
performance of the Company. The Company does not believe that it has any
material exposure to the Year 2000 Problem with respect to its own information
systems. There can be no assurance, however, that the Year 2000 Problem will not
adversely affect the Company's business, operating results and financial
condition.
The Company believes that each of its products is Year 2000 compliant,
however, it has no control over whether software modification made by third
parties or the combination of its products with the software developed by third
parties and combined with the Company's products will be Year 2000 compliant.
Additionally, there can be no assurance that such potential instances of
non-compliance will not adversely affect the Company's business, operating
results and financial condition. The Company has established no reserve for
auditing its software products or for correcting Year 2000 compliance issues
with such products.
Although the Company believes its products are Year 2000 compliant, the
purchasing patterns of customers and potential customers may be affected by
issues associated with the Year 2000 Problem. As companies expend significant
resources to correct their current data storage solutions, these expenditures
may result in reduced funds to purchase products as those offered by the
Company. There can be no assurance that the Year 2000 Problem will not adversely
affect the Company's business, operating results and financial condition.
Conversely, the Year 2000
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Problem may cause other companies to accelerate purchases, thereby causing an
increase in short-term demand and a consequent decrease in long-term demand for
the Company's products.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On March 31, 1999, the Trustee for Cardinal filed an adversary proceeding
against the Company in Cardinal's Chapter 7 bankruptcy proceeding pending in the
Bankruptcy Court. In June 1999, the Company and the Trustee amicably resolved
the dispute on the following items: the Company shall pay to the bankruptcy
estate the sum of $150,000 in full and final satisfaction of any and all claims
of the bankruptcy estate against the Company. The Trustee shall dismiss the
adversary proceeding with prejudice and waive any and all claims against the
Company under the bankruptcy code and the Cardinal Purchase Agreement,
including, without limitation, any and all claims to the proceeds from the sale
of the Real Estate. The settlement is subject to the approval of the Bankruptcy
Court.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On April 7, 1999, the Company issued 40,000 shares of restricted Common
Stock of the Company to Peter Ksiezopolski as partial consideration for the X+C
Acquisition.
On April 22, 1999, the Company issued 86,059 shares of restricted Common
Stock of the Company to Mario DeVita as partial consideration for the Progress
Acquisition.
On April 30, 1999, the Company issued 49,695 shares of restricted Common
Stock of the Company to the shareholders of Interface as partial consideration
for the Interface Acquisition.
Subsequent to the end of the quarter, on May 14, 1999, the Company issued
20,000 shares of restricted Common Stock of the Company to Timothy Twomey, a
former employee of the Company.
Subsequent to the end of the quarter, on July 2, 1999, the Company issued
10,000 shares of restricted Common Stock of the Company to Pablo DeJesus, an
employee of the Company.
No underwriter was employed by the Company in connection with the issuance
and sale of the securities described above. The Company believes that the
issuance and sale of the foregoing securities were exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended, as a transaction
not involving a public offering. No public offering was involved and the
securities were acquired for investment and not with a view to distribution.
Appropriate legends have been affixed to the stock certificates issued to the
recipients of such shares. All recipients had adequate access to information
about the Company.
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ITEM 5. OTHER INFORMATION
On May 12, 1999, the Company terminated its existing financing facilities
and entered into a new borrowing arrangement consisting of a $65,000,000
revolving line of credit facility. The revolving line of credit facility may be
increased to $80,000,000 in the event the Company raises subordinated debt with
net proceeds of at least $20,000,000. The borrowings are guaranteed by the
Company's subsidiaries and the Company pledged all of its equity interests in
its United States subsidiaries and 65% of its equity interests in its United
Kingdom subsidiaries as collateral for such credit facility. Interest under such
credit facility is, at the Company's option, at the Prime Rate or at the
Eurodollar Rate, as defined, plus an Applicable Margin, as defined, ranging from
1.0% to 3.25% depending on the Company's consolidated debt to earnings ratio and
the type of loan. As of May 31, 1999, the Company had an outstanding balance of
$60,850,000 under the revolving credit facility.
On April 7, 1999, the Company, through its wholly-owned subsidiary Unison
(NY), consummated the X+C Acquisition. The purchase price included an initial
cash payment of $70,000 and the issuance of 40,000 shares of restricted Common
Stock of the Company to the sole shareholder of X+C. In addition, the purchase
price includes a deferred cash payment of $100,000 payable on April 1, 2000, and
an earn-out payment of up to $1,000,000 in cash or in some combination of cash
and restricted Common Stock of the Company in the event X+C achieves certain
financial performance objectives.
On April 22, 1999, the Company, through Unison (NY), consummated the
Progress Acquisition. The purchase price included the issuance of 86,059 shares
($500,000) of restricted Common Stock of the Company to the sole shareholder of
Progress. In addition, the purchase price includes earn-out payments in cash,
restricted Common Stock of the Company or some combination thereof in the event
Progress attains revenues in excess of $3,000,000 in any of the first three
years following the closing.
On April 30, 1999, the Company, through Elements (UK), consummated the
Interface Acquisition. The initial aggregate purchase price was (pound)425,000
which included the issuance of 49,695 shares (approximately (pound)132,000 or
$218,000) of restricted Common Stock of the Company to the shareholders of
Interface. In addition, the purchase price includes deferred cash payments of
(pound)20,000 payable on each of January 31, 2000 and January 31, 2001, and
earn-out payments of up to (pound)55,000 per year in the event Interface
achieves certain financial performance objectives in any of the first two years
following the closing.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Asset Purchase Agreement dated as of
March 26, 1999 by and among Unidigital
Inc., Unison (NY), Inc., Peter X(+C)
Limited and Peter Ksiezopolski (included
as an exhibit to the Company's Quarterly
Report on Form 10-Q for the quarter
ended February 28, 1998 and incorporated
by reference herein).
10.2 Share Purchase Agreement By Way of Deed
dated December 21, 1998 by and among the
Shareholders of Interface Graphics
Limited, Elements (UK) Limited and
Interface Graphics Limited.
10.3 Asset Purchase Agreement dated as of
April 8, 1999 by and among Unidigital
Inc., Unison (NY), Inc., Progress
Graphics Inc. and Mario DeVita.
10.4 Credit Agreement dated as of May 12,
1999 among Unidigital Inc., Fleet Bank,
N.A., Bank Austria Creditanstalt
Corporate Finance, Inc. and the Banks,
Financial Institutions and Other
Institutional Lenders Named Therein.
10.5 Revolving Credit Promissory Note dated
May 12, 1999 made by Unidigital Inc. in
favor of Fleet Bank, N.A. in the
principal amount of $40,000,000,
together with Swing Line Promissory Note
dated May 12, 1999 made by Unidigital
Inc. in favor of Fleet Bank, N.A. in
the principal amount of $3,000,000.
10.6 Revolving Credit Promissory Note dated
May 12, 1999 made by Unidigital Inc. in
favor of Bank Austria Creditanstalt
Corporate Finance, Inc. in the principal
amount of $15,000,000.
10.7 Revolving Credit Promissory Note dated
May 12, 1999 made by Unidigital Inc. in
favor of Merrill Lynch Business
Financial Services Inc. in the principal
amount of $10,000,000.
10.8 General Security Agreement (Borrower)
dated May 12, 1999 by Unidigital Inc. in
favor of Fleet Bank, N.A.
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10.9 General Security Agreement (Guarantors)
dated May 12, 1999 by Unidigital
Elements (NY), Inc., Unison (NY), Inc.,
Unison (MA), Inc., Unidigital Elements
(SF), Inc., Mega Art Corp.,
SuperGraphics Holding Company, Inc. and
SuperGraphics Corporation in favor of
Fleet Bank, N.A.
10.10 Pledge and Security Agreement dated May
12, 1999 by Unidigital Inc. in favor of
Fleet Bank, N.A.
10.11 Pledge and Security Agreement
(Subsidiary) dated May 12, 1999 by
SuperGraphics Holding Company, Inc. in
favor of Fleet Bank, N.A.
10.12 Guaranty dated May 12, 1999 made by
Unidigital Inc., Unidigital Elements
(NY), Inc., Unison (NY), Inc., Unison
(MA), Inc., Unidigital Elements (SF),
Inc., Mega Art Corp., SuperGraphics
Holding Company, Inc. and SuperGraphics
Corporation in favor of Fleet Bank, N.A.
10.13 Foreign Guaranty dated May 12, 1999 made
by Elements (UK) Limited in favor of
Fleet Bank, N.A.
10.14 Trademark Collateral Assignment and
Security Agreement dated as of May 12,
1999 by and between Unidigital Inc. and
Fleet Bank, N.A.
10.15 Subsidiary Trademark Collateral
Assignment and Security Agreement dated
as of May 12, 1999 by and between Unison
(NY), Inc. and Fleet Bank, N.A.
10.16 Subsidiary Trademark Collateral
Assignment and Security Agreement dated
as of May 12, 1999 by and between
SuperGraphics Corporation and Fleet
Bank, N.A.
27.1 Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
None.
-23-
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the Issuer caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
UNIDIGITAL INC.
DATE: July 20, 1999 By: /s/William E. Dye
----------------------------
William E. Dye,
Chief Executive Officer
(Principal Executive, Financial
and Accounting Officer)
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<PAGE>
DATED 21ST DECEMBER 1998
A. ANDREW AND OTHERS
- and -
ELEMENTS (UK) LIMITED
- and -
INTERFACE GRAPHICS LIMITED
------------------------------------------
SHARE PURCHASE AGREEMENT
BY WAY OF DEED
------------------------------------------
WILDE SAPTE
1 Fleet Place
London EC4M 7WS
Tel. 0171 246 7000
Fax. 0171 246 7777
<PAGE>
TABLE OF CONTENTS
Clause Heading Page Number
1. DEFINITIONS AND INTERPRETATION...................................1
2. SALE AND PURCHASE................................................8
3. CONDITIONS PRECEDENT.............................................9
4. INITIAL CONSIDERATION AND DEFERRED CONSIDERATION................10
5. POSITION PENDING COMPLETION.....................................12
6. COMPLETION......................................................16
7. DELIVERY TO SOLICITORS..........................................19
8. WARRANTIES......................................................19
9. MEASURE OF DAMAGES..............................................20
10. LIMITATION OF WARRANTORS' LIABILITY.............................22
11. COVENANTS OF THE COVENANTORS....................................24
12. POWER OF ATTORNEY...............................................26
13. WAIVERS.........................................................27
14. POST-COMPLETION OPERATION.......................................27
15. COSTS AND WITHHOLDINGS..........................................28
16. ASSIGNMENT......................................................28
17. ANNOUNCEMENTS...................................................28
18. JURISDICTION....................................................29
19. NOTICES.........................................................30
20. INVALIDITY......................................................30
21. FURTHER ASSURANCE...............................................30
22. ENTIRE AGREEMENT................................................31
23. TIME OF THE ESSENCE.............................................31
24. COUNTERPARTS....................................................31
SCHEDULE 1 - Part I - The External Vendors....................................33
SCHEDULE 1 - Part II - The Employee Vendors...................................34
SCHEDULE 2 - The Company......................................................36
SCHEDULE 3 - Confirmation of No Claims - Part 1 - Directors and Secretary.....37
SCHEDULE 3 - Confirmation of No Claims - Part 2 - The Vendors.................38
SCHEDULE 3 - Confirmation of No Claims - Part 3 - Auditors....................39
SCHEDULE 4 - The Warranties...................................................40
SCHEDULE 5 - The Property - Property Details..................................71
<PAGE>
- --------------------------------------------------------------------------------
AGREED FORM DOCUMENTS CLAUSE REFERENCE
- --------------------------------------------------------------------------------
o Shareholders' powers of attorney Clause 6.2.1
- --------------------------------------------------------------------------------
o Deed of Tax Covenant Clause 6.2.3
- --------------------------------------------------------------------------------
o Disclosure Letter Clause 6.2.4
- --------------------------------------------------------------------------------
o Certificate of Non-Crystallisation Clause 6.2.8
- --------------------------------------------------------------------------------
o Shareholders' resolution of the Company adopting Clause 6.2.12
new articles of association
- --------------------------------------------------------------------------------
o Board minutes of the Company Clause 6.3
- --------------------------------------------------------------------------------
o Board resolution of the Purchaser
- --------------------------------------------------------------------------------
o Indemnity in respect of lost share certificates Clause 6.2.2
- --------------------------------------------------------------------------------
o Termination Agreement Clause 6.2.13
- --------------------------------------------------------------------------------
o Vendors' Solicitors Undertaking Clause 6.2.9
- --------------------------------------------------------------------------------
<PAGE>
THIS DEED is made the 21st December 1998
BETWEEN:
(1) THE SEVERAL PERSONS whose names and addresses are set out in Schedule 1
(together the "VENDORS");
(2) ELEMENTS (UK) LIMITED, a company registered in England and Wales with
registered number 02888039 and having its registered office at 48
Margaret Street, London W1N 7FD (the "PURCHASER"); and
(3) INTERFACE GRAPHICS LIMITED, a company registered in Scotland with
registered number SC137315 and having its registered office at Sandport
House, 17 Coburg Street, Edinburgh EH6 6ET (the "COMPANY")
WHEREAS:
(A) The Vendors are together the beneficial owners of the whole of the
issued and allotted share capital in the Company and each of the Vendors
is the beneficial owner of the number of shares in the Company set
against his name in Schedule 1.
(B) The Vendors have agreed to sell and the Purchaser has agreed to buy the
whole of the issued and allotted share capital in the Company on the
terms and conditions hereinafter contained.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
In this Deed (including the Recitals and Schedules), unless the context
otherwise requires or except as otherwise expressly provided:
1.1 DEFINITIONS
"ACCOUNTS" means in relation to the Company its audited financial
statements including its balance sheet as at the Last Accounts
Date, an audited profit and loss account (including any notes
thereto) of the Company for the financial year
-1-
<PAGE>
ended on the Last Accounts Date and all reports, accounts, and
other documents required by law to be included in or attached
thereto;
"AGREED FORM" means in a form approved by the Parties and
initialled for identification by or on behalf of the Vendors and
the Purchaser;
"BUSINESS" means the business of the Company as carried on as at
the Completion Date;
"BUSINESS DAY" means any day (other than a Saturday or a Sunday)
which is not a public or bank holiday in England or in Scotland;
"COMPANIES ACT" means the Companies Act 1985 (as amended by the
Companies Act 1989);
"COMPLETION" means the completion of the sale and purchase of the
Shares in accordance with Clause 6;
"COMPLETION DATE" means 31st January 1999 or such other date as
shall be agreed in writing between the Parties;
"CONDITIONS PRECEDENT" means the conditions set out in Clause 3;
"CONSIDERATION SHARES" means such number of Common Shares of $0.01
each in the capital of Unidigital as are admitted to NASDAQ and as
shall in aggregate have a value of (pound)131,992.05 and which
shall rank pari passu in all respects and form a class with the
existing Common Shares of Unidigital to be allotted and issued to
the Employee Vendors pursuant to Clause 6.4;
"COVENANTORS" means the External Vendors, John O Warren, Alistair
Fisher and Margaret Craig (all of whose addresses are set out in
Schedule 1);
"DEED OF TAX COVENANT" means a deed of covenant in the Agreed Form
to be executed by the Vendors and delivered on Completion;
"DEFERRED CONSIDERATION" means the consideration due to the Vendors
pursuant to Clauses 4.4 to 4.7 (inclusive);
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<PAGE>
"DISCLOSURE LETTER" means the letter of even date herewith in the
Agreed Form (which may be updated by or on behalf of the Warrantors
prior to Completion) and which is to be delivered to the Purchaser
by or on behalf of the Warrantors and accepted by or on behalf of
the Purchaser respectively on the date hereof and at Completion;
"EMPLOYEE VENDORS" means the persons whose names and addresses are
set out in Schedule 1 Part II;
"ENVIRONMENTAL LAWS" means any legislation (including regulations,
codes of practice, circulars or guidance notes made thereunder)
relating to environmental matters including (without limitation):-
a) waste;
b) contaminated land;
c) discharges to land, ground and surface water and sewers;
d) emissions to air;
e) noise;
f) dangerous, hazardous and toxic substances and materials;
g) nuisance; and
h) health and safety.
"EXTERNAL VENDORS" means the persons whose names and addresses are
set out in Schedule 1 Part I;
"EXISTING FLOATING CHARGE" means the floating charge dated 25th
October 1993 granted to the Governor and Company of the Bank of
Scotland by the Company;
"FINANCIAL YEARS" means each of the financial years of the company
ending on 31st August 2000 and 31st August 2001;
-3-
<PAGE>
"GROUP" shall have the meaning ascribed thereto in section 262 of
the Companies Act 1985;
"INITIAL CONSIDERATION" means the consideration due to the Vendors
pursuant to Clause 4.1;
"INTELLECTUAL PROPERTY RIGHTS" has the meaning ascribed thereto in
paragraph 8.1 of Schedule 4 Part 1;
"LANDLORDS" means Knowe Properties Limited, a Company registered in
Scotland with registered number 48970, and having its registered
office at 37 Queen Street, Edinburgh, EH2 1JX.
"LAST ACCOUNTS DATE" means 31st May 1998;
"LEASES" means (i) lease between the Landlords and the Company dated
25th January and 9th February and registered in the Books of Council
Session on 14th June 1994 as varied and extended by a Minute of
Variation and Extension of Lease between the Landlords and the
Company dated 7th and 23rd April 1997 as further varied by Minutes
of Variation of Lease between the Landlords and the Company dated
4th October 1998 and subsequent dates; and (ii) Lease between the
Landlords and Coda Technologies Limited constituted by missives
dated 24th and 26th August as amended by letters dated 25th and 28th
October and registered in the Books of Council Session on 3rd
November 1994 as further amended by letters of 24th May and 29th
June 1995 as assigned and varied by Minute of Assignation and
Variation between the Landlords, the Company and the said Coda
Technologies Limited dated 12th October 1998 and subsequent dates.
"LP(MP)A" means the Law of Property (Miscellaneous Provisions) Act
1994;
"PROFIT" means the profit on the ordinary activities of the Company
before taxation; extraordinary items and after reasonable
management charges up to a maximum of (pound)56,000 in any of the
Financial Years for each Financial Year as shown by the audited
profit and loss account of the Company for the Financial Year
in question, such audited profit and loss account to be prepared
in accordance with the Company's standard accounting policies
and procedures; "PROPERTY" means the property short details of
which are set out in Schedule 5;
-4-
<PAGE>
"PURCHASER" means Elements (UK) Limited or its successors in title
and permitted assigns (as the case may be) in terms of this
Agreement;
"PURCHASER'S SOLICITORS" means Wilde Sapte of 1 Fleet Place, London
EC4M 7WS;
"SHARES" means all the shares in the capital of the Company allotted
or in issue at Completion;
"TAX" includes all present taxes, charges, imposts, duties, levies,
deductions, withholdings or fees of any kind whatsoever, or any
amount payable on account of or as security for any of the
foregoing, payable at the instance of or imposed by any statutory,
governmental, international, state, federal, provincial, local or
municipal authority, agency, body or department whatsoever or
European Community institution, in each case whether in the United
Kingdom or elsewhere, together with any penalties, additions,
fines, surcharges or interest relating thereto, and "TAXATION" and
cognate expressions shall be construed accordingly;
"TAXES ACT" means the Income and Corporation Taxes Act 1988;
"TAX WARRANTIES" means the Warranties in Part 4 of Schedule 4;
"TCGA 1992" means the Taxation of Chargeable Gains Act 1992;
"TERMINATION AGREEMENT" means a termination agreement in the Agreed
Form to be executed by John Hackland Craig (1) and Barry Edward
Sealey and others (2) and the Company (3) and delivered at
Completion;
"UNIDIGITAL" means Unidigital Inc. a Delaware Corporation having its
principal place of business at 545 West 45th Street, New York, NY
10036 U.S.A.;
"UNITED KINGDOM" means England, Wales, Scotland and Northern Ireland
as defined in Schedule 1 to the Interpretation Act 1978 and includes
the territorial sea of the United Kingdom and any area designated by
Order in Council under sub-section 1(7), Continental Shelf Act 1964;
-5-
<PAGE>
"VAT" means value added tax as provided for in VATA 1994 and
legislation (or purported legislation and whether delegated or
otherwise) supplemental thereto and any tax similar or equivalent to
value added tax imposed by any country other than the United Kingdom
and any similar or turnover tax replacing or introduced in addition
to any of the same;
"VATA 1994" means the Value Added Tax Act 1994;
"VENDORS" means the Employee Vendors and the External Vendors or
their respective personal representatives and estates;
"VENDORS' SOLICITORS" means Messrs. Henderson Boyd Jackson WS of 9
Ainslie Place, Edinburgh EH3 6AU;
"VENDORS' SOLICITORS' UNDERTAKING" means the undertaking in the
Agreed Form to be given by the Vendors' Solicitors at Completion;
"WARRANTIES" means the representations and warranties set out in
Schedule 4 and any other representations and warranties contained in
this Deed; and
"WARRANTORS" means:
(a) In relation to any Warranties not set out in Schedule 4 and the
Warranties numbered 2 and 3 in Schedule 4 Part I, each of the
Vendors; and
(b) in relation to the Warranties numbered 1 and 4 to 12.5
(inclusive) in Schedule 4 and the Warranties set out in Parts
2 to 4 (inclusive), John O Warren, Alistair Fisher, Barry E
Sealey, Christopher J Shaw and Margaret A Craig (all of whose
addresses are set out in Schedule 1).
1.2 INTERPRETATION
1.2.1 any reference to the provisions of any statute or
subordinate legislation or of any rule made by a local
authority and having the effect of law shall be deemed to
include reference to the same as in force (including any
amendment or re-enactment or consolidation) at the time the
matter relating thereto occurs PROVIDED THAT the liability
of each Party shall not thereby exceed the
-6-
<PAGE>
amount of the liability of such Party which would have
arisen had no such amendment, re-enactment or consolidation
taken place after the date hereof;
1.2.2 any reference to a person being "connected with" another
person means (a) any person connected with such other person
(and "connected with" bears the meaning set out in section
839 of the Taxes Act); and/or (b) any company under the
control of such other person (and "control" bears the
meaning set out in section 840 of the Taxes Act);
1.2.3 words and expressions defined in the Companies Act shall
bear the same meanings herein;
1.2.4 words denoting one gender include all genders, words
denoting individuals or persons include corporations and
trusts and vice versa, words denoting the singular include
the plural and vice versa, and words denoting the whole
include a reference to any part thereof;
1.2.5 clause and paragraph headings are inserted for ease of
reference only and shall not affect construction;
1.2.6 references to Recitals, Clauses, Sub-clauses, Paragraphs,
Sub-paragraphs and Schedules are to the recitals, clauses,
sub-clauses, paragraphs, sub-paragraphs and schedules of and
to this Deed;
1.2.7 references to this Deed mean this agreement and Deed
together with its Recitals and Schedules and reference to
this Deed or any document or agreement includes references
to such document or agreement as amended, novated,
supplemented, varied or replaced from time to time with the
agreement of the Parties;
1.2.8 references to a Party means a party to this Deed and shall
include that person's permitted assigns, transferees or
successors in title in accordance with the terms of this
Deed;
1.2.9 the words "including", "include" and "in particular" shall
be construed as being by way of illustration only and shall
not be construed as limiting the generality of any foregoing
words; and
-7-
<PAGE>
1.2.10 references to any English legal term for any action, remedy,
method of judicial proceeding, legal document, legal status,
court, official or any other legal concept shall, in respect
of any jurisdiction other than England, be deemed to include
the legal concept which most nearly approximates in that
jurisdiction to the English legal term.
2. SALE AND PURCHASE
2.1 Each of the Vendors shall sell with full title guarantee and with
effect from Completion such number of the Shares as is set out
opposite the name of the Vendor in question in Schedule 1 and the
Purchaser relying on the Warranties herein contained shall buy the
Shares together with all dividends, distributions and rights declared,
paid, created or arising after the Last Accounts Date or attaching
thereto and free from all claims, charges, liens, encumbrances,
options, equities, rights of pre-emption or other third party rights
(save for any claims, charges, liens, encumbrances, options, equities
or other third party rights arising under the Articles of Association
of the Company, this Deed or the Existing Floating Charge).
2.2 The Purchaser shall not be obliged to complete the purchase of any of
the Shares unless the purchase of all the Shares is completed
simultaneously in accordance with this Deed.
2.3 The covenants implied herein pursuant to LP(MP)A shall apply:
2.3.1 as modified or extended by the express terms of the
Warranties;
2.3.2 as if the covenant set out in section 3(1) of LP(MP)A ended
after the word "parties"; and
2.3.3 as if section 6(2)(b) of LP(MP)A did not apply
PROVIDED ALWAYS that without prejudice to the provisions of Clause 2.4
each of the Vendors shall sell such number of the Shares as are set
out opposite the name of the Vendor in question in Schedule 1 subject
to any charges or encumbrances arising under the Articles of
Association of the Company or arising pursuant to the terms of this
Deed or the Existing Floating Charge.
2.4 Each of the Vendors and the Company hereby waive all and any rights of
pre-emption or rights associated therewith to which they may be
entitled under the Articles of Association of
-8-
<PAGE>
the Company or under the shareholders agreement amongst John Hackland
Craig, John Owen Warren, Barry Edward Sealey, Andrew Edward Sealey,
Christopher Shaw, Albert Shaw, John Shaw, John Ireland and Henjac 207
Limited (now called Interface Graphics Limited), by agreement, by
statute or otherwise in respect of any transfer of Shares contemplated
by this Deed and, in particular, but without prejudice to the
generality of the foregoing waive any rights they may have under
Articles 3, 4, 17 to 20 inclusive and 23 of the Articles of
Association of the Company.
3. CONDITIONS PRECEDENT
3.1 Completion of the sale and purchase of the Shares shall be
conditional upon the Purchaser obtaining sufficient funding to enable
it to pay the Initial Consideration PROVIDED that in the event that
such funding shall not have been obtained at the Completion Date the
Purchaser shall pay the Vendors the sum of (pound)30,000 by way of
damages which payment shall be the Vendors' sole remedy for failure to
complete this Agreement as a result of such failure to obtain funding.
3.2 Completion of the sale and purchase of the Shares shall, in addition,
be conditional upon the following conditions having been fulfilled:
3.2.1 the repayment of all sums (if any) owing to the Company by
3.2.1.1 the Vendors or the directors of the Company or any
of them; or
3.2.1.2 by any person connected with any of the Vendors
or director of the Company or by any company
directly or indirectly controlled by such persons
or any of them; or
3.2.1.3 any partnership in which such persons or company
is a partner and whether or not such sums are due
for repayment;
3.2.2 the release of the Company (without payment of compensation)
from any debenture, charge, guarantee, cross-guarantee,
indemnity, counter-indemnity, bond, security, assurance or
other contingent liability of whatsoever nature or other
similar obligation which relates or could be made to relate
in whole or in part to debts or other liabilities or
obligations, whether actual or contingent and whether now or
hereinafter incurred, of any other person PROVIDED ALWAYS
-9-
<PAGE>
that this Clause 3.2.2 shall not require the release of the
Company from the Existing Floating Charge;
3.2.3 the release of the Company (without payment of compensation)
from all agreements and arrangements (other than as required
by the Purchaser) between the Company on the one hand, and
any Vendor or person connected with any of the Vendors on
the other hand PROVIDED that the provisions of this Clause
3.2.3 shall have no effect with regard to any contract of
employment between the Company and any of the Employee
Vendors; and
3.3 Each of the Vendors undertakes to use its reasonable endeavours to
ensure that the Conditions Precedent set out at Clause 3.2 are
fulfilled (to the reasonable satisfaction of the Purchaser) as soon as
reasonably practicable and, in any event, by Completion.
3.4 The Purchaser shall be entitled in its absolute discretion, by written
notice to the Vendors, to waive any or all of the Conditions Precedent
set out at Clause 3.2 either in whole or in part.
4. INITIAL CONSIDERATION AND DEFERRED CONSIDERATION
4.1 The Initial Consideration for the Shares shall be (pound)425,000
payable partly in cash and partly in monies worth in accordance with
the provisions of Clause 4.2.
4.2 The Initial Consideration set out in Clause 4.1 shall be satisfied:
4.2.1 in relation to the External Vendors and (in part) the
Employee Vendors in cash at Completion in accordance with
the provisions of Clause 6.4.1 and in the amounts set
opposite their names in Schedule 1; and
4.2.2 in relation to (in part) the Employee Vendors by the
allotment and issue to the Employee Vendors (or as they may
direct) of the Consideration Shares at Completion in
accordance with the provisions of Clause 6.4.2 and in the
proportions set opposite their names in Schedule1.
4.3 In computing the number of Consideration Shares to be allotted and
issued to the Employee Vendors pursuant to Clause 6.4 the US dollar
value attributed to each Consideration Share shall be the average of
the middle market quotations as shown by the NASDAQ index for each of
the 5 dealing days ending on the dealing day preceding the Completion
Date and the
-10-
<PAGE>
dollar to pound sterling exchange rate shall be the average of the
Royal Bank of Scotland plc spot rate of exchange for the purchase of
pounds sterling with dollars for the five dealing days ending on the
dealing day preceding the Completion Date. Where the calculation of
the number of the Consideration Shares or the apportionment thereof
results in other than a whole number, such number shall be rounded up
to the nearest whole amount.
4.4 The Deferred Consideration shall be comprised of (a) two payments of
(pound)20,000 each, the first of which shall be paid by 31st January
2000 and the second of which shall be paid by 31st January 2001 and
which payments shall be apportioned between the Vendors pro-rata to
their entitlement to the Initial Consideration together with (b) such
payments (if any) as shall be due in accordance with Clause 4.7 and
payable in accordance with Clause 4.8.
4.5 The Purchaser shall procure that the auditors of the Company at the
end of each of the Financial Years shall, within four months of the
end of that Financial Year, be required to issue a certificate to the
Vendors and the Purchaser stating the Profit for that Financial Year.
Such certificate shall, subject to any changes proposed by the
independent accountants appointed by the Vendors pursuant to Clause
4.6 and any demonstrable error be conclusive evidence of the Profit
for that Financial Year.
4.6 The Vendors shall on demand within 10 Business Days of the issue of
the auditors certificate pursuant to Clause 4.5 be entitled to examine
or arrange for an independent accountant to examine the papers and
calculations of the auditors referred to in Clause 4.5
4.7 If the Profit for either or both of the Financial Years is greater
than (pound)60,000 then the Purchaser shall pay the Vendors an amount
equal to 50% of the amount by which the Profit for the relevant
Financial Year exceeded (pound)60,000 PROVIDED that the maximum amount
payable by the Purchaser pursuant to this Clause 4.7 in respect of
each Financial Year shall not exceed (pound)55,000 and PROVIDED
FURTHER that for the avoidance of doubt no payment shall be due in
respect of a Financial Year in which the Profit is less than
(pound)60,000
4.8 Any amounts payable pursuant to Clause 4.7 shall be paid within 20
Business Days of issue of the certificate for the relevant Financial
Year referred to in Clause 4.5 or, if later, within 20 Business Days
of the conclusion of the examination by either the Vendors or the
independent accountant pursuant to Clause 4.6 and shall be apportioned
between the Vendors pro-rata to their entitlement to the Initial
Consideration.
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<PAGE>
5. POSITION PENDING COMPLETION
5.1 The Vendors separately and severally undertake to the Purchaser to
procure that pending Completion neither they nor the Company shall
allow or procure any act or omission which would (or would be likely
to) cause, constitute or result in a breach of any of the
representations, warranties set out or referred to in Clause 8 and
Schedule 4 which would make any of such representations, warranties
and undertakings untrue or incorrect or misleading.
5.2 Without prejudice to Clause 5.1 the Vendors separately and severally
undertake to the Purchaser that they will immediately notify the
Purchaser in writing of any matter or thing which arises or becomes
known to them after the date of this Deed and prior to Completion
which constitutes (or would with the passage of time constitute) a
material breach of any representation or warranty set out or referred
to in Clause 8 and Schedule 4 or a material breach of any of the
covenants or undertakings or obligations of the Vendors under this
Deed.
5.3 The Vendors hereby separately and severally undertake to the Purchaser
to procure that pending Completion, the Company shall carry on
business in the ordinary course as carried on prior to the date of
this Deed and shall not do anything which is not of a routine nature
or which is material in the context of the business of the Company.
5.4 Without prejudice to the generality of the undertaking contained in
Clause 5.3, the Vendors separately and severally further undertake to
the Purchaser to procure that pending Completion the Company shall
not, except with the prior written consent of the Purchaser or as
required pursuant to the terms of this Agreement:
5.4.1 make any change in its business as carried on as at the date
of this Deed which materially adversely affects its
business;
5.4.2 make any change to its trade or trade connections which
materially adversely affects its business;
5.4.3 acquire or dispose of (or agree to acquire or dispose of)
any asset exceeding (pound)1,000 in value or assets
aggregating more than (pound)5,000 in value;
5.4.4 dispose of or agree to dispose of or grant any option in
respect of any material asset or assets or any interests
therein except in the ordinary course of business;
-12-
<PAGE>
5.4.5 remove any asset from the Property save in the ordinary
course of normal day to day business;
5.4.6 dispose of or agree to dispose of or grant any option in
respect of its business or any part of its business or
discontinue or cease to operate, or propose to discontinue
or cease to operate any part or all of its business;
5.4.7 conduct transactions other than on an arm's length basis;
5.4.8 enter into any contract or commitment other than in the
ordinary course of its business, or enter into any contract
or commitment of a long-term or unusual nature or which
involves or could involve an obligation which is material;
5.4.9 enter into, modify or agree to terminate any material
contract or incur any capital expenditure on any individual
item for an amount in excess of (pound)1,000, or in respect
of all such capital expenditure incurred between the date of
this Deed and Completion which, in aggregate, exceeds the
sum of (pound)5,000;
5.4.10 acquire (whether by subscription or purchase) any shares,
debentures, loan stock, convertible securities or similar
securities or enter into any agreement for the acquisition
(whether by subscription or purchase) of any shares,
debentures, loan stock, convertible securities or similar
securities;
5.4.11 permit or suffer any of its insurance to lapse or do
anything which would make any policy of insurance void or
voidable;
5.4.12 grant or agree to grant any lease or third party right in
respect of the Property or assign or agree to assign or
otherwise dispose or deal with the same;
5.4.13 enter into any leasing, hire purchase or other agreement or
arrangements for payment on deferred terms;
5.4.14 borrow any money over and above existing facilities from its
bank;
5.4.15 grant or issue or agree to grant or issue any mortgage,
charge, debenture or security for money or redeem or agree
to redeem any such mortgage, charge, debenture or security
or give or agree to give any guarantee or indemnity;
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5.4.16 make any loan or advance;
5.4.17 declare or pay any dividend or make any other distribution
of its assets or profits to any shareholder or other person
or repay loans to it made by any shareholder or any other
person or assign or otherwise dispose of any of its book
debts or do or suffer anything whereby its financial
position shall be rendered less favourable than at the date
hereof;
5.4.18 amend or alter its Memorandum or Articles of Association;
5.4.19 increase or reduce (including by way of redemption or
repurchase of existing securities) its authorised or issued
share capital;
5.4.20 convert, sub-divide or consolidate any of its shares;
5.4.21 allot or issue (or agree to allot or issue) any shares,
rights or options to subscribe for or acquire shares, or
grant (or agree to grant) any option in respect of any
shares, or allot or issue (or agree to allot or issue) any
securities which are convertible into shares of any class;
5.4.22 change its accounting reference date or make any changes to
the accounting policies or procedures by reference to which
the Accounts were prepared;
5.4.23 change its residence for taxation purposes;
5.4.24 institute or propose any insolvency proceedings including
the appointment of an administrator or the filing of a
petition for voluntary winding up, or any reconstruction or
amalgamation;
5.4.25 appoint or employ any new managerial or senior skilled
employee or consultant or amend the terms of employment
(including terms as to pension) of any of its present
employees or consultants;
5.4.26 institute, settle or agree to settle any legal proceedings
relating to its business (save for debt collection in the
ordinary course of its business); or
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5.4.27 incur any liabilities between itself and any of the Vendors
or any person connected with any of the Vendors save for
remuneration in the ordinary course of business at current
rates.
5.5 Each of the Vendors undertakes to the Purchaser that:
5.5.1 he shall not at any time prior to Completion
dispose or attempt to dispose of any interest in
the Shares or grant any option over, or mortgage,
charge or otherwise encumber or dispose of the
Shares or exercise or vary any of the rights
attaching to the Shares; or
5.5.2 except with the prior written consent of the
Purchaser, he shall not vote in favour of any
resolution at any general meeting of the Company.
5.6 Pending Completion the Vendors shall procure that the
Purchaser and its agents and representatives are given, upon
reasonable notice and during normal business hours, full
access to the employees and the Vendors shall upon request
furnish such information regarding the businesses and
affairs of the Company as the Purchaser may reasonably
require and the Purchaser may make such copies of such
information as it may reasonably require PROVIDED that in
the event that Completion of this Agreement shall not occur
in accordance with the provisions of Clause 6 then the
Purchaser shall at the election of the Vendors either return
all such copies to the Company or destroy all such copies.
5.7 If any material breach of any of the representations and
warranties set out or referred to in Clause 8 and Schedule 4
shall come to the notice of the Purchaser before Completion
or if there is any material breach or non-fulfilment before
Completion of any of the agreements or obligations on the
part of the Vendors (or any of them) contained in this Deed
which (being capable of remedy) is not remedied to the
reasonable satisfaction of the Purchaser prior to Completion
and such breach would give rise to a proper claim then
(without prejudice to any other right or remedy which may be
available to the Purchaser in respect thereof) the Purchaser
may in its sole discretion and without any liability
whatsoever to the Vendors elect not to complete the purchase
of the Shares.
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6. COMPLETION
6.1 Completion shall take place on the Completion Date at the offices of
the Vendor's Solicitors (or as otherwise agreed between the Parties).
6.2 At Completion the Vendors shall deliver (where appropriate as agent
for the Company) to the Purchaser:
6.2.1 duly executed (unstamped) transfers of the Shares and
powers of attorney in Agreed Form duly executed by the
registered holders thereof;
6.2.2 certificates for the Shares (or an indemnity, in Agreed
Form, for any lost certificate in respect thereof) and any
other documents (including any necessary waivers or
consents) which may be required to give good title to the
Shares and to enable the Purchaser to procure registration
of the same in its name or as it may direct;
6.2.3 the Deed of Tax Covenant duly executed by Alistair Fisher,
Barry E. Sealey, Christopher J. Shaw, Margaret A. Craig and
John O. Warren (all of whose addresses are specified in
Schedule 1);
6.2.4 the Disclosure Letter in a form acceptable to the Purchaser
duly executed by or on behalf of the Vendors;
6.2.5 the resignations by way of deed of each of the directors
(other than those requested by the Purchaser to remain) and
the secretary of the Company substantially in the form set
out in Part 1 of Schedule 3 and confirmation by way of deed
by each of the Vendors in the form set out in Part 2 of
Schedule 3 that they have no claims against the Company;
6.2.6 cheque books in respect of all bank accounts operated by the
Company together with bank statements drawn up to the
preceding Business Day relating to such accounts and a
reconciliation of such bank statements to the cash books of
the Company;
6.2.7 the certificate of incorporation, certificate of
incorporation on change of name, common seal (if any),
statutory register, minute book, share certificate book and
all other books of the Company (all duly written up to
date);
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6.2.8 a certificate of non-crystallisation in the Agreed Form
duly executed by the Governor and Company of the Bank of
Scotland in respect of the Existing Floating Charge;
6.2.9 the Leases together with the Vendors' Solicitors'
Undertaking;
6.2.10 the resignation of the auditors of the Company in the form
set out in Part 3 of Schedule 3 together with a duplicate
thereof;
6.2.11 any power of attorney under which any document required to
be delivered under this Clause 6 has been executed;
6.2.12 certified copies of resolutions, in the Agreed Form, of the
Company adopting new Articles of Association;
6.2.13 the Termination Agreement duly executed by the parties
thereto; and
6.2.14 such evidence as the Purchaser shall reasonably require of
satisfaction of the Conditions Precedent.
6.3 The Vendors shall procure that board resolutions of the Company are
passed and the Vendors shall deliver to the Purchaser certified copies
of such board resolutions, in the Agreed Form, at Completion:
6.3.1 authorising the execution of and the performance by the
Company of its obligations under each of the documents to be
executed by it;
6.3.2 recording acceptance of the resignations referred to in
Clause 6.2.5;
6.3.3 adopting new bank mandates and changed authorities in
respect of existing bank accounts operated by the Company in
accordance with the directions of the Purchaser;
6.3.4 approving (subject only to proper stamping) the transfers of
the Shares delivered hereunder;
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6.3.5 approving (subject only to proper stamping) the placing on
the register of members of the Company of the names of the
transferees for registration in accordance with the share
transfer forms referred to above and authorising the issue
of appropriate share certificates;
6.3.6 recording the appointment of such persons as the directors
(within the maximum number permitted by the articles of
association of the relevant company), secretaries and
auditors of the Company as the Purchaser shall nominate; and
6.3.7 changing the accounting reference date of the Company to
such date as shall be permissible in accordance with the
Companies Act and as the Purchaser may direct.
6.4 Provided that the Vendors comply with all their obligations under
Clauses 6.1, 6.2 and 6.3, the Purchaser shall at Completion:
6.4.1 pay to the External Vendors and the Employee Vendors the
cash element of the Initial Consideration due pursuant to
Clause 4.2.1 by way of a banker's draft in favour of or by
telegraphic transfer to the client account of the Vendors'
Solicitors;
6.4.2 procure the allotment and issue on the Completion Date by
Unidigital of the Consideration Shares due pursuant to
Clause 4.2.2 in accordance with the terms of this Deed;
6.4.3 procure the placing on the Completion Date by Unidigital on
its register of members of the Employee Vendors;
6.4.4 deliver to the Vendors duplicates of the Deed of Tax
Covenant executed by the Purchaser; and
6.4.5 accept and sign a duplicate of the Disclosure Letter to show
its acceptance of the contents thereof.
6.5 If for any reason the provisions of any of Clauses 6.1 to 6.3 are not
fully complied with, the Party not in default (and for the purposes of
this Clause 6.5 alone the Vendor's shall constitute one "PARTY") shall
be entitled (in addition and without prejudice to any other right
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or remedy available to it) to rescind this Deed without any liability
on its part to the other Party.
6.6 Neither the Purchaser nor the Vendors shall be entitled to rescind or
otherwise terminate this Deed following Completion.
7. DELIVERY TO SOLICITORS
The solicitors to any Party are authorised to take delivery on behalf
of such Party of any items hereunder and their receipt shall be a good
discharge therefor to the Party and the solicitors to the Party making
delivery.
8. WARRANTIES
8.1 The Warrantors separately and severally represent and warrant to the
Purchaser that as at the date of this Deed and at Completion, save for
and to the extent that any relevant fact, matter, event or
circumstance is fairly and accurately disclosed in the Disclosure
Letter in respect thereof each of the Warranties is true and not
misleading and so that:
8.1.1 each Warranty shall be, and shall be construed as, a
separate representation and warranty by each of the
Warrantors to the Purchaser and (save as expressly provided
to the contrary) shall not be limited or restricted by
reference to or inference from the terms of any other
Warranty or any other terms of this Deed, the Deed of Tax
Covenant or the Disclosure Letter (other than the factual
disclosure therein);
8.1.2 to the extent that any Warranty relates to present or past
matters of fact the Warranty shall be deemed to constitute a
representation on the faith of, and in reliance upon, which
the Purchaser has entered into this Deed; and
8.1.3 the rights and remedies of the Purchaser in respect of the
Warranties and the liability of the Warrantors under the
Warranties shall not be confined to breaches discovered
before Completion, or in any way affected, modified or
discharged by (a) Completion; or (b) the constructive (but
not actual) knowledge of the Purchaser or any of its
officers, employees or advisers or by any investigations
(other than any investigation of matters reasonably apparent
from the Disclosure
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Letter, the content thereof and the documents attached
thereto) carried out by or on behalf of the Purchaser.
8.2 Where any statement in the Warranties is qualified by the expression
"to the best of the knowledge, information and belief of the
Warrantors" or "so far as the Warrantors are aware" or any similar
expression each Warrantor shall be deemed to have knowledge of:
8.2.1 where applicable, anything of which he ought reasonably to
have knowledge given his responsibilities to the Company;
and
8.2.2 anything of which he would have had knowledge had he made
reasonable enquiry of Peter Shakeshaft and the other
Warrantors immediately before giving the Warranties and such
expression shall be construed as a separate warranty that
each Warrantors shall have made reasonable enquiries as to
the accuracy and completeness of that statement.
PROVIDED that no Warrantor shall be deemed to have knowledge of
anything of which any of the other Warrantors has knowledge or is
deemed to have knowledge other than in respect of knowledge imputed
pursuant to Clause 8.2.2.
9. MEASURE OF DAMAGES
9.1 Subject to the limitations set out in Clause 10 in the event of any
breach of Warranty, the Purchaser may at its option and without
prejudice to any other right or remedy which may be available to it:
9.1.1 claim for all loss suffered by it in consequence of any
document which ought to be in the possession of the Company
as at the Completion Date not having been properly stamped
whether or not the Company has a legal obligation to present
or re-present the same for stamping; and/or
9.1.2 require the Warrantors to pay to the Purchaser such sum as
is equal to the amount by which the assets of the Company
are less, or less valuable, or its liabilities greater, than
the values at which the same were included in the Accounts
or (if the Purchaser so elects) than they would have been if
the relevant Warranty had been true and correct and not
misleading.
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and so that the exercise by the Purchaser of any of the rights and
remedies set out in this Clause shall be without prejudice to the
exercise of any other of them.
9.2 Subject to the limitations set out in Clause 10 but without prejudice
to any right or remedy available to the Purchaser, the Warrantors
shall be separately and severally liable on an indemnity basis for all
reasonable costs, claims and expenses incurred by the Purchaser in
connection with any claim arising out of any breach of the Warranties,
or out of any breach of any other undertaking, indemnity, covenant,
agreement or obligation contained in this Deed in respect of which
claim any Warrantor has agreed to make payment by way of settlement or
in respect of which claim the Purchaser has obtained judgment in its
favour.
9.3 The liability of each Warrantor pursuant to this Clause 9 shall be
met:
9.3.1 firstly by reduction in any Deferred Consideration payable
to such Warrantor pursuant to Clause 4.4(a) and remaining
unpaid;
9.3.2 in the event that the reduction pursuant to Clause 9.3.1
shall be insufficient to meet the relevant Warrantor's
liability then in the case of a Warrantor who has received
Consideration Shares any remaining liability may at the
election of the relevant Warrantor be met secondly by the
transfer to the Purchaser of such number of Consideration
Shares as at the date of settlement of any such claim for
breach of Warranty are equal in value to the remaining
liability of the relevant Warrantor or by payment of a cash
amount equal to the amount of such liability; and
9.3.3 in the event that reduction, transfer or payment pursuant to
Clauses 9.3.1 and 9.3.2 shall be insufficient to meet the
relevant Warrantor's liability in the case of a Warrantor
who has received cash (whether as payment for the Initial
Consideration or as payment for the Deferred Consideration
which payment has been made at the date the liability
arises) be met thirdly by payment in cash;
PROVIDED that for the avoidance of doubt if any Warrantor entitled to
effect payment in whole or in part by the transfer to the Purchaser of
Consideration Shares shall have disposed of a number of Consideration
Shares prior to the date of settlement of any such claim for breach of
Warranty such that he has insufficient Consideration Shares to meet
the relevant portion of his liability then that portion shall be met
by a payment in cash.
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9.4 For the purposes of this Clause 9 the value of each Consideration
Share in pounds sterling as at the date of settlement of any claim for
breach of Warranty shall be calculated by reference to the average of
the middle market quotations as shown by the NASDAQ index for the
Consideration Shares for each of the 5 dealing days ending on the
dealing day preceding the date of settlement and the dollar to pound
sterling exchange rate shall be the average of the Royal Bank of
Scotland plc spot rate of exchange for the purchase of dollars with
pound sterling for the five dealing days ending on the dealing day
preceding the relevant date of settlement.
10. LIMITATION OF WARRANTORS' LIABILITY
10.1 The liability of the Warrantors under the Deed of Tax Covenant and/or
for breach of any of the Warranties shall be limited as follows:
10.1.1 no claim may be made against the Warrantors in respect of
any such liability for breach of the Warranties (other than
a liability under and/or for breach of the Tax Warranties or
the Deed of Tax Covenant) unless notice of such claim is
served on the Warrantors in writing specifying in reasonable
detail the event, matter or default which gives rise to the
claim as soon as reasonably practicable after the Purchaser
becomes aware that circumstances giving rise to such claim
have arisen and in any event before the expiration of twelve
(12) months from Completion;
10.1.2 no claim may be made against the Warrantors in respect of
any liability under and/or for breach of the Tax Warranties
or the Deed of Tax Covenant unless notice of such claim is
served on the Warrantors in writing specifying in reasonable
detail the event, matter or default which gives rise to the
claim as soon as reasonably practicable after the Purchaser
becomes aware that circumstances giving rise to such claim
have arisen in any event before the expiration of six (6)
years from Completion;
10.1.3 notwithstanding Clauses 10.1.1 and 10.1.2, no claim shall be
made or brought by the Purchaser under the Deed of Tax
Covenant and/or in respect of any breach of the Warranties
unless notice in writing of such claim (specifying in
reasonable detail the event, matter or default which gives
rise to the claim, the breach that results and the amount
claimed ) has been given to the Warrantors within one month
of the Purchaser becoming aware of the same;
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10.1.4 any claim pursuant to Clauses 10.1.1 and/or 10.1.2 shall (if
it has not been previously satisfied, settled or withdrawn)
be deemed to have been withdrawn at the expiration of a
period of six (6) months from the giving of notice in
relation thereto unless legal proceedings shall have been
both issued and served on the Warrantors in respect of such
claim;
10.1.5 the Warrantors shall not be liable to the extent that the
amount of the claim or claims against them in respect of any
such liability exceeds (or would when aggregated with the
amount of all claims in respect of any such liabilities
exceed) the amount of consideration paid by the Purchaser in
respect of the Shares of that Warrantor (including for the
avoidance of doubt any amounts paid in respect of Deferred
Consideration pursuant to Clauses 4.4 to 4.7 of this Deed);
10.1.6 the Warrantors shall not in any event be liable to the
Purchaser unless a claim or claims can be validly made
against them exceeding in aggregate the sum of (pound)30,000
but, in the event such sum is exceeded, the Warrantors shall
be liable for the entire amount thereof and not only for the
excess;
10.1.7 the Warrantors shall not in any event be liable to the
Purchaser in respect of any single claim where the liability
of such claim does not exceed (pound)7,500 and any such
claim shall be disregarded for the purposes of Clause 10.1.5
but, in the event that such sum is exceeded the Warrantors
shall be liable for the entire amount thereof and not only
for the excess;
10.1.8 the Purchaser shall promptly reimburse to the relevant
Warrantors an amount equal to any sum paid by such
Warrantors in respect of any such liability which is
subsequently recovered by the Purchaser or the Company (as
the case may be) from any third party; and
10.1.9 in relation to Tax Warranties, the provisions of Clauses 4,6
and 7 of the Deed of Tax Covenant shall apply.
10.2 The Purchaser and/or the Company shall not be entitled to recover the
same sum or for the same loss more than once in respect of any claim
under or breach of any of the Warranties or Deed of Tax Covenant and
shall not otherwise obtain reimbursement or restitution more than once
in respect of any cause of action giving rise to any breach of the
Warranties or claim under the Deed of Tax Covenant.
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10.3 Notwithstanding anything expressed or implied in this Deed to the
contrary, any payment by the Warrantors pursuant to this Deed or the
Deed of Tax Covenant shall be treated for all purposes by the Parties
as a reduction in the consideration payable for the Shares and Clause
4 shall be modified accordingly.
10.4 The Purchaser may release or compromise the liability of any of the
Warrantors hereunder or grant to any of the Warrantors time or other
indulgence without affecting the liability of any other of the
Warrantors hereunder.
10.5 The Warrantors shall not be liable for any claim which would not have
arisen but for an act or omission of the Purchaser occurring after the
Completion Date, otherwise than in the ordinary course of business.
10.6 The Warrantors shall not be liable for any claim which would not have
arisen but for legislation passed after Completion which is
retrospective in effect.
10.7 The amount of any claim shall take into account any tax benefit
accruing to the Purchaser or the Company or the amount of any relief
from or deduction available to the Purchaser or the Company in respect
of Taxation directly or specifically arising by virtue of the loss and
damage in respect of which the claim is made.
11. COVENANTS OF THE COVENANTORS
11.1 Each of the Covenantors covenants with the Purchaser and the Company
that he will not, either alone or jointly with others, whether as
principal, agent, director, shareholder, independent contractor,
employee or in any other capacity, whether directly or indirectly
through any other person, firm or company and whether for his own
benefit or that of others:
11.1.1 in the case of the External Vendors for a period of
eighteen (18) months from the date hereof and in the case of
the remaining Covenantors for a period of twelve (12) months
from the date hereof within a radius of seventy-five (75)
miles of any place from which the Business is now carried on
be engaged in or carry on or be interested in or concerned
in (except as the holder together with any connected persons
of not more than three (3) per cent. in aggregate of any
class of securities of a company which class is listed or
dealt in on a recognised stock exchange in the United
Kingdom or elsewhere) any business in competition with the
Business;
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11.1.2 for a period of two (2) years from the date hereof solicit
for a business similar to or competing with the Business or
accept the custom or business of any person, firm or company
from whom the Company has within two (2) years before the
date hereof solicited or received an order for goods or
services and who has for that purpose had dealings with such
Covenantor nor attempt to discourage any such person, firm
or company from dealing with the Company;
11.1.3 for a period of two (2) years from the date hereof solicit
or entice away any officer or employee of the Company or do
any act whereby any such officer or employee with whom such
Covenantor had a working relationship is encouraged to leave
the employ of the Company, whether or not such officer or
employee would by reason of leaving the service of the
Company commit a breach of his contract of employment;
11.1.4 at any time after the date hereof use the name Interface
Graphics or any colourable imitation thereof or any name
likely to cause confusion therewith in the minds of members
of the public for the purposes of a business similar to or
competing with the Business whether by using such name as
part of a corporate name or otherwise; or
11.1.5 at any time make use of or publish or disclose to any
person any trade secrets or confidential information
concerning the Business or affairs of the Company howsoever
acquired by him except to the extent:
11.1.5.1 required by the law of any relevant jurisdiction;
11.1.5.2 disclosed to the professional advisers, auditors
and bankers of any Covenantor on a confidential
basis;
11.1.5.3 the information has come into the public domain
through no fault of that Covenantor; or
11.1.5.4 the Purchaser has given prior written approval
to disclosure, such approval not to be
unreasonably withheld or delayed; or
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11.1.5.5 in the case of the Covenantors who are Employee
Vendors for as long as they remain within the
employment of the Company and are required so to
do in accordance with the terms of their
employment; or
11.1.6 at any time after the date hereof do or say anything
harmful to the reputation of the Business or which leads any
person, firm or company to cease to do business with the
Company on substantially equivalent terms to those
previously offered or not to engage in business with the
Company.
11.2 Each of the covenants contained in each of the Sub-clauses of Clause
11.1 shall be a separate covenant by each of the Covenantors and shall
be enforceable by the Purchaser and by the Company independently of
any right to enforce any other covenant or obligation howsoever
arising.
11.3 Each of the restrictions contained in each of the Sub-clauses of
Clause 11.1 is considered reasonable by the Parties for the legitimate
protection of the Business and goodwill of the Company, but in the
event that any such restriction shall be found to be void but would be
valid if some part thereof was deleted, such restriction shall apply
with the deletion of such words as may be required to limit such
restrictions to what is required for the legitimate protection of such
Business and goodwill.
11.4 Each of the Covenantors will provide promptly such information
within his knowledge, possession or control as the Purchaser or the
Company may reasonably require in relation to the business or
activities of any person, firm or company competing with the Business.
11.5 For the avoidance of doubt none of the covenants contained in each of
Sub-Clauses 11.1 is given by the Covenantors jointly and severally.
12. POWER OF ATTORNEY
12.1 Each of the Vendors hereby, with effect from Completion,
irrevocably and unconditionally appoints the Purchaser or any director
of the Purchaser as the Purchaser shall direct as the attorney of such
Vendor with full powers of substitution in such Vendor's name and on
behalf of such Vendor (and to the complete exclusion of any rights
such Vendor may have in such regard) lawfully to exercise all voting
and other rights and receive all benefits and entitlements which may
now or at any time hereafter attach to the Shares of which such Vendor
is the registered holder and to transfer and deal with such Shares and
such rights,
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benefits and entitlements and execute such documents under hand or
under seal and do such acts and things in connection with the
foregoing as the Purchaser shall from time to time think fit in all
respects as if the Purchaser were the absolute legal and beneficial
owner thereof.
12.2 Each of the Vendors hereby undertakes to the Purchaser to ratify
everything that the Purchaser shall lawfully do or purport to do
pursuant to this Clause 12.
13. WAIVERS
13.1 Each of the Vendors hereby irrevocably waives, for the benefit of
the Purchaser and the Company, all and any rights to which he may be
entitled in respect of any misrepresentation, inaccuracy or omission
in or from any information or advice supplied or given by the Company
or by any present or former officer, employee or adviser of the
Company with a view to:
13.1.1 enabling or inducing such Vendor to give the Warranties set
out or referred to in Clause 8 and Schedule 4 or make any
statement set out in the Disclosure Letter; or
13.1.2 upon which such Vendor may have relied in agreeing to any
term of this Deed or making any statement set out in the
Disclosure Letter and each Vendor irrevocably undertakes not
to make any claim against either the Company or the
Purchaser in respect of any such matter.
13.2 The granting by any Party of any time or indulgence in respect of any
breach of any term of this Deed by the other(s) shall not be deemed a
waiver of such breach. The waiver by any Party of any breach of any
term of this Deed by the other(s) shall not prevent the subsequent
enforcement of that term (save to the extent of the express waiver in
question) and shall not be deemed a waiver of any subsequent breach.
14. POST-COMPLETION OPERATION
The provisions of this Deed shall continue in full force and effect
and be binding on the Parties in accordance with its terms
notwithstanding Completion.
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15. COSTS AND WITHHOLDINGS
15.1 Subject to Clause 3.1, the Purchaser shall bear both its own and all
of the Vendors' reasonable costs properly incurred of and incidental
to the negotiation, making and fulfilment of this Deed and the
transactions contemplated hereby PROVIDED that the Vendors shall bear
their own costs to the extent that they exceed (pound)15,000 excluding
VAT.
15.2 All sums payable to the Purchaser under this Deed shall be paid free
and clear of all deductions or withholdings whatsoever save only as
may be required by law. If any such deduction or withholding is
required by law the Vendors shall be obliged to pay such sum as will
after such deduction or withholding has been made leave the same
amount as the Purchaser would have been entitled to receive in the
absence of any such requirement to make a deduction or withholding. If
any sum payable to the Purchaser under this Deed shall otherwise be
subject to Tax in the hands of the Purchaser the same obligation to
make an increased payment shall apply in relation to such sums as if
it were a deduction or withholding required by law.
16. ASSIGNMENT
16.1 This Deed shall be binding on and enure to the benefit of the personal
representatives and estates of the Vendors.
16.2 No Party may assign in whole or in part the benefit of any provision
of this Deed save that the Purchaser may assign the benefit thereof to
a member of its Group.
17. ANNOUNCEMENTS
17.1 Subject to Clause 17.2, no announcement shall be made by any Party
relating to the transactions referred to in this Deed and no Party
shall disclose to any third party any information concerning the terms
or subject matter hereof.
17.2 Any Party may make an announcement or disclose information which would
otherwise be required hereunder to be treated as confidential if and
to the extent:
17.2.1 required by the law of any relevant jurisdiction;
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<PAGE>
17.2.2 required by any securities exchange or regulatory or
governmental body to which such Party or a member of its
Group is subject or submits, wherever situated, whether or
not the requirement for information has the force of law;
17.2.3 necessary to enable such Party to obtain the full benefit of
its rights under this Deed in accordance with the terms
hereof;
17.2.4 disclosed on a confidential basis to the professional
advisers, auditors and bankers of any Party;
17.2.5 the information has come into the public domain through no
fault of that Party; or
17.2.6 the other Parties have given prior written approval to the
disclosure, such approval not to be unreasonably withheld or
delayed,
PROVIDED THAT any such information be disclosed pursuant to Clauses
17.2.1 and 17.2.2 of this Clause shall be disclosed only after
consultation with the other Parties.
18. JURISDICTION
18.1 This Deed shall be governed by and construed in accordance with
English law.
18.2 The Parties agree that the English courts shall have non-exclusive
jurisdiction in relation to any dispute arising out of or in respect
of this Deed and that any judgment or order of an English court made
in this respect shall be conclusive and binding on them and may be
enforced against them. Nothing in this Clause 18 limits the rights of
the Parties to bring proceedings in any other court of competent
jurisdiction or concurrently in more than one jurisdiction.
18.3 Each of the Vendors hereby irrevocably appoints the Vendors'
Solicitors as his agent to accept service of notices and legal
proceedings in connection with all matters arising out of this Deed
and the transactions hereby contemplated.
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<PAGE>
19. NOTICES
19.1 Save as specifically otherwise provided in this Deed any notice, to
be given pursuant to this Deed shall be delivered by hand, sent by
prepaid post sent first class (for inland mail) or airmail (for
overseas mail) or shall be transmitted by facsimile addressed to the
Party to be served in the case of:
19.1.1 a company at its registered office for the time being; and
19.1.2 an individual to the address specified in Schedule 1
or at such other address or facsimile number in the United Kingdom as
any such Party may from time to time notify the other Parties in
writing as being their address for service hereunder.
19.2 Notices delivered by hand shall be deemed served at the time of
delivery, notices sent by post shall be deemed served on the second
Business Day (for inland mail) or the fifth Business Day (for overseas
mail) after the date of posting and any notice sent by facsimile
transmission shall be deemed served on the Business Day following the
date of transmission.
20. INVALIDITY
If any provision of this Deed is held to be invalid or unenforceable,
such a provision shall (so far as invalid or unenforceable) be given
no effect and shall be deemed to be excluded from this Deed, but
without invalidating any of the remaining provisions of this Deed. The
Parties shall use all reasonable endeavours to replace the invalid or
unenforceable provision by a valid provision, the effect of which is
as close as possible to the intended effect of the provision so
excluded.
21. FURTHER ASSURANCE
Each Party shall at the Purchaser's cost do or procure to be done all
such further acts or things, and execute or procure the execution of
all such other documents as the other may from time to time reasonably
require, whether on or after Completion, for the purpose of giving
such other Party the full benefit of all the provisions of this Deed.
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22. ENTIRE AGREEMENT
22.1 This Deed, the Deed of Tax Covenant, the Disclosure Letter and all
other documents which are required by those documents to be entered
into by the parties or any of them, constitute the whole and only
agreement between the Parties relating to the subject matter hereof
and, except to the extent repeated in any of the aforesaid documents,
supersede and extinguish any prior drafts, agreements, undertakings,
representations, warranties and arrangements of any nature whatsoever,
whether or not in writing, relating thereto.
22.2 Each of the Parties acknowledges that he has not entered into this
Deed relying upon any representation or arrangements whether oral or
in writing made by any other of the Parties other than those expressly
incorporated or referred to in this Deed or such other documents as
are referred to in Clause 22.1 and accordingly, except in the case of
fraud, none of the Parties shall have any right of action against any
other Party arising out of or in connection with any such
representation or arrangement which has not been so expressly
incorporated or referred to.
22.3 No variation or amendment of this Deed shall be valid unless it refers
to this Deed is evidenced in writing and signed by or on behalf of
each of the Parties.
23. TIME OF THE ESSENCE
Any date or period mentioned in any provision of this Deed may be
extended by mutual written agreement of the Parties, but as regards
any date or period so extended, time shall be of the essence in this
Deed (unless the Parties determine otherwise on agreeing to such
extension).
24. COUNTERPARTS
This Deed may be executed in any number of counterparts each of which
when executed shall constitute an original, but all the counterparts
shall together constitute one and the same Deed.
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<PAGE>
AS WITNESS this Deed has been entered into on and is intended by the
Parties to be Delivered upon the date first stated above.
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<PAGE>
SCHEDULE 1
PART I
The EXTERNAL VENDORS
<TABLE>
<CAPTION>
NAME OF ADDRESS OF VENDOR REGISTERED HOLDER NUMBER OF CASH
VENDOR (IF DIFFERENT FROM SHARES CONSIDERATION
VENDOR) (POUND)
<S> <C> <C> <C>
J.H. Craig 58 Silverknowes 9,859 47,816.62
Parkway
Edinburgh
EH4 5LA
B.E. Sealey 4 Castlelaw Road 10,418 50,527.80
Edinburgh
EH13 0DN
C. J. Shaw 39a Mansionhouse Road 11,792 57,191.77
Edinburgh
EH9 2JD
A. Shaw 5 Burnside Avenue 8,844 42,893.82
Dalkeith
EH22 4JB
A. E. Sealey The Coachouse 4,557 22,101.67
99 Blackheath Park
London
SE3 0EU
J. Ireland 5 Ashmeadows 9,114 44,203.34
Picktree
Washington
Tyne & Wear
NE38 9HN
-------- ----------
54,584 264,735.02
======== ==========
</TABLE>
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<PAGE>
SCHEDULE 1
PART II
THE EMPLOYEE VENDORS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME OF VENDOR ADDRESS OF VENDOR REGISTERED NUMBER OF PORTION OF CASH
HOLDER SHARES CONSIDERATION CONSIDERATION
(IF DIFFERENT SHARES (POUND)
FROM VENDOR) (%)
John O Warren Grantshall 10,002 32.43 5,705.94
Blyth Bridge
West Linton
Peebleshire
EH46 7DH
Alistair Fisher Ballencrieff House 4,929 18.11
Longniddry
East Lothian
EH32 4PJ
Margaret A. Craig 46 Silverknowes Crescent 4,929 13.79 5,705.94
Edinburgh
EH4 5JB
Alex Lyon 96 Penicuik Road 4,929 13.79 5,705.94
Roslin
Midlothian
EH25 9NQ
Gordon O'Malley 5/5 Craigend Park 4,287 9.27 8,558.91
Gilmerton
Edinburgh
Robin Clark 55 Birrell Drive 2,113 7.76
Westerpitcorthie
Dunfermline
Fife
KY11 5DT
Roddy Castle 12 Priestfield Crescent 727 2.67
Edinburgh
EH16 5JQ
Alison Andrew 15/3 Hillcoat Place 500 0.11 2,282.37
Edinburgh
EH15 1TW
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<PAGE>
NAME OF VENDOR ADDRESS OF VENDOR REGISTERED NUMBER OF PORTION OF CASH
HOLDER SHARES CONSIDERATION CONSIDERATION
(IF DIFFERENT SHARES (POUND)
FROM VENDOR) (%)
Lorraine Brown 384/8 Easter Road 352 1.29
Ferrier Court
Edinburgh
EH6 8JN
Moira Dempster 2 Newhaven Road 113 0.18 313.83
Edinburgh
EH6 5PU
Steve Bissett 53 Jean Armour Avenue 113 0.42
Edinburgh
EH16 6XB
Gail Archibald 13 Parkhead View 50 0.18
Edinburgh
EH11 4RU
------ ------ ---------
33,686 100 28,272.93
====== ====== =========
</TABLE>
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<PAGE>
SCHEDULE 2
THE COMPANY
1. Date of incorporation: 24th March 1992
2. Companies Act(s) under which incorporated: 1985 and 1989
3. Registered number: SC137315
4. Registered office: Sandport House,
17 Coburg Street,
Edinburgh EH6 6ET
5. Directors:
Alistair Fisher
Barry Edward Sealey
Christopher John Shaw
John Owen Warren
6. Secretary: Christopher John Shaw
7. Accounting Reference Date: 31st May
8. Authorised share capital: (pound)50,000 divided
into 100,000 ordinary
shares of (pound)0.50
each
9. Issued and allotted share capital: 87,628 ordinary shares of
(pound)0.50 each all of
which have been issued
and allotted and are
fully paid or credited as
fully paid.
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<PAGE>
SCHEDULE 3
CONFIRMATION OF NO CLAIMS
PART 1
DIRECTORS AND SECRETARY
The Directors,
Interface Graphics Limited
[ ] 1998
I hereby resign my office as [director/Secretary/and as an employee] of the
above company with effect from the date upon which my resignation is accepted.
I hereby confirm that [save for accrued remuneration of not more than [ ],] I
have no claim against the above company in respect of any cause, matter or thing
including (without limitation) any claim for compensation for loss of office,
breach of contract or for redundancy or unfair dismissal and that there is not
outstanding any agreement or arrangement under which the above company has or
could have any obligation to me.
SIGNED as a Deed and Delivered by )
[ ] )
in the presence of: )
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<PAGE>
SCHEDULE 3
PART 2
THE VENDORS
The Directors,
Interface Graphics Limited
[ ] 1998
I hereby confirm that I have no claim against the above company in respect of
any cause, matter or thing and that there is not outstanding any agreement or
arrangement under which the above company has or could have any obligation to me
save pursuant to the share purchase agreement by way of deed dated [ ] 1998 and
made between A. Andrew and others (1) and Elements (UK) Limited (2) and
Interface Graphics Limited (3) or to any employment contract subsisting between
the Company and me.
SIGNED as a Deed and Delivered by )
[ ] )
in the presence of: )
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<PAGE>
SCHEDULE 3
PART 3
AUDITORS
The Directors,
Interface Graphics Limited
Sandport House
17 Coburg Street
Edinburgh
EH6 6ET
[ ] 1998
We hereby resign our office as auditors of the above company with effect from
the date hereof. We confirm that we have no claim against the said company in
respect of any cause, matter or thing. There are no circumstances connected with
our resignation which we consider should be brought to the notice of the members
or creditors of the said company.
We consent to the submission of a signed duplicate of this document to the
Registrar of Companies for filing by the said company in accordance with section
392 of the Companies Act 1985.
For and on behalf of Grant Thornton
- -----------------------------------
(Partner)
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<PAGE>
SCHEDULE 4
THE WARRANTIES
PART 1
GENERAL
1. INFORMATION
1.1 DISCLOSURE
the text of the Disclosure Letter is true, accurate and not
misleading.
1.2 OTHER INFORMATION
The contents of the Recitals and of Schedule 1 are true and accurate.
2. THE VENDORS
2.1 The Vendor in question has obtained all applicable governmental,
statutory, regulatory, or other consents, licences, waivers or
exemptions required to empower him to enter into and to perform his
obligations under this Deed and the other documents to be executed by
him as contemplated herein and, accordingly, that Vendor has the full
legal right and power to sell and transfer all his Shares to the
Purchaser in accordance with the provisions of this Deed which,
together with the other documents to be executed by that Vendor as
contemplated herein, shall upon execution and delivery be valid and
binding upon that Vendor.
2.2 Neither the Vendor in question nor any person connected with that
Vendor:
2.2.1 is a customer or supplier of the Company;
2.2.2 owns or controls Intellectual Property Rights or land or any
other substantial asset used by the Company;
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<PAGE>
2.2.3 enjoys or has enjoyed any benefit from the Company other
than in accordance with the express terms of his employment
contract and other than in respect of dividends declared
prior to the Last Accounts Date;
2.2.4 owes money to or is owed money by the Company; or
2.2.5 has any interest in any company or partnership which carries
on business competing directly or indirectly with any
business of the Company.
3. THE SHARES
All of the Shares registered in the name of that Vendor are fully paid
or properly credited as fully paid and the Vendor in question is the
registered and beneficial owner of that number of Shares set out
opposite his name in Schedule 1 and all his Shares are free from all
security interests, options, equities, claims or other third party
rights (including rights of pre-emption) of any nature whatsoever
(save for such security interests, options, equities, claims or other
third party rights as may arise pursuant to the Articles of
Association of the Company).
4. FINANCIAL MATTERS
4.1 ACCOUNTS
4.1.1 The Accounts give a true and fair view of the state of affairs of the
Company as at the Last Accounts Date and of their results for the
financial year ended on the Last Accounts Date and there have been no
post-balance sheet events which might affect such true and fair view.
4.1.2 Without limiting the generality of Warranty 4.1.1:
(a) the Accounts either make full provision for or, as appropriate,
disclose all liabilities, whether actual, contingent,
unquantified or disputed (including financial lease commitments,
tax liabilities (including, without limitation, deferred
taxation) and pension liabilities), all capital commitments,
whether actual or contingent, and all bad or doubtful debts of
the Company as at the Last Accounts Date, in each case in
accordance with generally accepted accounting principles;
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<PAGE>
(b) the Accounts and the audited accounts of the Company for each of
its two financial periods immediately preceding its financial
period ended on the Last Accounts Date were prepared under the
historical convention, complied with the requirements of the
Companies Act 1985 (as amended) and all other relevant laws then
in force and with all statements of standard accounting practice,
financial reporting standards and other accounting standards
issued by the Accounting Standards Board and all other generally
accepted accounting principles of the United Kingdom then in
force;
(c) any slow moving stock included in the Accounts (being stock held
for a period in excess of 3 months as at the Last Accounts Date)
has been written down appropriately and any redundant, obsolete,
damaged, used or unsaleable stock and irrecoverable
work-in-progress has been wholly written off, and in no case did
the value attributed to any stock included in the Accounts exceed
the lower of cost and net realisable value as at the Last
Accounts Date;
(d) all work-in-progress valued in the Accounts was valued on a basis
excluding profit and including adequate provision for losses
which are or should reasonably have been anticipated by the
Warrantors;
(e) the method of valuing stock and work-in-progress and the basis
of depreciation and amortisation adopted in the Accounts were the
same as those adopted in the audited accounts of the Company for
each of its two financial years preceding the financial year
ended on the Last Accounts Date;
4.2 MANAGEMENT ACCOUNTS
4.2.1 The unaudited management accounts of the Company for all periods ended
after the Last Accounts Date are contained in the Disclosure Letter
and they were properly prepared in a manner consistent with that
adopted in the preparation of its management accounts for all periods
ended during the 12 months prior to the Last Accounts Date.
4.2.2 Having regard to the purpose for which such unaudited management
accounts were prepared, they are not misleading in any material
respect and neither materially overstate the value of the assets nor
materially understate the liabilities of the Company as at the dates
to which they were drawn up and do not materially overstate the
profits of the Company in respect of the periods to which they relate.
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<PAGE>
4.3 POSITION SINCE THE LAST ACCOUNTS DATE
4.3.1 Since the Last Accounts Date there has been no material adverse
change in the financial or trading position or (save to the extent
that the same would be likely to affect to a similar extent
generally all companies carrying on similar businesses to the Company
in the United Kingdom) in the trading prospects of the Company and, so
far as the Warrantors are aware no event, fact or matter has occurred
which is likely to give rise to any such change.
4.3.2 Since the Last Accounts Date:
(a) the business of the Company has been carried on in the ordinary
and usual course and the Company has not made or agreed to make
any payment other than routine payments in the ordinary and usual
course of trading;
(b) no contract, liability or commitment (whether in respect of
capital expenditure or otherwise) has been entered into by the
Company which is of a long term or unusual nature or which
involved or could involve an obligation of a material nature or
magnitude (a liability for expenditure in excess of (pound)5,000
being included as "material" for this purpose);
(c) the Company has not (whether in the ordinary and usual course of
business or otherwise) acquired or disposed of, or agreed to
acquire or dispose of, any business or any asset having a value
in excess of (pound)2,000, except as disclosed in the Disclosure
Letter;
(d) no debtor has been released by the Company on terms that such
debtor pays less than the book value of its debt and no debt in
excess of (pound)10,000 owing to the Company has been deferred,
subordinated or written off or has proved to any extent
irrecoverable;
(e) there has been no unusual increase or decrease in the level of
the stock of the Company;
(f) the business of the Company has not been affected by any abnormal
factor not affecting to a similar extent generally all companies
carrying on similar businesses to the Company in the United
Kingdom;
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<PAGE>
(g) there has been no material reduction in the cash balances of the
Company from those set out in the Accounts; and
(h) the Company has continued to pay its creditors in the ordinary
course of business.
4.4 WORKING CAPITAL
Having regard to existing bank and other financial facilities, the
Company has sufficient working capital available to it as at the
Completion Date to enable it to continue to carry on its business in
its present form and at its present level of turnover and for the
purpose of performing in accordance with their terms all orders,
projects and other obligations of the Company and discharging all
liabilities of the Company which ought properly to be discharged
during the period of 12 months after Completion.
4.5 ACCOUNTING AND OTHER RECORDS
4.5.1 The statutory books, books of account, accounting, tax, VAT and other
records of the Company:
(a) are up-to-date and have been maintained in accordance with all
applicable laws and generally accepted accounting practices on a
proper and consistent basis;
(b) comprise complete and accurate records of all information
required to be recorded therein (including, without limitation,
details of all the Company's assets, liabilities and current
transactions); and
(c) are in its possession or under its control together with all
documents of title and executed copies of all existing agreements
to which the Company is a party.
4.5.2 All the records and systems (including but not limited to computer
systems) and all data and information of the Company is recorded,
stored, maintained or operated or otherwise held by the Company and is
not wholly or partly dependent on any facilities which are not under
the exclusive ownership or control of the Company.
4.5.3 The Company is licensed to use all software necessary to enable it to
continue to use its computerised records for the foreseeable future in
the same manner in which they have been
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<PAGE>
used prior to the Completion Date and does not share any user rights
in respect of such software with any other person.
4.5.4 All accounts, documents and returns required by law to be delivered or
made by the Company to the Registrar of Companies or any other
authority have been duly and correctly delivered or made.
5. DEBT POSITION
5.1 DEBTS OWED TO THE COMPANY
5.1.1 There are no debts owing to the Company other than:
(a) those debts specified in the Disclosure Letter and
(b) trade debts incurred in the ordinary and usual course of business
which do not exceed (pound)270,000 in aggregate and none of which
exceeds (pound)25,000.
5.1.2 None of the book debts included in the Accounts as owing to the
Company have been realised for an amount less than the value at which
they were included in the Accounts. All debts owing to the Company at
Completion are the absolute property of the Company and are not the
subject of any assignment, factoring agreement or other encumbrance
and such book debts will (save insofar as a specific provision has
been made in the Accounts therefor) be good and collectable in the
ordinary course of business and in any event not later than three
months after Completion.
5.2 DEBTS OWED BY THE COMPANY
5.2.1 The Company does not have outstanding any borrowing or indebtedness
in the nature of borrowing (including, without limitation, any
indebtedness for moneys borrowed or raised under any acceptance
credit, bond, note, bill of exchange or commercial paper, finance
lease, hire purchase agreement, trade bills (other than those on terms
normally obtained), forward sale or purchase agreement or conditional
sale agreement or other transaction having the commercial effect of a
borrowing) other than as set out in the Disclosure Letter and trade
debts incurred by the Company in the ordinary and usual course of
business since the last Accounts Date which do not exceed
(pound)150,000 in aggregate and none of which exceeds (pound)15,000.
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5.2.2 The Company has received no notice to repay under any agreement
relating to any borrowing or indebtedness in the nature of borrowing
which is repayable on demand.
5.2.3 There has not occurred any event of default or any other event or
circumstance which would entitle any person to call for early
repayment under any agreement relating to any borrowing or
indebtedness of the Company or to enforce any security given by the
Company (or, in either case, any event or circumstance which with the
giving of notice and/or the lapse of time and/or a relevant
determination would constitute such an event or circumstance).
6. REGULATORY MATTERS
6.1 LICENCES
6.1.1 The licences, permissions, authorisations and consents set out in the
Disclosure Letter comprise all the licences, permissions,
authorisations, consents and rights required to be granted by third
parties in order for the Company to carry on its business effectively
in the places and in the manner in which such business is now carried
on.
6.1.2 The licences, permissions, authorisations and consents set out in the
Disclosure Letter are in full force and effect, are not limited in
duration or subject to any unusual or onerous conditions and have been
complied with in all respects.
6.1.3 No act, event or omission has occurred as a result of which, and there
are no circumstances of which the Warrantors are aware which indicate
that, any of the licences, permissions, authorisations or consents set
out in the Disclosure Letter will or are likely to be revoked or not
renewed, in whole or in part, in the ordinary course of events
(whether as a result of the acquisition of the Shares by the Purchaser
or otherwise).
6.2 COMPLIANCE WITH LAWS
6.2.1 The Company has conducted its business and corporate affairs in
accordance with its Memorandum and Articles of Association and with
all applicable laws and regulations (whether of the United Kingdom or
of any other jurisdiction in which the Company has conducted its
business and/or corporate affairs).
6.2.2 There is no violation by the Company of, or default with respect to,
any statute, regulation, order, decree or judgment of any court or any
governmental or regulatory authority (whether
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<PAGE>
of the United Kingdom or of any other jurisdiction in which the
Company has conducted its business and/or corporate affairs).
6.3 FAIR TRADING AND RESTRICTIVE PRACTICES
6.3.1 The Company is not a party to (and is not concerned in) any agreement,
arrangement, concerted practice or course of conduct which:
(a) is registrable under the provisions of the Restrictive Trade
Practices Act 1976 (as amended); or
(b) contravenes the provisions of the Resale Prices Act 1976; or
(c) amounts to an anti-competitive practice within section 2 of the
Competition Act 1980; or
(d) contravenes Article 85 and/or Article 86 of the Treaty of Rome;
or
(e) infringes the competition legislation or practice of any other
jurisdiction in which the Company has conducted its business
and/or corporate affairs.
6.3.2 The Company has received no process, notice or other communication
(formal or informal) by or on behalf of the Office of Fair Trading
(whether under the Fair Trading Act 1973, the Competition Act 1980 or
otherwise), the Monopolies and Mergers Commission, the Secretary of
State for Trade and Industry or the Commission of the European
Communities or any other authority having jurisdiction in competition
matters in relation to any aspect of the business of the Company or
any agreement, arrangement, concerted practice or course of conduct to
which the Company is, or is alleged to be, a party.
6.3.3 The Company is not involved in any practice or agreement as a result
of which it is likely to receive any such process, notice or
communication as is referred to in Warranty 6.3.2.
6.3.4 The Company is not subject to any order or judgment given by any
court or governmental or regulatory authority, or party to any
undertaking or assurance given to any such court or authority, in
relation to competition matters which is still in force.
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7. THE COMPANY'S ASSETS
7.1 OWNERSHIP
7.1.1 For the purpose of this Warranty 7.1, "assets" includes plant,
machinery, vehicles, equipment and stock but shall not include the
Property, to which the provisions of Part 2 of this Schedule shall
apply.
7.1.2 All the assets included in the Accounts of the Company or purchased
by it since the Last Accounts Date (other than assets sold in the
ordinary course of business but including all book debts owed to the
Company) are the absolute property of the Company. Those assets are
not the subject of any security interest or any assignment, equity,
option, right of pre-emption, royalty, factoring arrangement, leasing
or hiring agreement, hire purchase agreement, conditional sale or
credit sale agreement, agreement for payment on deferred terms,
agreement whereby title to those assets is reserved to the supplier or
any similar agreement or arrangement (or any obligation, including a
conditional obligation, to create or enter into any such agreement or
arrangement) except for those agreements listed in the Disclosure
Letter.
7.2 POSSESSION AND THIRD PARTY FACILITIES
7.2.1 All of the assets owned by the Company, or in respect of which the
Company has a right of use, are in the possession or under the control
of the Company.
7.2.2 Where any assets are used but not owned by the Company or any
facilities or services are provided to the Company by any third party,
there has not occurred any event of default or any other event or
circumstance which would entitle any third party to terminate any
agreement or licence in respect of the provision of such facilities or
services (or any event or circumstance which with the giving of notice
and/or the lapse of time and/or a relevant determination would
constitute such an event or circumstance).
7.3 ADEQUACY OF ASSETS
7.3.1 The assets of the Company and the facilities and services to which
the Company has a contractual right include all rights, properties,
assets, facilities and services reasonably required for the carrying
on of the business of the Company in the manner in which it is
currently carried on.
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7.3.2 The computer software used by the Company is capable of recognising
and distinguishing between year dates relating to the 20th and 21st
centuries and neither the functionality nor the performance of the
computer software will be affected by the advent of the year 2000.
7.4 CONDITION
All the fixtures, plant, machinery, equipment and vehicles owned
and/or used by the Company:
7.4.1 are in a reasonable state of repair, given the age and use
made of the relevant asset, (fair wear and tear excepted)
and have been regularly and properly maintained in
accordance with appropriate technical specifications, safety
regulations and the terms and conditions of any applicable
agreement;
7.4.2 are capable of being efficiently and properly used for the
purposes for which they were acquired or are retained; and
7.4.3 none is dangerous (if used in accordance with appropriate
instructions), inefficient, obsolete (given the age of the
relevant asset) or in need of renewal or replacement by
reason of being worn out.
7.5 MAINTENANCE CONTRACTS
Maintenance contracts are in full force and effect in respect of all
assets which the Company is obliged to maintain or repair and in
respect of all assets which it is necessary to have maintained by
outside or specialist contractors.
7.6 ASSET REGISTER
The Disclosure Letter includes a complete and accurate record of all
the plant, machinery, equipment and vehicles owned, used or possessed
by the Company.
7.7 CASH
7.7.1 Details of the cash balances of the Company as at the Completion Date
are accurately set out in the Disclosure Letter.
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7.8 INSURANCES
7.8.1 There is set out in the Disclosure Letter an accurate summary of the
insurances maintained by or covering the Company. Such insurances are
in full force and effect and, to the best of the knowledge,
information and belief of the Vendors, there are no circumstances
which might lead to any liability under such insurance being avoided
by the insurers or the premiums being increased and Completion will
not have the effect of terminating, or entitling any insurer to
terminate, cover under any such insurance.
7.8.2 No claim is outstanding by the Company under any such policy of
insurance and, to the best of the knowledge, information and belief of
the Vendors, there are no circumstances likely to give rise to such a
claim.
7.8.3 All premiums falling due in respect of such policies of insurance have
been promptly paid.
8. INTELLECTUAL PROPERTY RIGHTS
8.1 Save in respect of its name and personal computer software generally
available in the market place, the Company does not require to conduct
its Business any patents, trade marks and service marks (whether
registered or not), registered design rights, utility models,
applications for any of the foregoing and the right to apply for any
of the foregoing in any part of the world, copyright, design rights,
inventions, confidential information, trade secrets, know-how,
production data, business or trade names or the benefit of any licence
in connection with any of the foregoing ("Intellectual Property
Rights").
8.2 No notice or claim has been received by the Company which claims any
infringement by the Company of any Intellectual Property Rights.
9. CONTRACTUAL MATTERS
9.1 MATERIAL CONTRACTS
Except as specified in the Disclosure Letter, there is not outstanding
any agreement or arrangement to which the Company is a party:
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9.1.1 which, by virtue of the acquisition of the Shares by the
Purchaser or other performance of the terms of this Deed,
will result in:
(a) any third party being relieved of any obligation to the
Company or becoming entitled to exercise any right
(including any right of termination or any right of
pre-emption or other option) against the Company; or
(b) the Company being in default under any such agreement
or arrangement or losing any benefit, right or licence
which it currently enjoys or a liability or obligation
of the Company being created or increased;
9.1.2 entered into otherwise than by way of a bargain at arm's
length;
9.1.3 to which any of the provisions of section 320, 322 or 330 of
the Companies Act may apply;
9.1.4 (save for the guarantees specified in the Disclosure Letter)
which establishes any guarantee, indemnity, suretyship, form
of comfort or support (whether or not legally binding) given
by the Company in respect of the obligations or solvency of
any third party;
9.1.5 which, upon completion by the Company of its work or the
performance of its other obligations under it, is likely to
result in a loss for the Company which is not fully provided
for in the Accounts or which is either not expected to make
a normal profit margin or which involves an abnormal degree
of risk;
9.1.6 or any power of attorney given by the Company or any other
authority which would enable any person not employed by
the Company to enter into any contract or commitment on
behalf of the Company;
9.1.7 which involves or is likely to involve:
(a) expenditure by the Company in excess of (pound)5,000
outside of the ordinary and normal course of business;
or
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(b) obligations or restrictions of the Company of an
unusual or exceptional nature and not in the ordinary
and usual course of the Business;
9.1.8 which has more than three months left to run and is not
capable of being terminated by three months' notice or less
without payment of compensation or damages by the Company;
9.1.9 which is an agreement or arrangement for the supply of
consultancy or similar services to the Company;
9.1.10 in which a director of the Company or any of the Vendors or
any person connected with any of them is interested;
9.1.11 which is any other agreement or arrangement having or likely
to have a material adverse effect on the financial or
trading position or prospects of the Company; or
9.1.12 which is a bid, tender, proposal or offer which, if
accepted, would result in the Company becoming a party to
any agreement or arrangement of a kind described in
Warranties 9.1.1 to 9.1.11 above.
9.2 DEFAULTS
9.2.1 The Company is not in default under any agreement to which it is a
party and there are no circumstances likely to give rise to any such
default.
9.2.2 No party with whom the Company has entered into any agreement or
arrangement is in default under such agreement or arrangement and
there are no circumstances likely to give rise to any such default.
9.3 TRADING RELATIONSHIPS
During the 12 months preceding the Completion Date no customer of the
Company who contributed five (5) per cent. or more of annual sales of
the Company or supplier of the Company who supplied five (5) per cent.
or more of the aggregate value of all purchases by the Company has
ceased to deal with the Company or has indicated an intention to cease
to deal with the Company, either in whole or in part, and, to the best
of the knowledge,
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information and belief of the Vendors, no such person is likely to
cease to deal with the Company or deal with the Company on a reduced
level (whether as a result of the acquisition of the Shares by the
Purchaser or other performance of the terms of this Deed or for any
other reason).
9.4 PRINCIPAL CUSTOMERS AND SUPPLIERS
9.4.1 Other than as listed in the Disclosure Letter as appropriate, no
customer or supplier (including any person connected in any way with
any such customer or supplier) accounts either for more than ten (10)
per cent. of the aggregate value of all sales or for more than ten
(10) per cent. of the aggregate value of all purchases of the Company.
10. LITIGATION AND INVESTIGATIONS
10.1 LITIGATION
10.1.1 Except as plaintiff in the collection of debts arising in the
ordinary course of business (none of which exceeds (pound)5,000 and
which do not exceed (pound)10,000 in aggregate), the Company is not,
and no person for whose acts or defaults the Company is capable of
being held vicariously liable is, a plaintiff or defendant in or
otherwise a party to any litigation, arbitration or administrative
proceedings which are in progress or threatened or pending by or
against or concerning the Company or any of its assets.
10.1.2 The Company is not subject to any order or judgment given by any
court or governmental agency and is not a party to any undertaking or
assurance given to any court or governmental agency which is still in
force.
10.1.3 So far as the Warrantors are aware there are no circumstances which
are likely to give rise to any such proceeding, investigation or
inquiry as is referred to in Warranty 10.1.1 or 10.1.2.
10.2 DEFECTIVE PRODUCTS
The Company has not manufactured, sold or supplied any product or
service which is or was or will become in any material respect faulty,
defective or dangerous (unless inherently dangerous) (fair wear and
tear excepted) or which does not comply in any material respect
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with any warranties or representations expressly or impliedly made by
the Company or with all applicable laws, regulations, standards and
requirements.
11. DIRECTORS AND EMPLOYEES
11.1 The Disclosure Letter contains full details of the terms of employment
(including the name, sex, age, position held, hours of work, date of
commencement of period of continuous service, notice period, number of
days' statutory sick pay received during current calendar year,
current salary and other material benefits of each such person) of all
employees of the Company.
11.2 No assurances or undertakings (whether legally binding or not) have
been given to the employees of the Company as to the continuance or
introduction or increase or improvement of any retirement, death,
sickness or disability scheme.
11.3 No person is employed by the Company on terms which in any particular
circumstances would entitle him to a bonus or incentive payment or
commission (based on profits or turnover) or participation in a share
option or share incentive scheme.
11.4 Since the Last Accounts Date no change has been made in the basis of
emoluments or other terms of employment of any of the officers or
employees of the Company.
11.5 There is no outstanding commitment (whether legally binding or not) to
increase the remuneration of any officer or employee of the Company.
11.6 Neither the Company nor any of its employees is engaged in any
industrial or trade dispute and so far as the Warrantors are aware no
act, event or omission has occurred which is likely to give rise to
any such dispute.
11.7 The Company has complied with all provisions of the legislation
relating to statutory sick pay.
11.8 There is not outstanding any contract of service or contract for
services between the Company and any of its directors, officers or
employees which is not terminable by the Company without compensation
(other than compensation payable by statute) on one month's notice at
any time.
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11.9 There is no outstanding claim against the Company by any present or
former employee of the Company nor any dispute between the Company and
a material number or class of its employees and no payments are due by
the Company under the provisions of the Employment Rights Act 1996.
12. INSOLVENCY
12.1 No order has been made, petition presented or meeting convened for
the purpose of considering a resolution for the winding up of the
Company. No petition has been presented for an administration order to
be made in relation to the Company, and no receiver (including any
administrative receiver) has been appointed in respect of the whole or
any part of any of the Properties, assets and/or undertaking of the
Company.
12.2 No composition in satisfaction of the debts of the Company, or
scheme of arrangement of its affairs, or compromise or arrangement
between it and its creditors and/or members or any class of its
creditors and/or members, has been proposed, sanctioned or approved.
12.3 No distress, distraint, charging order, garnishee order, execution or
other process has been levied or applied for in respect of the whole
or any part of any of the Properties, assets and/or undertaking of the
Company.
12.4 The Company is not and has not been party to any transaction with any
third party or parties which, in the event of any such third party
going into liquidation or receivership or an administration order or a
bankruptcy order being made in relation to it or him, is likely to
constitute (in whole or in part) a transaction at an undervalue, a
preference, an invalid floating charge or an extortionate credit
transaction or part of a general assignment of debts, or (in Scotland)
an unfair preference or a gratuitous alienation, under sections 238 to
245 and/or sections 339 to 344 of the Insolvency Act.
12.5 All charges in favour of the Company required to be registered in
accordance with the provisions of sections 395 and 398 of the
Companies Act have been so registered or comply with all necessary
formalities as to registration or otherwise in any foreign
jurisdiction.
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THE WARRANTIES
PART 2
PROPERTY WARRANTIES
1. The Property comprises all the land and buildings owned, leased or occupied
by the Company. The Company does not use or occupy or have an interest in
any other land or buildings.
2. The Company has undisputed exclusive and actual possession of the whole of
the Property and, during the period of the Company's ownership or tenancy
of the Property there have been no disputes with adjoining proprietors or
with third parties concerning any items common to any of the Property and
to any contiguous property, access to or egress from the Property or the
title to or right to exclusive and actual possession of the Property.
3. There are no circumstances which would entitle or require any superior
landlord or any other person to exercise any right of irritancy or
forfeiture or which restrict the right of the Company to continuing
exclusive and actual possession or occupation of the Property, and without
prejudice to the generality of the foregoing, there are no third party
occupancy rights, leases or sub-leases affecting the Property.
4. The information provided by the Warrantors related to the Lease is true,
complete and accurate in all respects.
5. All deeds and documents necessary to prove the title of the Company to the
Property are in the possession of the Company or are held to the order of
the Company.
6. The Company has duly complied with all material feuing or title conditions
affecting or relating to the Property.
7. The Company has in respect of the Property complied in all respects with
all statutory requirements, planning consents, bye-laws, orders and
regulations affecting it and no notice of any breach or non-compliance by
the Company in relation to any of the foregoing matters has been received.
8. The Company has not offered or agreed to dispose of any of the Property or
any part of any of them or any interest therein and the Company has not
offered or agreed to grant any option, sub-lease, servitude or interest or
any other Encumbrance over any of the Properties
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or any part thereof or offered or agreed to acquire any other land or
buildings or any interest therein.
9. There are no outstanding liabilities in respect of the maintenance or
repair of any of the Property or of any property common to the Property and
any contiguous property nor are there are any repairs or maintenance works
proposed.
10. No buildings or other construction erected on any of the Property contains
in its fabric any Hazardous Substance or any materials or substances whose
use is not in accordance with current good building practice or with
current building standards.
11. Copies of all building contracts and of all warranties and guarantees and
of all consultants' contracts and terms of engagement relating to any
building or engineering work carried out in respect of any of the Property
in the last ten years are attached to the Disclosure Letter and there are
no outstanding defects liability periods thereunder or any outstanding or
contemplated actions, proceedings, costs, claims, damages or losses arising
thereunder or in connection therewith.
12. The current use of the Property has been duly authorised or established
under the Town & Country Planning (Scotland) Act 1997 and there are no
conditions or restrictions attached to the said use.
13. In the event that any reservation of minerals affects the Property such
reservation does not include the right to open or enter onto the surface of
the Property and adequate compensation is payable to the Company for any
damage occasioned to the Property in question as a consequence of any
operations in connection with such reserved minerals.
14. There are no outstanding actions, disputes or claims affecting the
Property.
15. There are no restrictions in the title deeds to the Property or otherwise
which would prevent the Property from being used for their existing use and
the business of the Company.
16. The Property has the benefit of all rights and services (including rights
of access from the public roadway) necessary for their full use and
enjoyment.
17. The Company has disclosed all information material to the continued
occupation and use of the Property by the Company.
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18. There are no securities, burdens, servitudes, wayleaves, overriding
interests, rights of pre-emption or redemption, options or other third
party rights or any other Encumbrances adversely affecting the Property
other than the rights reserved to the landlords under the Leases (including
Landlords' hypothec) and matters within the Warrantors knowledge.
19. All necessary consents, permissions, licences, warrants and others have
been obtained and complied with for all works carried out on the Property
and for their existing use.
20. Any alterations, improvements or additions carried out and completed to the
Property have been carried out in accordance with valid planning
permissions, building warrants, certificates of completion and all other
requisite consents and copies of all such items are in the possession of
the Company.
21. There are no orders or notices by the local authority or otherwise
affecting the Property nor to the best of the knowledge, information and
belief of the Vendors are there any present or future proposals whether in
respect of the Property or other nearby subjects which would either
adversely affect the use, value, amenity or character of the Property or
result in any charge or other liability.
22. The carriageway, footpaths, kerbs, water channels and sewers ex adverso and
serving the Property have been taken over for maintenance by the relevant
public authority and there are no road widening or other road proposals
affecting the Property or any charges due in respect of them.
23. The Property complies in all respects with all relevant statutes,
subsidiary legislation and the like and in particular but without prejudice
to the generality of the foregoing meet the requirements of the Department
of Environmental Health and comply with the Offices, Shops and Railway
Premises Act 1963 and the Health and Safety at Work etc. Act 1974.
24. The Property is served by electricity, gas and water from or to the mains
supply and are directly connected to the mains sewers.
25. Either there is in existence for the Property a valid and unconditional
fire certificate issued in the Fire Precautions Act 1971 and the Property
complies with the conditions attaching to the same or alternatively, if a
fire certificate is not required for the Property, nevertheless comply with
the requirements of the Fire Precautions Act 1971 in all respects.
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26. The title to the Property contains no unduly onerous or unusual
burdens, restrictions or conditions.
27. The Property is not listed as lying within a conservation area nor as being
of architectural or historic interest nor are they the subject of a Tree
Preservation Order, Section 75 Agreement or like restriction.
28. The Property is not subject to any feuduties or other monetary ground
burdens where the cumulo or allocated proportion exceeds (pound)50 per
annum in total other than rent, service charge or other monies payable in
accordance with the Leases.
29. The Company has a valid marketable title to the Leases.
30. In relation to the Leases-
30.1.1 the rents and all other outgoings payable have been paid in
accordance with the terms of the Leases;
30.1.2 they comprise the whole documentation affecting or relating to
the tenant's interest in and to the Property and have not been
the subject of any amendment or alteration or variation either
formal or informal;
30.1.3 The Company as tenant has complied with its obligations under the
Leases and there are no outstanding claims in respect of the
Leases and in particular no notice has been served by the
landlord under the irritancy provision of any of the Leases;
30.1.4 there are no sub-leases or subsidiary rights of occupation;
30.1.5 no alterations, additions or improvements have been carried out
by the Company as tenant without the landlords' consent where
necessary;
30.1.6 the Company is not aware of any proposals by any landlord
for refurbishment or redevelopment which would give rise to a
substantial increase in the service charge or contribution to
common costs payable under the Leases; and
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30.1.7 there are no guarantees, rent deposits or similar arrangements
entered into with any landlord by way of security for the
implementation of the tenant's obligations.
31. The Company has not at any time assigned or otherwise disposed of any
interest under a lease or any land or buildings in such a way that it
retains any residual liability (contingent or otherwise) in respect
thereof.
32. There is no rent review pending or dispute outstanding as to the relevant
level of rent payable in respect of the Leases.
33.1 Neither the Company nor any of its officers, agents or employees have
committed, whether by act or omission, any breach of Environmental Laws,
and they have acted at all times in conformity with all relevant
Environmental Laws.
33.2 The Company has not received any notice, order or other communications from
any relevant authority which alleges a failure to comply with any
Environmental Laws or failure to comply with which would constitute breach
of any Environmental Laws or compliance with which could be secured by
further proceedings. To the best of the knowledge, information and belief
of the Warrantors there are no circumstances which might give rise to such
notice, order or other communication being received or of any intention on
the part of such authority to give such notice.
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THE WARRANTIES
PART 3
PENSION WARRANTIES
1. Other than The Interface Graphics Limited Retirement and Death Benefit
Scheme ("the Scheme"), there are no agreements or arrangements or
obligations or commitments (whether legally binding or otherwise) under
which the Company is required to make payment of a contribution towards or
other provision of relevant benefits (as defined in section 612 of the
Taxes Act) (including on an ex gratia basis) for the benefit of an employee
or an employee's dependants and no undertaking or assurance (whether
legally binding, written or oral) has been given by the Company to any
person as to the continuance or introduction of any scheme or arrangement,
or increase or improvement of any relevant benefits (including but not
restricted to those provided under the Scheme) other than pursuant to the
Scheme..
2. In respect of the Scheme all particulars have been disclosed to the
Purchaser including complete and accurate copies of all formal governing
documents, all explanatory booklets or announcements issued to members, any
amendments thereto.
3. In respect of the Scheme:-
3.1 the Company is not required to pay contributions or expenses;
3.2 only money purchase benefits (as defined in section 181(1) of the
Pension Schemes Act 1993) are provided;
3.3 exempt approved status for the purposes of Chapter I of Part XIV of
the Taxes Act has been obtained and there is no reason why such status
is likely to be withdrawn or cease to apply;
3.4 there is no contracting-out certificate in force to cover employments
to which the Scheme relates;
3.5 it has at all times been administered in accordance with the trusts,
powers and provisions of its governing documentation and has been
administered in accordance with all applicable UK legislation and
regulations (including but not restricted to the Pensions Act 1995);
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3.6 no reports have been made to nor has a fine or penalty been levied by
the Occupational Pensions Regulatory Authority in relation to the
Scheme nor are there any circumstances which would lead to such a fine
or penalty being levied; and
3.7 no claim has been made or threatened against the trustees or
administrator of the Scheme (including any complaint under any
internal dispute resolution procedure or to the Pensions Ombudsman and
reports to the Occupational Pensions Regulatory Authority) in respect
of any act, event, omission or other matter arising out of or in
connection with the Scheme (other than routine claims for benefits)
and there are no circumstances which may give rise to any such claim.
4. Benefits (except refunds of contributions) payable on the death of any
employee are at the date of this Agreement, insured with one or more
reputable insurance companies and all insurance premiums which have fallen
due for payment have been paid.
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THE WARRANTIES
PART 4
TAX WARRANTIES
1. ADMINISTRATION
1.1 The Company has at all times:
1.1.1 punctually paid all Tax for which it is or has been liable to
pay or account for prior to the date of this Deed and is not
liable to pay any interest or penalty in connection with any
claim for Taxation;
1.1.2 made all payments under deduction of Tax which were required by
law to have been so made and the Company has (if so required)
accounted to the appropriate authority for the amounts deducted;
and
1.1.3 properly and punctually made or provided to the appropriate
authority all returns, documents and information which the
Company has been required by law to make or provide prior to the
date of this Deed for the purposes of Taxation.
1.2 Any information that the Company has at any time supplied to the Inland
Revenue, Customs and Excise or any other Taxation authority has been
complete and true.
1.3 All returns which the Company has made for the purposes of Taxation and
which relate to a period ending on or before a date referred to in relation
to this warranty in the Disclosure Letter have been agreed by the
appropriate authority.
1.4 There is no disagreement or dispute between the Company and the Inland
Revenue or any other fiscal authority with regard to any such returns or
otherwise in connection with Taxation and, so far as the Vendors are aware,
no such disagreement or dispute is likely to occur.
1.5 The Company has not been the subject of an investigation by any Tax
authority and none of the Vendors is aware of any circumstance which will
or is likely to give rise to any such investigation.
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1.6 The Company has not taken any action which has had, or might have, the
result of prejudicing or disturbing any special arrangement details of
which are set out in the Disclosure Letter.
1.7 All particulars furnished to the Inland Revenue or any other Taxation
authority in connection with an application for a consent or clearance on
behalf of or affecting the Company made full and accurate disclosure of all
facts and circumstances which were material to be known by the authority in
question.
1.8 Any transaction for which such a consent or clearance was obtained by or on
behalf of the Company from any Taxation authority has been carried into
effect (if at all) in accordance with the terms of the consent or clearance
and the application therefor.
1.9 The Company has sufficient records to calculate any Tax liability or relief
which would arise on a disposal or realisation of any of its assets on the
date hereof.
2. VALUE ADDED TAX
2.1 The Company:
2.1.1 is registered for the purposes of VAT;
2.1.2 has complied fully with the legislation relating to VAT;
2.1.3 has maintained full and complete records and has obtained and/or
retained such invoices and other documents as are required by
such legislation; and
2.1.4 has not been required by Customs and Excise to give security for
the purposes of such legislation.
2.2 The Company has never been treated for the purposes of section 43 of VATA
1994 (groups of companies) as a member of a group of companies.
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3. PAYE AND NATIONAL INSURANCE
The Company has properly operated the Pay As You Earn System (including its
application to National Insurance Contributions), has maintained all proper
records as required in respect thereof and has complied with all its
reporting obligations to the Inland Revenue in connection with benefits
provided for employees of the Company.
4. STAMP AND CAPITAL DUTY
All documents in the possession or under the control of the Company which
are or may at any time be necessary to establish the title of the Company
to any asset or the enforceability by the Company of any right and which
are subject to stamp duty have been properly stamped; and no such documents
which are outside the United Kingdom would attract stamp duty if brought
into the United Kingdom.
5. CASE I OF SCHEDULE D
5.1 All payments of an income nature which the Company has made since the Last
Accounts Date and all such payments which the Company has bound itself to
make in the future are or will be allowable as a deduction or a charge on
income in computing the Company's profits for corporation tax purposes for
the accounting period in which the payment has been or will be made.
5.2 There has been no change in the ownership of the Company nor any major
change in the nature or conduct of any trade carried on by the Company for
the purposes of sections 245 (calculation etc. of ACT on change of
ownership of company) or 768 (change in ownership of company: disallowance
of trading losses) or 768A (change in ownership: disallowance of carry back
of trading losses) of the Taxes Act since its incorporation, nor has the
scale of the activities in any trade carried on by the Company become small
or negligible during that period.
5.3 Any unutilised and outstanding trading losses, capital losses, excess
charges on income and management expenses, unrelieved advance corporation
tax and surplus franked investment income are available to be carried
forward and utilised by the Company in accounting periods beginning on or
after the Last Accounts Date.
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6. CAPITAL GAINS
6.1 The values at which assets are included in the balance sheet in the
Accounts correspond to the base cost of such assets (disregarding any
indexation allowance which may be available pursuant to Chapter IV of Part
II of TCGA 1992) for the purposes of the provision of the Tax legislation
relating to corporation tax on chargeable gains.
6.2 If each of the capital assets of the Company were disposed of for a
consideration equal to the book value of the asset in or adopted for the
purpose of the Accounts, no liability to corporation tax on chargeable
gains and no balancing charge under the Capital Allowances Act 1990 (other
than a liability or charge which has been taken into account in computing
the provision for deferred taxation in the Accounts) would arise.
6.3 In determining any liability to corporation tax on chargeable gains for the
purposes of Warranty 6.2 any relief or allowance available to the Company,
other than deductions allowed by section 38 of TCGA 1992 (acquisition and
disposal costs etc.) or any indexation allowance provided under Chapter IV
of Part II of TCGA 1992 shall be disregarded.
6.4 The Company does not own any capital assets on the disposal of which any
allowable loss is liable to be reduced or any chargeable gain increased
under sections 176 (depreciatory transactions within a group) or 177
(dividend stripping) or section 30 (tax-free benefits) of TCGA 1992.
6.5 The Company does not own any shares on a disposal of which the allowable
expenditure is liable to be reduced under section 125 of TCGA 1992 (shares
in a close company transferring assets at an undervalue).
6.6 No capital asset owned or agreed to be acquired by the Company (other than
an asset the expenditure on which has qualified in full for capital
allowances) is a wasting asset for the purposes of section 44 of TCGA 1992
(meaning of "wasting asset").
6.7 No chargeable gain will accrue to the Company on the disposal or
satisfaction of any debt owed to the Company other than a debt on a
security.
6.8 The Company has not acquired benefits under any policy of life assurance
other than as the original beneficial owner.
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6.9 The Company has not transferred the whole or any part of any trade carried
on by it outside the United Kingdom through a branch or agency to a company
not resident in the United Kingdom in circumstances in which a charge to
Tax which would otherwise have arisen has been deferred under section 140
of TCGA 1992 (postponement of charge on transfer of assets to non-resident
company).
6.10 No unpaid corporation tax is or could become recoverable from the Company
under section 191 of TCGA 1992 (non-payment of tax by non-resident
companies) in respect of any chargeable gain accruing on or before the date
of Completion.
7. DISTRIBUTIONS
7.1 No securities of the Company in issue at the date hereof, or which the
Company has bound itself to issue, are such that any interest or other
payment in respect thereof is liable to be treated as a distribution under
section 209(2)(d) or section 209(2)(e) of the Taxes Act.
7.2 The Company has not repaid, or agreed to repay, any share capital other
than fully paid preference shares within the meaning of section 210 of the
Taxes Act (bonus issue following repayment of share capital).
7.3 The Company has not resolved or otherwise bound itself to make any future
distributions within the meaning of section 209 of the Taxes Act (meaning
of distribution).
8. CAPITAL ALLOWANCES
All capital allowances to be made to the Company in respect of capital
expenditure incurred prior to the date hereof, or to be incurred under any
subsisting commitment, will be made in taxing its trade.
9. CLOSE COMPANIES
The Company is not and never has been a close company as defined in Section
414 of the Taxes Act (close companies).
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10. MISCELLANEOUS
The Company is not the tenant under any lease which was granted at an
undervalue such that a charge might arise under section 35 of the Taxes Act
(Schedule D charge on assignment of lease granted at an undervalue) on an
assignment.
11. ANTI-AVOIDANCE
11.1 The Company is, and always has been, UK. resident for tax purposes and has
not been a party to or otherwise involved in any transaction to which
section 765 of the Taxes Act (migration etc. of companies) applied, other
than one in respect of which the prior consent of the Treasury was obtained
or to which section 765A of the Taxes Act (movements of capital between
residents of member States) applied without having duly provided the
required information to the Board of the Inland Revenue.
11.2 The Company has not been party to any transaction in respect of which it
is or could become liable to make any payments to which section 779 of the
Taxes Act (sale and lease-back: limitation on tax reliefs) could apply.
11.3 The Company has not been party to any transaction to which section 786 of
the Taxes Act (transactions associated with loans or credit) could apply.
11.4 The Company is not and never has been a dual resident company for the
purposes of section 404(4) of the Taxes Act.
12. INFORMATION
Full details of the following are contained in the records of the Company
to which the Purchaser has been granted full access:
12.1 all appeals, applications, claims, disclaimers and elections
made by the Company in relation to Taxation within the last six
(6) years;
12.2 all matters in respect of which the Company has at Completion, or
may have (whether alone, or with any other person or persons), an
outstanding entitlement
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<PAGE>
to make any appeal, application, claim, disclaimer and/or
election in relation to Taxation;
12.3 any notice, direction, consent or clearance received by the
Company in relation to Taxation within the last six (6) years;
12.4 any special arrangements made by the Company with the Inland
Revenue, Customs & Excise or any other Taxation authority within
the last six (6) years;
12.5 any circumstances which the Warrantors are aware might entitle
the Company to make a claim for bad debt relief under section 22
of Value Added Tax Act 1983 (refund of tax in cases of bad debts)
or section 36 of VATA 1994 (bad debts);
12.6 any election to waive exemption from VAT in relation to any
property which has been made by the Company at any time, or to
which any property occupied or leased by the Company is subject;
12.7 all transactions carried out within the last five (5) years in
respect of which the Company has obtained relief from stamp duty
under section 42 of the Finance Act 1930 (relief from transfer
stamp duty in case of transfer of property as between associated
companies);
12.8 all transactions in respect of which any document has been
submitted by the Company to the Inland Revenue for adjudication
for stamp duty purposes and in respect of which the adjudication
process has not yet been completed;
12.9 all trading losses, capital losses, excess charges on income and
management expenses, unrelieved advance corporation tax and
surplus franked investment income;
12.10 all debts on a security which are owed to the Company;
12.11 full particulars of all transactions by which any capital assets
owned by the Company were acquired:
12.11.1 from a company which at the time of the acquisition was
a member of the same group of companies for the
purposes of section 170 of TCGA 1992 (groups of
companies: interpretation);
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<PAGE>
12.11.2 otherwise than by way of a bargain at arm's length;
12.11.3 from a person who was connected with the Company within
the meaning of section 286 of TCGA 1992 (connected
persons: interpretation); or
12.11.4 on a no gain/no loss basis by virtue of section 139
of TCGA 1992 (reconstruction or amalgamation involving
transfer of business) or sections 126 to 138 of that
Act,
12.12 all surrenders or claims made by the Company for the
purposes of group relief under sections 402 to 413 of
the Taxes Act (group relief);
12.13 all surrenders of advance corporation tax by or to the
Company pursuant to section 240 of the Taxes Act
(set-off of company's surplus ACT against subsidiary's
liability to corporation tax); and
12.14 all arrangements and agreements to which the Company is
a party relating:
12.14.1 to the surrender of advance corporation tax
under section 240 of the Taxes Act (set-off
of company's surplus ACT against subsidiary's
liability to corporation tax); or
12.4.2 to group relief as defined by section 402 of
the Taxes Act (surrender of relief between
members of groups and consortia).
13. CLOSE COMPANIES
13.1 The Company is and has always been a close company as defined in
section 414 of the Taxes Act (close companies).
13.2 The Company has not made or agreed to make any such loan or
advance or released or written off any such debt as it within
sections 419 to 422 of the Taxes Act and no such loan, advance or
debt is currently outstanding.
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SCHEDULE 5
THE PROPERTY
PART 1
PROPERTY DETAILS
1. First/Top floor comprising Suites 1, 2, 3 and 4 of Sandport House, 17
Coburg Street, Edinburgh EH6 6ET (Sandport House being hereinafter defined
as "the Building"
2. Part of Ground floor of the Building comprising Suite 5.
3. Part of the Ground floor of the Building comprising Suite 7.
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<PAGE>
EXECUTED as a Deed by )
JOHN HACKLAND CRAIG ) /s/ John Hackland Craig
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
JOHN OWEN WARREN ) /s/ John Owen Warren
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
BARRY EDWARD SEALEY ) /s/ Barry Edward Sealey
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
CHRISTOPHER JOHN SHAW ) /s/ Christopher John Shaw
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
ALBERT SHAW ) /s/ Albert Shaw
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
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<PAGE>
EXECUTED as a Deed by )
ANDREW EDWARD SEALEY ) /s/ P Shakeshaft
in the presence of: ) As Attorney for Andrew Sealey
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
JOHN IRELAND ) /s/ John Ireland
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
MARGARET ANN CRAIG ) /s/ Margaret Ann Craig
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
GORDON O'MALLEY ) /s/ Gordon O'Malley
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
LORRAINE BROWN ) /s/ Lorraine Brown
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
-73-
<PAGE>
EXECUTED as a Deed by )
ALISON MARGARET ANDREW ) /s/ Alison Margaret Andrew
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
ALEXANDER LYON ) /s/ Alexander Lyon
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
ALISTAIR STEPHEN FISHER ) /s/ Alistair Stephen Fisher
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
ROBIN CLARK ) /s/ Robin Clark
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
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<PAGE>
EXECUTED as a Deed by )
RODERICK CASTLE ) /s/ Roderick Castle
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
MOIRA DEMPSTER ) /s/ Moira Dempster
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
GAIL ARCHIBALD ) /s/ Gail Archibald
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
STEVEN BISSETT ) /s/ Steven Bissett
in the presence of: )
DAVID MICHAEL KIRCHIN
19 Ainslie Place
Edinburgh
EXECUTED as a Deed by )
ELEMENTS (UK) LIMITED )
acting by: )
ANTHONY MANSER Director
PAUL MARTIN Secretary
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<PAGE>
Subscribed for and on behalf of INTERFACE GRAPHICS LIMITED by Christopher John
Shaw, Director and ALISTAIR STEPHEN FISHER, Director, at Edinburgh on the 21st
day of December 1998 before this witness:
Witness: D M KIRCHIN
Full Name: DAVID MICHAEL KIRCHIN
Address: 19 Ainslie Place
Edinburgh
/s/ Christopher John Shaw
----------------------------
Director
/s/ Alistair Stephen Fisher
----------------------------
Director
ASSET PURCHASE AGREEMENT
Agreement made as of the 8th day of April, 1999 by and among Unidigital
Inc., a Delaware corporation with its principal office at 229 West 28th Street,
New York, New York 10001 ("UNIDIGITAL"), its wholly owned subsidiary, Unison
(NY), Inc., a Delaware corporation with its principal office at c/o Unidigital
Inc., 229 West 28th Street, New York, New York (the "BUYER"), Progress Graphics,
Inc., a New Jersey corporation with its principal office at 418 Summit Avenue,
Jersey City, New Jersey 07306 (the "SELLER"), and Mario DeVita, the holder of
all the issued and outstanding capital stock of the Seller (the "SHAREHOLDER").
The Seller and the Shareholder are sometimes collectively referred to herein as
the "SELLING PARTIES."
Preliminary Statement
---------------------
The Seller is engaged principally in the business of printing and graphic
arts services (the "BUSINESS"). The Buyer desires to purchase, and the Seller
desires to sell, certain of the assets and the Business of the Seller, for the
consideration set forth below and the assumption of certain of the Seller's
liabilities set forth below, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
-------------------------------
1.1 Delivery of the Assets.
----------------------
(a) Subject to and upon the terms and conditions of this Agreement,
except as specifically provided in Section 1.1(b) hereof, at the closing of the
transactions contemplated by this Agreement (the "CLOSING"), the Seller shall
sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall
purchase from the Seller, free and clear of all liens, liabilities, security
interests, leasehold interests and encumbrances of any nature whatsoever (except
as otherwise expressly provided herein), all of the properties, assets and other
claims, rights and interests of the Seller or which are used in the Business of
whatever kind, character or description, whether real, personal or mixed,
tangible or intangible, wherever situated, including without limitation:
(i) all inventories of raw materials, work in process, goods
in transit (i.e., inventories purchased by, but not delivered to, the Seller),
finished goods, office supplies, maintenance supplies, packaging materials,
spare parts and similar items (collectively, the "INVENTORY");
(ii) all accounts receivable and notes receivable (including
any security held by the Seller for the payment thereof) (collectively, the
"ACCOUNTS RECEIVABLE");
(iii) those prepaid expenses set forth in Schedule 1.1(a)(iii);
--------------------
<PAGE>
(iv) all rights under the contracts, agreements, leases,
licenses, purchase orders, customer sales agreements and other instruments set
forth on Schedule 2.9(b) and Schedule 2.13(a) attached hereto (collectively, the
--------------- ----------------
"CONTRACT RIGHTS");
(v) all customer payment records; accounts; customer lists;
production records; technical, manufacturing and procedural manuals; employment
and personnel records; and other useful business records, including electronic
media, and any confidential or other information which has been reduced to
writing, utilized in the conduct of or relating to the Business or the Assets
(as hereinafter defined), subject to the Seller's right to retain copies thereof
which the Seller reasonably requires for its ongoing operation, winding-up or
dissolution;
(vi) all rights of the Seller under express or implied
warranties from the suppliers of the Assets to the extent transferable (but
excluding such rights insofar as the same pertain to liabilities retained by the
Seller hereunder);
(vii) the motor vehicles and other rolling stock listed on
Schedule 1.1(a)(vii);
- --------------------
(viii) all of the machinery, equipment, tools, dies, tooling,
production fixtures, maintenance machinery and equipment, computers,
telecommunication systems, fittings and other office equipment, furniture,
leasehold improvements and construction in progress on the date hereof whether
or not reflected as capital assets in the accounting records of the Seller which
are owned by the Seller and used or useful in the Business including but not
limited to all of the foregoing located at the locations set forth on Schedule
--------
1.1(a)(viii) (collectively, the "FIXED ASSETS");
- ------------
(ix) all right, title and interest of the Seller in and to all
intangible property rights relating to the Business, including but not limited
to inventions, discoveries, trade secrets, processes, formulas, know-how, United
States and foreign patents, patent applications, trade names, including but not
limited to the name "Progress Graphics, Inc." or any derivation thereof and
those names listed on Schedule 2.20 attached hereto, trademarks, trademark
--------------
registrations, applications for trademark registrations, copyrights, copyright
registrations, certification marks, industrial designs, technical expertise,
research data and other similar property and the registrations and applications
for registration thereof owned by the Seller or, where not owned, used by the
Seller in the Business and all goodwill associated therewith and all licenses
and other agreements to which the Seller is a party (as licensor or licensee) or
by which the Seller is bound relating to any of the foregoing kinds of property
or rights to any "know-how" or disclosure or use of ideas (collectively, the
"INTANGIBLE PROPERTY");
(x) all transferable approvals, authorizations,
certifications, consents, variances, permissions, licenses and permits to or
from, or filings, notices or recordings to or with, federal, state, foreign, and
local governmental authorities as held or effected by the Seller in connection
with the Assets;
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<PAGE>
(xi) all of the Seller's goodwill and the exclusive right to
use the names of the Seller as all or part of a corporate name;
(xii) except as specifically provided in Section 1.1(b) hereof,
all other assets, properties, claims, rights and interests of the Seller which
relate to the Business and exist on the date hereof, of every kind and nature
and description, whether tangible or intangible, real, personal or mixed;
(xiii) all bank accounts of the Business; and
(xiv) cash or cash equivalents ("CASH").
(b) Notwithstanding the provisions of Section 1.1(a) above, the
assets to be transferred to the Buyer under this Agreement shall not include (i)
any of Seller's rights or consideration under this Agreement, or (ii) any
refunds of federal, state, foreign or local income or other tax paid by the
Seller, or (iii) any insurance policies currently held by the Seller and related
premium agreements for general liability, product liability and workers
compensation insurance for periods prior to the date hereof, or (iv) any real
estate owned by the Selling Parties or any of their respective affiliates, and
any improvements made to such real estate, or (v) those assets listed on
Schedule 1.1(b) attached hereto (collectively, the "EXCLUDED ASSETS").
- ---------------
(c) The Inventory, Accounts Receivable, Contract Rights, Fixed
Assets, Intangible Property, Cash and other properties, assets and business of
the Seller described in Section 1.1(a) above, other than the Excluded Assets,
shall be referred to collectively as the "ASSETS."
1.2 Further Assurances.
------------------
(a) At the Closing, the Seller shall execute and deliver a Bill of
Sale (the "BILL OF SALE") substantially in the form attached hereto as Exhibit A
---------
and the assignments described in Sections 7.12(b) and (c) hereof. At any time
and from time to time after the Closing, at the Buyer's request and without
further consideration, the Selling Parties (or their successors) promptly shall
execute and deliver such assignments of leases and other instruments of sale,
transfer, conveyance, assignment and confirmation, and take such other action,
as the Buyer may reasonably request to more effectively transfer, convey and
assign to the Buyer, and to confirm the Buyer's title to, all of the Assets and
the Business, to put the Buyer in actual possession and operating control
thereof, to assist Buyer in exercising all rights with respect thereto and to
carry out the purpose and intent of this Agreement.
(b) The Selling Parties and the Buyer each will use its best efforts
to obtain as promptly as possible written consents to the transfer, assignment
or sublicense to the Buyer of all agreements, commitments, purchase orders,
contracts, licenses, leases, rights and other contract documents being
transferred pursuant to Section 1.1(a) hereof where the approval or other
consent of any other person is required. If any such approval or consent cannot
be obtained, or if
-3-
<PAGE>
the parties hereafter agree in writing that it is not in their respective best
interests to obtain any such approval or other consent, the Selling Parties will
cooperate with the Buyer in any reasonable arrangement designed to provide the
Buyer with substantially the same benefits as if such approval or other consent
had been obtained and the transfer effected on or before the date hereof.
1.3 Assumption of Liabilities.
-------------------------
(a) At the Closing, the Buyer shall execute and deliver an
Instrument of Assumption of Liabilities (the "ASSUMPTION AGREEMENT")
substantially in the form attached hereto as Exhibit B, pursuant to which it
---------
shall assume and agree to (i) perform, pay and discharge, in accordance with
their respective terms, all those liabilities and obligations set forth on
Schedule 1.3(a) attached hereto which were incurred in the ordinary course of
- ----------------
business of the Business and are outstanding on the date hereof, not to exceed
the sum set forth on Schedule 1.3(a) unless otherwise agreed by the Buyer (the
---------------
obligations set forth in (i) are collectively, the "ASSUMED CURRENT
LIABILITIES"); (ii) perform in accordance with their terms those obligations
outstanding on the date hereof under the Contract Rights; and (iii) perform in
accordance with their terms those liabilities arising after the date hereof from
any agreement, contract, commitment or other contract documents which the Buyer
has requested be transferred to it pursuant to Section 1.1(a) but which has not
been so transferred due to the failure of the Seller to obtain the consent or
approval required for such transfer, provided that the Buyer has received
substantially the same benefit of such contract as if such consent or approval
had been obtained (the obligations set forth in (i), (ii) and (iii) are,
collectively, the "ASSUMED LIABILITIES").
(b) Except as otherwise provided herein, the Buyer shall not assume
any of the liabilities of the Selling Parties and shall purchase the Assets free
and clear of all liens, mortgages, security interests, encumbrances and claims
and the Selling Parties each represent, warrant and agree that the Buyer shall
not be or become liable for any claims, demands, liabilities or obligations not
expressly assumed in this Agreement of any kind whatsoever arising out of or
relating to the conduct of the Business by Seller or the Assets or Assumed
Liabilities prior to the date hereof. Without limiting the foregoing, the Buyer
shall not at the Closing assume or agree to perform, pay or discharge, and the
Selling Parties shall remain unconditionally liable for, all obligations,
liabilities and commitments, fixed or contingent, of the Selling Parties other
than the Assumed Liabilities, including but not limited to:
(i) severance, termination or other payments or benefits
(including, but not limited to, post-retirement benefits) including, but not
limited to, those owing under the Seller's severance policy, any employment
agreement to any employees (union or non-union) or any collective bargaining
agreement with any employees (including, but not limited to the Seller's
collective bargaining agreement with the Amalgamated Lithographers of America
(the "COLLECTIVE BARGAINING AGREEMENT")), sales agents or independent
contractors employed by the Seller prior to the Closing (collectively, "SELLER'S
EMPLOYEES"), liabilities arising under any federal, state, local or foreign
"plant closing law", liabilities accruing under the Seller's employee benefit
plans, vacation pay plans or programs, retirement plans, and liabilities for any
Employee Plan (as defined in
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<PAGE>
Section 2.21 except those liabilities to Seller's Employees who become employees
of the Buyer after the Closing relating solely to and arising solely out of
their term of employment with the Buyer);
(ii) worker's compensation claims arising from events prior to
the Closing;
(iii) profit sharing, stock option or other stock-based awards
made to Seller's Employees;
(iv) liabilities for any federal, state, local or foreign
income taxes (including interest, penalties and additions to such taxes) or any
deferred income taxes of the Selling Parties;
(v) liabilities for any payroll taxes (including interest,
penalties and additions to such taxes), except those liabilities to Seller's
Employees who become employees of the Buyer after the Closing relating solely to
and arising solely out of their term of employment with the Buyer;
(vi) liabilities incurred for violations of occupational
safety, wage, health, welfare, employee benefit or environmental laws or
regulations prior to the date hereof;
(vii) liabilities to the extent related to the Excluded Assets;
(viii) any tax (including but not limited to any federal, state,
local or foreign income, franchise, single business, value added, excise,
customs, intangible, sales, transfer, recording, documentary or other tax)
imposed upon, or incurred by, the Selling Parties, if any, in connection with or
related to this Agreement or the transactions contemplated hereby (including
interest, penalties and additions to such taxes);
(ix) liabilities for any commercial rent taxes to the extent
accrued but not paid prior to the date hereof;
(x) other than the Assumed Liabilities, any liabilities of
the Seller to third parties arising out of the failure of the Seller to obtain
any necessary consents to the assignment to the Buyer of contracts or leases to
which the Seller is a party (including damages asserted by third parties for
breach of such contracts or leases due to the failure to obtain such consents);
(xi) liabilities, contingent or otherwise, which are not
disclosed on Schedule 1.3(a);
---------------
(xii) liabilities for borrowed money or liabilities, other
than the Assumed Liabilities, to creditors of the Selling Parties;
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<PAGE>
(xiii) liabilities of the Seller for any state franchise taxes
or annual license or other fees relating to qualification as a foreign
corporation or authorization to do business in such states (including interest,
penalties and additions to such taxes and fees); and
(xiv) any other liabilities of any kind or nature whether now
in existence or arising hereafter not expressly assumed by the Buyer under
Section 1.3(a) hereof.
1.4 Purchase Price and Consideration for Consulting Duties and
---------------------------------------------------------------------
Restrictive Covenants.
- ---------------------
(a) The purchase price for the Assets shall be the assumption by the
Buyer of the Assumed Liabilities. The consideration for the undertaking by the
Shareholder as a consultant to the Buyer under Section 9.10 and the restrictive
covenants under Section 9.3 shall be (i) 86,059 shares ($500,000) of common
stock, par value $0.01 per share, of Unidigital ("COMMON STOCK"), and (ii)
certain additional post-closing payments in the event certain performance goals
of the Business are achieved.
(b) The Buyer shall pay to the Shareholder on or before June 30,
1999 an amount equal to all funds or credits advanced to the Seller by the
Shareholder during the month of April 1999 ("SELLING SHAREHOLDER ADVANCE" and
"ADVANCE REPAYMENT") which Selling Shareholder Advance shall be evidenced by
copies of checks or other appropriate writing in the books and records of the
Seller. The Advance Repayment shall be evidenced by a promissory note of the
Buyer, substantially in the form attached hereto as Exhibit C (the "NOTE"), to
---------
be executed and delivered within five (5) business days of submission of the
evidence of the Selling Shareholder Advance being delivered to the Buyer.
(c) In addition to the foregoing, in the event revenues of the
Business (the "REVENUES") for any of the twelve-month periods ending on the
first, second and third anniversaries of the Closing Date exceed Three Million
Dollars ($3,000,000) (the "REVENUE TARGET"), the Shareholder shall be entitled
to five percent (5%) of any amounts in excess such twelve-month period. Such
amounts, if any, shall be payable to the Shareholder no later than sixty (60)
days after the completion of each such twelve-month period and shall be payable
in cash, Common Stock or some combination thereof, at the sole discretion of the
Buyer. If such amounts are paid in Common Stock, the Buyer shall deliver to the
Seller that number of shares of Common Stock which shall be computed by dividing
(i) the amount to be paid in Common Stock under this Section 1.4(c) by (ii) the
average closing price of the Common Stock for the 52-week period immediately
preceding the first, second or third anniversary of the Closing Date, as
applicable.
(d) In the event of a dispute regarding the amount of the Revenues,
the Seller shall notify the Buyer in writing (the "DISPUTE NOTICE") within
twenty (20) calendar days after notice of the Revenues has been delivered to the
Seller setting forth the amount, nature and basis of the dispute.
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<PAGE>
Within the following thirty (30) days, the parties shall use their best
efforts to resolve such dispute. Upon their failure to do so, the dispute shall
be submitted for arbitration as follows:
(i) The arbitrator shall be a "Big Five" public accounting
firm located in the City of New York, State of New York (other than Ernst &
Young LLP), unless both parties agree on the selection of another arbitrator. In
the event the selected arbitrator declines or is unable to serve for any reason,
the parties shall select another arbitrator. Upon their failure to agree on
another arbitrator, the jurisdiction of the Supreme Court of the State of New
York shall be invoked to make such selection.
(ii) The arbitrator shall follow the Commercial Arbitration
Rules of the American Arbitration Association, except as otherwise provided
herein. The arbitrator shall substantially comply with the rules of evidence;
shall grant essential but limited discovery; shall provide for the exchange of
witness lists and exhibit copies; shall conduct a pretrial and consider
dispositive motions. Each party shall have the right to request the arbitrator
to make findings of specific factual issues.
The arbitrator shall complete its proceedings and render its decision
within forty (40) days after submission of the dispute to it, unless both
parties agree to an extension. Each party shall cooperate with the arbitrator to
comply with procedural time requirements and the failure of either to do so
shall entitle the arbitrator to extend the arbitration proceedings accordingly
and to impose sanctions on the party responsible for the delay, payable to the
other party.
In the event the arbitrator does not fulfill its responsibilities on a
timely basis, either party shall have the right to require a replacement and the
appointment of a new arbitrator.
(iii) The decision of the arbitrator shall be final and binding
upon the parties and accordingly a judgment by a court of competent jurisdiction
may be entered in accordance therewith.
1.5 The Closing. The Closing shall take place at the offices of the
-----------
Seller located at 418 Summit Avenue, Jersey City, New Jersey (or at such other
place as the parties may agree in writing) on April 8, 1999 or such other date
mutually designated by Seller and Buyer. The date on which the Closing is held
is referred to in this Agreement as the "CLOSING DATE." At the Closing, the
parties shall make the closing deliveries referred to in Sections 7.12 and 8.6.
1.6 Allocation of Purchase Price. The aggregate amount of the Purchase
-----------------------------
Price shall, for tax purposes only, be allocated among the Assets and Assumed
Liabilities substantially in accordance with the amounts set forth on Schedule
--------
1.6. The Seller and the Buyer agree that they will not take any position which
- ---
is materially inconsistent with the allocations provided for in this Agreement
in preparing income, capital or franchise tax returns.
-7-
<PAGE>
2. Representations of the Selling Parties
--------------------------------------
The representations and warranties made by the Selling Parties herein
or in any instrument or document furnished in connection herewith shall survive
the Closing until (and including) the fifth anniversary of the date hereof. The
representations and warranties in this Section 2 or in any document delivered to
the Buyer pursuant to this Agreement are deemed to be material and the Buyer is
entering into this Agreement relying on such representations and warranties. The
Selling Parties, jointly and severally, represent and warrant to the Buyer as
follows (it being understood that all references in this Section 2 to the Seller
shall be deemed to include any of Seller's subsidiaries, unless the context
otherwise requires):
2.1 Organization. The Seller is a corporation duly organized, validly
------------
existing and in good standing under the laws of the state of its incorporation,
and has all requisite power and authority (corporate and other) to own its
properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby. Schedule 2.1 sets forth the authorized and
------------
outstanding capital stock of the Seller as well as the record and beneficial
owners thereof. Except as set forth on Schedule 2.1, the Seller does not own or
------------
control or participate in, directly or indirectly, any corporation, partnership,
association or business entity. The Seller is duly qualified to do business and
in good standing in all jurisdictions in which its ownership of property or the
character of its business requires such qualification. Schedule 2.1 contains a
------------
true, correct and complete list of all of the jurisdictions in which the
ownership of the property used in the Business or the nature of the Business
requires qualification.
2.2 Authorization. The execution and delivery of this Agreement (and all
-------------
other agreements provided for herein) by the Seller, and the consummation by the
Seller of all transactions contemplated hereby, has been duly authorized by all
requisite corporate and shareholder action. This Agreement and all such other
agreements and obligations entered into and undertaken in connection with the
transactions contemplated hereby to which the Seller is a party constitutes the
valid and legally binding obligations of the Seller, enforceable against it, in
accordance with their respective terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally. The execution, delivery and performance by the
Seller of this Agreement and the agreements provided for herein, and the
consummation by the Buyer of the transactions contemplated hereby and thereby,
will not, with or without the giving of notice or the passage of time or both,
(a) violate the provisions of any law, rule or regulation applicable to the
Seller; (b) violate the provisions of the Certificate of Incorporation or Bylaws
of the Seller; (c) violate any judgment, decree, order or award of any court,
governmental body or arbitrator; or (d) conflict with or result in the breach or
termination of any term or provision of, or constitute a default under, or cause
any acceleration under, or cause the creation of any lien, charge or encumbrance
upon the properties or assets of the Seller pursuant to, any indenture,
mortgage, deed of trust or other instrument or agreement to which any of them is
a party or by which any of them or any of their properties is or may be bound,
other than with respect to obligations of Seller which will be discharged at or
prior to Closing. Schedule 2.2 attached hereto sets forth a true, correct and
------------
complete list of all consents,
-8-
<PAGE>
approvals, permissions, licenses, authorizations and other requirements
prescribed by law, rule, regulation or by contract in connection with the
consummation by the Seller of the transactions contemplated by this Agreement.
Except as indicated on Schedule 2.2, all such items have been or will be, prior
-------------
to the date hereof, obtained and satisfied.
2.3 Ownership of the Assets. Except as set forth on Schedule 2.3 attached
----------------------- ------------
hereto, there are no claims, liabilities, liens, pledges, charges, encumbrances
and/or equities of any kind affecting the Assets (collectively, the
"ENCUMBRANCES"). Except as set forth on Schedule 2.3, the Seller is the true and
------------
lawful owner of the Assets, and has the right to sell and transfer to the Buyer
good and marketable title to all Assets, which are free and clear of all
Encumbrances. Except as set forth on Schedule 2.3, the delivery to the Buyer of
------------
the instruments of transfer of ownership contemplated by this Agreement will
vest good and marketable title to all Assets in the Buyer, free and clear of all
liens, mortgages, pledges, security interests, restrictions, prior assignments,
encumbrances and claims of any kind or nature whatsoever. The Assets to be
conveyed to the Buyer hereunder constitute all properties, assets, rights and
claims which are necessary to or used in the conduct of the Business as
currently conducted by the Seller.
2.4 Financial Statements.
--------------------
(a) The Seller has previously delivered to the Buyer its unaudited
balance sheets as of December 31, 1996, 1997 and 1998, and the related
statements of operations, shareholders' equity and changes in financial position
of the Seller for the fiscal years then ended, and its unaudited balance sheet
as of March 31, 1999, and the related statements of operations, shareholders'
equity and changes in the financial position of the Seller for the three months
then ended (collectively, "FINANCIAL STATEMENTS"). The Financial Statements have
been prepared consistently with the past accounting practices of the Seller.
(b) The Financial Statements are accurate and complete in all
material respects, and fairly present, as of their respective dates, the
financial condition, retained earnings (deficit), assets and liabilities of the
Seller and the results of operations of the Seller's business for the periods
indicated.
2.5 Litigation. Except as set forth on Schedule 2.5, the Seller is not a
---------- ------------
party to, or to the Selling Parties' best knowledge threatened with, and none of
the Assets are subject to, any litigation, suit, action, investigation (to the
best of the Selling Parties' knowledge), grievance, arbitration, proceeding, or
controversy or claim before any court, administrative agency or other
governmental authority relating to or affecting the Assets or the business,
properties, condition (financial or otherwise) or prospects of the Business. The
Seller is not in violation of or in default with respect to any judgment, order,
award, writ, injunction, decree or rule of any court, governmental department,
commission, agency, instrumentality, arbitrator, administrative agency or
governmental authority or any regulation of any administrative agency or
governmental authority, where such violation or default would have a material
adverse effect upon the Assets, the business, properties, condition (financial
or otherwise) or prospects of the Business or the consummation of the
transactions contemplated hereby (a "MATERIAL ADVERSE EFFECT"). The Seller
-9-
<PAGE>
has not received notice of any product liability claim, warranty claim or other
claim whatsoever which, if decided adversely, would have a Material Adverse
Effect.
2.6 Insurance. Schedule 2.6 sets forth a true, correct and complete list
--------- ------------
of all fire, theft, casualty, general liability, workers compensation, business
interruption, environmental impairment, product liability, automobile and other
insurance policies insuring the Assets or business of the Business and of all
life insurance policies maintained for any employees of the Business, specifying
the type of coverage, the amount of coverage, the premium, the insurer and the
expiration date of each such policy (collectively, the "INSURANCE POLICIES") and
all claims made under such Insurance Policies since January 1, 1996. True,
correct and complete copies of all of the Insurance Policies have been
previously delivered by the Seller to the Buyer. The Insurance Policies are in
full force and effect and, to the best knowledge of the Seller, are in amounts
and of a nature which are adequate and customary for the business of the
Business. Except as set forth on Schedule 2.6, 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 where such default would result in a Material
Adverse Effect. Except as set forth on Schedule 2.6, the Seller 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 the Selling Parties, no such cancellation, amendment or increase of
deductibles, retainers or premiums is threatened.
2.7 Inventory. Schedule 2.7 sets forth a true, correct and complete list
--------- ------------
of the Inventory as of the date hereof, including a description and valuation
thereof. The Seller shall use commercially reasonable efforts to insure that at
the Closing, the Inventory will consist of items of a quality and quantity which
are usable or saleable ("Usable Inventory"), without discount and at values at
least equal to the values indicated on the latest balance sheet included in the
Financial Statements, in the ordinary course of business, except as otherwise
reserved or provided for in accordance with the procedures set forth on Schedule
--------
2.7, conducted by and within the normal operating cycle of the Business. In no
- ---
event shall the Buyer be required to pay for Inventory which is not Usable
Inventory.
2.8 Fixed Assets. Schedule 2.8 sets forth a true, correct and complete
------------ ------------
list of all Fixed Assets as of the date hereof, including a description and the
cost and accumulated depreciation on an aggregate basis with respect to all
Fixed Assets. Except as set forth in Schedule 2.8, as of the date hereof, the
-------------
Fixed Assets are in condition and repair sufficiently operational (apart from
ordinary wear and tear) to enable the Buyer to conduct the business in
essentially the same manner in which it has heretofore been conducted by the
Seller.
2.9 Leases. As of the date hereof, the Seller is not a party to any
------
ground lease which the Seller uses in the operations of the Business.
2.10 Change in Financial Condition and Assets. Except as set forth on
-------------------------------------------
Schedule 2.10, since December 31, 1998, there has been no change which would
- --------------
result in a Material Adverse
-10-
<PAGE>
Effect. Except as set forth on Schedule 2.10, the Selling Parties have no
--------------
knowledge of any existing or threatened occurrence, event or development related
to the Assets or the business, properties, condition (financial or otherwise) or
prospects of the Business which could have a Material Adverse Effect.
2.11 Accounts Receivable. Schedule 2.11 sets forth a true, correct and
------------------- --------------
complete list of all Accounts Receivable, including an aging thereof as of the
date hereof. All Accounts Receivable arose out of the sales of inventory or
services in the ordinary course of business and are collectible in the values
set forth on Schedule 2.11 net of the respective reserves, if any, shown on the
-------------
latest balance sheet included in the Financial Statements (which reserves, to
the best knowledge of the Seller, are adequate and calculated consistent with
past practice). Except as set forth on Schedule 2.11, there is no contest,
--------------
claim, or right of set-off, other than returns in the ordinary course of
business, under any contract or agreement with any account debtor of an Account
Receivable relating to the amount or validity of such Account Receivable.
2.12 Books and Records. The sales records and expense accounts of the
-------------------
Seller with respect to the Business, all of which have been made available to
the Buyer, are in all material respects complete and correct and have been
maintained in accordance with good business practice.
2.13 Contracts and Commitments.
-------------------------
(a) True, correct and complete copies of all material contracts and
agreements, whether written or oral, which relate to the Business have been
previously delivered by the Seller to the Buyer.
(b) Schedule 2.13(b) attached hereto sets forth a true, correct and
----------------
complete list of the contracts and agreements, whether written or oral, which
are to be assigned from the Seller to the Buyer at the Closing (collectively,
the "CONTRACTS").
(c) Except as set forth on Schedule 2.13(c), the continuation,
-----------------
validity and effectiveness of each Contract would not be affected by the
transfer thereof to the Buyer under this Agreement and all such Contracts are
assignable to the Buyer without a consent and:
(i) each Contract is a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, and the
Selling Parties have no knowledge that any Contract is not a valid and binding
agreement of the other parties thereto:
(ii) to the best knowledge of the Selling Parties, the Seller
has fulfilled all material obligations required pursuant to the Contracts to
have been performed by it prior to the date hereof;
(iii) to the best knowledge of the Selling Parties, the
Seller is not in material breach of or default under any Contract, and no event
has occurred which with the passage of time or giving of notice or both would
constitute such a default, result in a loss of
-11-
<PAGE>
rights or result in the creation of any lien, charge or encumbrance on the
Assets, thereunder or pursuant thereto (an "INCHOATE DEFAULT"); and
(iv) to the best knowledge of the Selling Parties, there is no
existing material breach or default by any other party to any Contract, and no
Inchoate Default.
2.14 Compliance with Laws. The Seller has all requisite licenses, permits
--------------------
and certificates, including health and safety permits, from federal, state,
local and foreign authorities necessary in all material respects to conduct the
Business and own and operate the Assets (collectively, the "PERMITS"), except
where the failure to have such licenses, permits or certificates would result in
a Material Adverse Effect. Schedule 2.14 sets forth a true, correct and complete
-------------
list of all such Permits, copies of which previously have been delivered by the
Seller to the Buyer. To the best knowledge of the Selling Parties, the Seller
has not engaged in any activity which would cause or, permit revocation or
suspension of any such Permit and no action or proceeding looking to or
contemplating the revocation or suspension of any such Permit is pending or
threatened. To the best knowledge of the Selling Parties, there are no existing
material defaults or Inchoate Defaults by the Seller under any Permit. The
Selling Parties have no knowledge of any material default or claimed or
purported or alleged material default or Inchoate Defaults on the part of any
party in the performance of any obligation to be performed or paid by any party
under any Permit. Except as set forth in Schedule 2.14, the consummation of the
-------------
transactions contemplated by this Agreement will in no way affect the
continuation, validity or effectiveness of the Permits or require the consent of
any third party under any such Permit. The Seller is not in violation of any
law, regulation or ordinance (including but not limited to laws, regulations or
ordinances relating to building, zoning, land use or similar matters) relating
to its properties, the violation of which could have a Material Adverse Effect.
The business of the Seller does not violate, in any material respect, and the
Seller is not in violation of, any federal, state, local or foreign laws,
regulations or orders, the violation or enforcement of which would have a
Material Adverse Effect. Except as set forth on Schedule 2.14, the Seller has
-------------
not received any notice or communication from any federal, state, foreign, or
local governmental or regulatory authority or otherwise of any such violation or
noncompliance and has not received any notice prior to such time of any
violation that has not been cured.
2.15 Employee Relations.
------------------
(a) The Seller is in compliance with all material federal, state,
local and foreign laws respecting employment and employment practices, terms and
conditions of employment, and wages and hours, and is not engaged in any unfair
labor practice, and there are no arrears in the payment of wages or taxes or
workers compensation assessments or penalties.
(b) Except as set forth on Schedule 2.15:
-------------
(i) none of Seller's Employees are represented by any labor
union;
-12-
<PAGE>
(ii) there is no unfair labor practice complaint against
the Seller pending before the National Labor Relations Board or any state,
foreign, or local agency affecting the Seller;
(iii) there is no pending labor strike or other material labor
trouble affecting the Seller (including but not limited to any organizational
campaign);
(iv) there is no material labor grievance pending against or
affecting the Seller;
(v) there are no pending organizing activities respecting the
Seller's Employees;
(vi) there are no pending arbitration proceedings arising out
of or under any collective bargaining agreement to which the Seller is a party,
or to the best knowledge of the Selling Parties, any basis for which a claim may
be made under any collective bargaining agreement to which the Seller is a party
affecting the Seller's Employees; and
(vii) there is no pending litigation, or other proceeding or
basis for an unasserted claim against the Seller by any employee or group of
employees or independent contractor or group of independent contractors which is
based on claims arising out of any employee's or group of employees' employment
relationship with the Seller or any independent contractor's or group of
independent contractors' independent consulting relationship with the Seller
(insofar as such relationship pertains to the Business of the Seller), including
but not limited to claims for contract, tort, discrimination, employee benefits,
commissions, wrongful termination, age discrimination, sexual harassment, sexual
discrimination and any and all common law or statutory claims.
(c) The Seller has not violated the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. Sections 2101-09 (the "WARN ACT") or any
similar state or local law.
2.16 Absence of Certain Changes or Events. Since December 31, 1998, the
-------------------------------------
Selling Parties have operated the Business in the ordinary course and, except as
set forth on Schedule 2.16, there has not been:
-------------
(a) any change in the business, financial condition or results of
operations of the Business that has had or could reasonably be expected to have
a Material Adverse Effect;
(b) any change in any of the Assets or any change in the manner of
conducting the Business that has had or could reasonably be expected to have a
Material Adverse Effect;
(c) any damage, destruction or loss (whether or not covered by
insurance) that has had or could reasonably be expected to have a Material
Adverse Effect;
-13-
<PAGE>
(d) any material change in the accounting methods or principles of
the Seller that would be required to be disclosed under generally accepted
accounting principles;
(e) any material transaction made by the Seller relating to the
Assets or Business (including the acquisition or disposition of Assets) other
than in the ordinary course of business consistent with past practice or as
otherwise permitted or contemplated by this Agreement;
(f) any lien, security interest or other Encumbrance created or
assumed by the Seller on any of the Assets other than the Assumed Liabilities;
(g) any recall notices authorized or issued for any products
relating to the Business or any safety investigations issued relating to the
Business;
(h) any notice of litigation, warranty claim or products liability
claim relating to the Business;
(i) any entering into, amendment or termination of any material
contract, agreement, lease, franchise, security, instrument, permit or license
between the Seller and any party that has had or could reasonably be expected to
have a Material Adverse Effect; or
(j) any existing agreement or arrangement made by the Seller to take
any action that would cause any representations or warranty in this Section 2.16
to be untrue or incorrect.
2.17 Customers. The Seller has heretofore provided to the Buyer a true,
---------
correct and complete list of the names and addresses of all current customers of
the Seller. Except as set forth on Schedule 2.17, none of the 15 customers which
-------------
accounted for the largest dollar volume of purchases from the Seller for the
twelve month periods ended December 31, 1997 and December 31, 1998,
respectively, has notified the Seller that it intends to discontinue its
relationship with the Seller nor, to the best of the Selling Parties' knowledge,
does there exist any actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
the Seller with any such customer nor does there exist a present condition or
state of facts or circumstances known to the Seller involving such customers
which would materially adversely affect the Business or prevent the Buyer from
conducting the Business after the consummation of the transactions contemplated
by this Agreement in essentially the same manner in which it has heretofore been
conducted by the Seller. The Seller has no consignment sales in effect as of the
date hereof and no customer has any return rights except as set forth on
Schedule 2.13(a).
- ----------------
2.18 Suppliers. Schedule 2.18 sets forth a true, correct and complete list
--------- -------------
of the names and addresses of the ten suppliers of the Seller which accounted
for the largest dollar volume of purchases by the Seller for the twelve month
periods ended December 31, 1997 and December 31, 1998, respectively. The Seller
is not a party to any requirements contract relating to the
-14-
<PAGE>
purchase of inventory, finished goods or other property used in the conduct of
the Business. None of the Seller's suppliers has notified the Seller that it
intends to discontinue its relationship with the Seller, nor raise its prices so
as to materially adversely affect the Business nor, to the best of the Selling
Parties' knowledge, does there exist any actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship of the Seller with any such supplier, nor does there exist a
present condition or state of facts or circumstances known to the Selling
Parties involving such suppliers which would materially adversely affect the
Business or prevent the Buyer from conducting the Business after the
consummation of the transactions contemplated by this Agreement in essentially
the same manner in which it has immediately heretofore been conducted by the
Seller.
2.19 Prepayments and Deposits. Except as set forth on Schedule 2.19, the
------------------------- -------------
Seller has no prepayments or deposits from customers for products to be shipped,
or services to be performed, by the Seller after the date hereof.
2.20 Trade Names and Other Intangible Property.
-----------------------------------------
(a) Schedule 2.20 attached hereto sets forth a true, correct and
-------------
complete list and a description of all Intangible Property. True, correct and
complete copies of all licenses and other agreements relating to the Intangible
Property have been previously delivered by the Seller to the Buyer. The Selling
Parties have no knowledge of any default or claimed or purported or alleged
default or state of facts which with notice or lapse of time or both would
constitute a default on the part of any party in the performance of any
obligation to be performed or paid by any party under any such license or
agreement. During the past five years the only name by which the Seller has been
known or which the Seller has used is its corporate name set forth in the
preamble of this Agreement.
(b) Except as otherwise disclosed in Schedule 2.20 attached hereto,
-------------
the Seller is the sole and exclusive owner, free and clear of all liens, claims
and restrictions, of all Intangible Property and all designs, permits, labels
and packages used on or in connection therewith. The Intangible Property owned
by the Seller is sufficient to conduct the Business, as presently conducted. The
Seller has received no notice of, and has no knowledge of any basis for, a claim
against it that any of its operations, activities, products or publications
infringes on any patent, trademark, trade name, copyright or other property
right of a third party, or that it is illegally or otherwise using the trade
secrets, formulae or any property rights of others. Except as otherwise
disclosed in Schedule 2.20, the Seller (i) has no disputes with or claims
--------------
against any third party for infringement by such third party of any trade name
or other Intangible Property of the Seller, and (ii) is not obligated or under
any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, trade name, copyright or other property right, with respect to the
use thereof or in connection with the conduct of the Business or otherwise.
Prior to the Closing, the Seller has taken all steps reasonably necessary to
protect its right, title and interest in and to the Intangible Property. Except
as set forth in Schedule 2.20, the consummation of the transactions contemplated
-------------
by this
-15-
<PAGE>
Agreement will in no way affect the continuation, validity or effectiveness of
the Intangible Property or require the consent of any third party in respect of
the Intangible Property.
2.21 Employee Benefit Plans.
----------------------
(a) ERISA. Except as set forth on Schedule 2.21, neither the
----- --------------
Seller nor any person, firm, corporation or entity which is (or within the past
five years has been) a member with the Seller of a "controlled or affiliated
group", within the meaning of Section 414(b), (c), (m), (n) or (o) of the
Internal Revenue Code of 1986, as amended (the "CODE"), has maintained,
sponsored or contributed to any "pension plan" within the meaning of Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any "welfare plan" within the meaning of Section 3(1) of ERISA, or
any other employee benefit plan, program, practice or arrangement, whether or
not subject to ERISA (a "NON-ERISA PLAN") (such pension plans, welfare plans and
non-ERISA plans of the Seller being herein referred to as the "EMPLOYEE PLANS").
Except as set forth on Schedule 2.21, the Seller has provided the Buyer with a
--------------
true, correct and complete copy of each pension plan, each welfare plan and each
non-ERISA plan listed on such Schedule, together with a copy of the most recent
summary plan description and annual report (if applicable) with respect to each
such plan. Except as set forth on Schedule 2.21, each pension plan listed on
--------------
such Schedule is a "qualified plan" within the meaning of Section 401 of the
Code. Except as set forth on Schedule 2.21, each pension plan, each welfare plan
-------------
and each non-ERISA plan listed on such Schedule has been administered in
accordance with its terms, and each pension plan and welfare plan has been
operated and administered in accordance with all applicable requirements of
ERISA and the Code. Without limiting the generality of the foregoing, no
trustee, administrator, sponsor, or other party-in-interest or disqualified
person, has engaged or participated in any "prohibited transaction", as that
term is defined in Section 4975(c)(1) of the Code, with respect to any pension
plan or welfare plan listed on Schedule 2.21. Without limiting the generality of
-------------
the foregoing, in connection with all welfare or non-ERISA plans which are
subject to continuation coverage under Section 4980B of the Code, all notices
and elections with respect to such coverage have been made in compliance with
the requirements of Section 4980B. With respect to each "defined benefit pension
plan", as defined in Section 3(35) of ERISA, identified on Schedule 2.21: (i)
--------------
the fair market value of the assets thereof as of the date hereof is as set
forth on such Schedule; (ii) the present value of all accrued benefits
thereunder, determined as if such pension plan terminated on the date hereof, is
as set forth on Schedule 2.21; (iii) if any such plan is a "multiemployer plan",
-------------
as defined in Section 3(37) of ERISA, the present value of the contingent
liability of the Seller both in the event of the termination of such plan and in
the event that the Seller withdraws therefrom is as set forth on Schedule 2.21;
-------------
(iv) no such plan has incurred an "accumulated funding deficiency", as such term
is defined in Section 302 of ERISA, and (v) no such pension plan has terminated,
nor has any "reportable event", within the meaning of Section 4043 of ERISA,
occurred with respect to such plan. All contributions for all periods ending
prior to the date hereof (including periods from the first day of the current
plan year to the date hereof) will be made prior to the date hereof by the
Seller in accordance with past practice with respect to pension plans, welfare
plans and non-ERISA plans. All insurance premiums (including premiums to the
Pension Benefit Guaranty Corporation) have been paid in full, subject only to
normal retrospective adjustments in the ordinary course of business, with regard
to
-16-
<PAGE>
applicable plans for policy years or other applicable policy periods ending on
or before the date hereof.
(b) Claims and Litigation. Except as set forth on Schedule 2.21, to
--------------------- -------------
the best of the Selling Parties' knowledge, there are no threatened or pending
claims, suits or other proceedings by present or former employees of Seller,
plan participants, beneficiaries or spouses of any of the above, the Internal
Revenue Service, the Pension Benefit Guaranty Corporation, or any other pension
or entity involving any Employee Plan, including claims against the assets of
any trust, involving any Employee Plan, or any rights or benefits thereunder,
other than ordinary and usual claims for benefits to participants or
beneficiaries, including claims pursuant to domestic relations orders and there
is no basis for any legal action, proceeding or investigation with respect to
such plans.
2.22 Leased Premises.
---------------
(a) Schedule 2.22 contains a true, correct and complete list of the
--------------
address and legal description of all leased premises (the "BUSINESS PREMISES").
(b) There is no pending or, to the best knowledge of the Selling
Parties, threatened condemnation or eminent domain proceeding with respect to
the Business Premises.
(c) Except as set forth on Schedule 2.22, there are no taxes or
--------------
betterment or special assessments other than ordinary real estate taxes pending
or payable against the Business Premises and there are no contingencies existing
under which any assessment for real estate taxes may be retroactively filed
against the Business Premises; the Selling Parties have no knowledge of any
proposed special assessment that may affect the Business Premises or any part
thereof; there are no penalties due with respect to real estate taxes and/or
impositions, and all real estate taxes and/or impositions (excepting those for
the current year that are not yet due and payable) with respect to the Business
Premises have been paid in full; there are no taxes or levies, permit fees or
connection fees which must be paid respecting existing curb cuts, sewer hookups,
water-main hookups or services of a like nature.
(d) The Business Premises comply in all material respects with the
requirements of all building, zoning, subdivision, health, safety,
environmental, pollution control, waste products, sewage control and all other
applicable statutes, laws, codes, ordinances, rules, orders, regulations and
decrees (collectively, the "GOVERNMENT REGULATIONS") of any and all government
agencies, and any non-compliance will not result in a Material Adverse Effect on
the Business Premises. To the extent set forth in Schedule 2.14, the Seller has
-------------
obtained and provided to the Buyer all consents, permits, licenses and approvals
required by such Government Regulations, and to the best knowledge of the
Seller, such consents, permits, licenses and approvals are in full force and
effect, have been properly and validly issued, and on or prior to the date
hereof will be assigned to the Buyer by the Seller to the extent the same are
assignable. Except as set forth in Schedule 2.14, there is no uncured breach of
-------------
any condition or requirement imposed by, or pursuant to, any permit or license
issued with respect to the Business Premises,
-17-
<PAGE>
which breach would have a Material Adverse Effect on the Business Premises.
There is no action pending or, to the best of the Selling Parties' knowledge,
threatened by any government agencies claiming that the Business Premises
violates such Government Regulations or threatening to shut down the Business or
the use of the Assets or to prevent the Assets from being used as presently
used.
(e) Except as set forth on Schedule 2.22, there are no actions,
--------------
suits, petitions, notices or proceedings pending, given or, to the best of the
Seller's knowledge, threatened by any persons or government agencies before any
court, government agencies or instrumentalities, administrative or otherwise,
which if given, commenced or concluded would have a Material Adverse Effect on
the value, occupancy, use or operation of the Business Premises.
(f) Except as set forth on Schedule 2.22, the Selling Parties (i)
-------------
have not received notice and (ii) have no knowledge of the existence of any
outstanding notice:
(A) from any federal, state, county, municipal or foreign
authority alleging any health, safety, pollution, environmental, zoning or other
violation of law with respect to the Leased Premises or any part thereof that
has not been entirely corrected; or
(B) from any insurance company or bonding company with respect
to any defects or inadequacies in the Business Premises or any part thereof that
would adversely affect the insurability of same or cause the imposition of
extraordinary premiums or charges therefor or any termination or threatened
termination of any policy of insurance or bond relating thereto.
2.23 Bank Accounts; Securities. Set forth in Schedule 2.23 is a list of
------------------------- -------------
all bank accounts, safe deposit boxes, money market funds, certificates of
deposit, stocks, bonds, notes and other securities in the names of or owned or
controlled by the Seller, all of which are included in the Assets.
2.24 Disclosure. No representation or warranty by the Selling Parties in
----------
this Agreement or in any Exhibit hereto, or in any list, statement, document or
information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading. The Selling
Parties have disclosed to the Buyer all material facts pertaining to the
transactions contemplated by this Agreement.
2.25 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried on by the Seller without the
intervention of any other person in such manner as to give rise to any valid
claim for a finder's fee, brokerage commission or other like payment.
2.26 Preservation of Assets. The Seller has not sold, assigned or
------------------------
transferred any of the Assets, other than in the ordinary course of business, or
declared or paid any dividend or other distribution in respect of shares of
capital stock or made any purchase, redemption or other
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<PAGE>
acquisition, directly or indirectly, of any outstanding shares of its capital
stock, since January 1, 1997.
2.27 Environmental Compliance.
------------------------
(a) The Seller has obtained all permits, licenses and other
authorizations required under Federal, state and local laws, relating to
protection of the Environment (as defined below), including laws relating to any
Release (as defined below) of or presence of pollutants, contaminants, or
hazardous or toxic materials or wastes into or in soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient air,
and/or any environmental medium (the "ENVIRONMENT") or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or waste, except where failure to obtain such permits, licenses and
other authorizations would not result in a Material Adverse Effect. Schedule
--------
2.27 hereto sets forth a complete and accurate list of all such permits,
- ----
licenses and other authorizations obtained by the Seller, copies of which have
been delivered to the Buyer. The Seller is in full compliance with all terms and
conditions of such permits, licenses and other authorizations, except where
failure to be in compliance would not result in a Material Adverse Effect. To
the best of the Selling Parties' knowledge, except as set forth on Schedule
--------
2.27, there are no proposed or pending changes in the Federal, state, county or
- ----
local laws, regulations, standards, or in the Seller's permits, licenses or
authorizations relating to pollution or protection of the Environment that would
increase the present costs of compliance with such laws or change any methods of
operation of the Business after the Closing.
(b) Except as indicated on Schedule 2.27 neither the Seller nor, to
--------------
the best of the Selling Parties' knowledge, any of the Seller's, employees,
agents, contractors or subcontractors have, used, generated, processed, stored,
transported, recycled, Released or otherwise handled any Hazardous Materials (as
defined below) except as permitted by law, on or about any real property related
to the Seller's business, including, but not limited to, real property formerly
owned by the Seller (collectively, the "SELLER REAL PROPERTY") and the
facilities now or formerly leased or operated by the Seller (collectively, the
"SELLER FACILITIES"). Additionally, except as indicated on Schedule 2.27,
--------------
neither the Seller Facilities nor the Seller Real Property is being used or has
ever previously been used for the generation, use, processing, storage,
transportation, recycling, Release or handling of any Hazardous Materials other
than in compliance with or as permitted by law. In addition, except as indicated
on Schedule 2.27, neither the Seller Facilities nor the Seller Real Property has
-------------
ever been affected by any Hazardous Materials Contamination or Environmental
Condition. The Seller, in the conduct of its business, is and has been in
material compliance with all Environmental Laws. Notwithstanding any statement
or representation to the contrary in any affidavit or other document, the Seller
affirmatively represents that as of the date hereof, the Seller has made all
filings required by RCRA and that there have been no failures by the Seller to
timely report under CERCLA Section 103 or RCRA Section 304. The Seller has not
received any written notice from any governmental authority or any other person
respecting or related to any actual, threatened or potential Release or presence
of any Hazardous Materials or any non-compliance with any Environmental Laws as
to which any
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<PAGE>
such claimed noncompliance presently exists. Notwithstanding the preceding
sentence, the Seller has not received any notice from any governmental authority
respecting noncompliance with RCRA and has not been notified that it is a
potentially responsible party in connection with any site or facility governed
thereby or has any liability for offsite disposal of any Hazardous Material. No
investigation, administrative proceeding, consent order or agreement, limitation
or settlement with respect to Hazardous Materials, Hazardous Materials
Contamination or Environmental Condition is, to the best of the Selling Parties'
knowledge, proposed, threatened, anticipated or in force with respect to its
business, nor has such property ever been on any Federal or state "Superfund" or
"Super Lien" list.
As used herein "HAZARDOUS MATERIALS" include any (i) "HAZARDOUS WASTE" as
defined by The Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section
6901 et seq.), as amended from time to time ("RCRA"), and regulations
-- ---
promulgated thereunder; and "Hazardous Substance" as defined by The
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601 et seq.), as amended from time to time ("CERCLA"), and
-- ---
regulations promulgated thereunder; (ii) asbestos; (iii) polychlorinated
biphenyls; (iv) any substance, the presence of which on the premises of the
Seller's business, is prohibited by applicable law; (v) oil, petroleum or any
petroleum products or by-products; (vi) any other substance which, according to
applicable law, requires special handling or notification of any Federal, state
or local governmental entity in its collection, processing, handling, storage,
transport, treatment or disposal or exposure thereto; (vii) any substance, which
if not properly disposed of, may pollute, contaminate, harm or have any
detrimental effect on the Environment; (viii) underground storage tanks, whether
empty, filled or partially filled with any substance; and (ix) any other
pollutant, toxic substance, hazardous substance, hazardous waste, hazardous
material or hazardous substance as regulated by or defined in or pursuant to any
Environmental law or any other Federal, state, or local environmental law,
regulation, ordinance, rule, or by-law, whether existing on or prior to the date
hereof.
As used herein, "HAZARDOUS MATERIALS CONTAMINATION" shall mean, with
respect to any premises, building or facilities or, the Environment,
contamination by a Release or the presence of Hazardous Materials.
As used herein, "ENVIRONMENTAL CONDITION" shall mean any condition with
respect to the Environment on or off the Seller Real Property and Seller
Facilities, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order, or liability to or against
the parties hereto by any third party (including, without limitation, any
government entity), including, without limitation, any condition resulting from
the operation of Seller's business and/or the operation of the business of any
other property owner or operator in the vicinity of the Seller Real Property and
Seller Facilities and/or any activity or operation formerly conducted by any
person or entity on or off the Seller Real Property and Seller Facilities.
As used herein, "RELEASE" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing.
-20-
<PAGE>
As used herein, "ENVIRONMENTAL LAWS" shall mean any environmental or health
and/or safety-related law, regulation, rule, ordinance, or by-law at the
Federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted, including but not limited to: (i)
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA
601 et seq.; (ii) Solid Waste Disposal Act, as amended by the Resource
-- ---
Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid
Waste Amendments of 1984, 42 USCA 6901 et seq.; (iii) Federal Water Pollution
-- ---
Control Act of 1972 as amended by the Clean Water Act of 1977, as amended, 33
USCA 1251 et seq.; (iv) Toxic Substances Control Act of 1976, as amended, 15
-- ---
USCA 2601 et seq.; (v) Emergency Planning and Community Right-to-Know Act of
-- ---
1986, 42 USCA 11001 et seq.; (vi) Clean Air Act of 1966, as amended by the Clean
-- ---
Air Act of 1986, as amended by the Clean Air Act Amendments of l990, 42 USCA
7401 et seq.; (vii) National Environmental Policy Act of 1970, as amended, 42
-- ---
USCA 4321 et seq.; (viii) Rivers and Harbors Act of 1970, as amended, 33 USCA
-- ---
401 et seq.; (ix) Endangered Species Act of 1973, as amended, 16 USCA 1531, et
-- --- --
seq; (x) Occupational Safety and Health Act of 1970, as amended, 29 USCA 651 et
- --- --
seq.; (xi) Safe Drinking Water Act of 1974, as amended, 42 USCA 300 et seq., and
- --- -- ---
any other federal, state, or local law, regulation, rule, ordinance or order
currently in existence which governs:
(i) the existence, cleanup and/or remediation of toxic or
hazardous materials;
(ii) the Release, emission, discharge or presence of Hazardous
Materials into or in the Environment;
(iii) the control of Hazardous Materials; or
(iv) the use, generation, transport, treatment, storage,
disposal, removal or recovery of Hazardous Materials.
2.28 Purchase for Investment. The Shareholder represents that he is an
-----------------------
"accredited investor", within the meaning of Regulation D under the Securities
Act of 1933, as amended (the "1933 ACT"), and is acquiring the Common Stock and,
if applicable, the Note (collectively, the "SECURITIES"), for his own account,
for investment purposes only, and not with a view to the resale or distribution
of all or any part thereof. The Shareholder has not offered or sold, and will
not offer or sell, any portion of the Securities and has no present plan or
intention of dividing such Securities with others or reselling or otherwise
disposing of any portion of the Securities, either currently or after the
passage of a fixed or determinable period of time, or upon the occurrence or
nonoccurrence of any predetermined event or circumstance. The Shareholder agrees
not to distribute or to transfer any of the Securities in the United States
except in compliance with all applicable United States federal and state
securities laws. The Shareholder further recognizes that the Securities will not
be registered under the 1933 Act or the securities laws of any state, and the
transfer of the same will be restricted under such laws, and the Securities
cannot be sold except
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<PAGE>
pursuant to an effective registration statement under such laws or an available
exemption from such registration, and the certificates representing the
Securities will bear a legend to such effect. The Shareholder acknowledges and
understands that Unidigital is under no obligation to register the Securities.
The Shareholder agrees not to distribute or to transfer any of the Common Stock
within two years after the date hereof. The Shareholder is aware of Unidigital's
business affairs and financial condition, has had the opportunity to ask
questions of Unidigital's management with respect to its business affairs and
financial condition and has acquired sufficient information (including, but not
limited to, Unidigital's Form 10-KSB for the fiscal year ended August 31, 1998,
Unidigital's 1998 annual report, Unidigital's 1998 proxy statement and
Unidigital's Form 10-Q for the quarter ended November 30, 1998) about Unidigital
to reach an informed and knowledgeable decision to acquire the Securities.
2.29 Solvency. The Seller is not now insolvent, and will not be rendered
--------
insolvent by any of the transactions contemplated by this Agreement. In
addition, immediately after giving effect to the consummation of the
transactions contemplated by this Agreement, (i) the Seller will be able to pay
its debts as they become due, (ii) the property of the Seller does not and will
not constitute unreasonably small assets, and the Seller will not have
unreasonably small assets and will not have insufficient assets with which to
conduct its present or proposed business, and (iii) taking into account all
pending and threatened litigation, final judgments against the Seller in actions
for money damages are not reasonably anticipated to be rendered at a time when,
or in amounts such that, the Seller will be unable to satisfy any such judgments
promptly in accordance with their terms (taking into account the maximum
probable amount of such judgments in any such actions and the earliest
reasonable time at which such judgments might be rendered) as well as all other
obligations of the Seller. The cash available to the Seller, after taking into
account all other anticipated uses of the cash of the Seller, will be sufficient
to pay all such judgments promptly in accordance with their terms. As used in
this Section 2.29, (x) "insolvent" means that the sum of the present fair
salable value of the Seller's assets is less than the Seller's debts and other
probable liabilities, and (ii) the term "debts" includes any legal liability,
whether matured or unmatured, liquidated or unliquidated, absolute, fixed or
contingent, disputed or undisputed or secured or unsecured.
2.30 Knowledge of Misrepresentation. As of the date hereof, neither the
--------------------------------
Selling Parties nor any authorized representative of the Selling Parties has any
actual personal knowledge of (i) any representation made by Unidigital or the
Buyer herein which is false or inaccurate, (ii) any breach of warranty made
herein by Unidigital or the Buyer or (iii) any state of facts which if made
known to Unidigital or the Buyer would cause any representation made by
Unidigital or the Buyer to be false or inaccurate or which would presently, or
with the passage of time, cause Unidigital or the Buyer to be in breach of any
warranty given by Unidigital or the Buyer. In the event that prior to Closing,
the Selling Parties or any authorized representative of the Selling Parties has
any actual personal knowledge (i) that any representation made by Unidigital or
the Buyer herein is false or inaccurate, (ii) of any breach of warranty made
herein by Unidigital or the Buyer or (iii) of any state of facts which if made
known to Unidigital or the Buyer would cause any representations made by
Unidigital or the Buyer to be false or inaccurate or which would presently, or
with the passage of time, cause Unidigital or the Buyer to be in breach of any
-22-
<PAGE>
warranty given by Unidigital or the Buyer hereunder, then in such event, the
Selling Parties' sole remedy shall be to terminate this Agreement (or proceed to
Closing and waive such misrepresentation).
3. Representations of the Buyer and Unidigital
-------------------------------------------
Representations and warranties made by the Buyer and Unidigital
herein or in any instrument or document furnished in connection herewith shall
survive the Closing until (and including) the fifth anniversary of the date
hereof. The Buyer and Unidigital represent and warrant to the Seller as follows:
3.1 Organization and Authority. Each of the Buyer and Unidigital is
----------------------------
duly organized and validly existing and in good standing under the laws of the
State of Delaware, and has requisite power and authority to own its properties
and to carry on its business as now being conducted. Each of the Buyer and
Unidigital has full power to execute and deliver this Agreement, and the
Instrument of Assumption and to consummate the transactions contemplated hereby
and thereby.
3.2 Authorization. The execution and delivery of this Agreement by the
-------------
Buyer and Unidigital and the agreements provided for herein to which each is a
party, and the consummation by the Buyer and Unidigital of all transactions
contemplated hereby, have been duly authorized by all requisite corporate
action. This Agreement and all such other agreements and written obligations
entered into and undertaken in connection with the transactions contemplated
hereby constitute the respective valid and legally binding obligations of the
Buyer and Unidigital, enforceable against them in accordance with their
respective terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights generally.
The execution, delivery and performance of this Agreement and the agreements
provided for herein, and the consummation by the Buyer and Unidigital of the
transactions contemplated hereby and thereby, will not, with or without the
giving of notice or the passage of time or both, (a) violate the provisions of
any law, rule or regulation applicable to the Buyer or Unidigital; (b) violate
the provisions of the organizational documents of the Buyer or Unidigital; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator applicable to the Buyer or Unidigital; or (d) conflict with or result
in the breach or termination of any term or provision of, or constitute a
default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Buyer or
Unidigital pursuant to, any indenture, mortgage, deed of trust or other
agreement or instrument to which it or its properties is a party or by which the
Buyer or Unidigital is or may be bound. Schedule 3.2 attached hereto sets forth
------------
a true, correct and complete list of all consents and approvals of third parties
that are required of the Buyer and Unidigital in connection with the
consummation by the Buyer and Unidigital of the transactions contemplated by
this Agreement.
3.3 Regulatory Approvals. All consents, approvals, authorizations and
---------------------
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the
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<PAGE>
Buyer and Unidigital and which are necessary for its consummation by the Buyer
and Unidigital of the transactions contemplated by this Agreement have been
obtained and satisfied.
3.4 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried on by the Buyer and
Unidigital without the intervention of any other person in such manner as to
give rise to any valid claim for a finder's fee, brokerage commission or other
like payment.
3.5 Examination Opportunity. The Buyer acknowledges that the Buyer and
-----------------------
its authorized representative have had the opportunity to examine the Seller's
books and records with respect to the operations of the Business and any other
books, records, documents or writings with respect to the operations of the
Business in the possession or under the control of the Seller involving the
subject of the within transaction deemed desirable by Buyer prior to
consummating the within transaction. To the extent the Buyer's inspection
relates to the inspection of documents, the Buyer will arrange with the Seller
to inspect such documents off the premises of the Facility whenever possible.
3.6 Knowledge of Misrepresentation. As of the date hereof, neither the
--------------------------------
Buyer nor any authorized representative of the Buyer has any actual personal
knowledge of (i) any representation made by Seller herein which is false or
inaccurate, (ii) any breach of warranty made herein by the Seller or (iii) any
state of facts which is made know to the Seller would cause any representation
made by Seller to be false or inaccurate or which would presently, or with the
passage of time, cause the Seller to be in breach of any warranty given by the
Seller hereunder. In the event that prior to Closing, the Buyer or any
authorized representative of Buyer has any actual personal knowledge (i) that
any representation made by Seller herein is false or inaccurate, (ii) of any
breach of warranty made herein by the Seller or (iii) of any state of facts
which if made known to the Seller would cause any representations made by Seller
to be false or inaccurate or which would presently, or with the passage of time,
cause the Seller to be in breach of any warranty given by Seller hereunder,
then, in such event, the Buyer's sole remedy shall be to terminate this
Agreement (or proceed to Closing and waive such misrepresentation).
3.7 Assignments. There are no facts presently known to the Buyer
-----------
concerning the Buyer or the Seller that would preclude, prevent, impair or
otherwise delay the transfer of the Assets, which are subject to security
interests being assumed by the Buyer, which are conditions precedent to the
timely completion of the within transaction other than as set forth in Schedule
--------
3.7, to the extent that any required approvals are not obtained by the Buyer
- ---
prior to Closing, the Buyer waives same.
4. Confidentiality; Public Announcements
-------------------------------------
4.1 Confidentiality. None of the information not previously
---------------
disclosed to the public or not generally known to persons engaged in the
business of the Seller or the Buyer which shall have been furnished by the Buyer
or the Seller to the other party in connection with the transactions
contemplated hereby shall be disclosed by such receiving party to any person
other
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<PAGE>
than their respective employees, directors, attorneys, accountants or financial
advisors or other than as contemplated herein. In the event that the
transactions contemplated by this Agreement shall not be consummated, all such
information which shall be in writing shall be returned to the party furnishing
the same, including, to the extent reasonably practicable, all copies or
reproductions thereof which may have been prepared, and neither party shall at
any time thereafter disclose to third parties, or use, directly or indirectly,
for its own benefit, any such information, written or oral, about the business
of the other party hereto.
4.2 Public Announcements. Any public announcement, press release or
---------------------
similar publicity with respect to this Agreement or the transactions
contemplated hereby shall be issued, if at all, at such time and in such manner
as the Buyer determines. Unless consented to by the Buyer in advance or required
by applicable law, prior to the Closing, the Selling Parties shall keep this
Agreement strictly confidential and may not make any disclosure related to this
Agreement to any person. The Selling Parties and the Buyer shall consult with
each other concerning the means by which the Seller's Employees, customers,
suppliers and others having a business relationship with the Selling Parties
will be informed of the transactions contemplated hereby, and the Buyer shall
have the right to be present for any such communication. The Seller hereby
acknowledges that this Agreement may be filed by Unidigital as an exhibit to
certain registration statements and/or reports filed by it pursuant to the 1933
Act or the Securities Exchange Act of 1934, as amended.
5. Employee Matters
----------------
5.1 Seller's Employees. The Seller has furnished to the Buyer a list
-------------------
containing the names of Seller's Employees, including each such employee's
status, social security number and current compensation. The Selling Parties
hereby acknowledge that the Buyer and Unidigital have no current plans to offer
employment to all of the Seller's Employees affected by the transactions
contemplated hereby. The Buyer and/or Unidigital may, however, offer employment
to some of the Seller's Employees under such terms and conditions as may be set
by the Buyer or Unidigital, as the case may be. The Selling Parties agree and
acknowledge that neither the Buyer nor Unidigital shall assume the Collective
Bargaining Agreement or any other collective bargaining agreement between the
Seller and any of the Seller's Employees, notwithstanding any specific terms to
the contrary contained in any such collective bargaining agreement.
5.2 Future Changes. Nothing in this Section 5 shall require the Buyer to
--------------
retain any of Seller's Employees for any period of time after the date hereof.
Subject to requirements of applicable law, the Buyer reserves the right at any
time after the date hereof to terminate such employment and amend, modify or
terminate any term or condition of employment, including without limitation, any
employee benefit plan, program, policy, practice or arrangement.
5.3 Plant Closing. None of the Selling Parties has, directly or
--------------
indirectly, taken or omitted to take any action which may result in the Seller's
or the Buyer's liability to any person or entity under the WARN Act. The term
"any action" does not include the sale and acquisition contemplated by this
Agreement and the liability under the WARN Act, if any, which results from
-25-
<PAGE>
the Seller's termination of employees in connection with such sale and
acquisition is the sole responsibility of the Seller.
5.4 Reporting of Data. The Buyer and the Seller shall compile and
-------------------
furnish to each other such actuarial and employee data as shall be required from
time to time for each party to perform and fulfill its obligations under this
Section 5.
5.5 Pending Litigation. With respect to any litigation pending, or to
-------------------
the knowledge of the Selling Parties threatened, as set forth in Schedule 2.21
-------------
hereto, which claim alleges violation of any nondiscrimination laws, collective
bargaining agreements, employment contract and termination thereof or wage and
hour laws, the Seller shall fully defend such claim. The Seller shall be
responsible for any monetary damages awarded in connection therewith. It is
understood by the parties that if the Seller chooses to settle any matter
relating to any of the foregoing, including the terms and conditions thereof of
any back pay claims, such settlement shall be at the sole discretion of the
Seller and the Seller shall be solely responsible for the payment or performance
of any such settlement terms.
6. Further Agreements of the Parties
---------------------------------
6.1 Expenses. Except as otherwise specifically provided in this
--------
Agreement, Buyer and Seller shall bear their own respective expenses incurred in
connection with this Agreement and in connection with all obligations required
to be performed by each of them under this Agreement.
6.2 Transfer Taxes. Any sales taxes, real property transfer or gains
---------------
taxes, recording fees or any other taxes payable as a result of the sale of the
Assets or any other action contemplated by this Agreement shall be paid by the
Seller.
7. Conditions to Obligations of the Buyer
--------------------------------------
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:
7.1 Continued Truth of Representations and Warranties of the Selling
---------------------------------------------------------------------
Parties; Compliance with Covenants and Obligations. The representations and
- -----------------------------------------------------
warranties of the Selling Parties shall be true and correct in all material
respects on and as of the date hereof. The Seller shall have performed and
complied in all material respects with all covenants required by this Agreement
to be performed or complied with by it prior to or at the date hereof.
7.2 Corporate and Shareholder Proceedings. All corporate, shareholder and
-------------------------------------
other proceedings required to be taken on the part of the Seller to authorize or
carry out this Agreement and to convey, assign, transfer and deliver the Assets
shall have been taken.
7.3 Other Governmental Approvals. All courts of law, governmental
-------------------------------
agencies, departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of
-26-
<PAGE>
which is necessary under any applicable law, rule, order or regulation for the
consummation by the Seller of the transactions contemplated by this Agreement
and the operation of the Seller's business by the Buyer, shall have consented
to, authorized, permitted or approved such transactions including but not
limited to, all clearance certificates required pursuant to any applicable
retail sales tax legislation required in connection with the completion of the
transactions contemplated herein.
7.4 Consents of Lenders, Lessors and Other Third Parties. The Seller
--------------------------------------------------------
shall have received the consents and approvals of all lenders, lessors and other
third parties whose consent or approval is required in order for the Seller to
consummate the transactions contemplated by this Agreement.
7.5 Adverse Proceedings. No action or proceeding by or before any court
-------------------
or other governmental body shall have been instituted by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Buyer to own or use the Assets after the Closing.
7.6 Opinion of Counsel. The Buyer shall have received an opinion of
--------------------
Contant, Scherby & Atkins, counsel to the Seller, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit D (the "OPINION OF SELLER'S
---------
COUNSEL").
7.7 Board of Directors and Shareholder Approval. The directors and
-----------------------------------------------
shareholders of the Seller shall have duly authorized the transactions
contemplated by this Agreement.
7.8 Title to Assets. At the Closing, the Buyer shall receive good and
-----------------
marketable title to all Assets, free and clear of all liens, mortgages, pledges,
security interests, restrictions, prior assignments, encumbrances and claims of
any kind or nature whatsoever, other than those involving the Assumed
Liabilities.
7.9 Environmental Reports; Compliance with Laws. The Buyer shall not
-----------------------------------------------
have received unsatisfactory environmental reports from its environmental
consultants and at any time prior to the Closing shall not have discovered that
any Leased Premises fail to comply in any material respect with all applicable
federal, foreign, state or local environmental, zoning, land use, and wetlands
laws, rules and regulations.
7.10 Fire, Casualty or Eminent Domain. If any non-material portion of the
--------------------------------
Assets are, prior to the Closing, either damaged by fire or other casualty
insured against or taken, in whole or in part, by eminent domain proceedings,
then the Buyer shall accept said Assets in their damaged or diminished condition
together with an assignment to Buyer of all insurance and/or condemnation
proceeds payable with respect to such fire, casualty or loss or terminate this
Agreement. If any material portion of the Assets are so damaged or taken, the
Buyer shall have the right to terminate this Agreement.
-27-
<PAGE>
7.11 Due Diligence Review. The Buyer shall have completed a due diligence
--------------------
review of the Business, the results of which review are satisfactory to the
Buyer in Buyer's sole discretion.
7.12 Closing Deliveries. The Buyer shall have received at or prior to the
------------------
Closing each of the following documents:
(a) the Bill of Sale;
(b) such instruments of conveyance, assignment and transfer, and
motor vehicle transfers and safety inspection certificates, if any, in form and
substance reasonably satisfactory to the Buyer, as shall be appropriate to
convey, transfer and assign to, and to vest in, the Buyer, good and marketable
title to the Assets other than the Intangible Property, subject to the Assumed
Liabilities applicable thereto.
(c) such instruments of conveyance, assignment and transfer in
form and substance reasonably satisfactory to the Buyer and in a form
appropriate to file, if required, with the United States Office of Patents and
Trademarks, sufficient to convey, transfer and assign to, and to vest in, the
Buyer, good and marketable title to the Intangible Property;
(d) all existing technical data, formulations, product literature
and other documentation relating to the Assets;
(e) such existing contracts, files and other data and documents
pertaining to the Assets as the Buyer may reasonably request;
(f) a certificate of the Seller's President and such other documents
evidencing satisfaction of the conditions specified in this Section 7 as the
Buyer shall reasonably request;
(g) a certificate of the Secretary of the Seller attesting to the
incumbency of the Seller's officers, respectively, and the authenticity of the
resolutions authorizing the transactions contemplated by the Agreement and the
organizational documents of the Seller;
(h) the Opinion of Seller's Counsel;
(i) the Amendment of the Certificate of Incorporation of the
Seller to discontinue the use of the name "Progress Graphics, Inc." and the
Seller's undertaking to file any instruments as may be necessary with any
governmental authority to change their corporate names and foreign
qualifications; and
(j) such other documents, instruments or certificates as the Buyer
may reasonably request in order to evidence the accuracy of the Selling Parties'
representations or compliance by Seller with its covenants hereunder.
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8. Conditions to Obligations of the Seller
---------------------------------------
The obligations of the Seller under this Agreement are subject to the
fulfillment, at the Closing, of the following conditions precedent, each of
which may be waived in writing at the sole discretion of the Seller:
8.1 Continued Truth of Representations and Warranties of the Buyer and
---------------------------------------------------------------------
Unidigital; Compliance with Covenants and Obligations. The representations and
- ------------------------------------------------------
warranties of the Buyer and Unidigital in this Agreement shall be true and
correct in all material respects as of the date hereof. The Buyer and Unidigital
shall have performed and complied with all covenants required by this Agreement
to be performed or complied with by each of them prior to the date hereof.
8.2 Corporate and Shareholder Proceedings. All corporate, shareholder,
---------------------------------------
legal and other proceedings required to be taken on the part of the Buyer and
Unidigital to authorize or carry out this Agreement shall have been taken.
8.3 Approvals. All other governmental agencies, departments, bureaus,
---------
commissions and similar bodies, the consent, authorization or approval of which
is necessary under any applicable law, rule, order or regulation for the
consummation by the Buyer and Unidigital of the transactions contemplated by
this Agreement shall have consented to, authorized, permitted or approved such
transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer
----------------------------------------------------------
and Unidigital shall have received all requisite and material consents and
approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for the Buyer and Unidigital to consummate the
transactions contemplated by this Agreement, including but not limited to those
set forth on Schedule 3.2 attached hereto.
------------
8.5 Adverse Proceedings. No action or proceeding by or before any court
-------------------
or other governmental body shall have been instituted by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Seller to transfer the Assets or would affect the right of the Buyer to
acquire the Assets.
8.6 Closing Deliveries. The Seller and the Shareholder, respectively,
-------------------
shall have received at or prior to the Closing each of the following documents:
(a) a certificate of the Buyer's Chief Executive Officer and such
other documents evidencing satisfaction of the conditions specified in this
Section 8 as the Seller shall reasonably request;
(b) a certificate of the Secretary or Assistant Secretary of the
Buyer attesting to the incumbency of the Buyer's officers, the authenticity of
the resolutions authorizing the transactions contemplated by this Agreement and
the organizational documents of the Buyer;
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(c) a certificate of Unidigital's Chief Executive Officer and such
other documents evidencing satisfaction of the conditions specified in this
Section 8 as the Seller may reasonably request;
(d) a certificate of the Secretary or Assistant Secretary of
Unidigital attesting to the incumbency of Unidigital's officers, and the
authenticity of the resolutions authorizing the transactions contemplated by
this Agreement and the organizational documents of Unidigital;
(e) the Assumption Agreement executed by the Buyer and accepted by
the Seller;
(f) an opinion of Buchanan Ingersoll Professional Corporation,
counsel to the Buyer, dated as of the Closing Date, substantially in the form
attached hereto as Exhibit E; and
---------
(g) such other documents, instruments or certificates as the Seller
may reasonably request.
8.7 Business Premises Lease. The Buyer shall have entered into the
------------------------
Business Premises Lease referred to in Section 9.9 hereof.
9. Post-Closing Agreements
-----------------------
9.1 Proprietary Information.
-----------------------
(a) The Selling Parties shall hold in confidence, and use their best
efforts to have all officers, shareholders, directors and employees hold in
confidence, all knowledge and information of a secret or confidential nature
with respect to the Business, and shall not disclose, publish or make use of the
same without the consent of the Buyer, except to the extent that such
information shall have become public knowledge other than by breach of this
Agreement by the Selling Parties or by any other persons who have agreed not to
disclose, publish or make use of such information.
(b) The Selling Parties agree that the remedy at law for any breach
of this Section 9.1 would be inadequate and that the Buyer and/or Unidigital
shall be entitled to injunctive relief in addition to any other remedy it may
have upon breach of any provision of this Section 9.1.
(c) The foregoing to the contrary notwithstanding, no information,
written or oral, shall be construed or considered confidential information and
thereby subject to the restrictions of this Section 9.1 if such information was
(i) generally available to the public other than as a result of a disclosure by
the Selling Parties or anyone to whom the Selling Parties transmit the
information in violation hereof, (ii) in the possession of the Selling Parties
or known to the Selling Parties on a non-confidential basis prior to its
disclosure to the Selling Parties, (iii) available to the Selling Parties on a
non-confidential basis from a source other than the Buyer or Unidigital who is
not bound by a confidentiality agreement with the Buyer or Unidigital, as the
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case may be, or (iv) available in trade publications, reference books or other
resources and which may be compiled by any person's decisions of preparing a
report or memorandum containing such information.
9.2 Solicitation or Hiring of Former Employees. Except as provided by
---------------------------------------------
law or with the written consent of the Buyer, for a period of three years after
the date hereof, the Selling Parties and any persons or entities that are not
natural persons, that directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with,
the Seller (the "CORPORATE AFFILIATES"), shall not solicit any person who was a
Seller's Employee on the date hereof, and has been employed, and not terminated
without cause, by the Buyer, to terminate his employment with the Buyer or to
become an employee of the Seller or its Corporate Affiliates or hire any person
who was such an employee on the date hereof.
9.3 Non-Competition Agreement.
-------------------------
(a) For a period of five (5) years after the date hereof, neither
the Selling Parties nor any Corporate Affiliate shall directly or indirectly (i)
manufacture, market or sell any product which has the same or substantially the
same function and primary application as any existing or proposed product
manufactured, marketed or sold by the Seller on or prior to the date hereof or
(ii) engage in, manage, operate, be connected with or acquire any interest in,
as an employee, consultant, advisor, agent, owner, partner, co-venturer,
principal, director, shareholder, lender or otherwise, any business competitive
with the business of the Seller, Unidigital or the Buyer as conducted on the
date hereof (a "COMPETITIVE BUSINESS"), in the United States or any other
country in which the Seller, Unidigital or the Buyer conducted business during
the two years prior to the date hereof, except that the Selling Parties and any
Corporate Affiliates may own, in the aggregate, not more than 1% of the
outstanding shares of any publicly held corporation which is a Competitive
Business which has shares listed for trading on a securities exchange registered
with the Securities and Exchange Commission or through the automatic quotation
system of a registered securities association.
(b) The parties hereto agree that the duration and geographic scope
of the non-competition provision set forth in this Section 9.3 are reasonable.
In the event that any court determines that the duration or the geographic
scope, or both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain in full
force and effect for the greatest time period and in the greatest area that
would not render it unenforceable. The parties intend that this non-competition
provision shall be deemed to be a series of separate covenants, one for each and
every county of each and every state of the United States of America and each
and every political subdivision of each and every country outside the United
States of America where this provision is intended to be effective. The Selling
Parties agree that damages are an inadequate remedy for any breach of this
provision and that the Buyer shall, whether or not it is pursuing any potential
remedies at law, be entitled to equitable relief in the form of preliminary and
permanent injunctions without bond or other security upon any actual or
threatened breach of this non-competition provision. If the Selling Parties or
any Corporate Affiliate shall violate this Section 9.3, the duration of this
Section 9.3 automatically shall be
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extended as against such violating party for a period equal to the period during
which such party shall have been in violation of this Section 9.3. The covenants
contained in this Section 9.3 are deemed to be material and the Buyer is
entering into this Agreement relying on such covenants.
9.4 Sharing of Data. The Selling Parties and their duly authorized
---------------
representatives shall have the right for a period of seven years following the
date hereof to have reasonable access to and, the right to copy any of, such
books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other similar
information as are transferred to the Buyer pursuant to the terms of this
Agreement for the limited purposes of concluding its involvement in the business
of the Seller prior to the date hereof and for complying with its obligations
under applicable securities, tax, environmental, employment or other laws and
regulations. The Buyer and/or Unidigital shall have the right for a period of
seven years following the date hereof to have reasonable access to those books,
records and accounts, including financial and tax information, correspondence,
production records, employment records and other records which are retained by
the Seller pursuant to the terms of this Agreement to the extent that any of the
foregoing relates to the Business transferred to the Buyer hereunder or is
otherwise needed by the Buyer and/or Unidigital in order to comply with its
obligations under applicable securities, tax, environmental, employment or other
laws and regulations.
9.5 Cooperation in Litigation. Each party hereto will fully cooperate
-------------------------
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such party
relating to or arising out of the conduct of the Business prior to or after the
date hereof (other than litigation arising out of the transactions contemplated
by this Agreement and except as otherwise expressly provided herein). The party
requesting such cooperation shall pay the out-of-pocket expenses (including
legal fees and disbursements) of the party providing such cooperation and
reasonable compensation for the time spent of its officers, directors, employees
and agents reasonably incurred in connection with providing such cooperation
while assisting in the defense or prosecution of any such litigation or
proceeding (other than litigation arising out of the transactions contemplated
by this Agreement and except as expressly provided herein).
9.6 Customer and Other Business Relationships. During the period for
---------------------------------------------
which consulting services are provided to the Buyer by the Shareholder
hereunder, the Shareholder will cooperate with the Buyer in its efforts to
continue and maintain, with lessors, licensors, customers, suppliers and other
business associates of the Seller, the same business relationships with the
Buyer after the Closing as maintained with the Seller before the Closing, with
respect to the business to be carried on by the Buyer utilizing the Assets. The
Selling Parties will refer to the Buyer all inquiries relating to the Business
from customers and all such other persons. The Selling Parties will not take any
action designed or intended to have the effect of discouraging any customer or
such other person from continuing or maintaining the same such business with the
Buyer after the Closing. The Selling Parties shall use their best efforts to
satisfy any liability or obligation not assumed by the Buyer hereunder in a
manner which is not detrimental to the Buyer's relationships with suppliers and
vendors.
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9.7 Subrogation. If the Buyer or Unidigital becomes liable for or
-----------
suffers any damage with respect to any matter that was covered by insurance
maintained by the Selling Parties at or before the Closing, the Buyer and
Unidigital, as the case may be, shall be and hereby are subrogated to any rights
of the Selling Parties under such insurance coverage. The Selling Parties shall
promptly remit to the Buyer or Unidigital, as the case may be, any insurance
proceeds any of them may receive on account of any such liability or damage.
9.8 Continuation Period. The parties hereto understand and agree that
--------------------
the Business shall continue to be operated by the Buyer in the Seller's present
facilities located at the Business Premises from the Closing Date through April
30, 1999 (the "TERMINATION DATE"). After the Termination Date, the Buyer shall
have no further obligation to operate the Business at the Business Premises and
shall not operate the Business at the Business Premises without the Seller's
written consent, but the Buyer shall have the right to store the Assets at the
Business Premises until the last day of the term of the Business Premises Lease.
9.9 Business Premises Lease. After the Closing, the Buyer shall use and
-----------------------
occupy the Business Premises pursuant to a lease therefor, substantially in the
form attached hereto as Exhibit F (the "BUSINESS PREMISES LEASE"). The execution
---------
and delivery of the Business Premises Lease shall be effected at the Closing.
9.10 Consulting Duties.
-----------------
(a) For a period of two (2) years after the Closing, to the extent
his health and other activities permit, at the request of the Buyer, the
Shareholder shall provide consulting duties as mutually agreed to by the Buyer
and the Shareholder. The Shareholder agrees to make himself available to the
extent required to perform such consulting duties. The means by which the
Shareholder performs such consulting duties shall be determined by Consultant,
in his sole discretion.
(b) The Shareholder shall perform the duties hereunder as an
independent contractor. The Shareholder shall receive no benefits otherwise
enjoyed by employees of the Buyer. It is expressly understood and agreed that
the Consultant shall have no authority to act, represent or bind Buyer or any
affiliate thereof in any manner, except as may be agreed expressly by Buyer in
writing from time to time. As an independent contractor, the Consultant
recognizes and agrees that no federal, state or FICA withholdings will be made
by Buyer on the Shareholder's behalf and that the Shareholder shall be solely
responsible for payment of all taxes of any type attendant to the Shareholder's
payments pursuant to Section 9.10(c).
(c) For the performance of all the Shareholder's services to be
rendered pursuant to the terms of this Agreement, Buyer will reimburse
reasonable business expenses incurred by the Shareholder in the performance of
his duties hereunder in accordance with Buyer's policies then in effect. In
addition to the foregoing, Buyer shall pay the Shareholder's expenses with
respect to his automobile and driver; provided, however, that such expenses
-------- -------
shall not exceed $530 per month.
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10. Indemnification.
---------------
10.1 Indemnification by the Selling Parties.
--------------------------------------
(a) Each of the Selling Parties (sometimes hereinafter referred
to as "INDEMNITOR") shall be liable for and does hereby agree to indemnify the
Buyer, Unidigital and their respective officers and directors (each sometimes
hereinafter referred to as "INDEMNITEE") against, and hold each Indemnitee
harmless from, and reimburse each Indemnitee for, any and all Damages (as
hereafter defined) in the manner and to the extent set forth in this Section 10
("INDEMNIFICATION OBLIGATION").
(b) As used in this Section 10, the term "DAMAGES" shall mean and
include all losses and costs, expenses, liabilities and damages sustained by the
Indemnitee with respect to each and every Indemnifiable Claim which arises out
of or results from a breach of any representation or warranty, covenant or other
agreement of the Selling Parties set forth in this Agreement, including, without
limitation, any Damages arising out of the Collective Bargaining Agreement, or
in any documents executed by the Selling Parties in connection with the
transactions described herein.
(c) The following terms shall be used with respect to the
Indemnification Obligation:
(i) "SURVIVING OBLIGATIONS" shall mean any Indemnification
Obligation owed to an Indemnitee for Damages suffered by such Indemnitee as a
result of any breach of any representation, warranty or covenant by the Selling
Parties contained in this Agreement or in any certificate or other documents
delivered in connection therewith, which survive the Closing.
(ii) "INDEMNIFIED EXPENSES" shall mean all costs and expenses
(including reasonable attorney's fees) incurred by the Indemnitee with respect
to enforcing any Surviving Obligations, or in defending an Indemnitee from the
claim of a creditor of such Indemnitee (other than with respect to an Assumed
Liability) which claim, if not defended, would result in a lien on any of the
Assets, if not defended by the Selling Parties as hereinafter provided.
(iii) "INDEMNIFIABLE CLAIM" shall mean a claim for Damages duly
assertable by the Indemnitee hereunder.
(iv) "UNDISCLOSED LIABILITIES" shall mean those liabilities
of the Selling Parties not disclosed to the Buyer or Unidigital in this
Agreement or in any certificate or document delivered by Selling Parties in
connection herewith.
(d) Indemnification Procedure. The procedure with respect to
---------------------------
Indemnitor's Indemnification Obligation is as follows:
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(i) Indemnitee shall give Indemnitor written notice of any
claim for Damages promptly upon receipt of notice of any third party claim or
discovery of facts which give rise to a direct claims by it for Damages
hereunder.
(ii) Indemnitee shall have the right to control the defense of
(and settle in its discretion) any third party claim, action or proceeding
giving rise to an Indemnifiable Claim, except that the Indemnitor shall have the
right to assume the defense, with independent counsel reasonably satisfactory to
the Indemnitee, at its own expense, of any such matter or its settlement. If
Indemnitor settles any third party claim, it agrees to perform such settlement
in accordance with the terms thereof. Notwithstanding the foregoing, no such
settlement shall impose any obligation upon, or result in the entry of judgment
against, the Indemnitee. Reasonable attorney's fees and related costs incurred
by an Indemnitee in defense of an Indemnifiable Claim shall be an Indemnified
Expense.
With respect to any such claim by a third party that is now or
shall hereafter be instituted against the Seller and an Indemnitee for which the
Seller is insured ("INSURED CLAIM"), the defense of such Insured Claim shall be
undertaken by the Seller's insurance company and any claim, loss or judgment
shall be satisfied by such insurance company to the extent of the applicable
coverage.
(iii) The Indemnitor and Indemnitee agree to render to each
other such assistance as they may reasonably require of each other in order to
ensure the proper and adequate defense of any such claim, action or proceeding
instituted by a third party. If Indemnitor should fail to diligently process any
third party claims for which it assumed the defense (other than an Insured
Claim, which shall be the duty of the Seller's insurance company), Indemnitee
may do so with counsel of its choice and the reasonable attorney's fees and
related costs thereof shall be an Indemnified Expense.
(iv) If Indemnitor admits in writing or does not dispute in
writing any Indemnifiable Claim made by the Indemnitee within thirty (30) days
of written notice thereof ("CLAIM NOTICE"), Indemnitor shall pay the amount
claimed due or may undertake the defense of any third party claim which is the
basis of such Indemnifiable Claim within thirty (30) days of the Claim Notice.
(v) If Indemnitor disputes its liability for such
Indemnifiable Claim ("CLAIM DISPUTE"), it shall do so in writing ("CLAIM DISPUTE
NOTICE") and if the parties have not resolved the dispute or agreed upon a
procedure to effect same within thirty (30) days from the date of the Claim
Dispute Notice, same shall be resolved by arbitration as hereinafter provided
for. During the period of any such Claim Dispute, the Indemnitee or Indemnitor,
as the case may be, shall defend any such third party claim, and if it is
determined in such arbitration proceeding that the Indemnitor is not liable
therefor, the Indemnitee shall pay to the Indemnitor the amount of Indemnitor's
reasonable cost and expenses and reasonable attorney's fees paid or incurred in
such defense, if any.
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(e) Limitation Upon Indemnification Obligation of Indemnitor.
----------------------------------------------------------------
Indemnitor's obligations pursuant to this Section 10 shall not apply in the
following instances:
(i) with respect to Indemnified Expenses, if there is a Claim
Dispute and the Indemnitor is successful therein and is held to have no
Indemnification Obligation; or
(ii) with respect to Undisclosed Liabilities, if same are
liabilities for which the Selling Parties are covered by insurance or other
contractual indemnification (collectively, "INSURED LIABILITIES") to the extent
that such insurance or other contractual indemnification is actually paid in
satisfaction of such Undisclosed Liabilities; or
(iii) with respect to a breach of any representation or
warranty of the Selling Parties to the extent that the Buyer had actual
knowledge, as of the date of the Closing, that there was a breach of such
representation or warranty.
10.2 Recovery of Damages. Upon agreement of the parties ("DAMAGE
----------------------
AGREEMENT") or upon issuance of any arbitration award with respect thereto
("DAMAGES AWARD") as to the amount of Damages for which Indemnitor is liable
hereunder (collectively, "DAMAGE DETERMINATION"), the Indemnitor shall pay the
amount thereof to the Indemnitee hereunder within ten (10) days of the date of
the Damage Determination. If not so paid, the Buyer shall have the right of set
off against monies net due to the Indemnitor until the amount due is paid, with
Indemnitor paying Indemnitee interest thereon at the same interest rate as
Seller is entitled under the Note.
10.3 Indemnification of Buyer. From and after the Closing Date, the
--------------------------
Buyer (sometimes hereinafter referred to as "INDEMNITOR") agrees to, indemnify,
defend and hold harmless the Selling Parties (sometimes hereinafter referred to
as "INDEMNITEE") from and against any and all losses and costs, expenses,
liabilities and damages actually suffered by the Selling Parties, which arise
out of or result from a breach of any representation or warranty, covenant or
other agreement of Buyer which survives the Closing ("BUYER'S SURVIVING
OBLIGATIONS"), together with Indemnified Expenses incurred by the Selling
Parties with respect to Surviving Obligations.
The procedure for the assertion and satisfaction of said claim by the
Selling Parties shall be same as set forth above in this Section 10, except that
the Selling Parties shall be the Indemnitee and the Buyer shall be the
Indemnitor, respectively.
10.4 Other Rights and Remedies Not Affected. The indemnification rights
--------------------------------------
of the parties hereto under this Agreement shall be subject to, and deemed
effective as of, the Closing of the transactions contemplated hereunder and are
independent of, and in addition to such rights and remedies as the parties may
have at law or in equity for any fraud or intentional misrepresentations and is
exclusive of the Buyer's right to seek specific performance, rescission or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
10.5 Survival of Representations and Warranties. All representations,
----------------------------------------------
warranties and agreement made by the parties in this Agreement or in any
agreement, document, statement, list,
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certificate or instrument furnished hereunder or in connection with the
negotiation, execution and performance of this Agreement shall survive the
Closing for a period of five (5) years thereafter.
10.6 Limitation of Indemnification. Notwithstanding the provisions of
-------------------------------
Sections 10.1 and 10.3 above, the respective indemnification rights of the
parties hereto set forth in said Sections shall be subject to the following
limitations:
(a) Any claim for indemnification hereunder shall be net of any
actual tax benefit or insurance proceeds received by the Indemnified Party in
respect of such claim.
(b) No party shall assert a claim for indemnification hereunder
unless the amount of such claim, together with all other claims for
indemnification which may be asserted by such party hereunder, exceeds $25,000
in the aggregate; provided, however, the foregoing shall not restrict the
-------- -------
ability of any Indemnified Party to recover the full amount of any claim or
claims which exceed $25,000 in the aggregate.
(c) The maximum liability of the Selling Parties for indemnification
hereunder shall not exceed the greater of (i) the sum of the purchase price
hereunder or (ii) $100,000.
10.7 Accounts Receivable. In addition to the provisions of Section 10.1,
--------------------
the Seller shall also indemnify the Buyer for the face value of all Accounts
Receivable which existed as of the Closing, but are not collected within one
hundred twenty (120) days after Closing, upon the Buyer's request therefor,
provided that the Buyer has used commercially reasonable efforts to collect such
receivables. If the Buyer shall thereafter collect any Account Receivable for
which it has received an indemnification payment from the Seller pursuant to the
immediately preceding sentence, the Buyer shall promptly remit the amount so
collected to the Seller.
10.8 Cooperation. The parties hereto agree to render to each other such
-----------
assistance as they may reasonably require of each other and to cooperate in good
faith with each other in order to ensure the proper and adequate defense of any
claim, action, suit or proceeding brought by any third party. Where counsel has
been selected by the Selling Parties or by the Buyer, the Selling Parties or the
Buyer, as the case may be, shall be entitled to rely upon the advice of such
counsel in the conduct of the defense.
10.9 Confidentiality. The parties agree to cooperate in such a manner as
---------------
to preserve in full the confidentiality of all confidential business records and
the attorney-client and work-product privileges. In connection therewith, each
party agrees that (a) it will use its best efforts, in any action, suit or
proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records and (b) all communications between
any party hereto and counsel responsible for or participating in the defense of
any action, suit or proceeding shall, to the extent possible, be made so as to
preserve any applicable attorney-client or work-product privilege.
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10.10 Right of Offset. Subject to the provisions of Section 10.7, the
----------------
Buyer may offset any and all Damages owned by the Selling Parties to the Buyer
pursuant to this Section 10 against the Note and any other payments owed the
Seller under Section 1.4. Neither the exercise of nor the failure to exercise
such right shall constitute an election or remedies or limit the Buyer in any
manner in the enforcement of any other legal or equitable remedies that may be
available to the Buyer.
10.11 Limited Right of Rescission. Other than for a willful
--------------------------------
misrepresentation by the Seller or the Shareholder, the Buyer waives any right
to rescission for a breach of a representation or warranty by the Seller or the
Shareholder.
11. Notices. Any notices or other communications required or permitted
-------
hereunder shall be sufficiently given if in writing (including
telecommunications) and delivered personally or sent by fax or other wire
transmission (with request for assurance in a manner typical with respect to
communications of that type), federal express or other overnight air courier
(postage prepaid), registered or certified mail (postage prepaid with return
receipt requested), addressed as follows or to such other address of which the
parties may have given notice:
To the Seller: Progress Graphics, Inc.
418 Summit Avenue
Jersey City, New Jersey 07356
Attn: Mr. Mario DeVita
Tel. No.: (201) 653-0717
Fax No.: (201) 653-1361
With a copy to: Contant, Scherby & Atkins
33 Hudson Street
Hackensack, New Jersey 07601
Attn: Richard Jon Contant, Esq.
Tel. No.: (201) 342-1070
Fax No.: (201) 342-5213
To the Buyer or Unidigital: Unidigital Inc.
229 West 28th Street
New York, New York 10001
Attn: Mr. William Dye, Chief Executive
Officer
Tel. No.: (212) 244-7820
Fax No.: (212) 244-7815
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With a copy to: Buchanan Ingersoll Professional
Corporation
500 College Road East
Princeton, New Jersey 08540
Attn: David J. Sorin, Esq.
Tel. No.: (609) 987-6800
Fax No.: (609) 520-0360
Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally or by wire
transmission with evidence of successful transmittal provided; (b) on the next
business day after mailing or deposit with an overnight air courier; or (c) five
business days after being sent, if sent by registered or certified mail.
12. Successors and Assigns. This Agreement shall be binding upon and
------------------------
inure to the benefit of the parties hereto and their respective successors and
assigns. Neither the Seller nor the Buyer may assign all or a portion of its
rights and obligations hereunder without the prior written consent of the other
party, except that the Buyer may assign all or a portion of its rights and
obligations hereunder to an Affiliate of the Buyer, provided that the Buyer
shall remain liable for the performance of the Buyer's obligations under this
Agreement. Any assignment in contravention of this provision shall be void.
13. Entire Agreement; Amendments; Attachments.
-----------------------------------------
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties except as expressly provided herein. The Buyer and the
Seller, by the consent of their respective Boards of Directors, or officers
authorized by such Boards, may amend or modify this Agreement, in such manner as
may be agreed upon, by a written instrument executed by the Buyer and the
Seller.
(b) If the provisions of any Schedule or Exhibit to this Agreement
are inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this Agreement.
14. Expenses. Except as otherwise expressly provided herein, the Buyer
--------
and the Seller shall each pay their own expenses in connection with this
Agreement and the transactions contemplated hereby.
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15. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New Jersey, without reference to
conflicts of laws rules or principles.
16. Section Headings. The section headings are for the convenience of
----------------
the parties and in no way alter, modify, amend, limit, or restrict the
contractual obligations of the parties.
17. Severability. The invalidity or unenforceability of any provision of
------------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
18. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
19. Currency. Unless otherwise indicated, all dollar amounts referred to
--------
in this Agreement are in United States funds.
20. Waiver. The rights and remedies of the parties to this Agreement
------
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party, (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given, and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
21. Ambiguity in Drafting. Each party shall have been deemed to have
---------------------
participated equally in the drafting of this Agreement and the agreements
contemplated hereby and any ambiguity in any such contracts shall not be
construed against any purported author thereof.
22. Dispute Resolution.
------------------
(a) Any and all disputes or controversies arising hereunder, except
as otherwise provided for in Section 1.4, shall be submitted to arbitration and
shall be settled by arbitration by a panel of three (3) arbitrators
("ARBITRATORS"), in accordance with the rules then pertaining of the American
Arbitration Association, and judgment upon the decision rendered may be endorsed
in any court of competent jurisdiction. The cost of such arbitration proceedings
shall be borne equally by the parties, each of which shall bear its own
attorney's fees, except as hereinafter provided.
(b) If it is determined by the Arbitrators that one party was in
default hereof
-40-
<PAGE>
(the "DEFAULTING PARTY"), which default either: (i) resulted in the Defaulting
Party unjustifiably terminating this Agreement or any agreement entered into at
the Closing contemplated hereby; (ii) justified the termination thereof by the
other party; or (iii) warranted the institution or defense of such arbitration
claim by the non-defaulting party, the Defaulting Party shall bear the costs of
the arbitration proceeding and pay to the other party the reasonable attorney's
fees and costs incurred in such proceeding, which amounts shall be separately
determined by the Arbitrators in such proceeding and become part of the amount
of the Arbitration award, payable by the Defaulting Party to the other party.
(c) If the Defaulting Party does not pay to the other party the
arbitration award within ten (10) days of written demand therefor, and the other
party shall institute suit in a court of competent jurisdiction to enforce said
decision, the Defaulting Party shall pay the other party the reasonable
attorney's fees and court costs incurred in such action.
(d) Refusal of one (1) party to arbitrate shall entitle any other
party hereto to specifically enforce this Agreement in a court of competent
jurisdiction, and as a result of said refusal to arbitrate, shall be entitled to
receive its cost and reasonable attorney's fees incurred in such enforcement
action.
(e) Nothing herein is intended to preclude any party hereto from
seeking injunctive and/or equitable relief from a court of competent
jurisdiction in any event of default for which there is no adequate remedy at
law.
[SIGNATURE PAGE FOLLOWS]
-41-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
(Corporate Seal) SELLER:
ATTEST: PROGRESS GRAPHICS, INC.
/s/ Joseph Matos By: /s/ Mario DeVita
- --------------------------------- ---------------------------------
Joseph Matos, Assistant Secretary Name: Mario DeVita
Title: President
SHAREHOLDER:
/s/ Mario DeVita
------------------------------------
Mario DeVita
(Corporate Seal) BUYER:
ATTEST: UNISON (NY), INC.
/s/ Peter Saad By: /s/ William E. Dye
- -------------------------------- ---------------------------------
Peter Saad, Secretary Name: William E. Dye
Title: Chairman of the Board
(Corporate Seal)
ATTEST: UNIDIGITAL INC.
/s/ Peter Saad By: /s/ William E. Dye
- ------------------------------- ---------------------------------
Peter Saad, Assistant Secretary Name: William E. Dye
Title: Chief Executive Officer
-42-
<PAGE>
CREDIT AGREEMENT
among
UNIDIGITAL INC.
as Borrower,
THE BANKS, FINANCIAL INSTITUTIONS AND
OTHER INSTITUTIONAL LENDERS NAMED HEREIN,
as Initial Lenders,
and
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.,
as Documentation Agent
and
FLEET BANK, N.A.,
as Initial Issuing Bank, Swing Line Bank and Administrative Agent
Dated as of May 12, 1999
<PAGE>
TABLE OF CONTENTS
Page
PRELIMINARY STATEMENTS.........................................................1
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS..........................................3
Section 1.01. Certain Defined Terms.................................3
Section 1.02. Computation of Time Periods..........................43
Section 1.03. Accounting Terms.....................................43
ARTICLE II
AMOUNTS AND TERMS OF
THE ADVANCES AND THE LETTERS OF CREDIT...................................43
Section 2.01. The Advances.........................................43
(a) The Revolving Credit Advances...................43
(b) The Swing Line Advances.........................44
(c) Letters of Credit...............................44
Section 2.02. Making the Advances..................................45
Section 2.03. Issuance of and Drawings and
Reimbursement Under Letters of Credit................49
(a) Request for Issuance............................49
(b) Letter of Credit Reports........................50
(c) Drawing and Reimbursement.......................50
(d) Failure to Make Letter of Credit Advances.......51
Section 2.04. Repayment of Advances................................52
(a) Revolving Credit Advances.......................52
(b) Swing Line Advances.............................52
(c) Letter of Credit Advances.......................52
Section 2.05. Termination or Reduction of the Commitments;
Increase in the Commitments..........................53
(a) Optional Termination or Reduction
of the Commitments..............................53
(b) Mandatory Termination or Reduction
of the Commitments..............................54
(c) Increase in the Commitment......................55
Section 2.06. Prepayments and Repayments...........................56
(a) Optional........................................56
(b) Mandatory.......................................57
(c) Application of Prepayments and Repayments.......58
-i-
<PAGE>
Page
(d) Miscellaneous Provisions Relating to Prepayments,
Termination or Reduction of Commitments and
Maintenance of L/C Cash Collateral Account......58
Section 2.07. Interest.............................................60
(a) Scheduled Interest..............................60
(b) Default Interest................................61
(c) Notice of Interest Rate.........................61
Section 2.08. Fees.................................................61
(a) Commitment Fees.................................61
(b) Letter of Credit Fees...........................62
(c) Administrative Agent's Fees.....................63
Section 2.09. Conversion of Advances...............................63
(a) Optional........................................63
(b) Mandatory.......................................64
Section 2.10. Increased Costs, Etc.................................65
Section 2.11. Payments and Computations............................67
Section 2.12. Taxes................................................69
Section 2.13. Sharing of Payments, Etc.............................73
Section 2.14. Use of Proceeds......................................74
Section 2.15. Defaulting Lenders...................................74
Section 2.16. Regulation U.........................................78
ARTICLE III
CONDITIONS OF LENDING....................................................78
Section 3.01. Conditions Precedent to the Initial Funding Date.....78
(a) Credit Agreement................................78
(b) Resolutions; Incumbency.........................78
(c) Organization Documents; Good Standing...........79
(d) Legal Opinions..................................79
(e) Certificate.....................................79
(f) Pro Forma Balance Sheet; Projections; and
Financials......................................80
(g) Solvency Certificates...........................80
(h) [Intentionally Omitted].........................80
(i) Notes...........................................80
(j) Lender Release Letters..........................81
(k) Collateral Documents............................81
(l) Payment of Fees.................................83
(n) Other Documents.................................84
-ii-
<PAGE>
Page
Section 3.02. Conditions Precedent to All Credit Extensions........84
(a) Notice, Application; Continuation of
Representations and Warranties..................84
(b) Permitted Acquisitions..........................85
(c) Other Approvals.................................85
Section 3.03. Determinations Under Sections 3.01 and 3.02..........85
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...........................................86
Section 4.01. Representations and Warranties.......................86
ARTICLE V
COVENANTS OF THE BORROWER AND THE SUBSIDIARIES...........................93
Section 5.01. Affirmative Covenants................................93
(a) Compliance with Law.............................93
(b) Payment of Taxes, Etc...........................93
(c) Compliance with Environmental Laws..............93
(d) Maintenance of Insurance........................94
(e) Preservation of Corporate Existence, Etc........94
(f) Visitation Rights...............................94
(g) Keeping of Books................................95
(h) Maintenance of Properties, Etc..................95
(i) Performance of Material Contracts...............95
(j) Transactions with Affiliates....................95
(k) Interest Rate Protection........................95
(l) Year 2000 Compatibility.........................96
(m) Agreement to Grant Additional Security..........96
(n) Foreign Subsidiaries Security...................99
Section 5.02. Negative Covenants..................................100
(a) Liens, Etc.....................................100
(b) Debt...........................................101
(c) Fundamental Changes............................104
(d) Sales, Etc. of Assets.........................104
(e) Investments in Other Persons...................105
(f) Dividends Etc..................................106
(g) Leases.........................................106
(h) Change in Nature of Business...................106
(i) Charter Amendments.............................107
(j) Accounting Changes.............................107
(k) Prepayments, Etc. of Debt.....................107
(l) Amendment, Etc. of Material Contracts.........107
(m) Negative Pledge................................107
-iii-
<PAGE>
Page
(n) Partnerships, New Subsidiaries.................108
(o) Speculative Transactions.......................108
(p) Capital Expenditures...........................108
(q) Issuance of Stock..............................109
(r) Sale and Leasebacks............................110
Section 5.03. Reporting Requirements..............................110
(a) Default Notice.................................110
(b) Annual Financials..............................110
(c) Quarterly Financials...........................110
(d) Monthly Reports................................111
(e) Certificate of Independent Certified
Accountants....................................111
(f) Certificate of Responsible Officer.............111
(g) Annual Forecasts...............................112
(h) Insurance......................................112
(i) ERISA Events and ERISA Reports.................112
(j) Plan Terminations..............................112
(k) Litigation.....................................112
(l) Securities Reports.............................113
(m) Agreement Notices..............................113
(n) Environmental Conditions.......................113
(o) Management Letters.............................113
(p) Permitted Acquisition Documents................113
(q) Other Information..............................114
Section 5.04. Financial Covenants.................................114
(a) Consolidated Total Funded Debt to
Pro Forma EBITDA Ratio.........................114
(b) Consolidated Senior Debt to
Pro Forma EBITDA Ratio.........................114
(c) Fixed Charge Coverage Ratio....................115
(d) Minimum Net Worth..............................115
ARTICLE VI
EVENTS OF DEFAULT.......................................................115
Section 6.01. Events of Default...................................116
Section 6.02. Actions in Respect of the Letters of Credit
upon Default........................................120
ARTICLE VII
THE ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT........................120
Section 7.01. Authorization and Action............................120
Section 7.02. Agent's Reliance, Etc...............................121
Section 7.03. Fleet and Affiliates................................122
Section 7.04. Lender Party Credit Decision........................122
-iv-
<PAGE>
Page
Section 7.05. Indemnification.....................................122
Section 7.06. Successor Administrative Agents.....................124
Section 7.07. Documentation Agent.................................125
ARTICLE VIII
MISCELLANEOUS...........................................................126
Section 8.01. Amendments, Etc.....................................126
Section 8.02. Notices Etc.........................................127
Section 8.03. No Waiver; Remedies.................................129
Section 8.04. Costs and Expenses..................................129
Section 8.05. Right of Set-off....................................132
Section 8.06. Binding Effect......................................133
Section 8.07. Assignments and Participations......................134
Section 8.08. Execution in Counterparts; Severability.............140
Section 8.09. No Liability of the Issuing Bank....................140
Section 8.10. Confidentiality.....................................141
Section 8.11. Jurisdiction, Etc...................................141
Section 8.12. Governing Law.......................................143
Section 8.13. Waiver of Jury Trial................................143
Section 8.14. Replacement of Items................................143
Section 8.15. Certain Payments....................................144
EXHIBITS
Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Swing Line Note
Exhibit D - Form of Notice of Borrowing
SCHEDULES
Schedule I Commitments and Applicable Lending Offices
Schedule 2.14(a) Foreign Subsidiary Debt
Schedule 4.01(b) Subsidiaries
Schedule 4.01(d) Required Authorizations and Approvals
Schedule 4.01(i) Disclosed Litigation
Schedule 4.01(k) Welfare Plans
Schedule 4.01(o) Certain Agreements
Schedule 4.01(t) Surviving Debt
Schedule 5.02(a)(iii) Liens
-v-
<PAGE>
CREDIT AGREEMENT
----------------
CREDIT AGREEMENT, dated as of May 12, 1999, by and among UNIDIGITAL INC., a
Delaware corporation (together with its successors or assigns, the "Borrower"),
the banks, financial institutions and other institutional lenders listed on the
signature pages hereof as the Initial Lenders (the "Initial Lenders"), any
Lender Party hereto (as hereinafter defined), FLEET BANK N.A., as Initial
Issuing Bank (the "Initial Issuing Bank"), FLEET BANK, N.A., as Swing Line Bank
(as hereinafter defined), BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC., as
Documentation Agent, and FLEET BANK, N.A., as administrative agent (together
with any successor appointed pursuant to Article VII, the "Administrative
Agent") for the Lender Parties and the Hedge Banks (as hereinafter defined).
PRELIMINARY STATEMENTS:
----------------------
The Borrower has requested that the Lender Parties make loans to the
Borrower and issue letters of credit having an aggregate principal and face
amount at any one time outstanding of up to Sixty-Five Million Dollars
($65,000,000), which amount may be increased to Eighty Million Dollars
($80,000,000) in the event Borrower raises subordinated debt with net proceeds
of at least Twenty Million Dollars ($20,000,000) on terms and conditions
acceptable to the Administrative Agent as provided for in this Agreement, (i) to
repay all outstanding Debt pursuant to the Existing Credit Facility, (ii) to
finance future acquisitions by the Borrower or any of its Subsidiaries, (iii) to
provide for working capital and other general corporate purposes of the Borrower
and its Subsidiaries, and (iv) to pay fees and expenses relating to the
financing set forth in this Agreement and the other Loan Documents and the
Lender Parties have agreed to make such loans and issue such letters of credit
all on and subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
<PAGE>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" means all Accounts referred to in Section 1.1 of the Security
Agreement.
"Additional Collateral Documents" has the meaning specified in section
5.01(n)(v).
"Acquisition Rights Assignment" has the meaning specified in section
3.01(k)(iii).
"Administrative Agent" has the meaning specified in the recital of parties
to this Agreement.
"Administrative Agent's Account" means the account of the Administrative
Agent maintained by the Administrative Agent at its office at Fleet Bank, N.A.,
1185 Avenue of the Americas, New York, new York 10036, Account No.
1510352-03102, Attention: Loan Administration.
"Advance" means a Revolving Credit Advance, a Swing Line Advance or a
Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling," "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 50% or more of the Voting Stock of such Person or
to direct or cause the direction of the
2
<PAGE>
management and policies of such Person, whether through the ownership of Voting
Stock, by contract or otherwise.
"Applicable Lending Office" means, with respect to each Lender Party, such
Lender Party's Domestic Lending Office in the case of a Prime Rate Advance and
such Lender Party's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance.
"Applicable Margin" means at any date of determination thereof, the
applicable percentage set forth below opposite the applicable ratio of
Consolidated Total Funded Debt to Pro Forma EBITDA determined as set forth
below:
APPLICABLE MARGIN FOR REVOLVING CREDIT ADVANCES
-----------------------------------------------
<TABLE>
<CAPTION>
Ratio of Consolidated Total Applicable Margin for Applicable Margin for
Funded Debt/Pro Forma EBITDA Eurodollar Rate Advances Prime Rate Advances
- ---------------------------- ------------------------ -------------------
<S> <C> <C>
Equal to or greater than 3.50
to 1.00 3.25% 2.00%
Equal to or greater than 3.00
to 1.00, but less than 3.50 to 1.00 3.00% 1.75%
Equal to or greater than 2.50 to
1.00, but less than 3.00 to 1.00 2.75% 1.50%
Equal to or greater than 2.00 to
1.00, but less than 2.50 to 1.00 2.50% 1.25%
Less than 2.00 to 1.00 2.25% 1.00%
</TABLE>
3
<PAGE>
The Applicable Margin for each Advance shall be determined on a quarterly basis
by reference to the ratio of Consolidated Total Funded Debt to Pro Forma EBITDA
for the preceding four (4) full fiscal quarters, as reflected on the financial
statements provided to the Administrative Agent pursuant to Section 5.03(c) or
(d), three (3) Business Days after the date on which the Administrative Agent
receives the foregoing financial statements, together with a certificate of a
Responsible Officer of the Borrower demonstrating the ratio of Consolidated
Total Funded Debt to Pro Forma EBITDA. If the Borrower has not submitted to the
Administrative Agent the information described above as and when required under
Section 5.03(b) or (c), as the case may be, the Applicable Margin in effect for
the period commencing on such date shall be one (1) tier higher than the
Applicable Margin in effect during the preceding calendar quarter, until such
time as the Borrower submits to the Administrative Agent the information so
required, and within three (3) Business Days after receipt thereof the
Applicable Margin shall be adjusted retroactively for the relevant period.
Notwithstanding the above, for the first six (6) months from the Initial
Facility Date, the Applicable Margin for a Revolving Credit Advance shall be
3.25% for a Eurodollar Advance and 2.00% for a Prime Rate Advance.
"Asset Disposition" has the meaning specified in Section 2.06(b).
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender Party and an Eligible Assignee, and accepted by the Administrative
Agent, in accordance with Section 8.07, substantially in the form of Exhibit A
---------
hereto.
"Available Amount" of any Letter of Credit means, at any time, the maximum
amount available to be drawn under such Letter of Credit at such time (assuming
compliance at such time with all conditions to drawing).
"Bank Hedge Agreement" means any Hedge Agreement required or permitted
under this Agreement that is entered into by and between the Borrower and any
Hedge Bank, as the same now
4
<PAGE>
exists or may hereinafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
"Borrower" has the meaning specified in the recital of parties to this
Agreement.
"Borrower's Account" means an account of the Borrower maintained by the
Borrower with Fleet Bank, N.A.
"Borrowing" means a Revolving Credit Borrowing or a Swing Line Borrowing.
"Business Day" means a day of the year on which banks are not required or
authorized by law to close in New York, New York and, if the applicable Business
Day relates to any Eurodollar Rate Advances, on which dealings in U.S. dollars
are carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period, the sum of all
expenditures made, directly or indirectly, by such Person or any of its
Subsidiaries during such period for equipment, fixed assets, real property or
improvements, or for replacements or substitutions therefor or additions
thereto, that have been or should be, in accordance with GAAP, reflected as
additions to property, plant or equipment on a Consolidated balance sheet of
such Person.
"Capital Stock" means any and all shares, interests, participation or other
equivalents (however designated) of capital stock of a corporation, any and all
similar ownership interests in a Person (other than a corporation) and any and
all warrants or options to purchase any of the foregoing.
"Capitalized Leases" means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.
5
<PAGE>
"Cash Equivalents" means any of the following, to the extent owned by the
Borrower or any of its Subsidiaries free and clear of all Liens other than Liens
created under the Collateral Documents:
(i) readily marketable direct obligations of the government of the
United States or any agency or instrumentality thereof or obligations
unconditionally guaranteed by the full faith and credit of the Government of the
United States or any agency or instrumentality thereof having a maturity of not
greater than twelve (12) months from the date of issuance thereof;
(ii) insured certificates of deposit, bankers' acceptances or time
deposits (including, without limitation, Eurodollar denominated and Yankee
issues) having a maturity of not greater than twelve (12) months from the date
of issuance thereof with any commercial bank or financial institution having
combined capital and surplus of at least $1 billion and either located in the
U.S. or with respect to Foreign Subsidiaries organized under the laws of an
Approved Country (as defined in clause (ix) below) and a rating of at least
"P-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or "A-1"
(or the then equivalent grade) by Standard & Poor's Ratings Group, or with
respect to banks located in an Approved Country, the equivalent thereof;
(iii) corporate securities and commercial paper having a maturity of
not greater than twelve (12) months from the date of issuance and rated at least
"P-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or "A-1"
(or the then equivalent grade) by Standard & Poor's Ratings Group;
(iv) short-term tax exempt securities including municipal notes,
commercial paper, auction rate floaters, and floating rate notes rated at least
"P-1" (or the then equivalent grade) by Moody's Investors Service, Inc. or "A-1"
(or the then equivalent grade) by Standard & Poor's Ratings Group, and bonds
rated at least "AA" (or the then equivalent grade) by Standard & Poor's Ratings
Group;
6
<PAGE>
(v) pre-refunded municipal bonds escrowed to maturity and backed by
U.S. Treasury securities;
(vi) repurchase agreements covering U.S. Treasury or U.S. government
agency securities valued at not less favorably than 102% of market value with a
term of not more than seven (7) days with major banks and dealers that are
recognized as "primary dealers" by the Federal Reserve Bank of New York;
(vii) tax exempt preferred stock or bonds issued with a rate-reset
mechanism and a maximum term of 180 days and rated at least "AAA" (or the then
equivalent grade) by Moody's Investors Service, Inc.;
(viii) money market mutual funds that offer daily purchase and
redemption, maintain a constant share price, are 'no-load' funds and have a
constant $1.00 net asset value; or
(ix) with respect to Foreign Subsidiaries, government obligations
of (A) the United Kingdom, (B) the country in which such Foreign Subsidiary
maintains its chief executive office, (C) any other country approved by the
Administrative Agent, or (D) any other country whose debt securities are rated
by Standard & Poor's Ratings Group and Moody's Investors Service, Inc. A-1 or
P-1, respectively, or the equivalent thereof (if a short-term debt rating is
provided by either) or at least AA or AA2, respectively, or the equivalent
thereof (if a long-term unsecured debt rating is provided by either) (each such
country, an "Approved Country"), in each case with maturities of less than 12
months.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended from time to
time.
"CERCLIS" means the Comprehensive Environmental Response, Compensation and
Liability Information System maintained by the U.S. Environmental Protection
Agency.
7
<PAGE>
"Collateral" means all "Collateral" referred to in the Collateral Documents
and all other property that is or is intended to be subject to any Lien in favor
of the Administrative Agent for the benefit of the Secured Parties.
"Collateral Documents" means each Security Agreement, each Pledge Agreement
and any other agreement that creates or purports to create a Lien in favor of
the Administrative Agent for the benefit of the Secured Parties as the same now
exists or may hereinafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
"Commitment" means a Revolving Credit Commitment or a Letter of Credit
Commitment.
"Confidential Information" means information that the Borrower furnishes to
the Administrative Agent or any Lender Party in a writing designated as
confidential, but does not include any such information that is or becomes
generally available to the public other than as a result of a breach by the
Administrative Agent or any Lender Party of its obligations hereunder or that is
or becomes available to the Administrative Agent or such Lender Party from a
source other than the Borrower that is not, to the best of the Administrative
Agent's or such Lender Party's knowledge, acting in violation of a
confidentiality agreement with the Borrower.
"Consolidated" refers to the consolidation of accounts, in accordance with
GAAP, of the Borrower and all of its Subsidiaries.
"Consolidated Lease Expense" means, for any period, the aggregate amount of
fixed or contingent rentals payable by the Borrower and its Subsidiaries,
determined on a consolidated basis, in accordance with GAAP, for such period
with respect to leases of personal property.
"Conversion", "Convert" and "Converted" each refer to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section 2.09 or
2.10.
8
<PAGE>
"Credit Extension" means (i) the making of any Advances hereunder, and (ii)
the issuance of any Letters of Credit hereunder.
"Current Assets" of any Person means all assets of such Person that would,
in accordance with GAAP, be classified as current assets of a company conducting
a business the same as or similar to that of such Person, after deducting
adequate reserves in each case in which a reserve is proper in accordance with
GAAP.
"Current Liabilities" of any Person means (a) Debt of such Person, except
Total Funded Debt, that by its terms is payable on demand or matures within one
year after the date of determination (excluding any Debt renewable or
extendible, at the option of such Person, to a date more than one year from such
date or arising under a revolving credit or similar agreement that obligates the
lender or lenders to extend credit during a period of more than one year from
such date), (b) all amounts of Total Funded Debt of such Person required to be
paid or prepaid within one year after the date of determination and (c) all
other items (including taxes accrued as estimated) that in accordance with GAAP
would be classified as current liabilities of such Person.
"Debt" of any Person means, without duplication,
(i) all indebtedness of such Person for borrowed money,
(ii) all Obligations of such Person for the deferred purchase price
of property or services,
(iii) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments,
(iv) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property),
9
<PAGE>
(v) all Obligations of such Person as lessee under Capitalized
Leases,
(vi) all Obligations, contingent or otherwise, of such Person in
respect of letters of credit or similar facilities,
(vii) all Obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of or
other ownership or profit interest in such Person or any other Person or any
warrants, rights or options to acquire such capital stock,
(viii) all Debt of others referred to in clauses (i) through (vii)
above or clause (ix) below guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (A) to pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt, (B) to purchase, sell or lease
(as lessee or lessor) property, or to purchase or sell services, primarily for
the purpose of enabling the debtor to make payment of such Debt or to assure the
holder of such Debt against loss, (C) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are rendered)
or (D) otherwise to assure a creditor against loss, and
(ix) all Debt referred to in clauses (i) through (viii) above of
another Person secured by (or for which the holder of such Debt has an existing
right, contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts, contract rights or inventory) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Debt.
10
<PAGE>
"Debt Issuance" means any issuance or sale or other incurrence by the
Borrower or any of its Subsidiaries of any Debt; provided, however, that for
-------- -------
purposes of determination of Net Cash Proceeds under Section 2.06(b), the term
"Debt Issuance" shall not include any Debt Issuance, the proceeds of which are
used to prepay or refinance the Existing Subordinated Debt.
"Default" means any Event of Default or any event that would constitute an
Event of Default but for the requirement that notice be given or time elapse or
both.
"Defaulted Advance" means, with respect to any Lender Party at any time,
the portion of any Advance required to be made by such Lender Party to the
Borrower pursuant to Section 2.02 at or prior to such time which has not been
made by such Lender Party or by the Administrative Agent for the account of such
Lender Party pursuant to Section 2.02(e) as of such time. In the event that a
portion of a Defaulted Advance shall be deemed made pursuant to Section 2.15(a),
the remaining portion of such Defaulted Advance shall be considered a Defaulted
Advance originally required to be made pursuant to Section 2.02 on the same date
as the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at any time, any
amount required to be paid by such Lender Party to the Administrative Agent or
any other Lender Party hereunder or under any other Loan Document at or prior to
such time which has not been so paid as of such time, including, without
limitation, any amount required to be paid by such Lender Party to (i) the Swing
Line Bank pursuant to Section 2.02(b) to repay a portion of a Swing Line Advance
made by the Swing Line Bank, (ii) the Issuing Bank pursuant to Section 2.03(c)
to purchase a portion of a Letter of Credit Advance made by the Issuing Bank,
(iii) the Administrative Agent pursuant to Section 2.02(e) to reimburse the
Administrative Agent for the amount of any Advance made by the Administrative
Agent for the account of such Lender Party, (iv) any other Lender Party pursuant
to Section 2.13 to purchase any participation in Advances owing to such other
Lender Party and (v) the Administrative Agent or the Issuing Bank pursuant to
Section 7.05 to reimburse the Administrative Agent or the Issuing Bank for such
Lender Party's ratable share of any amount required to be paid
11
<PAGE>
by the Lender Parties to the Administrative Agent or the Issuing Bank as
provided therein. In the event that a portion of a Defaulted Amount shall be
deemed paid pursuant to Section 2.15(b), the remaining portion of such Defaulted
Amount shall be considered a Defaulted Amount originally required to be paid
hereunder or under any other Loan Document on the same date as the Defaulted
Amount so deemed paid in part.
"Defaulting Lender" means, at any time, any Lender Party that, at such
time, (i) owes a Defaulted Advance or a Defaulted Amount or (ii) shall take any
action or be the subject of any action or proceeding of a type described in
Section 6.01(f).
"Disclosed Litigation" has the meaning specified in Section 4.01(i).
"Disposal" means the discharge, deposit, injection, dumping, spilling,
leaking or placing of any solid waste or hazardous waste, as those terms are
defined by any federal, state, local or foreign law, into or on any land or
water so that such solid waste or hazardous waste or any constituents thereof
may enter the environment or be emitted into the air or discharged into any
waters, including ground waters.
"Dollars", "dollars" and the symbol "$" each mean the lawful currency of
the United States.
"Domestic Lending Office" means, with respect to any Lender Party or Hedge
Bank, the office of such Lender Party (or, in the case of a Hedge Bank, the
office of the corresponding Lender Party) specified as its "Domestic Lending
Office" opposite such Lender Party's name on Schedule I hereto or in the
----------
Assignment and Acceptance pursuant to which it became a Lender Party, as the
case may be, or such other office of such Lender Party or Hedge Bank as such
Lender Party or Hedge Bank may from time to time specify to the Borrower and the
Administrative Agent.
"Domestic Subsidiary" means any Subsidiary organized under the laws of the
United States of America or any State thereof and any successor or assign
thereof.
12
<PAGE>
"EBITDA" means, for any period, the sum, determined on a Consolidated basis
without duplication, of (a) net income (or net loss), (b) interest expense, (c)
income tax expense, (d) depreciation expense, (e) amortization expense, (f)
non-cash charges, (g) the legal and accounting costs and other reasonable
expenses incurred in connection with any Permitted Acquisition completed after
the date of this Agreement, in each case determined in accordance with GAAP for
such period and (h) other non-recurring, non-operating expenses, including,
without limitation, restructuring expenses; provided, however, that net income
-------- -------
(or net loss) shall be computed without giving effect to extraordinary losses or
gains; provided, further, that EBITDA shall in any event exclude from the
-------- -------
Initial Funding Date, the amount of any non-cash income recognized during any
period for which EBITDA is determined.
"Eligible Assignee" means with respect to the rights and obligations
related to any Facility (other than the Letter of Credit Facility) and all of
the other rights and obligations under this Agreement, (A) a Lender; (B) an
Affiliate of a Lender; and (C) subject to the prior approval of the
Administrative Agent and, so long as no Default or Event of Default shall have
occurred and be continuing, the Borrower, such approval not to be unreasonably
withheld or delayed, (i) a commercial bank organized under the laws of the
United States, or any State thereof, and having total assets in excess of
$500,000,000; (ii) a savings and loan association or savings bank organized
under the laws of the United States, or any State thereof, and having total
assets in excess of $500,000,000; (iii) a commercial bank organized under the
laws of any other country that is a member of the OECD or has concluded special
lending arrangements with the International Monetary Fund associated with its
general arrangements to borrow or of the Cayman Islands, or a political
subdivision of any such country, and having total assets in excess of
$500,000,000, so long as such bank is acting through a branch or agency located
in the United States; (iv) the central bank of any country that is a member of
the OECD; and (v) a finance company, insurance company or other financial
institution or fund (whether a corporation, partnership, trust or other entity)
located in the United States that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having
total assets in excess of $500,000,000; and,
13
<PAGE>
with respect to the rights and obligations related to the Letter of Credit
Facility, a Person that is an Eligible Assignee under subclause (i) or (iii) of
clause (C) of this definition and is approved by the Administrative Agent and
the Borrower, such approval not to be unreasonably withheld or delayed (and
provided that no such approval shall be necessary if an Eligible Assignee is an
Affiliate of the Assignor); provided, however, that neither the Borrower, any of
-------- -------
its Subsidiaries nor any Affiliate of the Borrower or any of its Subsidiaries
shall qualify as an Eligible Assignee under this definition.
"Environmental Action" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent agreement
relating in any way to any Environmental Law, any Environmental Permit or
Hazardous Material or arising from alleged injury or threat to public health and
safety or the environment, including, without limitation, (i) by any
governmental or regulatory authority or third party for enforcement, cleanup,
Removal, Response, Remedial or other actions or damages and (ii) by any
governmental or regulatory authority or third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any international or transnational law, federal,
state, local or foreign statute, law, ordinance, rule, regulation, code, order,
writ, judgment, injunction, decree or judicial or agency interpretation, policy
or guidelines relating to pollution or protection of the environment or natural
resources, including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, threatened release, release or
discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any Environmental Law.
"Equity Issuance" means any issuance or sale by the Borrower or any of its
Subsidiaries of any of its capital stock or other equity securities or any
obligations convertible into or exchangeable for, or giving any Person a right,
option or warrant to acquire such securities or such convertible or
14
<PAGE>
exchangeable obligations; provided, however, that for purposes of determination
-------- -------
of Net Cash Proceeds under Section 2.06(b), the term "Equity Issuance" shall not
include any issuance or sale of (a) capital stock of the Borrower to any Person
as consideration paid in connection with any Permitted Acquisition; (b) capital
stock to qualify any director of the Borrower or any of its Subsidiaries if
required by applicable law; (c) capital stock or other equity securities to
directors, management and employees and other eligible participants of the
Borrower or any of its Subsidiaries, pursuant to a stock purchase, stock option
or similar incentive plan of the Borrower or any of its Subsidiaries, or any
exercise of options issued pursuant thereto; (d) capital stock of any Subsidiary
of the Borrower to the Borrower or any other Wholly-Owned Subsidiary of the
Borrower; (e) capital stock of the Borrower to any Person for cash, if, and only
if, in respect of this clause (e); such Net Cash Proceeds are applied towards
the payment of the Permitted Acquisition Purchase Price as follows: if the
offering documents for such issuance or sale identify a specific acquisition
transaction, within ten (10) days after the consummation of such acquisition
transaction; (f) capital stock of the Borrower issued in connection with the
exercise of warrants granted prior to the date hereof; and (g) capital stock of
the Borrower or other equity securities or any obligations converted into or
exchangeable for capital stock of the Borrower issued in connection with the
Subordinated Issuance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of ERISA
is a member of the controlled group of any Loan Party, or under common control
with any Loan Party, within the meaning of Section 414 of the Internal Revenue
Code.
"ERISA Event" means (i) (y) the occurrence of a reportable event, within
the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day
notice requirement with respect to such event has been waived by the PBGC, or
(z) the requirements of subsection (1) of Section 4043(b) of ERISA (without
regard to subsection (2) of such Section) are met with respect to a
15
<PAGE>
contributing sponsor, as defined in Section 4001 (a)(13) of ERISA, of a Plan,
and an event described in paragraph (9), (10), (11), (12) or (13) of
Section 4043(c) of ERISA is reasonably expected to occur with respect to such
Plan within the following 30 days; (ii) the application for a minimum funding
waiver with respect to a Plan; (iii) the provision by the administrator of any
Plan of a notice of intent to terminate such Plan under ERISA Section 4041(c),
pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect
to a plan amendment referred to in Section 4041(e) of ERISA); (iv) the cessation
of operations at a facility of any Loan Party or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA; (v) the withdrawal by any
Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan
year for which it was a substantial employer, as defined in Section 4001(a)(2)
of ERISA; (vi) the conditions for imposition of a lien under Section 302(f) of
ERISA shall have been met with respect to any Plan; (vii) the adoption of an
amendment to a Plan requiring the provision of security to such Plan pursuant to
Section 307 of ERISA; or (viii) the institution by the PBGC of proceedings to
terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any
event or condition described in Section 4042 of ERISA that constitutes grounds
for the termination of, or the appointment of a trustee to administer, such
Plan.
"Eurocurrency Liabilities" has the meaning specified in Regulation D of the
Board of Governors of the Federal Reserve System, as in effect from time to
time.
"Eurodollar Lending Office" means, with respect to any Lender Party, the
office of such Lender Party specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and Acceptance
----------
pursuant to which it became a Lender Party (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Lender Party as such
Lender Party may from time to time specify to the Borrower and the
Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all Eurodollar Rate
Advances comprising part of the same Borrowing, an interest rate per annum
(rounded upward, if necessary, to the nearest 1/32 of one percent) as determined
on the basis of the offered rates for deposits in U.S. dollars, for a period of
time comparable to such Interest Period which appears on the Telerate Page
16
<PAGE>
3750 as of 11:00 a.m. (New York time) two Business Days before the first day of
such Interest Period; provided, however, that if the rate described above does
-------- -------
not appear on the Telerate System on any applicable interest determination date,
the Eurodollar Rate shall be the rate (rounded upward as described above, if
necessary) for deposits in U.S. dollars for a period substantially equal to the
interest period on the Reuters Page "LIBO" (or such other page as may replace
the LIBO page on that service for the purpose of displaying such rates), as of
11:00 a.m. (New York time) two Business Days before the first day of such
Interest Period.
If both the Telerate and Reuters system are unavailable, then the rate for
that date will be determined on the basis of the offered rates for deposits in
U.S. dollars for a period of time comparable to such Interest Period which are
offered by four major banks in the London interbank market at approximately
11:00 a.m. (New York time) two Business Days before the first day of such
Interest Period as selected by the Administrative Agent. The principal London
office of each of the four major London banks will be requested to provide a
quotation of its U.S. dollar deposit offered rate. If at least two such
quotations are provided, the rate for that date will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as requested, the rate
for that date will be determined on the basis of the rates quoted for loans in
U.S. dollars to leading European banks for a period of time comparable to such
Interest Period offered by major banks in New York City at approximately 11:00
a.m. (New York time) two Business Days before the first day of such Interest
Period. In the event that the Administrative Agent is unable to obtain any such
quotation as provided above, it will be deemed that the Eurodollar Rate for such
Interest Period cannot be determined.
In the event that the Board of Governors, of the Federal Reserve System
shall impose a Eurodollar Rate Reserve Percentage with respect to Eurocurrency
Liabilities, the Eurodollar Rate for an Interest Period shall be equal to the
amount determined above for such Interest Period divided by a percentage equal
to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period.
17
<PAGE>
"Eurodollar Rate Advance" means an Advance that bears interest as provided
in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, the reserve
percentage applicable two Business Days before the first day of such Interest
Period under regulations issued from time to time by the Board of Governors of
the Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate on
Eurodollar Rate Advances is determined) having a term equal to such Interest
Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excess Cash Flow" means for any period the sum of (a) EBITDA of the
Borrower and its Subsidiaries for such period plus (b) the aggregate amount of
----
all non-cash charges deducted from Consolidated net income for such period, but
not added back in arriving at EBITDA less (c) the aggregate amount of mandatory
----
and optional prepayments or repayments of principal made by the Borrower and its
Subsidiaries on any Total Funded Debt of the Borrower and its Subsidiaries
during such period; provided, however, that, with respect to any optional
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prepayment of the Revolving Credit Advances, the amount of such prepayment shall
be expressly excluded from the determination of the amount in this clause (c) if
the Revolving Credit Facility is not, upon such repayment, permanently reduced
by the amount of such prepayment less (d) Capital Expenditures of the Borrower
----
and its Subsidiaries during such period less (e) the aggregate amount of all
----
federal, state, local and foreign taxes paid by the Borrower and its
Subsidiaries during such period less (f) the aggregate amount of interest paid
----
on any Debt of the Borrower and its Subsidiaries during such period less (g) the
----
aggregate amount of the cash portion of all non-recurring charges included in
arriving at such EBITDA less (h) dividends paid by the Borrower to the holders
----
of its common stock
18
<PAGE>
during such period to the extent that the Borrower is expressly permitted to pay
such dividends under this Agreement less (i) all cash paid as part of the cost
----
of any Permitted Acquisition.
"Existing Credit Facility" means the credit facilities pursuant to a Credit
Agreement, dated as of March 24, 1998, by and among the Borrower, lenders from
time parties to such agreement and Canadian Imperial Bank of Commerce, as
administrative agent for such lenders and each other agreement, document and/or
interest related thereto, in each case as the same exists or may hereinafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
"Existing Subordinated Debt" means the Subordinated Debt of the Borrower
existing on the date hereof pursuant to the Securities Purchase Agreement, dated
November 25, 1998, among the Borrower, certain Subsidiaries of the Borrower and
CIBC Wood Gundy Capital Corp. and any agreements, documents and instruments
related thereto, in each case, as the same now exists or may hereinafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
"Extraordinary Receipt" means any cash received by or paid to or for the
account of any Person not in the ordinary course of business, including, without
limitation, pension plan reversions, proceeds of casualty insurance and
condemnation awards (and payments in lieu thereof), excluding proceeds of any
other insurance; provided, however, that an Extraordinary Receipt shall not
-------- -------
include cash receipts received from proceeds of casualty insurance, condemnation
awards (or payments in lieu thereof) or indemnity payments to the extent that
such proceeds, awards or payments (i) in respect of loss or damage to equipment,
fixed assets, inventory or real property, are applied (or in respect of which
expenditures were previously incurred) to replace or repair such equipment,
fixed assets, inventory or real property so long as such application is made or
committed to be made within one hundred twenty (120) days (or such longer time
as may be commercially reasonable in the circumstances) after such Person's
receipt of such proceeds, awards or payments; or (ii) are received by any Person
in respect of any third party claim against such Person and applied to pay (or
to reimburse such Person for its prior payment of) such claim and the costs and
expenses of such Person with respect thereto.
19
<PAGE>
"Facility" means the Revolving Credit Facility, Swing Line Facility or the
Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fee Letter" has the meaning specified in Section 2.08(c).
"Financing Lease" means any lease of personal property, the obligations of
the lessee in respect of which are required in accordance with GAAP to be
capitalized on a balance sheet of the lessee.
"Fiscal Year" means a fiscal year of the Borrower and its Consolidated
Subsidiaries ending on August 31 in any calendar year.
"Fleet" means Fleet Bank, N.A. in its capacity as a Lender or Issuing Bank.
"Fleet Base Rate" has the meaning specified in the definition of "Prime
Rate" herein.
"Foreign Guarantor" means, collectively, each active Foreign Subsidiary, on
the Initial Funding Date and each Foreign Subsidiary created or acquired after
the Initial Funding Date, and, in each case, its respective successors and
assigns.
"Foreign Guaranty" has the meaning specified in Section 3.02(k)(vi).
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<PAGE>
"Foreign Subsidiary" means any Subsidiary organized under the laws of any
jurisdiction other than the United States of America or any State thereof and,
in each case, successors and assigns thereof.
"GAAP" has the meaning specified in Section 1.03.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranteed Obligations" has the meaning specified in the Subsidiary
Guaranty and the Foreign Guaranty.
"Hazardous Materials" means (i) petroleum or petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials, polychlorinated biophenyls and radon gas and (ii) any other
chemicals, materials or substances designated, classified or regulated as
hazardous or toxic or as a pollutant or contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements, currency
future or option contracts and other similar agreements.
"Hedge Bank" means any Lender Party or any Affiliate thereof, in its
capacity as a party to a Bank Hedge Agreement and each Eligible Assignee to
which rights and obligations hereunder and other the other Loan Documents, as
applicable, have been assigned pursuant to Section 8.07.
21
<PAGE>
"Indemnified Party" has the meaning specified in Section 8.04(b).
"Initial Extension of Credit" means the earlier to occur of the initial
Borrowing and the initial issuance of a Letter of Credit.
"Initial Funding Date" means the date on which all of the conditions
precedent set forth in Section 3.01 are satisfied or waived by the Required
Lenders and the initial Advances are made by the Lender Parties hereto to the
Borrower.
"Initial Issuing Bank" has the meaning specified in the recital of parties
to this Agreement.
"Initial Lenders" has the meaning specified in the recital of parties to
this Agreement.
"Insufficiency" means, with respect to any Plan, the amount, if any, of its
unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.
"Interest Expense" means, with respect to any Person for any period,
interest expense on all Debt of such Person for such period net of interest
income for such period, whether paid or accrued, determined on a Consolidated
basis for such Person and its Subsidiaries and in accordance with GAAP, and
including, without limitation, (i) in the case of the Borrower, interest expense
in respect of Debt resulting from Advances, (ii) the interest component of all
obligations under Capitalized Leases, (iii) commissions, discounts and other
fees and charges payable in connection with letters of credit (including,
without limitation, Letters of Credit), (iv) the net payment, if any, payable in
connection with Hedge Agreements less the net credit, if any, received in
connection with Hedge Agreements and (v) all fees paid by the Borrower pursuant
to Section 2.08(a) (other than non-cash amortization related thereto).
"Interest Period" means, for each Eurodollar Rate Advance comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar Rate
Advance or the date of the
22
<PAGE>
Conversion of any Advance into such Eurodollar Rate Advance, and ending on the
last day of the period selected by the Borrower pursuant to the provisions below
and, thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the period
selected by the Borrower pursuant to the provisions below. The duration of each
such Interest Period shall be one, two, three or six months, as the Borrower
may, upon notice received by the Administrative Agent not later than 1:00 p.m.
(New York time) on the third Business Day prior to the first day of such
Interest Period, select; provided, however, that:
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(a) The Borrower may not select any Interest Period with respect to
any Eurodollar Rate Advance under a Facility that ends after any principal
repayment installment date for such Facility unless, after giving effect to such
selection, the aggregate principal amount of Eurodollar Rate Advances having
Interest Periods that end on or prior to such principal repayment installment
date for such Facility shall be at least equal to the aggregate principal amount
of Advances under such Facility due and payable on or prior to such date;
(b) Whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day; provided,
--------
however, that, if such extension would cause the last day of such Interest
- -------
Period to occur in the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business Day;
(c) Whenever the first day of any Interest Period occurs on a day
of an initial calendar month for which there is no numerically corresponding day
in the calendar month that succeeds such initial calendar month by the number of
months equal to the number of months in such Interest Period, such Interest
Period shall end on the last Business Day of such succeeding calendar month; and
23
<PAGE>
(d) Until the date on which the Administrative Agent notifies the
Borrower that the syndication of the Facilities has been completed, only
Interest Periods with a duration of seven days shall be available to the
Borrower for Eurodollar Rate Advances.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
"Inventory" of any Person means all of such Person's now owned and
hereafter acquired inventory, goods, merchandise, and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all returned goods, raw materials, other materials and supplies of any
kind, nature or description which are or might be consumed in such Person's
business or used in connection with the packing, shipping, advertising, selling
or finishing of such goods, merchandise and such other personal property, and
all documents of title or other documents representing them.
"Investment" in any Person means any loan or advance to such Person, any
purchase or other acquisition of any capital stock or other ownership or profit
interest, warrants, rights, options, obligations or other securities of such
Person, any capital contribution to such Person or any other investment in such
Person.
"Issuing Bank" means the Initial Issuing Bank and each Eligible Assignee to
which the Letter of Credit Commitment hereunder and other rights and
obligations, as applicably have been assigned pursuant to Section 8.07.
"L/C Cash Collateral Account" has the meaning specified in the Security
Agreement.
"L/C Related Documents" has the meaning specified in
Section 2.04(d)(ii)(A).
24
<PAGE>
"Lender Party" means any Lender, Swing Line Bank, the Issuing Bank and each
Eligible Assignee to which rights and obligations hereunder and under the other
Loan Documents, as applicable, have been assigned pursuant to Section 8.07. The
term "Lender Party" shall include such party in its capacity as a Hedge Bank
unless the surrounding text (a) indicates otherwise or (b) indicates that such
term relates solely to the "Lending Party" in its capacity as a lender or issuer
of letters of credit.
"Lender(s)" means the Initial Lender(s) and each Person that shall become a
Lender hereunder pursuant to Section 8.07.
"Letter of Credit" means any Letter of Credit issued hereunder (as
specified in Section 2.03(a)), as the same now exists or may hereinafter be
amended, modified, supplemented, expanded, renewed, restated or replaced.
"Letter of Credit Advance" means an advance made by the Issuing Bank or any
Revolving Credit Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section 2.03(a).
"Letter of Credit Commitment" means, with respect to the Issuing Bank, the
amount set forth opposite the Issuing Bank's name on Schedule I hereto under the
----------
caption "Letter of Credit Commitment" or, if the Issuing Bank has entered into
one or more Assignments and Acceptances, set forth for the Issuing Bank in the
Register maintained by the Administrative Agent pursuant to Section 8.07(d) as
the Issuing Bank's "Letter of Credit Commitment," as such amount may be reduced
pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount equal to the
amount of the Issuing Bank's Letter of Credit Commitment at such time, as such
amount may be reduced at or prior to such time pursuant to Section 2.05.
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"Lien" means any lien, security interest or other charge or encumbrance of
any kind, or any other type of preferential arrangement, including, without
limitation, the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.
"Loan Documents" means (i) this Agreement, (ii) the Notes, (iii) the
Collateral Documents, (iv) each Subsidiary Guaranty, (v) each Foreign Guaranty,
(vi) each Subsidiary Guaranty and Foreign Guaranty delivered pursuant to
Section 5.01(m)(ii) hereof, (vii) each Letter of Credit Agreement, (viii) each
Bank Hedge Agreement, and (ix) all other agreements, instruments and documents
executed in connection with the foregoing, in each case as the same may at any
time be amended, supplemented, restated or otherwise modified and in effect.
"Loan Party" means each of the Borrower and the Subsidiary Guarantors.
"Margin Stock" has the meaning specified in Regulations T, U and X.
"Material Adverse Effect" means any fact of circumstance which (a)
materially and adversely affects the business or financial condition of the
Borrower and its Subsidiaries, taken as a whole, or (b) materially and adversely
affects the ability of the Borrower and the Subsidiary Guarantors, taken as a
whole, to perform their collective obligations under the Loan Documents.
"Material Contract" means, with respect to any Person, each written
contract which would create a monetary obligation of such Person, or a right to
receive funds by such Person, and each other written contract to which such
Person is a party which is material to the business and operations of such
Person, the termination of which could reasonably be expected to result in a
Material Adverse Effect.
"Mortgages" means, individually and collectively, each mortgage, deed to
secure debt or deed of trust or other instrument at any time granting the
Administrative Agent, for itself and ratably for
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the benefit of the Lender Parties and the Hedge Banks, a lien upon any Real
Property of the Borrower or any of its Subsidiaries.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of any Loan
Party or any ERISA Affiliate and at least one Person other than the Loan Parties
and the ERISA Affiliates or (ii) was so maintained and in respect of which any
Loan Party or any ERISA Affiliate could have liability under Section 4064 or
4069 of ERISA in the event such plan has been or were to be terminated.
"Net Cash Proceeds" means, with respect to any Asset Disposition, Debt
Issuance or the Subordinated Issuance or Equity Issuance by any Person, or any
Extraordinary Receipt, the aggregate amount of cash received from time to time
(whether as initial consideration or through payment or disposition of deferred
consideration) in connection with such transaction after deducting therefrom
only (without duplication) (i) reasonable and customary brokerage commissions,
underwriting fees and discounts, legal fees, finder's fees and other similar
fees and commissions and all other reasonable costs and expenses incurred in
connection with any such Asset Disposition, Debt Issuance, Subordinated
Issuance, Equity Issuance or Extraordinary Receipt, (ii) the amount of taxes
payable in connection with or as a result of such transaction, (iii) the amount
of any Debt secured by a Lien on such asset that is required to be repaid upon
such disposition, in each case to the extent, but only to the extent, that the
amounts so deducted are, at the time of receipt of such cash, actually paid to a
Person that is not an Affiliate of such Person or the Borrower or any of its
Subsidiaries or any Affiliate of any Borrower or any of its Subsidiaries and are
properly attributable to such transaction or to the asset that is the subject
thereof and (iv) the amount to be used to replace any such asset.
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"Note" means a Revolving Credit Note or a Swing Line Note, and
collectively, the "Notes".
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Issuance" has the meaning specified in Section 2.03(a).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.02(b).
"Notice of Termination" has the meaning specified in Section 2.01(d).
"NPL" means the National Priorities List under CERCLA.
"Obligation" means, with respect to any Person, any payment, performance or
other obligation of such Person of any kind, including, without limitation, any
liability of such Person on any claim, whether or not the right of any creditor
to payment in respect of such claim is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, disputed, undisputed, legal, is
equitable, secured or unsecured, and whether or not such claim is discharged,
stayed or otherwise affected by any proceeding referred to in Section 6.01(f).
Without limiting the generality of the foregoing, the Obligations of the Loan
Parties under the Loan Documents include (i) the obligation to pay principal,
interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by any Loan Party under
any Loan Document (ii) the obligation of any Loan Party to reimburse any amount
in respect of any of the foregoing that any Lender Party, in its sole
discretion, may elect to pay or advance on behalf of such Loan Party.
"OECD" means the Organization for Economic Cooperation and Development (or
any successor).
"Other Taxes" has the meaning specified in Section 2.12(b).
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"PBGC" means the Pension Benefit Guaranty Corporation (or any successor).
"Permitted Acquisition" means the acquisition by the Borrower or any of its
Subsidiaries of Interface Graphics Ltd., a corporation organized under the laws
of Scotland, (ii) Jevons Brown Limited, a corporation organized under the laws
of the United Kingdom and (iii) any Person or of any division or line of
business of any Person or of any Person with (or without) its Subsidiaries (any
such acquired Person, division or line or business, or Person and Subsidiaries
being herein called a "Proposed Business") either by merger, consolidation,
purchase of the majority of the Voting Stock, or purchase of all or any portion
of the assets of such Proposed Business, provided that each of the conditions to
any such acquisition set forth below shall have been satisfied as of the
consummation of such acquisition:
(a) such Proposed Business is principally engaged in substantially
the same or similar line of business as the Borrower or any of its Subsidiaries;
(b) in the event that the total consideration paid by the Borrower
and its Subsidiaries (whether in cash, by the assumption or incurrence of Debt
(including seller notes and other liabilities otherwise permitted to be incurred
under this Agreement), by the transfer of any other assets or properties by the
Borrower or any of its Subsidiaries to the seller in connection with such
acquisition), shall equal or exceed (and including in the computation of
consideration the amount of any contingent, earnout and deferred cash payments
reasonably likely to be paid in the next succeeding 12 months) (i) Ten Million
Dollars ($10,000,000) in respect of any single acquisition (or series of related
acquisitions that may reasonably be deemed to constitute a single transaction)
or (ii) Twenty-Five Million Dollars ($25,000,000) in respect of all acquisitions
in any twelve (12) month period ending on the last day of the calendar month
immediately preceding the closing of the proposed acquisition the Required
Lenders shall have consented to the acquisition (such consent not to be
unreasonably withheld);
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(c) after giving effect to any such acquisition, there shall be not
less than Two Million Five Hundred Thousand Dollars ($2,500,000) in the
aggregate, of Unused Revolving Credit Commitments and cash on hand;
(d) no Event of Default shall exist or be continuing or would exist
after giving effect to such acquisition;
(e) all assets and properties acquired in connection with such
proposed acquisition shall be free and clear of all Liens, except as otherwise
permitted in this Agreement;
(f) concurrently with the making of such an acquisition consisting
of assets, the Borrower shall, as additional collateral security for the
Obligations, grant to the Administrative Agent for staff and ratably for the
benefit of the Lender, Parties and the Hedge Banks, first priority liens on and
first priority security interests in any of the acquired assets of the type
previously granted to the Administrative Agent (subject only to Permitted Liens)
by the execution and delivery to the Administrative Agent of such agreements,
instruments and documents as shall be satisfactory in form and substance to the
Administrative Agent;
(g) each of the Administrative Agent and each of the Lender Parties
shall receive for its review the full text of the financial statements of the
Proposed Business, which demonstrates that the Proposed Business has a positive
Pro Forma EBITDA and all core documentation (or other documentation requested by
the Administrative Agent) with respect to the proposed acquisition; and
(h) subject to Section 5.01(n) below, if applicable, concurrently
with the making of such acquisition, the Borrower shall, as additional
collateral security for the Obligations, deliver to the Administrative Agent an
Acquisition Rights Assignment, in form and substance satisfactory to the
Administrative Agent at least five (5) Business Days prior to the consummation
of an acquisition.
30
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Notwithstanding the foregoing, in no event shall a Permitted Acquisition be
deemed to include an unsolicited tender offer or other takeover (other than a
tender offer) which does not have the approval of the board of directors of the
Proposed Business prior to the time the Borrower has taken control of the
Proposed Business.
"Permitted Acquisition Documents" means, in respect of a Permitted
Acquisition, the final executed copy of the asset or stock purchase agreement or
the merger agreement, as the case may be, and all other material agreements,
documents or instruments to be executed and/or delivered by the Borrower or any
of its Subsidiaries in connection with such Permitted Acquisition.
"Permitted Acquisition Purchase Price" means, with respect to any Permitted
Acquisition, the cash purchase price (including related reasonable and customary
fees and costs with respect to such acquisition) paid by the Borrower or its
Subsidiary making such purchase in respect thereof.
"Permitted Liens" means any of the following: (i) Liens for taxes,
assessments and governmental charges or levies (x) not yet due and payable or
(y) due and payable that are being contested in good faith and by appropriate
proceedings diligently conducted, provided that in the case of Liens under this
--------
clause (y), reserves or other appropriate provisions shall have been established
therefor in accordance with GAAP; (ii) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens and other
similar Liens arising in the ordinary course of business securing obligations
that are not overdue for a period of more than sixty (60) days or which are
being contested in good faith and by appropriate proceedings diligently
conducted, provided that reserves or other appropriate provisions shall have
--------
been established therefor in accordance with GAAP; (iii) pledges or deposits to
secure obligations under workers' compensation laws or similar legislation or to
secure public or statutory obligations; and (iv) Permitted Real Property
Encumbrances.
"Permitted Real Property Encumbrances" means, with respect to any
particular real property, easements, zoning restrictions or other restrictions,
rights-of-way, encroachments, covenants or
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encumbrances on real property imposed by law or arising in the ordinary course
of business that do not materially detract from the value of the affected
property or interfere with the ordinary conduct of business of the Borrower or
any of its Subsidiaries or materially impair the use thereof to the Borrower or
any Subsidiary.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Pledge Agreement" has the meaning specified in Section 3.01(l)(ii).
"Pledged Collateral" means the "Pledged Securities" as defined in the
relevant Collateral Document.
"Prime Rate" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by Fleet in Boston,
Massachusetts from time to time, as Fleet's prime rate, which is not necessarily
the lowest or best rate made available by Fleet (the "Fleet Base Rate"); or
(b) one-half (1/2) of one percent per annum above the Federal Funds
Rate.
"Prime Rate Advance" means an Advance that bears interest as provided in
Section 2.07(a)(i).
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"Pro Forma EBITDA" means, for any period, the sum, determined on a
Consolidated basis without duplication, of (A)(i) net income (or net loss), (ii)
interest expense, (iii) income tax expense, (iv) depreciation expense, (v)
amortization expense, (vi) non-cash charges, (vii) the legal and accounting
costs and other reasonable expenses incurred in connection with any Permitted
Acquisition completed after the date of this Agreement, in each case determined
in accordance with GAAP for such period and (viii) other non-recurring,
non-operating expenses, including, without limitation, restructuring expenses;
provided, however, that net income (or net loss) shall be computed without
- -------- -------
giving effect to extraordinary losses or gains; provided, further, that Pro
-------- -------
Forma EBITDA shall in any event exclude from the Initial Funding Date the amount
of any non-cash income recognized during any period for which Pro Forma EBITDA
is determined,(B) the pro forma effect on EBITDA for such period of any
Permitted Acquisition consummated by the Borrower or any of its Subsidiaries
during the most recent twelve month period preceding the date of determination,
but solely for the number of months immediately preceding the consummation of
the applicable Permitted Acquisition, which number equals twelve (12) less the
number of months following the consummation of the applicable Permitted
Acquisition to such date of determination, plus (C) the amount by which
Compensation to owners, employees or agents of a Proposed Business will be
reduced following a Permitted Acquisition, as set forth in a certificate of the
Borrower which is reasonably acceptable to the Administrative Agent.
"Proposed Business" has the meaning specified in the definition of
"Permitted Acquisition".
"Pro Rata Share" of any amount means, with respect to any Revolving Credit
Lender at any time, the product of such amount times a fraction the numerator of
which is the amount of such Lender's Revolving Credit Commitment at such time
and the denominator of which is the Revolving Credit Facility at such time.
"Reduction Amount" has the meaning specified in Section 2.06(d)(iii).
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"Real Property" means all now owned and hereafter acquired real property of
the Borrower and its Subsidiaries, including leasehold interests, together with
all buildings, structures, and other improvements located thereon and all
licenses, easements and appurtenances relating thereto, wherever located,
including without limitation, the real property and related assets more
particularly described in the Mortgages.
"Register" has the meaning specified in Section 8.07(d).
"Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System, as the same may be modified and supplemented and in effect from
time to time.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as the same may be modified and supplemented and in effect from
time to time.
"Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System, as the same may be modified and supplemented and in effect from
time to time.
"Release" means any release, spill, emission, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment (including the abandonment or discarding of
barrels, containers and other closed receptacles containing any Hazardous
Materials) or into or from any property, including, without limitation, the
movement of any Hazardous Materials through the air, soil, surface waters or
ground water.
"Remedial" shall have the meaning as set forth in CERCLA at 42 U.S.C.
Section 9601(24) and/or any other applicable Environmental Laws.
"Removal" shall have the meaning as set forth in CERCLA at 42 U.S.C.
Section 9601(23) and/or any other applicable Environmental Laws.
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"Required Lenders" means at any time Lenders owed or holding greater than
51% of the sum of (i) the aggregate principal amount of the Advances outstanding
at such time and (ii) the aggregate Available Amount of all Letters of Credit
outstanding at such time, or, if no such principal amount and no Letters of
Credit are outstanding at such time, Lenders holding greater than 51% of the
Revolving Credit Commitments; provided, however, that if any Lender shall be a
-------- -------
Defaulting Lender at such time, there shall be excluded from the determination
of Required Lenders at such time (i) the aggregate principal amount of the
Advances owing to such Lender (in its capacity as a Lender) and outstanding at
such time, and (ii) the Revolving Credit Commitment of such Lender at such time.
For purposes of this definition, the aggregate principal amount of Swing Line
Advances owing to the Swing Line Bank, Letter of Credit Advances owing to the
Issuing Bank and the Available Amount of each Letter of Credit shall be
considered to be owed to the Revolving Credit Lenders ratably in accordance with
their respective Revolving Credit Commitments.
"Response" shall have the meaning as set forth in CERCLA at 42 U.S.C.
Section 9601(25) and/or any other applicable Environmental Laws.
"Responsible Officer" means, in the case of any Loan Party, the chief
executive officer, chief financial officer or the treasurer of such Loan Party.
"Revolving Credit Advance" has the meaning specified in Sections 2.01(a)
and 2.01(b).
"Revolving Credit Availability" means the amount (if any) by which, at any
time, the Revolving Credit Facility exceeds the aggregate amount of the Unused
Revolving Credit Commitments of the Revolving Credit Lenders at such time.
"Revolving Credit Borrowing" means a borrowing consisting of simultaneous
Revolving Credit Advances of the same Type made by the Revolving Credit Lenders.
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"Revolving Credit Commitment" means, with respect to any Revolving Credit
Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Revolving Credit Commitment" or, if such
- ----------
Lender has entered into one or more Assignments and Acceptances, set forth for
such Lender in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Revolving Credit Commitment," as such amount
may be reduced at or prior to such time pursuant to Sections 2.05 (a) or (b).
The initial aggregate amount of the Lenders' Revolving Credit Commitments is
$65,000,000. Notwithstanding the foregoing, upon the satisfaction of the
conditions set forth in Section 2.05(c), the Revolving Credit Commitment shall
increase to $80,000,000 and, with respect to any Revolving Credit Lender at any
time, the amount set forth opposite such Lender's name on Schedule I hereto
----------
under the caption "Revolving Credit Commitment (as increased)" or, if such
Lender has entered into one or more Assignments and Acceptances, set forth for
such Lender in the Register maintained by the Administrative Agent pursuant to
Section 8.07(d) as such Lender's "Revolving Credit Commitment (as increased)",
as such amount may be reduced at or prior to such time pursuant to Sections
2.05(a)and/or (b).
"Revolving Credit Facility" means, at any time, the aggregate amount of the
Revolving Credit Lenders' Revolving Credit Commitments at such time.
"Revolving Credit Increase" means the increase in the Revolving Credit
Facility in the amount of $15,000,000.
"Revolving Credit Lender" means any Lender that has a Revolving Credit
Commitment.
"Revolving Credit Note" means a promissory note of the Borrower payable to
the order of any Revolving Credit Lender, in substantially the form of Exhibit B
---------
hereto, evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Revolving Credit Advances made by such Lender, as each may
hereafter be amended, restated, supplemented, replaced or otherwise modified
from time to time.
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"Revolving Credit Termination Date" means the earlier of (x) the fifth
anniversary of the Initial Funding Date and (y) the Termination Date.
"Secured Obligations" has the meaning of the term "Obligations" as
specified in the Security Agreement.
"Secured Parties" means the Administrative Agent, the Lender Parties, and
the Hedge Banks and the other Persons whose Obligations are or are purported to
be secured by the Collateral under the terms of the Collateral Documents.
"Security Agreement" has the meaning specified in Section 3.02(l)(i).
"Senior Debt" means, as at any date of determination thereof, the aggregate
outstanding principal balance of (a) all Revolving Credit Advances and Swing
Line Advances, (b) all Debt of the Borrower and its Subsidiaries, if any,
secured by purchase money security interests, conditional sale arrangements or
other similar security interests, (c) obligations of the Borrower and its
Subsidiaries, if any, with respect to Capitalized Leases and (d) other Debt of
the Borrower and its Subsidiaries, if any, which is not subordinated to other
debt in the priority of payment.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (i) is maintained for employees of any Loan
Party or any ERISA Affiliate and no Person other than the Loan Parties and the
ERISA Affiliates or (ii) was so maintained and in respect of which any Loan
Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"Solvent" and "Solvency" mean, that on a particular date (a) with respect
to any Person (other than a Person subject to clause (b) below) on such date,
(i) the fair value of the assets of such Person is greater than the total amount
of liabilities, including, without limitation, contingent liabilities, of such
Person, (ii) the present fair saleable value of the assets of such Person is not
less than the
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amount that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (iii) such Person does not intend to,
and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay such debts and liabilities as they mature and (iv) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's assets would constitute an
unreasonably small capital; and (b) with respect to any Person incorporated in
England, on such date such Person has the ability to pay its debts as and when
they fall due and could not be deemed to be insolvent for the purposes of the
Insolvency Act 1986 of the United Kingdom. The amount of contingent liabilities
at any time shall be computed as the amount that, in the light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Standby Letter of Credit" means any Letter of Credit other than a Trade
Letter of Credit.
"Subordinated Issuance" means the issuance or sale by Borrower of any Debt,
the Net Cash Proceeds of which equal or exceed $20,000,000, a portion of which
shall prepay the Existing Subordinated Debt.
"Subordinated Debt" means any Debt of the Borrower or any of its
Subsidiaries that is subordinated to the Obligations of the Borrower under the
Loan Documents on, and that otherwise contains, terms and conditions reasonably
satisfactory to the Administrative Agent and Required Lenders.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate (a) of which (or in which)
more than 50% of (i) the issued and outstanding capital stock having ordinary
voting power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (ii) the interest in the capital or profits of such partnership,
joint venture or limited liability company or (iii) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or controlled
38
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by such Person, by such Person and one or more of its other Subsidiaries or by
one or more of such Person's other Subsidiaries; and (b) with respect to any
Person incorporated in England, a subsidiary within the meaning of Section 736
of the Companies Act or, unless the context otherwise requires, a subsidiary
undertaking within the meaning of Section 258 of the Companies Act.
"Subsidiary Guarantor" means, collectively, each Subsidiary on the Initial
Funding Date providing a Subsidiary Guaranty or a Foreign Guaranty and each
Subsidiary created or acquired after the Initial Funding Date, which is
obligated to provide a Subsidiary Guaranty or a Foreign Guaranty pursuant to
Section 5.01(m)(iii), and, in each case, its respective successors and assigns.
"Subsidiary Guaranty" has the meaning specified in Section 3.02(k)(vi).
"Surviving Debt" shall mean the Debt which shall remain outstanding from
and after the date hereof.
"Swing Line Advance" means an advance made by the Swing Line Bank pursuant
to Section 2.01(c).
"Swing Line Advance Outstanding" means the aggregate amount of all Swing
Line Advances outstanding as at the close of business on the day immediately
preceding each Swing Line Rollover Date.
"Swing Line Bank" means Fleet.
"Swing Line Borrowing" means a borrowing consisting of a Swing Line Advance
made by the Swing Line Bank.
"Swing Line Facility" has the meaning specified in Section 2.01(b).
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<PAGE>
"Swing Line Note" means a promissory note of the Borrower payable to the
order of the Swing Line Bank, in substantially the form of Exhibit C hereto,
---------
evidencing the indebtedness of the Borrower to such Swing Line Bank resulting
from the Swing Line Advances made by such Swing Line Bank, as it may hereafter,
be amended, restated, supplemented, replaced or otherwise modified from time to
time.
"Swing Line Rate" has the meaning specified in Section 2.01(b).
"Swing Line Rollover Date" means the calendar day Wednesday or, if such
Wednesday is not a Business Day, the next succeeding Business Day.
"Taxes" has the meaning specified in Section 2.12(a).
"Termination Date" means the date of termination in whole of the
Commitments pursuant to Section 2.05 or 6.01.
"Trade Letter of Credit" means any Letter of Credit that is issued for the
benefit of a supplier of Inventory to the Borrower or any of its Subsidiaries to
effect payment for such Inventory, the conditions to drawing under which include
the presentation to the Issuing Bank of negotiable bills of lading, invoices and
related documents sufficient, in the judgment of the Issuing Bank, to create a
valid and perfected lien on or security interest in such Inventory, bills of
lading, invoices and related documents in favor of the Issuing Bank.
"Total Funded Debt" means, at any date of determination thereof, the
aggregate outstanding balance of all Debt of the Borrower and its Subsidiaries
(other than (a) Debt arising from Hedge Agreements, (b) guaranties of any such
Debt as described in clauses (viii) and (ix) of the definition "Debt" and (c)
Debt described in Section 5.02(b)(iii)(F)).
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"Type" refers to the distinction between Advances bearing interest at the
Prime Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Revolving Credit Commitment" means, with respect to any Revolving
Credit Lender, at any time, (a) such Lender's Revolving Credit Commitment at
such time minus (b) the sum of (1) the aggregate principal amount of all
-----
Revolving Credit Advances and Letter of Credit Advances made by such Lender (in
its capacity as a Lender) and outstanding at such time, plus (2) such Lender's
----
Pro Rata Share of (A) the aggregate Available Amount of all Letters of Credit
outstanding at such time and (B) the aggregate principal amount of all Letter of
Credit Advances made by the Issuing Bank pursuant to Section 2.03(c) and
outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or equivalent
interests in any other Person, including, without limitation, partnership
interests and membership interests issued by a limited liability company, the
holders of which are ordinarily, in the absence of contingencies, entitled to
vote for the election of directors (or persons performing similar functions) of
such Person, even if the right so to vote has been suspended by the happening of
such a contingency.
"Welfare Plan" means a welfare plan, as defined in Section 3(l) of ERISA,
that is maintained for employees of any Loan Party or in respect of which any
Loan Party could have liability.
"Wholly-Owned Subsidiary" means with respect to any Person, any Subsidiary,
all of the shares of capital stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
such Person.
"Withdrawal Liabilities" has the meaning specified in Part I of Subtitle E
of Title IV of ERISA.
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SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Sections 4.01(f) and (g) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF
THE ADVANCES AND THE LETTERS OF CREDIT
--------------------------------------
SECTION 2.01. THE ADVANCES.
(a) The Revolving Credit Advances. Each Revolving Credit Lender
--------------------------------
severally agrees, on the terms and conditions hereinafter set forth, to make
advances (each a "Revolving Credit Advance") to the Borrower from time to time
on any Business Day during the period from the Initial Funding Date until the
Revolving Credit Termination Date in an amount for each such Advance not to
exceed such Lender's Unused Revolving Credit Commitment at such time. Each
Revolving Credit Borrowing shall be in an aggregate amount of $500,000 or an
integral multiple of $100,000 in excess thereof in the case of Prime Rate
Advances and in an aggregate amount of $500,000 or an integral multiple of
$100,000 in excess thereof in the case of Eurodollar Rate Advances (other than a
Borrowing the proceeds of which shall be used solely to repay or prepay in full
outstanding Swing Line Advances or outstanding Letter of Credit Advances) and
shall consist of Revolving Credit Advances made simultaneously by the Revolving
Credit Lenders ratably according to their Revolving Credit Commitments. Within
the limits of the Unused Revolving Credit Commitments in effect from time to
time, the Borrower may borrow, repay and reborrow.
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(b) The Swing Line Advances. The Borrower may request the Swing Line
-----------------------
Bank to make, and the Swing Line Bank shall make, on the terms and conditions
hereinafter set forth, Swing Line Advances to the Borrower from time to time on
any Business Day during the period from the Initial Funding Date until the
Revolving Credit Termination Date in a aggregate amount not to exceed at any
time outstanding the lesser of (i)(x) $3,000,000 (the "Swing Line Facility"),
minus (y) the aggregate Swing Line Advances outstanding at such time, and (ii)
an amount equal to the aggregate of the Unused Revolving Credit Commitments of
the Revolving Credit Lenders at such time. Each Swing Line Advance shall be in
integral multiples of $50,000. No Swing Line Advance shall be used for the
purpose of funding the payment of principal of any other Swing Line Advance.
Each Swing Line Borrowering shall bear interest at the rate established pursuant
to the Fee Letter (the "Swing Line Rate"). Within the limits of the Swing Line
Facility and within the limits referred to in this Section 2.01(c), the Borrower
may borrow and reborrow under this Section 2.01(c) and may repay or prepay the
Swing Line Advances at such time prior to the Revolving Credit Termination Date,
and in such integral multiples, as the Borrower may elect.
(c) Letters of Credit. The Issuing Bank agrees, on the terms and
-----------------
conditions hereinafter set forth, to issue Letters of Credit for the account of
the Borrower from time to time on any Business Day during the period from the
Initial Funding Date until sixty (60) days before the Revolving Credit
Termination Date (A) in an aggregate Available Amount for all Letters of Credit
not to exceed at any time the Issuing Bank's Letter of Credit Commitment at such
time and (B) in an Available Amount for each such Letter of Credit not to exceed
an amount equal to (x) the Unused Revolving Credit Commitments of the Revolving
Credit Lenders at such time minus (y) the aggregate Swing Line Advances
-----
outstanding at such time. No Letter of Credit shall have an expiration date
(excluding all rights of the Borrower or the beneficiary to require renewal)
later than the earlier of (A) sixty (60) days before the fifth anniversary of
the Initial Funding Date, (B) in the case of Standby Letters of Credit, 365 days
after the date of issuance thereof and (C) in the case of a Trade Letter of
Credit 180 days after the date of issuance thereof. The foregoing
notwithstanding any Standby Letter of Credit may, by its terms, be automatically
renewable annually unless such Issuing Bank shall have notified the Borrower
(with a copy to the Administrative Agent) on or prior
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to the date for notice of termination set forth in such Letter of Credit (but in
any event at least thirty (30) Business Days prior to the date of automatic
renewal) of its election not to renew such Standby Letter of Credit (a "Notice
of Termination"); provided that the terms of each Standby Letter of Credit that
--------
is automatically renewable annually shall not permit the expiration date (after
giving effect to any renewal) of such Standby Letter of Credit in any event to
be extended to a date later than sixty (60) days before the Revolving Credit
Termination Date. If a Notice of Termination is given by the Issuing Bank
pursuant to the immediately preceding sentence, such Standby Letter of Credit
shall expire on the date on which it otherwise would have been automatically
renewed.
SECTION 2.02. MAKING THE ADVANCES.
(a) Except as otherwise provided in Section 2.03 or, with respect to
Swing Line Advances in Section 2.02(b) below, each Borrowing shall be made on
notice, given not later than 1:00 p.m. (New York time) on the third Business Day
prior to the date of the proposed Borrowing in the case of Eurodollar Rate
Advances and on the Business Day prior to the date of the proposed Borrowing in
the case of Prime Rate Advances by the Borrower to the Administrative Agent,
which shall give to each appropriate Lender same day notice thereof by telex or
telecopier. Each such notice of a Borrowing (a "Notice of Borrowing") may be by
telephone, confirmed immediately in writing, or telex or telecopier in
substantially the form of Exhibit D hereto, specifying therein the requested (i)
---------
date of such Borrowing, (ii) Facility under which such Borrowing is to be made,
(iii) Type of Advances comprising such Borrowing, (iv) aggregate amount of such
Borrowing and (v) in the case of a Borrowing consisting of Eurodollar Rate
Advances, initial Interest Period for each such Advance. Each appropriate Lender
shall, (x) before 1:00 p.m. (New York time) on the date of such Borrowing in the
case of Eurodollar Rate Advances and (y) before 3:00 p.m. (New York time) on the
date of such Borrowing in the case of Prime Rate Advances, make available for
the account of its Applicable Lending Office to the Administrative Agent at the
Administrative Agent's Account, in same day funds, such Lender's ratable portion
of such Borrowing in accordance with the respective Commitments under the
applicable Facility of such Lender and the other appropriate Lenders. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
44
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applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower by crediting the Borrower's Account;
provided, however, that in the case of any Revolving Credit Borrowing, the
- -------- -------
Administrative Agent shall first make a portion of such funds equal to the
aggregate principal amount of any Swing Line Advances and Letter of Credit
Advances made by the Swing Line Bank, the Issuing Bank and by any other
Revolving Credit Lender and outstanding on the date of such Revolving Credit
Borrowing in accordance with the terms of this Agreement, plus interest accrued
----
and unpaid thereon to and as of such date, available to the Swing Line Bank, the
Issuing Bank and such other Revolving Credit Lenders for repayment of such Swing
Line Advances and Letter of Credit Advances.
(b) Each Swing Line Borrowing shall be made either (x) on notice,
given not later than 1:00 p.m. (New York time) on the Business Day of the
proposed Swing Line Borrowing, by the Borrower to the Swing Line Bank and the
Administrative Agent or (y) pursuant to other arrangements, including, by way of
example and not of limitation, arrangements for daily repayments and borrowings
on each Business Day, which are satisfactory in form and substance to the Swing
Line Bank, the Administrative Agent and the Borrower. Each notice of a Swing
Line Borrowing pursuant to clause (x) in the immediately preceding sentence (a
"Notice of Swing Line Borrowing") shall be by telephone, confirmed immediately
in writing, or telex or telecopier, specifying therein the requested (i) date of
such Borrowing and (ii) amount of such Borrowing. The Swing Line Bank shall make
the amount of the Swing Line Advance available to the Administrative Agent at
the Administrative Agent's Account, in same day funds. After the Administrative
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article III, the Administrative Agent will make such funds
available to the Borrower by crediting the Borrower's Account. If, and to the
extent, any Swing Line Advance shall be outstanding on the date of any Revolving
Credit Borrowing, such Swing Line Advance shall first be repaid from the
proceeds of such Revolving Credit Borrowing prior to disbursement to the
Borrower pursuant to the proviso in Section 2.02(a) above. In addition, (x) the
Swing Line Bank may, at any time, in its sole discretion by written notice to
the Borrower and the Administrative Agent, demand repayment of its Swing Line
Advances or, (y) in the event the Swing Line Advance Outstanding exceeds
$1,000,000, on
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each Swing Line Rollover Date such Swing Line Advance Outstanding shall be
automatically rolled over into the Revolving Credit Facility, and in either case
the Borrower shall be deemed to have requested a Revolving Credit Advance
hereunder comprised entirely of a Prime Rate Advance in the amount of such Swing
Line Advances from all the Revolving Credit Lenders based on each such Lender's
Pro Rata Share and the Revolving Credit Lenders shall make a Revolving Credit
Advance (comprised entirely of a Prime Rate Advance and based on each such
Lender's Pro Rata Share) in an amount equal to (i) all outstanding Swing Line
Advances as of the date of such demand in the case of clause (x) above or (ii)
the Swing Line Advance Outstanding in the case of clause (y) above, by deposit
to the Administrative Agent's Account, in same day funds, an amount equal to
such Lender's Pro Rata Share thereof, without regard to whether or not the
conditions set forth in Section 3.02 have otherwise been satisfied. The proceeds
from such Revolving Credit Advance shall be applied directly to the Swing Line
Bank to repay the Swing Line Bank for such outstanding Swing Line Advances. The
Borrower hereby agrees to each such automatic rollover into the Revolving Credit
Facility and to each such Revolving Credit Advance. Each Revolving Credit Lender
agrees to each such automatic rollover into the Revolving Credit Facility and to
make each such Revolving Credit Advance based on its Pro Rata Share on (i) the
Swing Line Rollover Date or such other Business Day on which demand therefor is
made by the Swing Line Bank; provided that notice of such demand is given not
--------
later than 3:00 P.M. (New York time) on such Business Day, or (ii) the first
Business Day next succeeding such demand if notice of such demand is given after
such time. If and to the extent that any Revolving Credit Lender shall not have
so made the amount of such Lender's Pro Rata Share of such Revolving Credit
Advance available to the Administrative Agent, such Revolving Credit Lender
agrees to pay to the Administrative Agent, for the account of the Swing Line
Bank, forthwith on demand such amount together with interest thereon, for each
day from the date of demand by the Swing Line Bank until the date such amount is
paid to the Administrative Agent, at the Federal Funds Rate. If such Lender
shall pay to the Administrative Agent such amount for the account of the Swing
Line Bank on any Business Day, such amount so paid in respect of principal shall
constitute a Revolving Credit Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
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<PAGE>
Swing Line Advance made by the Swing Line Bank shall be reduced by such amount
on such Business Day.
(c) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances if the obligation of
the appropriate Lenders to make Eurodollar Rate Advances shall then be suspended
pursuant to Section 2.09 or Section 2.10, and (ii) Eurodollar Rate Advances may
not be outstanding as part of more than ten (10) separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall
be irrevocable and binding on the Borrower. In the case of any Borrowing that
the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the Borrower shall indemnify each appropriate Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to fulfill on
or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (including loss of anticipated profits as reasonably determined by such
Lender), cost or expense incurred by reason of the liquidation or redeployment
of deposits or other funds acquired by such Lender to fund the Advance to be
made by such Lender as part of such Borrowing when such Advance, as a result of
such failure, is not made on such date.
(e) Unless the Administrative Agent shall have received notice from
an appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) or (b) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the Borrower severally agree to repay or pay to the Administrative Agent
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<PAGE>
forthwith on demand such corresponding amount and to pay interest thereon, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid or paid to the Administrative Agent, at (i) in the
case of the Borrower, the interest rate applicable at such time under
Section 2.07 to Advances comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall pay to the Administrative
Agent such corresponding amount, such amount so paid shall constitute such
Lender's Advance as part of such Borrowing for all purposes.
(f) The failure of any Lender to make the Advance to be made by
it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
SECTION 2.03. ISSUANCE OF AN DRAWINGS AND REIMBURSEMENT UNDER LETTERS OF
CREDIT.
(a) Request for Issuance. Each Letter of Credit shall be issued upon
--------------------
notice, given not later than 1:00 p.m. (New York time) on the fifth Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Borrower to the Issuing Bank, which shall give to the Administrative Agent and
each Revolving Credit Lender prompt notice thereof by telex or telecopier. Each
such notice of issuance of a Letter of Credit (a "Notice of Issuance") may be by
telephone, confirmed immediately in writing, or telex or telecopier, specifying
therein the requested (i) date of such issuance (which shall be a Business Day),
(ii) Available Amount of such Letter of Credit, (iii) expiration date of such
Letter of Credit, (iv) name and address of the beneficiary of such Letter of
Credit and (v) form of such Letter of Credit, and shall be accompanied by such
customary application and agreement for letter of credit as the Issuing Bank may
specify to the Borrower for use in connection with such requested Letter of
Credit (as the same now exists or may thereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, a "Letter of Credit
Agreement"). If the requested form of such Letter of Credit is acceptable to the
Issuing Bank, in its reasonable discretion, the Issuing Bank will, upon
fulfillment of the applicable conditions set forth
48
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in Article III, make such Letter of Credit available to the Borrower or as
otherwise directed by the Borrower in connection with such issuance. In the
event and to the extent that the provisions of any such Letter of Credit
Agreement shall conflict with this Agreement, the provisions of this Agreement
shall govern.
(b) Letter of Credit Reports. The Issuing Bank shall furnish (i) to
------------------------
the Administrative Agent on the first Business Day of each week a written report
summarizing issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit, (ii) to
the Administrative Agent, the Borrower and each Revolving Credit Lender on the
first Business Day of each month a written report summarizing issuance and
expiration dates of Letters of Credit issued during the preceding month and
drawings during such month under all Letters of Credit and (iii) to the
Administrative Agent, the Borrower and each Revolving Credit Lender on the first
Business Day of each calendar quarter a written report setting forth the average
daily aggregate Available Amount during the preceding calendar quarter of all
Letters of Credit.
(c) Drawing and Reimbursement. The Borrower shall be obligated
---------------------------
pursuant to each Letter of Credit Agreement to reimburse the Issuing Bank within
two (2) Business Days after demand in immediately available funds for drafts
drawn under any Letter of Credit. If any drawing is not so reimbursed, then the
payment by the Issuing Bank of a draft drawn under any Letter of Credit shall
constitute for all purposes of this Agreement the making by the Issuing Bank of
a Letter of Credit Advance which shall be a Prime Rate Advance (retroactive to
the date of the demand), in the amount of such draft. The Borrower, the
Administrative Agent and each Revolving Credit Lender hereby acknowledge and
agree that Letter of Credit Advances may be made, or deemed made, by the Issuing
Bank in respect of any Letter of Credit and to participate in all Letter of
Credit Advances made hereunder as provided herein. Upon written demand by the
Issuing Bank, with a copy of such demand to the Administrative Agent, each
Revolving Credit Lender shall purchase from the Issuing Bank, and the Issuing
Bank shall sell and assign to each such Revolving Credit Lender, such Lender's
Pro Rata Share of such outstanding Letter of Credit Advance as of the date of
such
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purchase, by making available (for the account of its Applicable Lending Office)
to the Administrative Agent (for the account of the Issuing Bank), by deposit to
the Administrative Agent's Account, in same day funds, an amount equal to the
portion of the outstanding principal amount of such Letter of Credit Advance to
be purchased by such Lender. Promptly after receipt thereof, the Administrative
Agent shall transfer such funds to the Issuing Bank. The Borrower hereby agrees
to each such sale and assignment. Each Revolving Credit Lender agrees to
purchase its Pro Rata Share of an outstanding Letter of Credit Advance on (i)
the Business Day on which demand therefor is made by the Issuing Bank; provided
--------
that notice of such demand is given not later than 1:00 p.m. (New York time) on
such Business Day or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. Upon any such assignment by the
Issuing Bank to any other Revolving Credit Lender of a portion of a Letter of
Credit Advance, the Issuing Bank represents and warrants to such other Lender
that the Issuing Bank is the legal and beneficial owner of such interest being
assigned by it, free and clear of any liens, but makes no other representation
or warranty and assumes no responsibility with respect to such Letter of Credit
Advance, the Loan Documents or any Loan Party. If and to the extent that any
Revolving Credit Lender shall not have so made its pro rata share of the amount
of such Letter of Credit Advance available to the Administrative Agent, such
Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on
demand such amount together with interest thereon, for each day from the date of
demand by the Issuing Bank until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate for its account or the account
of the Issuing Bank, as applicable. If such Lender shall pay to the
Administrative Agent such amount for the account of the Issuing Bank on any
Business Day, such amount so paid in respect of principal shall constitute a
Letter of Credit Advance made by such Lender on such Business Day for purposes
of this Agreement, and the outstanding principal amount of the Letter of Credit
Advance made by the Issuing Bank shall be reduced by such amount on such
Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
-------------------------------------------
Lender to make any Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such
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date, but no Lender shall be responsible for the failure of any other Lender to
make the Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. REPAYMENT OF ADVANCES.
(a) Revolving Credit Advances. The Borrower shall repay to
-----------------------------
the Administrative Agent for the ratable account of the Revolving Credit Lenders
on the Revolving Credit Termination Date the aggregate outstanding principal
amount of the Revolving Credit Advances then outstanding.
(b) Swing Line Advances. The Borrower shall repay to the
---------------------
Administrative Agent for the account of the Swing Line Bank that has made a
Swing Line Advance the outstanding principal amount of each Swing Line Advance
made by such Swing Line Bank in accordance with Section 2.02(b), but in any
event no later than the Revolving Credit Termination Date.
(c) Letter of Credit Advances.
-------------------------
(i) The Borrower shall repay to the Administrative Agent for
the account of the Issuing Bank and each other Revolving Credit Lender that has
made a Letter of Credit Advance on the earlier of demand and the Revolving
Credit Termination Date the outstanding principal amount of each Letter of
Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances:
(A) any lack of validity or enforceability of any Loan
Document, any Letter of Credit Agreement, any Letter of Credit or any other
agreement or instrument relating
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to any of the foregoing (as the same now exists or may hereinafter be amended,
modified, supplemented, extended, renewed, restated or replaced, all of the
foregoing being, collectively, the "L/C Related Documents");
(B) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations of the Borrower in
respect of any L/C Related Document or any other amendment or waiver of or any
consent to departure from all or any of the L/C Related Documents;
(C) the existence of any claim, set-off, defense or
other right that the Borrower may have at any time against any beneficiary or
any transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, or any
other Person, whether in connection with the transactions contemplated by the
L/C Related Documents or any unrelated transaction;
(D) any statement or any other document presented
under a Letter of Credit should prove to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or inaccurate
in any respect; or
(E) any exchange, release or non-perfection of any
Collateral or other collateral, or any release or amendment or waiver of or
consent to departure from any Subsidiary Guaranty, Foreign Guaranty or any other
guarantee, for all or any of the Obligations of the Borrower in respect of the
L/C Related Documents.
SECTION 2.05. TERMINATION OR REDUCTION OF THE COMMITMENTS; INCREASE IN THE
COMMITMENTS.
(a) Optional Termination or Reduction of the Commitments. The
----------------------------------------------------------
Borrower may, upon at least three (3) Business Days' notice to the
Administrative Agent, terminate in whole or
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reduce in part the unused portions of each of the Unused Revolving Credit
Commitments and/or the Letter of Credit Facility; provided, however, that each
-------- -------
partial reduction of a Facility (i) shall be in an aggregate amount of $500,000
or an integral multiple of $100,000 in excess thereof, and (ii) shall be made
ratably among the appropriate Lenders in accordance with their Commitments with
respect to such Facility.
(b) Mandatory Termination or Reduction of the Commitments.
-----------------------------------------------------
(i) The Revolving Credit Facility shall be automatically and
permanently reduced on each of the following dates (or on the next Business Day,
if any such date is not a Business Day) in the amounts set forth below:
Amount (if prior to Amount (if after
Date Revolving Credit Increase) Revolving Credit Increase)
- ---- -------------------------- --------------------------
August 12, 2001 $1,250,000 $1,250,000
November 12, 2001 $1,250,000 $1,250,000
February 12, 2002 $1,250,000 $1,250,000
May 12, 2002 $1,250,000 $1,250,000
August 12, 2002 $1,250,000 $2,500,000
November 12, 2002 $1,250,000 $2,500,000
February 12, 2003 $1,250,000 $2,500,000
May 12, 2003 $1,250,000 $2,500,000
August 12, 2003 $3,750,000 $3,750,000
November 12, 2003 $3,750,000 $3,750,000
February 12, 2004 $3,750,000 $3,750,000
May 12, 2004 $3,750,000 $3,750,000
provided that each such reduction of the Revolving Credit Facility shall be made
- --------
ratably among the Revolving Credit Lenders in accordance with the Revolving
Credit Commitments.
(ii) The Letter of Credit Facility shall be permanently reduced
from time to time on the date of each reduction in the Revolving Credit Facility
by the amount, if any, by which
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the amount of the Letter of Credit Facility exceeds the Revolving Credit
Facility after giving effect to such reduction of the Revolving Credit Facility.
With respect to Asset Dispositions under Section 2.06(b), the Revolving
Credit Facility shall be automatically and permanently reduced on each date on
which prepayment thereof is required to be made pursuant to Section 2.06(b) in
an amount equal to the applicable prepayment, provided that each such reduction
of the Revolving Credit Facility shall be made ratably among the Revolving
Credit Lenders in accordance with their Revolving Credit Commitments, provided,
--------
further that no such permanent reduction shall be made, if within one hundred
- -------
eighty (180) days after the closing of same, the Net Cash Proceeds of any Asset
Disposition is expended to make a Permitted Acquisition or to purchase capital
assets to be used by Borrower or any Subsidiary in its existing business;
provided, further, that if the Net Cash Proceeds of any Asset Disposition causes
- -------- -------
the aggregate Net Cash Proceeds of all Asset Dispositions in any Fiscal Year to
exceed $10,000,000, the Net Cash Proceeds from such disposition and any
additional Asset Dispositions in such Fiscal Year shall be used to prepay and
permanently reduce the Revolving Credit Facility as provided above.
(c) Increase in the Commitment. Without any action by any Person,
--------------------------
the Revolving Credit Increase shall occur upon the satisfaction of the following
conditions:
(i) the receipt by the Administrative Agent of true, correct
and complete copies of the executed agreements, documents and/or instruments
relating to the Subordinated Issuance, in form and substance satisfactory to the
Administrative Agent;
(ii) the receipt by the Administrative Agent of evidence of the
receipt by the Borrower of the Net Cash Proceeds of the Subordinated Issuance,
in form and substance satisfactory to the Administrative Agent;
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(iii) the receipt by the Administrative Agent of evidence of
the payment in full of the Existing Subordinated Debt, in form and substance
satisfactory to the Administrative Agent;
(iv) the receipt by the Administrative Agent of the written
request by the Borrower for an increase in the Revolving Credit Facility in the
amount of $15,000,000 pursuant to this Section 2.05(c);
(v) a subordination agreement with the lender or lenders of
the Subordinated Issuance in form and substance satisfactory for the
Administrative Agent which shall include, without limitation, a maturity date
occurring after the fifth anniversary of the Initial Funding Date;
(vi) the receipt by the Administrative Agent of any other
agreements, documents and/or instruments reasonably requested by the
Administrative Agent in connection with the purposes of this Section 2.05(c),
including, without limitation, amended and restated Revolving Credit Notes, in
form and substance satisfactory to the Administrative Agent;
(vii) the passing of sixty (60) days following satisfaction of
the last of the foregoing conditions set forth in this Section 2.05(c); and
(viii) no Default or Event of Default shall exist on the date on
which the Revolving Credit Increase would occur if not for the existence of this
condition.
SECTION 2.06. PREPAYMENTS AND REPAYMENTS.
(a) Optional. The Borrower may, upon at least three (3) Business
--------
Days' notice in the case of Eurodollar Advances and same day notice in the case
of Prime Rate Advances to the Administrative Agent stating the proposed date and
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aggregate principal amount of the prepayment or repayment, as the case may be,
and if such notice is given, the Borrower shall, without premium or penalty,
prepay or repay, as the case may be, the outstanding aggregate principal amount
of the Advances, in whole or ratably in part, together with accrued interest to
the date of such prepayment on the aggregate principal amount prepaid or repaid,
as the case may be; provided, however, that (i) each partial prepayment or
repayment, as the case may be, shall be in an aggregate principal amount of
$500,000 or an integral multiple of $100,000 in excess thereof and (ii) if any
prepayment or repayment, as the case may be, of a Eurodollar Rate Advance shall
be made on a day other than on the last day of an Interest Period therefor, the
Borrower shall, together with such prepayment or repayment, as the case may be,
pay any Eurodollar Rate breakage costs as provided in Section 8.04(c). Each
prepayment or repayment, as the case may be, made pursuant to this
Section 2.06(a) shall be applied in accordance with the Borrower's direction.
(b) Mandatory. With respect to (i) any sale, lease, transfer or
---------
other disposition of any property or asset of the Borrower or any of its
Subsidiaries (other than any sale, lease, transfer or other disposition of any
such property or asset as set forth in Sections 5.02(d)(i) and (d)(iii) (each an
"Asset Disposition", and collectively, "Asset Dispositions")), (ii) any Equity
Issuance, (iii) any Debt Issuance, (iv) any Extraordinary Receipt, or (v) any
Excess Cash Flow, the Borrower shall, (w) within fifteen (15) days after receipt
by the Borrower or any of its Subsidiaries of the Net Cash Proceeds from such
Asset Disposition or Extraordinary Receipt, as the case may be, or, (x) with
respect to an Equity Issuance, within two (2) Business Days after the
requirement set forth in clause (e) of the definition of "Equity Issuance"
pertaining to the application thereof to the applicable Permitted Acquisition
Purchase Price has not been met, or (y) with respect to any Debt Issuance,
within two (2) Business Days of receipt by the Borrower of the Net Cash Proceeds
therefrom, in any case prepay or repay, as the case may be (without premium or
penalty), the then outstanding Advances in an amount equal to (w) one hundred
percent (100%) of such Net Cash Proceeds resulting from such Asset Disposition
or Extraordinary Receipt, (x) seventy five percent (75%) of such Net Cash
Proceeds resulting from such Equity Issuance, (y) one hundred percent (100%) of
such Net Cash Proceeds resulting from such Debt Issuance, and (z) if the ratio
of Consolidated Senior Debt to Pro Forma EBITDA, as computed in accordance with
Section 5.04(b), is greater than
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or equal to 2.50:1.00, 75%, and if such ratio is less than 2.50:1.00, 50%. Each
prepayment or repayment, as the case may be, made pursuant to this
Section 2.06(b) shall be subject to the provisions of Section 8.04(c) and shall
be applied as set forth in clause (c) below.
(c) Application of Prepayments and Repayments. All prepayments or
repayments, as the case may be, made pursuant to clause (b) of this Section 2.06
shall be applied to the outstanding Advances as follows:
(i) first, to prepay Letter of Credit Advances then
outstanding until all such Letter of Credit Advances are paid in full; and
(ii) second, to prepay Revolving Credit Advances then
outstanding (whereupon the Revolving Credit Facility shall be permanently
reduced to the extent set forth in Section 2.05(b)(iii) in the amount of such
prepayment) until such Revolving Credit Advances are paid in full; and
(iii) third, deposited in the L/C Cash Collateral Account to
cash collateralize 100% of the Available Amount of the Letters of Credit then
outstanding.
(d) Miscellaneous Provisions Relating to Prepayments, Termination or
-----------------------------------------------------------------
Reduction of Commitments and Maintenance of L/C Cash Collateral Account.
- --------------------------------------------------------------------------
(i) To the extent that any application provided for in clause
(c) of this Section 2.06 allocable to Eurodollar Rate Advances shall occur on
other than the last day of an applicable Interest Period, the Borrower shall be
required to pay the amounts provided for in Section 8.04(c) hereof.
(ii) Upon the drawing of any Letter of Credit for which funds
are on deposit in the L/C Cash Collateral Account, such funds shall be applied
to reimburse the Issuing
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Bank or the Revolving Credit Lenders, as applicable. Upon the termination of all
of the Commitments and the payment in full of all Obligations, the termination
or expiration of all Letters of Credit and the payment in full of all
Obligations in respect of all Letters of Credit, then all amounts remaining on
deposit in the L/C Cash Collateral Account shall be returned to the Borrower.
(iii) The amount remaining (if any) after the required
prepayment of the Advances then outstanding and the 100% cash collateralization
of the aggregate Available Amount of Letters of Credit then outstanding in
accordance with clause (c) of this Section 2.06 (the sum of such prepayment
amounts and cash collateralization amounts being referred to herein as the
"Reduction Amount") may be retained by the Borrower.
(iv) The Borrower shall, within fifteen (15) days following
the end of each month in each Fiscal Year, pay to the Administrative Agent for
deposit in the L/C Cash Collateral Account an amount sufficient to cause the
aggregate amount on deposit in such Account to equal the amount by which the
aggregate Available Amount of all Letters of Credit then outstanding exceeds the
Letter of Credit Facility on such day.
(v) At any time that the aggregate amount of Revolving Credit
Advances outstanding exceeds the Revolving Credit Availability, the Borrower
shall immediately repay Revolving Credit Advances to the extent necessary to
reduce the principal balance of Revolving Credit Advances to an amount equal to
or less than the Revolving Credit Availability.
(vi) The provisions of this Section 2.06 shall not be
construed to permit any Equity Issuance, Debt Issuance or Asset Disposition
otherwise prohibited under the terms of this Agreement.
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SECTION 2.07. INTEREST.
(a) Scheduled Interest. The Borrower shall pay to the
---------------------
Administrative Agent, for the benefit of the Lenders, interest on the unpaid
principal amount of each Advance owing to each Lender from the date of such
Advance until such principal amount shall be paid in full, at the following
rates per annum:
(i) Prime Rate Advances. During such periods as such
---------------------
Advance is a Prime Rate Advance, a rate per annum equal at all times to the sum
of (x) the Prime Rate in effect from time to time plus (y) the Applicable Margin
for such Advance in effect from time to time, payable in arrears quarterly on
the last day of each calendar quarter during such periods and on the date such
Prime Rate Advance shall be Converted or paid in full. Changes in the rate of
interest resulting from changes in the Prime Rate shall take place immediately
without notice or demand of any kind.
(ii) Eurodollar Rate Advances. During such periods as such
--------------------------
Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during
each Interest Period for such Advance to the sum of (x) the Eurodollar Rate for
such Interest Period for such Advance plus (y) the Applicable Margin for such
----
Advance in effect on the first day of such Interest Period, payable in arrears
on the last day of such Interest Period and, if such Interest Period has a
duration of more than three months, on each day that occurs during such Interest
Period every three months from the first day of such Interest Period and on the
date such Eurodollar Rate Advance shall be Converted or paid in full.
(iii) Swing Line Advances. During such periods as such Advance
-------------------
is a Swing Line Advance, a rate per annum equal at all times to the Swing Line
Rate in effect from time to time, payable in arrears monthly on the last day of
each month and on the date such Swing Line Advance shall be rolled over into the
Revolving Credit Facility as provided in Section 2.02(b) or paid in full.
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(b) Default Interest. (i) With respect to any principal amount of
-----------------
any Advance not paid when due by the Borrower (whether at the stated maturity,
by acceleration or otherwise), the Borrower shall pay interest on such unpaid
principal amount, in arrears on the dates referred to in clause (a)(i), (a)(ii)
or (a)(iii) above and on demand, at a rate per annum equal at all times to two
percent (2%) per annum above the rate per annum required to be paid on such
Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above; and with respect
to the amount of any interest, fee or other amount payable hereunder not paid
when due (whether at the stated maturity, by acceleration or otherwise) the
Borrower shall pay interest on such amount to the fullest extent permitted by
law from the date such amount shall be due until such amount shall be paid in
full, in arrears on the date such amount shall be paid in full and on demand, at
a rate per annum equal at all times to two percent (2%) per annum above the rate
per annum required to be paid, in the case of interest, on the Type of Advance
on which such interest has accrued pursuant to clause (a)(i) or (a)(ii) above,
and, in all other cases, on Prime Rate Advances pursuant to clause (a)(i) above.
(c) Notice of Interest Rate. Promptly after receipt of a Notice of
------------------------
Borrowing pursuant to Section 2.02(a), the Administrative Agent shall give
notice to the Borrower and each appropriate Lender of the applicable interest
rate determined by the Administrative Agent for purposes of clause (a)(i) or
(ii).
SECTION 2.08. FEES.
(a) Commitment Fees. The Borrower shall pay to the Administrative
---------------
Agent, for the account of the Lenders, commitment fees on the Unused Revolving
Credit Commitment, from the earlier of: (i) Initial Funding Date in the case of
each Initial Lender and from the effective date specified in the Assignment and
Acceptance pursuant to which it became a Lender in the case of each other
Lender, and (ii) 90 days after the date hereof, until the Revolving Credit
Termination Date payable in arrears quarterly on the last Business Day of each
March, June, September, and December, commencing on the first of such dates
after the Initial Funding Date, and on the Revolving Credit Termination Date at
the applicable percent per annum set forth in the Unused
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Commitment Fee Table set forth below, determined in the same manner as are the
Applicable Margins for the Facilities, by reference to the ratio of Consolidated
Total Funded Debt to Pro Forma EBITDA for the four full fiscal quarters
preceding such determination. For purposes of this clause (a), Swing Line
Advances shall not constitute utilization of the Revolving Credit Commitments of
the Revolving Credit Lenders.
Notwithstanding the foregoing, for the first six (6) months after the
Initial Funding Date, the rate per annum on the average daily Unused Revolving
Credit Commitment of each Lender shall be equal to 0.500%.
UNUSED COMMITMENT FEE TABLE
---------------------------
Consolidated Total Funded
Debt to Pro Forma EBITDA Percentage
------------------------ ----------
Equal to or greater than 3.00 to 1.00 .500%
Equal to or greater than 3.00 to 1.00
but less than 3.00 to 1.00 .500%
Equal to or greater than 2.00 to 1 .00,
but less than 3.00 to 1.00 .500%
Equal to or greater than 2.50 to 1 .00,
but less than 3.00 to 1.00 .500%
Less than 2.00 to 1.00 .375%
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(b) Letter of Credit Fees.
---------------------
(i) The Borrower shall pay to the Administrative Agent for
the account of each Revolving Credit Lender a commission, payable in arrears
quarterly on the last Business Day of each March, June, September and December,
commencing on the first of such dates after the Initial Funding Date, and on the
Revolving Credit Termination Date, on such Lender's Pro Rata Share of the
average daily aggregate Available Amount during such quarter of all Letters of
Credit outstanding from time to time at the rate per annum equal to the
Applicable Margin then in effect for Eurodollar Rate Advances under the
Revolving Credit Facility.
(ii) In addition to the foregoing fees described in Section
2.08(b)(i) above, the Borrower shall pay to the Issuing Bank, for its own
account, (x) on the Available Amount of each Letter of Credit, a fronting fee,
for the period from the date of issuance of such Letter of Credit to and
including the termination thereof, computed at the rate of one quarter of one
percent (1/4%) per annum, payable in arrears quarterly on the last Business Day
of each March, June, September and December of each year and on the date of
termination thereof and (y) transfer fees and other customary fees and charges
in connection with the issuance or administration of each Letter of Credit as
the Borrower and the Issuing Bank shall agree.
(c) Administrative Agent's Fees. The Borrower shall pay to the
----------------------------
Administrative Agent for its own account such fees as may from time to time be
agreed between the Borrower and the Administrative Agent, including, without
limitation, the fees specified in that certain letter agreement dated April 15,
1999, between Borrower and Fleet (as such letter agreement may be amended,
supplemented or otherwise modified from time to time, the "Fee Letter") and due
under and pursuant to such Fee Letter.
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SECTION 2.09. CONVERSION OF ADVANCES.
(a) Optional. The Borrower may on any Business Day, upon notice
--------
given to the Administrative Agent not later than 1:00 p.m. (New York time) on
the third Business Day prior to the date of the proposed Conversion to
Eurodollar Rate Advances and by 1:00 p.m. on the Business Day prior to the
proposed Conversion to Prime Rate Advances and subject to the provisions of
Sections 2.07 and 2.10, Convert all or any portion of the Advances of one Type
comprising the same Borrowing into Advances of the other Type; provided,
--------
however, that any Conversion of Eurodollar Rate Advances into Prime Rate
- -------
Advances shall be made only on the last day of an Interest Period for such
Eurodollar Rate Advances, no Conversion of any Advances shall be less than the
minimum amount applicable under Section 2.01(a) or (b) or result in more
separate Borrowings than permitted under Section 2.02(c) and each Conversion of
Advances comprising part of the same Borrowing under any Facility shall be made
ratably among the appropriate Lenders in accordance with their Commitments under
such Facility. Each such notice of Conversion shall, within the restrictions
specified above, specify (i) the date of such Conversion, (ii) the Advances to
be Converted and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for such Advances. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
(b) Mandatory.
---------
(i) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $500,000, such Advances shall
automatically Convert into Prime Rate Advances on the last day of the Interest
Period relating thereto.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and
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the appropriate Lenders, whereupon each such Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Prime Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Event of Default and the acceleration of the Notes, interest thereon and other
amounts payable by the Borrower under this Agreement and the other Loan
Documents pursuant to Article VI, (x) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Prime Rate Advance and (y) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
SECTION 2.10. INCREASED COSTS, ETC.
(a) If, after the date hereof, due to (i) the introduction of any
change in reserve requirements included in the Eurodollar Rate Reserve
Percentage, any change in the interpretation of, or any change in, any law or
regulation, or (ii) the compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law made after the date hereof), there shall be any increase in the cost to any
Lender Party of agreeing to make or of making, funding or maintaining Eurodollar
Rate Advances or of agreeing to issue or of issuing or maintaining Letters of
Credit or of agreeing to make or of making or maintaining Letter of Credit
Advances (excluding for purposes of this Section 2.10 any such increased costs
resulting from (x) Taxes or Other Taxes (as to which Section 2.12 shall govern)
and (y) changes in the basis of taxation of overall net income or overall gross
income by the United States or by the foreign jurisdiction or state under the
laws of which such Lender Party is organized or has its Applicable Lending
Office or any political subdivision thereof), then the Borrower shall from time
to time, upon demand by such Lender Party (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender Party additional amounts sufficient to compensate such Lender Party for
such increased cost; provided, however, that a Lender Party claiming additional
-------- -------
amounts under this Section 2.10(a) agrees to use reasonable efforts (consistent
with legal and regulatory restrictions) to designate a different Applicable
Lending Office if the
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making of such a designation would avoid the need for, or reduce the amount of,
such increased cost that may thereafter accrue and would not, in the reasonable
judgment of such Lender Party, be otherwise disadvantageous to such Lender
Party. A certificate as to the amount of such increased cost, submitted to the
Borrower by such Lender Party, shall be conclusive and binding for all purposes,
absent manifest error.
(b) If, after the date hereof, due to (i) the introduction of any
change in the interpretation of, or any change in, any law or regulation, or
(ii) the compliance with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law made after the
date hereof), there shall be any increase in the amount of capital required or
reasonably expected to be maintained by any Lender Party or any corporation
controlling such Lender Party as a result of or based upon the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder or the
issuance or maintenance of the Letters of Credit, then, upon demand by such
Lender Party (with a copy of such demand to the Administrative Agent), the
Borrower shall pay to the Administrative Agent for the account of such Lender
Party, from time to time as specified by such Lender Party, additional amounts
sufficient to compensate such Lender Party or such corporation in the light of
such circumstances, to the extent that such Lender Party reasonably determines
such increase in capital to be allocable to the existence of such Lender Party's
commitment to lend or to issue Letters of Credit hereunder or to the issuance or
maintenance of any Letters of Credit. A certificate as to such amounts submitted
to the Borrower by such Lender Party shall be conclusive and binding for all
purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders owed greater than 50% of the then aggregate unpaid principal
amount thereof notify the Administrative Agent that the Eurodollar Rate for any
Interest Period for such Advances will not adequately reflect the cost to such
Lenders of making, funding or maintaining their Eurodollar Rate Advances for
such Interest Period, the Administrative Agent shall forthwith so notify the
Borrower and the appropriate Lenders, whereupon (i) each such Eurodollar Rate
Advance under any Facility will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Prime
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Rate Advance and (ii) the obligation of the appropriate Lenders to make, or to
Convert Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lenders have determined
that the circumstances causing such suspension no longer exist.
(d) Notwithstanding any other provision of this Agreement, if, after
the date hereof, the introduction of any change in, or any change in the
interpretation of, any law or regulation shall make it unlawful, or any central
bank or other governmental authority shall assert that it is unlawful, for any
Lender or its Eurodollar Lending Office to perform its obligations hereunder to
make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances hereunder, then, on notice thereof and demand therefor by such Lender
to the Borrower through the Administrative Agent, (i) that portion of each
Eurodollar Rate Advance made by such Lender under each Facility under which such
Lender has a Commitment will automatically, upon such demand, Convert into a
Prime Rate Advance and (ii) the obligation of such Lender to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower that such Lender has determined
that the circumstances causing such suspension no longer exist; provided,
--------
however, that before making any such demand, such Lender agrees to use
- -------
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Eurodollar Lending Office if the making
of such a designation would allow such Lender or its Eurodollar Lending Office
to continue to perform its obligations to make Eurodollar Rate Advances or to
continue to fund or maintain Eurodollar Rate Advances and would not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender.
SECTION 2.11. PAYMENTS AND COMPUTATIONS.
(a) The Borrower shall make each payment hereunder and under the
Notes, irrespective of any right of counterclaim or set-off (except as otherwise
provided in Section 2.13), not later than 1:00 p.m. (New York time) on the day
when due in lawful money of the United States to the Administrative Agent at the
Administrative Agent's Account in immediately available funds.
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The Administrative Agent will promptly thereafter cause like funds to be
distributed (i) if such payment by the Borrower is in respect of principal,
interest, commitment fees or any other Obligation then payable hereunder and
under the Notes to more than one Lender Party, to such Lender Parties for the
account of their respective Applicable Lending Offices ratably in accordance
with the amounts of such respective Obligations then payable to such Lender
Parties and (ii) if such payment by the Borrower is in respect of any Obligation
then payable hereunder to one Lender Party, to such Lender Party for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon its acceptance of an Assignment and Acceptance
and recording of the information contained therein in the Register pursuant to
Section 8.07(d), from and after the effective date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder and under
the Notes in respect of the interest assigned thereby to the Lender Party
assignee thereunder, and the parties to such Assignment and Acceptance shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.
(b) If the Administrative Agent receives funds for application to
the Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances, the Facility or other amount to which, or
the manner in which, such funds are to be applied, the Administrative Agent may,
but shall not be obligated to, elect to distribute such funds to each Lender
Party ratably in accordance with such Lender Party's proportionate share of the
principal amount of all outstanding Advances and the Available Amount of all
Letters of Credit then outstanding in repayment or prepayment of such of the
outstanding Advances or other Obligations owed to such Lender Party, and for
application to such Obligation, as the Administrative Agent shall direct.
(c) The Borrower hereby authorizes each Lender Party, if and to the
extent payment owed to such Lender Party is not made when due hereunder or, in
the case of a Lender, under the Note held by such Lender, to charge from time to
time against any or all of the Borrower's accounts with such Lender Party any
amount so due.
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(d) With the exception of the calculation of interest with respect
to the Fleet Base Rate which shall be calculated by the Administrative Agent on
the basis of a year of 365 or 366 days for the actual number of days occurring
in the period for which such interest is payable all computations of interest,
fees and Letter of Credit commissions shall be made by the Administrative Agent
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest, fees or commissions are payable. Each determination by the
Administrative Agent of an interest rate, fee or commission hereunder shall be
conclusive and binding for all purposes, absent manifest error.
(e) Whenever any payment hereunder or under any Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fee, as the
case may be; provided, however, that, if such extension would cause payment of
-------- -------
interest on or principal of Eurodollar Rate Advances to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
(f) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to any Lender Party
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount equal to the amount then due such Lender Party. If
and to the extent the Borrower shall not have so made such payment in full to
the Administrative Agent, each such Lender Party shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon, for each day from the date such amount is
distributed to such Lender Party until the date such Lender Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.
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SECTION 2.12. TAXES.
(a) Any and all payments by the Borrower hereunder or under the Notes
shall be made in accordance with Section 2.11, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender Party and the Administrative Agent, net income taxes
that are imposed by the United States and net income taxes (or franchise taxes
imposed in lieu thereof) that are imposed on such Lender Party or the
Administrative Agent by the local, state or foreign jurisdiction under the laws
of which such Lender Party or the Administrative Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender
Party, net income taxes (or franchise taxes imposed in lieu thereof) that are
imposed on such Lender Party by the local, state or foreign jurisdiction of such
Lender Party's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Eligible Assignee, any Lender Party or the Administrative Agent, (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.12) such Lender Party or the Administrative Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any present or future stamp,
documentary, excise, property or similar taxes, charges or levies that arise
from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, performing under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
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(c) The Borrower shall indemnify each Lender Party and the
Administrative Agent for the full amount of Taxes and Other Taxes, and for the
full amount of taxes imposed by any jurisdiction on amounts payable under this
Section 2.12, imposed on or paid by such Lender Party or the Administrative
Agent (as the case may be) and any liability (including penalties, additions to
tax, interest and expenses) arising therefrom or with respect thereto, except
with respect to any Lender Party or the Administrative Agent, as the case may
be, for such a liability arising from such Lender Party's or the Administrative
Agent's, as the case may be, willful misconduct or gross negligence. This
indemnification shall be made within thirty (30) days from the date such Lender
Party or the Administrative Agent, as the case may be, makes written demand
specifying in reasonable detail the basis therefor.
(d) Within thirty (30) days after the date of any payment of Taxes,
the Borrower shall furnish to the Administrative Agent, at its address referred
to in Section 8.02, the original receipt of payment thereof or a certified copy
of such receipt. In the case of any payment hereunder or under the Notes by or
on behalf of the Borrower through an account or branch outside the United States
or by or on behalf of the Borrower by a payor that is not a United States
person, if the Borrower determines that no Taxes are payable in respect thereof,
the Borrower shall furnish, or shall cause such payor to furnish, to the
Administrative Agent, at such address, an opinion of counsel acceptable to the
Administrative Agent stating that such payment is exempt from Taxes. For
purposes of this subsection (d) and subsection (e), the terms "United States"
and "United States person" shall have the meanings specified in Section 7701 of
the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States shall, (i) on or prior to the date of its execution
and delivery of this Agreement in the case of each Initial Lender or Initial
Issuing Bank, as the case may be, and on the date of the Assignment and
Acceptance pursuant to which it became a Lender Party in the case of each other
Lender Party, and (ii) from time to time thereafter as requested in writing by
the Borrower or the Administrative Agent (except to the extent such Lender Party
is unable to do so by reason of a change in the Code, any applicable tax treaty,
or any official interpretation of either occurring after
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the Lender Party became such under this Agreement (a "Change in Law"), provide
each of the Administrative Agent and the Borrower with two (2) original Internal
Revenue Service Form 1001 or 4224, as appropriate, and two (2) original Forms
W-8 or any successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender is exempt from or entitled to a reduced rate of
United States withholding tax on payments pursuant to this Agreement or the
Notes. If the forms provided by a Lender Party at the time such Lender Party
first becomes a party to this Agreement indicate a United States interest
withholding tax rate in excess of zero, withholding tax at such rate shall be
considered excluded from Taxes unless and until such Lender Party provides the
appropriate form certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for periods
governed by such form; provided, however, that, if at the date of the Assignment
-------- -------
and Acceptance pursuant to which a Lender Party becomes a party to this
Agreement, the Lender Party assignor was entitled to payments under subsection
(a) in respect of United States withholding tax with respect to interest paid at
such date, then, to such extent, the term Taxes shall include (in addition to
withholding taxes that may be imposed in the future or other amounts otherwise
includable in Taxes) United States withholding tax, if any, applicable with
respect to the Lender Party assignee on such date. If any form or document
referred to in this subsection (e) requires the disclosure of information, other
than information necessary to compute the tax payable and information required
on the date hereof by Internal Revenue Service Form 1001 or 4224, that a Lender
Party reasonably considers to be confidential, such Lender Party shall give
notice thereof to the Borrower and shall not be obligated to include in such
form or document such confidential information.
(f) For any period with respect to which a Lender Party described in
Section 2.12(e) has failed to provide the Borrower with the appropriate form
described in Section 2.12(e) (other than if such failure is due to a Change in
Law occurring after the date on which a form originally was required to be
provided), such Lender Party shall not be entitled to indemnification under
Sections 2.12(a) or (c) with respect to Taxes imposed by the United States by
reason of such failure.
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(g) Any Lender Party claiming any additional amounts payable pursuant
to this Section 2.12 agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Applicable Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party.
SECTION 2.13. SHARING OF PAYMENTS, ETC. If any Lender Party shall obtain
at any time any payment (whether voluntary, involuntary, through the exercise of
any right of set-off, or otherwise) (i) on account of Obligations due and
payable to such Lender Party hereunder or under the Notes at such time in excess
of its ratable share (according to the proportion of (x) the amount of such
Obligations due and payable to such Lender Party at such time to (y) the
aggregate amount of the Obligations due and payable to all Lender Parties
hereunder and under the Notes at such time) of payments on account of the
Obligations due and payable to all Lender Parties hereunder or under the Notes
at such time obtained by all the Lender Parties at such time or (ii) on account
of Obligations owing (but not due and payable) to such Lender Party hereunder
and under the Notes at such time in excess of its ratable share (according to
the proportion of (x) the amount of such Obligations owing to such Lender Party
at such time to (y) the aggregate amount of the Obligations owing (but not due
and payable) to all Lender Parties hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such participations in the Obligations due and payable or
owing to them, as the case may be, as shall be necessary to cause such
purchasing Lender Party to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
- -------- -------
thereafter recovered from such purchasing Lender Party, such purchase from each
other Lender Party shall be rescinded and each such other Lender Party shall
repay to the purchasing Lender Party the purchase price to the extent of such
Lender Party's ratable share (according to the proportion of (x) the purchase
price paid to such Lender Party to (y) the aggregate purchase price paid to all
Lender Parties) of such recovery together with an amount equal
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to such Lender Party's ratable share (according to the proportion of (x) the
amount of such other Lender Party's required repayment to (y) the total amount
of such required repayments to the purchasing Lender Party) of any interest or
other amount paid or payable by the purchasing Lender Party in respect of the
total amount so recovered. The Borrower agrees that any Lender Party so
purchasing a participation from another Lender Party pursuant to this
Section 2.13 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender Party were the direct creditor of the
Borrower in the amount of such participation.
SECTION 2.14. USE OF PROCEEDS. The proceeds of the Advances and issuances
of Letters of Credit shall be available, and the Borrower shall use such
proceeds and Letters of Credit solely for the following purposes:
(a) to refinance or prepay all outstanding Debt of the Borrower and
its Subsidiaries under the Existing Credit Facility and the outstanding Debt of
the Foreign Subsidiaries as listed on Schedule 2.14(a) attached hereto.
----------------
(b) to finance Permitted Acquisitions, to pay fees and expenses
relating to the financing set forth in this Agreement and the other Loan
Documents, and to provide for working capital and other general corporate
purposes of the Borrower and its Subsidiaries.
SECTION 2.15. DEFAULTING LENDERS.
(a) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Advance
to the Borrower and (iii) the Borrower shall be required to make any payment
hereunder or under any other Loan Document to or for the account of such
Defaulting Lender, then the Borrower may, so long as no Default shall occur or
be continuing at such time and to the fullest extent permitted by applicable
law, set off and otherwise apply the obligation of the Borrower to make such
payment to or for the account of such
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Defaulting Lender against the obligation of such Defaulting Lender to make such
Defaulted Advance. In the event that, on any date, the Borrower shall so set off
and otherwise apply its obligation to make any such payment against the
obligation of such Defaulting Lender to make any such Defaulted Advance on or
prior to such date, the amount so set off and otherwise applied by the Borrower
shall constitute for all purposes of this Agreement and the other Loan Documents
an Advance by such Defaulting Lender made on the date under the Facility
pursuant to which such Defaulted Advance was originally required to have been
made pursuant to Section 2.01. Such Advance shall be a Prime Rate Advance and
shall be considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the Borrower exercises its right of
set-off pursuant to this subsection (a) and shall set forth in such notice (i)
the name of the Defaulting Lender and the Defaulted Advance required to be made
by such Defaulting Lender and (ii) the amount set off and otherwise applied in
respect of such Defaulted Advance pursuant to this subsection (a). Any portion
of such payment otherwise required to be made by the Borrower to or for the
account of such Defaulting Lender which is paid by the Borrower, after giving
effect to the amount set off and otherwise applied by the Borrower pursuant to
this subsection (a), shall be applied by the Administrative Agent as specified
in subsection (b) or (c) of this Section 2.15.
(b) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
the Administrative Agent or any of the other Lender Parties and (iii) the
Borrower shall make any payment hereunder or under any other Loan Document to
the Administrative Agent for the account of such Defaulting Lender, then the
Administrative Agent may, on its behalf or on behalf of such other Lender
Parties and to the fullest extent permitted by applicable law, apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such Defaulted Amount to the extent required to
pay such Defaulted Amount. In the event that the Administrative Agent shall
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so apply any such amount to the payment of any such Defaulted Amount on any
date, the amount so applied by the Administrative Agent shall constitute for all
purposes of this Agreement and the other Loan Documents, payment, to such
extent, of such Defaulted Amount on such date. Any such amount so applied by the
Administrative Agent shall be retained by the Administrative Agent or
distributed by the Administrative Agent to such other Lender Parties, ratably in
accordance with the respective portions of such Defaulted Amounts payable at
such time to the Administrative Agent and such other Lender Parties and, if the
amount of such payment made by the Borrower shall at such time be insufficient
to pay all Defaulted Amounts owing at such time to the Administrative Agent and
the other Lender Parties, in the following order of priority:
(i) first, to the Administrative Agent for any Defaulted
Amount then owing to the Administrative Agent; and
(ii) second, to the Lender Parties for any Defaulted Amounts
then owing to such Lender Parties, ratably in accordance with such respective
Defaulted Amounts then owing to such Lender Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.
(c) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrower, the Administrative Agent or any
other Lender Party shall be required to pay or distribute any amount hereunder
or under any other Loan Document to or for the account of such Defaulting
Lender, then the Borrower or such other Lender Party shall pay such amount to
the Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent shall,
to the fullest extent permitted by
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applicable law, hold in escrow such amount otherwise held by it. Any funds held
by the Administrative Agent in escrow under this subsection (c) shall be
deposited by the Administrative Agent in an account with Fleet, in the name and
under the control of the Administrative Agent, but subject to the provisions of
this subsection (c). The terms applicable to such account, including the rate of
interest payable with respect to the credit balance of such account from time to
time, shall be Fleet's standard terms applicable to escrow accounts maintained
with it. Any interest credited to such account from time to time shall be held
by the Administrative Agent in escrow under, and applied by the Administrative
Agent from time to time in accordance with the provisions of, this subsection
(c). The Administrative Agent shall, to the fullest extent permitted by
applicable law, apply all funds so held in escrow from time to time to the
extent necessary to make any Advances required to be made by such Defaulting
Lender and to pay any amount payable by such Defaulting Lender hereunder and
under the other Loan Documents to the Administrative Agent or any other Lender
Party, as and when such Advances or amounts are required to be made or paid and,
if the amount so held in escrow shall at any time be insufficient to make and
pay all such Advances and amounts required to be made or paid at such time, in
the following order of priority:
(i) first, to the Administrative Agent for any amount then
due and payable by such Defaulting Lender to the Administrative Agent hereunder;
(ii) second, to the Lender Parties for any amount then due and
payable by such Defaulting Lender to such Lender Parties hereunder, ratably in
accordance with such respective amounts then due and payable to such Lender
Parties; and
(iii) third, to the Borrower for any Advance then required to
be made by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and
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applied by such Lender Party to the Obligations owing to such Lender Party at
such time under this Agreement and the other Loan Documents in such manner as
the Administrative Agent shall reasonably direct.
(d) The rights and remedies against a Defaulting Lender under this
Section 2.15 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that the Administrative Agent or any Lender Party may have against such
Defaulting Lender with respect to any Defaulted Amount.
SECTION 2.16. REGULATION U. Each Lender Party shall be responsible for
its compliance hereunder with Regulation U, if and as applicable, and the
Administrative Agent shall have no responsibility with respect to any such
compliance by any Lender Party.
ARTICLE III
CONDITIONS OF LENDING
---------------------
SECTION 3.01. CONDITIONS PRECEDENT TO THE INITIAL FUNDING DATE. The
obligation of each Lender to make its Initial Extension of Credit hereunder and
the effectiveness of this Agreement is subject to the condition that the
Administrative Agent shall have received each of the following, each in form and
substance satisfactory to the Administrative Agent, and in sufficient copies for
each Lender:
(a) Credit Agreement. This Agreement, which shall have been executed
----------------
by each party hereto.
(b) Resolutions; Incumbency. With respect to each of the Borrower
-----------------------
and each of the Subsidiaries:
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(i) copies of the resolutions of the board of directors of
such Person authorizing the execution, delivery and performance of the Loan
Documents to which such Person is a party and the transactions contemplated
hereby and thereby, certified by the Secretary or an Assistant Secretary of such
Person; and
(ii) a certificate of the Secretary or Assistant Secretary of
such Person certifying the names, titles and true signatures of the officers of
such Person authorized to execute, deliver and perform, as applicable, the Loan
Documents to be delivered by it hereunder.
(c) Organization Documents; Good Standing. With respect to each of
-------------------------------------
the Borrower and each of the Subsidiaries:
(i) the articles or certificate of incorporation, memorandum
and articles of association, and bylaws of such Person as then in effect,
certified by the Secretary or Assistant Secretary of such Person; and
(ii) a good standing certificate for such Person from the
Secretary of State (or similar, applicable Governmental Authority) of its state
of incorporation and each state where such Person is qualified to do business as
a foreign corporation as of a recent date, together with a bring-down
certificate by facsimile.
(d) Legal Opinions. Opinions addressed to the Administrative Agent
--------------
and the Lenders, dated as of the Initial Funding Date, of (i) Buchanan Ingersoll
Professional Corporation, counsel to the Borrower; and (ii) Wilde Sapte, special
English counsel to the Borrower, in each case, in form and substance
satisfactory to the Administrative Agent.
(e) Certificate. A certificate signed by a Responsible Officer of
-----------
the Borrower, stating that:
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(i) the representations and warranties contained in Article
IV are true and correct;
(ii) no Default or Event of Default exists;
(iii) no event of default or any event that would constitute an
event of default but for the requirement that notice be given at time elapse or
both, exists under the Existing Credit Facility; and
(iv) there has not occurred since February 28, 1999, with
respect to the Borrower and its Subsidiaries, any event or circumstance that has
resulted or could reasonably be expected to result in a Material Adverse Effect.
(f) Pro Forma Balance Sheet; Projections; and Financials.
----------------------------------------------------
(i) A pro forma consolidated balance sheet of the Borrower
and its Subsidiaries (based on the interim financial statements of the Borrower
as of February 28, 1999, together with a compliance certificate executed by a
Responsible Officer, demonstrating compliance by the Borrower with Section 5.04
as of the Initial Funding Date, which pro forma balance sheet and compliance
certificate shall be in form and substance satisfactory to the Administrative
Agent; and
(ii) Projections for the period commencing in August 31, 1998,
and concluding on the date five years thereafter in form and substance
acceptable to the Administrative Agent.
(g) Solvency Certificates. The Borrower shall have delivered a
----------------------
written certificate of a Responsible Officer of the Borrower, in form and
substance satisfactory to the Administrative Agent with respect to the solvency
of the Borrower and each of the Subsidiaries.
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(h) [Intentionally Omitted]
(i) Notes. The Notes in the form of Exhibit B and Exhibit C, payable
----- --------- ---------
to the order of the applicable Lender Parties duly executed by the Borrower.
(j) Lender Release Letters. A fully executed, valid and binding
------------------------
bank release letter, or other customary evidence of satisfaction acceptable to
the Administrative Agent, delivered by each lender to the Borrower and each of
its Subsidiaries (which must include the lenders under Existing Credit Facility)
being repaid on the Initial Funding Date stating that the total amount due under
any credit and loan documents or agreements with such lenders, as the case may
be, howsoever due and owing (whether as principal, interest or premium) shall be
satisfied (and such agreements terminated) upon payment of an amount certain,
together with such lien releases and other customary payoff documentation as the
Administrative Agent shall reasonably require.
(k) Collateral Documents.
--------------------
(i) A security agreement duly executed by the Borrower, in
form and substance satisfactory to the Administrative Agent, granting to the
Administrative Agent, for itself and ratably for the benefit of the Lender
Parties and the Hedge Banks, a first priority security interest (subject only to
Permitted Liens) in the Collateral described therein (together with each
security agreement duly executed and delivered by the Domestic Subsidiaries, in
form and substance satisfactory to the Administrative Agent, granting to the
Administrative Agent, for itself and ratably for the benefit of the Lender
Parties and the Hedge Banks, a first priority security interest (subject only to
Permitted Liens) in the Collateral described therein, in each case as amended,
supplemented or otherwise modified from time to time in accordance with its
terms, a "Security Agreement"), together with:
(A) proper, duly executed financing statements under the
Uniform Commercial Code of all jurisdictions that the Administrative Agent may
deem necessary or desirable
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in order to perfect and protect the first priority Liens and security interests
created under the Security Agreement, covering the Collateral described in the
Security Agreement;
(B) completed requests for information listing all
effective financing statements filed that name the Borrower or any Domestic
Subsidiary as debtor, together with copies of such financing statements; and
(C) evidence of the insurance required by the terms of the
Security Agreement.
(ii) A pledge agreement duly executed by the Borrower, in form
and substance satisfactory to the Administrative Agent, granting to the
Administrative Agent, for itself and ratably for the benefit of the Lender
Parties and the Hedge Banks, a first priority security interest (subject only to
Permitted Liens) in the Collateral described therein (together with each pledge
agreement duly executed and delivered by any Domestic Subsidiary which is the
parent company of another Domestic Subsidiary, in form and substance
satisfactory to the Administrative Agent, granting to the Administrative Agent,
for itself and ratably for the benefit of the Lender Parties and the Hedge
Banks, a first priority security interest (subject only to Permitted Liens) in
the Collateral described therein, in each case as amended, supplemented or
otherwise modified from time to time in accordance with its terms, a "Pledge
Agreement"), together with certificates representing the Pledged Securities
referred to in the Pledge Agreement, accompanied by undated stock powers
executed in blank and irrevocable proxies.
(iii) agreements with respect to the Collateral Agreement of
acquisition agreements with respect to prior acquisitions (each an "Acquisition
Rights Agreement", and, collectively "Acquisition Rights Assignments"), by
sellers of assets and capital stock to the Borrower and its Subsidiaries in
favor of the Administrative Agent, for itself and ratably for the benefit of the
Lender Parties and the Hedge Banks, in each case, in form and substance
satisfactory to the Administrative Agent;
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(iv) intellectual property security agreements in form and
substance reasonably acceptable to the Administrative Agent;
(v) all consents, waivers, acknowledgments and other
agreements from third persons, which the Administrative Agent may deem necessary
or desirable in order to permit, protect and perfect its security interest for
and liens upon the Collateral (for itself and ratably for the benefit of the
Lender Parties and the Hedge Banks) or to effectuate the provisions or purposes
of this Agreement and the other Loan documents, including, without limitation
acknowledgments by lessors, mortgagees and warehousemen of the Administrative
Agent's security interests in the Collateral, for itself, and ratably for the
benefit of Lender Parties and the Hedge Banks, waivers by such persons of any
security interests, liens or other claims by such person to the Collateral and
agreements permitting the Administrative Agent's access to, and the right to
remain on, the premises to exercise its and their rights and remedies and
otherwise deal with the Collateral.
(vi) (A) A guaranty in form and substance satisfactory to the
Administrative Agent, duly executed by each Domestic Subsidiary of the Borrower
(as hereafter amended, supplemented or otherwise modified from time to time in
accordance with its terms, the "Subsidiary Guaranty"); and
(B) A guaranty in form and substance satisfactory to the
Administrative Agent, duly executed by each Foreign Subsidiary of the Borrower
(as hereafter amended, supplemented or otherwise modified from time to time in
accordance with its terms, the "Foreign Guaranty").
(vii) Evidence that all other actions necessary or, in the
reasonable opinion of the Administrative Agent, customary to perfect and protect
the first priority Lien created by the Collateral Documents has been taken.
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(l) Payment of Fees. Evidence of payment by the Borrower of all
-----------------
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Initial Funding Date, including any such costs, fees and expenses arising
under or referenced in Sections 2.08 and 8.04, and the fees and expenses of
counsel for the Administrative Agent.
(m) Post-Closing Letter Agreement. A letter agreement with respect
------------------------------
to certain items to be delivered post-closing, including, without limitation,
(i) evidence of and collateral assignment of life insurance policy in favor of
the Borrower with respect to the life of William Dye, together with an
associated life insurance questionnaire, in form and substance satisfactory to
the Administrative Agent; and (ii) at the discretion of the Administrative
Agent, with respect to the premises of the Borrower located at 229 West 28th
Street, New York, New York, including, without limitation, (A) a leasehold
mortgage, (B) a Phase I environmental audit, (C) a valid and effective title
insurance policy; all in form and substance satisfactory to the Administrative
Agent.
(n) Other Documents. Such other customary approvals, opinions,
----------------
documents or materials as in the Administrative Agent may reasonably request.
SECTION 3.02. CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The
obligation of each Lender to make an Advance (including its initial Advance) and
the obligation of the Issuing Bank to issue a Letter of Credit (including the
initial issuance thereof) or renew a Letter of Credit and the right of the
Borrower to request the issuance or renewal of a Letter of Credit, shall each be
subject to the further conditions precedent that on the date of each such
Borrowing or issuance or renewal:
(a) Notice, Application; Continuation of Representations and
-----------------------------------------------------------------
Warranties. The following statements shall be true and the Administrative Agent
- ----------
shall have received (except in the case of the Letter of Credit Advance made by
the Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and a
Swing Line Advance made by a Swing Line Bank pursuant to Section 2.02(b)) a
certificate signed by a duly authorized officer of the Borrower, dated the date
of such Borrowing or issuance or renewal, stating that (and each of the giving
of the applicable Notice
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of Borrowing, Notice of Swing Line Borrowing or Notice of Issuance and the
acceptance by the Borrower of the proceeds of a Borrowing or of a Letter of
Credit or the renewal of a Letter of Credit, shall constitute a representation
and warranty by the Borrower that both on the date of such notice and on the
date of such Borrowing or issuance or renewal such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct in all material respects on and as of such date (or, if any
such representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date), before and after giving effect to such
Borrowing or issuance or renewal and to the application of the proceeds
therefrom, as though made on and as of such date; and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or issuance or renewal or from the application of the
proceeds therefrom, that constitutes a Default or an Event of Default.
(b) Permitted Acquisitions. With respect to any Permitted
------------------------
Acquisition, the Administrative Agent shall have received a certificate executed
by the Borrower's Responsible Officer showing the Borrower's compliance
(including the computations used by the Borrower in determining such compliance)
with the financial covenants set forth in Sections 5.04(a) through (c) on a pro
forma basis after giving effect to the proposed Permitted Acquisition.
(c) Other Approvals. The Administrative Agent shall have received
----------------
such other approvals, opinions or documents as any appropriate Lender through
the Administrative Agent may reasonably request, and all legal matters incident
to such Borrowing or issuance of such Letter of Credit shall be reasonably
satisfactory to counsel for the Administrative Agent.
SECTION 3.03. DETERMINATIONS UNDER SECTIONS 3.01 AND 3.02. For purposes of
determining compliance with the conditions specified in Section 3.01 and 3.02,
each Lender Party shall be deemed to have consented to, approved or accepted or
to be satisfied with each document or other
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matter required thereunder to be consented to or approved by or acceptable or
satisfactory to the Lender Parties, unless an officer of the Administrative
Agent responsible for the transactions contemplated by the Loan Documents shall
have received written notice from such Lender Party prior to the Initial
Extension of Credit specifying its objection thereto and, if the Initial
Extension of Credit consists of a Borrowing, such Lender Party shall not have
made available to the Administrative Agent such Lender Party's ratable portion
of such Borrowing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 4.01. REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants as follows:
(a) The Borrower and each of its Subsidiaries (i) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (ii) is duly qualified and in good standing in each other
jurisdiction in which it owns or leases property or in which the conduct of its
business requires it to so qualify or be licensed except where the failure to so
qualify or be licensed could not reasonably be expected to have a Material
Adverse Effect and (iii) has all requisite power and authority, corporate or
otherwise (including, without limitation, all governmental licenses, permits and
other approvals), to own or lease and operate its properties and to carry on its
business as now conducted.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
----------------
list of all Subsidiaries of the Borrower as of the date hereof, showing as of
the date hereof (as to each such Subsidiary) the jurisdiction of its
organization, the number of shares of each class of capital stock, authorized,
and the number outstanding, on the date hereof and the percentage of the
outstanding shares of each such class owned (directly or indirectly) by the
Borrower or such Subsidiary and the number of shares covered by all outstanding
options, warrants, rights of conversion or purchase and
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similar rights at the date hereof. All of the outstanding capital stock of all
of such Subsidiaries has been validly issued, is fully paid and non-assessable
and is owned by the Borrower or such Subsidiary or one or more of their
respective Subsidiaries free and clear of all Liens, except those created under
the Collateral Documents.
(c) The execution, delivery and performance by each Loan Party of
this Agreement and each other Loan Document to which it is or is to be a party,
and the consummation of transactions contemplated hereby and thereby, are within
such Loan Party's governing powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene such Loan Party's organization
documents, (ii) violate any law (including, without limitation, the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended),
rule, regulation (including, without limitation, Regulation T, U or X), order,
writ, judgment, injunction, decree, determination or award, (iii) conflict with
or result in the breach of, or constitute a default under, any Material
Contract, loan agreement, indenture, mortgage, deed of trust, lease or other
material instrument binding on or affecting the Borrower or any of its
Subsidiaries or any of their respective properties or (iv) except for the Liens
created pursuant to the Collateral Documents, result in or require the creation
or imposition of any Lien upon or with respect to any of the properties of the
Borrower or any of its Subsidiaries. Neither the Borrower nor any of its
Subsidiaries is in violation of any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or other
instrument or agreement, the violation or breach of which could reasonably be
expected to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing (other than pursuant to the Collateral Documents) with, any
governmental authority or regulatory body or any other third party is required
for (i) the due execution, delivery, recordation, filing or performance by the
Borrower or any of its Subsidiaries of this Agreement or any other Loan Document
to which it is or is to be a party, or for the consummation of the transactions
contemplated hereby or thereby, (ii) the grant by any Loan Party of the Liens to
be granted by it pursuant to the
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Collateral Documents, (iii) the perfection or maintenance of the Liens created
by the Collateral Documents (including the first priority nature thereof) or
(iv) the exercise by the Administrative Agent or any Lender Party of its rights
under the Loan Documents or the remedies in respect of the Collateral pursuant
to the Collateral Documents, except for the authorizations, approvals, actions,
notices and filings listed on Schedule 4.01(d), all of which shall have been
----------------
duly obtained, taken, given or made on or prior to the Initial Funding Date and
are in full force and effect. On the Initial Funding Date, all applicable
waiting periods in connection with the transactions contemplated hereby, if any,
will have expired without any action having been taken by any competent
authority restraining, preventing or imposing materially adverse conditions upon
the transactions contemplated hereby or the rights of the Loan Parties freely to
transfer or otherwise dispose of, or to create any Lien on, any properties now
owned or hereafter acquired by any of them.
(e) This Agreement has been and each of the Notes and each other Loan
Document has been or when delivered hereunder will have been, duly executed and
delivered by each Loan Party thereto, as applicable. This Agreement is and each
of the Notes and each other Loan Document has been or when delivered hereunder
will be, the legal, valid and binding obligation of each Loan Party thereto, as
applicable, enforceable against such Loan Party in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (ii) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(f) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at August 31, 1998, and the related Consolidated statement of
income and Consolidated statement of cash flows of the Borrower and its
Subsidiaries for the Fiscal Year then ended, accompanied by an opinion of Ernst
& Young LLP independent public accountants, and the Consolidated balance sheet
of the Borrower and its Subsidiaries as at February 28, 1999, and the related
Consolidated statement of income and Consolidated statement of cash flows of the
Borrower and its Subsidiaries for the six (6) months then ended, duly certified
by the chief executive officer of the Borrower, copies of which
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have been furnished to the Administrative Agent, fairly present in all material
respects, subject, in the case of said balance sheet as at February 28, 1999,
and said statement of income and cash flows for the three months then ended, to
normal year-end audit adjustments and the absence of footnotes, the Consolidated
financial condition of the Borrower and its Subsidiaries as at such dates and
the Consolidated results of the operations of the Borrower and its Subsidiaries
for the period ended on such date, all in accordance with GAAP applied on a
consistent basis, and, since February 28, 1999, there has been no change which
could reasonably be expected to result in a Material Adverse Effect.
(g) The Consolidated pro forma balance sheet of the Borrower and its
Subsidiaries as at February 28, 1999, and the related Consolidated pro forma
statement of income of the Borrower and its Subsidiaries for the period then
ended, certified by the chief executive officer of the Borrower, copies of which
have been furnished to the Administrative Agent, fairly present in all material
respects the Consolidated pro forma financial condition of the Borrower and its
Subsidiaries as at such date and the Consolidated pro forma results of
operations of the Borrower and its Subsidiaries for the period ended on such
date, in each case after giving effect to the transactions contemplated hereby,
all in accordance with GAAP.
(h) No information, exhibit or report furnished by Borrower or any
Person on behalf of Borrower to the Administrative Agent or any Lender Party in
connection with the Loan Documents or pursuant to the terms of the Loan
Documents contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements made therein not misleading.
(i) As of the date hereof, other than as disclosed on Schedule
--------
4.01(i) (the "Disclosed Litigation"), there is no action, suit, investigation,
- -------
litigation or proceeding affecting the Borrower or any of its Subsidiaries
including, without limitation, any Environmental Action, pending or, to their
knowledge, threatened before or by any court, governmental agency or arbitrator
that could reasonably be expected to have a Material Adverse Effect, and there
has been no change
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in the status, or financial effect on the Borrower or any of its Subsidiaries of
any of the Disclosed Litigation which could reasonably be expected to result in
a Material Adverse Effect.
(j) Neither the Borrower nor any of its Subsidiaries is engaged in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock. No part of the proceeds received by the Borrower or any of its
Subsidiaries from the Advances and Letter of Credit will be used directly or
indirectly (i) for any purpose other than as set forth in Section 2.14, or (ii)
for the purpose of purchasing or carrying, or for payment in full or in part of
Debt that was incurred for the purpose of carrying, any Margin Stock.
(k) As of the date hereof, except as set forth on Schedule 4.01(k)
----------------
hereto, neither the Borrower nor any of its Subsidiaries nor any of their
respective ERISA Affiliates maintains or has maintained any Plans or
Multiemployer Plans. Set forth on Schedule 4.01(k) is a complete and accurate
----------------
list of all Welfare Plans and all defined contribution plans in respect of which
any Loan Party could have liability.
(l) Except as set forth in the financial statements referred to in
this Section 4.01 and in Section 5.03, neither the Borrower nor any of its
Subsidiaries has any liability with respect to "expected post retirement benefit
obligations" within the meaning of Statement of Financial Accounting Standards
No. 106 which could reasonably be expected to have a Material Adverse Effect.
(m) Neither the business nor the properties of the Borrower or
any of its Subsidiaries have been affected by any fire, explosion, accident,
strike, lockout or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy or other casualty (whether or not
covered by insurance) that could reasonably be expected to have a Material
Adverse Effect.
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(n) The operations and properties of the Borrower and each of its
Subsidiaries comply in all respects with all applicable Environmental Laws and
Environmental Permits, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect, and no circumstances
exist that could reasonably be expected to form the basis of an Environmental
Action against the Borrower or any of its Subsidiaries or any of their
properties that could reasonably be expected to have a Material Adverse Effect.
(o) Except as set forth on Schedule 4.01(o), neither the Borrower nor
----------------
any of its Subsidiaries is a party to any indenture, loan or credit agreement or
any lease or other agreement or instrument or subject to any charter or
corporate restriction that could reasonably be expected to have a Material
Adverse Effect.
(p) Each of the Borrower and its Subsidiaries has filed, as caused
to be filed or has been included in all income and other material tax returns
(Federal, state, local and foreign) required to be filed and has paid all taxes
shown thereon to be due, together with applicable interest and penalties or is
contesting such taxes in good faith and by appropriate proceedings diligently
conducted and reserves or other appropriate provisions therefor have been
established in accordance with GAAP.
(q) No "ownership change" as defined in Section 382(g) of the
Internal Revenue Code, and no event that would result in the application of the
"separate return limitation year" or "consolidated return change of ownership"
limitations under the Federal income tax consolidated return regulations, has
occurred with respect to the Borrower or any of its Subsidiaries.
(r) Neither the Borrower nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended. Neither the making of any Advances,
nor the issuance of any Letters of Credit, nor the application of the proceeds
or repayment thereof by the Borrower, nor the consummation of the transactions
contemplated hereby,
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will violate any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder or any takeover, disclosure or
other federal, state or foreign securities law or Regulations T, U or X. The
Borrower is not subject to regulation under any federal, state or foreign
statute or regulation which limits its ability to incur Debt.
(s) The Borrower is, individually and together with its Subsidiaries,
Solvent.
(t) Set forth on Schedule 4.01(t) is a complete and accurate list of
----------------
all Surviving Debt of the Borrower and each of its Subsidiaries as of the date
hereof the principal amount of which is greater than $500,000, showing as of the
Initial Funding Date, with respect to the Borrower and each of its Subsidiaries,
the principal amount outstanding thereunder, the name of the relevant creditor,
the maturity date thereof and if any promissory note exists with respect
thereto. There exists no promissory notes which evidence intercompany loans
between or among the Borrower or any of its Subsidiaries.
(u) Except as could not reasonably be expected to have a Material
Adverse Effect, each Material Contract has been duly authorized, executed and
delivered by all parties thereto, has not been amended or otherwise modified, is
in full force and effect, and to the best of Borrower's knowledge, is binding
upon and enforceable against all parties thereto in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (ii) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law). There exists no default under any Material
Contract by the Borrower or any of its Subsidiaries and, to the best knowledge
of the Borrower, there exists no default under any Material Contract by any
other party thereto, in each case which could reasonably be expected to have a
Material Adverse Effect.
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(v) Borrower and each of its Subsidiaries owns or has rights to use
all patents, trademarks, trade names, service marks, copyrights and other
intellectual property necessary to conduct its business as now or heretofore
conducted by it.
(w) The Collateral Documents create in favor of the Administrative
Agent, for itself and ratably for the benefit of the Lender Parties and the
Hedge Banks, a valid and perfected first priority security interest in the
Collateral (other than Permitted Liens) securing the payment of the Obligations.
The Loan Parties are the legal and beneficial owners of the Collateral free and
clear of any Lien, except for the Liens and security interests created or
expressly permitted under the Loan Documents.
ARTICLE V
COVENANTS OF THE BORROWER AND THE SUBSIDIARIES
----------------------------------------------
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, the Borrower will:
(a) Compliance with Law. Comply, and cause each of its Subsidiaries
-------------------
to comply, in all respects, with all applicable laws, rules, regulations and
orders, except to the extent that the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Timely pay and discharge, and cause each
-----------------------
of its Subsidiaries to timely pay and discharge, (i) all income and other
material taxes, assessments and governmental charges or levies imposed upon its
property and (ii) all lawful claims that, if unpaid, might by law become a Lien
upon its property; provided, however, that the Borrower and its Subsidiaries
-------- -------
shall not be required to pay or discharge any such tax, assessment, charge or
claim that
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is being contested in good faith and by appropriate proceedings diligently
conducted and as to which reserves or other appropriate provisions therefor have
been established in accordance with GAAP.
(c) Compliance with Environmental Laws. (i) Comply, and cause each
------------------------------------
of its Subsidiaries and all lessees and other Persons operating or occupying its
properties to comply, in all material respects, with all applicable
Environmental Laws and Environmental Permits; (ii) obtain and renew and cause
each of its Subsidiaries to obtain and renew all Environmental Permits
reasonably necessary for its operations and properties; and (iii) conduct, and
cause each of its Subsidiaries to conduct, any investigation, study, sampling
and testing, and undertake any cleanup, removal, remedial or other action
necessary to remove and clean up all Hazardous Materials from any of its
properties, in accordance with the requirements of all Environmental Laws;
except in the case of each of clauses (i), (ii) and (iii) above, to the extent
that the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect; provided, however, that the Borrower and its
-------- -------
Subsidiaries shall not be required to undertake any such cleanup, Removal,
Remedial or Response action to the extent that its obligation to do so is being
contested in good faith and by proper proceedings and adequate reserves are
being maintained with respect to such circumstances.
(d) Maintenance of Insurance. Maintain, and cause each of its
--------------------------
Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which the Borrower or such Subsidiary operates.
(e) Preservation of Corporate Existence, Etc. Preserve and maintain,
-----------------------------------------
and cause each of its Subsidiaries to preserve and maintain, its existence,
legal structure, legal name, rights (charter and statutory), permits, licenses,
approvals, privileges and franchises, in each case where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.
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(f) Visitation Rights. At any reasonable time and from time to time,
------------------
upon reasonable notice, permit the Administrative Agent, any of the Lender
Parties or any agents or representatives thereof, (i) to examine and make copies
of and abstracts from the records and books of account of and visit the
properties of the Borrower and its Subsidiaries and to discuss the affairs,
finances and accounts of the Borrower and any such Subsidiaries with any of
their officers or directors, and (ii) to conduct such commercial finance
examinations and/or Collateral audits of the Borrower and its Subsidiaries
during each calendar year as the Administrative Agent and any Lender Party may
reasonably request; provided, however, that so long as no Event of Default
-------- -------
exists, the Administrative Agent may make only one such examination per year at
the expense of the Borrower, which expense shall be reasonable and customary for
such examinations.
(g) Keeping of Books. Keep, and cause each of its Subsidiaries to
----------------
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Borrower and each such Subsidiary in accordance with GAAP.
(h) Maintenance of Properties, Etc. Maintain and preserve, and cause
-------------------------------
each of its Subsidiaries to maintain and preserve, all of its properties that
are reasonably necessary in the conduct of its business in good working order
and condition, ordinary wear and tear excepted.
(i) Performance of Material Contracts. Perform and observe, and cause
---------------------------------
each of its Subsidiaries to perform and observe, all of the terms and provisions
of each Material Contract to be performed or observed by it, maintain, and cause
each of its Subsidiaries to maintain, each such Material Contract in full force
and effect, and enforce, and cause each of its Subsidiaries to enforce, each
such Material Contract in accordance with its terms, except in each case where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
(j) Transactions with Affiliates. Conduct, and cause each of its
------------------------------
Subsidiaries to conduct, all transactions otherwise permitted under the Loan
Documents with any of its Affiliates
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on terms that are fair and reasonable and no less favorable to the Borrower or
such Subsidiary than it would obtain in a comparable arms-length transaction
with a Person not an Affiliate.
(k) Interest Rate Protection. Within one hundred eighty (180) days
-------------------------
after the Initial Funding Date, obtain and thereafter keep in effect one or more
interest rate Bank Hedge Agreements (the terms and other provisions of all such
Bank Hedge Agreements to be subject to the prior written consent of the
Administrative Agent) covering at least thirty percent (30%) of the Advances
made in connection with the Initial Funding for an aggregate period of not less
than two (2) years.
(l) Year 2000 Compatibility. Take, and cause each of its Subsidiaries
-----------------------
to take, all action necessary to assure that its computer based systems,
hardware and software used in their business and operations are able to operate
and effectively receive, transmit, process, store, retrieve or retransmit data
including dates on and after January 1, 2000, on or before June 30, 1999, except
where the failure to do so could not reasonably be expected to result in a
Material Adverse Effect, and, at the request of the Administrative Agent or the
Lenders, the Loan Parties will provide evidence to the satisfaction of the
Lenders of such year 2000 compatibility.
(m) Agreement to Grant Additional Security.
--------------------------------------
(i) Subject to subsection 5.01(n) below, promptly, and in any
event within thirty (30) days after the acquisition of assets of the type that
would have constituted Collateral at the Initial Funding Date and investments of
the type that would have constituted Collateral on the Initial Funding Date
(other than assets with a fair market value of less than $100,000), notify the
Administrative Agent of the acquisition of such assets or investments and, to
the extent not already Collateral in which the Administrative Agent has a
perfected security interest pursuant to the Collateral Documents, such assets
and investments will become additional Collateral hereunder to the extent the
Administrative Agent deems the pledge of such assets practicable (the
"Additional Collateral"), and the Borrower will, and will cause each applicable
Subsidiary, to take all necessary action, including providing appropriate lien
searches and the filing of appropriate financing
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statements under the provisions of the UCC, applicable foreign, domestic or
local laws, rules or regulations in each of the offices where such filing is
necessary or appropriate to (A) grant the Administrative Agent, for itself and
ratably for the benefit of the Lender Parties and the Hedge Banks, a perfected
first priority Lien (other than Permitted Liens) in such Collateral (or
comparable interest under foreign law in the case of foreign Collateral)
pursuant to and to the full extent required by the Collateral Documents and this
Agreement and (B) otherwise to the Administrative Agent any and all other
agreements, documents and/or contracts which were similarly executed and/or
delivered to the Administrative Agent at or prior to the Initial Funding Date
with respect to such grant of a security interest.
(ii) Subject to subsection 5.01(n) below, contemporaneously
with the consummation of a Permitted Acquisition or the formation of any
Subsidiary, or at the request of the Administrative Agent, cause each of the
Borrower's Subsidiaries as the Administrative Agent shall request to become
party to, or to execute and deliver a Subsidiary Guaranty or a Foreign Guaranty,
as the case may be, guarantying to the Administrative Agent, Lender Parties and
the Hedge Banks the prompt payment, when and as due, of all Obligations of the
Loan Parties under the Loan Documents, including all obligations under any Hedge
Agreements or other hedging agreements.
(iii) Subject to subsection 5.01(n) below, cause each
Subsidiary Guarantor created or established (whether by acquisition, initial
formation or otherwise) after the date hereof, concurrently with its creation or
establishing, to grant to the Administrative Agent, for itself and ratably for
the benefit of the Lender Parties and the Hedge Banks, a first priority Lien on
all property (tangible and intangible) of such Guarantor which constitutes
Collateral under the Security Agreement, including, without limitation, all of
the capital stock of any of its Domestic Subsidiaries and 65% of the stock of
any Foreign Subsidiaries organized under the laws of the United Kingdom or any
other foreign country and owned directly by it, upon terms similar to those set
forth in the Collateral Documents and otherwise satisfactory in form and
substance to the Administrative Agent. The Borrower shall cause each Subsidiary
Guarantor, at its own expense, to become a party to (or execute a separate)
Security Agreement and any other Collateral Document and to execute,
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acknowledge and deliver, or cause the execution, acknowledgment and delivery of,
and thereafter register, file or record in any appropriate governmental office,
any document or instrument reasonably deemed by the Administrative Agent to be
necessary or desirable for the creation and perfection of the foregoing Liens.
The Borrower will cause each such Subsidiary Guarantor to take all actions
requested by the Administrative Agent (including, without limitation, the filing
of UCC-1's, providing lien releases and payoff letters) in connection with the
granting of such security interests.
(iv) Subject to subsection 5.01(n) below, (i) deliver to the
Administrative Agent the original of all instruments, documents and chattel
paper, and all other Collateral of which the Administrative Agent should have
physical possession in order to perfect and protect its security interest
therein, duly pledged, endorsed or assigned to the Administrative Agent without
restriction; (ii) use commercially reasonable efforts to obtain landlord
waivers, in form and substance satisfactory to the Administrative Agent, with
respect to any Inventory or other Collateral located at a location that is not
owned by the Borrower or a Subsidiary; (iii) deliver to the Administrative Agent
warehouse receipts covering any portion of the Inventory or other Collateral
located in warehouses and for which warehouse receipts are issued; (iv) when an
Event of Default exists, transfer Inventory to locations designated by the
Administrative Agent; (v) if any Collateral is at any time in the possession or
control of any warehousemen, bailee or the Borrower's agents or processors,
notify the Administrative Agent thereof and notify such person of the
Administrative Agent's security interest in such Collateral and obtain a
landlord waiver or bailee letter, in form and substance satisfactory to the
Administrative Agent, from such person and instruct such person to hold all such
Collateral for the Administrative Agent's account subject to the Administrative
Agent's instructions; (vi) if at any time any Inventory or other Collateral is
located on any Real Property of the Borrower or its Subsidiaries which is
subject to a mortgage or other Lien, obtain a mortgagee waiver, in form and
substance satisfactory to the Administrative Agent, from the holder of each
mortgage or other Lien on such real property; (vii) if requested by the
Administrative Agent, if any Real Property exists with respect to which a
Mortgage has not been granted to the Administrative Agent, for itself and
ratably for the benefit of the Lender Parties and the Hedge Banks, execute and
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deliver to the Administrative Agent a Mortgage and associated environmental
reports and title insurance policy and UCC-1 financing statements, all in form
and substance satisfactory to the Administrative Agent; and (viii) take all such
other actions and obtain all such other agreements as the Administrative Agent
may reasonably deem necessary or desirable in respect of any Collateral
including, without limitation, UCC, federal and state tax lien searches and
releases and payoff letters. This Section 5.01(m)(iv) shall be applicable to all
Collateral whether existing on the Initial Funding Date or at any time
thereafter, and it shall be deemed an Event of Default under this Agreement if
the actions required by this Section 5.01(m)(iv) are not taken by the Borrower
and its Subsidiaries, as applicable, as soon as practicable with respect to any
such Collateral.
(v) Subject to subsection 5.01(n) below, the security
interests required to be granted pursuant to this Section shall be granted
pursuant to the Collateral Documents or, in the Administrative Agent's
discretion, such other security documentation (which shall be substantially
similar to the Collateral Documents already executed and delivered by the
Borrower and the Guarantors or is required to be executed pursuant to the
definition of "Permitted Acquisition") as is satisfactory in form and substance
to the Administrative Agent (the "Additional Collateral Documents") and shall
constitute valid and enforceable perfected security interests prior to the
rights of all third Persons subject to no other Liens except Liens permitted
under Section 5.02(a) and shall be granted with respect to each type of
Collateral which this Agreement or the other Loan Documents contemplate as
Collateral. The Additional Collateral Documents and other instruments related
thereto shall be duly recorded or filed in such manner and in such places and at
such times as are required by law to establish, perfect, preserve and protect
the Liens, in favor of the Administrative Agent, for itself and ratably for the
benefit of the Lender Parties and the Hedge Banks, granted pursuant to the
Additional Collateral Documents and, all taxes, fees and other charges payable
in connection therewith shall be paid in full by the Borrower. At the time of
the execution and delivery of Additional Collateral Documents, the Borrower
shall cause to be delivered to the Administrative Agent such agreements,
opinions of counsel, and other related documents as may be reasonably requested
by the Administrative Agent or the Required Lenders to assure themselves that
this Section 5.01(m) has been complied with.
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(n) Foreign Subsidiaries Security. If the Administrative Agent
--------------------------------
reasonably believes that appropriate changes have been made to the relevant
sections of the Internal Revenue Code as in effect on the Initial Funding Date,
the regulations and rules promulgated thereunder and any rulings issued
thereunder, the Administrative Agent may request that counsel for the Borrower
reasonably acceptable to the Administrative Agent within 30 days after such
request deliver evidence satisfactory to the Administrative Agent, with respect
to any Foreign Subsidiary of the Borrower, that (i) a pledge of more than 65% of
the total Voting Stock of such Foreign Subsidiary or (ii) the entering into by
such Foreign Subsidiary of a pledge agreement in substantially the form of the
Pledge Agreement, in either case would cause the earnings of such Foreign
Subsidiary to be treated as a deemed dividend to such Foreign Subsidiary's
United States parent or would otherwise violate a material applicable law or
governmental or regulatory restriction or rule (including laws, rules, or
restrictions of, or issued by, a government or regulatory authorities of a
foreign jurisdiction) or would otherwise cause a material adverse monetary tax
consequence to the Borrower, and in the case of a failure to deliver the
evidence described in clause (i) above, (A) that portion of such Foreign
Subsidiary's outstanding capital stock and intercompany notes, if any, not
theretofore pledged pursuant to a Pledge Agreement shall be pledged to the
Administrative Agent, for itself and ratably for the benefit of the Lender
Parties or the Hedge Banks pursuant to the Security Agreement or the Pledge
Agreement (or another pledge agreement in substantially similar form, if
needed), as applicable, and in the case of a failure to deliver the evidence
described in clause (ii) above, (B) such Foreign Subsidiary shall execute and
deliver a pledge agreement granting the Administrative Agent for a security
interest in all of the capital stock of each Subsidiary of such Foreign
Subsidiary and intercompany notes, if any, payable to such Foreign Subsidiary,
in each case with all documents delivered pursuant to this Section 5.01(n) to be
in form and substance satisfactory to the Administrative Agent.
SECTION 5.02. NEGATIVE COVENANTS. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, the Borrower will not, at any time, without the prior
consent of the Required Lenders:
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(a) Liens, Etc. Create, incur, assume or suffer to exist, or permit
-----------
any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on
or with respect to any of its assets and properties of any character (including,
without limitation, the Collateral) whether now owned or hereafter acquired, or
sign or suffer to exist, or permit any of its Subsidiaries to sign or suffer to
exist, any security agreement, or assign, or permit any of its Subsidiaries to
assign, any accounts or other right to receive income, excluding, however, from
--------- -------
the operation of the foregoing restrictions the following:
(i) Liens created under the Loan Documents;
(ii) Permitted Liens;
(iii) Liens existing on the date hereof and described on
Schedule 5.02(a)(iii);
- ---------------------
(iv) purchase money Liens securing Debt permitted under
Section 5.02(b)(iii)(A) upon equipment acquired or held by the Borrower or any
of its Subsidiaries in the ordinary course of business to secure the purchase
price of such equipment or to secure Debt incurred solely for the purpose of
financing the acquisition of any such equipment to be subject to such Liens, or
Liens existing on any such equipment at the time of acquisition (other than any
such Liens created in contemplation of such acquisition that do not secure the
purchase price), or extensions, renewals or replacements of any of the foregoing
for the same or a lesser amount; provided, however, that no such Lien shall
-------- -------
extend to or cover any property other than the equipment being acquired,
constructed or improved; and
(v) Liens arising in connection with Capitalized Leases
permitted under Section 5.02(b)(iii)(B); provided that no such Lien shall extend
--------
to or cover any Collateral or any assets or properties other than the assets or
properties subject to such Capitalized Leases.
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(b) Debt. Create, incur, assume or suffer to exist, or permit any of
----
its Subsidiaries to create, incur, assume or suffer to exist, any Debt other
than:
(i) in the case of the Borrower and the other Loan Parties,
Debt incurred pursuant to the Loan Documents;
(ii) unsecured Debt (v) of the Borrower to any of its Domestic
Subsidiaries, (w) of any Domestic Subsidiary of the Borrower to the Borrower or
any other Domestic Subsidiary of the Borrower, (x) of any Wholly-Owned Foreign
Subsidiary of the Borrower to the Borrower or any Domestic Subsidiary of the
Borrower; provided, however, that the aggregate of all outstanding unsecured
-------- -------
Debt of a Wholly-Owned Foreign Subsidiary of the Borrower to the Borrower or any
Domestic Subsidiary of the Borrower and Investments by the Borrower or any
Domestic Subsidiary of the Borrower in any Person organized under the laws of
any jurisdiction other than the United States of America or any state thereof as
permitted pursuant to Section 5.02(e)(i) herein shall not exceed (A) $10,000,000
in any Fiscal Year or (B) in any event, $15,000,000 in the aggregate outstanding
at any time, (y) of any Wholly-Owned Foreign Subsidiary of the Borrower to any
other Wholly-Owned Foreign Subsidiary of the Borrower, and (z) of the Borrower
or any Domestic Subsidiary of the Borrower to any Wholly-Owned Foreign
Subsidiary of the Borrower not to exceed $15,000,000 in the aggregate
outstanding at any time;
(iii) in the case of the Borrower and any of its Subsidiaries:
(A) Debt secured by Liens permitted by Section 5.02(a)(iv),
in each case incurred only if, immediately after giving effect to the incurrence
thereof, the limit on Capital Expenditures set forth in Section 5.02(p) hereof
would not be breached;
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(B) Debt incurred with respect to Capitalized Leases, in
each case incurred only if, immediately after giving effect to the incurrence
thereof, the limit on Capital Expenditures set forth in Section 5.02(p) hereof
would not be breached;
(C) the Surviving Debt, and any Debt extending the maturity
of, or refunding or refinancing, in whole or in part, the Surviving Debt;
provided that the principal amount or interest rate with respect thereto of such
- --------
Surviving Debt shall not be increased above the principal amount thereof
outstanding and interest rate existing on the date hereof;
(D) endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(E) Subordinated Debt; provided, that a subordination
--------
agreement is in effect which is in favor of and is acceptable to the
Administrative Agent;
(F) unsecured Debt incurred in the ordinary course of
business in the form of accounts payable arising from the purchase of property
or services, including, without limitation, Inventory acquired for resale;
(G) in the case of Borrower or any of its Subsidiaries,
Debt of Proposed Businesses, whether secured or unsecured, assumed by Borrower
or such Subsidiary, as the case may be, in respect of Permitted Acquisitions
(subject to the limitations set forth in the definition of "Permitted
Acquisitions" set forth herein);
(H) in addition to Debt that is otherwise permitted in
clauses (F) and (G) above, unsecured Debt that is incurred in the ordinary
course of business, not to exceed in the aggregate $1,500,000 at any time
outstanding;
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(I) Debt in respect of Bank Hedge Agreements provided that
such Debt shall not exceed at any one time eighty percent (80%) of the Revolving
Credit Commitments; or
(J) Existing Debt of others guaranteed directly or
indirectly by Borrower or any of its Subsidiaries and listed on
Schedule 5.02(b)(iii)(J).
(c) Fundamental Changes.
-------------------
(i) Merge into or consolidate with any Person or permit
any Person to merge into it, or permit any of its Subsidiaries to do so, except
(A) the Borrower or any of its Subsidiaries may make Permitted Acquisitions, (B)
any Subsidiary of Borrower may merge or consolidate with and into the Borrower
(provided, the Borrower is the surviving entity) or one of the Borrower's
--------
Wholly-Owned Domestic Subsidiaries (provided, that, if a Loan Party is a party
--------
to such merger or consolidation, a Domestic Wholly-Owned Subsidiary is the
surviving entity) and (C) any Foreign Subsidiary of Borrower may merge or
consolidate with and into one of the Borrower's Foreign Subsidiaries (provided,
--------
that a Wholly-Owned Foreign Subsidiary is the surviving entity).
(ii) Liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), convey, sell, assign, lease, transfer or otherwise
dispose of (or agree to do any of the foregoing at any future time) all or
substantially all of its property, business or assets, or permit any of its
Subsidiaries to do any of the foregoing, except to the extent such Subsidiary
liquidates, winds-up or dissolves into or is otherwise sold, leased, transferred
or disposed of to the Borrower or any other wholly-owned Domestic Subsidiary of
the Borrower, or as otherwise permitted under Section 5.02(e).
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(iii) Acquire or permit any Subsidiary to acquire all or
substantially all of the assets of any other Person (including capital stock),
except that the Borrower or any Subsidiary of Borrower may consummate Permitted
Acquisitions.
(d) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose
---------------------
of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise
dispose of, any assets or grant any option or other right to purchase, lease or
otherwise acquire any assets, except:
(i) sales of Inventory in the ordinary course of
business;
(ii) sales, leases, transfers or other dispositions of
obsolete or redundant equipment in the ordinary course of business;
(iii) the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection with the
compromise or collection thereof; and
(iv) in addition to sales, leases, transfers and other
dispositions permitted by subsections (i), (ii) and (iii) of this
Section 5.02(d), sales, leases, transfers and other dispositions resulting in
Net Cash Proceeds not to exceed in the aggregate $2,500,000, which Net Cash
Proceeds shall be applied in accordance with Section 2.05(b)(ii).
(e) Investments in Other Persons. Make or hold, or permit any of its
----------------------------
Subsidiaries to make or hold, any Investment in any Person other than:
(i) Investments by the Borrower or any of its Subsidiaries
(x) in Domestic Subsidiaries and (y) in Wholly-Owned Foreign Subsidiaries not to
exceed in the aggregate $15,000,000 provided, however, that the aggregate of all
-------- -------
outstanding unsecured Debt permitted pursuant to Section 5.02(b)(ii)(y) and
Investments from the Initial Funding Date by the Borrower or any Domestic
Subsidiary of the Borrower in any Person organized under the laws of any
jurisdiction other than the United States of America or any state thereof, shall
not exceed (A) $10,000,000 in any Fiscal Year or (B) in any event, $15,000,000
in the aggregate outstanding at any time.
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(ii) Loans and advances to directors, officers and other
employees in the ordinary course of the business of the Borrower and its
Subsidiaries in an aggregate principal amount not to exceed $750,000 at any time
outstanding;
(iii) Investments by the Borrower and its Subsidiaries in Cash
Equivalents;
(iv) Investments by the Borrower and its Subsidiaries in Bank
Hedge Agreements; provided that such Investments shall not exceed at any one
time eighty percent (80%) of the Revolving Credit Commitment;
(v) Investments consisting of intercompany Debt permitted
under Section 5.02(b)(ii);
(vi) Investments consisting of accounts receivable arising in
the ordinary course of business; and
(vii) Investments in the form of Permitted Acquisitions; and
(viii) Investments in related businesses which do not exceed
$2,500,000 in the aggregate at any one time outstanding for the Borrower and its
Subsidiaries on a Consolidated Basis.
(f) Dividends Etc. Declare or pay any dividends, purchase, redeem,
--------------
retire, defease or otherwise acquire for value any of its capital stock or any
warrants, rights or options to acquire such capital stock, now or hereafter
outstanding, return any capital to its stockholders as such or make any
distribution to its stockholders, except:
(i) the Borrower may declare and pay dividends and make
distributions payable solely in common stock of the Borrower;
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(ii) a Subsidiary of the Borrower may declare and pay
dividends and make distributions to the Borrower or to another Loan Party; and
(iii) for issuances of stock or other equity interests
expressly permitted by Section 5.02(q).
(g) Leases. Permit Consolidated Lease Expenses (other than Capital
------
Leases) for any Fiscal Year to exceed $2,500,000.
(h) Change in Nature of Business. Make, or permit any of its
-------------------------------
Subsidiaries to make, any material change in the nature of its business as
carried on at the date hereof.
(i) Charter Amendments. Amend, or permit any of its Subsidiaries to
------------------
amend, its certificate or articles of incorporation or by-laws, in a manner
which would have a Material Adverse Effect except for a charter amendment which
would increase the authorized common stock of the Borrower to 25,000,000 shares
and authorized Preferred Stock of the Borrower to 10,000,000 shares.
(j) Accounting Changes. Make or permit, or permit any of its
--------------------
Subsidiaries to make or permit, any change (i) in accounting policies or
reporting practices, except as mandated by GAAP or approved by its independent
auditors for purposes of consistency or improved presentation or (ii) in its
Fiscal Year.
(k) Prepayments, Etc. of Debt. (i) Prepay, redeem, purchase, defease
-------------------------
or otherwise satisfy prior to the scheduled maturity thereof in any manner, or
make any payment in violation of any subordination terms of, any Debt, other
than (A) the prepayment of the Advances in accordance with the terms of this
Agreement, (B) regularly scheduled or required repayments or redemptions of
Surviving Debt which could not reasonably be expected to have a Material Adverse
Effect, or (ii) amend, modify or change in any manner any term or condition of
any Surviving Debt, or (iii) permit any of its Subsidiaries to do any of the
foregoing other than to repay any Debt payable to the Borrower or any other
Subsidiary.
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(l) Amendment, Etc. of Material Contracts. Except in the ordinary
---------------------------------------
course of business or to the extent such would not result in a Material Adverse
Effect, either cancel or terminate any Material Contract, consent to or accept
any cancellation or termination thereof, amend or otherwise modify any Material
Contract, give any consent, waiver or approval thereunder, waive any default
under or breach of any Material Contract, or take any other action in connection
with any Material Contract.
(m) Negative Pledge. Enter into or suffer to exist, or permit any
----------------
of its Subsidiaries to enter into or suffer to exist, any agreement prohibiting
or conditioning the creation or assumption of any Lien upon any of its
properties or assets (including, without limitation the Collateral) other than
as permitted in the Loan Documents.
(n) Partnerships, New Subsidiaries. Except as otherwise permitted
--------------------------------
under this Agreement, (i) become a general partner in any general or limited
partnership or joint venture with any unaffiliated third Person, or permit any
of its Subsidiaries to do so, or (ii) create any new Subsidiary, unless such
newly created Subsidiary shall become a Guarantor (by executing and delivering
to the Administrative Agent a Subsidiary Guaranty or a Foreign Guaranty, as
applicable) and an additional grantor pursuant to the terms of the Security
Agreement, and all shares of the capital stock of such Domestic Subsidiary are
pledged to the Administrative Agent in accordance with Section 5.01(m) and
pursuant to the Pledge Agreement.
(o) Speculative Transactions. Engage, or permit any of its
--------------------------
Subsidiaries to engage, in any transaction involving commodity options or
futures contracts or derivatives or any similar speculative transactions, except
for Bank Hedge Agreements.
(p) Capital Expenditures. Make, or permit any of its Subsidiaries to
--------------------
make, any Capital Expenditure that would cause the aggregate of all such Capital
Expenditures made by the Borrower and its Subsidiaries in any Fiscal Year set
forth below to exceed the aggregate amount set forth opposite such Fiscal Year:
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Fiscal Year Amount/Category of Expenditures Total Amount
- ----------- ------------------------------- ------------
1999 Financing Leases - $4,500,000 $7,000,000
Other - 2,500,000
2000 Financing Leases - $5,000,000 $7,500,000
Other - 2,500,000
2001 Financing Leases - $5,500,000 $8,000,000
Other - 2,500,000
2002 and each fiscal Financing Leases - $6,000,000 $8,500,000
year thereafter Other - 2,500,000
provided, however, that (a) up to $500,000 of the amount permitted to be
- -------- -------
expended in a Fiscal Year from the "Other" category that is not expended in such
Fiscal Year (not including any amount permitted to be carried forward from a
prior year) shall be permitted to be expended in, but only in, the subsequent
Fiscal Year, and (b) amounts representing Capital Expenditures paid or incurred
with respect to a Proposed Business in the ordinary course of its business prior
to consummation of a Permitted Acquisition shall not be deemed included in the
calculation of the aggregate amount of Capital Expenditures for purposes of
determining the maximum annual Capital Expenditures permitted to be made
hereunder, so long as such amounts were incurred prior to the date of
consummation of a Permitted Acquisition and were not incurred in anticipation of
such acquisition, and otherwise conform with the terms and conditions of this
clause (o).
(q) Issuance of Stock. Except as otherwise specifically permitted in
-----------------
this Agreement, the Borrower will not, and will not permit any of its
Subsidiaries to, directly or indirectly, issue, sell, assign, pledge or
otherwise encumber or dispose of any shares of capital stock of the Borrower or
any Subsidiary of the Borrower, except:
(A) to the Borrower or any of its Wholly-Owned
Subsidiaries;
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(B) for issuances or sales of capital stock or other equity
interests of the Borrower;
(C) in connection with the Borrower's or any of its
Subsidiaries' stock purchase, stock option or similar incentive plans, or any
exercise pursuant thereto, for the benefit of the Borrower's or any of its
Subsidiaries' directors, management, employees and other eligible participants;
and
(D) for issuances of capital stock of the Borrower to any
Person as consideration paid in connection with any Permitted Acquisition.
(r) Sale and Leasebacks. Enter into any arrangement with any Person
-------------------
providing for the leasing by the Borrower or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person or to any other Person for which Funds have been or
are to be advanced by such person or the granting of such property or rental
obligation of the Borrower or such Subsidiary.
SECTION 5.03. REPORTING REQUIREMENTS. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, the Borrower will furnish to the Administrative Agent
for itself and on behalf of the Lender Parties (references in this Section 5.03
to any reports or statements being Consolidated or consolidating shall be
applicable at any time the Borrower has any Subsidiaries):
(a) Default Notice. As soon as possible and in any event within two
--------------
(2) Business Days after obtaining knowledge of the occurrence of any Default or
Event of Default or any event, development or occurrence reasonably likely to
have a Material Adverse Effect, a statement of the Responsible Officer of the
Borrower setting forth details of such Default or Event of Default or event,
development or occurrence and the action that the Borrower has taken and
proposes to take with respect thereto.
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(b) Annual Financials. As soon as available, but in any event
------------------
within 90 days after the end of each Fiscal Year, a copy of the Consolidated and
consolidating balance sheets of the Borrower and it Subsidiaries as at the end
of such year and the related Consolidated and consolidating statements of income
and retained earnings and of cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on without
a "going concern" or like qualification or exception, or qualification arising
out of the scope of the audit, by Ernst & Young, LLP or other independent
certified public accountants of nationality recognized standing; and
(c) Quarterly Financials. As soon as available, but in any event
---------------------
not later than 45 days after the end of each of the first three quarterly
periods of each Fiscal Year, the unaudited Consolidated and consolidating
balance sheets for the Borrower and its Consolidated Subsidiaries as at the end
of such quarter and the related unaudited Consolidated and consolidating
statements of income and retained earnings and of cash flows of the Borrower and
its Consolidated Subsidiaries for such quarter and the portion of the Fiscal
Year through the end of such quarter, setting forth in each case in comparative
form the figures for the previous year, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end audit
adjustments); and
(d) Monthly Reports. Within thirty (30) days after the end of each
----------------
calendar month (i) an accounts receivable aging schedule for the Borrower and
its Subsidiaries on a Consolidated and consolidating basis and (ii) a schedule
of the Borrower's and each Subsidiary's billings for the immediately preceding
calendar month (without giving effect to any intercompany adjustments); and such
financial statements shall be complete and correct in all material respects and
shall be prepared in reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
(e) Certificate of Independent Certified Accountants. Concurrently
--------------------------------------------------
with the delivery of the financial statements referred to in Section 5.03(b), a
certificate of the independent certified public accountants reporting on such
financial statements stating that in making the
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examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate;
(f) Certificate of Responsible Officer. Concurrently with the
--------------------------------------
delivery of the financial statements referred to in Section 5.03(b) and (c), a
certificate of a Responsible Officer (i) stating that, to the best of such
Officer's knowledge, the Borrower during such period has observed or performed
all of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the other Loan Documents to be observed,
performed or satisfied by it, and that such Officer has obtained no knowledge of
any Default or Event of Default except as specified in such certificate and (ii)
showing in detail the calculations, including compliance with financial
covenants, supporting such Officer's certification of the Borrower's compliance
with the requirements of Section 5.04(a) through 5.04(c);
(g) Annual Forecasts. Not later than thirty days prior to the end
----------------
of each Fiscal Year, a copy of the projections by the Borrower of the operating
budget and cash flow budget of the Borrower and its Subsidiaries for the
succeeding Fiscal Year on a Consolidated consolidating basis, such projections
have been prepared on the basis of sound financial planning practice and that
such Officer has no reason to believe they are incorrect or misleading in any
material respect;
(h) Insurance. During the month of August in each calendar year, a
---------
report of a reputable insurance broker with respect to the insurance maintained
by the Borrower and its Subsidiaries in accordance with Section 5.01(d) of this
Agreement and Section 5.2 of the Security Agreement, and such supplemental
reports with respect to insurance maintained by the Borrower and its
Subsidiaries as the Administrative Agent may from time to time reasonably
request, and
(i) ERISA Events and ERISA Reports. (i) Promptly and in any event
-------------------------------
within twenty (20) days after the Borrower or any ERISA Affiliate knows or has
reason to know that any ERISA Event has occurred, which could reasonably be
expected to have a Material Adverse Effect, a statement of the chief financial
officer or chief executive officer of the Borrower describing such ERISA Event
and the action, if any, that the Borrower or such ERISA Affiliate has taken and
proposes to take with respect thereto and (ii) on the date any records,
documents or other information
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must be furnished to the PBGC with respect to any Plan pursuant to Section 4010
of ERISA, a copy of such records, documents and information.
(j) Plan Terminations. Promptly and in any event within five (5)
------------------
Business Days after receipt thereof by the Borrower or any ERISA Affiliate,
copies of each notice from the PBGC stating its intention to terminate any Plan
or to have a trustee appointed to administer any Plan or correspondence from the
PBGC indicating it is considering termination of any Plan.
(k) Litigation. Promptly after the commencement thereof, notice
----------
of all actions, suits, investigations, litigation and proceedings before or by
any court or governmental department, commission, board, bureau, agency or
instrumentality, Federal, state, local or foreign, that reasonably could be
expected to have a Material Adverse Effect and, promptly after the occurrence
thereof, notice of any change in either the status of the Disclosed Litigation
or the financial effect on the Borrower or any of its Subsidiaries in connection
therewith from that described on Schedule 4.01(i) which could reasonably be
----------------
expected to result in a Material Adverse Effect.
(l) Securities Reports. Promptly after the sending or filing thereof,
------------------
copies of all proxy statements, financial statements and reports that the
Borrower or any of its Subsidiaries sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements, that the
Borrower or any of its Subsidiaries files with the Securities and Exchange
Commission or any other governmental authority or with any national securities
exchange.
(m) Agreement Notices. Promptly upon receipt thereof, copies of all
-----------------
notices, requests and other documents received by the Borrower or any of its
Subsidiaries under or pursuant to any Material Contract or indenture, loan or
credit agreement or similar agreement or instrument regarding or related to any
breach or default by any party thereto or any event that could materially impair
the value of the interests or the rights of the Borrower or any of its
Subsidiaries or otherwise have a Material Adverse Effect and copies of any
amendment, modification or waiver of any provision of any Material Contract or
indenture, loan or credit agreement or similar agreement or indenture and, from
time to time upon request by the Administrative Agent, such information and
reports regarding the foregoing as the Administrative Agent may reasonably
request.
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(n) Environmental Conditions. Promptly after the assertion or
-------------------------
occurrence thereof, notice of any Environmental Action against or of any
noncompliance by the Borrower or any of its Subsidiaries with any Environmental
Law or Environmental Permit that could reasonably be expected to have a Material
Adverse Effect.
(o) Management Letters. As soon as available and in any event within
------------------
five (5) Business Days after the receipt thereof, copies of any "management
letter" or similar letter received by the Borrower or its Board of Directors (or
any Committee thereof) from its independent public accountants.
(p) Permitted Acquisition Documents. Within thirty (30) days
-----------------------------------
following the consummation of each Permitted Acquisition for which the related
Permitted Acquisition Purchase Price is in excess of $1,000,000, a reasonably
detailed description of such Permitted Acquisition and a copy of the Permitted
Acquisition Documents, in each case certified as true and correct by a
Responsible Officer of the Borrower.
(q) Other Information. Such other information respecting the
------------------
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or any of its Subsidiaries or the
Collateral as the Administrative Agent or any Lender Party (through the
Administrative Agent) may from time to time reasonably request.
SECTION 5.04. FINANCIAL COVENANTS. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, the Borrower will:
(a) Consolidated Total Funded Debt to Pro Forma EBITDA Ratio.
----------------------------------------------------------------
Maintain as of the last day of each fiscal quarter of the Borrower commencing
with the first complete fiscal quarter after the Initial Funding Date a ratio of
(i) Consolidated Total Funded Debt to (ii) Pro Forma EBITDA for the most
recently completed four fiscal quarters of the Borrower of not more than
4.25:1.00.
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(b) Consolidated Senior Debt to Pro Forma EBITDA Ratio. Maintain
------------------------------------------------------
as of the last day of each fiscal quarter of the Borrower commencing with the
first complete fiscal quarter after the Initial Funding Date a ratio of (i)
Consolidated Senior Debt to (ii) Pro Forma EBITDA for the most recently
completed four fiscal quarters of the Borrower of not more than the ratio set
forth below:
FOUR FISCAL-QUARTERS ENDING ON: RATIO
------------------------------ -----
First Quarter 3.50:1.00
Second Quarter 3.50:1.00
Third Quarter 3.50:1.00
Fourth Quarter 3.50:1.00
Fifth Quarter 3.50:1.00
Sixth Quarter 3.50:1.00
Seventh Quarter 3.50:1.00
Eighth Quarter 3.50:1.00
Each Fiscal Quarter Thereafter 3.45:1.00
(c) Fixed Charge Coverage Ratio. Maintain as of the last day of each
---------------------------
fiscal quarter of the Borrower commencing with the first complete fiscal quarter
after the Initial Funding Date a ratio of (i) Pro Forma EBITDA for the most
recently completed four fiscal quarters of the Borrower, less (x) cash Capital
----
Expenditures made by the Borrower and its Subsidiaries during such four fiscal
quarters and less (y) the aggregate amount of federal, state, local and foreign
----
income taxes paid by the Borrower and its Subsidiaries in cash during such four
fiscal quarters to the (ii) sum of (x) cash interest paid by the Borrower and
its Subsidiaries on all Debt during such four fiscal quarters plus (y) scheduled
----
principal amounts of all Debt paid by the Borrower and its Subsidiaries during
the preceding four fiscal quarters commencing on such day, plus (z) cash
----
dividends, if any, paid by the Borrower to the holders of its common stock
during such four fiscal quarters, at not less than 1.45:1.00.
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(d) Minimum Net Worth. Maintain as of the last day of each fiscal
------------------
quarter of the Borrower an excess of Consolidated total assets over Consolidated
total liabilities of the Borrower and its Subsidiaries of not less than (i)
eighty percent (80%) of the excess of Consolidated total assets over
Consolidated total liabilities of the Borrower and its Subsidiaries at the
Initial Funding Date plus (ii) eighty percent (80%) of Consolidated positive net
----
income (and excluding one hundred percent (100%) of Consolidated net losses) of
the Borrower and its Subsidiaries plus (iii) one hundred percent (100%) of Net
----
Proceeds of any Equity Issuance as at the Initial Funding Date and each June 30
and December 31 thereafter computed on a cumulative basis for said entire
period.
ARTICLE VI
EVENTS OF DEFAULT
-----------------
SECTION 6.01. EVENTS OF DEFAULT. If any of the following ("Events of
Default") shall occur and be continuing:
(a) (i) The Borrower shall fail to pay any principal of any Advance
when the same shall become due and payable or (ii) the Borrower shall fail to
pay any interest on any Advance, or any Loan Party shall fail to make any other
payment under any Loan Document, in each case under this clause (ii) within five
(5) days after the same becomes due and payable; or
(b) Any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to have
been incorrect in any material respect when made or confirmed; or
(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in Sections 2.14, 5.01(1), 5.01(m), 5.01(n), 5.02,
5.03(a) or 5.04; or
(d) The Borrower or any of its Subsidiaries shall fail to perform any
other term, covenant or agreement contained in any Loan Document on its part to
be performed or observed if
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such failure shall remain unremedied for thirty (30) days after written notice
thereof shall have been given to the Borrower by the Administrative Agent or any
Lender Party; or
(e) The Borrower or any of its Subsidiaries shall fail to pay any
principal of, premium or interest on or any other amount payable in respect of
any Debt that is outstanding in a principal or notional amount of at least
$250,000 either individually or in the aggregate (but excluding Debt outstanding
hereunder) of the Borrower or such Subsidiary (as the case may be), when the
same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise, beyond the period of grace, if
any); or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt, in each case if the effect of
such event or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt or otherwise to cause, or to permit the holder thereof to
cause, such Debt to mature; or any such Debt shall be declared to be due and
payable or required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption), purchased or defeased, or an offer
to prepay, redeem, purchase or defease such Debt shall be required to be made,
in each case prior to the stated maturity thereof; or
(f) The Borrower or any of its Subsidiaries shall admit in writing
its inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by or against
the Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
administrative receiver, trustee or other similar official for it or for any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it) that is being diligently
contested by it in good faith, either such proceeding shall remain undismissed
or unstayed for a period of sixty (60) days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or any substantial part of its property) shall occur, or the
Borrower or any of its Subsidiaries shall take any corporate action to authorize
any of the actions set forth above in this subsection (f); or
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(g) Any judgment or order for the payment of money in excess of
$250,000 (other than such a judgment or order which is fully covered by
insurance for which the appropriate insurer has acknowledged responsibility in
writing) shall be rendered against the Borrower or any of its Subsidiaries and
either (i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be a period of thirty (30)
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect; or
(h) Any material provision of any Loan Document after delivery
thereof shall for any reason cease to be valid and binding on or enforceable
against any Loan Party which is party to it, or any such Loan Party shall so
state in writing; or
(i) William E. Dye shall cease to maintain beneficial ownership of
5% or more of the outstanding class of Capital Stock having ordinary voting
power in the election of directors of the Borrower, unless such cessation is the
result of a testamentary disposition upon his death; or
(j) (i) Any Person or "group" (within the meaning of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended) other than William E.
Dye or Richard J. Sirota (A) shall have acquired beneficial ownership of 20% or
more of any outstanding class of Capital Stock having ordinary voting power in
the election of directors of the Borrower or (B) shall obtain the power (whether
or not exercised) to elect a majority of the Borrower's directors or (ii) the
Board of Directors of the Borrower shall not consist of a majority of Continuing
Directors; "Continuing Directors" shall mean the directors of the Borrower on
the Initial Funding Date and each other director, if such other director's
nomination for election to the Board of Directors of the Borrower is recommended
by a majority of the then Continuing Directors, provided that notwithstanding
anything in this Section 6.01(j) to the contrary, the transfer of Capital Stock
owned by either William E. Dye or Richard J. Sirota upon their death shall not
be deemed an Event of Default hereunder.
(k) Any ERISA Event shall have occurred with respect to a Plan and
the sum (determined as of the date of occurrence of the last such ERISA Event)
of the Insufficiency of such
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Plan and the Insufficiency of any and all other Plans with respect to which an
ERISA Event shall have occurred and then exist (or the liability of the Loan
Parties and the ERISA Affiliates related to such ERISA Events) exceeds $100,000;
or
(l) Any Loan Party or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability
to such Multiemployer Plan in an amount that, when aggregated with all other
amounts required to be paid to Multiemployer Plans by the Loan Parties and the
ERISA Affiliates as Withdrawal Liability (determined as of the date of such
notification), exceeds $100,000, unless contested in good faith and by
appropriate proceedings diligently conducted and reserves or other appropriate
provisions shall have been established therefor in accordance with GAAP, or
requires payments exceeding $100,000 per annum; or
(m) Any Loan Party or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is
in reorganization or is being terminated, within the meaning of Title IV of
ERISA, and as a result of such reorganization or termination the aggregate
annual contributions of the Loan Parties and the ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated have
been or will be increased over the amounts contributed to such Multiemployer
Plans for the plan years of such Multiemployer Plans immediately preceding the
plan year in which such reorganization or termination occurs by an amount
exceeding $100,000; or
(n) there shall occur in the reasonable judgment of the Required
Lenders any Material Adverse Effect; or
(o) Any Collateral Document after delivery thereof shall for any
reason cease to or otherwise not create a valid and perfected first priority
Lien on and security interest in the Collateral (subject to Permitted Liens)
purported to be covered thereby and could reasonably result in a Material
Adverse Effect; or
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(p) There shall be an event of default under any of the other
Loan Documents, not cured within the applicable grace period thereunder (if
any); then, and in any such event, the Administrative Agent (i) shall at the
request, or with the consent, of the Required Lenders, by notice to the
Borrower, declare the Commitments of each appropriate Lender and of the Issuing
Bank to issue Letters of Credit to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or with the consent, of the
Required Lenders, (A) by notice to the Borrower, declare the Notes, all interest
thereon and all other amounts payable under this Agreement and the other Loan
Documents to be forthwith due and payable, whereupon the Notes, all such
interest and all such other amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower and (B) by notice to each
party required under the terms of any agreement in support of which a Standby
Letter of Credit is issued, request that all Obligations under such agreement be
declared to be due and payable; provided, however, that upon the occurrence of
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an Event of Default set forth in Section 6.01(f), (x) the obligation of each
Lender to make Advances and of the Issuing Bank to issue Letters of Credit shall
automatically be terminated and (y) the Notes, all such interest and all such
amounts shall automatically become and be due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower. In addition, upon the occurrence and continuance of an
Event of Default, the Administrative Agent shall have the right to require the
establishment of a blocked account arrangement with respect to the Borrower and
its Subsidiaries and the Borrower hereby agrees to enter into a blocked account
agreement or agreements, in form and substance satisfactory to the
Administrative Agent upon the occurrence and continuance of an Event of Default.
SECTION 6.02. ACTIONS IN RESPECT OF THE LETTERS OF CREDIT UPON DEFAULT. If
any Event of Default shall have occurred and be continuing, the Administrative
Agent may, or shall at the request of the Required Lenders, irrespective of
whether it is taking any of the actions described in Section 6.01 or otherwise,
make demand upon the Borrower to, and forthwith upon such demand the Borrower
will, pay to the Administrative Agent on behalf of the Lender Parties in same
day funds at the Administrative Agent's office designated in such demand, for
deposit in the L/C Cash Collateral Account, an amount equal to the aggregate
Available Amount of all Letters of Credit then outstanding. If at any time the
Administrative Agent determines that any funds held in the L/C Cash
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Collateral Account are subject to any right or claim of any Person other than
the Administrative Agent and the Lender Parties and the Hedge Banks or that the
total amount of such funds is less than the aggregate Available Amount of all
Letters of Credit, the Borrower will, forthwith upon demand by the
Administrative Agent, pay to the Administrative Agent, as additional funds to be
deposited and held in the L/C Cash Collateral Account, an amount equal to the
excess of (a) such aggregate Available Amount over (b) the total amount of
funds, if any, then held in the L/C Cash Collateral Account that the
Administrative Agent determines to be free and clear of any such right and
claim.
ARTICLE VII
THE ADMINISTRATIVE AGENT AND DOCUMENTATION AGENT
------------------------------------------------
SECTION 7.01. AUTHORIZATION AND ACTION. Each Lender Party (which term
shall mean in its capacity as a Lender, the Issuing Bank, the Swing Line Bank
and/or any Hedge Bank for purposes of this Article VII) hereby appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Loan Documents as are delegated to the Administrative Agent by the terms hereof
and thereof, together with such powers and discretion as are reasonably
incidental thereto. As to any matters not expressly provided for by the Loan
Documents (including, without limitation, enforcement or collection of the
Revolving Credit Notes), the Administrative Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Required Lenders, and such
instructions shall be binding upon all Lender Parties and all holders of Notes;
provided, however, that the Administrative Agent shall not be required to take
- -------- -------
any action that exposes the Administrative Agent to personal liability or that
is contrary to this Agreement, any other Loan Document or applicable law. The
Administrative Agent agrees to give to each Lender Party prompt notice of each
notice given to it by the Borrower pursuant to the terms of this Agreement. The
Administrative Agent shall not be a trustee or fiduciary for any Lender.
SECTION 7.02. AGENT'S RELIANCE, ETC. Neither the Administrative Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by
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it or them under or in connection with the Loan Documents, except for its or
their own gross negligence or willful misconduct. Without limitation of the
generality of the foregoing, the Administrative Agent: (a) may treat the payee
of any Note as the holder thereof until the Administrative Agent receives and
accepts an Assignment and Acceptance entered into by the Lender that is the
payee of such Note, as assignor, and an Eligible Assignee, as assignee, as
provided in Section 8.07; (b) may consult with legal counsel (including counsel
for any Loan Party), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Lender Party and shall
not be responsible to any Lender Party for any statements, warranties or
representations (whether written or oral) made in or in connection with the Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Loan Document on the part of any Loan Party or to inspect the property
(including the books and records) of any Loan Party; (e) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with any Loan Document or any other instrument or
document furnished pursuant thereto; and (f) shall incur no liability under or
in respect of any Loan Document by acting upon any notice, consent, certificate
or other instrument or writing (which may be by telegram, telecopy or telex)
believed by it to be genuine and signed or sent by the proper party or parties.
SECTION 7.03. FLEET AND AFFILIATES. With respect to its Commitments, the
Advances made by it and the Notes issued to it, Fleet shall have the same rights
and powers under the Loan Documents as any other Lender Party and may exercise
the same as though it were not the Administrative Agent; and the term "Lender
Party" or "Lender Parties" shall, unless otherwise expressly indicated, include
Fleet in its individual capacity. Fleet and its affiliates may accept deposits
from, lend money to, act as trustee under indentures of, accept investment
banking engagements from, and generally engage in any kind of business with, the
Borrower, any of its Subsidiaries and any Person who may do business with or own
securities of the Borrower or any such Subsidiary, all as if Fleet were not the
Administrative Agent and without any duty to account therefor to the Lender
Parties.
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SECTION 7.04. LENDER PARTY CREDIT DECISION. Each Lender Party acknowledges
that it has, independently and without reliance upon the Administrative Agent or
any other Lender Party and based on the financial statements referred to in
Sections 4.01(f) and (g) and such other documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges that it will, independently and
without reliance upon the Administrative Agent or any other Lender Party and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
SECTION 7.05. INDEMNIFICATION.
(a) Each Lender Party severally agrees to indemnify the
Administrative Agent (to the extent not promptly reimbursed by the Borrower)
from and against such Lender Party's ratable share (determined as provided
below) of any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of any of the Loan
Documents or any action taken or omitted by the Administrative Agent under any
of the Loan Documents; provided, however, that no Lender Party shall be liable
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for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Lender Party agrees to reimburse the
Administrative Agent promptly upon written demand for its ratable share of any
costs and expenses (including, without limitation, fees and expenses of counsel)
payable by the Borrower under Section 8.04, to the extent that the
Administrative Agent is not promptly reimbursed for such costs and expenses by
the Borrower.
(b) Each Lender Party severally agrees to indemnify the Issuing Bank
(to the extent not promptly reimbursed by the Borrower) from and against such
Lender Party's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that
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may be imposed on, incurred by, or asserted against the Issuing Bank in any way
relating to or arising out of any of the Loan Documents or any action taken or
omitted by the Issuing Bank under any of the Loan Documents; provided, however,
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that no Lender Party shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Issuing Bank's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender Party
agrees to reimburse the Issuing Bank promptly upon written demand for its
ratable share of any costs and expenses (including, without limitation, fees and
expenses of counsel) payable by the Borrower under Section 8.04, to the extent
that the Issuing Bank is not promptly reimbursed for such costs and expenses by
the Borrower.
(c) For purposes of Sections 7.05(a) and 7.05(b), the Lender Parties'
respective ratable shares of any amount shall be determined, at any time,
according to the sum of (i) the aggregate principal amount of the Advances
outstanding at such time and owing to the respective Lender Parties, (ii) their
respective Pro Rata Shares of the aggregate Available Amount of all Letters of
Credit outstanding at such time, (iii) the aggregate unused portions of their
respective Term Loan Commitments at such time, and (iv) their respective Unused
Revolving Credit Commitments at such time; provided, that the aggregate
--------
principal amount of Swing Line Advances owing to the Swing Line Bank and Letter
of Credit Advances owing to the Issuing Bank shall be considered to be owed to
the Revolving Credit Lenders ratably in accordance with their respective
Revolving Credit Commitments. In the event that any Defaulted Advance shall be
owing by any Defaulting Lender at any time, such Defaulting Lender Party's
Commitment with respect to the Facility under which such Defaulted Advance was
required to have been made shall be considered to be unused for purposes of this
Section 7.05 to the extent of the amount of such Defaulted Advance. The failure
of any Lender Party to reimburse the Administrative Agent or the Issuing Bank,
as the case may be, promptly upon written demand for its ratable share of any
amount required to be paid by the Lender Parties to the Administrative Agent or
the Issuing Bank, as the case may be, as provided herein shall not relieve any
other Lender Party of its obligation hereunder to reimburse the Administrative
Agent or the Issuing Bank, as the case may be, for its ratable share of such
amount, but no Lender Party shall be responsible for the failure of any other
Lender Party to reimburse the Administrative Agent or the Issuing Bank, as the
case may be, for such other Lender Party's ratable share of such amount. Without
prejudice to the survival of any other agreements of any Lender Party hereunder,
the
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agreement and obligations of each Lender Party contained in this Section 7.05
shall survive the payment in full of principal, interest and all other amounts
payable hereunder and under the other Loan Documents.
SECTION 7.06. SUCCESSOR ADMINISTRATIVE AGENTS. The Administrative Agent
may resign at any time by giving written notice thereof to the Lender Parties
and the Borrower and may be removed as to all of the Facilities at any time with
or without cause by the Required Lenders. Upon any such resignation or removal,
the Required Lenders shall have the right to appoint a successor Administrative
Agent as to such of the Facilities as to which the Administrative Agent has
resigned or been removed, which successor shall have been approved by the
Borrower, which approval shall not be unreasonably withheld or delayed. If no
successor Administrative Agent shall have been so appointed by the Required
Lenders, and shall have accepted such appointment, within thirty (30) days after
the retiring Administrative Agent's giving of notice of resignation or the
Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of the Lender Parties, appoint a
successor Administrative Agent, which shall be a Lender which is a commercial
bank organized under the laws of the United States or of any State thereof and
having a combined capital and surplus of at least $250,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent as to all of the Facilities and upon the execution and
filing or recording of such financing statements, or amendments thereto, and
such other instruments or notices, as may be necessary or desirable, or as the
Required Lenders may request, in order to continue the perfection of the Liens
granted or purported to be granted by the Collateral Documents, such successor
Administrative Agent shall succeed to and become vested with all the rights,
powers, discretion, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged from all of its duties
and obligations under this Agreement and the other Loan Documents. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent as to less than all of the Facilities and upon the
execution and filing or recording of such financing statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to continue the
perfection of the Liens granted or purported to be granted by the Collateral
Documents, such successor Administrative Agent shall succeed to and become
vested with all the rights, powers, discretion, privileges and
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duties of the retiring Administrative Agent as to such Facilities, other than
with respect to funds transfers and other similar aspects of the administration
of Borrowings under such Facilities, issuances of Letters of Credit
(notwithstanding any resignation as Administrative Agent with respect to the
Letter of Credit Facility) and payments by the Borrower in respect of such
Facilities, and the retiring Administrative Agent shall be discharged from its
duties and obligations under this Agreement as to such Facilities, other than as
aforesaid. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent as to all of the Facilities, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent as to any Facilities under
this Agreement.
SECTION 7.07. DOCUMENTATION AGENT. The Documentation Agent shall have no
rights, obligations or duties under this Agreement other than in its capacity as
a Lender hereunder.
ACTICLE VIII
MISCELLANEOUS
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SECTION 8.01. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement or the Notes or any other Loan Document, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed (or, in the case of the Collateral
Documents, consented to) by the Required Lenders, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that (a) no amendment, waiver or
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consent shall, unless in writing and signed by all of the Lender Parties (other
than any Lender Party that is, at such time, a Defaulting Lender), do any of the
following at any time: (i) change the percentage of (x) the Commitments, (y) the
aggregate unpaid principal amount of the Advances or (z) the aggregate Available
Amount of outstanding Letters of Credit that, in each case, shall be required
for the Lenders or any of them to take any action hereunder; (ii) release any
material portion of the Collateral in any transaction or series of related
transactions or permit the creation, incurrence, assumption or existence of any
Lien on any material portion of the Collateral in any transaction or series of
related transactions to secure any liabilities or obligations other than
Obligations
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owing to the Secured Parties under the Loan Documents; (iii) release any of the
Subsidiary Guarantors from their Subsidiary Guaranty or Foreign Guaranty, as
applicable, except as permitted under this Agreement, the Subsidiary Guaranty or
the Foreign Guaranty; (iv) amend this Section 8.01 or change the definition of
"Required Lenders"; or (v) limit the liability of any Loan Party under any of
the Loan Documents, except as permitted under this Agreement; and (b) no
amendment, waiver or consent shall, unless in writing and signed by the Required
Lenders and each Lender Party that has a Commitment under the Revolving Credit
Facility if affected by such amendment, waiver or consent, (i) change the
amounts of the Commitments of such Lender Party or subject such Lender Party to
any additional obligations, (ii) reduce the principal of, or interest on, the
Notes held by such Lender Party or any fees or other amounts payable hereunder
to such Lender Party, (iii) postpone any date fixed for any scheduled payment of
principal of, or interest on, the Notes held by such Lender Party or any fees or
other amounts payable hereunder to such Lender Party or (iv) change the order of
application of any prepayment set forth in Section 2.06 in any manner that
materially and adversely affects such Lender Party; provided, further, that no
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amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Bank or the Issuing Bank, as the case may be, in addition to the Lenders
required above to take such action, affect the rights or obligations of the
Swing Line Bank or the Issuing Bank, as the case may be, under this Agreement or
any other Loan Document; and provided, further, that no amendment, waiver or
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consent shall, unless in writing and signed by the Administrative Agent in
addition to the Lenders required above to take such action, affect the rights or
duties of the Administrative Agent under this Agreement or any other Loan
Document.
SECTION 8.02. NOTICES ETC. All notices and other communications provided
for hereunder shall be in writing (including telegraphic, telecopy or telex
communication) and mailed, telegraphed, telecopied, telexed, delivered by
overnight courier service or personally served,
(i) if to the Borrower:
Unidigital Inc.
229 West 28th Street
New York, New York 10001
Attention: Mr. William E. Dye, Chief Executive Officer
Telephone No.: (212) 244-7820
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Facsimile No.: (212) 244-7815
with a copy to:
Buchanan Ingersoll Professional Corporation
College Centre
500 College Road East
Princeton, New Jersey 08540
Attention: David J. Sorin, Esq.
Telephone No.: (609) 987-6800
Facsimile No.: (609) 520-0360
(ii) if to the Administrative Agent:
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036
Attention: Alfred R. Bonfantini, Senior Vice President
Telephone No.: (212) 819-5762
Facsimile No.: (212) 819-4120
Attention: Beth Goodman, Vice President
Telephone No.: (212) 819-5769
Facsimile No.: (212) 819-4120
Attention: Greg Mathis
Kathleen Buckley
Telephone No.: (212) 819-6005
Facsimile No.: (212) 819-6213
with a copy to:
Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attention: David A. Scherl, Esq. or
Joel A. Feldman, Esq.
Telephone No.: (212) 735-8600
Facsimile No.: (212) 735-8708
(iii) if to any Initial Lender or the Initial Issuing Bank, at
its Domestic Lending Office specified opposite its name on Schedule I attached
----------
hereto;
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(iv) if to any other Lender Party, at its Domestic Lending
Office specified in the Assignment and Acceptance pursuant to which it became a
Lender Party;
or, as to the Borrower or the Administrative Agent, at such other address as
shall be designated by such party in a written notice to the other parties and,
as to each other party, at such other address as shall be designated by such
party in a written notice to the Borrower and the Administrative Agent. All such
notices and communications shall, (w) when mailed by certified mail, return
receipt requested, be effective three (3) days after mailing, (x) when
telegraphed, telecopied or telexed, be effective upon delivery to the telegraph
company, upon transmission by telecopier or upon confirmation by telex
answerback, (y) when delivered in person, be effective when delivered and (z)
when delivered by overnight courier, be effective two (2) Business Days after
delivery to the courier properly addressed, except that notices and
communications to the Administrative Agent pursuant to Article II, III or VII
shall not be effective until received by the Administrative Agent. Delivery by
telecopier of an executed counterpart of this Agreement, the Notes or any other
Loan Document or of any Exhibit hereto or thereto or of any amendment or waiver
of any provision hereof or thereof shall be as effective as delivery of a
manually executed counterpart thereof.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of any Lender
Party or the Administrative Agent to exercise, and no delay in exercising, any
right hereunder or under any Note or under any other Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law or in equity.
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SECTION 8.04. COSTS AND EXPENSES.
(a) The Borrower agrees to pay on demand (i) all reasonable costs and
expenses of the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification and amendment of the Loan
Documents (including, without limitation, (A) all due diligence, collateral
review, syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing, registration and recording fees and expenses, and (B) the
reasonable fees and expenses of counsel for the Administrative Agent with
respect thereto, including advising the Administrative Agent as to its rights
and responsibilities, or the perfection, protection or preservation of rights or
interests under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally and any proceeding ancillary thereto) and (ii) all
reasonable costs and expenses of the Administrative Agent and the Lender Parties
in connection with the enforcement of the Loan Documents, whether in any action,
suit or litigation or any bankruptcy, insolvency or other similar proceeding
affecting creditors' rights generally or otherwise (including, without
limitation, the fees and expenses of counsel for the Administrative Agent and
each Lender Party with respect thereto).
(b) The Borrower agrees to indemnify and hold harmless the
Administrative Agent, each Lender Party and each of their respective Affiliates
and their respective officers,
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directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of, or in connection with
the preparation for a defense of, any investigation, litigation or proceeding
arising out of, related to or in connection with (i) any of the transactions
contemplated by the Loan Documents, (ii) any acquisition or proposed acquisition
or similar business combination or proposed business combination by the Borrower
or any of its Subsidiaries or other Affiliates of all or any portion of the
shares of capital stock or all or substantially all of the property and assets
of any other Person, (iii) the Facilities, the actual or proposed use of the
proceeds of the Advances or the Letters of Credit by the Borrower or any of its
Subsidiaries or other Affiliates and any of the other transactions contemplated
by the Loan Documents, (iv) the actual or alleged presence of Hazardous
Materials on any property of the Borrower or any of its Subsidiaries or any
Environmental Action relating in any way to the Borrower or any of its
Subsidiaries or (v) any broker's or finder's fees or commissions or any similar
fees or commissions which are or will be owed or payable by the Borrower or any
of its Subsidiaries in connection with the incurrence and maintenance of the
Obligations, any other transactions contemplated by the Loan Documents or any
services rendered in connection with such transactions, in the case of each of
clauses (i) through (v) above whether or not such investigation, litigation or
proceeding is brought by the Borrower or any of its Subsidiaries, or their
directors, officers, managers, employees, stockholders, or creditors or an
Indemnified Party or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated, except to
the extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such
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Indemnified Party's gross negligence or willful misconduct. The Borrower also
agrees not to assert any claim against the Administrative Agent, any Lender
Party or any of their respective Affiliates, or any of their respective
officers, directors, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to the Facilities, the actual or proposed use of the
proceeds of the Advances or the Letters of Credit, the Loan Documents or any of
the transactions contemplated thereby, other than claims for direct, as opposed
to consequential, damages which shall have been determined in a final
nonappealable judgment by a court of competent jurisdiction to have resulted
from such Person's gross negligence or willful misconduct.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance is made by the Borrower to or for the account of a Lender Party
other than on the last day of the Interest Period for such Advance, as a result
of a payment or Conversion pursuant to Section 2.09(b)(i) or 2.10(d) or a
prepayment pursuant to Section 2.06, acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason, the Borrower shall, upon
demand by such Lender Party (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender Party any
amounts required to compensate such Lender Party for any additional losses,
costs or expenses that it may reasonably incur as a result of such payment,
including, without limitation, any loss, cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds required by any
Lender Party to fund or maintain such Advance.
(d) If any Loan Party fails to pay when due any costs, expenses or
other amounts payable by it under any Loan Document, including, without
limitation, fees and
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expenses of counsel and indemnities, such amount may be paid on behalf of such
Loan Party by the Administrative Agent, in its sole discretion.
(e) Without prejudice to the survival of any other agreement of any
Loan Party hereunder or under any other Loan Document, the agreements and
obligations of the Borrower contained in Sections 2.10 and 2.12 and this
Section 8.04 shall survive the payment in full of principal, interest and all
other amounts payable hereunder and under any of the other Loan Documents.
SECTION 8.05. RIGHT OF SET-OFF. Borrower hereby grants to the
Administrative Agent for itself and ratably for the benefit of the Lender
Parties and the Hedge Banks, a lien, security interest and right of setoff as
security for all liabilities and obligations to the Administrative Agent, the
Lender Parties and the Hedge Banks, whether now existing or hereafter arising,
upon and against all deposits, credits, collateral and property, now or
hereafter in the possession, custody, safekeeping or control of the
Administrative Agent, the Lender Parties and the Hedge Banks or any entity under
the control of Fleet Financial Group, Inc., or in transit to any of them. At any
time, without demand or notice, the Administrative Agent, the Lender Parties and
the Hedge Banks may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower due to the appropriate party even though
unmatured and regardless of the adequacy of any collateral securing the
Obligation of the Borrower. ANY AND ALL RIGHTS TO REQUIRE THE ADMINISTRATIVE
AGENT, THE LENDER PARTIES AND THE HEDGE BANKS TO EXERCISE THEIR RESPECTIVE
RIGHTS OR REMEDIES WITH RESPECT TO ANY COLLATERAL WHICH SECURES THE OBLIGATIONS
OF THE BORROWER OR ANY OTHER LOAN PARTY, PRIOR TO EXERCISING ITS RIGHT OF
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SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER
ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED. Section 1.6 Binding
-------------------
Effect.
- ------
SECTION 8.06. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Administrative Agent and
when the Administrative Agent shall have been notified by each Initial Lender
and the Initial Issuing Bank that each such Initial Lender and the Initial
Issuing Bank has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Administrative Agent, each Lender Party, each
Hedge Bank and their respective successors and assigns, except that the Borrower
shall not have the right to assign any of its rights hereunder or any interest
herein without the prior written consent of the Lender Parties.
SECTION 8.07. ASSIGNMENTS AND PARTICIPATIONS.
(a) Each Lender Party may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment or Commitments, the
Advances owing to it and the Note or Notes held by it); provided, however, that
-------- -------
(i) each such assignment shall be of a uniform, and not a varying, percentage of
all rights and obligations hereunder and thereunder (including, without
limitation, under and in respect of the Facilities) on a pro rata basis with
respect thereto, (ii) except in the case of an assignment to a Person that,
immediately prior to such assignment, was a Lender or an assignment of all of a
Lender Party's and Hedge Bank's rights and obligations under this Agreement and
the other Loan Documents, as applicable, the amount of the
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Commitment of the assigning Lender Party being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $5,000,000, (iii) no
such assignments shall be permitted without the prior consent of the
Administrative Agent (which may be withheld for any reason) until the earlier to
occur of (x) the date on which the Administrative Agent shall have notified the
Lender Parties that syndication of the Commitments hereunder has been completed
or (y) the 120th day following the Initial Funding Date, (iv) no such assignment
shall be permitted if, immediately after giving effect thereto, the Borrower
would be required to make payments to or on behalf of the assignee Lender Party
pursuant to Section 2.10(a) or (b) or Section 2.12 and the assignor Lender Party
was not, at the time of such assignment, entitled to receive any payment
pursuant to Section 2.10(a) or (b) or Section 2.12, and (v) the parties to each
such assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,000. Swing Line Notes shall not be subject to assignment
and all amounts owing thereunder shall be deemed owing under the applicable
Revolving Credit Note at the time of an assignment pursuant to Section 8.07.
(b) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in such Assignment and Acceptance, (x) the
assignee thereunder shall be a party hereto and under the other Loan Documents,
as applicable, and, to the extent that rights and obligations hereunder and
under the other Loan Documents, as applicable, have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
or Issuing Bank, as the case may be, hereunder and under the other Loan
Documents, as applicable, and (y) the Lender or Issuing Bank assignor thereunder
shall, to the extent that rights
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and obligations hereunder have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations under
this Agreement and under the other Loan Documents, as applicable (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's or Issuing Bank's rights and obligations under this Agreement
and under the other Loan Documents, as applicable, such Lender or Issuing Bank
shall cease to be a party hereto and under the other Loan Documents, as
applicable), except as to Sections 2.10, 2.12 and 8.04 for the period prior to
the effective date of such assignments.
(c) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of, or the perfection or
priority of any lien or security interest created or purported to be created
under or in connection with this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto; (ii) such
assigning Lender Party makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
other Loan Party or the performance or observance by any Loan Party of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Sections 4.01(f) and (g) and such other documents and information
as it
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has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Lender Party or
any other Lender Party and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (v) such assignee confirms
that it is an Eligible Assignee; (vi) such assignee appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement and the other Loan Documents as
are delegated to the Administrative Agent by the terms hereof and thereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender or Issuing Bank, as the case may be.
(d) The Administrative Agent shall maintain at its address referred
to in Section 8.02 a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lender Parties and the Commitment under each Facility of, and principal
amount of the Advances owing under each Facility to, each Lender Party from time
to time (the "Register"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Borrower, the
Administrative Agent and the Lender Parties may treat each Person whose name is
recorded in the Register as a Lender Party hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable prior
notice.
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(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee, together with any Note or Notes subject
to such assignment and the appropriate processing and recordation fee and any
other agreement, documents and instruments reasonably requested by the
Administrative Agent, the Administrative Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit A
---------
hereto, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Borrower. In the case of any assignment by a Lender, within five (5) Business
Days after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Administrative Agent in exchange for the surrendered
Note or Notes a new Note to the order of such Eligible Assignee in an amount
equal to the Commitment assumed by it under a Facility pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder under such Facility, a new Note to the order of the assigning Lender
in an amount equal to the Commitment retained by it hereunder. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit B.
---------
(f) The Issuing Bank may assign to an Eligible Assignee all of its
rights and obligations under the undrawn portion of its Letter of Credit
Commitment and its other rights and obligations hereunder and under the other
Loan Documents, as applicable, at any time; provided, however, that (i) each
-------- -------
such assignment shall be to an Eligible Assignee and (ii) the parties to each
such assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, with a
processing and recordation
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fee of $3,000 and any other agreement, documents and instruments reasonably
requested by the Administrative Agent.
(g) Each Lender Party may sell participations to one or more Persons
(other than any Loan Party or any of its Affiliates) in or to all or a portion
of its rights and obligations under this Agreement and the other Loan Documents,
as applicable (including, without limitation, all or a portion of its
Commitments, the Advances owing to it and the Note or Notes, if any, held by
it); provided, however, that (i) such Lender Party's obligations under this
-------- -------
Agreement and the other Loan Documents (including, without limitation, its
Commitments) shall remain unchanged, (ii) such Lender Party shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender Party shall remain the holder of any such Note for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lender Parties shall continue to deal solely and directly with such Lender
Party in connection with such Lender Party's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right (x) to any payments under Sections 2.10 or 2.12 (other than to the extent
the Lender Party is entitled thereto) and (y) to approve any amendment, waiver
or other modification of any provision of this Agreement or any other Loan
Document, or any consent to any departure by any Loan Party therefrom, except to
the extent that such amendment, waiver, modification or consent would reduce the
principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, or postpone
any date fixed for any payment of principal of, or interest on, the Notes or any
fees or other amounts payable hereunder, in each case to the extent subject to
such participation, or release all or substantially all of the Collateral.
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(h) Any Lender Party may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower; provided, however, that, prior to any
-------- -------
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve the confidentiality of any Confidential Information
received by it from such Lender Party.
(i) Each of the Administrative Agent, for itself and ratably for
the benefit of the Lender Parties and the Hedge Banks, the Administrative Agent
for itself or any Lender Party or Hedge Bank may at any time pledge all or any
portion of its rights under the Loan Documents including any portion of any note
to any of the twelve (12) Federal Reserve Banks organized under Section 4 of the
Federal Reserve Act, 12 U.S.C. Section 341 (or any successor provision related
thereto). No such pledge or enforcement thereof shall release the Administrative
Agent or any of the Lender Parties, or any Hedge Bank from its obligations under
any of the Loan Documents.
SECTION 8.08. EXECUTION IN COUNTERPARTS; SEVERABILITY. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be as effective as delivery of a manually executed
counterpart of this Agreement. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or
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impair the legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
SECTION 8.09. NO LIABILITY OF THE ISSUING BANK. The Borrower assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any of its officers, directors, employees or agents, any Lender Party
or Hedge Bank shall be liable or responsible for: (a) the use that may be made
of any Letter of Credit or any acts or omissions of any beneficiary or
transferee in connection therewith; (b) the validity, sufficiency or genuineness
of documents, or of any endorsement thereon, even if such documents should prove
to be in any or all respects invalid, insufficient, fraudulent or forged; or (c)
any other circumstances whatsoever in making or failing to make payment under
any Letter of Credit, except that the Borrower shall have a claim against the
Issuing Bank, and the Issuing Bank shall be liable to the Borrower, to the
extent of any direct, but not consequential, damages suffered by the Borrower
that the Borrower proves were caused by (i) the Issuing Bank's willful
misconduct or gross negligence in determining whether documents presented under
any Letter of Credit comply with the terms of the Letter of Credit or (ii) the
Issuing Bank's willful failure to make lawful payment under a Letter of Credit
after the presentation to it of a draft and certificates strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.
SECTION 8.10. CONFIDENTIALITY. Neither the Administrative Agent nor any
Lender Party shall disclose any Confidential Information to any Person without
the consent of the Borrower,
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other than (a) to the Administrative Agent's or such Lender Party's Affiliates
and their officers, directors, employees, agents and advisors and to actual or
prospective Eligible Assignees and participants, and then only on a confidential
basis, (b) as required by any law, rule or regulation or judicial process, (c)
as required by the National Association of Insurance Commissioners, and (d) as
requested or required by any state, federal or foreign authority or examiner
regulating banks or banking or insurance companies.
SECTION 8.11. JURISDICTION, ETC.
(a) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF ANY
NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN
NEW YORK CITY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY
LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN
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THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY LENDER PARTY MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS IN THE COURTS OF ANY JURISDICTION.
(b) EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF, OR RELATING TO, THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY IN ANY NEW YORK STATE OR FEDERAL
COURT. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
SECTION 8.12. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 8.13. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO MUTUALLY
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY
JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY
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OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
ADMINISTRATION AGENT AND THE LENDER PARTIES TO ACCEPT THIS AGREEMENT AND MAKE
ADVANCES.
SECTION 8.14. REPLACEMENT OF ITEMS. Upon receipt of an affidavit of an
officer of the Administrative Agent or any of the Lender Parties as to the loss,
theft, destruction or mutilation of any of the Notes or any security document
which is not of public record, and, in the case of any such loss, theft,
destruction or mutilation, upon cancellation of any such Note or security
document, Borrower will issue and/or will cause any other applicable Loan Party
to issue, in lieu thereof, a replacement note or security document in the same
principal amount thereof and otherwise of like tenor.
SECTION 8.15. CERTAIN PAYMENTS. All Loan Documents are hereby expressly
limited so that in no contingency or event whatsoever, whether by reason of
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to the Administrative Agent for
itself, and the Agent for itself ratably for the benefit of the Lender Parties
and the Hedge Banks or any of the Lender Parties or the Hedge Banks for the use
or the forbearance of the indebtedness evidenced hereby or otherwise exceed the
maximum permissible under applicable law. As used herein, the term "applicable
law" shall mean the law in effect as of the date hereof provided, however, that
in the event there is a change in the law which results in a higher permissible
rate of interest, then the applicable Loan Document shall be governed by such
new law as of its effective date. In this regard, it is expressly agreed that it
is the intent of
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the parties hereof in the execution, delivery and acceptance of this Agreement
to contract in strict compliance with the laws of the State of New York from
time to time in effect. If, under or for any circumstances whatsoever,
fulfillment of any provision hereof or of any of the Loan Documents at the time
of performance of such provision shall be due, shall involve transcending the
limit of such validity prescribed by applicable law, then the obligation to be
fulfilled shall automatically be reduced to the limits of such validity, and if
under or from circumstances whatsoever the Administrative Agent or any of the
Lender Parties or any of the Hedge Banks should ever receive as interest an
amount which would exceed the highest lawful rate, such amount which would be
excessive interest shall be applied to the reduction of the principal balance
evidenced hereby and not to the payment of interest. This provision shall
control every other provision of all Loan Documents.
[Signature Pages Follow]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
UNIDIGITAL INC.
By: /s/ William E. Dye
---------------------------------
Name: William E. Dye
Title: Chief Executive Officer
FLEET BANK, N.A. as Administrative Agent,
Initial Issuing Bank and Swing Line Bank
By: /s/ Beth Goodman
-----------------------------------------
Name: Beth Goodman
Title: Vice President
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC. as
Documentation Agent
By: /s/ David E. Yewer
-----------------------------------------
Name: David E. Yewer
Title: Vice President
By: /s/ Clifford L. Wells
-----------------------------------------
Name: Clifford L. Wells
Title: Vice President
[Signature page 1 of 2 to Credit Agreement]
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<PAGE>
INITIAL LENDERS
FLEET BANK, N.A., as a Lender
By: /s/ Beth Goodman
-----------------------------------------
Name: Beth Goodman
Title: Vice President
BANK AUSTRIA CREDITANSTALT CORPORATE
FINANCE, INC.
By: /s/ David E. Yewer
-----------------------------------------
Name: David E. Yewer
Title: Vice President
By: /s/ Clifford L. Wells
-----------------------------------------
Name: Clifford L. Wells
Title: Vice President
MERRILL LYNCH BUSINESS FINANCE
SERVICES, INC.
By: /s/ T.G. Kopezynski
-----------------------------------------
Name: T.G. Kopezynski
Title: Vice President
[Signature Page 2 of 2 to Credit Agreement]
REVOLVING CREDIT PROMISSORY NOTE
--------------------------------
$40,000,000 Dated: May 12, 1999
FOR VALUE RECEIVED, the undersigned, Unidigital Inc., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Fleet Bank,
N.A. (the "Lender") for the account of its Applicable Lending Office (as defined
in the Credit Agreement referred to below) the principal sum of FORTY MILLION
DOLLARS AND NO CENTS ($ 40,000,000 ) or, if less, the aggregate unpaid principal
amount of the Revolving Credit Advances owing to the Lender by the Borrower
pursuant to the Credit Agreement, dated as of May 12, 1999 (as amended,
supplemented, restated or otherwise modified, the "Credit Agreement"; terms
defined therein being used herein as therein defined), among the Borrower, the
Lender and certain other Lender Parties thereto, Fleet Bank, N.A., as Initial
Issuing Bank, Fleet Bank, N.A., as Swing Line Bank, and Fleet Bank, N.A., as
Administrative Agent for the Lender and the other Lender Parties, on the
Revolving Credit Termination Date.
The Borrower further promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates and
at such times as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Fleet Bank, N. A., as Administrative Agent for the Lender
Parties, at 1185 Avenue of the Americas, New York, NY 10036, Account No.
1510352-03102, Attention: Loan Administration, in same day funds. Each Revolving
Credit Advance owing to the Lender by the Borrower and the maturity thereof, and
all payments made on account of principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on the grid attached hereto
or any continuation thereof, which is part of this Promissory Note; provided,
--------
however, that the failure of such Lender to so record any such information or
- -------
any error in so recording any such information shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any other Loan
Document.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of Revolving Credit Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Revolving Credit Advance being evidenced
by this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon thehappening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified. The obligations of the Borrower under
this Promissory Note, and the obligations of the other Loan
<PAGE>
Parties under the Loan Documents, are secured by the Collateral as provided in
the Loan Documents.
This Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York.
UNIDIGITAL INC.
By: /s/ William E. Dye
----------------------------------
Name: William E. Dye
Title: Chief Executive Officer
2
<PAGE>
REVOLVING CREDIT ADVANCES AND PAYMENTS OF PRINCIPAL
---------------------------------------------------
DATE AMOUNT OF AMOUNT OF UNPAID NOTATION
---- --------- --------- ------ --------
REVOLVING PRINCIPAL PAID PRINCIPAL MADE BY
--------- -------------- --------- --------
CREDIT ADVANCE OR PREPAID BALANCE
-------------- ---------- -------
3
<PAGE>
SWING LINE PROMISSORY NOTE
--------------------------
$3,000,000 Dated: May 12, 1999
FOR VALUE RECEIVED, the undersigned, Unidigital Inc., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Fleet Bank,
N.A. (the "Lender") for the account of its Applicable Lending Office (as defined
in the Credit Agreement referred to below) the principal sum of THREE MILLION
DOLLARS AND NO CENTS ($3,000,000) or, if less, the aggregate unpaid principal
amount of the Swing Line Advances owing to the Lender by the Borrower pursuant
to the Credit Agreement, dated as of May 12, 1999 (as amended, supplemented,
restated or otherwise modified, the "Credit Agreement"; terms defined therein
being used herein as therein defined), among the Borrower, the Lender and
certain other Lender Parties thereto, Fleet Bank, N.A., as Initial Issuing Bank,
Fleet Bank, N.A., as Swing Line Bank, and Fleet Bank, N.A., as Administrative
Agent for the Lender and the other Lender Parties, on the dates and in the
amounts specified in the Credit Agreement.
The Borrower further promises to pay interest on the unpaid principal
amount of each Swing Line Advance from the date of such Swing Line Advance until
such principal amount is paid in full, at such interest rates and at such times
as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Fleet Bank, N.A., as Administrative Agent for the Lender
Parties, at 1185 Avenue of the Americas, New York, NY 10036, Account No.
1510352-03102, Attention: Loan Administration, in same day funds. Each Swing
Line Advance owing to the Lender by the Borrower and the maturity thereof, and
all payments made on account of principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on the grid attached hereto
or any continuation thereof, which is part of this Promissory Note; provided,
--------
however, that the failure of such Lender to so record any such information or
- -------
any error in so recording any such information shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any other Loan
Document.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of Swing Line Advances by the Lender to the Borrower
from time to time in an aggregate amount not to exceed at any time outstanding
the U.S. dollar amount first above mentioned, the indebtedness of the Borrower
resulting from each such Swing Line Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon the terms and conditions
therein specified. The obligations of the
4
<PAGE>
Borrower under this Promissory Note, and the obligations of the other Loan
Parties under the Loan Documents, are secured by the Collateral as provided in
the Loan Documents.
This Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York.
UNIDIGITAL INC.
By: /s/ William E. Dye
----------------------------------
Name: William E. Dye
Title: Chief Executive Officer
5
<PAGE>
SWING LINE ADVANCES AND PAYMENTS OF PRINCIPAL
---------------------------------------------
DATE AMOUNT OF AMOUNT OF UNPAID NOTATION
---- --------- --------- ------ --------
SWING LINE PRINCIPAL PAID PRINCIPAL MADE BY
---------- -------------- --------- -------
ADVANCE OR PREPAID BALANCE
------- ---------- -------
6
<PAGE>
REVOLVING CREDIT PROMISSORY NOTE
--------------------------------
$15,000,000 Dated: May 12, 1999
FOR VALUE RECEIVED, the undersigned, Unidigital Inc., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Bank
Austria Creditanstalt Corporate Finance, Inc. (the "Lender") for the account of
its Applicable Lending Office (as defined in the Credit Agreement referred to
below) the principal sum of FIFTEEN MILLION DOLLARS AND NO CENTS ($ 15,000,000 )
or, if less, the aggregate unpaid principal amount of the Revolving Credit
Advances owing to the Lender by the Borrower pursuant to the Credit Agreement,
dated as of May 12, 1999 (as amended, supplemented, restated or otherwise
modified, the "Credit Agreement"; terms defined therein being used herein as
therein defined), among the Borrower, the Lender and certain other Lender
Parties thereto, Fleet Bank, N.A., as Initial Issuing Bank, Fleet Bank, N.A., as
Swing Line Bank, and Fleet Bank, N.A., as Administrative Agent for the Lender
and the other Lender Parties, on the Revolving Credit Termination Date.
The Borrower further promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates and
at such times as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Fleet Bank, N. A., as Administrative Agent for the Lender
Parties, at 1185 Avenue of the Americas, New York, NY 10036, Account No.
1510352-03102, Attention: Loan Administration, in same day funds. Each Revolving
Credit Advance owing to the Lender by the Borrower and the maturity thereof, and
all payments made on account of principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on the grid attached hereto
or any continuation thereof, which is part of this Promissory Note; provided,
however, that the failure of such Lender to so record any such information or
any error in so recording any such information shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any other Loan
Document.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of Revolving Credit Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Revolving Credit Advance being evidenced
by this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified. The obligations of the Borrower under
this Promissory Note, and the obligations of the other Loan
<PAGE>
Parties under the Loan Documents, are secured by the Collateral as provided in
the Loan Documents.
This Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York.
UNIDIGITAL INC.
By: /s/ William E. Dye
----------------------------
Name: William E. Dye
Title: Chief Executive Officer
2
<PAGE>
REVOLVING CREDIT ADVANCES AND PAYMENTS OF PRINCIPAL
---------------------------------------------------
DATE AMOUNT OF AMOUNT OF UNPAID NOTATION
---- --------- --------- ------ --------
REVOLVING PRINCIPAL PAID PRINCIPAL MADE BY
--------- -------------- --------- -------
CREDIT ADVANCE OR PREPAID BALANCE
-------------- ---------- -------
3
<PAGE>
REVOLVING CREDIT PROMISSORY NOTE
--------------------------------
$10,000,000 Dated: May 12, 1999
FOR VALUE RECEIVED, the undersigned, Unidigital Inc., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Merrill
Lynch Business Financial Services Inc. (the "Lender") for the account of its
Applicable Lending Office (as defined in the Credit Agreement referred to below)
the principal sum of TEN MILLION DOLLARS AND NO CENTS ($ 10,000,000 ) or, if
less, the aggregate unpaid principal amount of the Revolving Credit Advances
owing to the Lender by the Borrower pursuant to the Credit Agreement, dated as
of May 12, 1999 (as amended, supplemented, restated or otherwise modified, the
"Credit Agreement"; terms defined therein being used herein as therein defined),
among the Borrower, the Lender and certain other Lender Parties thereto, Fleet
Bank, N.A., as Initial Issuing Bank, Fleet Bank, N.A., as Swing Line Bank, and
Fleet Bank, N.A., as Administrative Agent for the Lender and the other Lender
Parties, on the Revolving Credit Termination Date.
The Borrower further promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates and
at such times as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United
States of America to Fleet Bank, N. A., as Administrative Agent for the Lender
Parties, at 1185 Avenue of the Americas, New York, NY 10036, Account No.
1510352-03102, Attention: Loan Administration, in same day funds. Each Revolving
Credit Advance owing to the Lender by the Borrower and the maturity thereof, and
all payments made on account of principal thereof, shall be recorded by the
Lender and, prior to any transfer hereof, endorsed on the grid attached hereto
or any continuation thereof, which is part of this Promissory Note; provided,
however, that the failure of such Lender to so record any such information or
any error in so recording any such information shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any other Loan
Document.
This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making of Revolving Credit Advances by the Lender to the
Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each such Revolving Credit Advance being evidenced
by this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon the
terms and conditions therein specified. The obligations of the Borrower under
this Promissory Note, and the obligations of the other Loan
<PAGE>
Parties under the Loan Documents, are secured by the Collateral as provided in
the Loan Documents.
This Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York.
UNIDIGITAL INC.
By: /s/ William E. Dye
----------------------------
Name: William E. Dye
Title: Chief Executive Officer
2
<PAGE>
REVOLVING CREDIT ADVANCES AND PAYMENTS OF PRINCIPAL
---------------------------------------------------
DATE AMOUNT OF AMOUNT OF UNPAID NOTATION
---- --------- --------- ------ --------
REVOLVING PRINCIPAL PAID PRINCIPAL MADE BY
--------- -------------- --------- -------
CREDIT ADVANCE OR PREPAID BALANCE
-------------- ---------- -------
3
<PAGE>
GENERAL SECURITY AGREEMENT (BORROWER)
-------------------------------------
This General Security Agreement ("Agreement") dated May 12, 1999 is by
Unidigital Inc., a Delaware corporation ("Borrower"), in favor of Fleet Bank,
N.A., a national banking association, as Administrative Agent for itself and
ratably for the benefit of the Lender Parties and the Hedge Banks (the "Secured
Party"). The Lender Parties and the Hedge Banks are collectively referred to
herein as the "Lenders."
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Secured Party and the Lenders have entered or are about to
enter into certain financing arrangements with the Borrower, pursuant to which
the Lenders may make loans and provide other financial accommodations to
Borrower;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION
1. DEFINITIONS
-----------
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower, the Secured Party and the
Lenders pursuant to the definitions set forth in the recitals hereto or to any
other person herein, shall include their respective successors and assigns. The
words "hereof", "herein", "hereunder", "this Agreement" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not any particular provision of this Agreement and as this Agreement now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced. The word "including" when used in this Agreement shall mean
"including, without limitation". An Event of Default shall exist or continue or
be continuing until such Event of Default is waived in accordance with Section
7.3 or is cured in a manner reasonably satisfactory to the Secured Party, if
such Event of Default is capable of being cured as reasonably determined by the
Secured Party. Any accounting term used herein unless otherwise defined in this
Agreement shall have the meanings customarily given to such term in accordance
with GAAP. For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
<PAGE>
1.2 "Credit Agreement" shall mean the Credit Agreement, of even date
hereof, by and among Borrower, the Secured Party and the Lenders, as the same
now exists and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.3 "Equipment" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.4 "Event of Default" shall have the meaning set forth in Section 6.1
hereof.
1.5 "L/C Cash Collateral Account" shall mean the L/C Cash Collateral
Account established by Borrower with the Secured Party to provide collateral
security with respect to outstanding letters of credit, as provided for in the
Credit Agreement.
1.6 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied.
1.7 "Hedge Banks" shall have the meaning ascribed thereto in the Credit
Agreement.
1.8 "Information Certificate" shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to the Secured Party or any of the Lenders in connection with the
preparation of this Agreement and the other Loan Documents and the financing
arrangements provided for herein.
1.9 "Inventory" shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.10 "Lender Parties" shall have the meaning ascribed thereto in the
Credit Agreement.
1.11 "Loan Documents" shall have the meaning ascribed thereto in the
Credit Agreement.
1.12 "Obligations" shall mean any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by Borrower to the
Secured Party and/or any of the Lenders and/or their respective affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under the Credit Agreement, this Agreement and the other Loan
Documents or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of the Credit
Agreement or after the commencement of any case with respect to the Borrower
under the United States Bankruptcy Code or any similar statute (including the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent,
-2-
<PAGE>
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by the Secured Party or
any of the Lenders.
1.13 "Obligor" shall mean any other guarantor, endorser, acceptor, surety
or other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
1.14 "Person" or "person" shall have the meaning ascribed thereto on the
Credit Agreement.
1.15 "Records" shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
Any term defined in the Credit Agreement and used herein shall have the
respective meanings ascribed to such terms therein, unless specified otherwise
herein.
SECTION 2. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations, Borrower hereby
grants to the Secured Party a continuing security interest in, a lien upon, and
a right of set off against, and hereby assigns to the Secured Party as security,
the following property and interests in property, whether now owned or hereafter
acquired or existing, and wherever located (collectively, the "Collateral"):
2.1 Accounts;
2.2 all present and future contract rights, general intangibles (including
tax and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper,
documents, instruments, letters of credit, bankers' acceptances and guaranties;
2.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter held or
received by or in transit to the Secured Party, any of the Lenders or any of
their affiliates or at any other depository or other institution from or for the
account of Borrower whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Accounts and other
Collateral, including (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (c) goods described in invoices, documents, contracts
or instruments with respect to, or otherwise representing or evidencing,
Accounts or other Collateral, including returned,
-3-
<PAGE>
repossessed and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account debtors;
2.4 Inventory;
2.5 Equipment;
2.6 Records; and
2.7 L/C Cash Collateral Account;
2.8 all right, title and interest of Borrower in the Master Agreement (as
defined in the Credit Agreement) and each transaction entered into thereunder
(including, without limitation, all amounts payable and deliverable thereunder),
and the benefit of any guarantee of other credit support in connection
therewith; and
2.9 all products and proceeds of the foregoing, in any form, including
insurance proceeds and any claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
SECTION 3. COLLATERAL COVENANTS
--------------------
3.1 Accounts Covenants.
------------------
(a) The Secured Party shall have the right at any time or times, in
the Secured Party's name or in the name of a nominee of the Secured Party, to
verify the validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
(b) Borrower shall deliver or cause to be delivered to the Secured
Party, with appropriate endorsement and assignment, with full recourse to
Borrower, all chattel paper and instruments which Borrower now owns or may at
any time acquire immediately upon Borrower's receipt thereof, except as the
Secured Party may otherwise agree.
(c) The Secured Party may, at any time or times that an Event of
Default exists or has occurred and is continuing, (i) notify any or all account
debtors that the Accounts have been assigned to the Secured Party and that the
Secured Party has a security interest therein and the Secured Party may direct
any or all accounts debtors to make payment of Accounts directly to the Secured
Party, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the account debtor or any other party or
parties in any way liable for payment thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and the Secured Party shall
not be liable for its failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action the Secured Party may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or has
occurred and is continuing, at the Secured Party's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to the Secured Party and are
-4-
<PAGE>
payable directly and only to the Secured Party and Borrower shall deliver to the
Secured Party such originals of documents evidencing the sale and delivery of
goods or the performance of services giving rise to any Accounts as the Secured
Party may require.
3.2 Inventory Covenants. With respect to the Inventory: (a) Borrower shall
-------------------
at all times maintain inventory records reasonably satisfactory to the Secured
Party keeping correct and accurate records itemizing and describing the kind,
type, quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall not remove any
Inventory from the locations set forth or permitted herein, without the prior
written consent of the Secured Party, except for sales of Inventory in the
ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (c)
Borrower shall produce, use, store and maintain the Inventory, with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (d) Borrower assumes all responsibility
and liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (e) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory; (f) Borrower shall keep
the Inventory in good and marketable condition; and (g) Borrower shall not,
without prior written notice to the Secured Party, acquire or accept any
Inventory on consignment or approval.
3.3 Equipment Covenants. With respect to the Equipment: (a) Borrower shall
-------------------
keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (b) Borrower shall use the Equipment with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with all applicable laws; (c) the Equipment is and
shall be used in Borrower's business and not for personal, family, household or
farming use; (d) Borrower shall not remove any Equipment from the locations set
forth or permitted herein, except to the extent necessary to have any Equipment
repaired or maintained in the ordinary course of the business of Borrower or to
move Equipment directly from one location set forth or permitted herein to
another such location and except for the movement of motor vehicles used by or
for the benefit of Borrower in the ordinary course of business; (e) the
Equipment is now and shall remain personal property and Borrower shall not
permit any of the Equipment to be or become a part of or affixed to real
property; and (f) Borrower assumes all responsibility and liability arising from
the use of the Equipment.
3.4 Power of Attorney. Borrower hereby irrevocably designates and appoints
-----------------
the Secured Party (and all persons designated by the Secured Party) as
Borrower's true and lawful attorney-in-fact, and authorizes the Secured Party,
in Borrower's or the Secured Party's name, to: (a) at any time an Event of
Default or event which with notice or passage of time or both would constitute
an Event of Default exists or has occurred and is continuing (i) demand payment
on Accounts or other proceeds of Inventory or other Collateral, (ii) enforce
payment of Accounts by legal proceedings or otherwise, (iii) exercise all of
Borrower's rights and remedies to collect any Account or other Collateral, (iv)
sell or assign any Account upon such terms, for such amount and at such time or
times as the Secured Party deems advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge and release any Account, (vii)
prepare, file and sign Borrower's name on any proof of claim in bankruptcy or
other similar document against an account debtor, (viii) notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by the Secured Party and open and dispose of all mail addressed to
Borrower, (ix) do all acts and things which are necessary, in the Secured
Party's
-5-
<PAGE>
determination, to fulfill Borrower's obligations under this Agreement and the
other Loan Documents, (x) take control in any manner of any item of payment or
proceeds thereof, (xi) endorse Borrower's name upon any items of payment or
proceeds thereof and deposit the same in the Secured Party's account for
application to the Obligations, (xii) endorse Borrower's name upon any chattel
paper, document, instrument, invoice, or similar document or agreement relating
to any Account or any goods pertaining thereto or any other Collateral and
(xiii) sign Borrower's name on any verification of Accounts and notices thereof
to account debtors and (b) at any time to (i) have access to any lockbox or
postal box into which Borrower's mail is deposited and (ii) execute in
Borrower's name and file any UCC financing statements or amendments thereto.
Borrower hereby releases the Secured Party and its officers, employees and
designees from any liabilities arising from any act or acts under this power of
attorney and in furtherance thereof, whether of omission or commission, except
as a result of the Secured Party's own gross negligence or wilful misconduct as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction.
3.5 Right to Cure. The Secured Party may, at its option, (a) cure any
-------------
default by Borrower under any agreement with a third party or pay or bond on
appeal any judgment entered against Borrower, (b) discharge taxes, liens,
security interests or other encumbrances at any time levied on or existing with
respect to the Collateral and (c) pay any amount, incur any expense or perform
any act which, in the Secured Party's judgment, is necessary or appropriate to
preserve, protect, insure or maintain the Collateral and the rights of the
Secured Party with respect thereto. The Secured Party may add any amounts so
expended to the Obligations and charge Borrower's account therefor, such amounts
to be repayable by Borrower on demand. The Secured Party shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower. Any payment
made or other action taken by the Secured Party under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.
3.6 Access to Premises. From time to time as requested by the Secured
-------------------
Party, at the cost and expense of Borrower, (a) the Secured Party or its
designee shall have complete access to all of Borrower's premises during normal
business hours and after reasonable notice to Borrower, or at any time and
without notice to Borrower if an Event of Default exists or has occurred and is
continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrower's books and records, including the Records, and
(b) Borrower shall promptly furnish to the Secured Party such copies of such
books and records or extracts therefrom as the Secured Party may request, and
(c) use during normal business hours such of Borrower's personnel, equipment,
supplies and premises as may be reasonably necessary for the foregoing, provided
that such use does not unreasonably disrupt the business of the Borrower, and if
an Event of Default exists or has occurred and is continuing for the collection
of Accounts and realization of other Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower hereby represents and warrants to the Secured Party and the
Lenders the following (which shall survive the execution and delivery of this
Agreement):
4.1 Chief Executive Office; Collateral Locations. The chief executive
------------------------------------------------
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in
-6-
<PAGE>
the Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 5.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof, and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
4.2 Priority of Liens; Title to Properties. The security interests and
----------------------------------------
liens granted to the Secured Party under this Agreement and the other Loan
Documents constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated on
Schedule 4.2 hereto and the other liens permitted by the Credit Agreement.
Borrower has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to the Secured Party and such others
as are specifically listed on Schedule 4.2 hereto or permitted by the Credit
Agreement.
4.3 Bank Accounts. All of the deposit accounts, investment accounts or
-------------
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 4.3 hereof, subject to the
right of Borrower to establish new accounts in accordance with Section 5.3
below.
4.4 Survival of Warranties; Cumulative. All representations and warranties
----------------------------------
contained in this Agreement or any of the other Loan Documents shall survive the
execution and delivery of this Agreement and shall be deemed to have been made
again to the Secured Party and the Lenders on the date of each additional
borrowing or other credit accommodation under the Credit Agreement and shall be
conclusively presumed to have been relied on by the Secured Party and the
Lenders regardless of any investigation made or information possessed by the
Secured Party or any of the Lenders. The representations and warranties set
forth herein shall be cumulative and in addition to any other representations or
warranties which Borrower shall now or hereafter give, or cause to be given, to
the Secured Party or any of the Lenders.
SECTION 5. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
5.1 New Collateral Locations. Borrower may open any new location within
-------------------------
the continental United States provided Borrower (a) gives the Secured Party
fifteen (15) days prior written notice of the intended opening of any such new
location and (b) executes and delivers, or causes to be executed and delivered,
to the Secured Party such agreements, documents, and instruments as the Secured
Party may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including UCC financing statements.
5.2 Insurance. Borrower shall, at all times, maintain with financially
---------
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to the Secured Party as to form, amount and
insurer. Borrower shall furnish certificates, policies or endorsements to the
Secured Party as the Secured Party shall require as proof of such insurance,
and, if Borrower fails to do so, the Secured Party is authorized, but not
required, to obtain such insurance at the expense of Borrower. All policies
shall provide for at least thirty (30) days prior written notice to the Secured
Party of any cancellation or reduction of coverage and that the Secured
-7-
<PAGE>
Party may act as attorney for Borrower in obtaining, and at any time an Event of
Default exists or has occurred and is continuing, adjusting, settling, amending
and canceling such insurance. Borrower shall cause the Secured Party to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory the Secured Party's loss payable endorsements to all insurance
policies in form and substance satisfactory to the Secured Party. Such Secured
Party's loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to the Secured Party as its interests may appear and
further specify that the Secured Party shall be paid regardless of any act or
omission by Borrower or any of its affiliates. At its option, the Secured Party
may apply any insurance proceeds received by the Secured Party at any time to
the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as the
Secured Party may determine or hold such proceeds as cash collateral for the
Obligations.
5.3 Additional Bank Accounts. Borrower shall not, directly or indirectly,
------------------------
open, establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the accounts
set forth in Schedule 4.3 hereto, except: (a) as to any new or additional
accounts which contain any Collateral or proceeds thereof, with the prior
written consent of the Secured Party and subject to such conditions thereto as
the Secured Party may establish and (b) as to any accounts used by Borrower to
make payments of payroll, taxes or other obligations to third parties, after
prior written notice to the Secured Party.
5.4 Costs and Expenses. Borrower shall pay to the Secured Party on demand
------------------
all costs, expenses, filing fees and taxes paid or payable in connection with
the preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, the Secured
Party's rights in the Collateral, this Agreement, the other Loan Documents and
all other documents related hereto or thereto, including any amendments,
supplements or consents which may hereafter be contemplated (whether or not
executed) or entered into in respect hereof and thereof, including: (a) all
costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) all insurance
premiums, appraisal fees and search fees; (c) costs and expenses of preserving
and protecting the Collateral; (d) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of the Secured Party, selling or otherwise realizing upon
the Collateral, and otherwise enforcing the provisions of this Agreement and the
other Loan Documents or defending any claims made or threatened against the
Secured Party arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); and
(e) the reasonable fees and disbursements of counsel (including legal
assistants) to the Secured Party in connection with any of the foregoing.
5.5 Further Assurances. At the request of the Secured Party at any time
-------------------
and from time to time, Borrower shall, at its expense, at any time or times duly
execute and deliver, or cause to be duly executed and delivered, such further
agreements, documents and instruments, and do or cause to be done such further
acts as may be necessary or proper to evidence, perfect, maintain and enforce
the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Loan Documents. Where permitted by law, Borrower hereby authorizes the
Secured Party to execute and file one or more UCC financing statements signed
only by the Secured Party.
-8-
<PAGE>
SECTION 6. EVENTS OF DEFAULT AND REMEDIES
------------------------------
6.1 Events of Default. The occurrence or existence of any Event of Default
-----------------
under the Credit Agreement is referred to herein individually as an "Event of
Default", and collectively as "Events of Default".
6.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, the Secured Party shall have all rights and remedies provided in
this Agreement, the other Loan Documents, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to the Secured Party hereunder, under any of the
other Loan Documents, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in the Secured Party's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Loan Documents. The Secured Party may, at any time
or times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, the Secured Party may, in its
discretion and without limitation, (i) accelerate the payment of all Obligations
and demand immediate payment thereof to the Secured Party (provided, that, upon
--------
the occurrence of any Event of Default described in Section 6.01 of the Credit
Agreement, all Obligations shall automatically become immediately due and
payable), (ii) with or without judicial process or the aid or assistance of
others, enter upon any premises on or in which any of the Collateral may be
located and take possession of the Collateral or complete processing,
manufacturing and repair of all or any portion of the Collateral, (iii) require
Borrower, at Borrower's expense, to assemble and make available to the Secured
Party any part or all of the Collateral at any place and time designated by the
Secured Party, (iv) collect, foreclose, receive, appropriate, setoff and realize
upon any and all Collateral, (v) remove any or all of the Collateral from any
premises on or in which the same may be located for the purpose of effecting the
sale, foreclosure or other disposition thereof or for any other purpose,(vi)
sell, lease, transfer, assign, deliver or otherwise dispose of any and all
Collateral (including entering into contracts with respect thereto, public or
private sales at any exchange, broker's board, at any office of the Secured
Party or elsewhere) at such prices or terms as the Secured Party may deem
reasonable, for cash, upon credit or for future delivery, with the Secured Party
having the right to purchase the whole or any part of the Collateral at any such
public sale, all of the foregoing being free from any right or equity of
redemption of Borrower, which right or equity of redemption is hereby expressly
waived and released by Borrower. If any of the Collateral is sold or leased by
the Secured Party upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by the Secured Party. If notice of disposition of Collateral is
required by law, five (5) days prior notice by the Secured Party to Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and Borrower waives any other notice. In
the event the Secured Party institutes an action to recover any Collateral or
seeks recovery of any Collateral by way of prejudgment remedy, Borrower waives
the posting of any bond which might otherwise be required.
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<PAGE>
(c) The Secured Party may apply the cash proceeds of Collateral
actually received by the Secured Party from any sale, lease, foreclosure or
other disposition of the Collateral to payment of the Obligations, in whole or
in part and in such order as The Secured Party may elect, whether or not then
due. Borrower shall remain liable to the Secured Party for the payment of any
deficiency with interest at the highest rate provided for in the Credit
Agreement and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
SECTION 7. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
7.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
---------------------------------------------------------------------
(a) The validity, interpretation and enforcement of this Agreement
and the other Loan Documents and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York.
(b) Borrower irrevocably consents and submits to the non-exclusive
jurisdiction of the State of New York and the United States District Court for
the Southern District of New York and waives any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
- ----- --- ----------
this Agreement or any of the other Loan Documents or in any way connected or
related or incidental to the dealings of Borrower and the Secured Party in
respect of this Agreement or the other Loan Documents or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agrees that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that the Secured Party shall have the right to bring any
action or proceeding against Borrower or its property in the courts of any other
jurisdiction which the Secured Party deems necessary or appropriate in order to
realize on the Collateral or to otherwise enforce its rights against Borrower or
its property).
(c) Borrower hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth on the
signature pages hereof and service so made shall be deemed to be completed five
(5) days after the same shall have been so deposited in the U.S. mails, or, at
the Secured Party's option, by service upon Borrower in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Borrower shall appear in answer to such process, failing which Borrower
shall be deemed in default and judgment may be entered by the Secured Party
against Borrower for the amount of the claim and other relief requested.
(d) BORROWER AND THE SECURED PARTY MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE SECURED PARTY AND THE LENDERS TO ACCEPT THIS AGREEMENT AND
MAKE LOANS PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
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<PAGE>
(e) The Secured Party shall not have any liability to Borrower
(whether in tort, contract, equity or otherwise) for losses suffered by Borrower
in connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on the Secured Party that the
losses were the result of acts or omissions constituting gross negligence or
willful misconduct. In any such litigation, the Secured Party shall be entitled
to the benefit of the rebuttable presumption that it acted in good faith and
with the exercise of ordinary care in the performance by it of the terms of this
Agreement and the other Loan Documents.
7.2 Waiver of Notices. Borrower hereby expressly waives demand,
-------------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which The Secured Party may elect to give shall entitle
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
7.3 Amendments and Waivers. Neither this Agreement nor any provision
-----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of the
Secured Party, and as to amendments, as also signed by an authorized officer of
Borrower. The Secured Party shall not, by any act, delay, omission or otherwise
be deemed to have expressly or impliedly waived any of its rights, powers and/or
remedies unless such waiver shall be in writing and signed by an authorized
officer of the Secured Party. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by the Secured Party of any
right, power and/or remedy on any one occasion shall not be construed as a bar
to or waiver of any such right, power and/or remedy which the Secured Party
would otherwise have on any future occasion, whether similar in kind or
otherwise.
7.4 Waiver of Counterclaims. Borrower waives all rights to interpose any
------------------------
claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
7.5 Indemnification. Borrower shall indemnify and hold the Secured Party,
---------------
the Lenders and their directors, agents, employees and counsel, harmless from
and against any and all losses, claims, damages, liabilities, costs or expenses
imposed on, incurred by or asserted against any of them in connection with any
litigation, investigation, claim or proceeding commenced or threatened related
to the negotiation, preparation, execution, delivery, enforcement, performance
or administration of this Agreement, any other Loan Documents, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, Borrower shall pay the maximum portion which it is
permitted to pay under applicable law to the Secured Party or any of the
Lenders, as the case may be, in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations,
the termination of this Agreement and the termination or non-renewal of the
Credit Agreement.
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<PAGE>
SECTION 8. MISCELLANEOUS
-------------
8.1 Notices. All notices, requests and demands hereunder shall be in
-------
writing and (a) made to the Secured Party as follows: Fleet Bank, N.A., as
Administrative Agent, 1185 Avenue of the Americas, New York, New York 10031,
Attention: Ms. Beth Goodman, Vice President and to Borrower at its chief
executive office set forth below, or to such other address as either party may
designate by written notice to the other in accordance with this provision, and
(b) deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.
8.2 Partial Invalidity. If any provision of this Agreement is held to be
-------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
8.3. Successors. This Agreement, the other Loan Documents and any other
----------
document referred to herein or therein shall be binding upon Borrower and its
successors and assigns and inure to the benefit of and be enforceable by the
Secured Party and its successors and assigns, except that Borrower may not
assign its rights under this Agreement, the other Loan Documents and any other
document referred to herein or therein without the prior written consent of the
Secured Party.
8.4 Entire Agreement. This Agreement, the other Loan Documents, any
-----------------
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
-12-
<PAGE>
IN WITNESS WHEREOF, Borrower has caused these presents to be duly executed
as of the day and year first above written.
BORROWER
--------
UNIDIGITAL INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
-----------------------
229 West 28th Street
New York, New York 10001
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<PAGE>
GENERAL SECURITY AGREEMENT (GUARANTORS)
---------------------------------------
This General Security Agreement ("Agreement") dated May 12, 1999 is by
Unidigital Elements (NY), Inc., a New York corporation, Unison (NY), Inc. a
Delaware corporation, Unison (MA), Inc., a Delaware Corporation, Unidigital
Elements (SF), Inc., a Delaware corporation, Mega Art Corp., a New York
corporation, SuperGraphics Holding Company, Inc., a Delaware corporation, and
SuperGraphics Corporation, a California corporation (collectively, the
"Guarantors"), in favor of Fleet Bank N.A. a National Banking Association, as
Administrative Agent for itself and ratably for the benefit of the Lender
Parties and the Hedge Banks (the "Secured Party"). The Lender Parties and the
Hedge Banks are collectively referred to herein as the "Lenders."
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Secured Party and the Lenders have entered or are about to
enter into certain financing arrangements with Unidigital Inc., a Delaware
corporation ("Borrower"), pursuant to which the Lenders may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Guarantors have executed and delivered or are about to execute
and deliver to the Secured Party a guarantee in favor of the Secured Party and
the Lenders, pursuant to which Guarantors absolutely and unconditionally
guarantee to the Secured Party and Lenders the payment and performance of all
now existing and hereafter arising obligations, liabilities and indebtedness of
Borrower to the Secured Party and the Lenders; and
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION
1. DEFINITIONS
-----------
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Guarantors, Borrower, the Secured Party
and the Lenders pursuant to the definitions set forth in the recitals hereto, or
to any other person herein, shall include their respective successors and
assigns. The words "hereof", "herein", "hereunder", "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced. The word "including" when used in this Agreement
shall mean "including, without limitation". An Event of Default shall exist or
<PAGE>
continue or be continuing until such Event of Default is waived in accordance
with Section 7.3 or is cured in a manner reasonably satisfactory to the Secured
Party, if such Event of Default is capable of being cured as reasonably
determined by the Secured Party. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meanings customarily given to
such term in accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Credit Agreement" shall mean the Credit Agreement, of even date
hereof, by and among Borrower, the Secured Party and the Lenders, as the same
now exists and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.3 "Equipment" shall mean all of Guarantors' now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.4 "Event of Default" shall have the meaning set forth in Section 6.1
hereof.
1.5 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied.
1.6 "Hedge Banks" shall have the meaning ascribed thereto in the Credit
Agreement.
1.7 "Information Certificate" shall mean the Information Certificate of
each Guarantor constituting Exhibit A hereto containing material information
with respect to each Guarantor, its business and assets provided by or on behalf
of Borrower or any Guarantor to the Secured Party or any of the Lenders in
connection with the preparation of this Agreement and the other Loan Documents
and the financing arrangements provided for herein.
1.8 "Inventory" shall mean all of each Guarantor now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.9 "Lender Parties" shall have the meaning ascribed thereto in the Credit
Agreement.
1.10 "Loan Documents" shall have the meaning ascribed thereto in the
Credit Agreement.
1.11 "Obligations" shall mean any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by any Guarantor to the
Secured Party and/or any of the Lenders and/or their respective affiliates,
including principal, interest, charges, fees, costs and expenses, however
-2-
<PAGE>
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under the Credit Agreement, this Agreement and the other Loan
Documents or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of the Credit
Agreement or after the commencement of any case with respect to the Borrower or
any Guarantor under the United States Bankruptcy Code or any similar statute
(including the payment of interest and other amounts which would accrue and
become due but for the commencement of such case, whether or not such amounts
are allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by the Secured Party or any of the Lenders.
1.12 "Obligor" shall mean any other guarantor, endorser, acceptor, surety
or other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
1.13 "Person" or "person" shall have the meaning ascribed thereto in the
Credit Agreement.
1.14 "Records" shall mean all of Guarantor's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Guarantors with respect to the
foregoing maintained with or by any other person).
Any term defined in the Credit Agreement and used herein shall have the
respective meanings ascribed to it therein, unless specified otherwise herein.
SECTION 2. GRANT OF SECURITY INTEREST
--------------------------
To secure payment and performance of all Obligations, each Guarantor
hereby grants to the Secured Party a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to the Secured Party,
as security, the following property and interests in property, whether now owned
or hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
2.1 Accounts;
2.2 all present and future contract rights, general intangibles (including
tax and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper,
documents, instruments, letters of credit, bankers' acceptances and guaranties;
2.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Guarantor now or hereafter held or
received by or in transit to the Secured Party, any of the Lenders or any of
their affiliates or at any other depository or other institution from or for the
account
-3-
<PAGE>
of each Guarantor whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Accounts and other
Collateral, including (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lien or secured party, (c) goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or evidencing, Accounts
or other Collateral, including returned, repossessed and reclaimed goods, and
(d) deposits by and property of account debtors or other persons securing the
obligations of account debtors;
2.4 Inventory;
2.5 Equipment;
2.6 Records; and
2.7 all products and proceeds of the foregoing, in any form, including
insurance proceeds and any claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
SECTION 3. COLLATERAL COVENANTS
--------------------
3.1 Accounts Covenants.
------------------
(a) Secured Party shall have the right at any time or times, in the
Secured Party's name or in the name of a nominee of the Secured Party, to verify
the validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
(b) Each Guarantor shall deliver or cause to be delivered to the
Secured Party, with appropriate endorsement and assignment, with full recourse
to each such Guarantor, all chattel paper and instruments which each Guarantor
now owns or may at any time acquire immediately upon such Guarantor's receipt
thereof, except as the Secured Party may otherwise agree.
(c) The Secured Party may, at any time or times that an Event of
Default exists or has occurred and is continuing, (i) notify any or all account
debtors that the Accounts have been assigned to the Secured Party and that the
Secured Party has a security interest therein and the Secured Party may direct
any or all accounts debtors to make payment of Accounts directly to the Secured
Party, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the account debtor or any other party or
parties in any way liable for payment thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and the Secured Party shall
not be liable for its failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action the Secured Party may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or has
occurred and is continuing, at the Secured Party's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to the Secured Party and are
-4-
<PAGE>
payable directly and only to the Secured Party and Guarantors shall deliver to
the Secured Party such originals of documents evidencing the sale and delivery
of goods or the performance of services giving rise to any Accounts as the
Secured Party may require.
3.2 Inventory Covenants. With respect to the Inventory: (a) each Guarantor
-------------------
shall at all times maintain inventory records reasonably satisfactory to the
Secured Party keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, such Guarantor's cost therefor
and daily withdrawals therefrom and additions thereto; (b) no Guarantor shall
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of the Secured Party, except for sales of Inventory in
the ordinary course of such Guarantor's business and except to move Inventory
directly from one location set forth or permitted herein to another such
location; (c) each Guarantor shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto); (d) each
Guarantor assumes all responsibility and liability arising from or relating to
the production, use, sale or other disposition of the Inventory; (e) each
Guarantor shall not Inventory to any customer on approval, or any other basis
which entitles the customer to return or may obligate such Guarantor to
repurchase such Inventory; (f) each Guarantor shall keep the Inventory in good
and marketable condition; and (g) no Guarantor shall, without prior written
notice to the Secured Party, acquire or accept any Inventory on consignment or
approval.
3.3 Equipment Covenants. With respect to the Equipment: (a) each Guarantor
-------------------
shall keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (b) each Guarantor shall use the Equipment
with all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with all applicable laws; (c) the Equipment
is and shall be used in each Guarantor's business and not for personal, family,
household or farming use; (d) no Guarantor shall remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of the business of
each Guarantor or to move Equipment directly from one location set forth or
permitted herein to another such location and except for the movement of motor
vehicles used by or for the benefit of each Guarantor in the ordinary course of
business; (e) the Equipment is now and shall remain personal property and no
Guarantor shall permit any of the Equipment to be or become a part of or affixed
to real property; and (f) each Guarantor assumes all responsibility and
liability arising from the use of the Equipment.
3.4 Power of Attorney. Each Guarantor hereby irrevocably designates and
-----------------
appoints the Secured Party (and all persons designated by the Secured Party) as
each such Guarantor's true and lawful attorney-in-fact, and authorizes Secured
Party, in such Guarantor's or Secured Party's name, to: (a) at any time an Event
of Default or event which with notice or passage of time or both would
constitute an Event of Default exists or has occurred and is continuing (i)
demand payment on Accounts or other proceeds of Inventory or other Collateral,
(ii) enforce payment of Accounts by legal proceedings or otherwise, (iii)
exercise all of such Guarantor's rights and remedies to collect any Account or
other Collateral, (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Secured Party deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign such Guarantor's name on any
proof of claim in bankruptcy or other similar document against an account
debtor, (viii) notify the post office authorities to change the address for
delivery of such Guarantor's mail to an address designated by the
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Secured Party and open and dispose of all mail addressed to such Guarantor, (ix)
do all acts and things which are necessary, in the Secured Party's
determination, to fulfill such Guarantor's obligations under this Agreement and
the other Loan Documents, (x) take control in any manner of any item of payment
or proceeds thereof, (xi) endorse such Guarantor's name upon any items of
payment or proceeds thereof and deposit the same in the Secured Party's account
for application to the Obligations, (xii) endorse such Guarantor's name upon any
chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Account or any goods pertaining thereto or any other Collateral
and (xiii) sign such Guarantor's name on any verification of Accounts and
notices thereof to account debtors and (b) at any time to (i) have access to any
lockbox or postal box into which such Guarantor's mail is deposited and (ii)
execute in such Guarantor's name and file any UCC financing statements or
amendments thereto. Each Guarantor hereby releases the Secured Party and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of the Secured Party's own gross
negligence or wilful misconduct as determined pursuant to a final non-appealable
order of a court of competent jurisdiction.
3.5 Right to Cure. The Secured Party may, at its option, (a) cure any
-------------
default by any Guarantor under any agreement with a third party or pay or bond
on appeal any judgment entered against such Guarantor (b) discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (c) pay any amount, incur any
expense or perform any act which, in the Secured Party's judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of the Secured Party with respect thereto. The Secured Party may add any
amounts so expended to the Obligations and charge such Guarantor's account
therefor, such amounts to be repayable by such Guarantor on demand. The Secured
Party shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
such Guarantor. Any payment made or other action taken by the Secured Party
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
3.6 Access to Premises. From time to time as requested by the Secured
-------------------
Party, at the cost and expense of the appropriate Guarantor, (a) the Secured
Party or its designee shall have complete access to all of each Guarantor's
premises during normal business hours and after reasonable notice to such
Guarantor, or at any time and without notice to such Guarantor if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of such Guarantor's
books and records, including the Records, and (b) each Guarantor shall promptly
furnish to the Secured Party such copies of such books and records or extracts
therefrom as the Secured Party may request, and (c) use during normal business
hours such of such Guarantor's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing, provided that such use does not
unreasonably disrupt the business of the Borrower, and if an Event of Default
exists or has occurred and is continuing for the collection of Accounts and
realization of other Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
------------------------------
Each Guarantor hereby represents and warrants to the Secured Party and the
Lenders the following (which shall survive the execution and delivery of this
Agreement):
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4.1 Corporate Existence, Power and Authority; Subsidiaries. Each Guarantor
------------------------------------------------------
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on such Guarantor's financial
condition, results of operation or business or the rights of the Secured Party
in or to any of the Collateral. The execution, delivery and performance of this
Agreement, the other Loan Documents and the transactions contemplated hereunder
and thereunder are all within such Guarantor's corporate powers, have been duly
authorized and are not in contravention of law or the terms of its certificate
of incorporation, by-laws, or other organizational documentation, or any
indenture, agreement or undertaking to which such Guarantor is a party or by
which such Guarantor or its property are bound. This Agreement and the other
Loan Documents constitute legal, valid and binding obligations of such Guarantor
enforceable in accordance with their respective terms. No Guarantor has any
subsidiaries except as set forth on its Information Certificate.
4.2 Chief Executive Office; Collateral Locations. The chief executive
------------------------------------------------
office of each Guarantor and its Records concerning Accounts are located only at
the address set forth below and its only other places of business and the only
other locations of Collateral, if any, are the addresses set forth in its
Information Certificate, subject to the right of such Guarantor to establish new
locations in accordance with Section 5.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by such Guarantor
and sets forth the owners and/or operators thereof, and to the best of such
Guarantor's knowledge, the holders of any mortgages on such locations.
4.3 Priority of Liens; Title to Properties. The security interests and
----------------------------------------
liens granted to the Secured Party under this Agreement and the other Loan
Documents constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated on
Schedule 4.3 hereto and the other liens permitted under Section 5.8 hereof. Each
Guarantor has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to the Secured Party and such others
as are specifically listed on Schedule 4.3 hereto or permitted under Section 5.8
hereof.
4.4 Tax Returns. Each Guarantor has filed, or caused to be filed, in a
-----------
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to the Secured Party). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Guarantor
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Guarantor and with respect to which adequate reserves have
been set aside on its books. Adequate provision has been made for the payment of
all accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
4.5 Litigation. Except as set forth on the Information Certificate, there
----------
is no present investigation by any governmental agency pending, or to the best
of each Guarantor's knowledge threatened, against or affecting such Guarantor or
its assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of each Guarantor's knowledge threatened, against
such Guarantor or its assets or goodwill, or against or affecting any
transactions contemplated by
-7-
<PAGE>
this Agreement, which if adversely determined against such Guarantor would
result in any material adverse change in the assets, business or prospects of
such Guarantor or which would impair the ability of such Guarantor to perform
its obligations hereunder or under any of the other Loan Documents to which it
is a party or of the Secured Party to enforce the Obligations or realize upon
any Collateral.
4.6 Compliance with Other Agreements and Applicable Laws. No Guarantor is
-----------------------------------------------------
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and each Guarantor is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority.
4.7 Bank Accounts. All of the deposit accounts, investment accounts or
-------------
other accounts in the name of or used by each Guarantor maintained at any bank
or other financial institution are set forth on Schedule 4.7 hereof, subject to
the right of such Guarantor to establish new accounts in accordance with Section
5.9 below.
4.8 Accuracy and Completeness of Information. All information furnished by
----------------------------------------
or on behalf of each Guarantor, in writing to the Secured Party in connection
with this Agreement or any of the other Loan Documents or any transaction
contemplated hereby or thereby, including all information on the Information
Certificates is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of any Guarantor,
which has not been fully and accurately disclosed to the Secured Party in
writing.
4.9 Survival of Warranties; Cumulative. All representations and warranties
----------------------------------
contained in this Agreement or any of the other Loan Documents shall survive the
execution and delivery of this Agreement and shall be deemed to have been made
again to the Secured Party and the Lenders on the date of each additional
borrowing or other credit accommodation under the Credit Agreement and shall be
conclusively presumed to have been relied on by the Secured Party or any of the
Lenders regardless of any investigation made or information possessed by the
Secured Party or any of the Lenders. The representations and warranties set
forth herein shall be cumulative and in addition to any other representations or
warranties which any Guarantor shall now or hereafter give, or cause to be
given, to the Secured Party or any of the Lenders.
SECTION 5. AFFIRMATIVE AND NEGATIVE COVENANTS
----------------------------------
5.1 Maintenance of Existence. Each Guarantor shall at all times preserve,
------------------------
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently conducted. Each
Guarantor shall give the Secured Party fifteen (15) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and such Guarantor shall deliver to the Secured Party a copy of the
amendment to the Certificate of Incorporation of such Guarantor providing for
the name change certified by the Secretary of State of the jurisdiction of
incorporation of such Guarantor as soon as it is available.
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5.2 New Collateral Locations. Each Guarantor may open any new location
--------------------------
within the continental United States provided such Guarantor gives the Secured
Party fifteen (15) days prior written notice of the intended opening of any such
new location and executes and delivers, or causes to be executed and delivered,
to the Secured Party such agreements, documents, and instruments as the Secured
Party may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including UCC financing statements.
5.3 Compliance with Laws, Regulations, Etc. Each Guarantor shall, at all
----------------------------------------
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any Federal, State or local
governmental authority applicable to it.
5.4 Payment of Taxes and Claims. Each Guarantor shall duly pay and
------------------------------
discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Guarantor and with respect to which adequate reserves have
been set aside on its books. Each Guarantor shall be liable for any tax or
penalties imposed on the Secured Party as a result of the financing arrangements
provided for herein and such Guarantor agrees to indemnify and hold the Secured
Party harmless with respect to the foregoing, and to repay to the Secured Party
on demand the amount thereof, and until paid by such Guarantor such amount shall
be added and deemed part of the Loans, provided, that, nothing contained herein
-------- ----
shall be construed to require such Guarantor to pay any income or franchise
taxes attributable to the income of the Secured Party from any amounts charged
or paid hereunder to the Secured Party. The foregoing indemnity shall survive
the payment of the Obligations, the termination of this Agreement and the
termination or non-renewal of the Credit Agreement.
5.5 Insurance. Each Guarantor shall, at all times, maintain with
---------
financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to the Secured Party
as to form, amount and insurer. Each Guarantor shall furnish certificates,
policies or endorsements to the Secured Party as the Secured Party shall require
as proof of such insurance, and, if such Guarantor fails to do so, the Secured
Party is authorized, but not required, to obtain such insurance at the expense
of such Guarantor. All policies shall provide for at least thirty (30) days
prior written notice to the Secured Party of any cancellation or reduction of
coverage and that the Secured Party may act as attorney for each Guarantor in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance. Each
Guarantor shall cause the Secured Party to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and each Guarantor shall obtain non-contributory the Secured
Party's loss payable endorsements to all insurance policies in form and
substance satisfactory to the Secured Party. Such Secured Party's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to the Secured Party as its interests may appear and further specify that the
Secured Party shall be paid regardless of any act or omission by Borrower, any
Guarantor or any of their affiliates. At its option, the Secured Party may apply
any insurance proceeds received by the Secured Party at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as the Secured Party
may determine or hold such proceeds as cash collateral for the Obligations.
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5.6 Financial Statements and Other Information. Each Guarantor shall keep
------------------------------------------
proper books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
such Guarantor and its subsidiaries (if any) in accordance with GAAP. Each
Guarantor shall furnish or cause to be furnished to the Secured Party, to the
extent available (a) such financial statements (including balance sheets,
statements of income and loss, statements of cash flow and statement of
shareholders' equity) all in reasonable detail fairly presenting the financial
position and results of the operations of such Guarantor as of the end and
through such period as the Secured Party may from time to time reasonably
request and (b) such budgets, forecasts, projections and other information
respecting the Collateral and the business of such Guarantor as the Secured
Party may, from time to time, reasonably request. The Secured Party is hereby
authorized to deliver a copy of any financial statement or any other information
relating to the business of each Guarantor to any court or other government
agency or to any participant or assignee or prospective participant or assignee.
Each Guarantor hereby irrevocably authorizes and directs all accountants or
auditors to deliver to the Secured Party, at such Guarantor's expense, copies of
the financial statements of each Guarantor and any reports or management letters
prepared by such accountants or auditors on behalf of each Guarantor and to
disclose to the Secured Party such information as they may have regarding the
business of such Guarantor. Any documents, schedules, invoices or other papers
delivered to the Secured Party may be destroyed or otherwise disposed of by the
Secured Party one (1) year after the same are delivered to the Secured Party,
except as otherwise designated by a Guarantor to the Secured Party in writing.
5.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Except as
-----------------------------------------------------------
otherwise permitted under the Credit Agreement, no Guarantor shall, directly or
indirectly, (a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or (b)
sell, assign, lease, transfer, abandon or otherwise dispose of any stock or
indebtedness to any other Person or any of its assets to any other Person or (c)
form or acquire any subsidiaries, or (d) wind up, liquidate or dissolve or (e)
agree to do any of the foregoing.
5.8 Encumbrances. No Guarantor shall create, incur, assume or suffer to
------------
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except: (a) liens and security interests of the Secured Party and
------
(b) the liens and security interests set forth on Schedule 4.3 hereto, or
permitted by the Credit Agreement.
5.9 Additional Bank Accounts. No Guarantor shall directly or indirectly,
-------------------------
open, establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the accounts
set forth in Schedule 4.7 hereto, except: (a) as to any new or additional
accounts which contain any Collateral or proceeds thereof, with the prior
written consent of the Secured Party and subject to such conditions thereto as
the Secured Party may establish and (b) as to any accounts used by such
Guarantor to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to the Secured Party.
5.10 Costs and Expenses. Each Guarantor shall pay to the Secured Party on
------------------
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, the Secured Party's rights in the Collateral, this Agreement, the
other Loan Documents and all other documents related hereto or thereto,
including any amendments, supplements or consents which may
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<PAGE>
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) all insurance premiums, appraisal fees and search fees; (c)
costs and expenses of preserving and protecting the Collateral; (d) costs and
expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of the Secured Party,
selling or otherwise realizing upon the Collateral, and otherwise enforcing the
provisions of this Agreement and the other Loan Documents or defending any
claims made or threatened against the Secured Party arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); and (e) the reasonable fees and
disbursements of counsel (including legal assistants) to the Secured Party in
connection with any of the foregoing.
5.11 Further Assurances. At the request of the Secured Party at any time
------------------
and from time to time, each Guarantor shall, at its expense, at any time or
times duly execute and deliver, or cause to be duly executed and delivered, such
further agreements, documents and instruments, and do or cause to be done such
further acts as may be necessary or proper to evidence, perfect, maintain and
enforce the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Loan Documents. Where permitted by law, each Guarantor hereby authorizes
the Secured Party to execute and file one or more UCC financing statements
signed only by the Secured Party.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES
------------------------------
6.1 Events of Default. The occurrence or existence of any Event of Default
-----------------
under the Loan Agreement is referred to herein individually as an "Event of
Default", and collectively as "Events of Default".
6.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, the Secured Party shall have all rights and remedies provided in
this Agreement, the other Loan Documents, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Guarantor or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to the Secured Party hereunder, under any of the
other Loan Documents, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in the Secured Party's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Guarantor of this
Agreement or any of the other Loan Documents. The Secured Party may, at any time
or times, proceed directly against any Guarantor or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, the Secured Party may, in its
discretion and without limitation, (i) accelerate the payment of all Obligations
and demand immediate payment thereof to the Secured Party (provided, that, upon
-------- ----
the occurrence of any Event of Default described in Section 6.01 of the Credit
Agreement, all
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<PAGE>
Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take possession
of the Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require each Guarantor, at such Guarantor's
expense, to assemble and make available to the Secured Party any part or all of
the Collateral at any place and time designated by the Secured Party, (iv)
collect, foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (v) remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the sale, foreclosure
or other disposition thereof or for any other purpose, (vi) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including entering into contracts with respect thereto, public or private sales
at any exchange, broker's board, at any office of the Secured Party or
elsewhere) at such prices or terms as the Secured Party may deem reasonable, for
cash, upon credit or for future delivery, with the Secured Party having the
right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
such Guarantor, which right or equity of redemption is hereby expressly waived
and released by such Guarantor. If any of the Collateral is sold or leased by
the Secured Party upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by the Secured Party. If notice of disposition of Collateral is
required by law, five (5) days prior notice by the Secured Party to each
applicable Guarantor designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be reasonable notice thereof and each Guarantor
waives any other notice. In the event the Secured Party institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, each Guarantor waives the posting of any bond which might otherwise be
required.
(c) The Secured Party may apply the cash proceeds of Collateral
actually received by the Secured Party from any sale, lease, foreclosure or
other disposition of the Collateral to payment of the Obligations, in whole or
in part and in such order as the Secured Party may elect, whether or not then
due. Guarantors shall remain liable to the Secured Party for the payment of any
deficiency with interest at the highest rate provided for in the Credit
Agreement and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
SECTION 7. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
7.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
---------------------------------------------------------------------
(a) The validity, interpretation and enforcement of this Agreement
and the other Loan Documents and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York.
(b) Each Guarantor irrevocably consents and submits to the
non-exclusive jurisdiction of the State of New York and the United States
District Court for the Southern District of New York and waives any objection
based on venue or forum non conveniens with respect to any action instituted
----- --- ----------
therein arising under this Agreement or any of the other Loan Documents or in
any way connected or related or incidental to the dealings of each Guarantor and
the Secured Party in respect of this Agreement or the other Loan Documents or
the transactions related hereto or thereto, in each case whether now
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<PAGE>
existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agrees that any dispute with respect to any such matters shall be
heard only in the courts described above (except that the Secured Party shall
have the right to bring any action or proceeding against any Guarantor or its
property in the courts of any other jurisdiction which the Secured Party deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against any Guarantor or its property).
(c) Each Guarantor hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at the Secured Party's option, by service upon each Guarantor's in any other
manner provided under the rules of any such courts. Within thirty (30) days
after such service, each Guarantor shall appear in answer to such process,
failing which such Guarantor shall be deemed in default and judgment may be
entered by the Secured Party against such Guarantor for the amount of the claim
and other relief requested.
(d) EACH GUARANTOR AND THE SECURED PARTY MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE SECURED PARTY AND THE LENDERS TO ACCEPT THIS AGREEMENT AND
MAKE LOANS PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
(e) The Secured Party shall not have any liability to Guarantors
(whether in tort, contract, equity or otherwise) for losses suffered by any
Guarantor in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on the Secured Party
that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, the Secured Party
shall be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it of
the terms of this Agreement and the other Loan Documents.
7.2 Waiver of Notices. Each Guarantor hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Guarantor which the Secured Party may elect to give shall
entitle such Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
7.3 Amendments and Waivers. Neither this Agreement nor any provision
-----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of the
Secured Party, and as to amendments, as also signed by an authorized officer of
each Guarantor. The Secured Party shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies
-13-
<PAGE>
unless such waiver shall be in writing and signed by an authorized officer of
the Secured Party. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by the Secured Party of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which the Secured Party would
otherwise have on any future occasion, whether similar in kind or otherwise.
7.4 Waiver of Counterclaims. Each Guarantor waives all rights to interpose
-----------------------
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
7.5 Indemnification. Each Guarantor shall indemnify and hold the Secured
---------------
Party, the Lenders and their directors, agents, employees and counsel, harmless
from and against any and all losses, claims, damages, liabilities, costs or
expenses imposed on, incurred by or asserted against any of them in connection
with any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Loan Documents, or
any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, each Guarantor shall pay the maximum portion which it
is permitted to pay under applicable law to the Secured Party or any of the
Lenders, as the case may be, in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations,
the termination of this Agreement and the termination or non-renewal of the
Credit Agreement.
SECTION 8. MISCELLANEOUS
-------------
8.1 Notices. All notices, requests and demands hereunder shall be in
-------
writing and (a) made to the Secured Party as follows: Fleet Bank, N.A., an
Administrative Agent, 1185 Avenue of the Americas, New York, New York 10031,
Attention: Ms. Beth Goodman, Vice President and to each Guarantor at its chief
executive office set forth below, or to such other address as either party may
designate by written notice to the other in accordance with this provision, and
(b) deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.
8.2 Partial Invalidity. If any provision of this Agreement is held to be
-------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
-14-
<PAGE>
8.3 Successors. This Agreement, the other Loan Documents and any other
----------
document referred to herein or therein shall be binding upon each Guarantor and
its successors and assigns and inure to the benefit of and be enforceable by the
Secured Party and its successors and assigns, except that no Guarantor may
assign its rights under this Agreement, the other Loan Documents and any other
document referred to herein or therein without the prior written consent of the
Secured Party.
8.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Agreement, it shall not be necessary
to produce or account for more then one counterpart thereof signed by each of
the parties hereto.
8.5 Entire Agreement. This Agreement, the other Loan Documents, any
-----------------
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
IN WITNESS WHEREOF, each Guarantor has caused these presents to be duly
executed as of the day and year first above written.
GUARANTORS:
-----------
UNIDIGITAL ELEMENTS (NY), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
UNIDIGITAL ELEMENTS (SF), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
-15-
<PAGE>
UNISON (NY), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
UNISON (MA), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
MEGA ART CORP.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
SUPERGRAPHICS HOLDING COMPANY, INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
-16-
<PAGE>
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
SUPERGRAPHICS CORPORATION
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
-17-
<PAGE>
PLEDGE AND SECURITY AGREEMENT
-----------------------------
THIS PLEDGE AND SECURITY AGREEMENT ("Pledge Agreement"), dated May 12,
1999, is by Unidigital Inc., a Delaware corporation ("Pledgor"), with its chief
executive office at 229 W. 28th Street, New York, New York 10001 to and in favor
of Fleet Bank, N.A., a national banking association, as Administrative Agent,
for itself and ratably for the benefit of the Lender Parties and the Hedge Banks
(as such terms are defined in the Credit Agreement and collectively referred to
herein, as the "Lenders"), having an office at 1185 Avenue of the Americas, New
York, New York 10036 ("Pledgee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Pledgor is now the direct and beneficial owner of all of the
issued and outstanding shares of capital stock of each of the corporations (the
"Issuers") as described on Exhibit A annexed hereto and made a part hereof (the
"Pledged Securities); and
WHEREAS, Pledgee, the Lenders and Pledgor have entered into or are about
to enter into financing arrangements pursuant to which the Lenders may make
loans and advances and provide other financial accommodations to Pledgor as set
forth in the Credit Agreement, of even date hereof, by and among Pledgee, the
Lenders and Pledgor (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the "Credit
Agreement") and other Loan Documents (as defined in the Credit Agreement); and
WHEREAS, in order to induce Pledgee and the Lenders to enter into the
Credit Agreement and the other Loan Documents and for the Lenders to make loans
and advances and provide other financial accommodations to Pledgor pursuant
thereto, Pledgor has agreed to secure the payment and performance of the
Obligations (as hereinafter defined) to Pledgee and to accomplish same by (i)
executing and delivering to Pledgee this Pledge Agreement, (ii) delivering to
Pledgee the Pledged Securities which are registered in the name of Pledgor,
together with appropriate powers duly executed in blank by Pledgor, and (iii)
delivering to Pledgee any and all other documents which Pledgee deems necessary
to protect Pledgee's interests hereunder.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees as follows:
1. GRANT OF SECURITY INTEREST
--------------------------
As collateral security for the prompt performance, observance and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to
Pledgee and grants to Pledgee a security interest in and lien upon (a) the
Pledged Securities, together with all cash dividends, stock dividends,
interests, profits, redemptions, warrants, subscription rights, stock,
securities options, substitutions, exchanges and other distributions now or
hereafter distributed by any of the Issuers or which may hereafter be delivered
to the possession of Pledgor or Pledgee with respect thereto, (b) Pledgor's
records with respect to the foregoing, and (c) the
<PAGE>
proceeds of all of the foregoing (all of the foregoing being collectively
referred to herein as the "Pledged Property").
2. OBLIGATIONS SECURED
-------------------
The security interest, lien and other interests granted to Pledgee
pursuant to this Pledge Agreement shall secure the prompt performance and
payment in full of any and all obligations, liabilities and indebtedness of
every kind, nature and description owing by Pledgor to Pledgee, and/or any of
the Lenders and/or their respective affiliates, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Pledge
Agreement, the Credit Agreement, the other Loan Documents or otherwise, whether
now existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Credit Agreement or after the commencement of
any case with respect to Pledgor under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Pledgee (all of the foregoing being
collectively referred to herein as the "Obligations").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Pledgor hereby represents, warrants and covenants with and to Pledgee the
following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) The Pledged Securities are duly authorized, validly issued, fully paid
and non-assessable capital stock of each Issuer and constitute Pledgor's entire
interest in each Issuer and are not registered, nor has Pledgor authorized the
registration thereof, in the name of any person or entity other than Pledgor or
Pledgee.
(b) The Pledged Property is directly, legally and beneficially owned by
Pledgor, free and clear of all claims, liens, pledges and encumbrances of any
kind, nature or description, except for the pledge and security interest in
favor of Pledgee and the pledges and security interests permitted under the
Credit Agreement.
(c) The Pledged Property is not subject to any restrictions relative to
the transfer thereof and Pledgor has the right to transfer and hypothecate the
Pledged Property free and clear of any liens, encumbrances or restrictions.
(d) The Pledged Property is duly and validly pledged to Pledgee and no
consent or approval of any governmental or regulatory authority or of any
securities exchange or the like, nor any consent or approval of any other third
party, was or is necessary to the validity and enforceability of this Pledge
Agreement, except for compliance with federal and state securities laws in the
event of the sale of the Pledged Securities pursuant to Section 5 hereof.
(e) Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the
Pledged Property, (ii) perform any and all other acts which Pledgee in good
faith deems reasonable and/or necessary for the protection and preservation of
the Pledged Property or its value or Pledgee's security interest therein,
-2-
<PAGE>
including, without limitation, transferring, registering or arranging for the
transfer or registration of the Pledged Property to or in Pledgee's own name and
receiving the income therefrom as additional security for the Obligations and
(iii) pay any charges or expenses which Pledgee deems necessary for the
foregoing purpose, but without any obligation to do so. Any obligation of
Pledgee for reasonable care for the Pledged Property in Pledgee's possession
shall be limited to the same degree of care which Pledgee uses for similar
property pledged to Pledgee by other persons.
(f) If Pledgor shall become entitled to receive or acquire, or shall
receive any stock certificate, or option or right with respect to any stock of
any Issuer (including without limitation, any certificate representing a
dividend or a distribution or exchange of or in connection with reclassification
of the Pledged Securities) whether as an addition to, in substitution of, or in
exchange for any of the Pledged Property or otherwise, Pledgor agrees to accept
same as Pledgee's agent, to hold same in trust for Pledgee and to deliver same
forthwith to Pledgee or Pledgee's agent or bailee in the form received, with the
endorsement(s) of Pledgor where necessary and/or appropriate powers and/or
assignments duly executed to be held by Pledgee or Pledgee's agent or bailee
subject to the terms hereof, as further security for the Obligations.
(g) Pledgor shall not, without the prior consent of Pledgee, directly or
indirectly, sell, assign, transfer, or otherwise dispose of, or grant any option
with respect to the Pledged Property, nor shall Pledgor create, incur or permit
any further pledge, hypothecation, encumbrance, lien, mortgage or security
interest with respect to the Pledged Property.
(h) So long as no Event of Default (as hereinafter defined) has occurred
and is continuing, Pledgor shall have the right to vote and exercise all
corporate rights with respect to the Pledged Securities, except as expressly
prohibited herein, and to receive any cash dividends payable in respect of the
Pledged Securities.
(i) Pledgor shall not permit any Issuer, directly or indirectly, to issue,
sell, grant, assign, transfer or otherwise dispose of, any additional shares of
capital stock of such Issuer or any option or warrant with respect to, or other
right or security convertible into, any additional shares of capital stock of
such Issuer, now or hereafter authorized, unless all such additional shares,
options, warrants, rights or other such securities are made and shall remain
part of the Pledged Property subject to the pledge and security interest granted
herein.
(j) Pledgor shall pay all charges and assessments of any nature against
the Pledged Property or with respect thereto prior to said charges and/or
assessments being delinquent.
(k) Pledgor shall promptly reimburse Pledgee on demand, together with
interest at the rate then applicable to the Obligations set forth in the Credit
Agreement, for any charges, assessments or expenses paid or incurred by Pledgee
in its discretion for the protection, preservation and maintenance of the
Pledged Property and the enforcement of Pledgee's rights hereunder, including,
without limitation, reasonable attorneys' fees and legal expenses incurred by
Pledgee in seeking to protect, collect or enforce its rights in the Pledged
Property or otherwise hereunder.
(l) Pledgor shall furnish, or cause to be furnished, to Pledgee such
information concerning the Issuers and the Pledged Property as Pledgee may from
time to time reasonably request in good faith, including, without limitation,
current financial statements.
-3-
<PAGE>
(m) Pledgee may notify the Issuers or the appropriate transfer agent of
the Pledged Securities to register the security interest and pledge granted
herein and honor the rights of Pledgee with respect thereto.
(n) Pledgor waives: (i) all rights to require Pledgee to proceed against
any other person, entity or collateral or to exercise any remedy, (ii) to the
extent permissible, the defense of the statute of limitations in any action upon
any of the Obligations, (iii) any right of subrogation or interest in the
Obligations or Pledged Property until all Obligations have been paid in full,
(iv) any rights to notice of any kind or nature whatsoever, unless specifically
required in this Pledge Agreement or non-waivable under any applicable law, and
(v) to the extent permissible, its rights under Section 9-112 and 9-207 of the
Uniform Commercial Code. Pledgor agrees that the Pledged Property, other
collateral, or any other guarantor or endorser may be released, substituted or
added with respect to the Obligations, in whole or in part, without releasing or
otherwise affecting the liability of Pledgor, the pledge and security interests
granted hereunder, or this Pledge Agreement. Pledgee is entitled to all of the
benefits of a secured party set forth in Section 9-207 of the New York Uniform
Commercial Code.
4. EVENTS OF DEFAULT
-----------------
All Obligations shall become immediately due and payable, without notice
or demand, at the option of Pledgee, upon the occurrence of any Event of
Default, as such term is defined in the Credit Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
-------------------
At any time an Event of Default exists or has occurred and is continuing,
in addition to all other rights and remedies of Pledgee, whether provided under
this Pledge Agreement, the Credit Agreement, the other Loan Documents,
applicable law or otherwise, Pledgee shall have the following rights and
remedies which may be exercised without notice to, or consent by, Pledgor except
as such notice or consent is expressly provided for hereunder:
(a) Pledgee, at its option, shall be empowered to exercise its continuing
right to instruct the Issuers or any Issuer (or the appropriate transfer agent
of any of the Pledged Securities) to register any or all of the Pledged
Securities in the name of Pledgee or in the name of Pledgee's nominee and
Pledgee may complete, in any manner Pledgee may deem expedient, any and all
stock powers, assignments or other documents heretofore or hereafter executed in
blank by Pledgor and delivered to Pledgee. After said instruction, and without
further notice, Pledgee shall have the exclusive right to exercise all voting
and corporate rights with respect to the Pledged Securities and other Pledged
Property, and exercise any and all rights of conversion, redemption, exchange,
subscription or any other rights, privileges, or options pertaining to any
shares of the Pledged Securities or other Pledged Property as if Pledgee were
the absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Pledged Securities and other
Pledged Property upon any merger, consolidation, reorganization,
recapitalization or other readjustment with respect thereto. Upon the exercise
of any such rights, privileges or options by Pledgee, Pledgee shall have the
right to deposit and deliver any and all of the Pledged Securities and other
Pledged Property to any committee, depository, transfer agent, registrar or
other designated agency upon such terms and conditions as Pledgee may determine,
all without liability, except to account for property actually received by
Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid
rights, privileges or options (all of which are exercisable in the sole
discretion of Pledgee) and shall not be responsible for any failure to do so or
delay in doing so.
-4-
<PAGE>
(b) In addition to all the rights and remedies of a secured party under
the Uniform Commercial Code or other applicable law, Pledgee shall have the
right, at any time and without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Pledgor or any other person (all
and each of which demands, advertisements and/or notices are hereby expressly
waived to the extent permitted by applicable law), to proceed forthwith to
collect, redeem, recover, receive, appropriate, realize, sell, or otherwise
dispose of and deliver said Pledged Property or any part thereof in one or more
lots at public or private sale or sales at any exchange, broker's board or at
any of Pledgee's offices or elsewhere at such prices and on such terms as
Pledgee may deem best. The foregoing disposition(s) may be for cash or on credit
or for future delivery without assumption of any credit risk, with Pledgee
having the right to purchase all or any part of said Pledged Property so sold at
any such sale or sales, public or private, free of any right or equity of
redemption in Pledgor, which right or equity is hereby expressly waived or
released by Pledgor. The proceeds of any such collection, redemption, recovery,
receipt, appropriation, realization, sale or other disposition, after deducting
all costs and expenses of every kind incurred relative thereto or incidental to
the care, safekeeping or otherwise of any and all Pledged Property or in any way
relating to the rights of Pledgee hereunder, including attorneys' fees and legal
expenses, shall be applied first to the satisfaction of the Obligations (in such
order as Pledgee may elect and whether or not due) and then to the payment of
any other amounts required by applicable law, including Section 9-504(1)(c) of
the Uniform Commercial Code, with Pledgor to be and remain liable for any
deficiency. Pledgor shall be liable to Pledgee for the payment on demand of all
such costs and expenses, together with interest at the then applicable rate set
forth in the Credit Agreement, and any reasonable attorneys' fees and legal
expenses. Pledgor agrees that five (5) days prior written notice by Pledgee
designating the place and time of any public sale or of the time after which any
private sale or other intended disposition of any or all of the Pledged Property
is to be made, is reasonable notification of such matters.
(c) Pledgor recognizes that Pledgee may be unable to effect a public sale
of all or part of the Pledged Property by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, as now or hereafter in
effect or in applicable Blue Sky or other state securities law, as now or
hereafter in effect, but may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such Pledged Property for their own account for investment
and not with a view to the distribution or resale thereof. If at the time of any
sale of the Pledged Property or any part thereof, the same shall not, for any
reason whatsoever, be effectively registered (if required) under the Securities
Act of 1933 (or other applicable state securities law), as then in effect,
Pledgee in its sole and absolute discretion is authorized to sell such Pledged
Property or such part thereof by private sale in such manner and under such
circumstances as Pledgee and its counsel may deem necessary or advisable in
order that such sale may legally be effected without registration. Pledgor
agrees that private sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Property were sold at public sale,
and that Pledgee has no obligation to delay the sale of any such Pledged
Property for the period of time necessary to permit Issuer, even if Issuer would
agree, to register such Pledged Property for public sale under such applicable
securities laws. Pledgor agrees that any private sales made under the foregoing
circumstances shall be deemed to have been in a commercially reasonable manner.
(d) All of the Pledgee's rights and remedies, including, but not limited
to, the foregoing and those otherwise arising under this Pledge Agreement, the
Credit Agreement and the other Loan Documents, the instruments comprising the
Pledged Property, applicable law or otherwise, shall be cumulative and not
exclusive and shall be enforceable alternatively, successively or concurrently
as Pledgee may deem expedient. No failure or delay on the part of Pledgee in
exercising any of its options,
-5-
<PAGE>
powers or rights or partial or single exercise thereof, shall constitute a
waiver of such option, power or right.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
(a) The validity, interpretation and enforcement of this Pledge Agreement
and the other Loan Documents and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York.
(b) Pledgor irrevocably consents and submits to the non-exclusive
jurisdiction of State of New York and the United States District Court for the
Southern District of New York and waives any objection based on venue or forum
-----
non conveniens with respect to any action instituted therein arising under this
- --- ----------
Pledge Agreement or any of the other Loan Documents or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Pledge Agreement or any of the other Loan Documents or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agrees that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Pledgee shall have the right to bring any action or
proceeding against Pledgor or its property in the courts of any other
jurisdiction which Pledgee deems necessary or appropriate in order to realize on
the Pledged Property or to otherwise enforce its rights against Pledgor or its
property).
(c) Pledgor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth herein and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Pledgee's option, by service upon
Pledgor in any other manner provided under the rules of any such courts. Within
thirty (30) days after such service, Pledgor shall appear in answer to such
process, failing which Pledgor shall be deemed in default and judgment may be
entered by Pledgee against Pledgor for the amount of the claim and other relief
requested.
(d) PLEDGOR AND PLEDGEE MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF OR, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR PLEDGEE
AND THE LENDERS TO ACCEPT THIS PLEDGE AGREEMENT AND TO MAKE LOANS PURSUANT TO
THE TERMS OF THE CREDIT AGREEMENT.
(e) Pledgee shall not have any liability to Pledgor (whether in tort,
contract, equity or otherwise) for losses suffered by Pledgor in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Pledge Agreement, or any act, omission or event occurring
in connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Pledgee, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Pledgee shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Pledge Agreement.
-6-
<PAGE>
7. MISCELLANEOUS
-------------
(a) Pledgor agrees that at any time and from time to time upon the written
request of Pledgee, Pledgor shall execute and deliver such further documents,
including, but not limited to, irrevocable proxies or stock powers, in form
satisfactory to counsel for Pledgee, and will take or cause to be taken such
further acts as Pledgee may request in order to effect the purposes of this
Pledge Agreement and perfect or continue the perfection of the security interest
in the Pledged Property granted to Pledgee hereunder.
(b) Beyond the exercise of reasonable care to assure the safe custody of
the Pledged Property (whether such custody is exercised by Pledgee, or Pledgee's
nominee, agent or bailee) Pledgee or Pledgee's nominee agent or bailee shall
have no duty or liability to protect or preserve any rights pertaining thereto
and shall be relieved of all responsibility for the Pledged Property upon
surrendering it to Pledgor or foreclosure with respect thereto.
(c) All notices, requests and demands to or upon the respective parties
hereto shall be in writing and shall be deemed to have been duly given or made:
if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
registered or certified mail, return receipt requested, five (5) days after
mailing. All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by
notice in accordance with this Section):
If to Pledgor: Unidigital Inc.
229 W. 28th Street
New York, New York 10001
Attention: Mr. William E. Dye, Chief Executive Officer
If to Pledgee: Fleet Bank, N.A., as Administrative Agent
1185 Avenue of the Americas
New York, New York 10036
Attention: Ms. Beth Goodman, Vice President
(d) All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural. All references to Pledgor, Pledgee
and Issuer pursuant to the definitions set forth in the recitals hereto, or to
any other person herein, shall include their respective successors and assigns.
The words "hereof," "herein," "hereunder," "this Pledge Agreement" and words of
similar import when used in this Pledge Agreement shall refer to this Pledge
Agreement as a whole and not any particular provision of this Pledge Agreement
and as this Pledge Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. An Event of Default shall
exist or continue or be continuing until such Event of Default is waived in
accordance with Section 7(g) hereof.
(e) This Pledge Agreement, the other Loan Documents and any other document
referred to herein or therein shall be binding upon Pledgor and its successors
and assigns and inure to the benefit of and be enforceable by Pledgee and its
successors and assigns.
-7-
<PAGE>
(f) If any provision of this Pledge Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Pledge Agreement as a whole, but this Pledge Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
(g) Neither this Pledge Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but only
by a written agreement signed by an authorized officer of Pledgee. Pledgee shall
not, by any act, delay, omission or otherwise be deemed to have expressly or
impliedly waived any of its rights, powers and/or remedies unless such waiver
shall be in writing and signed by an authorized officer of Pledgee. Any such
waiver shall be enforceable only to the extent specifically set forth therein. A
waiver by Pledgee of any right, power and/or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right, power and/or remedy
which Pledgee would otherwise have on any future occasion, whether similar in
kind or otherwise.
IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of the
day and year first above written.
UNIDIGITAL INC.
By: /s/ William E. Dye
---------------------------------
Name: William E. Dye
------------------------------
Title: Chief Executive Officer
-----------------------------
-8-
<PAGE>
EXHIBIT A
TO
PLEDGE AND SECURITY AGREEMENT
-----------------------------
Issuers Certificate No. Shares
------- --------------- ------
Unidigital Elements (NY), Inc. 1 20
Unison (NY), Inc. 1 100
Unison (MA), Inc. 1 100
Unidigital Elements (SF), Inc. 1 3
Mega Art Corp. 1 5
Mega Art Corp. 2 89
Mega Art Corp. 3 6
SuperGraphics Holding Company, Inc. C22 500,000
Elements (UK) Limited 13 651
-9-
PLEDGE AND SECURITY AGREEMENT (SUBSIDIARY)
------------------------------------------
THIS PLEDGE AND SECURITY AGREEMENT ("Pledge Agreement"), dated May 12,
1999, is by SuperGraphics Holding Company, Inc., a Delaware corporation
("Pledgor"), with its chief executive office at 229 W. 28th Street, New York,
New York 10001 to and in favor of Fleet Bank, N.A., a national banking
association, as Administrative Agent, for itself and ratably for the benefit of
the Lender Parties and the Hedge Banks (as such terms are defined in the Credit
Agreement and collectively referred to herein, as the "Lenders"), having an
office at 1185 Avenue of the Americas, New York, New York 10036 ("Pledgee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Pledgor is now the direct and beneficial owner of all of the
issued and outstanding shares of capital stock of each of the corporations (the
"Issuers") as described on Exhibit A annexed hereto and made a part hereof (the
"Pledged Securities); and
WHEREAS, Pledgee, the Lenders and Unidigital Inc., a Delaware corporation
("Borrower") have entered into or are about to enter into financing arrangements
pursuant to which the Lenders may make loans and advances and provide other
financial accommodations to Borrower as set forth in the Credit Agreement, of
even date hereof, by and among Pledgee, the Lenders and Borrower (as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the "Credit Agreement") and other Loan Documents
(as defined in the Credit Agreement); and
WHEREAS, due to the close business and financial relationship between
Borrower and Pledgor, in consideration of the benefits which will accrue to
Pledgor and as an inducement for Pledgee and the Lenders to enter into the
Credit Agreement and the other Loan Documents and for the Lenders to make loans
and advances and provide other financial accommodations to Borrower pursuant
thereto, Pledgor has agreed to secure the payment and performance of the
Obligations (as hereinafter defined) to Pledgee and to accomplish same by (i)
executing and delivering to Pledgee this Pledge Agreement, (ii) delivering to
Pledgee the Pledged Securities which are registered in the name of Pledgor,
together with appropriate powers duly executed in blank by Pledgor, and (iii)
delivering to Pledgee any and all other documents which Pledgee deems necessary
to protect Pledgee's interests hereunder.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees as follows:
1. GRANT OF SECURITY INTEREST
--------------------------
As collateral security for the prompt performance, observance and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
Pledgor hereby assigns, pledges, hypothecates, transfers and sets over to
Pledgee and grants to Pledgee a security interest in and lien upon (a) the
Pledged Securities, together with all cash dividends, stock dividends,
interests, profits, redemptions, warrants, subscription rights, stock,
securities options, substitutions, exchanges and other distributions now or
<PAGE>
hereafter distributed by any of the Issuers or which may hereafter be delivered
to the possession of Pledgor or Pledgee with respect thereto, (b) Pledgor's
records with respect to the foregoing, and (c) the proceeds of all of the
foregoing (all of the foregoing being collectively referred to herein as the
"Pledged Property").
2. OBLIGATIONS SECURED
-------------------
The security interest, lien and other interests granted to Pledgee
pursuant to this Pledge Agreement shall secure the prompt performance and
payment in full of any and all obligations, liabilities and indebtedness of
every kind, nature and description owing by Pledgor to Pledgee, and/or any of
the Lenders and/or their respective affiliates, including principal, interest,
charges, fees, costs and expenses, however evidenced, whether as principal,
surety, endorser, guarantor or otherwise, whether arising under this Pledge
Agreement, the Credit Agreement, the other Loan Documents or otherwise, whether
now existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the Credit Agreement or after the commencement of
any case with respect to Pledgor under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Pledgee (all of the foregoing being
collectively referred to herein as the "Obligations").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Pledgor hereby represents, warrants and covenants with and to Pledgee the
following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) The Pledged Securities are duly authorized, validly issued, fully paid
and non-assessable capital stock of each Issuer and constitute Pledgor's entire
interest in each Issuer and are not registered, nor has Pledgor authorized the
registration thereof, in the name of any person or entity other than Pledgor or
Pledgee.
(b) The Pledged Property is directly, legally and beneficially owned by
Pledgor, free and clear of all claims, liens, pledges and encumbrances of any
kind, nature or description, except for the pledge and security interest in
favor of Pledgee and the pledges and security interests permitted under the
Credit Agreement.
(c) The Pledged Property is not subject to any restrictions relative to
the transfer thereof and Pledgor has the right to transfer and hypothecate the
Pledged Property free and clear of any liens, encumbrances or restrictions.
(d) The Pledged Property is duly and validly pledged to Pledgee and no
consent or approval of any governmental or regulatory authority or of any
securities exchange or the like, nor any consent or approval of any other third
party, was or is necessary to the validity and enforceability of this Pledge
Agreement, except for compliance with federal and state securities laws in the
event of the sale of the Pledged Securities pursuant to Section 5 hereof.
- 2 -
<PAGE>
(e) Pledgor authorizes Pledgee to: (i) store, deposit and safeguard the
Pledged Property, (ii) perform any and all other acts which Pledgee in good
faith deems reasonable and/or necessary for the protection and preservation of
the Pledged Property or its value or Pledgee's security interest therein,
including, without limitation, transferring, registering or arranging for the
transfer or registration of the Pledged Property to or in Pledgee's own name and
receiving the income therefrom as additional security for the Obligations and
(iii) pay any charges or expenses which Pledgee deems necessary for the
foregoing purpose, but without any obligation to do so. Any obligation of
Pledgee for reasonable care for the Pledged Property in Pledgee's possession
shall be limited to the same degree of care which Pledgee uses for similar
property pledged to Pledgee by other persons.
(f) If Pledgor shall become entitled to receive or acquire, or shall
receive any stock certificate, or option or right with respect to any stock of
any Issuer (including without limitation, any certificate representing a
dividend or a distribution or exchange of or in connection with reclassification
of the Pledged Securities) whether as an addition to, in substitution of, or in
exchange for any of the Pledged Property or otherwise, Pledgor agrees to accept
same as Pledgee's agent, to hold same in trust for Pledgee and to deliver same
forthwith to Pledgee or Pledgee's agent or bailee in the form received, with the
endorsement(s) of Pledgor where necessary and/or appropriate powers and/or
assignments duly executed to be held by Pledgee or Pledgee's agent or bailee
subject to the terms hereof, as further security for the Obligations.
(g) Pledgor shall not, without the prior consent of Pledgee, directly or
indirectly, sell, assign, transfer, or otherwise dispose of, or grant any option
with respect to the Pledged Property, nor shall Pledgor create, incur or permit
any further pledge, hypothecation, encumbrance, lien, mortgage or security
interest with respect to the Pledged Property.
(h) So long as no Event of Default (as hereinafter defined) has occurred
and is continuing, Pledgor shall have the right to vote and exercise all
corporate rights with respect to the Pledged Securities, except as expressly
prohibited herein, and to receive any cash dividends payable in respect of the
Pledged Securities.
(i) Pledgor shall not permit any Issuer, directly or indirectly, to issue,
sell, grant, assign, transfer or otherwise dispose of, any additional shares of
capital stock of such Issuer or any option or warrant with respect to, or other
right or security convertible into, any additional shares of capital stock of
such Issuer, now or hereafter authorized, unless all such additional shares,
options, warrants, rights or other such securities are made and shall remain
part of the Pledged Property subject to the pledge and security interest granted
herein.
(j) Pledgor shall pay all charges and assessments of any nature against
the Pledged Property or with respect thereto prior to said charges and/or
assessments being delinquent.
(k) Pledgor shall promptly reimburse Pledgee on demand, together with
interest at the rate then applicable to the Obligations set forth in the Credit
Agreement, for any charges, assessments or expenses paid or incurred by Pledgee
in its discretion for the protection, preservation and maintenance of the
Pledged Property and the enforcement of Pledgee's rights hereunder, including,
without limitation, reasonable attorneys' fees and legal expenses incurred by
Pledgee in seeking to protect, collect or enforce its rights in the Pledged
Property or otherwise hereunder.
- 3 -
<PAGE>
(l) Pledgor shall furnish, or cause to be furnished, to Pledgee such
information concerning the Issuers and the Pledged Property as Pledgee may from
time to time reasonably request in good faith, including, without limitation,
current financial statements.
(m) Pledgee may notify the Issuers or the appropriate transfer agent of
the Pledged Securities to register the security interest and pledge granted
herein and honor the rights of Pledgee with respect thereto.
(n) Pledgor waives: (i) all rights to require Pledgee to proceed against
any other person, entity or collateral or to exercise any remedy, (ii) to the
extent permissible, the defense of the statute of limitations in any action upon
any of the Obligations, (iii) any right of subrogation or interest in the
Obligations or Pledged Property until all Obligations have been paid in full,
(iv) any rights to notice of any kind or nature whatsoever, unless specifically
required in this Pledge Agreement or non-waivable under any applicable law, and
(v) to the extent permissible, its rights under Section 9-112 and 9-207 of the
Uniform Commercial Code. Pledgor agrees that the Pledged Property, other
collateral, or any other guarantor or endorser may be released, substituted or
added with respect to the Obligations, in whole or in part, without releasing or
otherwise affecting the liability of Pledgor, the pledge and security interests
granted hereunder, or this Pledge Agreement. Pledgee is entitled to all of the
benefits of a secured party set forth in Section 9-207 of the New York Uniform
Commercial Code.
4. EVENTS OF DEFAULT
-----------------
All Obligations shall become immediately due and payable, without notice
or demand, at the option of Pledgee, upon the occurrence of any Event of
Default, as such term is defined in the Credit Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
-------------------
At any time an Event of Default exists or has occurred and is continuing,
in addition to all other rights and remedies of Pledgee, whether provided under
this Pledge Agreement, the Credit Agreement, the other Loan Documents,
applicable law or otherwise, Pledgee shall have the following rights and
remedies which may be exercised without notice to, or consent by, Pledgor except
as such notice or consent is expressly provided for hereunder:
(a) Pledgee, at its option, shall be empowered to exercise its continuing
right to instruct the Issuers or any Issuer (or the appropriate transfer agent
of any of the Pledged Securities) to register any or all of the Pledged
Securities in the name of Pledgee or in the name of Pledgee's nominee and
Pledgee may complete, in any manner Pledgee may deem expedient, any and all
stock powers, assignments or other documents heretofore or hereafter executed in
blank by Pledgor and delivered to Pledgee. After said instruction, and without
further notice, Pledgee shall have the exclusive right to exercise all voting
and corporate rights with respect to the Pledged Securities and other Pledged
Property, and exercise any and all rights of conversion, redemption, exchange,
subscription or any other rights, privileges, or options pertaining to any
shares of the Pledged Securities or other Pledged Property as if Pledgee were
the absolute owner thereof, including, without limitation, the right to
exchange, in its discretion, any and all of the Pledged Securities and other
Pledged Property upon any merger, consolidation, reorganization,
recapitalization or other readjustment with respect thereto. Upon the exercise
of any such rights, privileges or options by Pledgee, Pledgee shall have the
right to deposit and deliver any and all of the Pledged Securities and other
Pledged Property to any committee, depository, transfer agent, registrar or
- 4 -
<PAGE>
other designated agency upon such terms and conditions as Pledgee may determine,
all without liability, except to account for property actually received by
Pledgee. However, Pledgee shall have no duty to exercise any of the aforesaid
rights, privileges or options (all of which are exercisable in the sole
discretion of Pledgee) and shall not be responsible for any failure to do so or
delay in doing so.
(b) In addition to all the rights and remedies of a secured party under
the Uniform Commercial Code or other applicable law, Pledgee shall have the
right, at any time and without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon Pledgor or any other person (all
and each of which demands, advertisements and/or notices are hereby expressly
waived to the extent permitted by applicable law), to proceed forthwith to
collect, redeem, recover, receive, appropriate, realize, sell, or otherwise
dispose of and deliver said Pledged Property or any part thereof in one or more
lots at public or private sale or sales at any exchange, broker's board or at
any of Pledgee's offices or elsewhere at such prices and on such terms as
Pledgee may deem best. The foregoing disposition(s) may be for cash or on credit
or for future delivery without assumption of any credit risk, with Pledgee
having the right to purchase all or any part of said Pledged Property so sold at
any such sale or sales, public or private, free of any right or equity of
redemption in Pledgor, which right or equity is hereby expressly waived or
released by Pledgor. The proceeds of any such collection, redemption, recovery,
receipt, appropriation, realization, sale or other disposition, after deducting
all costs and expenses of every kind incurred relative thereto or incidental to
the care, safekeeping or otherwise of any and all Pledged Property or in any way
relating to the rights of Pledgee hereunder, including attorneys' fees and legal
expenses, shall be applied first to the satisfaction of the Obligations (in such
order as Pledgee may elect and whether or not due) and then to the payment of
any other amounts required by applicable law, including Section 9-504(1)(c) of
the Uniform Commercial Code, with Pledgor to be and remain liable for any
deficiency. Pledgor shall be liable to Pledgee for the payment on demand of all
such costs and expenses, together with interest at the then applicable rate set
forth in the Credit Agreement, and any reasonable attorneys' fees and legal
expenses. Pledgor agrees that five (5) days prior written notice by Pledgee
designating the place and time of any public sale or of the time after which any
private sale or other intended disposition of any or all of the Pledged Property
is to be made, is reasonable notification of such matters.
(c) Pledgor recognizes that Pledgee may be unable to effect a public sale
of all or part of the Pledged Property by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, as now or hereafter in
effect or in applicable Blue Sky or other state securities law, as now or
hereafter in effect, but may be compelled to resort to one or more private sales
to a restricted group of purchasers who will be obliged to agree, among other
things, to acquire such Pledged Property for their own account for investment
and not with a view to the distribution or resale thereof. If at the time of any
sale of the Pledged Property or any part thereof, the same shall not, for any
reason whatsoever, be effectively registered (if required) under the Securities
Act of 1933 (or other applicable state securities law), as then in effect,
Pledgee in its sole and absolute discretion is authorized to sell such Pledged
Property or such part thereof by private sale in such manner and under such
circumstances as Pledgee and its counsel may deem necessary or advisable in
order that such sale may legally be effected without registration. Pledgor
agrees that private sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Property were sold at public sale,
and that Pledgee has no obligation to delay the sale of any such Pledged
Property for the period of time necessary to permit Issuer, even if Issuer would
agree, to register such Pledged Property for public sale under such applicable
securities laws. Pledgor agrees that any private sales made under the foregoing
circumstances shall be deemed to have been in a commercially reasonable manner.
- 5 -
<PAGE>
(d) All of the Pledgee's rights and remedies, including, but not limited
to, the foregoing and those otherwise arising under this Pledge Agreement, the
Credit Agreement and the other Loan Documents, the instruments comprising the
Pledged Property, applicable law or otherwise, shall be cumulative and not
exclusive and shall be enforceable alternatively, successively or concurrently
as Pledgee may deem expedient. No failure or delay on the part of Pledgee in
exercising any of its options, powers or rights or partial or single exercise
thereof, shall constitute a waiver of such option, power or right.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
(a) The validity, interpretation and enforcement of this Pledge Agreement
and the other Loan Documents and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York.
(b) Pledgor irrevocably consents and submits to the non-exclusive
jurisdiction of State of New York and the United States District Court for the
Southern District of New York and waives any objection based on venue or forum
-----
non conveniens with respect to any action instituted therein arising under this
- --- ----------
Pledge Agreement or any of the other Loan Documents or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Pledge Agreement or any of the other Loan Documents or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agrees that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Pledgee shall have the right to bring any action or
proceeding against Pledgor or its property in the courts of any other
jurisdiction which Pledgee deems necessary or appropriate in order to realize on
the Pledged Property or to otherwise enforce its rights against Pledgor or its
property).
(c) Pledgor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth herein and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Pledgee's option, by service upon
Pledgor in any other manner provided under the rules of any such courts. Within
thirty (30) days after such service, Pledgor shall appear in answer to such
process, failing which Pledgor shall be deemed in default and judgment may be
entered by Pledgee against Pledgor for the amount of the claim and other relief
requested.
(d) PLEDGOR AND PLEDGEE MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF OR, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR PLEDGEE
AND THE LENDERS TO ACCEPT THIS PLEDGE AGREEMENT AND TO MAKE LOANS PURSUANT TO
THE TERMS OF THE CREDIT AGREEMENT.
(e) Pledgee shall not have any liability to Pledgor (whether in tort,
contract, equity or otherwise) for losses suffered by Pledgor in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Pledge Agreement, or any act, omission or event occurring
in
- 6 -
<PAGE>
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Pledgee, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Pledgee shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Pledge Agreement.
7. MISCELLANEOUS
-------------
(a) Pledgor agrees that at any time and from time to time upon the written
request of Pledgee, Pledgor shall execute and deliver such further documents,
including, but not limited to, irrevocable proxies or stock powers, in form
satisfactory to counsel for Pledgee, and will take or cause to be taken such
further acts as Pledgee may request in order to effect the purposes of this
Pledge Agreement and perfect or continue the perfection of the security interest
in the Pledged Property granted to Pledgee hereunder.
(b) Beyond the exercise of reasonable care to assure the safe custody of
the Pledged Property (whether such custody is exercised by Pledgee, or Pledgee's
nominee, agent or bailee) Pledgee or Pledgee's nominee agent or bailee shall
have no duty or liability to protect or preserve any rights pertaining thereto
and shall be relieved of all responsibility for the Pledged Property upon
surrendering it to Pledgor or foreclosure with respect thereto.
(c) All notices, requests and demands to or upon the respective parties
hereto shall be in writing and shall be deemed to have been duly given or made:
if delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
registered or certified mail, return receipt requested, five (5) days after
mailing. All notices, requests and demands upon the parties are to be given to
the following addresses (or to such other address as any party may designate by
notice in accordance with this Section):
If to Pledgor: SuperGraphics Holding Company, Inc.
229 W. 28th Street
New York, New York 10001
Attention: Mr. William E. Dye, Chief Executive Officer
If to Pledgee: Fleet Bank, N.A., as Administrative Agent
1185 Avenue of the Americas
New York, New York 10036
Attention: Ms. Beth Goodman, Vice President
(d) All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural. All references to Pledgor, Pledgee
and Issuer pursuant to the definitions set forth in the recitals hereto, or to
any other person herein, shall include their respective successors and assigns.
The words "hereof," "herein," "hereunder," "this Pledge Agreement" and words of
similar import when used in this Pledge Agreement shall refer to this Pledge
Agreement as a whole and not any particular provision of this Pledge Agreement
and as this Pledge Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced. An Event of Default shall
- 7 -
<PAGE>
exist or continue or be continuing until such Event of Default is waived in
accordance with Section 7(g) hereof.
(e) This Pledge Agreement, the other Loan Documents and any other document
referred to herein or therein shall be binding upon Pledgor and its successors
and assigns and inure to the benefit of and be enforceable by Pledgee and its
successors and assigns.
(f) If any provision of this Pledge Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Pledge Agreement as a whole, but this Pledge Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
(g) Neither this Pledge Agreement nor any provision hereof shall be
amended, modified, waived or discharged orally or by course of conduct, but only
by a written agreement signed by an authorized officer of Pledgee. Pledgee shall
not, by any act, delay, omission or otherwise be deemed to have expressly or
impliedly waived any of its rights, powers and/or remedies unless such waiver
shall be in writing and signed by an authorized officer of Pledgee. Any such
waiver shall be enforceable only to the extent specifically set forth therein. A
waiver by Pledgee of any right, power and/or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right, power and/or remedy
which Pledgee would otherwise have on any future occasion, whether similar in
kind or otherwise.
IN WITNESS WHEREOF, Pledgor has executed this Pledge Agreement as of the
day and year first above written.
SUPERGRAPHICS HOLDING COMPANY, INC.
By: /s/ William E. Dye
---------------------------------
Name: William E.Dye
------------------------------
Title: Chief Executive Officer
-----------------------------
- 8 -
<PAGE>
EXHIBIT A
TO
PLEDGE AND SECURITY AGREEMENT
-----------------------------
Issuers Certificate No. Shares
------- --------------- ------
SuperGraphics Corporation 1 49.9
SuperGraphics Corporation 2 50.1
- 9 -
GUARANTY
May 12, 1999
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036
Re: Unidigital Inc. ("Borrower")
----------------------------
Gentlemen:
Fleet Bank, N.A., as Administrative Agent for itself and ratably for the
benefit of the Lender Parties and Hedge Banks (as defined in the Credit
Agreement, and hereafter referred to as the "Lenders") (the "Administrative
Agent"), and Borrower have entered into certain financing arrangements, pursuant
to which the Lenders may make loans and advances and provide other financial
accommodations to Borrower as set forth in the Credit Agreement, of even date
hereof, by and among Borrower, the Administrative Agent and the Lenders (as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the "Credit Agreement"), and the other Loan
Documents (as defined in the Credit Agreement).
Due to the close business and financial relationships between Borrower and
each and all of the undersigned (individually and collectively, "Guarantors"),
in consideration of the benefits which will accrue to Guarantors and as an
inducement for and in consideration of the Lenders making loans and advances and
providing other financial accommodations to Borrower pursuant to the Credit
Agreement and the other Loan Documents, each of the Guarantors hereby jointly
and severally agrees in favor of the Administrative Agent and the Lenders as
follows:
1. Guaranty.
--------
(a) Each of the Guarantors absolutely and unconditionally, jointly
and severally, guarantees and agrees to be liable for the full and indefeasible
payment and performance when due of the following (all of which are collectively
referred to herein as the "Guaranteed Obligations"): (i) all obligations,
liabilities and indebtedness of any kind, nature and description of Borrower to
the Administrative Agent, and/or the Lenders and/or their respective affiliates,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under the Credit Agreement, the other Loan Documents, including
all obligations under any Hedge Agreements (as defined in the Credit Agreement)
or other hedging agreements, or otherwise, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term
of the Credit Agreement or after the commencement of any case with respect to
Borrower under the United States Bankruptcy Code or any similar statute
(including, without limitation, the payment of interest and other amounts, which
would accrue and become due but for the commencement of such case, whether or
not such amounts are allowed or allowable in whole or in part in any such case
and including loans, interest, fees, charges and expenses related thereto and
all other obligations of Borrower or its successors to the Administrative Agent
and the Lenders arising after the commencement of such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or
<PAGE>
unliquidated, secured or unsecured, and however acquired by the Administrative
Agent and the Lenders and (ii) all expenses (including, without limitation,
attorneys' fees and legal expenses) incurred by the Administrative Agent and the
Lenders in connection with the preparation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of Borrower's
obligations, liabilities and indebtedness as aforesaid to the Administrative
Agent and the Lenders, the rights of the Administrative Agent in any collateral
or under this Guaranty and all other Loan Documents or in any way involving
claims by or against the Administrative Agent and/or any of the Lenders directly
or indirectly arising out of or related to the relationships between Borrower,
any of the Guarantors or any other Obligor (as hereinafter defined) and the
Administrative Agent and/or any of the Lenders, whether such expenses are
incurred before, during or after the initial or any renewal term of the Credit
Agreement and the other Loan Documents or after the commencement of any case
with respect to Borrower or any of the Guarantors under the United States
Bankruptcy Code or any similar statute.
(b) This Guaranty is a guaranty of payment and not of collection.
Each of the Guarantors agrees that the Administrative Agent and the Lenders need
not attempt to collect any Guaranteed Obligations from Borrower, any one of the
Guarantors or any other Obligor or to realize upon any collateral, but may
require any one of the Guarantors to make immediate payment of all of the
Guaranteed Obligations to the Administrative Agent when due, whether by
maturity, acceleration or otherwise, or at any time thereafter. The
Administrative Agent may apply any amounts received in respect of the Guaranteed
Obligations to any of the Guaranteed Obligations, in whole or in part (including
reasonable attorneys' fees and legal expenses incurred by the Administrative
Agent with respect thereto or otherwise chargeable to Borrower or Guarantors)
and in such order as the Administrative Agent may elect.
(c) Payment by Guarantors shall be made to the Administrative Agent
at the office of the Administrative Agent from time to time on demand as
Guaranteed Obligations become due. Guarantors shall make all payments to the
Administrative Agent on the Guaranteed Obligations free and clear of, and
without deduction or withholding for or on account of, any setoff, counterclaim,
defense, duties, taxes, levies, imposts, fees, deductions, withholding,
restrictions or conditions of any kind. One or more successive or concurrent
actions may be brought hereon against any of the Guarantors either in the same
action in which Borrower or any of the other Guarantors or any other Obligor is
sued or in separate actions. In the event any claim or action, or action on any
judgment, based on this Guaranty is brought against any of the Guarantors, each
of the Guarantors agrees not to deduct, set-off, or seek any counterclaim for or
recoup any amounts which are or may be owed by the Administrative Agent or any
of the Lenders to any of the Guarantors.
2. Waivers and Consents.
--------------------
(a) Notice of acceptance of this Guaranty, the making of loans and
advances and providing other financial accommodations to Borrower and
presentment, demand, protest, notice of protest, notice of nonpayment or default
and all other notices to which Borrower or any of the Guarantors are entitled
are hereby waived by each of the Guarantors. Each of the Guarantors also waives
notice of and hereby consents to, (i) any amendment, modification, supplement,
extension, renewal, or restatement of the Credit Agreement and any of the other
Loan Documents, including, without limitation, extensions of time of payment of,
or increase or decrease in the amount of, any of the Guaranteed Obligations, the
interest rate, fees, other charges, or any collateral, and the guarantee made
herein shall apply to the Credit Agreement and the other Loan Documents and the
Guaranteed Obligations as so amended, modified, supplemented, renewed, restated
or extended, increased or decreased, the taking, exchange, surrender and
releasing of collateral or guarantees now or at any time held by or available to
the Administrative Agent and the Lenders for the obligations of Borrower or any
other party at any time liable on or in respect of the Guaranteed Obligations or
who is the owner of any property which is security for the Guaranteed
Obligations (individually, an
-2-
<PAGE>
"Obligor" and collectively, the "Obligors"), including, without limitation, the
surrender or release by the Administrative Agent of any one of the Guarantors
hereunder, the exercise of, or refraining from the exercise of any rights
against Borrower, any of the Guarantors or any other Obligor or any collateral,
(iv) the settlement, compromise or release of, or the waiver of any default with
respect to, any of the Guaranteed Obligations and (v) any financing by the
Administrative Agent and/or any of the Lenders of Borrower under Section 364 of
the United States Bankruptcy Code or consent to the use of cash collateral by
the Administrative Agent and/or Lenders under Section 363 of the United States
Bankruptcy Code. Each of the Guarantors agrees that the amount of the Guaranteed
Obligations shall not be diminished and the liability of the Guarantors
hereunder shall not be otherwise impaired or affected by any of the foregoing.
(b) No invalidity, irregularity or unenforceability of all or any
part of the Guaranteed Obligations shall affect, impair or be a defense to this
Guaranty, nor shall any other circumstance which might otherwise constitute a
defense available to or legal or equitable discharge of Borrower in respect of
any of the Guaranteed Obligations, or any one of the Guarantors in respect of
this Guaranty, affect, impair or be a defense to this Guaranty. Without
limitation of the foregoing, the liability of Guarantors hereunder shall not be
discharged or impaired in any respect by reason of any failure by the
Administrative Agent or any of the Lenders to perfect or continue perfection of
any lien or security interest in any collateral or any delay by the
Administrative Agent or any of the Lenders in perfecting any such lien or
security interest. As to interest, fees and expenses, whether arising before or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute, Guarantors shall be liable
therefor, even if Borrower's liability for such amounts does not, or ceases to,
exist by operation of law. Each of the Guarantors acknowledges that neither the
Administrative Agent nor any of the Lenders have made any representations to any
of the Guarantors with respect to Borrower, any other Obligor or otherwise in
connection with the execution and delivery by Guarantors of this Guaranty and
the Guarantors are not in any respect relying upon the Administrative Agent or
any of the Lenders or any statements by the Administrative Agent or any of the
Lenders in connection with this Guaranty.
(c) Each of the Guarantors hereby irrevocably and unconditionally
waives and relinquishes all statutory, contractual, common law, equitable and
all other claims against Borrower, any collateral for the Guaranteed Obligations
or other assets of Borrower or any other Obligor, for subrogation,
reimbursement, exoneration, contribution, indemnification, setoff or other
recourse in respect to sums paid or payable to the Administrative Agent or any
of the Lenders by each of the Guarantors hereunder and each of the Guarantors
hereby further irrevocably and unconditionally waives and relinquishes any and
all other benefits which Guarantors might otherwise directly or indirectly
receive or be entitled to receive by reason of any amounts paid by or collected
or due from Guarantors, Borrower or any other Obligor upon the Guaranteed
Obligations or realized from their property.
3. Subordination. Payment of all amounts now or hereafter owed to
-------------
Guarantors by Borrower or any other Obligor is hereby subordinated in right of
payment to the indefeasible payment in full to the Administrative Agent and the
Lenders of the Guaranteed Obligations and all such amounts and any security and
guarantees therefor are hereby assigned to the Administrative Agent as security
for the Guaranteed Obligations.
4. Acceleration. Notwithstanding anything to the contrary contained
------------
herein or any of the terms of any of the other Loan Documents, the liability of
Guarantors for the entire Guaranteed Obligations shall mature and become
immediately due and payable, even if the liability of Borrower or any other
Obligor therefor does not, upon the occurrence of any act, condition or event
which constitutes an Event of Default as such term is defined in the Credit
Agreement.
-3-
<PAGE>
5. Account Stated. The books and records of the Administrative Agent
---------------
showing the account among the Administrative Agent, the Lenders and Borrower
shall be admissible in evidence in any action or proceeding against or involving
Guarantors as prima facie proof of the items therein set forth, and the monthly
----- -----
statements of the Administrative Agent rendered to Borrower, to the extent to
which no written objection is made within thirty (30) days from the date of
sending thereof to Borrower, shall be deemed conclusively correct and constitute
an account stated among the Administrative Agent, the Lenders and Borrower and
be binding on Guarantors.
6. Termination. This Guaranty is continuing, unlimited, absolute and
-----------
unconditional. All Guaranteed Obligations shall be conclusively presumed to have
been created in reliance on this Guaranty. Each of the Guarantors shall continue
to be liable hereunder until one of the Administrative Agent's officers actually
receives a written termination notice from a Guarantor sent to the
Administrative Agent at its address set forth above by certified mail, return
receipt requested and thereafter as set forth below. Such notice received by the
Administrative Agent from any one of the Guarantors shall not constitute a
revocation or termination of this Guaranty as to any of the other Guarantors.
Revocation or termination hereof by any of the Guarantors shall not affect, in
any manner, the rights of the Administrative Agent or any obligations or duties
of any of the Guarantors (including the Guarantor which may have sent such
notice) under this Guaranty with respect to (a) Guaranteed Obligations which
have been created, contracted, assumed or incurred prior to the receipt by the
Administrative Agent of such written notice of revocation or termination as
provided herein, including, without limitation, (i) all amendments, extensions,
renewals and modifications of such Guaranteed Obligations (whether or not
evidenced by new or additional agreements, documents or instruments executed on
or after such notice of revocation or termination), (ii) all interest, fees and
similar charges accruing or due on and after revocation or termination, and
(iii) all reasonable attorneys' fees and legal expenses, costs and other
expenses paid or incurred on or after such notice of revocation or termination
in attempting to collect or enforce any of the Guaranteed Obligations against
Borrower, Guarantors or any other Obligor (whether or not suit be brought), (b)
or Guaranteed Obligations which have been created, contracted, assumed or
incurred after the receipt by the Administrative Agent of such written notice of
revocation or termination as provided herein pursuant to any contract entered
into by the Administrative Agent or any of the Lenders prior to receipt of such
notice. The sole effect of such revocation or termination by any of the
Guarantors shall be to exclude from this Guaranty the liability of such
Guarantor for those Guaranteed Obligations arising after the date of receipt by
the Administrative Agent of such written notice which are unrelated to
Guaranteed Obligations arising or transactions entered into prior to such date.
Without limiting the foregoing, this Guaranty may not be terminated and shall
continue so long as the Credit Agreement shall be in effect (whether during its
original term or any renewal, substitution or extension thereof).
7. Reinstatement. If after receipt of any payment of, or proceeds of
-------------
collateral applied to the payment of, any of the Guaranteed Obligations, the
Administrative Agent or any of the Lenders is required to surrender or return
such payment or proceeds to any Person (as defined in the Credit Agreement) for
any reason, then the Guaranteed Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Guaranty shall
continue in full force and effect as if such payment or proceeds had not been
received by the Administrative Agent or any of the Lenders. Each of the
Guarantors shall be liable to pay to the Administrative Agent and the Lenders,
and does indemnify and hold the Administrative Agent and the Lenders harmless
for the amount of any payments or proceeds surrendered or returned. This Section
7 shall remain effective notwithstanding any contrary action which may be taken
by the Administrative Agent or any of the Lenders in reliance upon such payment
or proceeds. This Section 7 shall survive the termination or revocation of this
Guaranty.
8. Amendments and Waivers. Neither this Guaranty nor any provision
----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by
-4-
<PAGE>
an authorized officer of the Administrative Agent. The Administrative Agent
shall not by any act, delay, omission or otherwise be deemed to have expressly
or impliedly waived any of its rights, powers and/or remedies unless such waiver
shall be in writing and signed by an authorized officer of the Administrative
Agent. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by the Administrative Agent of any right, power and/or
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right, power and/or remedy which the Administrative Agent would otherwise
have on any future occasion, whether similar in kind or otherwise.
9. Corporate Existence, Power and Authority. Each of the Guarantors is a
----------------------------------------
corporation duly organized and in good standing under the laws of its state or
other jurisdiction of incorporation and is duly qualified as a foreign
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a material adverse effect on the financial
condition, results of operation or businesses of such Guarantor or the rights of
the Administrative Agent hereunder or under any of the other Loan Documents. The
execution, delivery and performance of this Guaranty is within the corporate
powers of each of the Guarantors, have been duly authorized and are not in
contravention of law or the terms of the certificates of incorporation, by-laws,
or other organizational documentation of each of the Guarantors, or any
indenture, agreement or undertaking to which any of Guarantors is a party or by
which any of the Guarantors or its property are bound. This Guaranty constitutes
the legal, valid and binding obligation of each of the Guarantors enforceable in
accordance with its terms. Any one of the Guarantors signing this Guaranty shall
be bound hereby whether or not any of the other Guarantors or any other person
signs this Guaranty at any time.
10. Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
---------------------------------------------------------------------
(a) The validity, interpretation and enforcement of this Guaranty
and any dispute arising out of the relationship among any of the Guarantors and
the Administrative Agent, or any of the Lenders, whether in contract, tort,
equity or otherwise, shall be governed by the internal laws of the State of New
York.
(b) Each of the Guarantors hereby irrevocably consents and submits
to the non-exclusive jurisdiction of the Courts of New York State and the United
States District Court for the Southern District of New York and waives any
objection based on venue or forum non conveniens with respect to any action
----- --- ----------
instituted therein arising under this Guaranty or any of the other Loan
Documents or in any way connected with or related or incidental to the dealings
of any of Guarantors and the Administrative Agent in respect of this Guaranty or
any of the other Loan Documents or the transactions related hereto or thereto,
in each case whether now existing or hereafter arising and whether in contract,
tort, equity or otherwise, and agrees that any dispute arising out of the
relationship among any of Guarantors or Borrower and the Administrative Agent or
the conduct of any such persons in connection with this Guaranty, the other Loan
Documents or otherwise shall be heard only in the courts described above (except
that the Administrative Agent shall have the right to bring any action or
proceeding against any of the Guarantors or its property in the courts of any
other jurisdiction which the Administrative Agent deems necessary or appropriate
in order to realize on collateral at any time granted by Borrower or any of the
Guarantors to the Administrative Agent or to otherwise enforce its rights
against any of the Guarantors or its property).
(c) Each of the Guarantors hereby waives personal service of any and
all process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at the
-5-
<PAGE>
Administrative Agent's option, by service upon any of the Guarantors in any
other manner provided under the rules of any such courts. Within thirty (30)
days after such service, any of the Guarantors so served shall appear in answer
to such process, failing which such Guarantor shall be deemed in default and
judgment may be entered by the Administrative Agent against such Guarantor for
the amount of the claim and other relief requested.
(d) EACH GUARANTOR AND THE ADMINISTRATIVE AGENT MUTUALLY HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF OR, UNDER OR IN CONNECTION
WITH THIS GUARANTY OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN
CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS TO ACCEPT THE
TERMS OF THIS GUARANTY AND MAKE LOANS PURSUANT TO THE TERMS OF THE CREDIT
AGREEMENT.
(e) Neither the Administrative Agent nor any of the Lenders shall
have any liability to Guarantors (whether in tort, contract, equity or
otherwise) for losses suffered by Guarantors in connection with, arising out of,
or in any way related to the transactions or relationships contemplated by this
Guaranty, or any act, omission or event occurring in connection herewith, unless
it is determined by a final and non-appealable judgment or court order binding
on the Administrative Agent and the Lenders that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, the Administrative Agent and the Lenders shall be entitled to
the benefit of the rebuttable presumption that it acted in good faith and with
the exercise of ordinary care in the performance by it of the terms of the
Credit Agreement and the other Loan Documents.
11. Miscellaneous
-------------
(a) All notices, requests and demands hereunder shall be in writing
and (a) made to the Administrative Agent as follows: Fleet Bank, N.A., as
Administrative Agent, 1185 Avenue of the Americas, New York, New York 10036,
Attention Ms. Beth Goodman, Vice President and to each of the Guarantors at its
chief executive office set forth below, or to such other address as either party
may designate by written notice to the other in accordance with this provision,
and (b) deemed to have been given or made: if delivered in person, immediately
upon delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.
(b) Each Guarantor under this Guaranty or any of the Loan Documents,
in addition to the subrogation rights it shall have against a Borrower, under
applicable law as a result of any payment it makes under its Guaranty, shall
also have a right of contribution against all of the other Guarantors under the
Loan Documents, in respect of any such payment pro rata among same based on
--- ----
their respective net fair value as enterprises, provided any such right of
--------
contribution shall be subject and subordinate to the prior payment in full of
the "Obligations" of such Guarantor under its Guaranty. It is the desire and
intent of each Guarantor and the Administrative Agent and the Lenders that the
Guaranties shall be enforced against each Guarantor to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought.
-6-
<PAGE>
(c) If, however, and to the extent, that the "Obligations" of any
Guarantor under its Guaranty would, in the absence of this sentence, be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the "Obligations" of
such Guarantor (but not the "Obligations" of any other Guarantor unless such
other Guarantor or Guarantors are individually subject to the circumstances
covered by Sections 11(b) and 11(c) shall be deemed to be reduced ab initio to
-- ------
that maximum amount which would be permissible under applicable law without
causing such Guarantor's "Obligations" under its Guaranty to be so invalidated.
(d) If any provision of this Guaranty is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Guaranty as a whole, but this Guaranty shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by applicable law.
(e) This Guaranty represents the entire agreement and understanding
of this parties concerning the subject matter hereof, and supersedes all other
prior agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written.
(f) This Guaranty shall be binding upon Guarantors and their
respective successors and assigns and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors, endorsees,
transferees and assigns. The liquidation, dissolution or termination of any of
Guarantors shall not terminate this Guaranty as to such entity or as to any of
the other Guarantors.
(g) All references to the term "Guarantors" wherever used herein
shall mean each and all of Guarantors and their respective successors and
assigns, individually and collectively, jointly and severally (including,
without limitation, any receiver, trustee or custodian for any of Guarantors or
any of their respective assets or any of Guarantors in its capacity as debtor or
debtor-in-possession under the United States Bankruptcy Code). All references to
the terms the "Administrative Agent" and "Lenders", wherever used herein, shall
mean the Administrative Agent and the Lenders and their respective successors
and assigns and all references to the term "Borrower" wherever used herein shall
mean Borrower and its successors and assigns (including, without limitation, any
receiver, trustee or custodian for Borrower or any of its assets or Borrower in
its capacity as debtor or debtor-in-possession under the United States
Bankruptcy Code). All references to the plural shall also mean the singular and
to the singular shall also mean the plural.
(h) Any provision contained in this Guaranty or in any of the other
Loan Documents that is prohibited or unenforceable in any respect in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of the appropriate document or documents, as the case may be, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
(i) This Guaranty may be executed in any number of counterparts, but
all of such counterparts shall together constitute but one and the same
agreement. In making proof of this Guaranty, it shall not be necessary to
produce or account for more than one counterpart thereof signed by each of the
parties hereto.
-7-
<PAGE>
IN WITNESS WHEREOF, each of Guarantors has executed and delivered this
Guaranty as of the day and year first above written.
UNIDIGITAL ELEMENTS (NY), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
Chief Executive Office
----------------------
229 West 28th Street
New York, New York 10001
ATTEST:
/s/ Peter Saad
- ---------------------------
UNISON (NY), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
Chief Executive Office
----------------------
229 West 28th Street
New York, New York 10001
ATTEST:
/s/ Peter Saad
- ---------------------------
UNISON (MA), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
Chief Executive Office
----------------------
229 West 28th Street
New York, New York 10001
ATTEST:
/s/ Peter Saad
- ---------------------------
-8-
<PAGE>
UNIDIGITAL ELEMENTS (SF), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
Chief Executive Office
----------------------
229 West 28th Street
New York, New York 10001
ATTEST:
/s/ Peter Saad
- ---------------------------
MEGA ART CORP.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
Chief Executive Office
----------------------
229 West 28th Street
New York, New York 10001
ATTEST:
/s/ Peter Saad
- ---------------------------
SUPERGRAPHICS HOLDING
COMPANY, INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
Chief Executive Office
----------------------
229 West 28th Street
New York, New York 10001
ATTEST:
/s/ Peter Saad
- ---------------------------
-9-
<PAGE>
SUPERGRAPHICS CORPORATION
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
Chief Executive Office
----------------------
229 West 28th Street
New York, New York 10001
ATTEST:
/s/ Peter Saad
- ---------------------------
-10-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who stated that he is the Chief Executive Officer of Unidigital
Elements (NY), Inc., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
/s/ Barbara DiMartino
---------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye, to me
known, who stated that he is the Chief Executive Officer of Unison (NY), Inc. ,
the corporation described in and which executed the foregoing instrument; and
that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Barbara DiMartino
---------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who stated that he is the Chief Executive Officer of Unison (MA),
Inc., the corporation described in and which executed the foregoing instrument;
and that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Barbara DiMartino
---------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who stated that he is the Chief Executive Officer of Unidigital
Elements (SF), Inc., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
/s/ Barbara DiMartino
---------------------------
Notary Public
-11-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who stated that he is the Chief Executive Officer of Mega Art
Corp., the corporation described in and which executed the foregoing instrument;
and that he signed his name thereto by order of the Board of Directors of said
corporation.
/s/ Barbara DiMartino
---------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who stated that he is the Chief Executive Officer of SuperGraphics
Holding Company, Inc., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
/s/ Barbara DiMartino
---------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who stated that he is the Chief Executive Officer of SuperGraphics
Corporation, the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by order of the Board of
Directors of said corporation.
/s/ Barbara DiMartino
---------------------------
Notary Public
-12-
<PAGE>
FOREIGN GUARANTY
May 12, 1999
Fleet Bank, N.A.
1185 Avenue of the Americas
New York, New York 10036
Re: Unidigital Inc. ("Borrower")
----------------------------
Gentlemen:
Fleet Bank, N.A., as Administrative Agent for itself and ratably for the
benefit of the Lender Parties and Hedge Banks (as defined in the Credit
Agreement, and hereafter referred to as the "Lenders") (the "Administrative
Agent"), and Borrower have entered into certain financing arrangements, pursuant
to which the Lenders may make loans and advances and provide other financial
accommodations to Borrower as set forth in the Credit Agreement, of even date
hereof, by and among Borrower, the Administrative Agent and the Lenders (as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the "Credit Agreement"), and the other Loan
Documents (as defined in the Credit Agreement).
Due to the close business and financial relationships between Borrower and
each and all of the undersigned (individually and collectively, "Guarantors"),
in consideration of the benefits which will accrue to Guarantors and as an
inducement for and in consideration of the Lenders making loans and advances and
providing other financial accommodations to Borrower pursuant to the Credit
Agreement and the other Loan Documents, each of the Guarantors hereby jointly
and severally agrees in favor of the Administrative Agent and the Lenders as
follows:
1. GUARANTY.
--------
a. Each of the Guarantors absolutely and unconditionally, jointly and
severally, guarantees and agrees to be liable for the full and indefeasible
payment and performance when due of the following (all of which are collectively
referred to herein as the "Guaranteed Obligations"): (i) all obligations,
liabilities and indebtedness of any kind, nature and description of Borrower to
the Administrative Agent, and/or the Lenders and/or their respective affiliates
to whom the Lenders have transferred any of the Guaranteed Obligations,
including principal, interest, charges, fees, costs and expenses, however
evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under the Credit Agreement, the other Loan Documents, including
all obligations under any Hedge Agreements (as defined in the Credit Agreement)
or other hedging agreements, or otherwise, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term
of the Credit Agreement or after the commencement of any case with respect to
Borrower under the United States Bankruptcy Code or any similar statute
(including, without limitation, the payment of interest and other amounts, which
would accrue and become due but for the commencement of such case, whether or
not such amounts are allowed
<PAGE>
or allowable in whole or in part in any such case and including loans, interest,
fees, charges and expenses related thereto and all other obligations of Borrower
or its successors to the Administrative Agent and the Lenders arising after the
commencement of such case), whether direct or indirect, absolute or contingent,
joint or several, due or not due, primary or secondary, liquidated or
unliquidated, secured or unsecured, and however acquired by the Administrative
Agent and the Lenders and (ii) all expenses (including, without limitation,
reasonable attorneys' fees and legal expenses) incurred by the Administrative
Agent and the Lenders in connection with the preparation, execution, delivery,
recording, administration, collection, liquidation, enforcement and defense of
Borrower's obligations, liabilities and indebtedness as aforesaid to the
Administrative Agent and the Lenders, the rights of the Administrative Agent in
any security or under this Guaranty and all other Loan Documents or in any way
involving claims by or against the Administrative Agent and/or any of the
Lenders directly or indirectly arising out of or related to the relationships
between Borrower, any of the Guarantors or any other Obligor (as hereinafter
defined) and the Administrative Agent and/or any of the Lenders, whether such
expenses are incurred before, during or after the initial or any renewal term of
the Credit Agreement and the other Loan Documents or after the commencement of
any case with respect to Borrower under the United States Bankruptcy Code or any
similar statute.
(b) This Guaranty is a guaranty of payment and not of collection. Each of
the Guarantors agrees that the Administrative Agent and the Lenders need not
attempt to collect any Guaranteed Obligations from Borrower, any one of the
Guarantors or any other Obligor or to realize upon any collateral, and/or to
enforce any security, but may require any one of the Guarantors to make
immediate payment of all of the Guaranteed Obligations to the Administrative
Agent when due, whether by maturity, acceleration or otherwise, or at any time
thereafter. The Administrative Agent may apply any amounts received in respect
of the Guaranteed Obligations to any of the Guaranteed Obligations, in whole or
in part (including reasonable attorneys' fees and legal expenses incurred by the
Administrative Agent with respect thereto or otherwise chargeable to Borrower or
Guarantors) and in such order as the Administrative Agent may elect.
(c) Payment by Guarantors shall be made to the Administrative Agent at the
office of the Administrative Agent from time to time on demand as Guaranteed
Obligations become due. Guarantors shall make all payments to the Administrative
Agent on the Guaranteed Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind, save as may be required by applicable law. One or more
successive or concurrent actions may be brought hereon against any of the
Guarantors either in the same action in which Borrower or any of the other
Guarantors or any other Obligor is sued or in separate actions. In the event any
claim or action, or action on any judgment, based on this Guaranty is brought
against any of the Guarantors, each of the Guarantors agrees not to deduct,
set-off, or seek any counterclaim for or recoup any amounts which are or may be
owed by the Administrative Agent or any of the Lenders to any of the Guarantors.
2. WAIVERS AND CONSENTS.
--------------------
(a) Notice of acceptance of this Guaranty, the making of loans and
advances and providing other financial accommodations to Borrower and
presentment, demand, notice of obligation or nonpayment or default and all other
notices to which Borrower or any of the Guarantors are entitled are hereby
waived by each of the Guarantors. Each of the Guarantors also waives notice of
and hereby consents to, (i) any
2
<PAGE>
amendment, modification, supplement, extension, renewal, or restatement of the
Credit Agreement and any of the other Loan Documents, including, without
limitation, extensions of time of payment of, or increase or decrease in the
amount of, any of the Guaranteed Obligations, the interest rate, fees, other
charges, or any security, and the guarantee made herein shall apply to the
Credit Agreement and the other Loan Documents and the Guaranteed Obligations as
so amended, modified, supplemented, renewed, restated or extended, increased or
decreased, (ii) the taking, exchange, surrender and releasing of security or
guarantees now or at any time held by or available to the Administrative Agent
and the Lenders for the obligations of Borrower or any other party at any time
liable on or in respect of the Guaranteed Obligations or who is the owner of any
property which is security for the Guaranteed Obligations (individually, an
"Obligor" and collectively, the "Obligors"), including, without limitation, the
surrender or release by the Administrative Agent of any one of the Guarantors
hereunder, (iii) the exercise of, or refraining from the exercise of any rights
against Borrower, any of the Guarantors or any other Obligor or any security,
(iv) the settlement, compromise or release of, or the waiver of any default with
respect to, any of the Guaranteed Obligations and (v) any financing by the
Administrative Agent and/or any of the Lenders of Borrower under Section 364 of
the United States Bankruptcy Code or consent to the use of cash collateral by
the Administrative Agent and/or Lenders under Section 363 of the United States
Bankruptcy Code. Each of the Guarantors agrees that the amount of the Guaranteed
Obligations shall not be diminished and the liability of the Guarantors
hereunder shall not be otherwise impaired or affected by any of the foregoing.
(b) No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations shall affect, impair or be a defense to this
Guaranty, nor shall any other circumstance which might otherwise constitute a
defense available to or legal or equitable discharge of Borrower in respect of
any of the Guaranteed Obligations, or any one of the Guarantors in respect of
this Guaranty, affect, impair or be a defense to this Guaranty. Without
limitation of the foregoing, the liability of Guarantors hereunder shall not be
discharged or impaired in any respect by reason of any failure by the
Administrative Agent or any of the Lenders to perfect or continue perfection of
any lien or security interest in any collateral or any delay by the
Administrative Agent or any of the Lenders in perfecting any such lien or
security interest. As to interest, fees and expenses, whether arising before or
after the commencement of any case with respect to Borrower under the United
States Bankruptcy Code or any similar statute, Guarantors shall be liable
therefor, even if Borrower's liability for such amounts does not, or ceases to,
exist by operation of law. Each of the Guarantors acknowledges that neither the
Administrative Agent nor any of the Lenders have made any representations to any
of the Guarantors with respect to Borrower, any other Obligor or otherwise in
connection with the execution and delivery by Guarantors of this Guaranty and
the Guarantors are not in any respect relying upon the Administrative Agent or
any of the Lenders or any statements by the Administrative Agent or any of the
Lenders in connection with this Guaranty.
(c) Until such time as the Guarantors have fulfilled all their obligations
to make payment to the Administrative Agent and the Lenders under this Guaranty,
each of the Guarantors hereby irrevocably and unconditionally waives and
relinquishes all statutory, security, common law, equitable and all other claims
against Borrower, any collateral for the Guaranteed Obligations or other assets
of Borrower or any other Obligor, for subrogation, reimbursement, exoneration,
contribution, indemnification, setoff or other recourse in respect to sums paid
or payable to the Administrative Agent or any of the Lenders by each of the
Guarantors hereunder and each of the Guarantors hereby further irrevocably and
unconditionally waives and relinquishes any and all other benefits which
Guarantors might otherwise directly or indirectly receive or be entitled to
receive by reason of any amounts paid by or collected or due from Guarantors,
Borrower or any other Obligor upon the Guaranteed Obligations or realized from
their property.
3
<PAGE>
3. SUBORDINATION. Payment of all amounts now or hereafter owed to
-------------
Guarantors by Borrower or any other Obligor is hereby subordinated in right of
payment to the indefeasible payment in full to the Administrative Agent and the
Lenders of the Guaranteed Obligations and all such amounts and any security and
guarantees therefor are hereby assigned to the Administrative Agent as security
for the Guaranteed Obligations.
4. ACCELERATION. Notwithstanding anything to the contrary contained herein
------------
or any of the terms of any of the other Loan Documents, the liability of
Guarantors for the entire Guaranteed Obligations shall mature and become
immediately due and payable, even if the liability of Borrower or any other
Obligor therefor does not, upon the occurrence of any act, condition or event
which constitutes an Event of Default as such term is defined in the Credit
Agreement.
5. ACCOUNT STATED. The books and records of the Administrative Agent
---------------
showing the account among the Administrative Agent, the Lenders and Borrower
shall be admissible in evidence in any action or proceeding against or involving
Guarantors as prima facie proof of the items therein set forth, and the monthly
statements of the Administrative Agent rendered to Borrower, to the extent to
which no written objection is made within thirty (30) days from the date of
sending thereof to Borrower, shall be deemed conclusively correct and constitute
an account stated among the Administrative Agent, the Lenders and Borrower and
be binding on Guarantors.
6. TERMINATION. This Guaranty is continuing, unlimited, absolute and
-----------
unconditional. All Guaranteed Obligations shall be conclusively presumed to have
been created in reliance on this Guaranty. Each of the Guarantors shall continue
to be liable hereunder until one of the Administrative Agent's officers actually
receives a written termination notice from a Guarantor sent to the
Administrative Agent at its address set forth above by certified mail, return
receipt requested and thereafter as set forth below. Such notice received by the
Administrative Agent from any one of the Guarantors shall not constitute a
revocation or termination of this Guaranty as to any of the other Guarantors.
Revocation or termination hereof by any of the Guarantors shall not affect, in
any manner, the rights of the Administrative Agent or any obligations or duties
of any of the Guarantors (including the Guarantor which may have sent such
notice) under this Guaranty with respect to (a) Guaranteed Obligations which
have been created, contracted, assumed or incurred prior to the receipt by the
Administrative Agent of such written notice of revocation or termination as
provided herein, including, without limitation, all amendments, extensions,
renewals and modifications of such Guaranteed Obligations (whether or not
evidenced by new or additional agreements, documents or instruments executed on
or after such notice of revocation or termination), (ii) all interest, fees and
similar charges accruing or due on and after revocation or termination, and
(iii) all reasonable attorneys' fees and legal expenses, costs and other
expenses paid or incurred on or after such notice of revocation or termination
in attempting to collect or enforce any of the Guaranteed Obligations against
Borrower, Guarantors or any other Obligor (whether or not suit be brought), or
(b) Guaranteed Obligations which have been created, contracted, assumed or
incurred after the receipt by the Administrative Agent of such written notice of
revocation or termination as provided herein pursuant to any contract entered
into by the Administrative Agent or any of the Lenders prior to receipt of such
notice. The sole effect of such revocation or termination by any of the
Guarantors shall be to exclude from this Guaranty the liability of such
Guarantor for those Guaranteed Obligations arising after the date of receipt by
the Administrative Agent of such written notice which are unrelated to
Guaranteed Obligations arising or transactions entered into prior to such date.
Without limiting the foregoing, this Guaranty may not be terminated and shall
4
<PAGE>
continue so long as the Credit Agreement shall be in effect (whether during its
original term or any renewal, substitution or extension thereof).
7. REINSTATEMENT. If after receipt of any payment of, or proceeds of
-------------
collateral applied to the payment of, any of the Guaranteed Obligations, the
Administrative Agent or any of the Lenders is required to surrender or return
such payment or proceeds to any Person (as defined in the Credit Agreement) for
any reason, then the Guaranteed Obligations intended to be satisfied by such
payment or proceeds shall be reinstated and continue and this Guaranty shall
continue in full force and effect as if such payment or proceeds had not been
received by the Administrative Agent or any of the Lenders. Each of the
Guarantors shall be liable to pay to the Administrative Agent and the Lenders,
and does indemnify and hold the Administrative Agent and the Lenders harmless
for the amount of any payments or proceeds surrendered or returned. This Section
7 shall remain effective notwithstanding any contrary action which may be taken
by the Administrative Agent or any of the Lenders in reliance upon such payment
or proceeds. This Section 7 shall survive the termination or revocation of this
Guaranty.
8. AMENDMENTS AND WAIVERS. Neither this Guaranty nor any provision hereof
----------------------
shall be amended, modified, waived or discharged orally or by course of conduct,
but only by a written agreement signed by an authorized officer of the
Administrative Agent. The Administrative Agent shall not by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
rights, powers and/or remedies unless such waiver shall be in writing and signed
by an authorized officer of the Administrative Agent. Any such waiver shall be
enforceable only to the extent specifically set forth therein. A waiver by the
Administrative Agent of any right, power and/or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right, power and/or remedy
which the Administrative Agent would otherwise have on any future occasion,
whether similar in kind or otherwise.
9. CORPORATE EXISTENCE, POWER AND AUTHORITY. Each of the Guarantors is a
-------------------
corporation duly organized under the laws of England and Wales and is duly
qualified as a foreign corporation in other jurisdictions where the nature and
extent of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the financial condition,
results of operation or businesses of such Guarantor or the rights of the
Administrative Agent hereunder or under any of the other Loan Documents. The
execution, delivery and performance of this Guaranty is within the corporate
powers of each of the Guarantors, have been duly authorized and are not in
contravention of law or the terms of the certificates of incorporation, by-laws,
or other organizational documentation of each of the Guarantors, or any
indenture, agreement or undertaking to which any of Guarantors is a party or by
which any of the Guarantors or its property are bound. This Guaranty constitutes
the legal, valid and binding obligation of each of the Guarantors enforceable in
accordance with its terms. Any one of the Guarantors signing this Guaranty shall
be bound hereby whether or not any of the other Guarantors or any other person
signs this Guaranty at any time.
10. GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL WAIVER.
---------------------------------------------------------------------
(a) The validity, interpretation and enforcement of this Guaranty and any
dispute arising out of the relationship among any of the Guarantors and the
Administrative Agent, or any of the Lenders, whether in contract, tort, equity
or otherwise, shall be governed by laws of England.
5
<PAGE>
(b) Each of the Guarantors hereby irrevocably consents and submits to the
non-exclusive jurisdiction of the English Courts and the Courts of New York
State and the United States District Court for the Southern District of New York
and waives any objection based on venue or forum non conveniens with respect to
any action instituted in either jurisdiction arising under this Guaranty or any
of the other Loan Documents or in any way connected with or related or
incidental to the dealings of any of Guarantors and the Administrative Agent in
respect of this Guaranty or any of the other Loan Documents or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising and whether in contract, tort, equity or otherwise, and agrees that any
dispute arising out of the relationship among any of Guarantors or Borrower and
the Administrative Agent or the conduct of any such persons in connection with
this Guaranty, the other Loan Documents or otherwise shall be heard only in the
courts described above (except that the Administrative Agent shall have the
right to bring any action or proceeding against any of the Guarantors or its
property in the courts of any other jurisdiction which the Administrative Agent
deems necessary or appropriate in order to realize on collateral or in order to
enforce any security at any time granted by Borrower or any of the Guarantors to
the Administrative Agent or to otherwise enforce its rights against any of the
Guarantors or its property).
(c) Each of the Guarantors hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at the Administrative Agent's option, by service upon any of the Guarantors in
any other manner provided under the rules of any such courts.
(d) EACH GUARANTOR AND THE ADMINISTRATIVE AGENT MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF OR, UNDER OR IN CONNECTION WITH THIS
GUARANTY OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS STATEMENTS (WHETHER VERBAL
OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS TO ACCEPT THE TERMS OF
THIS GUARANTY AND MAKE LOANS PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
(e) Neither the Administrative Agent nor any of the Lenders shall have any
liability to Guarantors (whether in tort, contract, equity or otherwise) for
losses suffered by Guarantors in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Guaranty, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on the
Administrative Agent and the Lenders that the losses were the result of acts or
omissions constituting gross negligence or willful misconduct. In any such
litigation, the Administrative Agent and the Lenders shall be entitled to the
benefit of the rebuttable presumption that it acted in good faith and with the
exercise of ordinary care in the performance by it of the terms of the Credit
Agreement and the other Loan Documents.
6
<PAGE>
11. MISCELLANEOUS
-------------
(a) All notices, requests and demands hereunder shall be in writing and
(a) made to the Administrative Agent as follows: Fleet Bank, N.A., as
Administrative Agent, 1185 Avenue of the Americas, New York, New York 10036,
Attention Ms. Beth Goodman, and to each of the Guarantors at its registered
office set forth below, or to such other address as either party may designate
by written notice to the other in accordance with this provision, and (b) deemed
to have been given or made: if delivered in person, immediately upon delivery;
if by telex, telegram or facsimile transmission, immediately upon sending and
upon confirmation of receipt; if by nationally recognized overnight courier
service with instructions to deliver the next business day, one (1) business day
after sending; and if by certified mail, return receipt requested, five (5) days
after mailing.
(b) Each Guarantor under this Guaranty or any of the Loan Documents, in
addition to the subrogation rights it shall have against a Borrower, under
applicable law as a result of any payment it makes under its Guaranty, shall
also have a right of contribution against all of the other Guarantors under the
Loan Documents, in respect of any such payment, provided any such right of
contribution shall be subject and subordinate to the prior payment in full of
the "Obligations" of such Guarantor under its Guaranty. It is the desire and
intent of each Guarantor and the Administrative Agent and the Lenders that the
Guaranties shall be enforced against each Guarantor to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought.
(c) If, however, and to the extent, that the "Obligations" of any
Guarantor under its Guaranty would, in the absence of this sentence, be
adjudicated to be invalid or unenforceable for any reason (including, without
limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers), then the amount of the "Obligations" of
such Guarantor (but not the "Obligations" of any other Guarantor unless such
other Guarantor or Guarantors are individually subject to the circumstances
covered by Sections 11(b) and 11(c) shall be deemed to be reduced ab initio to
that maximum amount which would be permissible under applicable law without
causing such Guarantor's "Obligations" under its Guaranty to be so invalidated.
(d) If any provision of this Guaranty is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Guaranty as a whole, but this Guaranty shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by applicable law.
(e) This Guaranty represents the entire agreement and understanding of
this parties concerning the subject matter hereof, and supersedes all other
prior agreements, understandings, negotiations and discussions, representations,
warranties, commitments, proposals, offers and contracts concerning the subject
matter hereof, whether oral or written.
(f) This Guaranty shall be binding upon Guarantors and their respective
successors and assigns and shall inure to the benefit of the Administrative
Agent and the Lenders and their successors, endorsees, transferees and assigns.
The liquidation, dissolution or termination of any of Guarantors shall not
terminate this Guaranty as to such entity or as to any of the other Guarantors.
7
<PAGE>
(g) All references to the term "Guarantors" wherever used herein shall
mean each and all of Guarantors and their respective successors and assigns,
individually and collectively, jointly and severally (including, without
limitation, any receiver, administrator or liquidator for any of Guarantors or
any of their respective assets). All references to the terms the "Administrative
Agent" and "Lenders", wherever used herein, shall mean the Administrative Agent
and the Lenders and their respective successors and assigns and all references
to the term "Borrower" wherever used herein shall mean Borrower and its
successors and assigns (including, without limitation, any receiver, trustee or
custodian for Borrower or any of its assets or Borrower in its capacity as
debtor or debtor-in-possession under the United States Bankruptcy Code). All
references to the plural shall also mean the singular and to the singular shall
also mean the plural.
(h) Any provision contained in this Guaranty or in any of the other Loan
Documents that is prohibited or unenforceable in any respect in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions of the
appropriate document or documents, as the case may be, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(i) This Guaranty may be executed in any number of counterparts, but all
of such counterparts shall together constitute but one and the same agreement.
In making proof of this Guaranty, it shall not be necessary to produce or
account for more than one counterpart thereof signed by each of the parties
hereto.
IN WITNESS WHEREOF, each of Guarantors has executed and delivered this
Guaranty as a Deed as of the day and year first above written.
EXECUTED AS A DEED BY
ELEMENTS (U.K.) LIMITED
Acting By: /s/ Tony Manser
--------------------------
Duly Authorized
Acting By: /s/ Paul Martin
--------------------------
Duly Authorized
Registered Office
-----------------
48 Margaret Street
-------------------------
London W1N 7FD
-------------------------
8
<PAGE>
EXECUTED AS A DEED BY
REGENT GROUP LIMITED
Acting By: /s/ Tony Manser
--------------------------
Duly Authorized
Acting By: /s/ Paul Martin
--------------------------
Duly Authorized
Registered Office
-----------------
48 Margaret Street
-------------------------
London W1N 7FD
-------------------------
-9-
<PAGE>
TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of May 12, 1999, is by and between
Unidigital Inc., a Delaware corporation ("Debtor"), with its chief executive
office at 229 West 28th Street, New York, New York 10001 and Fleet Bank, N.A., a
national banking association, as Administrative Agent for itself and ratably for
the benefit of the Lender Parties and the Hedge Banks ("Secured Party"), having
an office at 1185 Avenue of the Americas, New York, New York 10036.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Debtor has adopted, used and is using, and is the owner of the
entire right, title, and interest in and to the trademarks, trade names, terms,
designs and applications therefor described in Exhibit A hereto and made a part
hereof; and
WHEREAS, Secured Party, the Lender Parties and Debtor have entered or are
about to enter into financing arrangements pursuant to which the Lender Parties
may make loans and advances and provide other financial accommodations to Debtor
as set forth in the Credit Agreement, dated as of the date hereof, by the
Secured Party, the Lender Parties and Debtor (as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, the "Credit Agreement") and other agreements, documents and
instruments referred to therein or at any time executed and/or delivered in
connection therewith or related thereto, including, but not limited to, this
Agreement (all of the foregoing, together with the Credit Agreement, as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, being collectively referred to herein as the
"Loan Documents"); and
WHEREAS, in order to induce Secured Party to enter into the Credit
Agreement and the other Loan Documents and the Lender Parties to make loans and
advances and provide other financial accommodations to Debtor pursuant thereto,
Debtor has agreed to grant to Secured Party certain collateral security as set
forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees as follows:
1. GRANT OF SECURITY INTEREST
--------------------------
As collateral security for the prompt performance, observance and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
Debtor hereby grants to Secured Party a continuing security interest in and a
general lien upon, and a conditional assignment of, the following (being
collectively referred to herein as the "Collateral"): (a) all of Debtor's now
existing or hereafter acquired right, title, and interest in and to: (i) all of
Debtor's trademarks, tradenames, trade styles and service
<PAGE>
marks and all applications, registrations and recordings relating to the
foregoing as may at any time be filed in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof, any political subdivision thereof or in any other country, including,
without limitation, the trademarks, terms, designs and applications described in
Exhibit A hereto, together with all rights and privileges arising under
applicable law with respect to Debtor's use of any trademarks, tradenames, trade
styles and service marks, and all reissues, extensions, continuation and
renewals thereof (all of the foregoing being collectively referred to herein as
the "Trademarks"); (ii) and all prints and labels on which such trademarks,
tradenames, tradestyles and service marks appear, have appeared or will appear,
and all designs and general intangibles of a like nature; (b) the goodwill of
the business symbolized by each of the Trademarks, including, without
limitation, all customer lists and other records relating to the distribution of
products or services bearing the Trademarks; (c) all income, fees, royalties and
other payments at any time due or payable with respect thereto, including,
without limitation, payments under all licenses at any time entered into in
connection therewith; (d) the right to sue for past, present and future
infringements thereof; (e) all rights corresponding thereto throughout the
world; and (f) any and all other proceeds of any of the foregoing, including,
without limitation, damages and payments or claims by Debtor against third
parties for past or future infringement of the Trademarks.
2. OBLIGATIONS SECURED
-------------------
The security interest, lien and other interests granted to Secured Party
pursuant to this Agreement shall secure the prompt performance, observance and
payment in full of any and all obligations, liabilities and indebtedness of
every kind, nature and description owing by Debtor to Secured Party, the Lender
Parties and the Hedge Banks and/or their respective affiliates, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement, the Credit Agreement, the other Loan Documents or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Credit Agreement or after
the commencement of any case with respect to Debtor under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Secured Party
(all of the foregoing being collectively referred to herein as the
"Obligations").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Debtor hereby represents, warrants and covenants with and to Secured Party
the following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) Debtor shall pay and perform all of the Obligations according to their
terms.
(b) All of the existing Collateral is valid and subsisting in full force
and effect, and Debtor owns the sole, full and clear title thereto, and the
right and power to grant the security interest and conditional assignment
granted hereunder. Debtor shall, at Debtor's expense, perform all acts and
execute all documents necessary to maintain the existence of the Collateral
consisting of registered Trademarks as registered trademarks and to maintain the
existence of all of the Collateral as valid and subsisting, including, without
limitation, the filing of any renewal affidavits and applications. The
Collateral is not subject to any liens, claims, mortgages, assignments,
licenses, security interests or encumbrances of any
- 2 -
<PAGE>
nature whatsoever, except: the security interests granted hereunder and pursuant
to the Credit Agreement, the security interests permitted under the Credit
Agreement, and the licenses permitted under Section 3(e) below.
(c) Debtor shall not assign, sell, mortgage, lease, transfer, pledge,
hypothecate, grant a security interest in or lien upon, encumber, grant an
exclusive or non-exclusive license relating to the Collateral, or otherwise
dispose of any of the Collateral, in each case without the prior written consent
of Secured Party, which consent shall not be unreasonably withheld, except as
otherwise permitted herein or in the Credit Agreement. Nothing in this Agreement
shall be deemed a consent by Secured Party to any such action, except as such
action is expressly permitted hereunder.
(d) Debtor shall, at Debtor's expense, promptly perform all acts and
execute all documents requested at any time by Secured Party to evidence,
perfect, maintain, record or enforce the security interest in and conditional
assignment of the Collateral granted hereunder or to otherwise further the
provisions of this Agreement. Debtor hereby authorizes Secured Party to execute
and file one or more financing statements (or similar documents) with respect to
the Collateral, signed only by Secured Party or as otherwise determined by
Secured Party. Debtor further authorizes Secured Party to have this Agreement or
any other similar security agreement filed with the Commissioner of Patents and
Trademarks or any other appropriate federal, state or government office.
(e) As of the date hereof, Debtor does not have any Trademarks registered,
or subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in Exhibit A hereto and has not granted any licenses with respect
thereto other than as set forth in Exhibit B hereto.
(f) Debtor shall, concurrently with the execution and delivery of this
Agreement, execute and deliver to Secured Party five (5) originals of a Special
Power of Attorney in the form of Exhibit C annexed hereto for the implementation
of the assignment, sale or other disposition of the Collateral pursuant to
Secured Party's exercise of the rights and remedies granted to Secured Party
hereunder following the occurrence and during the continuance of an Event of
Default.
(g) Secured Party may, in its discretion, pay any amount or do any act
which Debtor fails to pay or do as required hereunder or as requested by Secured
Party to preserve, defend, protect, maintain, record or enforce the Obligations,
the Collateral, or the security interest and conditional assignment granted
hereunder, including, but not limited to, all filing or recording fees, court
costs, collection charges, attorneys' fees and legal expenses. Debtor shall be
liable to Secured Party for any such payment, which payment shall be deemed an
advance by Secured Party to Debtor, shall be payable on demand together with
interest at the rate then applicable to the Obligations set forth in the Credit
Agreement and shall be part of the Obligations secured hereby.
(h) Contemporaneously with the filing of any application for the
registration of a Trademark with the United States Patent and Trademark Office
or any similar office or agency in the United States, the Debtor shall give
Secured Party written notice of such action. If, after the date hereof, Debtor
shall (i) obtain any registered trademark or tradename, or apply for any such
registration in the United States Patent and Trademark Office or in any similar
office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, or (ii) become the owner of any
trademark registrations or applications for trademark registration used in the
United States or any State thereof,
- 3 -
<PAGE>
political subdivision thereof or in any other country, the provisions of Section
1 hereof shall automatically apply thereto. Upon the request of Secured Party,
Debtor shall promptly execute and deliver to Secured Party any and all
assignments, agreements, instruments, documents and such other papers as may be
requested by Secured Party to evidence the security interest in and conditional
assignment of such Trademark in favor of Secured Party.
(i) Debtor has not abandoned any of the Trademarks and Debtor will not do
any act, nor omit to do any act, whereby the Trademarks may become abandoned,
invalidated, unenforceable, voided, or voidable. Debtor shall notify Secured
Party immediately if it knows or has reason to know of any reason why any
application, registration, or recording with respect to the Trademarks may
become abandoned, canceled, invalidated, voided, or voidable.
(j) Debtor shall render any assistance, as Secured Party shall determine
is necessary, to Secured Party in any proceeding before the United States Patent
and Trademark Office, any federal or state court, or any similar office or
agency in the United States, any State thereof, any political subdivision
thereof or in any other country, to maintain such application and registration
of the Trademarks as Debtor's exclusive property and to protect Secured Party's
interest therein, including, without limitation, filing of renewals, affidavits
of use, affidavits of incontestability and opposition, interference, and
cancellation proceedings.
(k) To Debtor's actual knowledge, no material infringement or unauthorized
use presently is being made of any of the Trademarks that would adversely affect
in any material respect the fair market value of the Collateral or the benefits
of this Agreement granted to Secured Party, including, without limitation, the
validity, priority or perfection of the security interest granted herein or the
remedies of Secured Party hereunder. Debtor shall promptly notify Secured Party
if Debtor (or any affiliate or subsidiary thereof) learns of any use by any
person of any term or design which infringes on any Trademark or is likely to
cause confusion with any Trademark. If requested by Secured Party, Debtor, at
Debtor's expense, shall join with Secured Party in such action as Secured Party,
in Secured Party's discretion, may deem advisable for the protection of Secured
Party's interest in and to the Trademarks.
(l) Debtor assumes all responsibility and liability arising from its use
of the Trademarks (and. prior to the occurrence and continuance of an Event of
Default, the use of the Trademarks by its licensees) and Debtor hereby
indemnifies and holds Secured Party harmless from and against any claim, suit,
loss, damage, or expense (including attorneys' fees and legal expenses) arising
out of any alleged defect in any product manufactured, promoted, or sold by
Debtor (or any affiliate or subsidiary thereof) in connection with any Trademark
or out of the manufacture, promotion, labeling, sale or advertisement of any
such product by Debtor (or any affiliate or subsidiary thereof). The foregoing
indemnity shall survive the payment of the Obligations, the termination of this
Agreement and the termination or non-renewal of the Credit Agreement.
(m) Debtor shall promptly pay Secured Party for any and all expenditures
made by Secured Party pursuant to the provisions of this Agreement or for the
defense, protection or enforcement of the Obligations, the Collateral, or the
security interests and conditional assignment granted hereunder, including, but
not limited to, all filing or recording fees, court costs, collection charges,
travel expenses, and attorneys' fees and legal expenses. Such expenditures shall
be payable on demand, together with interest at the rate then applicable to the
Obligations set forth in the Credit Agreements and shall be part of the
Obligations secured hereby.
- 4 -
<PAGE>
3A. CERTAIN RESPONSIBILITIES OF THE SECURED PARTY
---------------------------------------------
(a) Except in its capacity as a lender or an administrative agent or
otherwise as a financial institution with respect to a financing transaction,
Secured Party shall not apply for the registration of or cause the filing of an
application for the registration of, a trade name, trademark, or service mark
which is identical to or confusingly similar to the Trademarks.
(b) Prior to the time that Secured Party has asserted its rights under
Section 5 hereof, if in Debtor's reasonable opinion Secured Party's management
of the Trademarks has brought or has the reasonable likelihood to bring
discredit to Debtor or to the Trademarks ("Incorrect Management"), Debtor shall
have the unilateral right to notify Secured Party in writing to cease and desist
any such use and/or control over the use of the Trademarks, and within the time
specified (which time shall be reasonable, allowing for reasonable time to
discuss and cure any Incorrect Management, and, if incurable, allowing for
reasonable time to prepare and/or file any necessary and appropriate
documentation) to reassign the Trademark(s) in question to Debtor along with any
licenses granted by Secured Party with respect thereto. It is hereby agreed by
Debtor that if this Agreement were performed as written, there would exist no
Incorrect Management and that no action (or inaction) would need to occur in
order to avoid Incorrect Management.
(c) At such time as Debtor shall have indefeasibly paid in full all of the
Obligations, this Agreement shall terminate and Secured Party shall execute and
deliver to Debtor all deeds, assignments and other instruments as may be
necessary or proper to re-vest in Debtor the full title to the Trademarks.
4. EVENTS OF DEFAULT
-----------------
All Obligations shall become immediately due and payable, without notice
or demand, at the option of Secured Party, upon the occurrence of any Event of
Default, as such term is defined in the Credit Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
-------------------
At any time an Event of Default exists or has occurred and is continuing,
in addition to all other rights and remedies of Secured Party, whether provided
under this Agreement, the Credit Agreement, the other Loan Documents, applicable
law or otherwise, Secured Party shall have the following rights and remedies
which may be exercised without notice to, or consent by, Debtor except as such
notice or consent is expressly provided for hereunder:
(a) Secured Party may require that neither Debtor nor any affiliate or
subsidiary of Debtor make any use of the Trademarks or any marks similar thereto
for any purpose whatsoever. Secured Party may make use of any Trademarks for the
sale of goods, completion of work-in-process or rendering of services in
connection with enforcing any other security interest granted to Secured Party
by Debtor or any subsidiary or affiliate of Debtor or for such other reason as
Secured Party may determine.
(b) Secured Party may grant such license or licenses relating to the
Collateral for such term or terms, on such conditions, and in such manner, as
Secured Party shall in its discretion deem appropriate. Such license or licenses
may be general, special or otherwise, and may be granted on an exclusive or
non-exclusive basis throughout all or any part of the United States of America,
its territories and possessions, and all foreign countries.
- 5 -
<PAGE>
(c) Secured Party may assign, sell or otherwise dispose of the Collateral
or any part thereof, either with or without special conditions or stipulations
except that if notice to Debtor of intended disposition of Collateral is
required by law, the giving of five (5) days prior written notice to Debtor of
any proposed disposition shall be deemed reasonable notice thereof and Debtor
waives any other notice with respect thereto. Secured Party shall have the power
to buy the Collateral or any part thereof, and Secured Party shall also have the
power to execute assurances and perform all other acts which Secured Party may,
in its discretion, deem appropriate or proper to complete such assignment, sale,
or disposition. In any such event, Debtor shall be liable for any deficiency.
(d) In addition to the foregoing, in order to implement the assignment,
sale, or other disposition of any of the Collateral pursuant to the terms
hereof, Secured Party may at any time execute and deliver on behalf of Debtor,
pursuant to the authority granted in the Powers of Attorney described in Section
3(f) hereof, one or more instruments of assignment of the Trademarks (or any
application, registration, or recording relating thereto), in form suitable for
filing, recording, or registration. Debtor agrees to pay Secured Party on demand
all costs incurred in any such transfer of the Collateral, including, but not
limited to, any taxes, fees, and attorneys' fees and legal expenses. Debtor
agrees that Secured Party has no obligation to preserve rights to the Trademarks
against any other parties.
(e) Secured Party may first apply the proceeds actually received from any
such license, assignment, sale or other disposition of any of the Collateral to
the costs and expenses thereof, including, without limitation, attorneys' fees
and all legal, travel and other expenses which may be incurred by Secured Party.
Thereafter, Secured Party may apply any remaining proceeds to such of the
Obligations as Secured Party may in its discretion determine. Debtor shall
remain liable to Secured Party for any of the Obligations remaining unpaid after
the application of such proceeds, and Debtor shall pay Secured Party on demand
any such unpaid amount, together with interest at the rate then applicable to
the Obligations set forth in the Credit Agreement.
(f) Debtor shall supply to Secured Party or to Secured Party's designee,
Debtor's knowledge and expertise relating to the manufacture and sale of the
products and services bearing the Trademarks and Debtor's customer lists and
other records relating to the Trademarks and the distribution thereof at any
time an Event of Default exists and is continuing.
(g) Nothing contained herein shall be construed as requiring Secured Party
to take any such action at any time. All of Secured Party's rights and remedies,
whether provided under this Agreement, the other Loan Documents, applicable law,
or otherwise, shall be cumulative and none is exclusive. Such rights and
remedies may be enforced alternatively, successively, or concurrently.
(h) Except as set forth in this Agreement, Secured Party shall not use the
Trademarks.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
(a) The validity, interpretation and enforcement of this Agreement and the
other Loan Documents and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York (without giving effect to
principles of conflicts of law).
- 6 -
<PAGE>
(b) Debtor and Secured Party irrevocably consent and submit to the
non-exclusive jurisdiction of the State of New York and the United States
District Court for the Southern District of New York and waive any objection
based on venue or forum non conveniens with respect to any action instituted
----- --- ----------
therein arising under this Agreement or any of the other Loan Documents or in
any way connected or related or incidental to the dealings of Debtor and Secured
Party in respect of this Agreement or the other Loan Documents or the
transactions related hereto or thereto, in each case whether now existing or
thereafter arising, and whether in contract, tort, equity or otherwise, and
agree that any dispute with respect to any such matters shall be heard only in
the courts described above (except that Secured Party shall have the right to
bring any action or proceeding against Debtor or its property in the courts of
any other jurisdiction which Secured Party deems necessary or appropriate in
order to realize on the Collateral or to otherwise enforce its rights against
Debtor or its property).
(c) Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth herein and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Secured Party's option, by service
upon Debtor in any other manner provided under the rules of any such courts.
Within thirty (30) days after such service, Debtor shall appear in answer to
such process, failing which Debtor shall be deemed in default and judgment may
be entered by Secured Party against Debtor for the amount of the claim and other
relief requested.
(d) DEBTOR AND THE SECURED PARTY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM
BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY
COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
SECURED PARTY AND THE LENDER PARTIES TO ACCEPT THIS AGREEMENT AND MAKE LOANS
PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
(e) Secured Party shall not have any liability to Debtor (whether in tort,
contract, equity or otherwise) for losses suffered by Debtor in connection with,
arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Secured Party that the losses were the result
of acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Secured Party shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement and the
other Loan Documents.
7. MISCELLANEOUS
-------------
(a) All notices, requests and demands hereunder shall be in writing and
deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing. All notices,
- 7 -
<PAGE>
requests and demands upon the parties are to be given to the following addresses
(or to such other address as any party may designate by notice in accordance
with this Section):
If to Debtor: Unidigital Inc.
229 West 28th Street
New York, New York 10001
Attention: Mr. William E. Dye, Chief Executive Officer
If to Secured Party: Fleet Bank, N.A., as Administrative Agent
1185 Avenue of the Americas
New York, New York 10036
Attention: Ms. Beth Goodman, Vice President
(b) All references to the plural herein shall also mean the singular and
to the singular shall also mean the plural. All references to Debtor and Secured
Party pursuant to the definitions set forth in the recitals hereto, or to any
other person herein, shall include their respective successors and assigns. The
words "hereof," "herein," "hereunder," "this Agreement" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not any particular provision of this Agreement and as this Agreement now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced. An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 7(e) hereof. All
references to the term "Person" or "person" herein shall mean any individual,
sole proprietorship, partnership, corporation (including, without limitation,
any corporation which elects subchapter S status under the Internal Revenue Code
of 1986, as amended), limited liability company, limited liability partnership,
business trust, unincorporated association, joint stock company, trust, joint
venture or other entity or any government or any agency or instrumentality or
political subdivision thereof.
(c) Any term defined in the Credit Agreement and used herein shall have
the respective meanings ascribed to such terms therein, unless specified
otherwise herein.
(d) This Agreement, the other Loan Documents and any other document
referred to herein or therein shall be binding upon Debtor and its successors
and assigns and inure to the benefit of and be enforceable by Secured Party and
its successors and assigns.
(e) If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Agreement as a whole, but this Agreement shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by applicable law.
(f) Neither this Agreement nor any provision hereof shall be amended,
modified, waived or discharged orally or by course of conduct, but only by a
written agreement signed by an authorized officer of Secured Party. Secured
Party shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its rights, powers and/or remedies unless
such waiver shall be in writing and signed by an authorized officer of Secured
Party. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Secured Party of any right, power and/or
- 8 -
<PAGE>
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right, power and/or remedy which Secured Party would otherwise have on any
future occasion, whether similar in kind or otherwise.
IN WITNESS WHEREOF, Debtor and Secured Party have executed this Agreement
as of the day and year first above written.
UNIDIGITAL INC.
By: /s/ William E. Dye
--------------------------------------
Title: Chief Executive Officer
FLEET BANK, N.A., as Administrative Agent
By: /s/ Beth Goodman
--------------------------------------
Title: Vice President
- 9 -
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who being duly sworn, did depose and say, that he is the Chief
Executive Officer of UNIDIGITAL INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of May, 1999, before me personally came Beth Goodman, to
me known, who, being duly sworn, did depose and say, that he/she is the Vice
President of FLEET BANK, N.A., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
- 10 -
<PAGE>
EXHIBIT A
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
LIST OF TRADEMARKS AND TRADEMARK APPLICATIONS
---------------------------------------------
===============================================================================
Registration Registration Expiration
Trademark Number Date Date
===============================================================================
MEGA ART 2,108,405 October 28, 1997
- 11 -
<PAGE>
EXHIBIT B
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
LIST OF LICENSES
----------------
- 12 -
<PAGE>
EXHIBIT C
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
-------------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, that UNIDIGITAL INC. ("Debtor"), having an
office at 229 West 28th Street, New York, New York 10001, hereby appoints and
constitutes, severally, FLEET BANK, N.A., as Administrative Agent for itself and
ratably for the benefit of certain parties ("Secured Party"), and each of its
officers, its true and lawful attorney, with full power of substitution and with
full power and authority to perform the following acts on behalf of Debtor:
1. Execution and delivery of any and all agreements, documents, instrument
of assignment, or other papers which Secured Party, in its discretion, deems
necessary or advisable for the purpose of assigning, selling, or otherwise
disposing of all right, title, and interest of Debtor in and to any trademarks
and all registrations, recordings, reissues, extensions, and renewals thereof,
or for the purpose of recording, registering and filing of, or accomplishing any
other formality with respect to the foregoing.
2. Execution and delivery of any and all documents, statements,
certificates or other papers which Secured Party, in its discretion, deems
necessary or advisable to further the purposes described in Subparagraph 1
hereof.
This Power of Attorney is made pursuant to a Trademark Collateral
Assignment and Security Agreement, dated of even date herewith, between Debtor
and Secured Party (the "Security Agreement") and is subject to the terms and
provisions thereof. This Power of Attorney, being coupled with an interest, is
irrevocable until all "Obligations", as such term is defined in the Security
Agreement, are paid in full and the Security Agreement is terminated in writing
by Secured Party.
Dated: as of May 12, 1999
UNIDIGITAL INC.
By: /s/ William E. Dye
--------------------------------------
Title: Chief Executive Officer
- 13 -
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye,
to me known, who being duly sworn, did depose and say, that he is the Chief
Executive Officer of UNIDIGITAL INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
- 14 -
SUBSIDIARY TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
-----------------------------------------------------------------
THIS AGREEMENT ("Agreement"), dated as of May 12, 1999, is by and between
Unison (NY), Inc., a Delaware corporation ("Debtor"), with its chief executive
office at 229 West 28th Street, New York, New York 10001 and Fleet Bank, N.A., a
national banking association, as Administrative Agent for itself and ratably for
the benefit of the Lender Parties and the Hedge Banks ("Secured Party"), having
an office at 1185 Avenue of the Americas, New York, New York 10036.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Debtor has adopted, used and is using, and is the owner of the
entire right, title, and interest in and to the trademarks, trade names, terms,
designs and applications therefor described in Exhibit A hereto and made a part
hereof; and
WHEREAS, Secured Party, the Lender Parties and Unidigital, Inc., a Delaware
corporation ("Borrower") have entered or are about to enter into financing
arrangements pursuant to which the Lender Parties may make loans and advances
and provide other financial accommodations to Borrower as set forth in the
Credit Agreement, dated as of the date hereof, by the Secured Party, the Lender
Parties and Borrower (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the "Credit
Agreement") and other agreements, documents and instruments referred to therein
or at any time executed and/or delivered in connection therewith or related
thereto, including, but not limited to, this Agreement (all of the foregoing,
together with the Credit Agreement, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the "Loan Documents"); and
WHEREAS, due to the close business and financial relationship between
Borrower and Debtor, in consideration of the benefits which will accrue to
Debtor and as inducement for Secured Party and the Lender Parties to enter into
the Credit Agreement and the other Loan Documents and the Lender Parties to make
loans and advances and provide other financial accommodations to Borrower
pursuant thereto, Debtor has agreed to grant to Secured Party certain collateral
security as set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees as follows:
<PAGE>
1. GRANT OF SECURITY INTEREST
--------------------------
As collateral security for the prompt performance, observance and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
Debtor hereby grants to Secured Party a continuing security interest in and a
general lien upon, and a conditional assignment of, the following (being
collectively referred to herein as the "Collateral"): (a) all of Debtor's now
existing or hereafter acquired right, title, and interest in and to: (i) all of
Debtor's trademarks, tradenames, trade styles and service marks and all
applications, registrations and recordings relating to the foregoing as may at
any time be filed in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, any political
subdivision thereof or in any other country, including, without limitation, the
trademarks, terms, designs and applications described in Exhibit A hereto,
together with all rights and privileges arising under applicable law with
respect to Debtor's use of any trademarks, tradenames, trade styles and service
marks, and all reissues, extensions, continuation and renewals thereof (all of
the foregoing being collectively referred to herein as the "Trademarks"); and
(ii) all prints and labels on which such trademarks, tradenames, tradestyles and
service marks appear, have appeared or will appear, and all designs and general
intangibles of a like nature; (b) the goodwill of the business symbolized by
each of the Trademarks, including, without limitation, all customer lists and
other records relating to the distribution of products or services bearing the
Trademarks; (c) all income, fees, royalties and other payments at any time due
or payable with respect thereto, including, without limitation, payments under
all licenses at any time entered into in connection therewith; (d) the right to
sue for past, present and future infringements thereof; (e) all rights
corresponding thereto throughout the world; (f) and any and all other proceeds
of any of the foregoing, including, without limitation, damages and payments or
claims by Debtor against third parties for past or future infringement of the
Trademarks.
2. OBLIGATIONS SECURED
-------------------
The security interest, lien and other interests granted to Secured Party
pursuant to this Agreement shall secure the prompt performance, observance and
payment in full of any and all obligations, liabilities and indebtedness of
every kind, nature and description owing by Debtor to Secured Party, the Lender
Parties and the Hedge Banks and/or their respective affiliates, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement, the Credit Agreement, the other Loan Documents or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Credit Agreement or after
the commencement of any case with respect to Debtor under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Secured Party
(all of the foregoing being collectively referred to herein as the
"Obligations").
-2-
<PAGE>
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Debtor hereby represents, warrants and covenants with and to Secured Party
the following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) Debtor shall pay and perform all of the Obligations according to their
terms.
(b) All of the existing Collateral is valid and subsisting in full force
and effect, and Debtor owns the sole, full and clear title thereto, and the
right and power to grant the security interest and conditional assignment
granted hereunder. Debtor shall, at Debtor's expense, perform all acts and
execute all documents necessary to maintain the existence of the Collateral
consisting of registered Trademarks as registered trademarks and to maintain the
existence of all of the Collateral as valid and subsisting, including, without
limitation, the filing of any renewal affidavits and applications. The
Collateral is not subject to any liens, claims, mortgages, assignments,
licenses, security interests or encumbrances of any nature whatsoever, except:
(i) the security interests granted hereunder and pursuant to the Credit
Agreement, (ii) the security interests permitted under the Credit Agreement, and
(iii) the licenses permitted under Section 3(e) below.
(c) Debtor shall not assign, sell, mortgage, lease, transfer, pledge,
hypothecate, grant a security interest in or lien upon, encumber, grant an
exclusive or non-exclusive license relating to the Collateral, or otherwise
dispose of any of the Collateral, in each case without the prior written consent
of Secured Party, which consent shall not be unreasonably withheld, except as
otherwise permitted herein or in the Credit Agreement. Nothing in this Agreement
shall be deemed a consent by Secured Party to any such action, except as such
action is expressly permitted hereunder.
(d) Debtor shall, at Debtor's expense, promptly perform all acts and
execute all documents requested at any time by Secured Party to evidence,
perfect, maintain, record or enforce the security interest in and conditional
assignment of the Collateral granted hereunder or to otherwise further the
provisions of this Agreement. Debtor hereby authorizes Secured Party to execute
and file one or more financing statements (or similar documents) with respect to
the Collateral, signed only by Secured Party or as otherwise determined by
Secured Party. Debtor further authorizes Secured Party to have this Agreement or
any other similar security agreement filed with the Commissioner of Patents and
Trademarks or any other appropriate federal, state or government office.
(e) As of the date hereof, Debtor does not have any Trademarks registered,
or subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in Exhibit A hereto and has not granted any licenses with respect
thereto other than as set forth in Exhibit B hereto.
(f) Debtor shall, concurrently with the execution and delivery of this
Agreement, execute and deliver to Secured Party five (5) originals of a Special
Power of Attorney in the form of Exhibit C annexed hereto for the implementation
of the assignment, sale or other disposition of the Collateral
-3-
<PAGE>
pursuant to Secured Party's exercise of the rights and remedies granted to
Secured Party hereunder following the occurrence and during the continuance of
an Event of Default.
(g) Secured Party may, in its discretion, pay any amount or do any act
which Debtor fails to pay or do as required hereunder or as requested by Secured
Party to preserve, defend, protect, maintain, record or enforce the Obligations,
the Collateral, or the security interest and conditional assignment granted
hereunder, including, but not limited to, all filing or recording fees, court
costs, collection charges, attorneys' fees and legal expenses. Debtor shall be
liable to Secured Party for any such payment, which payment shall be deemed an
advance by Secured Party to Debtor, shall be payable on demand together with
interest at the rate then applicable to the Obligations set forth in the Credit
Agreement and shall be part of the Obligations secured hereby.
(h) Contemporaneously with the filing of any application for the
registration of a Trademark with the United States Patent and Trademark Office
or any similar office or agency in the United States, the Debtor shall give
Secured Party written notice of such action. If, after the date hereof, Debtor
shall (i) obtain any registered trademark or tradename, or apply for any such
registration in the United States Patent and Trademark Office or in any similar
office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, or (ii) become the owner of any
trademark registrations or applications for trademark registration used in the
United States or any State thereof, political subdivision thereof or in any
other country, the provisions of Section 1 hereof shall automatically apply
thereto. Upon the request of Secured Party, Debtor shall promptly execute and
deliver to Secured Party any and all assignments, agreements, instruments,
documents and such other papers as may be requested by Secured Party to evidence
the security interest in and conditional assignment of such Trademark in favor
of Secured Party.
(i) Debtor has not abandoned any of the Trademarks and Debtor will not do
any act, nor omit to do any act, whereby the Trademarks may become abandoned,
invalidated, unenforceable, voided, or voidable. Debtor shall notify Secured
Party immediately if it knows or has reason to know of any reason why any
application, registration, or recording with respect to the Trademarks may
become abandoned, canceled, invalidated, voided, or voidable.
(j) Debtor shall render any assistance, as Secured Party shall determine is
necessary, to Secured Party in any proceeding before the United States Patent
and Trademark Office, any federal or state court, or any similar office or
agency in the United States, any State thereof, any political subdivision
thereof or in any other country, to maintain such application and registration
of the Trademarks as Debtor's exclusive property and to protect Secured Party's
interest therein, including, without limitation, filing of renewals, affidavits
of use, affidavits of incontestability and opposition, interference, and
cancellation proceedings.
(k) To Debtor's actual knowledge, no material infringement or unauthorized
use presently is being made of any of the Trademarks that would adversely affect
in any material respect the fair market value of the Collateral or the benefits
of this Agreement granted to Secured Party, including, without limitation, the
validity, priority or perfection of the security interest granted herein or the
remedies of Secured Party hereunder. Debtor shall promptly notify Secured Party
if Debtor (or any affiliate or
-4-
<PAGE>
subsidiary thereof) learns of any use by any person of any term or design which
infringes on any Trademark or is likely to cause confusion with any Trademark.
If requested by Secured Party, Debtor, at Debtor's expense, shall join with
Secured Party in such action as Secured Party, in Secured Party's discretion,
may deem advisable for the protection of Secured Party's interest in and to the
Trademarks.
(l) Debtor assumes all responsibility and liability arising from its use of
the Trademarks (and. prior to the occurrence and continuance of an Event of
Default, the use of the Trademarks by its licensees) and Debtor hereby
indemnifies and holds Secured Party harmless from and against any claim, suit,
loss, damage, or expense (including attorneys' fees and legal expenses) arising
out of any alleged defect in any product manufactured, promoted, or sold by
Debtor (or any affiliate or subsidiary thereof) in connection with any Trademark
or out of the manufacture, promotion, labeling, sale or advertisement of any
such product by Debtor (or any affiliate or subsidiary thereof). The foregoing
indemnity shall survive the payment of the Obligations, the termination of this
Agreement and the termination or non-renewal of the Credit Agreement.
(m) Debtor shall promptly pay Secured Party for any and all expenditures
made by Secured Party pursuant to the provisions of this Agreement or for the
defense, protection or enforcement of the Obligations, the Collateral, or the
security interests and conditional assignment granted hereunder, including, but
not limited to, all filing or recording fees, court costs, collection charges,
travel expenses, and attorneys' fees and legal expenses. Such expenditures shall
be payable on demand, together with interest at the rate then applicable to the
Obligations set forth in the Credit Agreements and shall be part of the
Obligations secured hereby.
3A. CERTAIN RESPONSIBILITIES OF THE SECURED PARTY
---------------------------------------------
(a) Except in its capacity as a lender or an administrative agent or
otherwise as a financial institution with respect to a financing transaction,
Secured Party shall not apply for the registration of or cause the filing of an
application for the registration of, a trade name, trademark, or service mark
which is identical to or confusingly similar to the Trademarks.
(b) Prior to the time that Secured Party has asserted its rights under
Section 5 hereof, if in Debtor's reasonable opinion Secured Party's management
of the Trademarks has brought or has the reasonable likelihood to bring
discredit to Debtor or to the Trademarks ("Incorrect Management"), Debtor shall
have the unilateral right to notify Secured Party in writing to cease and desist
any such use and/or control over the use of the Trademarks, and within the time
specified (which time shall be reasonable, allowing for reasonable time to
discuss and cure any Incorrect Management, and, if incurable, allowing for
reasonable time to prepare and/or file any necessary and appropriate
documentation) to reassign the Trademark(s) in question to Debtor along with any
licenses granted by Secured Party with respect thereto. It is hereby agreed by
Debtor that if this Agreement were performed as written, there would exist no
Incorrect Management and that no action (or inaction) would need to occur in
order to avoid Incorrect Management.
-5-
<PAGE>
(c) At such time as Borrower shall have indefeasibly paid in full all of
the Obligations, this Agreement shall terminate and Secured Party shall execute
and deliver to Debtor all deeds, assignments and other instruments as may be
necessary or proper to re-vest in Debtor the full title to the Trademarks.
4. EVENTS OF DEFAULT
-----------------
All Obligations shall become immediately due and payable, without notice or
demand, at the option of Secured Party, upon the occurrence of any Event of
Default, as such term is defined in the Credit Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
-------------------
At any time an Event of Default exists or has occurred and is continuing,
in addition to all other rights and remedies of Secured Party, whether provided
under this Agreement, the Credit Agreement, the other Loan Documents, applicable
law or otherwise, Secured Party shall have the following rights and remedies
which may be exercised without notice to, or consent by, Debtor except as such
notice or consent is expressly provided for hereunder:
(a) Secured Party may require that neither Debtor nor any affiliate or
subsidiary of Debtor make any use of the Trademarks or any marks similar thereto
for any purpose whatsoever. Secured Party may make use of any Trademarks for the
sale of goods, completion of work-in-process or rendering of services in
connection with enforcing any other security interest granted to Secured Party
by Debtor or any subsidiary or affiliate of Debtor or for such other reason as
Secured Party may determine.
(b) Secured Party may grant such license or licenses relating to the
Collateral for such term or terms, on such conditions, and in such manner, as
Secured Party shall in its discretion deem appropriate. Such license or licenses
may be general, special or otherwise, and may be granted on an exclusive or
non-exclusive basis throughout all or any part of the United States of America,
its territories and possessions, and all foreign countries.
(c) Secured Party may assign, sell or otherwise dispose of the Collateral
or any part thereof, either with or without special conditions or stipulations
except that if notice to Debtor of intended disposition of Collateral is
required by law, the giving of five (5) days prior written notice to Debtor of
any proposed disposition shall be deemed reasonable notice thereof and Debtor
waives any other notice with respect thereto. Secured Party shall have the power
to buy the Collateral or any part thereof, and Secured Party shall also have the
power to execute assurances and perform all other acts which Secured Party may,
in its discretion, deem appropriate or proper to complete such assignment, sale,
or disposition. In any such event, Debtor shall be liable for any deficiency.
(d) In addition to the foregoing, in order to implement the assignment,
sale, or other disposition of any of the Collateral pursuant to the terms
hereof, Secured Party may at any time execute and deliver on behalf of Debtor,
pursuant to the authority granted in the Powers of Attorney described in Section
3(f) hereof, one or more instruments of assignment of the Trademarks (or any
application, registration, or recording relating thereto), in form suitable for
filing, recording, or registration. Debtor agrees to pay
-6-
<PAGE>
Secured Party on demand all costs incurred in any such transfer of the
Collateral, including, but not limited to, any taxes, fees, and attorneys' fees
and legal expenses. Debtor agrees that Secured Party has no obligation to
preserve rights to the Trademarks against any other parties.
(e) Secured Party may first apply the proceeds actually received from any
such license, assignment, sale or other disposition of any of the Collateral to
the costs and expenses thereof, including, without limitation, attorneys' fees
and all legal, travel and other expenses which may be incurred by Secured Party.
Thereafter, Secured Party may apply any remaining proceeds to such of the
Obligations as Secured Party may in its discretion determine. Debtor shall
remain liable to Secured Party for any of the Obligations remaining unpaid after
the application of such proceeds, and Debtor shall pay Secured Party on demand
any such unpaid amount, together with interest at the rate then applicable to
the Obligations set forth in the Credit Agreement.
(f) Debtor shall supply to Secured Party or to Secured Party's designee,
Debtor's knowledge and expertise relating to the manufacture and sale of the
products and services bearing the Trademarks and Debtor's customer lists and
other records relating to the Trademarks and the distribution thereof at any
time an Event of Default exists and is continuing.
(g) Nothing contained herein shall be construed as requiring Secured Party
to take any such action at any time. All of Secured Party's rights and remedies,
whether provided under this Agreement, the other Loan Documents, applicable law,
or otherwise, shall be cumulative and none is exclusive. Such rights and
remedies may be enforced alternatively, successively, or concurrently.
(h) Except as set forth in this Agreement, Secured Party shall not use the
Trademarks.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
(a) The validity, interpretation and enforcement of this Agreement and the
other Loan Documents and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York (without giving effect to
principles of conflicts of law).
(b) Debtor and Secured Party irrevocably consent and submit to the
non-exclusive jurisdiction of the State of New York and the United States
District Court for the Southern District of New York and waive any objection
based on venue or forum non conveniens with respect to any action instituted
----- --- ----------
therein arising under this Agreement or any of the other Loan Documents or in
any way connected or related or incidental to the dealings of Debtor and Secured
Party in respect of this Agreement or the other Loan Documents or the
transactions related hereto or thereto, in each case whether now existing or
thereafter arising, and whether in contract, tort, equity or otherwise, and
agree that any dispute with respect to any such matters shall be heard only in
the courts described above (except that Secured Party shall have the right to
bring any action or proceeding against Debtor or its property in the courts of
any
-7-
<PAGE>
other jurisdiction which Secured Party deems necessary or appropriate in order
to realize on the Collateral or to otherwise enforce its rights against Debtor
or its property).
(c) Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth herein and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Secured Party's option, by service
upon Debtor in any other manner provided under the rules of any such courts.
Within thirty (30) days after such service, Debtor shall appear in answer to
such process, failing which Debtor shall be deemed in default and judgment may
be entered by Secured Party against Debtor for the amount of the claim and other
relief requested.
(d) DEBTOR AND THE SECURED PARTY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
SECURED PARTY AND THE LENDER PARTIES TO ACCEPT THIS AGREEMENT AND MAKE LOANS
PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
(e) Secured Party shall not have any liability to Debtor (whether in tort,
contract, equity or otherwise) for losses suffered by Debtor in connection with,
arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Secured Party that the losses were the result
of acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Secured Party shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement and the
other Loan Documents.
7. MISCELLANEOUS
-------------
(a) All notices, requests and demands hereunder shall be in writing and
deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing. All notices, requests and demands upon the parties
are to be given to the following addresses (or to such other address as any
party may designate by notice in accordance with this Section):
If to Debtor: Unison (NY), Inc.
229 West 28th Street
New York, New York 10001
Attention: Mr. William E. Dye, Chief Executive Officer
-8-
<PAGE>
If to Secured Fleet Bank, N.A., as Administrative Agent
Party: 1185 Avenue of the Americas
New York, New York 10036
Attention: Ms. Beth Goodman, Vice President
(b) All references to the plural herein shall also mean the singular and to
the singular shall also mean the plural. All references to Borrower, Debtor and
Secured Party pursuant to the definitions set forth in the recitals hereto, or
to any other person herein, shall include their respective successors and
assigns. The words "hereof," "herein," "hereunder," "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced. An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section 7(e)
hereof. All references to the term "Person" or "person" herein shall mean any
individual, sole proprietorship, partnership, corporation (including, without
limitation, any corporation which elects subchapter S status under the Internal
Revenue Code of 1986, as amended), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock company,
trust, joint venture or other entity or any government or any agency or
instrumentality or political subdivision thereof.
(c) Any term defined in the Credit Agreement and used herein shall have the
respective meanings ascribed to such terms therein, unless specified otherwise
herein.
(d) This Agreement, the other Loan Documents and any other document
referred to herein or therein shall be binding upon Debtor and its successors
and assigns and inure to the benefit of and be enforceable by Secured Party and
its successors and assigns.
(e) If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Agreement as a whole, but this Agreement shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by applicable law.
(f) Neither this Agreement nor any provision hereof shall be amended,
modified, waived or discharged orally or by course of conduct, but only by a
written agreement signed by an authorized officer of Secured Party. Secured
Party shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its rights, powers and/or remedies unless
such waiver shall be in writing and signed by an authorized officer of Secured
Party. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Secured Party of any right, power and/or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Secured Party would otherwise have on any future
occasion, whether similar in kind or otherwise.
-9-
<PAGE>
IN WITNESS WHEREOF, Debtor and Secured Party have executed this Agreement
as of the day and year first above written.
UNISON (NY), INC.
By: /s/ William E. Dye
--------------------------------------
Title: Chief Executive Officer
FLEET BANK, N.A., as Administrative Agent
By: /s/ Beth Goodman
--------------------------------------
Title: Vice President
-----------------------------------
-10-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF YORK )
On this 11th day of May, 1999, before me personally came William E. Dye, to
me known, who being duly sworn, did depose and say, that he is the Chief
Executive Officer of UNISON (NY), INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of May, 1999, before me personally came Beth Goodman, to
me known, who, being duly sworn, did depose and say, that he/she is the
Vice Pres. of FLEET BANK, N.A., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
-11-
<PAGE>
EXHIBIT A
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
LIST OF TRADEMARKS AND TRADEMARK APPLICATIONS
---------------------------------------------
<TABLE>
<CAPTION>
=============================================================================================================
Registration Registration Expiration
Trademark Number Date Date
--------- ------------ ------------ ----------
=============================================================================================================
<S> <C> <C> <C>
KWIK MEGAMEDIA 2,102,691 December 10, 1996
(Logo)
- -------------------------------------------------------------------------------------------------------------
KWIK MEGAMEDIA 2,106,958 November 19, 1996
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
=============================================================================================================
</TABLE>
-12-
<PAGE>
EXHIBIT B
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
LIST OF LICENSES
----------------
-13-
<PAGE>
EXHIBIT C
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
-------------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, that UNISON (NY), INC. ("Debtor"), having
an office at 229 West 28th Street, New York, New York 10001, hereby appoints and
constitutes, severally, FLEET BANK, N.A., as Administrative Agent for itself and
ratably for the benefit of certain parties ("Secured Party"), and each of its
officers, its true and lawful attorney, with full power of substitution and with
full power and authority to perform the following acts on behalf of Debtor:
1. Execution and delivery of any and all agreements, documents, instrument
of assignment, or other papers which Secured Party, in its discretion, deems
necessary or advisable for the purpose of assigning, selling, or otherwise
disposing of all right, title, and interest of Debtor in and to any trademarks
and all registrations, recordings, reissues, extensions, and renewals thereof,
or for the purpose of recording, registering and filing of, or accomplishing any
other formality with respect to the foregoing.
2. Execution and delivery of any and all documents, statements,
certificates or other papers which Secured Party, in its discretion, deems
necessary or advisable to further the purposes described in Subparagraph 1
hereof.
This Power of Attorney is made pursuant to a Trademark Collateral
Assignment and Security Agreement, dated of even date herewith, between Debtor
and Secured Party (the "Security Agreement") and is subject to the terms and
provisions thereof. This Power of Attorney, being coupled with an interest, is
irrevocable until all "Obligations", as such term is defined in the Security
Agreement, are paid in full and the Security Agreement is terminated in writing
by Secured Party.
Dated: as of May 12, 1999
UNISON (NY), INC.
By: /s/ William E. Dye
---------------------------
Title: Chief Executive Officer
-14-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye, to
me known, who being duly sworn, did depose and say, that he is the Chief
Executive Officer of UNISON (NY), INC., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
-15-
<PAGE>
SUBSIDIARY TRADEMARK COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT
-----------------------------------------------------------------
THIS AGREEMENT ("Agreement"), dated as of May 12, 1999, is by and between
SuperGraphics Corporation, a California corporation ("Debtor"), with its chief
executive office at 229 West 28th Street, New York, New York 10001 and Fleet
Bank, N.A., a national banking association, as Administrative Agent for itself
and ratably for the benefit of the Lender Parties and the Hedge Banks ("Secured
Party"), having an office at 1185 Avenue of the Americas, New York, New York
10036.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Debtor has adopted, used and is using, and is the owner of the
entire right, title, and interest in and to the trademarks, trade names, terms,
designs and applications therefor described in Exhibit A hereto and made a part
hereof; and
WHEREAS, Secured Party, the Lender Parties and Unidigital, Inc., a Delaware
corporation ("Borrower") have entered or are about to enter into financing
arrangements pursuant to which the Lender Parties may make loans and advances
and provide other financial accommodations to Borrower as set forth in the
Credit Agreement, dated as of the date hereof, by the Secured Party, the Lender
Parties and Borrower (as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the "Credit
Agreement") and other agreements, documents and instruments referred to therein
or at any time executed and/or delivered in connection therewith or related
thereto, including, but not limited to, this Agreement (all of the foregoing,
together with the Credit Agreement, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, being
collectively referred to herein as the "Loan Documents"); and
WHEREAS, due to the close business and financial relationship between
Borrower and Debtor, in consideration of the benefits which will accrue to
Debtor and as inducement for Secured Party and the Lender Parties to enter into
the Credit Agreement and the other Loan Documents and the Lender Parties to make
loans and advances and provide other financial accommodations to Borrower
pursuant thereto, Debtor has agreed to grant to Secured Party certain collateral
security as set forth herein;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees as follows:
<PAGE>
1. GRANT OF SECURITY INTEREST
--------------------------
As collateral security for the prompt performance, observance and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
Debtor hereby grants to Secured Party a continuing security interest in and a
general lien upon, and a conditional assignment of, the following (being
collectively referred to herein as the "Collateral"): (a) all of Debtor's now
existing or hereafter acquired right, title, and interest in and to: (i) all of
Debtor's trademarks, tradenames, trade styles and service marks and all
applications, registrations and recordings relating to the foregoing as may at
any time be filed in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, any political
subdivision thereof or in any other country, including, without limitation, the
trademarks, terms, designs and applications described in Exhibit A hereto,
together with all rights and privileges arising under applicable law with
respect to Debtor's use of any trademarks, tradenames, trade styles and service
marks, and all reissues, extensions, continuation and renewals thereof (all of
the foregoing being collectively referred to herein as the "Trademarks"); and
(ii) all prints and labels on which such trademarks, tradenames, tradestyles and
service marks appear, have appeared or will appear, and all designs and general
intangibles of a like nature; (b) the goodwill of the business symbolized by
each of the Trademarks, including, without limitation, all customer lists and
other records relating to the distribution of products or services bearing the
Trademarks; (c) all income, fees, royalties and other payments at any time due
or payable with respect thereto, including, without limitation, payments under
all licenses at any time entered into in connection therewith; (d) the right to
sue for past, present and future infringements thereof; (e) all rights
corresponding thereto throughout the world; (f) and any and all other proceeds
of any of the foregoing, including, without limitation, damages and payments or
claims by Debtor against third parties for past or future infringement of the
Trademarks.
2. OBLIGATIONS SECURED
-------------------
The security interest, lien and other interests granted to Secured Party
pursuant to this Agreement shall secure the prompt performance, observance and
payment in full of any and all obligations, liabilities and indebtedness of
every kind, nature and description owing by Debtor to Secured Party, the Lender
Parties and the Hedge Banks and/or their respective affiliates, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, whether arising
under this Agreement, the Credit Agreement, the other Loan Documents or
otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Credit Agreement or after
the commencement of any case with respect to Debtor under the United States
Bankruptcy Code or any similar statute (including, without limitation, the
payment of interest and other amounts which would accrue and become due but for
the commencement of such case), whether direct or indirect, absolute or
contingent, joint or several, due or not due, primary or secondary, liquidated
or unliquidated, secured or unsecured, and however acquired by Secured Party
(all of the foregoing being collectively referred to herein as the
"Obligations").
-2-
<PAGE>
3. REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
Debtor hereby represents, warrants and covenants with and to Secured Party
the following (all of such representations, warranties and covenants being
continuing so long as any of the Obligations are outstanding):
(a) Debtor shall pay and perform all of the Obligations according to their
terms.
(b) All of the existing Collateral is valid and subsisting in full force
and effect, and Debtor owns the sole, full and clear title thereto, and the
right and power to grant the security interest and conditional assignment
granted hereunder. Debtor shall, at Debtor's expense, perform all acts and
execute all documents necessary to maintain the existence of the Collateral
consisting of registered Trademarks as registered trademarks and to maintain the
existence of all of the Collateral as valid and subsisting, including, without
limitation, the filing of any renewal affidavits and applications. The
Collateral is not subject to any liens, claims, mortgages, assignments,
licenses, security interests or encumbrances of any nature whatsoever, except:
(i) the security interests granted hereunder and pursuant to the Credit
Agreement, (ii) the security interests permitted under the Credit Agreement, and
(iii) the licenses permitted under Section 3(e) below.
(c) Debtor shall not assign, sell, mortgage, lease, transfer, pledge,
hypothecate, grant a security interest in or lien upon, encumber, grant an
exclusive or non-exclusive license relating to the Collateral, or otherwise
dispose of any of the Collateral, in each case without the prior written consent
of Secured Party, which consent shall not be unreasonably withheld, except as
otherwise permitted herein or in the Credit Agreement. Nothing in this Agreement
shall be deemed a consent by Secured Party to any such action, except as such
action is expressly permitted hereunder.
(d) Debtor shall, at Debtor's expense, promptly perform all acts and
execute all documents requested at any time by Secured Party to evidence,
perfect, maintain, record or enforce the security interest in and conditional
assignment of the Collateral granted hereunder or to otherwise further the
provisions of this Agreement. Debtor hereby authorizes Secured Party to execute
and file one or more financing statements (or similar documents) with respect to
the Collateral, signed only by Secured Party or as otherwise determined by
Secured Party. Debtor further authorizes Secured Party to have this Agreement or
any other similar security agreement filed with the Commissioner of Patents and
Trademarks or any other appropriate federal, state or government office.
(e) As of the date hereof, Debtor does not have any Trademarks registered,
or subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in Exhibit A hereto and has not granted any licenses with respect
thereto other than as set forth in Exhibit B hereto.
(f) Debtor shall, concurrently with the execution and delivery of this
Agreement, execute and deliver to Secured Party five (5) originals of a Special
Power of Attorney in the form of Exhibit C annexed hereto for the implementation
of the assignment, sale or other disposition of the Collateral
-3-
<PAGE>
pursuant to Secured Party's exercise of the rights and remedies granted to
Secured Party hereunder following the occurrence and during the continuance of
an Event of Default.
(g) Secured Party may, in its discretion, pay any amount or do any act
which Debtor fails to pay or do as required hereunder or as requested by Secured
Party to preserve, defend, protect, maintain, record or enforce the Obligations,
the Collateral, or the security interest and conditional assignment granted
hereunder, including, but not limited to, all filing or recording fees, court
costs, collection charges, attorneys' fees and legal expenses. Debtor shall be
liable to Secured Party for any such payment, which payment shall be deemed an
advance by Secured Party to Debtor, shall be payable on demand together with
interest at the rate then applicable to the Obligations set forth in the Credit
Agreement and shall be part of the Obligations secured hereby.
(h) Contemporaneously with the filing of any application for the
registration of a Trademark with the United States Patent and Trademark Office
or any similar office or agency in the United States, the Debtor shall give
Secured Party written notice of such action. If, after the date hereof, Debtor
shall (i) obtain any registered trademark or tradename, or apply for any such
registration in the United States Patent and Trademark Office or in any similar
office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, or (ii) become the owner of any
trademark registrations or applications for trademark registration used in the
United States or any State thereof, political subdivision thereof or in any
other country, the provisions of Section 1 hereof shall automatically apply
thereto. Upon the request of Secured Party, Debtor shall promptly execute and
deliver to Secured Party any and all assignments, agreements, instruments,
documents and such other papers as may be requested by Secured Party to evidence
the security interest in and conditional assignment of such Trademark in favor
of Secured Party.
(i) Debtor has not abandoned any of the Trademarks and Debtor will not do
any act, nor omit to do any act, whereby the Trademarks may become abandoned,
invalidated, unenforceable, voided, or voidable. Debtor shall notify Secured
Party immediately if it knows or has reason to know of any reason why any
application, registration, or recording with respect to the Trademarks may
become abandoned, canceled, invalidated, voided, or voidable.
(j) Debtor shall render any assistance, as Secured Party shall determine is
necessary, to Secured Party in any proceeding before the United States Patent
and Trademark Office, any federal or state court, or any similar office or
agency in the United States, any State thereof, any political subdivision
thereof or in any other country, to maintain such application and registration
of the Trademarks as Debtor's exclusive property and to protect Secured Party's
interest therein, including, without limitation, filing of renewals, affidavits
of use, affidavits of incontestability and opposition, interference, and
cancellation proceedings.
(k) To Debtor's actual knowledge, no material infringement or unauthorized
use presently is being made of any of the Trademarks that would adversely affect
in any material respect the fair market value of the Collateral or the benefits
of this Agreement granted to Secured Party, including, without limitation, the
validity, priority or perfection of the security interest granted herein or the
remedies of Secured Party hereunder. Debtor shall promptly notify Secured Party
if Debtor (or any affiliate or
-4-
<PAGE>
subsidiary thereof) learns of any use by any person of any term or design which
infringes on any Trademark or is likely to cause confusion with any Trademark.
If requested by Secured Party, Debtor, at Debtor's expense, shall join with
Secured Party in such action as Secured Party, in Secured Party's discretion,
may deem advisable for the protection of Secured Party's interest in and to the
Trademarks.
(l) Debtor assumes all responsibility and liability arising from its use of
the Trademarks (and. prior to the occurrence and continuance of an Event of
Default, the use of the Trademarks by its licensees) and Debtor hereby
indemnifies and holds Secured Party harmless from and against any claim, suit,
loss, damage, or expense (including attorneys' fees and legal expenses) arising
out of any alleged defect in any product manufactured, promoted, or sold by
Debtor (or any affiliate or subsidiary thereof) in connection with any Trademark
or out of the manufacture, promotion, labeling, sale or advertisement of any
such product by Debtor (or any affiliate or subsidiary thereof). The foregoing
indemnity shall survive the payment of the Obligations, the termination of this
Agreement and the termination or non-renewal of the Credit Agreement.
(m) Debtor shall promptly pay Secured Party for any and all expenditures
made by Secured Party pursuant to the provisions of this Agreement or for the
defense, protection or enforcement of the Obligations, the Collateral, or the
security interests and conditional assignment granted hereunder, including, but
not limited to, all filing or recording fees, court costs, collection charges,
travel expenses, and attorneys' fees and legal expenses. Such expenditures shall
be payable on demand, together with interest at the rate then applicable to the
Obligations set forth in the Credit Agreements and shall be part of the
Obligations secured hereby.
3A. CERTAIN RESPONSIBILITIES OF THE SECURED PARTY
---------------------------------------------
(a) Except in its capacity as a lender or an administrative agent or
otherwise as a financial institution with respect to a financing transaction,
Secured Party shall not apply for the registration of or cause the filing of an
application for the registration of, a trade name, trademark, or service mark
which is identical to or confusingly similar to the Trademarks.
(b) Prior to the time that Secured Party has asserted its rights under
Section 5 hereof, if in Debtor's reasonable opinion Secured Party's management
of the Trademarks has brought or has the reasonable likelihood to bring
discredit to Debtor or to the Trademarks ("Incorrect Management"), Debtor shall
have the unilateral right to notify Secured Party in writing to cease and desist
any such use and/or control over the use of the Trademarks, and within the time
specified (which time shall be reasonable, allowing for reasonable time to
discuss and cure any Incorrect Management, and, if incurable, allowing for
reasonable time to prepare and/or file any necessary and appropriate
documentation) to reassign the Trademark(s) in question to Debtor along with any
licenses granted by Secured Party with respect thereto. It is hereby agreed by
Debtor that if this Agreement were performed as written, there would exist no
Incorrect Management and that no action (or inaction) would need to occur in
order to avoid Incorrect Management.
-5-
<PAGE>
(c) At such time as Borrower shall have indefeasibly paid in full all of
the Obligations, this Agreement shall terminate and Secured Party shall execute
and deliver to Debtor all deeds, assignments and other instruments as may be
necessary or proper to re-vest in Debtor the full title to the Trademarks.
4. EVENTS OF DEFAULT
-----------------
All Obligations shall become immediately due and payable, without notice or
demand, at the option of Secured Party, upon the occurrence of any Event of
Default, as such term is defined in the Credit Agreement (each an "Event of
Default" hereunder).
5. RIGHTS AND REMEDIES
-------------------
At any time an Event of Default exists or has occurred and is continuing,
in addition to all other rights and remedies of Secured Party, whether provided
under this Agreement, the Credit Agreement, the other Loan Documents, applicable
law or otherwise, Secured Party shall have the following rights and remedies
which may be exercised without notice to, or consent by, Debtor except as such
notice or consent is expressly provided for hereunder:
(a) Secured Party may require that neither Debtor nor any affiliate or
subsidiary of Debtor make any use of the Trademarks or any marks similar thereto
for any purpose whatsoever. Secured Party may make use of any Trademarks for the
sale of goods, completion of work-in-process or rendering of services in
connection with enforcing any other security interest granted to Secured Party
by Debtor or any subsidiary or affiliate of Debtor or for such other reason as
Secured Party may determine.
(b) Secured Party may grant such license or licenses relating to the
Collateral for such term or terms, on such conditions, and in such manner, as
Secured Party shall in its discretion deem appropriate. Such license or licenses
may be general, special or otherwise, and may be granted on an exclusive or
non-exclusive basis throughout all or any part of the United States of America,
its territories and possessions, and all foreign countries.
(c) Secured Party may assign, sell or otherwise dispose of the Collateral
or any part thereof, either with or without special conditions or stipulations
except that if notice to Debtor of intended disposition of Collateral is
required by law, the giving of five (5) days prior written notice to Debtor of
any proposed disposition shall be deemed reasonable notice thereof and Debtor
waives any other notice with respect thereto. Secured Party shall have the power
to buy the Collateral or any part thereof, and Secured Party shall also have the
power to execute assurances and perform all other acts which Secured Party may,
in its discretion, deem appropriate or proper to complete such assignment, sale,
or disposition. In any such event, Debtor shall be liable for any deficiency.
(d) In addition to the foregoing, in order to implement the assignment,
sale, or other disposition of any of the Collateral pursuant to the terms
hereof, Secured Party may at any time execute and deliver on behalf of Debtor,
pursuant to the authority granted in the Powers of Attorney described in Section
3(f) hereof, one or more instruments of assignment of the Trademarks (or any
application, registration, or recording relating thereto), in form suitable for
filing, recording, or registration. Debtor agrees to pay
-6-
<PAGE>
Secured Party on demand all costs incurred in any such transfer of the
Collateral, including, but not limited to, any taxes, fees, and attorneys' fees
and legal expenses. Debtor agrees that Secured Party has no obligation to
preserve rights to the Trademarks against any other parties.
(e) Secured Party may first apply the proceeds actually received from any
such license, assignment, sale or other disposition of any of the Collateral to
the costs and expenses thereof, including, without limitation, attorneys' fees
and all legal, travel and other expenses which may be incurred by Secured Party.
Thereafter, Secured Party may apply any remaining proceeds to such of the
Obligations as Secured Party may in its discretion determine. Debtor shall
remain liable to Secured Party for any of the Obligations remaining unpaid after
the application of such proceeds, and Debtor shall pay Secured Party on demand
any such unpaid amount, together with interest at the rate then applicable to
the Obligations set forth in the Credit Agreement.
(f) Debtor shall supply to Secured Party or to Secured Party's designee,
Debtor's knowledge and expertise relating to the manufacture and sale of the
products and services bearing the Trademarks and Debtor's customer lists and
other records relating to the Trademarks and the distribution thereof at any
time an Event of Default exists and is continuing.
(g) Nothing contained herein shall be construed as requiring Secured Party
to take any such action at any time. All of Secured Party's rights and remedies,
whether provided under this Agreement, the other Loan Documents, applicable law,
or otherwise, shall be cumulative and none is exclusive. Such rights and
remedies may be enforced alternatively, successively, or concurrently.
(h) Except as set forth in this Agreement, Secured Party shall not use the
Trademarks.
6. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
(a) The validity, interpretation and enforcement of this Agreement and the
other Loan Documents and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of New York (without giving effect to
principles of conflicts of law).
(b) Debtor and Secured Party irrevocably consent and submit to the
non-exclusive jurisdiction of the State of New York and the United States
District Court for the Southern District of New York and waive any objection
based on venue or forum non conveniens with respect to any action instituted
----- --- ----------
therein arising under this Agreement or any of the other Loan Documents or in
any way connected or related or incidental to the dealings of Debtor and Secured
Party in respect of this Agreement or the other Loan Documents or the
transactions related hereto or thereto, in each case whether now existing or
thereafter arising, and whether in contract, tort, equity or otherwise, and
agree that any dispute with respect to any such matters shall be heard only in
the courts described above (except that Secured Party shall have the right to
bring any action or proceeding against Debtor or its property in the courts of
any
-7-
<PAGE>
other jurisdiction which Secured Party deems necessary or appropriate in order
to realize on the Collateral or to otherwise enforce its rights against Debtor
or its property).
(c) Debtor hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth herein and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Secured Party's option, by service
upon Debtor in any other manner provided under the rules of any such courts.
Within thirty (30) days after such service, Debtor shall appear in answer to
such process, failing which Debtor shall be deemed in default and judgment may
be entered by Secured Party against Debtor for the amount of the claim and other
relief requested.
(d) DEBTOR AND THE SECURED PARTY MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR THE
SECURED PARTY AND THE LENDER PARTIES TO ACCEPT THIS AGREEMENT AND MAKE LOANS
PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
(e) Secured Party shall not have any liability to Debtor (whether in tort,
contract, equity or otherwise) for losses suffered by Debtor in connection with,
arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Secured Party that the losses were the result
of acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Secured Party shall be entitled to the benefit of the
rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement and the
other Loan Documents.
7. MISCELLANEOUS
-------------
(a) All notices, requests and demands hereunder shall be in writing and
deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing. All notices, requests and demands upon the parties
are to be given to the following addresses (or to such other address as any
party may designate by notice in accordance with this Section):
If to Debtor: SuperGraphics Corporation
229 West 28th Street
New York, New York 10001
Attention: Mr. William E. Dye, Chief Executive Officer
-8-
<PAGE>
If to Secured Fleet Bank, N.A., as Administrative Agent
Party: 1185 Avenue of the Americas
New York, New York 10036
Attention: Ms. Beth Goodman, Vice President
(b) All references to the plural herein shall also mean the singular and to
the singular shall also mean the plural. All references to Borrower, Debtor and
Secured Party pursuant to the definitions set forth in the recitals hereto, or
to any other person herein, shall include their respective successors and
assigns. The words "hereof," "herein," "hereunder," "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced. An Event of Default shall exist or continue or be
continuing until such Event of Default is waived in accordance with Section 7(e)
hereof. All references to the term "Person" or "person" herein shall mean any
individual, sole proprietorship, partnership, corporation (including, without
limitation, any corporation which elects subchapter S status under the Internal
Revenue Code of 1986, as amended), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock company,
trust, joint venture or other entity or any government or any agency or
instrumentality or political subdivision thereof.
(c) Any term defined in the Credit Agreement and used herein shall have the
respective meanings ascribed to such terms therein, unless specified otherwise
herein.
(d) This Agreement, the other Loan Documents and any other document
referred to herein or therein shall be binding upon Debtor and its successors
and assigns and inure to the benefit of and be enforceable by Secured Party and
its successors and assigns.
(e) If any provision of this Agreement is held to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate this
Agreement as a whole, but this Agreement shall be construed as though it did not
contain the particular provision held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by applicable law.
(f) Neither this Agreement nor any provision hereof shall be amended,
modified, waived or discharged orally or by course of conduct, but only by a
written agreement signed by an authorized officer of Secured Party. Secured
Party shall not, by any act, delay, omission or otherwise be deemed to have
expressly or impliedly waived any of its rights, powers and/or remedies unless
such waiver shall be in writing and signed by an authorized officer of Secured
Party. Any such waiver shall be enforceable only to the extent specifically set
forth therein. A waiver by Secured Party of any right, power and/or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Secured Party would otherwise have on any future
occasion, whether similar in kind or otherwise.
-9-
<PAGE>
IN WITNESS WHEREOF, Debtor and Secured Party have executed this Agreement
as of the day and year first above written.
SUPERGRAPHICS CORPORATION
By: /s/ William E. Dye
--------------------------------------
Title: Chief Executive Officer
FLEET BANK, N.A., as Administrative Agent
By: /s/ Beth Goodman
--------------------------------------
Title: Vice President
-----------------------------------
-10-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF YORK )
On this 11th day of May, 1999, before me personally came William E. Dye, to
me known, who being duly sworn, did depose and say, that he is the Chief
Executive Officer of SUPERGRAPHICS CORPORATION, the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of May, 1999, before me personally came Beth Goodman, to
me known, who, being duly sworn, did depose and say, that he/she is the Vice
President of FLEET BANK, N.A., the corporation described in and which executed
the foregoing instrument; and that he signed his name thereto by order of the
Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
-11-
<PAGE>
EXHIBIT A
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
LIST OF TRADEMARKS AND TRADEMARK APPLICATIONS
---------------------------------------------
<TABLE>
<CAPTION>
==================================================================================================================
Registration Registration Expiration
Trademark Number Date Date
--------- ------------ ------------ ----------
==================================================================================================================
<S> <C> <C> <C>
SUPERGRAPHICS 1,976,895 May 28, 1996
- ------------------------------------------------------------------------------------------------------------------
SUPERGRAPHICS 2,151,519 April 14, 1998
THE BUS WRAP
COMPANY
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
==================================================================================================================
</TABLE>
-12-
<PAGE>
EXHIBIT B
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
LIST OF LICENSES
----------------
-13-
<PAGE>
EXHIBIT C
TO
TRADEMARK COLLATERAL ASSIGNMENT
AND SECURITY AGREEMENT
SPECIAL POWER OF ATTORNEY
-------------------------
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, that SUPERGRAPHICS CORPORATION ("Debtor"),
having an office at 229 West 28th Street, New York, New York 10001, hereby
appoints and constitutes, severally, FLEET BANK, N.A., as Administrative Agent
for itself and ratably for the benefit of certain parties ("Secured Party"), and
each of its officers, its true and lawful attorney, with full power of
substitution and with full power and authority to perform the following acts on
behalf of Debtor:
1. Execution and delivery of any and all agreements, documents, instrument
of assignment, or other papers which Secured Party, in its discretion, deems
necessary or advisable for the purpose of assigning, selling, or otherwise
disposing of all right, title, and interest of Debtor in and to any trademarks
and all registrations, recordings, reissues, extensions, and renewals thereof,
or for the purpose of recording, registering and filing of, or accomplishing any
other formality with respect to the foregoing.
2. Execution and delivery of any and all documents, statements,
certificates or other papers which Secured Party, in its discretion, deems
necessary or advisable to further the purposes described in Subparagraph 1
hereof.
This Power of Attorney is made pursuant to a Trademark Collateral
Assignment and Security Agreement, dated of even date herewith, between Debtor
and Secured Party (the "Security Agreement") and is subject to the terms and
provisions thereof. This Power of Attorney, being coupled with an interest, is
irrevocable until all "Obligations", as such term is defined in the Security
Agreement, are paid in full and the Security Agreement is terminated in writing
by Secured Party.
Dated: as of May 12, 1999
SUPERGRAPHICS CORPORATION
By: /s/ William E. Dye
---------------------------
Title: Chief Executive Officer
-14-
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 11th day of May, 1999, before me personally came William E. Dye, to
me known, who being duly sworn, did depose and say, that he is the Chief
Executive Officer of SUPERGRAPHICS CORPORATION, the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the Board of Directors of said corporation.
/s/ Barbara DiMartino
--------------------------------------
Notary Public
-15-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited consolidated financial statements at May 31, 1999 and for the nine
month period ended May 31, 1999 and is qualified in its entirety by reference to
such financial statements. Earnings per share information has been restated to
conform with the requirements of SFAS No. 128, Earnings Per Share.
</LEGEND>
<CIK> 0001003934
<NAME> Unidigital Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> MAY-31-1999
<EXCHANGE-RATE> 1
<CASH> 321,000
<SECURITIES> 0
<RECEIVABLES> 26,407,000
<ALLOWANCES> (877,000)
<INVENTORY> 0
<CURRENT-ASSETS> 37,219,000
<PP&E> 42,207,000
<DEPRECIATION> (22,019,000)
<TOTAL-ASSETS> 119,571,000
<CURRENT-LIABILITIES> 14,727,000
<BONDS> 0
0
0
<COMMON> 55,000
<OTHER-SE> 20,209,000
<TOTAL-LIABILITY-AND-EQUITY> 119,571,000
<SALES> 56,165,000
<TOTAL-REVENUES> 56,165,000
<CGS> 27,980,000
<TOTAL-COSTS> 27,980,000
<OTHER-EXPENSES> 20,193,000
<LOSS-PROVISION> 315,000
<INTEREST-EXPENSE> 4,841,000
<INCOME-PRETAX> 3,151,000
<INCOME-TAX> 1,259,000
<INCOME-CONTINUING> 1,892,000
<DISCONTINUED> 0
<EXTRAORDINARY> (542,000)
<CHANGES> 0
<NET-INCOME> 1,350,000
<EPS-BASIC> 0.26
<EPS-DILUTED> 0.26
</TABLE>
