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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 23, 1998
(January 9, 1998)
KATZ DIGITAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27934 13-3871120
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
Twenty-One Penn Plaza
New York, New York 10001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 594-4800
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KATZ DIGITAL TECHNOLOGIES, INC.
INDEX TO FORM 8-K
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
JANUARY 23, 1997
ITEMS IN FORM 8-K
Page
----
Facing page
Item 2. Acquisition or Disposition of Assets. 3
Item 7. Financial Statements and Exhibits. 4
Signatures
Exhibit Index
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Item 2. Acquisition or Disposition of Assets.
General.
On January 9, 1998, Katz N.Y. Acquisition, Inc., a wholly-owned subsidiary
of the Registrant ("KNY"), acquired substantially all of the assets of Speed
Graphics, Inc. ("SGI") and DDP, Inc. ("DDP"), an affiliate of SGI, pursuant to
an Asset Acquisition Agreement (the "Acquisition Agreement") by and among the
Registrant, KNY, SGI, DDP and Mr. Ronald Krivosheiw ("Krivosheiw"), the sole
shareholder of SGI and DDP (the "Acquisition"). SGI and DDP shall sometimes be
referred to collectively herein as "Speed". Speed, based in New York, New York,
provides commercial photo lab, prepress, photo imaging and digital short-run
printing services.
Consideration.
As aggregate consideration for the Acquisition (the "Acquisition
Consideration"), Speed received cash in the amount of $9,214,000, 293,848 shares
of the Registrant's common stock (the "Shares"), and a promissory note in the
principal amount of $2,000,000, with interest payable thereon at an annual rate
of 7% and becoming due and payable on February 1, 2001 (the "Note"). Such
Acquisition Consideration is subject to adjustment in the event Speed's net
worth as of the date of the Acquisition is greater or lesser than $2,904,000.00,
all as more fully specified in the Acquisition Agreement.
Concurrently with the Acquisition, the Registrant entered into a Loan
Agreement with the Bank of New York, whereby such lending institution agreed to
loan the Registrant (i) $6,000,000.00 in the form of a secured term loan note
(the "Term Loan Note") and (ii) $7,000,000.00 in the form of a secured revolving
credit facility note (the "Revolving Credit Facility Note"). The Registrant used
a portion of such available financing to fund the cash portion of the
Acquisition Consideration. Copies of such Loan Agreement, Term Loan Note and
Revolving Credit Facility Note are included in this Report as exhibits thereto.
The Acquisition Consideration was determined by arms-length negotiations
between the management of the Registrant and Speed.
Krivosheiw Employment Agreement.
Concurrently with the Acquisition, Krivosheiw entered into an employment
agreement with the Registrant to become Chief Operating Officer of each of the
Company and KNY for a period of three years. A copy of such employment agreement
is included as a schedule to the Acquisition Agreement which is included in this
Report as an exhibit thereto.
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Registration Rights.
Subject to the requirements of the Acquisition Agreement, Speed was
granted the one-time right at any time prior to January 1, 2001 to require the
Registrant to use its best efforts to file a registration statement with the
Commission and to have such registration statement declared effective to permit
the sale of the Shares in the public securities markets. In addition, if at any
time prior to January 1, 2001, the Registrant proposes to register any of its
securities under the Securities Act of 1933, as amended (the "Act") (other than
pursuant to a registration statement on Form S-8, S-4 or similar or successor
form), the Acquisition Agreement provides that Speed may require the Registrant
to use its best efforts to register the Shares along with the shares being
registered by the Registrant to permit the sale or other disposition of the
Shares by Speed.
Lock-Up.
Subject to the provisions of the Acquisition Agreement, Speed agreed that,
for so long as Mr. Gary Katz, the Registrant's Chairman and Chief Executive
Officer, is subject to the volume limitations of Rule 144 under the Act, Speed
will not transfer its interest in the Shares, except with respect to that number
of Shares which could be sold at any time or in any period if the provisions of
Rule 144(e)(1) under the Act applied to Speed as if the Shares were "restricted
securities" as defined in Rule 144(a)(3), notwithstanding that the Shares may
have been registered for sale under the Act or that Speed may not be an
"affiliate" as defined in Rule 144(a)(1).
Machinery, Equipment and Other Physical Property.
Certain of the assets owned by Speed prior to the Acquisition included
machinery, equipment and other physical property, or leases therefor, that were
used for commercial photo lab, prepress, photo imaging and digital short-run
printing services. The Registrant intends to continue to use certain of such
assets, or maintain certain of such leases, for these purposes. As to the
remaining assets for which the Registrant has no present need, the Registrant
intends to sell such items in arms length transactions or allow the leases
therefor to lapse.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of the Business Acquired.
It is impracticable at this time to include herein the financial
statements of Speed for the periods specified in Item 310(c)(3) of Regulation
S-B. The required financial statements of Speed will be filed under cover of
Form 8-K/A as soon as
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practicable, but not later than March 25, 1998, which is sixty (60) days after
the date by which this Report on Form 8-K must be filed.
(b) Pro Forma Financial Information.
It is impracticable at this time to include herein the pro forma financial
information of the Registrant reflecting the Acquisition. The required pro forma
information will be filed under cover of Form 8-K/A as soon as practicable, but
not later than March 25, 1998, which is sixty (60) days after the date by which
this Report on Form 8-K must be filed.
(c) Exhibits.
Exhibit
Number Description
- ------- -----------
2.1*+ Asset Acquisition Agreement by and among the
Registrant, Katz N.Y. Acquisition, Inc., Speed
Graphics, Inc., DDP, Inc. and Ronald Krivosheiw, with
schedules thereto.(P)
4.1* Subordinated Promissory Note of Registrant to Speed
Graphics, Inc. (included in Exhibit 2.1 as a schedule
thereto.).
4.2*+ Loan Agreement by and among the Registrant, Katz N.Y.
Acquisition, Inc., Advanced Digital Services, Inc. and
the Bank of New York, with schedules thereto.
4.3* Term Loan Note of Registrant to the Bank of New York (included
in Exhibit 4.2 as a schedule thereto.).
4.4* Revolving Credit Loan Note of Registrant to the Bank of
New York (included in Exhibit 4.2 as a schedule
thereto.).
4.5* Subordination Agreement by and between Speed Graphics,
Inc. and the Bank of New York.
- ----------
* Filed herewith
+ Confidential treatment requested as to portions of this Exhibit.
(P) Portions of this Exhibit filed by paper with the Commission pursuant
to a hardship exemption.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 23, 1998
KATZ DIGITAL TECHNOLOGIES, INC.
By: /s/ Donald L. Flamm
------------------------
Donald L. Flamm
Chief Financial Officer and
Vice President - Finance
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Exhibit Index
Exhibit
Number Description
- ------- -----------
2.1*+ Asset Acquisition Agreement by and among the Registrant,
Katz N.Y. Acquisition, Inc., Speed Graphics, Inc., DDP, Inc.
and Ronald Krivosheiw, with schedules thereto.(P)
4.1* Subordinated Promissory Note of Registrant to Speed
Graphics, Inc. (included in Exhibit 2.1 as a schedule
thereto.).
4.2*+ Loan Agreement by and among the Registrant, Katz N.Y.
Acquisition, Inc., Advanced Digital Services, Inc. and the
Bank of New York, with schedules thereto.
4.3* Term Loan Note of Registrant to the Bank of New York (included
in Exhibit 4.2 as a schedule thereto.).
4.4* Revolving Credit Loan Note of Registrant to the Bank of New
York (included in Exhibit 4.2 as a schedule thereto.).
4.5* Subordination Agreement by and between Speed Graphics, Inc.
and the Bank of New York.
- ----------
* Filed herewith
+ Confidential treatment requested as to portions of this Exhibit.
(P) Portions of this Exhibit filed by paper with the Commission pursuant
to a hardship exemption.
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EXHIBIT 2.1
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ASSET ACQUISITION AGREEMENT
among
KATZ DIGITAL TECHNOLOGIES, INC.,
KATZ N.Y. ACQUISITION INC.,
SPEED GRAPHICS, INC.,
DDP, INC.
and
RONALD KRIVOSHEIW
FOR THE
ACQUISITION OF THE ASSETS OF SPEED GRAPHICS, INC.
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TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS......................................................2
1.1 Accountants......................................................2
1.2 Acquired Assets..................................................2
1.3 Acquired Liabilities.............................................3
1.4 Additional Shares................................................4
1.5 Affiliate........................................................4
1.6 Asserted Liability...............................................4
1.7 Assets...........................................................4
1.8 Assignment and Assumption Agreement..............................4
1.9 Audited 1995 and 1994 Financial Statements.......................5
1.10 Audited 1996 Financial Statements................................5
1.11 Audited Financial Statements.....................................5
1.12 Balance Sheet Date...............................................5
1.13 Balance Sheet Date Book Value....................................5
1.14 Bill of Sale.....................................................6
1.15 Blue Sky Filing..................................................6
1.16 Blue Sky Laws....................................................6
1.17 Book Value.......................................................6
1.18 Book Value Adjustment............................................7
1.19 Business Day.....................................................7
1.20 Cash Component...................................................7
1.21 Claims...........................................................7
1.22 Claims Notice....................................................7
1.23 Closing..........................................................7
1.24 Closing Date.....................................................7
1.25 Closing Date Balance Sheet.......................................7
1.26 Code.............................................................8
1.27 Commission.......................................................8
1.28 Common Stock.....................................................8
1.29 Contracts........................................................8
1.30 Controlled Company...............................................8
1.31 Delivered Financial Statements...................................8
1.32 Determining Accountant...........................................8
1.33 Employment Agreement.............................................9
1.34 Environmental Claim..............................................9
1.35 Environmental Law................................................9
1.36 ERISA............................................................9
1.37 Exchange Act.....................................................9
1.38 Excluded Assets.................................................10
1.39 Excluded Liabilities............................................10
1.40 Final Closing Book Value........................................10
1.41 Financial Statements............................................10
1.42 GAAP............................................................10
1.43 Governmental Body...............................................10
1.44 Hazardous Materials.............................................11
1.45 Indemnifying Party..............................................11
1.46 Indemnitee......................................................11
1.47 Inspectors......................................................11
1.48 Intellectual Property...........................................11
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1.49 KDTI Indemnified Parties........................................11
1.50 KDTI Securities Claims..........................................11
1.51 Knowledge.......................................................12
1.52 Lease Assignment Documents......................................12
1.53 Leased Premises.................................................12
1.54 Leases..........................................................12
1.55 Licenses........................................................12
1.56 Machinery and Equipment.........................................12
1.57 Material Adverse Effect.........................................13
1.58 Notice of Disagreement..........................................13
1.59 Order...........................................................13
1.60 Other Documents.................................................13
1.61 Other Shares....................................................13
1.62 Permitted Lien..................................................13
1.63 Person..........................................................14
1.64 Present Accountants.............................................14
1.65 Promissory Note.................................................14
1.66 Purchase Price..................................................14
1.67 Records.........................................................14
1.68 Register; Registered; Registration; Registration Statement......14
1.69 Registrable Securities..........................................15
1.70 Securities Act..................................................15
1.71 Share Certificates..............................................15
1.72 Share Price.....................................................15
1.73 Shares..........................................................15
1.74 Shortfall Shares................................................15
1.75 SPEED Business..................................................15
1.76 SPEED Indemnified Parties.......................................16
1.77 SPEED Securities Claims.........................................16
1.78 SPEED Shares....................................................16
1.79 Statement.......................................................16
1.80 Subordination Agreement.........................................16
1.81 Tax.............................................................16
1.82 Tax Return......................................................16
1.83 Unaudited Financial Statements..................................17
ARTICLE 2: SALE AND PURCHASE OF ACQUIRED ASSETS; ASSUMPTION OF
ASSUMED LIABILITIES
...............................................................17
2.1 Sale and Purchase of Acquired Assets.
...............................................................17
2.2 Certain Assets..................................................17
2.3 Assumed Liabilities.............................................17
ARTICLE 3: PURCHASE PRICE..................................................18
3.1 Calculation of Purchase Price...................................18
3.2 Allocation......................................................18
3.3 Post Closing Adjustments to Purchase Price......................19
3.3.1. Preparation of Closing Date Balance Sheet and the
Statement............................................19
3.3.2. Adjustments to Purchase Price Based upon Book
Value Adjustment.....................................21
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ARTICLE 4: THE CLOSING.....................................................22
4.1 Closing.........................................................22
4.2 Deliveries by SPEED at Closing..................................22
4.3 Deliveries by KDTI and KDTI-NY at Closing.......................24
4.4 Delivery of Other Agreements at Closing.........................25
ARTICLE 5: REGISTRATION OF SHARES..........................................25
5.1 Demand Registration Right.......................................25
5.2 Piggy Back Registration Right...................................26
5.3 Lock Up Agreements..............................................27
5.4 Preparation and Filing of Registration Statement................28
5.5 Preparation; Reasonable Investigation...........................31
5.6 Other Registration Rights.......................................32
5.6.1. No Existing Agreements...............................32
5.6.2. Future Agreements....................................32
5.7 Other Conditions and Limitations................................33
5.8 Application to Subsequent Holders...............................34
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF SPEED AND RONALD
.......................................................35
6.1 Existence and Good Standing.....................................35
6.2 Capital Stock...................................................35
6.3 Financial Statements............................................36
Absence of Adverse Changes......................................37
6.4 Books and Records...............................................37
6.5 Real Property; Personal Property; Machinery and Equipment.......38
6.5.1. Leasehold and other Real Property Interests..........38
6.5.2. Title to Acquired Assets.............................38
6.5.3. Machinery and Equipment. ............................39
Sufficiency of Assets...........................................39
6.6 Contracts.......................................................39
6.7 Litigation......................................................41
6.8 Taxes...........................................................41
6.9 Liabilities.....................................................42
6.10 Intellectual Property...........................................42
6.11 Compliance with Laws............................................43
6.12 Licenses........................................................43
6.13 Insurance.......................................................43
6.14 Supplier and Customer Relations.................................44
6.15 Employment Relations............................................44
6.16 Personnel; Compliance with ERISA................................45
6.16.1. SPEED's Personnel...................................45
6.16.2. Employee Benefit Plans. ............................45
6.17 No Changes Since the Balance Sheet Date.........................46
6.18 Valid Agreements; Restrictive Documents.........................47
6.19 Required Approvals, Notices and Consents........................48
6.20 Disclosure......................................................49
6.21 Environmental Conditions........................................49
6.22 Health and Safety Conditions....................................50
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Copies of Documents...................................................50
6.23 No Brokers......................................................51
6.24 Corporate Controls..............................................51
ARTICLE 7: REPRESENTATIONS OF KDTI AND KDTI-NY ............................51
7.1 Existence and Good Standing.....................................51
7.2 Shares..........................................................52
7.3 Valid Agreements; Restrictive Documents.........................52
7.4 Required Approvals, Notices and Consents........................54
7.5 No Brokers......................................................54
7.6 Disclosure......................................................54
7.8 Securities Laws.................................................55
ARTICLE 8: POST CLOSING COVENANTS..........................................55
8.1 General.........................................................56
8.4 Post-Closing Assistance.........................................57
8.5 Cooperation in Preparation of Securities Law Filings............57
8.6 Guarantees by Ronald and DDP....................................58
8.7 Election of Ronald to the KDTI Board............................58
8.8 Employees: Assumed Plans........................................59
8.9 Delivery of Financial Statements................................59
8.10 Employee Stock Options..........................................60
8.11 Third Party Consents............................................60
8.12 Non-competition.................................................63
8.13 Material Modifications to Bank Loan.............................63
ARTICLE 9: SURVIVAL OF REPRESENTATIONS; INDEMNITIES........................63
9.1 Survival of Representations and Warranties of SPEED and Ronald. 63
9.2 Obligations of SPEED and Ronald to Indemnify....................64
9.2.1. General Indemnity....................................64
9.2.2. Limitation on Indemnification Obligation.............65
9.3 Survival of Representations and Warranties of KDTI and KDTI-NY..67
9.3.1. Obligation of KDTI and KDTI-NY to Indemnify..........67
9.3.2. Limitation on Indemnification Obligation.............69
9.4 Notice and Opportunity to Defend................................70
9.4.1. Notice of Asserted Liability.........................70
9.4.2. Opportunity to Defend................................71
9.4.3. Settlement...........................................72
9.5 Exclusive Provisions; No Rescission.............................73
ARTICLE 10: MISCELLANEOUS...................................................73
10.1 Expenses........................................................73
10.2 Governing Law...................................................73
10.3 Interchangeability of Schedules.................................73
10.4 Captions........................................................74
10.5 Notices.........................................................74
10.6 Parties in Interest.............................................74
10.7 Severability....................................................75
10.8 Counterparts....................................................75
10.9 Entire Agreement; Amendments....................................75
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INDEX TO SCHEDULES
Schedule 1.3 Acquired Liabilities
Schedule 1.8 Assignment and Assumption Agreement
Schedule 1.14 Bill of Sale
Schedule 1.29 Contracts
Schedule 1.33 Employment Agreement
Schedule 1.38 Excluded Assets
Schedule 1.54 Leases
Schedule 1.65 Promissory Note
Schedule 1.80 Subordination Agreement
Schedule 4.2(ii) Opinion of SPEED's Counsel
Schedule 4.3(iv) Opinion of KDTI-NY's Counsel
Schedule 6.2 Stockholders and Capitalization of SPEED
Schedule 6.3.2 Changes to SPEED since the Balance Sheet Date
Schedule 6.4 Books and Records
Schedule 6.5.1 Real Property Encumbrances
Schedule 6.5.2 Title to Assets; Encumbrances
Schedule 6.5.3 Machinery and Equipment; Encumbrances
Schedule 6.6 Contracts
Schedule 6.7 Litigation
Schedule 6.8 Tax Liabilities
Schedule 6.9 Indebtedness for Borrowed Money
Schedule 6.10 Intellectual Property
Schedule 6.13 Insurance
Schedule 6.14 Suppliers and Customers
Schedule 6.15 Labor Agreements
Schedule 6.16 Personnel
Schedule 6.17 Changes since the Balance Sheet Date (SPEED)
Schedule 6.18 Valid Agreements; Restrictive Documents
Schedule 6.19 Approvals for SPEED
Schedule 6.21 Environmental Conditions
Schedule 7.4 Required Approvals, Notices and Consents (KDTI)
Schedule 7.6 Disclosure (KDTI)
Schedule 7.7 Changes since the Balance Sheet Date (KDTI)
Schedule 8.8 Assumed Plans
Schedule 8.10 Stock Option Grants
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ASSET ACQUISITION AGREEMENT
AGREEMENT dated as of January 1, 1998 ("Agreement") by and among KATZ
DIGITAL TECHNOLOGIES, INC., a Delaware corporation, having an address at
Twenty-One Penn Plaza, New York, New York 10001 (hereafter referred to as
"KDTI"); KATZ N.Y. ACQUISITION, INC., a Delaware corporation, having an address
at Twenty-One Penn Plaza, New York, New York 10001 (hereafter referred to as
"KDTI-NY" or "Purchaser"); SPEED GRAPHICS, INC., a New York corporation, having
an address at 342 Madison Avenue, New York, New York 10173-1062 (hereafter
referred to as "SGI"); DDP, INC., a New York corporation, having an address at
342 Madison Avenue, New York, New York 10173-1062 (hereafter referred to as
"DDP", and, collectively with SGI referred to as "SPEED"); and RONALD
KRIVOSHEIW, an individual residing at 40 Central Park South, New York, New York
10019 (hereafter referred to as "RONALD").
W I T N E S S E T H :
WHEREAS, KDTI-NY, a wholly owned subsidiary of KDTI, wishes to acquire and
SPEED is willing to sell to KDTI-NY the Acquired Assets (as defined herein),
subject to the assumption by KDTI-NY of the Acquired Liabilities (as defined
herein), upon the terms and conditions hereof.
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NOW, THEREFORE, in consideration of the agreements herein set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1: DEFINITIONS.
Capitalized terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article 1. Certain
additional defined terms are set forth elsewhere in this Agreement.
1.1 Accountants.
"Accountants" means the independent public accountants then regularly retained
by KDTI. All determinations to be made by the Accountants pursuant to the terms
of this Agreement shall be made, where stated, using GAAP.
1.2 Acquired Assets.
"Acquired Assets" means all of SPEED's right, title and interest in or to the
Assets as and to the extent existing on the Closing Date, including all
property, plant, machinery, equipment, computer hardware and software,
inventories, goodwill and other assets of every kind, character and description,
whether tangible or intangible, whether real, personal or mixed, and wherever
situated, employed or held in connection with the business or operations of
SPEED (other than the Excluded Assets), and including, without limitation, the
following:
i. all cash, cash equivalents, accounts receivable and all proceeds
thereof;
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ii. all inventory, work in process, product lines, tools, molds, parts,
supplies, furniture, fixtures and equipment, computer hardware and
software, spare parts and other tangible assets used in connection with
the SPEED Business;
iii. all Intellectual Property;
iv. all of the following relating to the SPEED Business and the
Intellectual Property: customer lists, account records, pricing
information, sales literature, promotional literature and all other books
and records, files, invoices, supplier lists, blueprints, specifications,
designs, drawings, prototypes, letters of credit, prepaid items and
deposits, and the name "Speed Graphics;"
v. SPEED's leasehold estate in the Leased Premises if and to the extent
each Lease relating thereto is assignable on the Closing Date, all
leasehold improvements (subject to any right of lessor under such Lease to
recover such improvements upon the expiration or termination of such
Lease) and all furniture, fixtures and equipment located at such Leased
Premises or otherwise used by SPEED in the conduct of its business,
wherever located, provided that, if any such Lease is not so assignable by
its terms, then SPEED will use all commercially reasonable efforts to
arrange for such assignment or a sublease of the premises to Purchaser or
its nominee, or otherwise to make such Leased Premises available for the
use and benefit of KDTI-NY;
vi. all Machinery and Equipment; and
vii. all Contracts and all warranties, claims and causes of action against
third parties relating to any of the Acquired Assets.
1.3 Acquired Liabilities.
"Acquired Liabilities" means (i) all of SPEED's liabilities as shown on SPEED's
June 30, 1997 balance sheet (including the notes thereto) as at the Balance
Sheet Date (other than those liabilities that have been paid or otherwise
satisfied or discharged prior to the Closing Date) and those liabilities of
SPEED arising in the ordinary course of business of SPEED since the Balance
Sheet Date, which are of the same nature as the liabilities set forth on such
balance sheet, (ii) all obligations (A) under real property and equipment leases
that are included in the Acquired Assets and (B) with respect to any current or
former employees or independent contractors,
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including without limitation obligations for accrued vacation pay, sick leave
and statutory and non-statutory severance benefits, (iii) all obligations of
SPEED for replacement of, or refund for, damaged, defective, or other returned
products or for warranty claims in respect of products sold by SPEED, (iv) all
obligations of SPEED under the Contracts and (v) all liabilities of SPEED in
connection with each action or matter set forth on Schedule 1.3 hereto, but
shall in any case exclude the Excluded Liabilities.
1.4 Additional Shares.
"Additional Shares" means any shares of Common Stock issued and delivered by
KDTI pursuant to Section 3.3.2.
1.5 Affiliate.
"Affiliate" means, with respect to any Person, any other Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.6 Asserted Liability.
"Asserted Liability" has the meaning given in Section 9.4.1.
1.7 Assets.
"Assets" means SPEED's assets shown on its unaudited balance sheet as at the
Balance Sheet Date.
1.8 Assignment and Assumption Agreement.
"Assignment and Assumption Agreement" has the meaning given in Section 4.2.
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1.9 Audited 1995 and 1994 Financial Statements.
"Audited 1995 and 1994 Financial Statements" means SPEED's combined balance
sheets, combined statements of income and retained earnings, and combined
statements of cash flow and related footnotes thereto as at and for the twelve
(12) month periods ending December 31, 1995 and December 31, 1994, respectively.
1.10 Audited 1996 Financial Statements.
"Audited 1996 Financial Statements" means SPEED's combined balance sheets,
combined statements of income and retained earnings, and combined statements of
cash flow and related footnotes thereto as at and for the twelve (12) month
period ending December 31, 1996, audited by the Present Accountants.
1.11 Audited Financial Statements.
"Audited Financial Statements" means the Audited 1996 Financial Statements and
the Audited 1995 and 1994 Financial Statements.
1.12 Balance Sheet Date.
"Balance Sheet Date" means June 30, 1997.
1.13 Balance Sheet Date Book Value.
"Balance Sheet Date Book Value" means Two Million Nine Hundred Four Thousand
Dollars ($2,904,000.00), which represents (i) the difference between (A) the
total assets of SPEED as shown on the Audited 1996 Financial Statements and (B)
the total liabilities of SPEED as shown on the Audited 1996 Financial Statements
plus (ii) Five Hundred Twenty Five Thousand Dollars ($525,000.00).
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1.14 Bill of Sale.
"Bill of Sale" has the meaning given in Section 4.2.
1.15 Blue Sky Filing.
"Blue Sky Filing" means the filing of any application, registration, statement
or other document with any Governmental Body of any state, the District of
Columbia, or any territory or other jurisdiction in the United States necessary
to register or qualify the sale of the Registrable Securities in such
jurisdiction in or through the public securities markets.
1.16 Blue Sky Laws.
"Blue Sky Laws" means the laws of any state, the District of Columbia, or any
territory or other jurisdiction in the United States governing the purchase
and/or sale of securities in such jurisdiction.
1.17 Book Value.
"Book Value" means the difference between (i) the total assets of SPEED on the
Closing Date as reflected on the Closing Date Balance Sheet (excluding all
Excluded Assets) and (ii) the total liabilities of SPEED on the Closing Date as
reflected on the Closing Date Balance Sheet (excluding all Excluded
Liabilities), except that Book Value shall not include, and no adjustment
thereto pursuant to Section 3.3 shall be made in respect of, any contingent
liability for severance or other payments under the employment agreement dated
August 22, 1997 with Robert Heck, or for any liability arising after the Closing
Date for amounts due to Carmine Furci under a non-compete agreement dated
October 9, 1991, as amended August 16, 1995, or for contingent liabilities
arising after the Closing Date for the maintenance or repair of Machinery and
Equipment included in the Acquired Assets. Notwithstanding the foregoing, the
parties agree
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that all accruals required by GAAP with respect said agreements with Messrs.
Heck and Furci and the maintenance or repair obligations shall be reflected in
the Closing Date Balance Sheet.
1.18 Book Value Adjustment.
"Book Value Adjustment" means the difference, if any, between the Final Closing
Book Value and the Balance Sheet Date Book Value.
1.19 Business Day.
"Business Day" means a day, other than Saturday, Sunday or a day on which banks
in New York City are required or permitted to be closed.
1.20 Cash Component.
"Cash Component" has the meaning given in Section 3.1.
1.21 Claims.
"Claims" has the meaning given in Section 9.2.1.
1.22 Claims Notice.
"Claims Notice" has the meaning given in Section 9.4.1.
1.23 Closing.
"Closing" means the closing of the transactions described in this Agreement
pursuant to Section 4 of this Agreement.
1.24 Closing Date.
"Closing Date" means the date of this Agreement.
1.25 Closing Date Balance Sheet.
"Closing Date Balance Sheet" has the meaning given in Section 3.3.1.
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1.26 Code.
"Code" means the Internal Revenue Code of 1986, as amended.
1.27 Commission.
"Commission" means the United States Securities and Exchange Commission.
1.28 Common Stock.
"Common Stock" means the shares of common stock, par value $.001 per share, of
KDTI.
1.29 Contracts.
"Contracts" means all contracts, leases, licenses, commitments, sales orders,
invoices, purchase orders and other agreements relating to the SPEED Business,
including the agreements listed on Schedule 1.29.
1.30 Controlled Company.
"Controlled Company" means (i) any Affiliate of SPEED and (ii) any Affiliate of
Ronald which is engaged in a line of business which is similar to or competes
with the SPEED Business or acts as a supplier or customer of SPEED.
1.31 Delivered Financial Statements.
"Delivered Financial Statements" has the meaning given in Section 6.3.1.
1.32 Determining Accountant
"Determining Accountant" shall mean an accountant that has no past or existing
relationship with SPEED, KDTI or any of their respective Affiliates and that is
selected by the Accountants and the Present Accountants in accordance with this
Agreement, or, in the event of such two accountants' inability to select a
Determining Accountant, by a Judge of the Supreme Court of the State of New
York, County of New York, upon petition by either KDTI or SPEED.
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1.33 Employment Agreement.
"Employment Agreement" means the agreement between KDTI and Ronald, in the form
annexed hereto as Schedule 1.33.
1.34 Environmental Claim.
"Environmental Claim" means any written notice, claim, demand, action, suit,
complaint, proceeding or other written communication by any Person alleging
liability or potential liability (including, without limitation, liability or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of or relating to (i) the discharge, emission,
release or threatened release of any Hazardous Materials, at any of Speed's
locations in violation of any Environmental Law, or (ii) the violation or
alleged violation by SPEED of any permit, license, registration or other
authorization required under applicable Environmental Laws.
1.35 Environmental Law.
"Environmental Law" means any existing applicable federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, notification and reporting requirements of any Governmental Body, or
requirements of law (including, without limitation, common law) relating in any
manner to contamination, pollution, or the conservation, preservation or
protection of human health or the environment.
1.36 ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
1.37 Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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1.38 Excluded Assets.
"Excluded Assets" means all items described on Schedule 1.38.
1.39 Excluded Liabilities.
"Excluded Liabilities" means (i) accounts payable, obligations, liabilities and
debts of SPEED to (a) any Affiliate of SPEED, or (b) Ronald or any other
director or officer of SPEED or any Affiliate thereof; (ii) all unpaid dividends
or distributions to SGI's stockholder; (iii) all Tax liabilities for periods
prior to the Closing Date, other than such liabilities for which accruals or
reserves exist on the Closing Date Balance Sheet; and (iv) any other liabilities
and contingent liabilities not reflected on the Closing Date Balance Sheet (or
the footnotes thereto) that are not Acquired Liabilities.
1.40 Final Closing Book Value.
"Final Closing Book Value" has the meaning given in Section 3.3.
1.41 Financial Statements.
"Financial Statements" means the Audited Financial Statements and the Unaudited
Financial Statements.
1.42 GAAP.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
1.43 Governmental Body.
"Governmental Body" means any applicable court, tribunal, arbitrator or any
government or political subdivision thereof, whether federal, state, county or
local, or any agency, authority, official or instrumentality of any such
government or political subdivision.
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1.44 Hazardous Materials.
"Hazardous Materials" means any and all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants, polychlorinated biphenyls and any and all other materials and
substances regulated pursuant to any Environmental Laws.
1.45 Indemnifying Party.
"Indemnifying Party" has the meaning given in Section 9.4.1.
1.46 Indemnitee.
"Indemnitee" has the meaning given in Section 9.4.1.
1.47 Inspectors.
"Inspectors" has the meaning given in Section 5.5.
1.48 Intellectual Property.
"Intellectual Property" means United States and foreign patents, patent
applications, patent licenses, software licenses and know-how licenses, trade
names, trademarks, copyrights, service marks, trademark registrations and
applications (whether pending or abandoned), service mark registrations and
applications, copyright registrations and applications (whether pending or
abandoned), job or shop rights, rights to inventions and all other items of
intellectual property or other intangible property used in the SPEED Business.
1.49 KDTI Indemnified Parties.
"KDTI Indemnified Parties" has the meaning given in Section 9.2.1.
1.50 KDTI Securities Claims.
"KDTI Securities Claims" has the meaning given in Section 9.3.1.
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1.51 Knowledge
"Knowledge" of any matter means, with respect to an individual, the actual
knowledge, but not constructive or imputed knowledge, after due inquiry, of such
matter of such Person and, with respect to any Person that is not an individual,
such actual knowledge of each individual that is a director, officer, manager,
employee, counsel, accountant, investment banker or other professional advisor
of such Person.
1.52 Lease Assignment Documents
"Lease Assignment Documents" means the documents evidencing the assignment of
all right, title and interest of SPEED in the Leases to KDTI-NY, as lessee.
1.53 Leased Premises
"Leased Premises" means the premises used or occupied by SPEED under the Leases.
1.54 Leases.
"Leases" means the leases for all Leased Premises used or occupied by SPEED in
the SPEED Business, as listed on Schedule 1.54.
1.55 Licenses.
"Licenses" has the meaning given in Section 6.12.
1.56 Machinery and Equipment.
"Machinery and Equipment" means all machinery, equipment, vehicles and all
leases and subleases of machinery, equipment or vehicles, located at any plant,
facility or property of SPEED or used or held by SPEED in connection with its
business.
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1.57 Material Adverse Effect.
"Material Adverse Effect" means any change or changes or effect or effects that
individually or in the aggregate are or may reasonably be expected to be
materially adverse to the condition (financial or otherwise) of SPEED.
1.58 Notice of Disagreement.
"Notice of Disagreement" has the meaning given in Section 3.3.1.
1.59 Order.
"Order" means any judgment, writ, decree, injunction or similar order of any
Governmental Body, in each case whether preliminary or final.
1.60 Other Documents.
"Other Documents" means all Schedules and Exhibits to this Agreement and all
other instruments, agreements and documents executed or to be executed by any
party hereto in connection with the transactions contemplated hereby.
1.61 Other Shares.
"Other Shares" has the meaning given in Section 5.2.
1.62 Permitted Lien.
"Permitted Lien" means (i) any lien for Taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings, provided that appropriate
reserves or other appropriate provisions are made therefor to the extent
required by GAAP, (ii) any statutory lien arising in the ordinary course of
business by operation of law with respect to an obligation or liability that is
not yet due or delinquent or which are being contested in good faith by
appropriate proceedings (provided that appropriate reserves or other appropriate
provisions are made therefor
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to the extent required by GAAP) and (iii) any minor imperfection of title or
similar lien or encumbrance which individually or in the aggregate with other
such imperfections of title, liens or encumbrances do not have a Material
Adverse Effect.
1.63 Person.
"Person" means and includes an individual, a partnership, a joint venture, a
joint stock company, a corporation, a limited liability company, a trust, an
unincorporated association or organization and a government or a department or
agency, authority, official or instrumentality thereof, or any group of the
foregoing acting in concert.
1.64 Present Accountants
"Present Accountants" means the firm of Berenson & Company LLP.
1.65 Promissory Note.
"Promissory Note" means the promissory note, in the form attached hereto as
Schedule 1.65.
1.66 Purchase Price.
"Purchase Price" has the meaning set forth in Section 3.1.
1.67 Records.
"Records" has the meaning given in Section 5.5.
1.68 Register; Registered; Registration; Registration Statement.
The terms "register," "registered," "registration" and "registration statement"
shall refer to a registration of securities to be offered and sold under a
registration statement filed with the Commission, that becomes effective
pursuant to the Securities Act or the Exchange Act and the applicable rules and
regulations under either such Act.
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1.69 Registrable Securities.
"Registrable Securities" has the meaning given in Section 5.1.
1.70 Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
1.71 Share Certificates.
"Share Certificates" means the certificates representing the Shares and any
Additional Shares, which shall bear the following legend:
Any transfer or other disposition of the shares represented by this
certificate is subject to the provisions of an Asset Acquisition Agreement
dated as of January 1, 1998, among Katz Digital Technologies, Inc. (the
"Corporation"), Katz N.Y. Acquisition, Inc., Speed Graphics, Inc., DDP,
Inc. and Ronald Krivosheiw. The shares of stock represented by this
Certificate have not been registered under the United States Securities
Act of 1933, as amended (the "Act"), and may be transferred only if (i)
registered under the Act and the requirements of any state having
jurisdiction are complied with or (ii) the transfer is exempt from such
registration and state requirements and counsel reasonably acceptable to
the Corporation has delivered to the Corporation a written opinion
reasonably acceptable to the Corporation setting forth the basis for such
exemption.
1.72 Share Price.
"Share Price" means $3.403.
1.73 Shares.
"Shares" means 293,848 shares of Common Stock.
1.74 Shortfall Shares.
"Shortfall Shares" has the meaning given in Section 3.3.2.
1.75 SPEED Business.
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"SPEED Business" means SPEED's business and operations reflected in the
Unaudited Financial Statements as at and for the period ending on the Balance
Sheet Date and as conducted through the Closing Date.
1.76 SPEED Indemnified Parties.
"SPEED Indemnified Parties" has the meaning given in Section 9.3.1.
1.77 SPEED Securities Claims.
"SPEED Securities Claims" has the meaning given in Section 9.2.1.
1.78 SPEED Shares.
"SPEED Shares" means all of the issued and outstanding shares of capital stock
of SGI.
1.79 Statement.
"Statement" has the meaning given in Section 3.3.1.
1.80 Subordination Agreement.
"Subordination Agreement" means the Subordination Agreement in favor of the Bank
of New York, substantially in the form of Schedule 1.80.
1.81 Tax.
"Tax" means all federal, state, local and foreign income, profits, franchise,
sales, use, occupancy, excise and payroll taxes or charges imposed by any
Governmental Body, and includes any interest and penalties on or additions to
any such taxes and any expenses incurred in connection with the determination,
settlement or litigation of any liability for such taxes.
1.82 Tax Return.
"Tax Return" means any return, report, information return or other document
(including any related or supporting information) filed or required to be filed
with any federal, state, local or
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foreign Governmental Body in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
1.83 Unaudited Financial Statements.
"Unaudited Financial Statements" means SPEED's balance sheet, statement of
income and retained earnings, prepared by SPEED, for:
i. the six (6) month period ended June 30, 1997;
ii. the ten (10) month period ended October 31, 1997; and
iii. the eleven (11) month period ended November 30, 1997.
ARTICLE 2: SALE AND PURCHASE OF ACQUIRED ASSETS; ASSUMPTION OF
ASSUMED LIABILITIES
2.1 Sale and Purchase of Acquired Assets.
Subject to the terms and conditions set forth in this Agreement, SPEED
hereby agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from SPEED, at the Closing all of the Acquired Assets, free and clear
of any liabilities, liens, security interests, pledges, conditions or
encumbrances other than the Permitted Liens and Acquired Liabilities.
2.2 Certain Assets.
Immediately after the Closing Date, none of SPEED, Ronald or any
Controlled Company shall have or control any assets related to or necessary in
the conduct of the SPEED Business.
2.3 Assumed Liabilities.
Subject to the terms and conditions set forth in this Agreement, KDTI and
the Purchaser agree that, on the Closing Date, KDTI and the Purchaser shall
jointly and severally assume and
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thereafter pay, perform and discharge when due all of the Acquired Liabilities
arising under the Contracts, and the Purchaser shall assume and thereafter pay,
perform and discharge when due all other Acquired Liabilities.
ARTICLE 3: PURCHASE PRICE 3.1 Calculation of Purchase Price.
Subject to adjustment pursuant to Section 3.3, the aggregate purchase
price (the "Purchase Price") for the Acquired Assets is the sum of:
i. $9,214,000.00, as adjusted pursuant to Section 3.3.1 (the
"Cash Component"), payable as provided in Section 4.2;
ii. $2,000,000.00 payable in accordance with the terms of the
Promissory Note; and
iii. the Shares.
3.2 Allocation.
The Purchase Price is allocated (the "Purchase Price Allocation") among
the Acquired Assets as set forth on Schedule 3.2. Such Purchase Price Allocation
is being made consistent with Section 1060 of the Code. Each of the parties
hereto shall not, and shall not permit any of its Affiliates to, take a position
(except as required pursuant to any Order) on any Tax Return before any
Governmental Body charged with the collection of any Tax, or in any judicial
proceeding, that is in any way inconsistent with the Purchase Price Allocation
determined in accordance with this Section 3.2.
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3.3 Post Closing Adjustments to Purchase Price.
3.3.1. Preparation of Closing Date Balance Sheet and the Statement. As
promptly as practicable and in any event on or before February 16, 1998,
SPEED shall cause the Present Accountants to prepare and deliver to KDTI
(i) an audited balance sheet for SPEED as at the Closing Date (the
"Closing Date Balance Sheet") prepared in accordance with GAAP in the
manner used to prepare SPEED's balance sheet as at the Balance Sheet Date
and the Audited Financial Statements; provided, however, that for purposes
of preparing the Closing Date Balance Sheet only, no Excluded Assets and
no Excluded Liabilities shall be included in such balance sheet (and
liabilities shall not include any contingent liability for severance or
other payments under the employment agreement dated August 22, 1997 with
Robert Heck, or for any liability arising after the Closing Date for the
amounts due to a former stockholder under a non-compete agreement dated
October 9, 1991, as amended August 16, 1995, or for any liability arising
after the Closing Date for the maintenance or repair of Machinery and
Equipment included in the Acquired Assets; notwithstanding the foregoing,
the parties agree that all accruals required by GAAP with respect to said
agreements with Messrs. Heck and Furci and the maintenance or repair
obligations shall be reflected in the Closing Date Balance Sheet, and (ii)
a statement (the "Statement") setting forth the Book Value. The costs and
expenses of the Present Accountants incurred after the Closing in
connection with the preparation and delivery of the Closing Date Balance
Sheet and the Statement shall be paid by SPEED, except that KDTI shall
reimburse SPEED for up to $35,000.00 of the amount charged by the Present
Accountants for such work. Not later than 15 business
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days after the Closing Date Balance Sheet and the Statement are delivered
to KDTI, KDTI shall notify SPEED in writing (the "Notice of Disagreement")
whether KDTI disagrees with the Closing Date Balance Sheet and the
Statement. If no Notice of Disagreement is received by SPEED within such
15-business day period, then the Closing Date Balance Sheet and the
Statement shall be deemed to be accepted and agreed to by KDTI. KDTI shall
have the right to review the ledgers, books, records and work papers of
SPEED and the Present Accountants utilized in preparing the Closing Date
Balance Sheet and the Statement. The Notice of Disagreement shall provide
specific reasons for the disagreement. If such Notice of Disagreement is
given, then KDTI and SPEED shall use reasonable efforts to resolve the
disagreement regarding the Closing Date Balance Sheet and the Statement.
If no agreement is reached between them within thirty (30) days after the
date on which KDTI gives its Notice of Disagreement, then the Determining
Accountant shall be appointed by the Accountants and the Present
Accountants within ten (10) days thereafter with instructions to resolve
the disagreement and provide a report of its determination of the amounts
in dispute within thirty (30) days of its appointment. The Determining
Accountant may examine all ledgers, books, records and work papers
utilized in connection with the accounting and preparation of the Closing
Date Balance Sheet and the Statement but the scope of its engagement will
be limited to resolving those items which KDTI identified in its Notice of
Disagreement as to which KDTI disagreed and determining whether such items
were properly reflected on the Statement in accordance with the
requirements of this Section 3.3; provided that the Determining Accountant
shall also make such other changes to the Closing Date
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Balance Sheet as are necessary and appropriate for the consistent
presentation thereof in light of its determination of the specific issues
in dispute. The decision of the Determining Accountant shall be delivered
in a written report addressed to KDTI and SPEED and shall be binding and
conclusive upon the parties hereto. The costs and fees of the Determining
Accountant shall be borne one-half by SPEED and one-half by KDTI. The Book
Value set forth in the Closing Date Balance Sheet and the Statement,
either as agreed to by SPEED and KDTI if the Closing Date Balance Sheet
and the Statement are not referred to the Determining Accountant or as
finally determined by the Determining Accountant, is referred to herein as
the "Final Closing Book Value."
3.3.2. Adjustments to Purchase Price Based upon Book Value Adjustment.
Upon the fifth Business Day after completion of the calculation of the
Final Closing Book Value, the Purchase Price shall be adjusted in the
manner set forth in this Section 3.3.2.
i. If the Final Closing Book Value is less than the Balance Sheet
Date Book Value, the Purchase Price shall be reduced by such
Book Value Adjustment, and SPEED shall deliver to KDTI (A) a
number of shares of Common Stock (the "Shortfall Shares")
equal to the quotient of (1) 50% of the lesser of (x) the Book
Value Adjustment and (y) $75,000 and (2) the Share Price, and
(B) by wire transfer of immediately available funds to an
account designated in writing by KDTI, an amount equal to the
balance of the Book Value Adjustment. In the event SPEED is
required to deliver to KDTI any Shortfall Shares pursuant to
the preceding sentence, SPEED shall deliver to KDTI, or the
transfer agent for the Common Stock, one or more certificates
representing the Shortfall Shares, which certificates shall be
duly endorsed, or accompanied by stock powers duly executed,
in such manner as is necessary to transfer the Shortfall
Shares to KDTI in accordance with Article 8 of the Uniform
Commercial Code of New York. In the event the total number of
shares of Common Stock represented by any certificate(s)
delivered to KDTI in accordance with the preceding sentence
exceeds the Shortfall Shares, KDTI shall deliver to SPEED new
certificates for such excess as may be directed by SPEED.
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ii. If the Final Closing Book Value is greater than the Balance
Sheet Date Book Value, the Purchase Price shall be increased
by such Book Value Adjustment, and KDTI shall deliver to SPEED
(A) a number of shares of Common Stock equal to the quotient
of (1) 50% of the lesser of (x) the Book Value Adjustment and
(y) $75,000 and (2) the Share Price, and (B) by wire transfer
of immediately available funds to an account designated in
writing by SPEED, an amount equal to the balance of the Book
Value Adjustment.
ARTICLE 4: THE CLOSING
4.1 Closing.
The Closing is taking place as of the opening of business on the date
hereof at the offices of KDTI's counsel, Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass LLP, 750 Lexington Avenue, New York, New York 10022.
4.2 Deliveries by SPEED at Closing.
At the Closing, SPEED is delivering, or causing to be delivered, to KDTI
and KDTI-NY:
i. the opinion of Rogers & Wells, counsel for SPEED, in the form
annexed hereto as Schedule 4.2(i);
ii. a copy of SPEED's Certificate of Incorporation, including all
amendments, certified by the office of the Secretary of State
of New York and a certificate from the office of the Secretary
of State of New York and each state in which SPEED has
qualified as a foreign corporation to do business, to the
effect that such corporation is in good standing in each such
state and that it owes no taxes;
iii. a certificate signed by the Secretary of SPEED certifying as
to (a) the Certificate of Incorporation and By-Laws of SPEED
being true and correct as of the Closing Date, (b) resolutions
of the Board of Directors of SPEED, authorizing and approving
all matters in connection with this Agreement and the
transactions contemplated hereby, and (c) the
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incumbency of the officer(s) of SPEED executing this Agreement
and any related agreements;
iv. the Lease Assignment Documents;
v. an Assignment and Assumption Agreement (the "Assignment and
Assumption Agreement") substantially in the form of Schedule
1.8 and a Bill of Sale (the "Bill of Sale") substantially in
the form of Schedule 1.14;
vi. a certificate signed by a duly authorized executive officer of
SPEED that the representations and warranties of SPEED
contained in this Agreement are true, correct and complete on
and as of the Closing Date and that SPEED has performed and
complied with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior
to the Closing Date;
vii. copies of written consents to assignment of the Leases (to the
extent necessary under the Leases) and other Contracts
included in the Acquired Assets or Assumed Liabilities,
executed by the counterparties thereto;
viii. a letter from the Present Accountants confirming that in
connection with any review of the Closing Date Balance Sheet
pursuant to Section 3.3.1, the Present Accountants will
cooperate with KDTI and make available its work papers with
respect thereto;
ix. the Subordination Agreement;
x. a Certificate of Amendment to the Certificate of Incorporation
of SGI, duly executed and in suitable form for filing by the
Department of State of New York, changing the name of SGI to
Moondance, Inc.; and
xi. such other instruments or documents as may be reasonably
necessary in order to consummate the transactions described in
this Agreement.
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4.3 Deliveries by KDTI and KDTI-NY at Closing.
At the Closing, KDTI and KDTI-NY are delivering, or causing to be
delivered, to SPEED:
i. the Cash Component (in effect on the Closing Date) in
immediately available funds by wire transfer to the account
designated by SPEED;
ii. the executed Promissory Note;
iii. the Share Certificates representing the Shares;
iv. the opinion of Messrs. Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass LLP, counsel to KDTI and KDTI-NY, in the form
annexed hereto as Schedule 4.3(iv);
v. a copy of KDTI's and KDTI-NY's respective Certificates of
Incorporation, including all amendments, certified, in each
case, by the office of the Secretary of State of Delaware; and
certificates from the office of the Secretary of State of
Delaware to the effect that each of KDTI and KDTI-NY is in
good standing and owes no taxes in Delaware;
vi. certificates signed by the Secretary of each of KDTI and
KDTI-NY, certifying as to (a) the Certificate of Incorporation
and By-Laws of each of KDTI and KDTI-NY, respectively, (b)
resolutions of the Board of Directors of each of KDTI and
KDTI-NY, respectively, authorizing and approving all matters
in connection with this Agreement and the transactions
contemplated hereby, and (c) the incumbency of the officer(s)
of each of KDTI or KDTI-NY, respectively, executing this
Agreement and any related agreements;
vii. any Lease Assignment Documents to which KDTI or KDTI-NY is a
party;
viii. the Assignment and Assumption Agreement and the Bill of Sale;
ix. a certificate signed by a duly authorized executive officer of
each of KDTI and KDTI-NY that the representations and
warranties of each of KDTI and KDTI-NY contained in this
Agreement are true, correct and complete on and as of the
Closing Date and that each of KDTI and KDTI-NY has performed
and complied with all covenants and agreements required by
this Agreement to be performed or complied with by it on or
prior to the Closing Date; and
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x. executing and delivering such other instruments or documents
as may be reasonably necessary in order to consummate the
transactions described in this Agreement.
4.4 Delivery of Other Agreements at Closing.
At the Closing, (i) KDTI and Ronald are executing and delivering the
Employment Agreement to one another and (ii) KDTI is delivering to each of John
Sheehan and Robert Curran options to purchase 27,500 shares of Common Stock,
respectively, at an exercise price equal to the fair market value per share of
Common Stock on the date of grant.
ARTICLE 5: REGISTRATION OF SHARES
5.1 Demand Registration Right.
SPEED shall have the one-time right at any time within three (3) years
after the Closing Date to make a written request that KDTI register the Shares
and any Additional Shares (the "Registrable Securities"), and KDTI thereafter
agrees to use its best efforts to file a registration statement with the
Commission and to have such registration statement declared effective, to
permit, when such registration statement becomes effective, the sale of the
Registerable Securities in the public securities markets. KDTI may include in
the registration statement filed pursuant to this Article 5 any authorized but
unissued shares of Common Stock for sale by KDTI or any issued and outstanding
securities for sale by others; provided, however, that if the sale of the
Registerable Securities is to be underwritten and if the managing underwriter or
representative of the underwriters advises KDTI in writing that marketing
factors require a limitation of the number of shares of Common Stock so to be
included in the registration, the
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number of Registrable Securities that may be included in the underwriting shall
be reduced only after all shares of Common Stock, other than Registrable
Securities, are excluded from the registration.
5.2 Piggy Back Registration Right.
If at any time during the three (3) year period following the Closing
Date, KDTI proposes to register any of its securities under the Securities Act
(other than pursuant to a Registration Statement on Form S-8, S-4 or similar or
successor form), KDTI shall give notice of such intention to Ronald, and, if,
within ten (10) business days thereafter KDTI receives a written request by
SPEED to register the Registrable Securities (which request shall specify the
Registrable Securities intended to be sold or disposed of and shall state the
intended method of disposition of the Registrable Securities by SPEED), KDTI
will use its best efforts to register such Registrable Securities with the
securities being registered by KDTI to permit the sale or other disposition of
the Registrable Securities (in accordance with the intended methods thereof of
which KDTI has been given notice) by SPEED. In the event that the proposed
registration under this Section 5.2 is, in whole or in part, an underwritten
public offering of Common Stock of KDTI, any request pursuant to this Section
5.2 to register Registrable Securities may specify that such Registrable
Securities are to be included in the underwriting on the same terms and
conditions as the shares of Common Stock, if any, otherwise being sold through
underwriters under such registration; provided, however, that as to any
registration pursuant to this Section 5.2, (i) if the managing underwriter
determines and advises KDTI in writing that the inclusion of all Registrable
Securities proposed to be included in the underwritten public offering and other
issued and outstanding shares of Common Stock proposed to be included therein by
persons
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other than SPEED or KDTI (the "Other Shares") would interfere with the
successful marketing of such securities, then the number of Registrable
Securities and Other Shares excluded from such registration shall be allocated
pro rata among the holders of the Other Shares (based on the number of shares of
Common Stock requested by the holders thereof to be registered in such offering,
except for Other Shares included therein at the request of holders thereof
exercising demand registration rights with respect to such other Shares), and
(ii) in each case those shares of Common Stock that are excluded from the
underwritten public offering pursuant to this Section 5.2 shall be withheld from
the market by the holders thereof and SPEED for such period that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
5.3 Lock Up Agreements.
SPEED agrees that, for so long as Gary Katz is subject to the volume
limitations on the resale of Common Stock provided by Rule 144 under the
Securities Act, SPEED will not sell, assign, pledge or otherwise transfer or
engage in short-selling or hedging transactions with respect to the Registrable
Securities, except with respect to that number of Registrable Securities which
could be sold at any time or in any period if the provisions of Rule 144e(1) (as
in effect on the date of this Agreement) applied to SPEED as if the Registrable
Securities were "restricted securities" as defined in Rule 144(a)(3),
notwithstanding that the Registrable Securities may have been registered for
sale under the Securities Act or that SPEED may not be an "affiliate" as defined
in Rule 144(a)(1); provided, however, that the foregoing restriction shall (i)
terminate immediately upon the termination of employment of Ronald under the
Employment Agreement for "Good Reason" (as defined in the Employment Agreement)
or other than for "Cause" (as
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defined in the Employment Agreement) and (ii) shall not prohibit or in any way
restrict the transfer of any or all of the Shares or Additional Shares, if any,
by Speed or its Affiliates to Speed or an Affiliate of Speed; provided, further,
however, that any transferee shall acquire such Shares subject to the provisions
of this Article 5. In addition, for so long as Ronald is a director or officer
of KDTI or holds beneficially or of record 5% or more of the shares of Common
Stock from time to time outstanding, SPEED shall agree to any restrictions on
its resale of the Registrable Securities, whether in public or non-public
transactions, as required by the managing underwriter, representative or selling
agent of any public or private offering of Common Stock by KDTI and shall
execute and deliver to KDTI and such managing underwriter, representative or
selling agent an agreement to such effect, if each other director and officer of
KDTI and holder of 5% or more of the shares of Common Stock from time to time
outstanding likewise agree to such restrictions on resale and executes and
delivers such an agreement.
5.4 Preparation and Filing of Registration Statement.
With respect to any registration statement to be prepared by KDTI under
this Agreement, KDTI shall, at its sole expense, as expeditiously as
practicable:
i. prepare and file with the Commission a registration statement
necessary to permit the sale of the Registrable Securities in
the public securities markets when such registration statement
becomes effective, and such amendments and supplements to such
registration statement and the prospectus included therein as
may be necessary, to the extent reasonably practicable, to
cause such registration statement to become effective; to
cause such registration statement to become effective; and to
maintain the effectiveness of such registration statement and
to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities
covered by such registration statement, in accordance with the
intended methods of disposition thereof; provided that KDTI
shall not be required to maintain such effectiveness for any
time after (a) the disposition of the Registrable Securities
in accordance with
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the intended methods of disposition thereof as set forth
therein or (b) nine months after the date of effectiveness of
such Registration Statement;
ii. furnish to SPEED such number of conformed copies of such
registration statement and of each amendment or supplement
thereto (in each case including all exhibits and documents
incorporated therein by reference), such number of copies of
any prospectus included in such registration statement and
such other documents, in each case, as SPEED may reasonably
request in order to facilitate the sale of the Registrable
Securities in the public securities markets;
iii. register or qualify the Registrable Securities under the Blue
Sky Laws of each state governing further purchase or sale of
securities as SPEED may reasonably request, keep such
registration or qualification in effect for so long as such
registration statement remains in effect and take any other
action that may be reasonably necessary or advisable to enable
SPEED to consummate the disposition in such states of the
Registrable Securities; provided that KDTI shall not be
required to keep such registration or qualification in effect
at any time after (a) the disposition of the Registrable
Securities in accordance with the manner of disposition set
forth in the registration statement relating thereto or (b)
nine months after the date such registration statement becomes
effective; and provided, further, that KDTI will not be
required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to
qualify but for this paragraph or (B) subject itself to
taxation in any such jurisdiction;
iv. notify SPEED promptly, and confirm such advice in writing:
(a) when the registration statement or any amendment thereto
has been filed and when it has become effective;
(b) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose; and
(c) of the registration or qualification of the Registrable
Securities for sale under the Blue Sky Laws of any
jurisdiction affecting such registration or qualification;
v. make every reasonable effort to obtain the withdrawal of any
Order suspending the effectiveness of the registration
statement;
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vi. cause all of the Registrable Securities covered by the
registration statement to be listed on each securities
exchange, or designated for inclusion in each automated
interdealer quotation system, on which the Common Stock is
listed or included;
vii. provide and cause to be maintained a transfer agent for all
Registrable Securities covered by the registration statement
from and after a date not later than the effective date of the
registration statement;
viii. cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other
Governmental Bodies as may be reasonably necessary to enable
each holder thereof to consummate the disposition of such
Registrable Securities; provided that KDTI shall not be
required to maintain such registration or approval for any
time after (a) the disposition of the Registrable Securities
in accordance with the intended methods of disposition thereof
as set forth therein or (b) nine months after the date of
effectiveness of such registration statement;
ix. furnish to SPEED a signed counterpart, addressed to SPEED (and
the underwriters, if any), of an opinion of counsel for KDTI,
dated the effective date of such registration statement (or,
if such registration relates to an underwritten public
offering, dated the date of any closing under the underwriting
agreement), if and in the form delivered to any underwriter or
other purchaser of securities offered thereunder, covering
substantially the same matters with respect to such
registration statement (and the prospectus included therein)
as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings
of securities;
x. notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which any
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading,
and at the request of any such holder promptly prepare and
furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a
material fact required to be stated therein
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or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
and
xi. comply with all applicable rules and regulations of the
Commission, and make available to its securityholders, as soon
as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar
month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
5.5 Preparation; Reasonable Investigation.
In connection with the preparation and filing of the registration
statement and any amendments thereto and any Blue Sky Filing, KDTI will give
SPEED and its counsel and accountant the opportunity to review, in each case, a
reasonable time prior to their filing, the registration statement, each
prospectus included therein or filed with the Commission, each document
incorporated by reference therein and each amendment thereof or supplement
thereto and any Blue Sky Filing in order to verify the accuracy of any factual
information concerning SPEED. KDTI will make available for inspection by SPEED,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by SPEED or any
such underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of KDTI (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause KDTI's officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement and permit the Inspectors to participate in the
preparation of such registration statement and any prospectus contained therein
and any amendment thereof or supplement thereto. Records which
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KDTI determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other Order from a court of competent
jurisdiction, or (iii) the information in such Records has been made generally
available to the public. The seller of Registrable Securities agrees by
acquisition of such Registrable Securities that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to KDTI and allow KDTI, at KDTI's expense, to undertake appropriate
action to prevent or limit disclosure of the Records deemed confidential. KDTI
shall pay for all registration and filing fees, printing expenses and fees and
disbursements of KDTI's counsel and one counsel for SPEED and KDTI's Accountants
in connection with the preparation, review and filing of the registration
statement or any Blue Sky Filing pursuant to this Article 5; provided, however,
that SPEED shall pay underwriting discounts and commissions applicable to the
sale of the Registrable Securities.
5.6 Other Registration Rights.
5.6.1. No Existing Agreements. KDTI represents and warrants to SPEED that
there is not in effect on the date hereof any agreement by KDTI (other
than this Agreement) pursuant to which any holders of securities of KDTI
have a right to cause KDTI to register or qualify such securities under
the Securities Act or any Blue Sky Law that would conflict or be
inconsistent with any provision of this Agreement.
5.6.2. Future Agreements. KDTI shall not hereafter agree with the holders
of any securities issued or to be issued by KDTI to register or qualify
such securities under the
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Securities Act or any Blue Sky Law unless such agreement specifically
provides that (a) such holder of such securities may not participate in
any registration under Section 5.1 except as provided in the proviso to
Section 5.1, and (b) the holder of such securities may not participate in
any registration under Section 5.2 except as provided in Section 5.2.
5.7 Other Conditions and Limitations.
Any other provision hereof notwithstanding:
(a) SPEED's registration rights under this Section 5 are subject to the
conditions that (i) in the case of a Registration under Section 5.1 relating to
an underwritten offering of Registrable Securities, the underwriting agreement
and other documents to which KDTI is a party or which purport to obligate KDTI
with respect to any matter be reasonably satisfactory to KDTI, and (ii) in the
case of a registration under Section 5.2 relating to an underwritten offering of
securities of KDTI, SPEED agrees to the terms and conditions of, and executes
and delivers the underwriting agreement, a custody or deposit agreement and a
power of attorney, each in the customary form required by the underwriters, and
such other underwriting documents as the underwriters may reasonably require as
a condition to effecting the offering or the inclusion of Registrable Securities
therein;
(b) the registration rights pursuant to Section 5.1 or 5.2 and KDTI's
obligations under this Article 5 shall be suspended at any time when KDTI does
not have a class of equity securities (as defined in Section 3(a)(11) of the
Exchange Act and Rule 3a11-1 thereunder) registered under Section 12(b) or 12(g)
of the Exchange Act; and
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(c) notwithstanding that a demand for registration has been duly made
pursuant to Section 5.1 or 5.2, KDTI shall not be obligated to prepare or file a
registration statement under the Securities Act with respect to any Registrable
Securities as to which such demand relates, or to register or to qualify any
such Registrable Securities under any applicable Blue Sky Law, and if such a
registration statement has been filed or Blue Sky Filing has been made, KDTI may
suspend or withdraw such registration statement or Blue Sky Filing, if the Board
of Directors of KDTI determines in good faith that such registration would or
could reasonably be expected to interfere with or adversely affect the prospects
of consummating, or result in terms or conditions less favorable to KDTI
relating to, any material acquisition or disposition of assets (within the
meaning and scope of Item 2 of Form 8-K under the Exchange Act) or any public or
private financing as to which KDTI has entered into a definitive agreement or is
engaged in substantive negotiations for a period of 180 days after such demand
for registration is made; provided that KDTI may not so delay or suspend such
registration on more than one occasion in any period of twelve (12) consecutive
months.
5.8 Application to Subsequent Holders.
The provisions of this Article 5 shall inure to the benefit of and be
binding upon any holder of Registrable Securities; provided that all such
holders shall be deemed to be represented by and act through Ronald (or, if he
shall die, resign or otherwise cease so to act, a successor designated by Ronald
in a written notice given to KDTI, or if Ronald shall not so designate a
successor, a successor designated by the holders of a majority of the
Registrable Securities then outstanding in a written notice given to KDTI, the
designation of such successor to be effective upon actual receipt of such notice
by KDTI) and any notice or other documents required or
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permitted to be given or delivered pursuant to the provisions of this Article 5
to or by SPEED shall be deemed to be duly so given or delivered if given to or
by Ronald (or such successor) in accordance with Section 10.5, and any right of
the holders of Registrable Securities, including in connection with the
preparation of any documents or any investigation pursuant to Section 5.5
relating to any registration, shall be exercised or effected by or through
Ronald (or such successor).
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF SPEED AND RONALD
SPEED and Ronald, jointly and severally, represent and warrant to KDTI and
KDTI-NY the following:
6.1 Existence and Good Standing
Each of SGI and DDP is a corporation, duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and has
all requisite corporate power and authority to own, lease and operate all its
properties and to carry on its business as now being conducted. Each of SGI and
DDP is duly qualified and in good standing in each jurisdiction in which the
failure to qualify would have a Material Adverse Effect.
6.2 Capital Stock.
The stockholders and capitalization of SGI and DDP, respectively, are set
forth on Schedule 6.2. All such outstanding shares have been duly authorized and
validly issued and are fully paid and non-assessable, and have not been issued
in violation of any preemptive rights of stockholders. No other class of capital
stock of SGI or DDP is authorized or outstanding.
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There are no outstanding options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the purchase, issuance or sale of any shares of the
capital stock of SGI or DDP except as set forth on Schedule 6.2. Ronald owns the
SPEED Shares free and clear of any liabilities, liens, security interests,
pledges, or encumbrances, except for Permitted Liens and except as set forth on
Schedule 6.2.
6.3 Financial Statements.
6.3.1. Financial Statements delivered by SPEED. SPEED has furnished or
made available to KDTI the following financial statements and Tax Returns
(the "Delivered Financial Statements"):
i. federal and state Tax Returns of SPEED for the fiscal years
ended December 31, 1995 and December 31, 1996;
ii. the Unaudited Financial Statements;
iii. the Audited 1996 Financial Statements; and
iv. the Audited 1995 and 1994 Financial Statements.
The Delivered Financial Statements, including the footnotes thereto, are,
and the Closing Date Balance Sheet, including the footnotes thereto, will
be true and correct in all material respects, and, except for the Tax
Returns referred to in clause (i) of this Subsection 6.3.1, the Delivered
Financial Statements have been and the Closing Date Balance Sheet will be
prepared on the same basis as the Audited 1996 Financial Statements were
prepared, and, except for the tax returns referred to in clause (i) of
this Subsection 6.3.1, all adjustments consist only of normal recurring
adjustments necessary for a fair presentation of the results of operations
and financial condition for the period covered by such Financial
Statement. The balance sheets included in the Delivered
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Financial Statements, taken together, fairly present, and the Closing Date
Balance Sheet will fairly present, in all material respects the financial
condition of SPEED as at the respective dates thereof and, except as
indicated therein, and, in the case of the Unaudited Financial Statements,
except for the absence of footnotes and normal recurring adjustments,
reflect, and in the case of the Closing Date Balance Sheet, will reflect,
in all material respects all known claims against and all debts and
liabilities of SPEED, fixed or contingent, as at the date thereof,
required by GAAP to be shown thereon and the related statements of
operations and cash flows for the periods indicated, taken together,
fairly present, in all material respects the results of operations and
financial condition for such periods. 6.3.2.Absence of Adverse Changes.
Since the Balance Sheet Date, except as set forth on Schedule 6.3.2 or on
the Closing Date Balance Sheet, there has been (a) no materially adverse
change in the assets or liabilities, or in the business or financial
condition, or in the results of operations of SPEED, and (b) to the
knowledge of SPEED or Ronald, no fact or condition exists or is
contemplated or threatened which might cause such a materially adverse
change in the future. Notwithstanding the foregoing, if the Closing Date
Balance Sheet is revised in accordance with Section 3.3, such revision
shall not be considered a breach of this Section 6.3.2 or any other
provision of this Agreement.
6.4 Books and Records.
Except as set forth on Schedule 6.4, all accounts, books, ledgers, minute
books and official and other records of SPEED of whatsoever kind have been
properly and accurately kept and completed in all material respects, and there
are no material inaccuracies or discrepancies
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of any kind contained or reflected therein. SPEED does not own or possess any
records, systems, controls, data or information material or necessary to the
conduct of its business which is recorded, stored, maintained, operated or
otherwise wholly or partly dependent on or held by any means (including all
means of access thereto and therefrom) that are not under the exclusive
ownership and direct control of SPEED, other than financial records which are
maintained at the locations identified on Schedule 6.4 annexed hereto, and
which, after the Closing Date, are readily available to KDTI and KDTI-NY.
6.5 Real Property; Personal Property; Machinery and Equipment.
6.5.1. Leasehold and other Real Property Interests. SPEED does not own or
have any leasehold or other interest in any real property which is
presently necessary to conduct the development, production, marketing and
sale of the products and services offered as part of the SPEED Business
other than the Leased Premises demised under the Leases. Except as set
forth on Schedule 6.5.1, to the knowledge of SPEED, the Leased Premises
are in good condition and repair (normal wear and tear excepted)
consistent with their present use and are available for immediate use by
KDTI-NY. Except as set forth on Schedule 6.5.1, since January 1, 1993,
neither SPEED nor Ronald has received any written notice (that remains
outstanding) that the Leased Premises are presently in violation of any
environmental, zoning or similar laws.
6.5.2. Title to Acquired Assets. Except as set forth in Schedule 6.5.2,
SPEED has good title or holds a valid, existing, enforceable lease or
license to the Acquired Assets, subject to no encumbrance, lien, charge or
other restriction of any kind or character, other than Permitted Liens.
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6.5.3. Machinery and Equipment. Except as set forth in Schedule 6.5.3, the
Machinery and Equipment are, in the aggregate, in good operating
condition, normal wear and tear excepted. Except as set forth in Schedule
6.5.3, (i) all capital or operating leases under which SPEED leases
equipment; and (ii) each contract for the purchase of as yet undelivered
equipment is in full force and effect and constitutes a binding
obligation, enforceable in accordance with its terms, of SPEED, and to the
knowledge of SPEED and Ronald, of each other party thereto, subject to the
qualifications that enforcement of the rights and remedies created thereby
is subject to (a) bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies of
creditors, and (b) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law).
Except as disclosed on Schedule 6.5.3, there are no existing defaults by
SPEED under any such lease beyond applicable notice and grace periods or
which have not been waived by the respective lessor.
6.5.4. Sufficiency of Assets. The Acquired Assets constitute all of the
assets used in connection with the SPEED Business and are available for
immediate use by KDTI-NY.
6.6 Contracts.
Except as set forth in Schedule 6.6 or any other schedule annexed hereto,
SPEED is not a party to or bound by any agreement, contract or commitment
relating to any collective bargaining agreement, any bonus, deferred
compensation, pension, profit sharing, stock option, retirement or other
employee benefit plan; any loan or advance to, or investment in, any other
Person or any agreement relating to the making of any such loan, advance or
investment; any
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guarantee or other contingent liability in respect of any indebtedness or
obligation of any other Person (other than the endorsement of negotiable
instruments for collection in the ordinary course of business); any management
service, employment, consulting or any other similar type of contract; any
agreement, contract or commitment limiting the freedom of SPEED to engage in any
line of business or to compete with any other Person; any secrecy or
confidentiality agreement with any Person, including any employee of or
consultant to SPEED; any agreement, contract or commitment which involves the
payment by SPEED of Twenty-Five Thousand Dollars ($25,000) or more, in the
aggregate, and is not cancelable without penalty within thirty (30) days; any
agreement with any officer or director of SPEED; any licensing or franchise
agreement; or any contract with customers or other third parties for the
delivery of goods or performance of services which involves payment by SPEED of
more than Twenty Five Thousand Dollars ($25,000.00).
Except as set forth on Schedule 6.6, there exists no default or event of
default by SPEED, or occurrence, condition, or act (including this transaction)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default or event of default thereunder.
Except as set forth on Schedule 6.6, SPEED has not violated any material terms
or conditions of any Contract which would permit termination or modification of
any such Contract, there are no outstanding written claims of breach or
indemnification or written notice of default or termination of any such Contract
and, to the knowledge of SPEED or Ronald, all of the covenants to be performed
by any other party thereto have been substantially performed.
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6.7 Litigation.
Except as set forth in Schedule 6.7, there is no action, suit, proceeding
at law or in equity by any Person, or any arbitration or any administrative or
other proceeding by or before any Governmental Body, pending or, to the
knowledge of SPEED or Ronald, threatened since the Balance Sheet Date, against
or affecting SPEED or any of its properties or rights or the operation of its
business, and to the knowledge of SPEED or Ronald, there is no valid basis for
any such action, proceeding or investigation. Except as disclosed on Schedule
6.7, none of SPEED, Ronald or any Controlled Company is subject to any Order
entered in any lawsuit or proceeding which has a Material Adverse Effect or
which would prevent or interfere with the consummation of the transactions
contemplated hereby.
6.8 Taxes.
Except as set forth in Schedule 6.8 to this Agreement, SPEED has filed all
Tax Returns which are required to be filed by, or with respect to, its business.
Such Tax Returns reflect accurately, in all material respects, taxable income
and all liability for Taxes of SPEED for the periods covered thereby. Except as
set forth in Schedule 6.8, SPEED has paid within the time and manner prescribed
by law all Taxes payable by, or due from, SPEED (whether in its own right or as
transferee of the assets of, or successor to, any Person) or adequately provided
therefor by appropriate reserves as shown in the books and financial statements
of SPEED, and to the knowledge of SPEED or Ronald, no other Tax of any nature
whatsoever will be payable by SPEED with respect to any Tax Return filed or
required to be filed through the Closing Date. Except as set forth in Schedule
6.8, the federal, state and local taxable income and Tax liability of SPEED have
never been finally determined for any fiscal period; and no audit or examination
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of any return of SPEED by any Taxing authority is currently in progress and no
notice of any proposed audit or examination has been received by SPEED or any
SPEED Stockholder; and there are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of SPEED.
6.9 Liabilities.
To the knowledge of SPEED or Ronald, there are no outstanding claims,
liabilities or indebtedness, contingent or otherwise against SPEED, except as
set forth in Schedule 6.9 or in the Balance Sheet Date Balance Sheet of SPEED or
referred to in the footnotes thereto, other than (i) liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business and
consistent with past practice and other liabilities which in the aggregate do
not have a Material Adverse Effect, or (ii) liabilities set forth on any
Schedule hereto or which are not required to be set forth on any Schedule hereto
because such liabilities are specifically excluded from disclosure on the
Schedules provided for by the provisions of this Agreement. Schedule 6.9 sets
forth a list of all current arrangements of SPEED for borrowed money and all
outstanding balances as of the date hereof with respect thereto, but excluding
accounts payable, wages payable and operating expenses payable. SPEED is not in
material default in respect of the terms or conditions of any such indebtedness.
6.10 Intellectual Property.
Schedule 6.10 contains a materially accurate and complete list of all
Intellectual Property owned or used or anticipated to be used by SPEED in the
development, production, marketing and sale of the products and services offered
as part of the SPEED Business. Except as set forth on Schedule 6.10, to the
knowledge of SPEED and Ronald, no written claim of infringement
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or misappropriation of Intellectual Property has been made against SPEED and,
SPEED does not infringe or misappropriate any Intellectual Property of any third
party.
6.11 Compliance with Laws.
To the knowledge of SPEED or Ronald, except with respect to any
Environmental Law, SPEED is in compliance with all applicable material federal,
state and local laws, regulations and Orders and all other applicable
requirements of any Governmental Body having jurisdiction. Except with respect
to any Environmental Law, SPEED is not now charged with, and, to the knowledge
of SPEED and Ronald, SPEED is not now under investigation with respect to, any
violation of any law, regulation, or Order affecting its business, and SPEED has
filed all material reports required to be filed with any Governmental Body.
6.12 Licenses.
To the knowledge of SPEED or Ronald, SPEED has all licenses and permits
and other governmental certificates, authorizations and approvals (collectively,
"Licenses") required by any Governmental Body for the development, production,
marketing and sale of the products and services offered as part of the SPEED
Business and the use of its properties as presently operated or used, except
where the failure to have such Licenses would not have a Material Adverse
Effect. To the knowledge of SPEED and Ronald, all of such Licenses are in full
force and effect and no action or claim is pending to revoke or terminate any of
the Licenses or declare any License invalid.
6.13 Insurance.
Schedule 6.13 is a schedule of all insurance policies (including life
insurance) or binders maintained by SPEED. All such policies are in full force
and effect and all premiums that have
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become due have been currently paid. The coverage under such policies for
occurrences prior to the Closing shall not be materially adversely affected by
reason of the transactions contemplated hereby. Neither Ronald nor SPEED has
received written notice of cancellation or non-renewal of any such policy or
binder. Neither Ronald nor SPEED has received any written notice from any of its
insurance carriers that any premiums will be materially increased in the future
or that any insurance coverage listed on Schedule 6.13 will not be available in
the future on substantially the same terms now in effect.
6.14 Supplier and Customer Relations.
There has not been, and neither SPEED nor Ronald has any knowledge that
would lead them to anticipate, any material adverse change in relations with
SPEED's suppliers or customers as a result of the transactions contemplated by
this Agreement. Schedule 6.14 lists the ten largest suppliers and customers of
SPEED, as at the date hereof. Except as set forth on Schedule 6.14, to the
knowledge of SPEED and Ronald, none of these current suppliers and none of these
current customers has advised SPEED or Ronald, orally or in writing, formally or
informally, that (i) it is terminating or considering terminating, or is
materially dissatisfied with its business relationship with SPEED, as a whole or
in respect of any particular product or service, or (ii) any of these current
customers is contemplating reducing or discontinuing in any material respect its
purchases from SPEED, or that any of these suppliers is contemplating reducing
or discontinuing in any material respect its services or sales to SPEED.
6.15 Employment Relations.
To the knowledge of SPEED and Ronald, SPEED has not committed any unfair
labor practices in connection with the SPEED business and there is no unfair
labor practice complaint
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pending against SPEED before any applicable government entity; there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
involving SPEED; no representation question exists respecting the employees of
SPEED; no grievance which might have a Material Adverse Effect on the SPEED
Business, nor any arbitration proceeding arising out of or under any collective
bargaining agreement with SPEED, is pending and no claim therefor has been
asserted. Except as set forth in Schedule 6.15, SPEED is not a party to any
collective bargaining agreement, and no collective bargaining agreement is
currently being negotiated by SPEED; and SPEED has not experienced any work
stoppage or any other labor difficulty during the last three (3) years. To the
knowledge of SPEED and Ronald, there has not been, and SPEED does not
anticipate, any material adverse change in relations with employees as a result
of the transactions contemplated by this Agreement.
6.16 Personnel; Compliance with ERISA.
6.16.1. SPEED's Personnel. Schedule 6.16 contains a true and complete list
of all persons employed (and their latest rates of compensation) or
retained as independent contractors by SPEED as at the Closing Date.
Schedule 6.16 also lists all sales agents or sales representatives as at
the Closing Date. Except as set forth on Schedule 6.16, no employees of
SPEED are entitled to any accrued vacation pay, sick leave or
non-statutory severance benefits.
6.16.2. Employee Benefit Plans. With respect to any employee benefit plan,
program, arrangement or contract (including, without limitation, any
"employee benefit plan" as defined in Section 3(3) of ERISA), maintained
by SPEED or to which SPEED contributes, SPEED has made available to KDTI
and KDTI-NY a true and correct copy
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of (i) such employee benefit plan, (ii) each trust agreement relating to
such employee benefit plan, (iii) the most recent summary plan description
of the employee benefit plan, if any, and (iv) Internal Revenue Service
determination letters for all such employee benefit plans that are
intended to be tax-qualified under Section 401(a) of the Code. Forms 5500
for all such employee benefit plans have been timely and properly filed,
or a valid extension for filing has been obtained, and all employees
excluded from participating in any such employee benefit plans were
properly excludable by SPEED.
6.17 No Changes Since the Balance Sheet Date.
Since the Balance Sheet Date, except as specifically stated on Schedule
6.3.2 or Schedule 6.17 or reflected on the Closing Date Balance Sheet, SPEED has
not incurred any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except in the ordinary course of SPEED's
business; permitted any of its assets to be subjected to any mortgage, pledge,
lien, security interest, encumbrance, restriction or charge of any kind, other
than Permitted Liens; sold, transferred or otherwise disposed of any assets
except in the ordinary course of SPEED's business; made any single capital
expenditure or commitment therefor involving the expenditure of more than Fifty
Thousand Dollars ($50,000.00); made any bonus or profit sharing distribution or
payment of any kind; granted any increase in the rate of wages, salaries,
bonuses or other remuneration of any employee who after giving effect to such
increase or prior thereto receives compensation at an annual rate of $80,000.00
or more, except pursuant to a prior obligation or employment policy in the
ordinary course of SPEED's business; canceled or waived any claims or rights of
substantial value; made any change in any method of accounting or auditing
practice; otherwise conducted its business or entered into any transaction,
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except in the usual and ordinary manner and in the ordinary course of its
business; amended or terminated any agreement which is material to the business
of SPEED; renewed, extended or modified any Lease or, except in the ordinary
course of business, any lease of personal property; or agreed, whether or not in
writing, to do any of the foregoing; and there has been no adverse change in the
financial condition or results of operations of SPEED, which changes, in the
aggregate, do not have a Material Adverse Effect.
6.18 Valid Agreements; Restrictive Documents.
SPEED has corporate authority, and Ronald has the full legal right and
capacity, to execute, deliver and perform their respective obligations under
this Agreement and the Other Documents to which it or he is a party, and all of
the foregoing have been duly authorized by all necessary shareholder and
corporate action of SPEED. This Agreement and the Other Documents to which SPEED
or Ronald is a party have been duly executed and delivered by SPEED and Ronald,
respectively, and constitute the valid and binding obligation of SPEED and
Ronald, respectively, enforceable against SPEED and Ronald, respectively, in
accordance with their respective terms, except as the enforcement thereof may be
limited by bankruptcy, reorganization, moratorium, insolvency and other laws of
general applicability relating to or affecting creditors' rights or general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law). Except as set forth in Schedule 6.18, or in any
other Schedule to this Agreement, neither SPEED nor any SPEED Stockholder is
subject to, or a party to, any charter, by-law, mortgage, lien, lease, license,
permit, contract, instrument, law, regulation or, to the knowledge of SPEED or
Ronald, Order or any other restriction of any kind or character, which has a
Material Adverse Effect, or which would
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prevent consummation of the transactions contemplated by this Agreement and the
Other Documents or compliance by SPEED or Ronald with the terms, conditions and
provisions of this Agreement and the Other Documents. Except as set forth in
Schedule 6.18, the execution, delivery and performance of this Agreement and the
Other Documents and the consummation of the transactions contemplated hereby and
thereby will not violate, conflict with or result in the breach of any provision
of the charter documents or by-laws of SPEED; violate, conflict with or result
in the breach or material modification of any of the terms of, or constitute (or
with notice or lapse of time or both constitute) a default under, or otherwise
give any other contracting party the right to accelerate or terminate, any
material obligation, contract, agreement, lien, Order or other instrument to
which SPEED or Ronald is a party or by or to which it or his or any of its or
his respective assets or properties may be bound or subject; violate any Order
of any Governmental Body against, or binding upon SPEED or Ronald or upon any of
their respective Assets and which violation would have a Material Adverse
Effect; or violate any statute, law or regulation of the U.S. or New York and,
which violation would have a Material Adverse Effect.
6.19 Required Approvals, Notices and Consents.
Except as set forth on Schedule 6.19, or elsewhere in this Agreement, no
consent or approval of, other action by, or notice to, any Governmental Body, or
any third party is required in connection with the execution and delivery by
SPEED and Ronald of this Agreement and the Other Documents or the consummation
by SPEED and Ronald of the transactions contemplated hereby or thereby.
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6.20 Disclosure.
To the knowledge of SPEED or Ronald, this Agreement, the Financial
Statements, or any Schedule hereto, or any certificate, document or statement in
writing to be delivered as required under this Agreement by or on behalf of
SPEED does not contain, or will not contain, any untrue statement of a material
fact, or omits, or will omit, any statement of a material fact required to be
stated or necessary in order to make the statements contained herein or therein
not misleading. To the knowledge of SPEED or Ronald, there is no fact which
materially adversely affects the business or financial condition of SPEED which
has not been, or will not be, set forth in this Agreement or an Other Document
to be delivered at the Closing.
6.21 Environmental Conditions.
Schedule 6.21 sets forth the following, in each instance to the knowledge
of SPEED or Ronald:
i. all treatment, storage and disposal facilities for Hazardous
Materials which are currently owned or used by SPEED; all
hazardous waste disposal sites which are or have been owned or
used by SPEED in connection with the SPEED Business; and all
underground storage tanks which are or were owned or used by
SPEED in connection with the SPEED Business. As to each such
facility, site or underground storage tank, Schedule 6.21
describes the time period used and the type of hazardous waste
treated, stored or disposed of and, in the case of the
underground storage tanks, the type of material stored;
ii. all sites at which hazardous wastes from the operation of the
SPEED Business have been disposed and, as to each such site,
Schedule 6.21 describes the time period used and the type of
waste disposed; and
iii. all internal environmental audits conducted by SPEED or Ronald
with respect to SPEED since January 1, 1993 relating to the
SPEED Business.
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To the knowledge of SPEED or Ronald, except as disclosed on Schedule 6.21
in connection with, or in any way related to, the SPEED Business:
iv. SPEED holds, and is in substantial compliance with, all
permits, licenses, registrations or other authorizations
required under applicable Environmental Laws, and is, and has
been, otherwise in substantial compliance with all applicable
Environmental Laws.
v. Since January 1, 1993, neither Ronald nor SPEED has received
any written notice of any Environmental Claim, and neither
Ronald or SPEED is aware, without any duty of inquiry, of any
threatened Environmental Claim which remains outstanding.
vi. SPEED has not entered into or agreed to and is not subject to,
any judgment, decree or Order of any Governmental Body under
any Environmental Laws, including, without limitation,
relating to investigation, cleanup, remediation or removal of
Hazardous Materials;
vii. Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to be
released at, on, from or under any of the properties included
among the assets of SPEED in material violation of, or in a
manner or to a location that is likely to give rise to
material liability of SPEED under any Environmental Laws; and
viii. No approval is required under any Environmental Law for the
acquisition of the Acquired Assets pursuant to this Agreement.
6.22 Health and Safety Conditions.
SPEED has not conducted any internal health and safety audits, or
industrial hygiene surveys. Except as set forth on Schedule 6.22, to the
knowledge of SPEED or Ronald, SPEED is in substantial compliance with the
requirements of the Occupational Safety and Health Act and all other federal,
state and local occupational health and safety laws, rules and regulations.
Copies of Documents.
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SPEED has caused to be made available for inspection and copying by KDTI
or its officers or advisers, true and correct copies of all documents referred
to in this Article 6 or in any Schedule furnished pursuant to this Article 6.
6.23 No Brokers.
No broker, finder, agent or similar intermediary has acted on behalf of
Ronald or SPEED in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with any of Ronald or SPEED, or any
action taken by any of them.
6.24 Corporate Controls.
None of SPEED or Ronald or any director, officer, agent, employee or other
Person, in each case, acting on behalf of SPEED, has, directly or indirectly,
given or made any contribution, gift, entertainment expense or payment, in any
case (i) in contravention of applicable law and (ii) in excess of $2,500 to
obtain preferential or favorable treatment in obtaining business or performing
services.
ARTICLE 7: REPRESENTATIONS OF KDTI AND KDTI-NY
KDTI and KDTI-NY, jointly and severally, represent and warrant to SPEED
and Ronald as follows:
7.1 Existence and Good Standing.
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KDTI and KDTI-NY are each corporations duly organized, validly existing
and in good standing under the laws of Delaware and each has all requisite
corporate power and authority to own, lease and operate all its properties and
to carry on its business as now being conducted. Neither KDTI-NY nor KDTI is
required to qualify to do business in any jurisdiction such that failure to
qualify would have an adverse effect on the conduct of its business. KDTI-NY is
a wholly-owned subsidiary of KDTI.
7.2 Shares.
The Shares have been duly authorized and, when delivered at the Closing,
will be validly issued, fully paid and non-assessable and will be free and clear
of any liabilities, liens, security interests, pledges or encumbrances of any
nature whatsoever, except such as may be created by SPEED or Ronald and except
as the sale, pledge or other disposition thereof is limited by the provisions of
Section 5.3 hereof, the Securities Act and other applicable federal securities
laws and Blue Sky Laws. The Additional Shares of Common Stock, if any, will,
when delivered pursuant to Section 3.3.2, be duly authorized, validly issued,
fully paid and non-assessable and will be free and clear of any liabilities,
liens, security interests, pledges or encumbrances of any nature whatsoever,
except such as may be created by SPEED or Ronald and except as the sale, pledge
or other disposition thereof is limited by the provisions of Section 5.3 hereof,
the Securities Act and other applicable federal securities laws and Blue Sky
Laws.
7.3 Valid Agreements; Restrictive Documents.
Each of KDTI and KDTI-NY has corporate authority to execute, deliver and
perform their respective obligations under this Agreement and the Other
Documents to which it is a party, including the Promissory Note, and all of the
foregoing have been duly authorized by all
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necessary stockholder and corporate action. This Agreement and the Other
Documents to which KDTI or KDTI-NY is a party, including the Promissory Note,
have been duly executed and delivered by KDTI and KDTI-NY, respectively, and
constitute a valid and binding agreement of KDTI and KDTI-NY, respectively,
enforceable against KDTI and KDTI-NY, respectively, in accordance with their
respective terms, except as the enforcement thereof may be limited by
bankruptcy, reorganization, moratorium, insolvency and other laws of general
applicability relating to or affecting creditors' rights or general principles
of equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law). Except as set forth in any Schedule to this Agreement,
KDTI-NY and KDTI are not subject to, or a party to, any charter, by-law,
mortgage, lien, lease, license, permit, contract, instrument, law, rule,
ordinance, regulation, or, to their knowledge, Order or any other restriction of
any kind or character, which would prevent consummation of the transactions
contemplated by this Agreement and the Other Documents, including the Promissory
Note, or compliance by KDTI-NY or KDTI with the terms, conditions and provisions
of this Agreement and the Other Documents, including the Promissory Note. The
execution, delivery and performance of this Agreement and the Other Documents,
including the Promissory Note, and the consummation of the transactions
contemplated hereby and thereby will not (i) violate, conflict with or result in
the breach of any provision of the charter documents or by-laws of KDTI or
KDTI-NY; (ii) violate, conflict with or result in the breach or material
modification of any of the terms of, or constitute (or with notice or lapse of
time or both constitute) a default under, or otherwise give any other
contracting party the right to accelerate or terminate, any material obligation,
contract, agreement, lien, Order or other instrument to which KDTI or KDTI-NY is
a party or by or to
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which KDTI or KDTI-NY may be bound or subject; (iii) violate any Order of any
Governmental Body against, or binding upon, KDTI or KDTI-NY or any of their
assets which violation will or may reasonably be expected to be materially
adverse to the condition (financial or otherwise) of KDTI and KDTI-NY in the
aggregate; or (iv) violate any statute, law or regulation of the United States,
Delaware or New York which violation will or may reasonably be expected to be
materially adverse to the condition (financial or otherwise) of KDTI and KDTI-NY
in the aggregate.
7.4 Required Approvals, Notices and Consents.
Except as set forth on Schedule 7.4, no consent or approval of, other
action by, or notice to, any Governmental Body, or any third party is required
in connection with the execution and delivery by KDTI or KDTI-NY of this
Agreement and the Other Documents, including the Promissory Note, or the
consummation by KDTI or KDTI-NY of the transactions contemplated hereby or
thereby.
7.5 No Brokers.
No broker, finder, agent or similar intermediary has acted on behalf of
KDTI or KDTI-NY in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with KDTI, KDTI-NY, or any action taken
by KDTI or KDTI-NY.
7.6 Disclosure.
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To the knowledge of KDTI or KDTI-NY, each of this Agreement, any Other
Document to be delivered by or on behalf of KDTI or KDTI-NY and the financial
statements of KDTI and other written information provided by KDTI to SPEED
listed on Schedule 7.6 does not contain, and will not contain, any untrue
statement of a material fact, or omits or will omit, any statement of a material
fact required to be stated or necessary in order to make the statements
contained herein or therein not misleading. To the knowledge of KDTI and
KDTI-NY, there is no fact which materially adversely affects the business or
financial condition of KDTI or KDTI-NY, or KDTI's ability to perform its
obligations under the Promissory Note, which has not been, or will not be, set
forth in this Agreement or an Other Document to be delivered at the Closing.
7.7 Absence of Adverse Changes.
Since the Balance Sheet Date, there has been no materially adverse change
in the assets or liabilities, or in the business or financial condition, or the
results of operations of KDTI or KDTI-NY and, to the knowledge of KDTI and
KDTI-NY, no fact or condition exists or is contemplated or threatened which will
or could be reasonably expected to cause such a material adverse change in the
future.
7.8 Securities Laws.
The offering, issuance and delivery to SPEED by KDTI of the Promissory
Note, the Shares and any Additional Shares are not, and will not be, required to
be registered under the Securities Act or any applicable Blue Sky Laws.
ARTICLE 8: POST CLOSING COVENANTS
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8.1 General.
In case at any time after the Closing any further action is necessary to
carry out the purposes of this Agreement, each of the parties will take such
reasonable further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request. SPEED
acknowledges and agrees that from and after the Closing KDTI and KDTI-NY will be
entitled to possession of all documents, books, records (including tax records),
agreements and financial data of any sort relating to SPEED and the SPEED
Business.
8.2 Post-Closing Access.
Following the Closing, each party will afford to the other party, its
counsel and its accountants, during normal business hours, reasonable access to
the books, records and other data of SPEED or relating to the SPEED Business,
the Acquired Assets, the Acquired Liabilities or SPEED in its possession with
respect to periods prior to the Closing and the right to make copies and
extracts therefrom, to the extent that such access may be reasonably required by
the requesting party (a) to facilitate the investigation, litigation and final
disposition of any claims which may have been or may be made against any party
or its Affiliates and (b) for any other reasonable business purpose.
8.3 Record Retention.
Each party agrees that until the seventh anniversary of the Closing Date,
it shall not destroy or otherwise dispose of any of the books or records
relating to the SPEED business, the Acquired Assets, the Acquired Liabilities or
SPEED in its possession with respect to the periods prior to the Closing, after
which date it shall have the right to destroy all or part of such books
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and records, unless it gives each other party hereto 30 days' prior written
notice of any intended destruction or disposition and offers to deliver to any
other party, at the other parties' request and expense, custody of such books
and records as such party may intend to destroy or otherwise dispose of.
8.4 Post-Closing Assistance.
KDTI and SPEED will provide each other with such assistance as may
reasonably be requested in connection with the preparation of any Tax Return,
any audit or other examination by any Taxing authority, or any judicial or
administrative proceedings relating to liability for Taxes, and each will retain
and provide the requesting party with any records or information that may be
reasonably relevant to such return, audit or examination, proceedings or
determination. The party requesting assistance shall reimburse the other party
for reasonable out-of-pocket expenses (other than salaries or wages of any
employees of the parties) incurred in providing such assistance. Any information
obtained pursuant to this Section 8.4 or pursuant to any other Section hereof
providing for the sharing of information or the review of any Tax Return or
other schedule relating to Taxes shall be kept confidential by the parties
hereto.
8.5 Cooperation in Preparation of Securities Law Filings
SPEED agrees to cooperate to request the Present Accountants to cooperate
with KDTI and its accountants in the provision of such information and documents
as may be reasonably required in order to complete any filings required under
the Securities Act or other United States securities laws or Blue Sky Laws
relating to the acquisition transactions described in this Agreement. KDTI shall
reimburse SPEED and/or the Present Accountants for all reasonable
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fees and expenses incurred by SPEED and/or the Present Accountants in providing
such cooperation.
8.6 Guarantees by Ronald and DDP.
No later than five days after the Closing, KDTI shall use its commercially
reasonable best efforts to arrange for the elimination or satisfaction of all of
Ronald's personal guarantees and all of DDP's guarantees with respect to bank
indebtedness and equipment leases (to the extent such lease guarantees involve
Machinery and Equipment). In the event that Ronald or DDP is not released from
any guarantee of any lease of Machinery and Equipment by SPEED as of the Closing
Date, KDTI and KDTI-NY shall jointly and severally indemnify Ronald and DDP and
hold each of them harmless against any claim, obligation or liability
whatsoever, including reasonable attorneys' fees and reimbursable disbursements,
arising at any time under any such guarantee.
8.7 Election of Ronald to the KDTI Board.
KDTI's Board of Directors has approved an increase in the number of the
directors from five to six and the election of Ronald as a director effective
upon the Closing. KDTI shall cause its director and officer liability policy to
be amended to cover Ronald. Ronald shall have the right to introduce to KDTI's
Board of Directors other possible candidates to serve as a member of such Board
of Directors, and if KDTI's Board of Directors finds any of such candidates
acceptable, the size of the Board of Directors will be increased from six to
seven and such candidate will thereupon be appointed to fill such vacancy,
except that nothing herein shall in any way obligate KDTI or its Board of
Directors to accept any of the candidates suggested by
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Ronald and the Board of Directors will retain full discretion with respect to
any increase of its size and/or the acceptance of any candidate introduced by
Ronald.
8.8 Employees: Assumed Plans.
KDTI or KDTI-NY shall assume any severance or other similar costs incurred
in connection with the termination of employment of any employee of SPEED whose
employment is terminated by KDTI or KDTI-NY effective upon or after the Closing.
Without limiting KDTI's and KDTI-NY's obligations otherwise set forth in this
Agreement, effective as of the Closing, KDTI or KDTI-NY shall assume sponsorship
of each of SPEED's employee benefit plans, programs, agreements, policies and
arrangements listed on Schedule 8.8 (and all related funding arrangements) and
the liabilities associated therewith, and SPEED shall assign to KDTI or KDTI-NY
its rights thereunder, if and to the extent permitted by the terms thereof.
After the Closing, neither SPEED nor Ronald shall have any liabilities or
responsibilities arising after the Closing in respect of any current or former
employee of SPEED, other than such liabilities or responsibilities that are
Excluded Liabilities.
8.9 Delivery of Financial Statements.
As soon as practicable after the Closing, SPEED shall prepare and deliver
to KDTI SPEED's balance sheet, statement of income and retained earnings for (i)
the nine-month period ended September 30, 1997; (ii) the three-month period
ended March 31, 1997; and (iii) the nine-month period ended September 30, 1996.
Such financial statements shall be prepared on the same basis as the Audited
1996 Financial Statements were prepared and fairly present in all material
respects the financial condition and results of operations of SPEED at such date
for the respective periods then ended, and except as indicated therein and
except for the absence of
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footnotes, the balance sheets included therein shall reflect in all material
respects all known claims against and all debts and liabilities of SPEED, fixed
or contingent, as of the respective dates thereof, required by GAAP to be shown
thereon.
8.10 Employee Stock Options.
Subject to the approval of its stockholders, KDTI shall grant to the
employees listed on Schedule 8.10 options to purchase the number of shares of
Common Stock set forth opposite their respective names thereon, pursuant to
KDTI's Employee Stock Option Plan or pursuant to option agreements embodying an
exercise price and other such terms and conditions as would apply to options
granted under such plan; provided that such employee continues to be so employed
at the time of such grant. KDTI shall include a proposal relating to the grant
of such options in the proxy or information statement relating to the next
meeting of its stockholders (or solicitation of proxies with respect thereto or
consents in lieu thereof) and KDTI's Board of Directors shall recommend that
KDTI's stockholders vote in favor of such proposal. Gary Katz, by letter dated
the date hereof, has agreed to vote all shares of Common Stock which he shall
have the direct or indirect power to vote at such meeting in favor of such
proposal. Promptly after the approval of the stockholders of KDTI with respect
to such proposal is obtained, KDTI shall prepare and execute and deliver
appropriate option agreements to the employees to whom such options are to be
granted.
8.11 Third Party Consents.
(a) SPEED, KDTI and Purchaser will cooperate and use their respective
commercially reasonable efforts to obtain as promptly as practicable all
consents, approvals and waivers which have not been obtained as of the Closing
Date required by third Persons to transfer the Contracts
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in a manner that will avoid any default, conflict or termination of rights under
the Contracts. Notwithstanding anything to the contrary in this Agreement,
nothing in this Section 8.11 shall require SPEED, KDTI, or Purchaser to expend
any material sum, make a material financial commitment or grant or agree to any
material concession to any third Person to obtain any such consent, approval or
waiver.
(b) In the event that any and all consents, approvals or waivers necessary
for the assignment, transfer or novation of any Contract, or any claim, right or
benefit arising thereunder or resulting therefrom, or consents relating to sale
of substantially all of Speed's assets, shall not have been obtained prior to
the Closing Date, then as of the Closing, this Agreement, to the extent
permitted by Law, shall constitute full and equitable assignment by SPEED to
Purchaser and KDTI of all of SPEED's right, title and interest in and to, and
all of SPEED's obligations and liabilities under, such Contract, and Purchaser
and KDTI shall each be deemed SPEED's agent for purposes of completing,
fulfilling and discharging all of SPEED's liabilities under any such Contract.
The parties shall take all necessary steps and actions to provide Purchaser and
KDTI with the benefits of such Contracts, and to relieve SPEED of the
performance and other obligations thereunder arising after the Closing Date.
Purchaser agrees to pay, perform and discharge, and Purchaser and KDTI, jointly
and severally, agree to indemnify SPEED against and hold SPEED harmless from,
all obligations and liabilities of SPEED relating to such performance or failure
to perform under such Contracts arising after the Closing Date. To the extent
required in order to obtain a consent, approval or waiver to the transfer of any
Contract described in Section 8.11(a), KDTI agrees to pay, perform and
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discharge all obligations and liabilities of SPEED relating to such performance
or failure to perform under any such Contract arising after the Closing Date.
(c) In the event SPEED shall be unable to make the equitable assignment
described in Section 8.11(b), or if such attempted assignment would give rise to
any right of termination, or would otherwise adversely affect the rights of
SPEED or Purchaser under such Contract, or would not assign all SPEED's rights
thereunder at the Closing, SPEED and Purchaser shall continue to cooperate and
use all reasonable efforts to provide Purchaser with all such rights. To the
extent that any such consents and waivers are not obtained, or until the
impediments to such assignments are resolved, SPEED shall use all reasonable
efforts to (i) provide to Purchaser, at the request of Purchaser, the benefits
of any such Contract, (ii) cooperate in any lawful arrangement designed to
provide such benefits to Purchaser, and (iii) enforce, at the request of and for
the account of Purchaser, any rights of SPEED arising from any such Contract
against any third Person, including the right to elect to terminate in
accordance with the terms thereof upon the advise of Purchaser. To the extent
that Purchaser is provided the benefits of any Contract referred to herein
(whether from SPEED or otherwise), Purchaser shall perform the obligations of
SPEED thereunder, and Purchaser agrees to pay, perform and discharge, and
Purchaser and KDTI, jointly and severally, agree to indemnify SPEED against and
hold SPEED harmless from, all obligations and liabilities of SPEED relating to
such performance or failure to perform (but only to the extent such obligations
or liabilities arise solely from acts of Purchaser after the Closing Date).
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8.12 Non-competition.
SPEED and Ronald agree to perform and comply with the non-competition
covenants included in the Employment Agreement, as though fully set forth herein
as applicable to, and enforceable against, both SPEED and Ronald. SPEED and
Ronald acknowledge that KDTI and KDTI-NY are relying on such non-competition
covenants as an essential inducement and condition precedent to their entering
into this Agreement and acquiring the Acquired Assets hereunder.
8.13 Material Modifications to Bank Loan.
KDTI agrees that it will not agree to any material modification to the
Loan Agreement between KDTI and The Bank of New York or the Superior
Indebtedness referred to in the Subordination Agreement without the approval of
KDTI's Board of Directors. In the event that Ronald is not a member of KDTI's
Board of Directors at the time such modification is submitted to the Board of
Directors for approval, KDTI will give Ronald notice at least fifteen (15) days
prior to its proposed entry into such material modification of the Loan
Agreement or the Superior Indebtedness and an opportunity to discuss such
modification with the members of the Board of Directors at or prior to the
meeting of the Board of Directors called to approve such modification.
ARTICLE 9: SURVIVAL OF REPRESENTATIONS; INDEMNITIES
9.1 Survival of Representations and Warranties of SPEED and Ronald.
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The representations and warranties of SPEED and Ronald and the
indemnification obligations under Section 9.2 shall survive the execution and
delivery of this Agreement and the Other Documents and the Closing hereunder
until December 31, 1999, provided, however, that the covenants contained in
Section 3.3.2 and the representations and warranties made in Sections 6.2, 6.8,
6.16, 6.21 and 6.25 and the obligation to indemnify for Securities Claims, as
that term is defined in Section 9.2.1, shall survive the execution of this
Agreement and the Other Documents and the Closing hereunder until the date of
expiration of the relevant federal, state or other statute of limitations;
provided further, however, that as to matters as to which any Indemnitee has
given a proper Claims Notice under Section 9.4 on or prior to the expiration of
the applicable survival period aforesaid, the right to indemnification with
respect thereto shall survive the expiration of any such period until such claim
is finally resolved and any obligations with respect thereto are fully
satisfied.
9.2 Obligations of SPEED and Ronald to Indemnify.
9.2.1. General Indemnity. Subject to Section 9.1, SPEED and Ronald,
jointly and severally, agree to indemnify, defend and hold harmless
KDTI-NY and KDTI, and their respective officers, directors, employees and
agents, and any of their successors and assigns (collectively, "KDTI
Indemnified Parties") from and against any and all losses, liabilities,
damages, deficiencies, demands, claims, actions, judgments or causes of
action, assessments, costs or expenses (including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements)
("Claims"), whether such Claims are incurred in KDTI-NY's or KDTI's
disputes with SPEED or Ronald or involving third-party claims against
KDTI-NY or KDTI, based upon, arising out of or otherwise in
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<PAGE> 72
respect of (i) any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of SPEED or Ronald contained in this
Agreement or any of the Other Documents, (ii) any Excluded Liability or
(iii) any Claim based upon the operation of the SPEED Business prior to
the Closing Date. In addition, Ronald shall indemnify and hold harmless
KDTI, each director of KDTI, each officer of KDTI who shall sign the
Registration Statement and any Person who controls KDTI within the meaning
of the Securities Act, against any and all Claims to which any of the
foregoing Persons may become subject under the Securities Act or
otherwise, insofar as such Claims arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in, or
omission or alleged omission of a material fact from, the Registration
Statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or any document incident
to the registration or qualification of the Shares in reliance upon and in
conformity with written information furnished to KDTI by Ronald solely for
use in the preparation thereof ("SPEED Securities Claims").
9.2.2. Limitation on Indemnification Obligation. No claim may be made
against SPEED or Ronald for indemnification pursuant to this Section 9.2
with respect to any individual Claim, unless the aggregate of all Claims
of the KDTI Indemnified Parties with respect to this Section 9.2 shall
exceed $135,000 and SPEED or Ronald shall not be required to pay or be
liable for the first $135,000 in aggregate amount of any such Claims. The
KDTI Indemnified Parties shall not be indemnified pursuant to this Section
9.2 with respect to any individual Claim if the aggregate of all Claims
for which the KDTI
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<PAGE> 73
Indemnified Parties have received indemnification pursuant to this Section
9.2 shall have exceeded $8,500,000, except that any Claim (i) based upon
or relating to (a) any breach of the representations or warranties in
Sections 6.8, 6.16 or 6.25 or (b) any act of fraud with scienter by or on
behalf of SPEED or Ronald or (ii) asserted by a KDTI Indemnified Party by
way of defense, counterclaim or set off in connection with, and in an
amount not exceeding the amount of, any Claim by a SPEED Indemnified Party
(as defined below) against such KDTI Indemnified Party shall not be
subject to the foregoing upper limit. For the purposes of this Section 9,
in computing such individual or aggregate amounts of Claims, the amount of
each Claim shall be deemed to be an amount (i) net of any Tax benefit to
the applicable KDTI Indemnified Party or any Affiliate thereof, (ii) net
of any insurance proceeds and any indemnity, contribution or other similar
payment received any third party with respect thereto, and (iii) net of
any reserves provided for the situation in question which are included in
the Acquired Assets and reflected in the Closing Date Balance Sheet. Tax
benefits will be considered to be realized by a KDTI Indemnified Party for
the purposes of this Section 9.2 in the year in which a payment occurs,
and the amount of the Tax benefits shall be determined by assuming (i)
such KDTI Indemnified Party or Affiliate thereof is in the maximum Federal
income tax bracket after any deduction reportable with respect to a
payment hereunder and (ii) such KDTI Indemnified Party's or its
Affiliate's effective state and local income tax rate is its effective
rate for the most recent prior taxable year for which such information is
available. The foregoing notwithstanding, Securities Claims, any Claim
based upon a breach of the representations and warranties made in Section
6.2 (including,
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<PAGE> 74
without limitation, the shareholders of SPEED as set forth on Schedule
6.2), and any claim for adjustment of the Purchase Price under Section 3.2
shall not be subject to, or included in calculating, the limitations
contained in this Paragraph 9.2.2.
9.3 Survival of Representations and Warranties of KDTI and KDTI-NY
KDTI's and KDTI-NY's representations and warranties, covenants and the
indemnification obligations under Section 9.3.1 shall survive the execution and
delivery of this Agreement and the Other Documents and the Closing until
December 31, 1999, provided however, that (i) the representations and warranty
made in Section 7.2, (ii) the covenants set forth in Sections 8.6 and 8.8 and
(iii) the obligation to indemnify for (A) KDTI's Securities Claims (as that term
is defined in Section 9.3.1), (B) in respect of any Acquired Liability or (C)
for any Claim incurred by SPEED or Ronald based upon, arising out of, or
otherwise in respect of, the operation of the SPEED Business on or after the
Closing Date, in each case as provided in Section 9.3.1, shall survive the
execution of this Agreement and the Other Documents and the Closing hereunder
until the date of expiration of the relevant federal, state or other statute of
limitations; and provided further however, that as to matters as to which any
Indemnitee has given a proper Claims Notice under Section 9.4 on or prior to the
expiration of the applicable period aforesaid, the right to indemnification with
respect thereto shall survive the expiration of any such period until such claim
is finally resolved and any obligations with respect thereto are fully
satisfied.
9.3.1. Obligation of KDTI and KDTI-NY to Indemnify. Subject to Section
9.3, KDTI and KDTI-NY agree, jointly and severally, to indemnify, defend
and hold harmless SPEED and Ronald and their respective officers,
directors, employees and agents, and
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<PAGE> 75
any of their successors, heirs and assigns (collectively, "SPEED
Indemnified Parties") from and against any and all Claims based upon,
arising out of or otherwise in respect of (i) any inaccuracy in or any
breach of any representation or warranty or covenant or agreement of KDTI
or KDTI-NY contained in this Agreement or in any Other Document delivered
by KDTI or KDTI-NY, (ii) any Acquired Liability and (iii) any Claim
incurred by SPEED or Ronald resulting from the operation of the SPEED
Business on or after the Closing Date. In addition, KDTI and KDTI-NY
shall, jointly and severally, indemnify and hold harmless the SPEED
Indemnified Parties, within the meaning of the Securities Act, against any
and all Claims to which any of the SPEED Indemnified Parties may become
subject under the Securities Act or otherwise, insofar as such Claims
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or final prospectus contained therein, any document
incorporated by reference therein or any amendment or supplement thereto,
or any document prepared and/or furnished by KDTI or KDTI-NY or their
respective Affiliates incident to the registration or qualification of the
Registrable Securities, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein
in light of the circumstances under which they were made, not misleading,
or any violation by KDTI or KDTI-NY or their respective Affiliates of the
Securities Act or Blue Sky Laws applicable to them and relating to action
or inaction required of KDTI or KDTI-NY or their respective Affiliates in
connection with such
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<PAGE> 76
registration or qualification under such Blue Sky Laws ("KDTI's Securities
Claims"); provided, however, that KDTI shall not be liable in any such
case to the extent that such Claims arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained
in, or omission or alleged omission of a material fact from, the
Registration Statement, such preliminary prospectus or such prospectus or
such amendment or supplement or any document incident to the registration
or qualification of the Registrable Securities in reliance upon and in
conformity with written information furnished to it by Ronald or any other
holder of such Registrable Securities or their respective agents solely
for use in the preparation thereof. 9.3.2.Limitation on Indemnification
Obligation. No claim may be made against KDTI or KDTI-NY for
indemnification pursuant to this Section 9.3.2 with respect to any
individual Claim, unless the aggregate of all Claims of the SPEED
Indemnified Parties with respect to this Section 9.3.2 shall exceed
$135,000 and KDTI or KDTI-NY shall not be required to pay or be liable for
the first $135,000 in aggregate amount of any such Claims. The SPEED
Indemnified Parties shall not be indemnified pursuant to this Section
9.3.2 with respect to any individual KDTI Securities Claim if the
aggregate of all KDTI Securities Claims for which the KDTI Indemnified
Parties have received indemnification pursuant to this Section 9.3.2 shall
have exceeded $8,500,000. For the purposes of this Section 9, in computing
such individual or aggregate amounts of Claims, the amount of each Claim
shall be deemed to be an amount (i) net of any Tax benefit to the
applicable SPEED Indemnified Party or any Affiliate thereof, (ii) net of
any insurance proceeds and any indemnity, contribution or other similar
payment received
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<PAGE> 77
any third party with respect thereto, and (iii) net of any reserves
provided for the situation in question which are included in the Acquired
Assets and reflected in the Closing Date Balance Sheet. Tax benefits will
be considered to be realized by a SPEED Indemnified Party for the purposes
of this Section 9.2 in the year in which a payment occurs, and the amount
of the Tax benefits shall be determined by assuming (i) such SPEED
Indemnified Party or Affiliate thereof is in the maximum Federal income
tax bracket after any deduction reportable with respect to a payment
hereunder and (ii) such SPEED Indemnified Party's or its Affiliate's
effective state and local income tax rate is its effective rate for the
most recent prior taxable year for which such information is available.
9.4 Notice and Opportunity to Defend.
9.4.1. Notice of Asserted Liability. Promptly after receipt by any SPEED
Indemnified Party or KDTI Indemnified Party (the "Indemnitee") of notice
of any demand, claim or circumstance which, with the lapse of time, would
or might give rise to a Claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in any Claim, the Indemnitee shall promptly
give notice thereof (the "Claims Notice") to the party obligated to
provide indemnification pursuant to Section 9.2 or 9.3 (the "Indemnifying
Party"). The Claims Notice shall describe the Asserted Liability in
reasonable detail, shall contain supporting documentation (if applicable),
and shall indicate the amount (estimated, if necessary and to the extent
feasible) of the Claims that have been or may be suffered by the
Indemnitee. No indemnification obligation shall be imposed upon an
Indemnifying Party unless a
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proper Claims Notice is given to that Indemnifying Party on or before the
last day of the survival period for the representation, warranty, or
covenant, the alleged breach of which forms the basis for the Claim.
9.4.2. Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any
Asserted Liability. If the Indemnifying Party elects to compromise or
defend such Asserted Liability, it shall within thirty (30) days (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate with
the Indemnifying Party and shall provide the Indemnifying Party access to
its records and personnel relating to any such Asserted Liability, in each
case, at the expense of the Indemnifying Party, in the compromise of, or
defense against, such Asserted Liability. If the Indemnifying Party elects
not to compromise or defend the Asserted Liability or fails to notify the
Indemnitee of its election as herein provided, the Indemnitee may pay,
compromise or defend such Asserted Liability at the expense of the
Indemnifying Party. Subject to the limitations contained in Section 9.4.3
on the obligations of the Indemnifying Party in respect of proposed
settlements, the Indemnitee shall have the right to employ its own counsel
with respect to any Asserted Liability, but the fees and expenses of such
counsel shall be at the expense of such Indemnitee unless (a) the
employment of such counsel at the expense of the Indemnifying Party shall
have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or (b) such Indemnifying Party shall not
have, as provided above, promptly employed counsel reasonably satisfactory
to the Indemnitee to take charge of the defense
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of such action. The Indemnitee, at its own cost, may employ separate
counsel to assert, based on an opinion of counsel, one or more legal
defenses available to it which are different from or additional to those
available to such Indemnifying Party; the Indemnifying Party shall not
have the right to direct the defense of such action on behalf of the
Indemnitee in respect of such different or additional defenses. If the
Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents
within its control that are necessary or appropriate for such defense.
9.4.3. Settlement. Notwithstanding the provisions of Section 9.4.2,
neither the Indemnifying Party nor the Indemnitee may settle or compromise
any claim for which indemnification has been sought and is available
hereunder, over the reasonable objection of the other; provided, however,
that consent to settlement or compromise shall not be unreasonably
withheld or delayed. If, however, the Indemnitee refuses to consent to a
bona fide offer of settlement which the Indemnifying Party wishes to
accept, the Indemnitee may continue to pursue such matter, free of any
participation by the Indemnifying Party, at the sole expense of the
Indemnitee. In such event, the obligation of the Indemnifying Party to the
Indemnitee shall be equal to the lesser of (i) the amount of the offer of
settlement which the Indemnitee refused to accept plus the costs and
expenses of the Indemnitee prior to the date the Indemnifying Party
notified the Indemnitee of the offer of settlement, and (ii) the actual
out-of-pocket amount the Indemnitee is obligated to pay as a result of the
Indemnitee's continuing to pursue such matter.
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9.5 Exclusive Provisions; No Rescission.
Except as set forth in this Agreement, none of the parties hereto is
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. No party hereto shall be entitled to rescission of
this Agreement or the transactions contemplated hereby, except that the
foregoing provision shall not limit KDTI's or KDTI-NY's right to rescission or
to any other remedy or relief in any Claim based upon or relating to any act of
fraud with scienter, which is finally determined by a court of competent
jurisdiction, by or on behalf of SPEED or Ronald.
ARTICLE 10: MISCELLANEOUS
10.1 Expenses.
Except as otherwise provided herein, the parties hereto shall pay all of
their own expenses relating to the transactions contemplated by this Agreement
and the Other Documents, including, without limitation, the fees and expenses of
their respective counsel and financial advisers.
10.2 Governing Law.
The interpretation and construction of this Agreement and the Other
Documents, and all matters relating hereto, shall be governed by the law of the
State of New York, without reference to its conflict of laws provisions.
10.3 Interchangeability of Schedules.
Any information contained on any Schedule to this Agreement or in the
Financial Statements shall be deemed to be contained on each and every other
Schedule to this Agreement.
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10.4 Captions.
The article and section captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.
10.5 Notices.
Any notice or other communications required or permitted hereunder shall
be in writing and shall be deemed effective (a) upon personal delivery, if
delivered by hand; (b) one day after the date of delivery by Federal Express or
other nationally recognized courier service that provides a delivery receipt, if
delivered by priority overnight delivery between any two points within the
United States; or (c) five days after deposit in the mails, if mailed by
certified or registered mail (return receipt requested) between any two points
within the United States, and in each case of mailing, postage prepaid,
addressed to a party at its address first set forth above, with copies to
Messrs. Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP, 750 Lexington
Avenue, New York, New York 10022-1200, Attention: Murray L. Skala, Esq., and to
Rogers & Wells, 200 Park Avenue, New York, New York 10166-0153, Attn: Joseph A.
Adams, Esq. or such other address as shall be furnished in writing by like
notice by any such party.
10.6 Parties in Interest.
Except as otherwise provided in Section 5.8 or elsewhere herein or in the
Other Documents, this Agreement and the Other Documents may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement and the Other Documents shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns, Except as otherwise
provided in Section 5.8 or elsewhere herein, each party hereto intends that this
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<PAGE> 82
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto. Notwithstanding anything to
the contrary in this Agreement, but subject to Section 5.8 hereof and the
Securities Act, nothing in this Agreement shall prohibit or in any way restrict
the ability of SPEED or any of its Affiliates to transfer any or all of the
Shares and Additional Shares, if any, to SPEED or one or more Affiliates of
SPEED.
10.7 Severability.
In the event any provision of this Agreement or the Other Documents is
found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement or such Other Documents shall
nevertheless be binding upon the parties with the same effect as though the void
or unenforceable part had been severed and deleted.
10.8 Counterparts.
This Agreement may be executed in two or more counterparts, all of which
taken together shall constitute one instrument.
10.9 Entire Agreement; Amendments.
This Agreement, and the Other Documents, contain the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. This Agreement may not
be changed orally, but only by an agreement in writing signed by all parties.
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IN WITNESS WHEREOF, the individual parties have executed and the corporate
parties have each caused its corporate name to be hereunto subscribed by their
respective duly authorized officers on the date first written above.
KATZ DIGITAL TECHNOLOGIES, INC. KATZ N.Y. ACQUISITION INC.
By: By:
------------------------ -----------------------------
GARY KATZ GARY KATZ
Chief Executive Officer President
SPEED GRAPHICS, INC. DDP, INC.
By: By:
------------------------ -----------------------------
Name: Ronald Krivosheiw Name: Ronald Krivosheiw
Title:President Title:
- ------------------------------------
Ronald Krivosheiw
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<PAGE> 84
Schedule 1.3
Acquired Liabilities
(i) Under the terms of a settlement agreement with Nicole Cledic, Speed is
required to pay Ms. Cledic $7,500 in January, 1998. See Schedule
6.3.2(ii).
(ii) Speed is required to make the following payments for severance to the
individuals listed below:
Nature of
Name Amount Payment
---- ------ -------
[Omitted to maintain confidentiality and filed Severance
separately with the Commission] Severance
(iii) Speed is required to make payment for accrued vacation pay and sick leave
as set forth on Annex A to this Schedule 1.3.
- ----------
(1) The amount to be paid is based upon an oral agreement with the ex-employee
that Speed would pay him severance (not to exceed eight weeks) until he
finds gainful employment.
(2) The amount to be paid is based upon an oral agreement of the ex-employee
that Speed would pay him severance (not to exceed four weeks) until he
finds gainful employment.
<PAGE> 85
VACATION AND SICK TIME LIABILITY
- --------------------------------------------------------------------------------
[Omitted to maintain confidentiality and filed separately with the Commission]
- --------------------------------------------------------------------------------
GRAND TOTALS 14,799.87 4284.4462 291.952.36 4868.8 4284.4452 $70,239.26
================================================================================
<PAGE> 86
Schedule 1.8
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement, dated as of January __,
1998 (the "Agreement"), among Speed Graphics, Inc., a New York corporation
("SGI"), DDP, Inc., a New York corporation ("DDP"), Katz Digital Technologies,
Inc., a Delaware corporation ("KDTI") and Katz N.Y. Acquisition, Inc., a
Delaware corporation ("Purchaser").
WHEREAS, by an Asset Acquisition Agreement dated as of January __,
1998 (the "Purchase Agreement"), among SGI, DDP, Purchaser, KDTI and Ronald
Krivosheiw, SGI and DDP have agreed to sell and assign the Acquired Assets to
Purchaser;
WHEREAS, in connection with the Purchase Agreement, the Purchaser
has agreed to assume the Acquired Liabilities and Purchaser and KDTI have
agreed, jointly and severally, to assume any liabilities under the Contracts;
and
WHEREAS, the parties hereto desire to execute this Agreement to
further evidence the assignment by SGI and DDP and assumption by Purchaser and
KDTI;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
i. Definitions. Except as otherwise provided herein, all capitalized
terms contained and not defined herein (including the recitals hereto) shall
have herein the respective meanings ascribed to them in the Purchase Agreement.
ii. Assignment. Each of SGI and DDP hereby sells, transfers,
conveys, assigns and sets over to Purchaser, its successors and assigns, all of
the Acquired Assets (other than the Contracts). Each of SGI and DDP hereby
sells, transfers, conveys, assigns and sets over to KDTI, its successors and
assigns, all the Contracts.
iii. Assumption of Acquired Liabilities. Purchaser hereby assumes
and undertakes to pay, perform and discharge the Acquired Liabilities (other
than with respect to or under the Contracts), and KDTI hereby assumes and
undertakes to pay, perform and discharge any liability or obligation under the
Contracts.
iv. Assignability of Contracts. To the extent that any of the
Contracts are not assignable without the consent of another party and such
consent has not been obtained on or prior to the Closing Date, this Agreement
shall not constitute an assignment or attempted assignment that would constitute
a breach thereof. Any obligation of Speed under the Purchase Agreement to effect
the transfer of any Contract to KDTI shall not be terminated or abridged by this
provision.
v. Further Assurances. At any time and from time to time after the
date hereof, at the request of Purchaser or KDTI, and without further
consideration, Speed shall
<PAGE> 87
execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such other action as Purchaser or KDTI may
reasonably request as necessary or desirable in order to more effectively
transfer, convey and assign to Purchaser or KDTI, as the case may be, the
Acquired Assets.
vi. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of law.
<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
SPEED GRAPHICS, INC.
Attest:
By:
- ---------------------------- -------------------------------
Name:
Title:
DDP, INC.
Attest:
By:
- ---------------------------- -------------------------------
Name:
Title:
KATZ N.Y. ACQUISITION, INC.
Attest:
By:
- ---------------------------- -------------------------------
Name:
Title:
KATZ DIGITAL TECHNOLOGIES, INC.
Attest:
By:
- ---------------------------- -------------------------------
Name:
Title:
<PAGE> 89
Schedule 1.14
BILL OF SALE
THIS BILL OF SALE dated as of January ___, 1998, by SPEED GRAPHICS,
INC., a New York corporation ("SGI"), and DDP Inc., a New York corporation
("DDP", and together with SGI, "Speed"), to KATZ NEW YORK ACQUISITION, INC., a
Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, the Asset Acquisition Agreement, dated as of January 1,
1998 (the "Agreement"), among SGI, DDP, Ronald Krivosheiw, Purchaser and Katz
Digital Technologies, Inc., a Delaware corporation ("KDTI"), provides for, among
other things, the transfer and sale to the Purchaser of substantially all the
assets of Speed, all as more fully described in the Agreement, for consideration
in the amount and upon the terms provided in the Agreement; and
WHEREAS, by this instrument Speed is vesting in Purchaser all of the
properties, assets, and rights of Speed hereinafter described.
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration to Speed in hand paid by Purchaser, at or before the
execution and delivery hereof, the receipt and sufficiency of which by Speed is
hereby acknowledged, Speed has conveyed, granted, bargained, sold, transferred,
set over, assigned, aliened, remised, released, delivered and confirmed, and by
this Bill of Sale does convey, grant, bargain, sell, transfer, set over, assign,
alien, remise, release, deliver and confirm unto Purchaser, its successors and
assigns forever, all of Speed's right, title and interest in the Acquired Assets
(as defined in Section 1.2 of the Agreement) of every nature and description,
whether tangible or intangible, whether real, personal, or mixed, whether
accrued, contingent or otherwise, wherever located.
TO HAVE AND TO HOLD all of the Acquired Assets unto Purchaser, its
successors and assigns to its and their own use forever.
Speed hereby constitutes and appoints Purchaser, its successors and
assigns, Speed's true and lawful attorney and attorneys, with full power of
substitution, in Speed's name and stead, but on behalf and for the benefit of
Purchaser, its successors and assigns, to demand and receive any and all of the
Acquired Assets, and to give receipts and releases for and in respect of the
same, and any part thereof, and from time to time to institute and prosecute in
Speed's name, or otherwise, for the benefit of Purchaser, its successors and
assigns, any and all proceedings at law, in equity or otherwise, which
Purchaser, its successors and assigns, may deem proper for the collection or
reduction to possession of any of the Acquired Assets or for the collection and
enforcement of any claim or right of any kind hereby sold, conveyed, transferred
and assigned, or intended so to be, and to do all acts and things in relation to
the Acquired Assets which Purchaser, its successors and assigns shall deem
desirable, Speed hereby
<PAGE> 90
declaring that the foregoing powers are coupled with an interest and are and
shall be irrevocable by Speed or by its dissolution or in any manner or for any
reason whatsoever.
Speed hereby covenants that, from time to time after the delivery of
this instrument, at Purchaser's request and without further consideration, Speed
will do, execute, acknowledge, and deliver, or will cause to be done, executed,
acknowledged and delivered, all and every such further acts, deeds, conveyances,
transfers, assignments, powers of attorney and assurances as reasonably may be
required more effectively to convey, transfer to and vest in Purchaser, and to
put Purchaser in possession of, any of the Acquired Assets.
Nothing in this instrument, express or implied, is intended or shall
be construed to confer upon, or give to, any person, firm or corporation (other
than Purchaser and its successors and assigns) any remedy or claim under or by
reason of this instrument or any terms, covenants or condition hereof, and all
the terms, covenants and conditions, promises and agreements in this instrument
contained shall be for the sole and exclusive benefit of Purchaser and its
successors and assigns.
Nothing in this instrument, express or implied, is intended or shall
be construed to diminish in any way the rights and obligations of the parties
under the Agreement.
This instrument is executed by, and shall be binding upon, Speed,
its successors and assigns, for the uses and purposes above set forth and
referred to, effective immediately upon its delivery to Purchaser. This
instrument shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 91
IN WITNESS WHEREOF, each of SGI and DDP has caused this Bill of Sale
to be executed on its behalf by its duly authorized officer as of the date first
above written.
SPEED GRAPHICS, INC.
By:
-------------------------------
Name:
Title:
ATTEST:
- ----------------------------
Name:
DDP, INC.
Attest:
By:
-------------------------------
Name:
Title:
ATTEST:
- ----------------------------
Name:
Receipt of the foregoing instrument acknowledged:
KATZ NEW YORK ACQUISITION, INC.
By:
----------------------------
Name:
Title:
<PAGE> 92
Schedule 1.29
Contracts
Real Property Leases
1. Lease between 342 Madison Avenue Associates Limited Partnership and Speed
Graphics, Inc. ("Speed") dated as of May 31, 1985, as amended by a First
Supplemental Agreement dated May, 1986, a Second Supplemental Agreement
dated April, 1988, a Third Supplemental Agreement dated November, 1988, a
Fourth Supplemental Agreement dated April, 1989, a Fifth Supplemental
Agreement dated July, 1989, a Sixth Supplemental Agreement dated November
8, 1990, a Seventh Supplemental Agreement dated May, 1991, an Eighth
Supplemental Agreement dated January, 1992, a Ninth Supplemental Agreement
dated August, 1992, a Tenth Supplemental Agreement dated August, 1992, an
Eleventh Supplemental Agreement dated October, 1992, a Twelfth
Supplemental Agreement dated February 23, 1993, a Thirteenth Supplemental
Agreement dated February 23, 1993, a Fourteenth Supplemental Agreement
dated March, 1993, a Fifteenth Supplemental Agreement dated October, 1993,
a Sixteenth Supplemental Agreement dated October, 1993, a Seventeenth
Supplemental Agreement dated November, 1993, an Eighteenth Supplemental
Agreement dated November, 1993, a Nineteenth Supplemental Agreement dated
August, 1994, a Twentieth Supplemental Agreement dated August, 1994, a
Twenty-First Supplemental Agreement dated October, 1994, a Twenty-Second
Supplemental Agreement dated April, 1996, a Twenty-Third Supplemental
Agreement dated April, 1996 and as Twenty-Fourth Supplemental Agreement
dated December 1, 1996 (as so amended, the "Lease").
2. Riders to Lease, regarding:
- Room 340
- Room 236
- Room 260
- Room 320
- Room 215
- Room 402/403
- Room 401
- Room 227
- Room 204/205
- Room 202
- Room 400
- Room 336
- Room 436
3. Letter Agreement dated April 8, 1992 from 342 Madison Avenue Associated
Limited Partnership to Speed.
<PAGE> 93
4. Agreement of Lease dated as of June 22, 1995 between 575 Realties, Inc.
and Speed, regarding office space at 6th floor, 228 East 45th Street.
5. Nondisturbance and Attornment Agreement dated as of June 27, 1995, between
1740 Advisors, Inc., as agent for ALLSA Life Insurance Company, Inc.,
Speed and 575 Realties, Inc.
6. Non-Disturbance Agreement dated as of June 22, 1995, among Beckrose
Estates, L.L.C., Steinberg & Pokoik and Speed.
7. Loan Agreement dated June 22, 1995, between 575 Realties, Inc. and Speed.
8. Improvement Loan Note dated as of June 22, 1995, by Speed to 575 Realties,
Inc.
9. Cancellation and Release Agreement dated as of November 15, 1996, between
Speed and Metropolitan Transportation Authority relating to the
cancellation of a Lease Agreement with an occupancy commencement date of
February 15, 1992 and rent commencement date of April 15, 1996, between
Speed and Metropolitan Transportation Authority, regarding office space on
ground floor of 341 Madison Avenue.
10. Agreement of Lease commencing April 1, 1992, between Fifth Avenue
Partners, L.P. and Speed, regarding commercial space at 19 West 21 Street.
11. Lease Modification Agreement dated as of December 9, 1994, between Fifth
Avenue Partners, L.P. and Speed.
12. Consent to Sublease dated as of June 6, 1996, among Fifth Avenue Partners,
L.P., Speed and Progressive Casualty Insurance Company.
13. Sublease dated as of May 2, 1996, between Speed and Progressive Casualty
Insurance Company.
Equipment Leases and Related Agreements
14. Equipment Lease Agreement dated June 29, 1993, between Speed and Eastman
Kodak Credit Corporation, regarding Springboard SCSI Emulator, etc.
15. Equipment Lease Agreement dated December 17, 1993, between Speed and
Eastman Kodak Credit Corporation, regarding Linotype RIP 50 Upgrade.
16. Equipment Lease dated October 26, 1994, between Speed and European
American Bank, as assignee of Gramercy Leasing Services, Inc., regarding
photographic/production equipment.
17. Lease Dated November 16, 1994, between Speed and Canon Financial Services,
Inc., regarding NCS00544 CLC 800.
<PAGE> 94
18. Equipment Acquisition Agreement dated October 18, 1994, between Speed and
MCS Business Machines, Inc., regarding NC500552 CLC 800.
19. Lease dated November 29, 1994, between Speed and Canon Financial Services,
Inc., regarding NC500552 CLC 800.
20. Lease dated October 8, 1994, between Speed and Canon Financial Services,
Inc.
21. Equipment Lease dated as of May 23, 1995, between Speed and European
American Bank as assignee of Gramercy Leasing Services, Inc., regarding
printing/imaging/computer equipment.
22. Guaranty dated as of May 23, 1995, made by Ronald Krivosheiw in favor of
Gramercy Leasing Services, Inc.
23. Master Lease Agreement dated as of March 15, 1995, between Speed and
General Electric Capital Corporation, as amended.
24. Agreement of Sale dated as of December 21, 1994, between Speed and Scitex
America Corp., regarding IRIS 3047, PS/Z Pentium, DAT tape drive, etc.
25. Sales Contract and Security Agreement dated as of May 30, 1995, between
Speed and General Electric Capital Corporation, as assignee of Heidelberg
USA, Inc., regarding Heidelberg GTODIV 4 color press.
26. Equipment Lease Agreement dated May 30, 1995 between Speed and Tilden
Financial Corp., regarding Heidelberg GTODIV 4 color press.
27. Corporate Guaranty dated May 30, 1995 made by DDP, Inc. in favor of Tilden
Financial Corp.
28. Personal Guaranty dated May 30, 1995 made by Ronald Krivosheiw in favor of
Tilden Financial Corp.
29. Equipment Lease dated August 23, 1995, between Speed and General Electric
Capital Corporation as assignee of Gramercy Leasing Services, Inc.
30. Guaranty dated August 23, 1995 made by Ronald Krivosheiw in favor of
Gramercy Leasing Services, Inc.
31. Master Lease Agreement dated as of March 15, 1995, between Speed and
General Electric Capital Corporation.
32. Lease Agreement dated as of October 3, 1995, between Speed and Tokai
Financial Services, Inc.
<PAGE> 95
33. Customer Service Maintenance Agreement dated as of September 14, 1995,
between Speed and AOE Ricoh, Inc.
34. Equipment Purchase Agreement dated September 14, 1995, between Speed and
AOE Ricoh, Inc.
35. Master Lease Agreement dated as of October 23, 1995, between Speed and GE
Capital Corp.
36. Guaranty dated November 1, 1995, made by Ronald Krivosheiw in favor of
General Electric Capital Corporation.
37. Agreement of Sale dated as of September 21, 1995, between Speed and Scitex
America Corp.
38. Equipment Acquisition Agreement dated October 4, 1995, between Speed and
MCS, regarding two Film Scanner III.
39. Lease dated as of December, 1995, between Speed and Canon Financial
Services, Inc., regarding two film Scanner III.
40. Agreement of Sale dated as of December 7, 1995, between Speed and Scitex
America Corp.
41. Master Lease Agreement dated October 23, 1995, between Speed and GE
Capital Corp., regarding IRIS 3047 with Colorbase.
42. Assumption Agreement dated as of January 23, 1995, among Speed, Finest
Photoprint and AT&T Capital Leasing Services/Eaton Financial Corp.
43. Lease dated as of March 22, 1994, between Finest Photoprint and Graphics,
Inc. and Eaton Financial Corp., regarding display printer, advanced color
server with software, etc.
44. Assumption Agreement dated as of April 11, 1996, among Finest Photo Print,
Inc., Speed and National Marketing Network, Inc.
45. Lease dated as of March 23, 1994, between Finest Photo Print, Inc. and
Colonial Pacific Leasing Corporation as assignee of National Marketing
Network, Inc., regarding Apple Mac Quadra 800 Computer, etc.
46. Equipment Lease Guaranty dated April 11, 1996, made by Ronald Krivosheiw
in favor of Colonial Pacific Leasing Corporation.
<PAGE> 96
47. Lease Guaranty dated as of March 12, 1996, made by Speed and Ronald
Krivosheiw in favor of Gramercy Leasing Services, Inc., regarding
electronic and photographic imaging equipment and air conditioning
equipment.
48. Equipment Lease dated as of March 12, 1996, between Speed and The CIT
Group as assignee of Gramercy Leasing Services, Inc., regarding electronic
and photographic imaging equipment and air conditioning equipment.
49. Guaranty dated March 12, 1996, made by Ronald Krivosheiw in favor of
Gramercy Leasing Services, Inc.
50. Guaranty dated March 12, 1996, made by DDP Inc. in favor of Gramercy
Leasing Services, Inc.
51. Equipment Lease dated April 15, 1996, between Speed and, Summit Leasing
Corporation, as assignee of Gramercy Leasing Services, Inc., regarding
digital photo imaging equipment and computer equipment.
52. Guaranty dated April 15, 1996 made by Ronald Krivosheiw in favor of
Gramercy Leasing Services, Inc.
53. Purchase Agreement dated January 31, 1996, between Speed and Durst ACS
Inc., regarding Durst Lamda 130 Large Format Digital Laser Imager.
54. Master Equipment Lease Agreement dated as of April 25, 1996, between Speed
and Colonial Pacific Leasing Corp., as amended.
55. Guaranty Agreement dated as of April 25, 1996 made by Ronald Krivosheiw in
favor of Colonial Pacific Leasing Corp.
56. Agreement of Sale dated as of March 12, 1996, between Speed and Scitex
America Corp., regarding Kodak Approval Systems, Inc.
57. Equipment Lease dated as of May 9, 1996, between Speed and European
American Bank, as assignee of Gramercy Leasing Services, Inc., regarding
drum scanner, file server, CD jukebox.
58. Guaranty dated May 9, 1996, made by DDP, Inc. in favor of Gramercy Leasing
Service, Inc.
59. Guaranty dated May 19, 1996, made by Ronald Krivosheiw in favor of
Gramercy Leasing Service, Inc.
60. Equipment Lease dated May 30, 1996, between Speed and Sterling National
Bank & Trust Company of New York as assignee of Gramercy Leasing Services,
Inc., regarding computer equipment and jet stream.
<PAGE> 97
61. Guaranty dated May 30, 1996, made by Ronald Krivosheiw in favor of
Gramercy Leasing Service, Inc.
62. Xerox Order Agreement dated May 8, 1996, between Speed and Xerox Corp.,
regarding 5790 Edit Color Copier (2 agreements).
63. Purchase Order Agreement dated as of September 19, 1996, among Speed,
Heidelberg USA Inc. and UJB Leasing, regarding Heidelberg Quickmaster
Model QMD1-46-4 Four Color Press.
64. Master Lease dated March 12, 1996, between Speed and Summit Leasing
Corporation (formerly UJB Leasing), as amended.
65. Individual Guaranty of Payment dated March 12, 1996, made by Ronald
Krivosheiw in favor of UJB Leasing Corp.
66. Corporate Guaranty of Payment dated March 12, 1996, made by DDP, Inc. in
favor of UJB Leasing Corp.
67. Equipment Lease dated as of September 16, 1996, between Speed and P.C.
Leasing, a Division of Phoenixcor, Inc., as assignee of Gramercy Leasing
Services, Inc., regarding Heidelberg QMD1-46-4 Four Color Press.
68. Guaranty dated September 16, 1996, made by Ronald Krivosheiw in favor of
P.C. Leasing, a Division of Phoenixcor, Inc., as assignee of Gramercy
Leasing Services, Inc.
69. Equipment Lease dated as of August 8, 1996, between Speed and Summit Bank
Leasing as assignee of Gramercy Leasing Services, Inc., regarding digital
photo imaging equipment and computer equipment.
70. Guaranty dated August 8, 1996, made by Ronald Krivosheiw in favor of
Gramercy Leasing Services, Inc.
71. Equipment Lease dated April 24, 1997, between Speed and, Sterling National
Bank, as assignee of Gramercy Leasing Services, Inc., regarding Canon CLC
1000, Edit Board Al, Editor F1.
72. Equipment Acquisition Agreement dated March 31, 1997, between Speed and
MCS Business Solutions, Inc., regarding CLC 1000, Ed Board A1 and Editor
F1.
73. Master Lease Agreement dated as of May 20, 1997, between Speed and
Gramercy Leasing Services, Inc.
74. Quotation, Purchase and License Agreement dated June 20, 1997, between
Speed and NAPC, Inc.
<PAGE> 98
75. Loan and Security Agreement dated as of June 9, 1994, between Phoenixcor,
Inc. and DDP, Inc., regarding loan for $903,000 for acquisition of color
system with Sun IPX Workstation, etc.
76. Individual Guaranty dated as of June 9, 1994, made by Ronald Krivosheiw in
favor of Phoenixcor, Inc.
77. Corporate Guaranty dated as of June 9, 1994, made by Speed in favor of
Phoenixcor, Inc.
78. Agreement dated as of June 9, 1994, among Phoenixcor, Inc., Speed and DDP,
Inc. (acknowledged by Ronald Krivosheiw).
79. Loan and Security Agreement dated as of June 10, 1994, between DDP, Inc.
and Phoenixcor, Inc., regarding loan for $159,862.37 for digital print
equipment.
80. Corporate Guaranty dated as of June 10, 1994, made by Speed in favor of
Phoenixcor, Inc.
81. Individual Guaranty dated as of June 10, 1994, made by Ronald Krivosheiw
in favor of Phoenixcor, Inc.
82. Equipment Lease Agreement dated as of November 22, 1993, between Speed and
Eastman Kodak Credit Corporation, regarding Agfa SelectSet 7000, etc.
83. Lease Agreement dated September 17, 1997 between Speed and Water Cure
Systems, Inc., regarding counter top water filtration cooler.
84. New Jersey Motor Vehicle Lease Agreement dated November 28, 1997 between
Speed and Ford Motor Credit Company, as assignee of Jack Trebour Ford,
regarding 1998 Ford Explorer.
85. [INTENTIONALLY OMITTED].
86. Consignment Inventory Stocking and Sales Agreement dated as of February
26, 1996, between Speed and Harold M. Pitman Company.
87. Consignment Contract dated as of April 23, 1996, between Speed and
Recognition Systems, Inc.
88. Equipment lease dated May 20, 1997, between Speed and Wasco Funding Corp
as assignee of Gramercy Leasing regarding Colorpass 8000 with Interface
board and command workstation.
<PAGE> 99
89. Equipment lease dated May 20, 1997, between Speed and Wasco Funding Corp
as assignee of Gramercy Leasing regarding ADP 8800-197LE computer system
and all related peripherals.
90. Equipment lease dated June 26, 1997, between Speed and Wasco Funding Corp
as assignee of Gramercy Leasing regarding Octane computer including
upgrades, Contex Rip n' Strip as well as all related software and hardware
related to this equipment.
Miscellaneous
91. Letter Agreement (the "Credit Agreement") dated August 11, 1997, from
Fleet Bank, N.A. to Speed, Ronald Krivosheiw and DDP, Inc., regarding
credit line. Amounts outstanding will be paid off by KDTI at the Closing.
92. Promissory Note dated August 11, 1997, by Speed to Fleet Bank, N.A. for
$2,735,000 principal sum. Amounts outstanding will be paid off by KDTI at
the Closing.
93. Agreement for Production and Sale of Fine Art Watercolor and Silver
Italide Prints dated as of April 17, 1997 among Gary Kollberg, Ronald
Krivosheiw, Cindy Krivosheiw and Speed.
94. Speed Graphics, Inc. 401(k) Profit Sharing Plan effective as of January 1,
992, as amended by the Amendment dated August 12, 1994 and the Second
Amendment dated as of February 20, 1996.
95. Incentive Program for Michael Constantino.
96. Letter Agreement dated August 22, 1997, between Robert E. Heck, Jr. and
Speed.
97. Letter Agreement dated August 16, 1993, between Carmine Furci and Speed.
98. Oral employment agreement between Joseph Ragusa and Speed.
99. Indenticolor License Agreement dated as of February 8, 1989, between
Indenticolor International, Inc. and Speed.
100. Rental Agreement dated as of May 1, 1996, between Speed and Magic
Graphics, Inc.
101. Oral employment agreement between Speed and Steve Greenberg.
102. Oral employment agreement between Speed and Robert J. Dito.
<PAGE> 100
Schedule 1.33
EMPLOYMENT AGREEMENT dated as of January 9, 1998 by
and between KATZ DIGITAL TECHNOLOGIES, INC., a
Delaware corporation ("KDTI" or the "Company"), and
RONALD KRIVOSHEIW (the "Employee").
---------------------------
The parties hereto desire to provide for the Employee's employment by the
Company in accordance with the terms and provisions set forth below:
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT; TERM.
The Company agrees to employ the Employee, and the Employee agrees to work
for the Company as its Chief Operating Officer for a period of three (3) years
commencing on the date hereof unless sooner terminated in accordance with
Section 7 hereof. Such period, together with the period of any extension or
renewal of such employment, is referred to herein as the "Employment Period."
2. DUTIES.
During the Employment Period, the Employee shall serve as the Chief
Operating Officer of the Company and its wholly owned subsidiary Katz N.Y.
Acquisition, Inc. ("KDTI-NY"), and perform such duties for the Company or an
Affiliate (as hereinafter defined) as shall, from time to time, be reasonably
assigned to the Employee by the Board of Directors or Chief Executive Officer of
the Company consistent with his position and abilities. The Employee shall have
such corporate power and authority as are necessary to perform the duties of
such office and any other office(s) that are so assigned to him. In his capacity
as Chief Operating Officer, the Employee shall formulate and implement a plan to
effect the operational combination of the business of Speed Graphics, Inc. and
its affiliate DDP, Inc., each a New York corporation (collectively, "Speed"),
with the business of KDTI and KDTI-NY (the assets of Speed having been acquired
by KDTI-NY concurrently with the execution of this Agreement), in order to
create maximum personnel, equipment and approving production efficiencies and
capacity. The Employee shall also be involved with identifying new acquisition
candidates, the due diligence process relating to such acquisitions and the
combination of the operations of any business or operation that may be acquired.
The duties to be performed by the Employee hereunder shall be performed
primarily in New York, New York, subject to reasonable travel requirements on
behalf of the Company. The Company shall not relocate the Employee outside of
New York, New York, without his prior written consent.
<PAGE> 101
3. DEVOTION OF TIME.
During the Employment Period, the Employee shall: (i) expend substantially
all of his working time for the Company; (ii) devote his best efforts, energy
and skill to the services of the Company and the promotion of its interests; and
(iii) not, directly or indirectly, engage, participate or invest in, or render
any services for, any other business enterprise or activity engaged in a
business competitive to the business of the Company; provided, however, that the
foregoing notwithstanding, the Employee may own, directly or indirectly, solely
as an investment, securities of any Person (as hereinafter defined); provided
that such securities are listed on a registered securities exchange or actively
traded in the over-the-counter market; and provided further, that the Employee
is not a controlling Person of, or a member of a group that controls, such
Person and that the number or amount of such securities represents not more than
two percent (2%) of the total number or amount of such securities then
outstanding.
4. COMPENSATION; ADDITIONAL BENEFITS.
4.1 In consideration for the services to be performed by the Employee
during the Employment Period hereunder, the Company shall compensate
the Employee at an annual base salary from the date hereof at an
annual rate which is equal to the base salary paid by KDTI to its
Chief Executive Officer (the "Base Salary"), provided, however, that
the Employee's Base Salary for each of the twelve (12) calendar
month periods ending on the first, second and third anniversaries of
the date of this Agreement shall not be less than $385,000, $424,000
and $466,000 per annum, respectively, payable in accordance with the
Company's customary payroll practices.
4.2 Consistent with the Company's other senior executives, the Employee
shall be eligible to be granted an annual bonus in accordance with
the provisions of Schedule 1 attached hereto.
4.3 Employee shall be entitled to health insurance and other benefits
and perquisites similar to those provided to other executive
employees of KDTI; provided, however, that such health and other
benefits and perquisites shall be no less favorable than the health
and other benefits and perquisites afforded KDTI's Chief Executive
Officer. To the fullest extent possible under applicable law, the
Company shall waive any and all vesting periods, minimum service
periods and waiting periods that may otherwise apply to the Employee
under the Company's health, benefit and other employee benefit plans
available to the Company's key employees.
4.4 The Company shall pay directly, or reimburse the Employee for, all
other reasonable and necessary, documented business expenses and
disbursements incurred by him for and on behalf of the Company in
the performance of his duties under this Agreement. For such
purposes, the Employee shall submit to the
<PAGE> 102
Company itemized reports of such expenses in accordance with the
Company's policies.
4.5 The Employee shall be entitled to six (6) weeks of annual vacation
and shall be subject to the Company's standard vacation policy
applicable to employees of his position and seniority.
4.6 The Company shall, at the Company's sole cost and expense, provide
or make available to the Employee (i) a 1987 Rolls Royce automobile
(VIN SCAZN02A1HCX20634) and a 1997 Lexus automobile (VIN
JT6HJ88J3V0173916), (ii) full collision and liability insurance on
such automobiles, (iii) one full-time driver, and (iv) reimbursement
for all expenses associated with use of such automobiles, including
without limitation gasoline, garage and parking expenses,
maintenance and repairs, registration, taxes and tolls. Upon
termination of his employment hereunder, the Company shall, without
any payment or other consideration required to be made or given by
the Employee, assign and transfer to the Employee the Rolls Royce
automobile referred to above and, if and to the extent permitted
under such lease, the lease of the 1997 Lexus automobile referred to
above; provided that Employee pays any penalty or fee payable in
connection with the transfer under the lease and provided further
that, except as otherwise provided herein, the Company shall have no
further obligation under this Section 4.6 with respect to such
automobiles after such termination.
5. EMPLOYEE KNOWLEDGE.
5.1 Employee hereby agrees to communicate and make known to the Company
all knowledge possessed by him relating to any methods,
developments, inventions and/or improvements, whether patented,
patentable or unpatentable, which relate to the business of the
Company; whether acquired by him before or during the Employment
Period; provided, however, that nothing herein shall be construed as
requiring any such communication where the method, development,
invention and/or improvement is lawfully protected from disclosure
as the trade secret of a third party or by any other lawful bar to
such communications existing prior to the commencement of employment
hereunder.
5.2 Employee hereby agrees to keep all such records in connection with
the Employee's employment as the Company may from time to time
reasonably direct, and all such records shall be the sole and
exclusive property of the Company.
5.3 It is expressly agreed between the Employee and the Company that any
invention the Employee develops entirely on his own time without
using the Company's equipment, supplies, facilities or trade secret
information belongs to the Employee except for those inventions that
either: (a) relate at the time of conception or reduction to
practice of the invention to the Company's business or actual or
<PAGE> 103
demonstrably anticipated research or development of the Company; or
(b) result from any work performed by the Employee for the Company.
6. RESTRICTIVE COVENANTS.
6.1 Definitions. Capitalized terms used herein, unless the context
otherwise requires, have the meanings specified below.
6.1.1 "Customer" means (i) any Person who is a customer of any of
the KDTI Companies at any time of determination or at any time
during the preceding two (2) year period; (ii) any customer of
Speed on the date hereof or at any time during the preceding
two (2) year period; or (iii) any prospective customer to whom
any of the KDTI Companies makes a bona fide presentation (or
similar offering of services) within a period of one (1) year
immediately preceding the time of determination.
6.1.2 "Affiliate" means any Person which, directly or indirectly,
controls or is controlled by or under common control with
KDTI.
6.1.3 "KDTI Companies" means KDTI, KDTI-NY and any other Affiliate.
6.1.4 "Restricted Period" means the period commencing on the day
next following the last day of the Employment Period and
ending on the third anniversary of the last day of the
Employment Period.
6.2 Acknowledgments by Employee. The Employee acknowledges that his
position with the Company will require the performance of services
which are special, unique, extraordinary and of an intellectual
character and places and will continue to place him in a position of
confidence and trust with the Customers of the Company. The Employee
further acknowledges that his performance of services for the
Company necessarily requires the disclosure to the Employee of
confidential information and trade secrets of the Company. The
Employee also acknowledges that he has developed prior to the date
hereof, as an employee and stockholder of Speed, the assets of which
were acquired by the Company pursuant to an Asset Acquisition
Agreement dated of even date herewith among KDTI, KDTI-NY, Speed,
and the Employee (the "Acquisition Agreement"), concurrently with
the execution and delivery of this Agreement, a personal
acquaintance and relationship with Customers of Speed and that he
will continue to develop such relationships with such Customers as
an employee of the Company. The Employee also acknowledges that in
the course of his employment by the Company he will develop a
personal acquaintanceship and relationship with other Customers of
KDTI and its Affiliates. The Employee further acknowledges that he
has and will acquire a knowledge of such Customers' affairs and
requirements which may constitute a primary contact of the Company
or KDTI and its Affiliates with such Customers, and that therefore,
the Company's and KDTI's and its other
<PAGE> 104
Affiliates relationships with its Customers may be placed in the
Employee's hands in confidence and trust. The Employee therefore
agrees that it is reasonable and necessary for the protection of the
goodwill and business of the Company that the Employee make the
covenants contained herein and that making such covenants is an
essential inducement and a necessary condition precedent to the
Company (a) acquiring the assets of Speed pursuant to the
Acquisition Agreement, which acquisition results in a direct and
substantial pecuniary benefit to the Employee, and (b) employing the
Employee hereunder.
6.3 Covenants against Competition. Employee hereby covenants and agrees
that he will not, directly or indirectly, by himself, or through any
other Person:
6.3.1 during the Employment Period:
(a) render any services within the scope of the KDTI
Companies's respective businesses to or for a Customer,
unless such services are rendered as an employee of or
consultant to one of the KDTI Companies;
(b) attempt in any manner to solicit business that competes
with the KDTI Companies from any Customer (except on
behalf of the KDTI Companies), or persuade any Customer
to cease doing business or to reduce the amount of
business which any such Customer is doing or
contemplates doing with any of the KDTI Companies;
(c) employ or attempt to employ or assist any other Person
to employ any person (except on behalf of the KDTI
Companies) who is at such time, or at any time during
the twelve months preceding the date of this Agreement
was, in the employ of any of the KDTI Companies to
perform services;
(d) solicit or affect to the detriment of any of the KDTI
Companies, any relationship of any of the KDTI Companies
with any Customer or any supplier, service bureau,
vendor or employee of any of the KDTI Companies, or
cause any Customer, supplier, or vendor of any of the
KDTI Companies to refrain from entrusting additional
business to any of the KDTI Companies; or
(e) engage in any business activity which is competitive
with the services offered or products manufactured by
any of the KDTI Companies or competitive with services
or products the offering of which was under active
consideration by any of the KDTI Companies at such date;
<PAGE> 105
6.3.2 during the Restricted Period, engage in any business activity,
enterprise or venture that produces products produced or
performs services performed, directly or indirectly, by any
KDTI Company, or that are being actively considered by any
KDTI Company or Speed, on the last day of the Employment
Period;
6.3.3 during the Restricted Period and for a further twelve (12)
month period ending on the fourth anniversary of the last day
of the Employment Period, solicit any Customer or solicit or
offer to employ or engage in any capacity any Person who is
then, or at any time within the preceding twelve (12) month
period was, an employee of any KDTI Company for any business
activity or purpose whatsoever; or
6.3.4 at any time after the date hereof, solicit any Customer or
solicit or offer to employ or engage in any capacity any
Person who is then, or at any time within the preceding twelve
(12) month period was, an employee of any KDTI Company for any
business activity or purpose that is competitive with the
business of any KDTI Company or Speed, or that are being
actively considered by any KDTI Company or Speed, on the last
day of the Employment Period;
provided, however, that the foregoing notwithstanding, the Employee
may own, directly or indirectly, solely as an investment, securities
of any Person; provided that such securities are listed on a
registered securities exchange or actively traded in the
over-the-counter market; and provided further, that the Employee is
not a controlling Person of, or a member of a group that controls,
such Person and that the number or amount of such securities
represents not more than two percent (2%) of the total number or
amount of such securities then outstanding.
6.4 Confidential Information. From and at all times after the date
hereof, the Employee shall keep secret and retain in strictest
confidence, and shall not use for the benefit of himself or others,
except in connection with the business and affairs of the KDTI
Companies, all confidential matters relating to the business of the
KDTI Companies, including, but not limited to, "know-how," trade
secrets, customer lists, subscription lists, pricing policies,
operational methods, marketing plans or strategies, product
development techniques or plans, information pertaining to Customers
and their requirements, business acquisition plans, new personnel
acquisition plans, formulae, methods of manufacture, technical
processes, designs and design projects, inventions and research
projects and other business affairs relating to the business and
affairs of the KDTI Companies, learned by the Employee at any time
and shall never disclose such matters to anyone outside of the KDTI
Companies, except (i) as required in the course of performing duties
for the KDTI Companies or as required by law or any court or
administrative body of competent jurisdiction (provided that the
Employee gives prompt notice of any such applicable requirement so
that KDTI may oppose such requirement, seek a protective order or
otherwise take such action as it may deem
<PAGE> 106
desirable to afford confidential treatment to such information),
(ii) with KDTI's express written consent; or (iii) with respect to
such information which is generally known to the public or to
businesses engaged in the type of business in which any of the KDTI
Companies is engaged becomes known to the public or such businesses
though no fault of the Employee.
6.5 Enforcement Through Injunction. Employee acknowledges that the type
and periods of restriction imposed in this Section 6 are fair and
reasonable and are reasonably required for the protection of the
KDTI Companies. The Employee acknowledge that a breach of the
provisions of this Agreement would irreparably damage the KDTI
Companies, and that once such a breach has occurred, there may be no
accurate way of determining the amount of damage or loss suffered by
the KDTI Companies. The Employee therefore agrees that the terms of
this Agreement may be enforced (after posting any bond required by
applicable law) through preliminary or final injunctive relief or
other equitable remedy, without any of the KDTI Companies having to
prove irreparable injury or likelihood of success and without
limiting any other damages or remedies to which any of the KDTI
Companies may be entitled, including termination of any salary or
other payments required under this Agreement.
6.6 Blue Lining. If any of the provisions of this Agreement relating to
time, geographical area, services products, devices and/or
information are deemed by a court of competent jurisdiction to be
overly broad or for any other reason unenforceable, the parties
agree that such restrictions herein as to time, geographical area,
services, products, devices and/or information shall be reduced to
such time, geographical area, services, products, devices and/or
information as such court shall hold to be reasonable and legally
enforceable. In addition, if any court determines that any of the
restrictive covenants contained in this Agreement or any part
thereof, is invalid or unenforceable, the remainder of the
restrictive covenants shall not thereby be affected and shall be
given full effect without regard to the invalid portions.
The Employee acknowledges that the business of the KDTI Companies
extends beyond the geographic area of the State of New York and
accordingly, it is reasonable that the restrictive covenants set
forth above are not limited by specific geographic area but by the
location of the Customers. The Employee further acknowledges that
the Company and the Employee intend to and hereby confer
jurisdiction to enforce the covenants contained in this Agreement
upon the courts of any state within the geographical scope of such
covenants. In the event that the courts of one or more of such
states shall hold such covenants wholly unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect
the right of any of the KDTI Companies to the relief provided above
in the courts of any other states within the geographical scope of
such covenants, as to breaches of such covenants in such other
respective states, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent
<PAGE> 107
covenants. Notwithstanding the foregoing, no action will be
commenced in more than one jurisdiction at a time unless one or more
of the provisions of this Agreement can only be enforced if an
action is brought in another jurisdiction or jurisdictions.
7. Termination. The Employee's employment hereunder may be terminated only
upon the expiration of the Employment Period or under the following
circumstances:
7.1 Death. The Employee's employment hereunder shall be terminated
automatically upon his death, in which event the Company shall pay
to the Employee's written designee or, if he has no written
designee, to his spouse or, if he leaves no spouse and has no
written designee, to his estate, (i) accrued but unpaid Base Salary
through the date of death, (ii) Base Salary payable for the
remainder of the Employment Period (without any extension or renewal
for any reason and disregarding for this purpose the early
termination of his employment on account of his death), such amounts
to be paid in the same manner through the remainder of the
Employment Period as if the Employee's employment were not
terminated, (iii) accrued but unpaid Bonus through the date of
death, and (iv) all reasonable expenses actually incurred or paid by
the Employee in the performance of his duties hereunder prior to the
date of death.
7.2 Disability. The Company may terminate the Employee's employment
hereunder if as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have failed to
perform his duties hereunder on a substantially full- time basis for
an aggregate of 180 consecutive or non-consecutive days in any 12
consecutive-month period. The determination of incapacity or
disability under the preceding sentence shall be made in good faith
by the Company based upon information supplied by a physician
selected by the Company or its insurers and reasonably acceptable to
the Employee or his legal representative. During any period that the
Employee fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness (the "Disability
Period"), the Employee shall continue to receive his full Base
Salary hereunder until his employment is terminated pursuant to this
Section 7.2.; provided that amounts payable to the Employee shall be
reduced by the sum of the amounts, if any, paid to the Employee
during the Disability Period under any disability benefits plans of
the Company.
7.3 Termination by the Company
7.3.1 The Company may terminate the Employee's employment on written
notice given to the Employee at any time following the
occurrence of any of the following events (which shall
constitute "cause"): (a) being convicted of or entering a
guilty plea or plea of nolo contendere to a felony or any
crime involving the Company (other than pursuant to actions
taken at the direction or with the approval of the Board), (b)
being found
<PAGE> 108
by reasonable determination of the Company, made in good
faith, to have engaged in (1) willful misconduct, (2) willful
or gross neglect, (3) fraud, (4) misappropriation or (5)
embezzlement in the performance of his duties hereunder or (c)
having breached in any material respect the terms and
provisions of this Agreement and failed to cure such breach
within 15 days following written notice from the Company
specifying such breach.
7.3.2 In the event the Employee's employment is terminated by the
Company under this Subsection 7.3 other than for "cause", the
Employee shall be entitled to continue to receive (i) Base
Salary, (ii) an amount equal to (a) the average Bonus paid to
the Employee during the period immediately prior to
termination by the Company other than for "cause" or (b) if
two years shall not have elapsed prior to such termination the
Bonus paid to the Employee, or which would have been paid to
the Employee pursuant to this Agreement but for such
termination, during the first full fiscal year of the Company
during the Employment Period and (iii) the benefits and
perquisites contemplated by Sections 4.3 and 4.6(i) of this
Agreement, in each case for the remainder of the Employment
Period as if such employment had not been terminated, such
amounts to be paid (and benefits to be provided) in the same
manner through the remainder of the Employment Period as if
such employment were not terminated and without offset for
earnings from subsequent employment or otherwise.
Notwithstanding the foregoing, if the benefit plans with
respect to the benefits described above do not provide
coverage for or with respect to the Employee after Employee's
employment is terminated by the Company other than for
"cause," the Company shall, at its sole cost and expense,
provide the Employee supplemental benefits to the extent
necessary to afford the Employee the same benefit coverage
that would have been available to the Employee for the
remainder of the Employment Period had his employment not been
terminated.
7.4 Termination by the Employee.
7.4.1 Definitions. For purposes of this Section 7.4, the following
terms shall have the respective meanings set forth below.
(a) "Acceleration Payment" means an amount in cash equal to
the value of (i) any Bonus accrued but unpaid prior to
the date of termination, (ii) any vacation accrued but
unused prior to the date of termination, and (iii) any
stock options, restricted stock awards, stock
appreciation rights and any other similar Company
capital-stock based compensation award (whether vested
or not vested) that have been granted or awarded to the
Employee prior to the date of termination.
<PAGE> 109
(b) "Change of Control" means (i) a Person acquires,
directly or indirectly, the beneficial ownership of 50%
or more of the issued and outstanding voting stock of
the Company in a single transaction or series of
transactions, (ii) the Company is a party to a merger,
consolidation or similar transaction and following such
transaction 50% or more of the issued and outstanding
voting securities of the Person surviving or emerging
from such transaction is beneficially owned by a Person
other than the Company or an Affiliate, (iii) the
Company sells or transfers all or substantially all of
its assets to another Person, other than an Affiliate of
the Company, (iv) the Company files for dissolution of
the Company, or (v) during any two-year period,
individuals who comprise a majority of the Board of
Directors of the Company (the "Board") at the beginning
of such two-year period do not comprise a majority of
the Board at the end of such two year period.
(c) "Good reason" means (i) the assignment to the Employee
of any duties inconsistent with his status as Chief
Operating Officer of the Company or a material adverse
alteration in the nature or status of his
responsibilities from those provided herein or the
transfer of a significant portion of such
responsibilities to one or more other Persons; (ii) the
failure by the Company to pay or provide to the
Employee, within 45 days of a written demand therefor,
any amount of compensation or any benefit which is due,
owing and payable pursuant to the terms hereof or of any
applicable plan, program, arrangement or policy; (iii)
the breach in any material respect by the Company of any
of its other obligations or agreements set forth herein
and the failure by the Company to cure such breach
within 45 days after written notice thereof from the
Employee; or (iv) the occurrence of a Change of Control.
(d) "Severance" means the sum of (i) the highest Base Salary
that was paid to the Employee at any time prior to
termination by the Employee for good reason, and (ii)
the average Bonus paid to the Employee during the period
immediately prior to termination by the Employee for
good reason, or if two years shall not have elapsed
prior to such termination, the Bonus paid to the
Employee, or which would have been paid to the Employee
pursuant to this Agreement but for such termination,
during the first full fiscal year of the Company during
the Employment Period.
(e) "Severance Benefits" means the benefits contemplated by
Sections 4.3 and 4.6(i) of this Agreement.
(f) "Severance Term" means the longer of (i) the remainder
of the Employment Period as if the Employee's employment
had not been
<PAGE> 110
terminated and (ii) the six-month period following the
date of termination of employment hereunder.
7.4.2 At the election of the Employee for "good reason," the
Employee may terminate his employment immediately upon written
notice to the Company. If during the Employment Period the
Employee's employment is terminated by the Employee for good
reason, the Employee shall be entitled to receive from the
Company (i) Severance and Severance Benefits for each year
during the Severance Term and the Acceleration Payment and
(ii) in addition to the amounts described above, cash payments
in an amount sufficient to ensure that the amounts received
under this Section 7.4.2 as a result of a Change of Control
are not subject to net reductions due to the imposition of
excise taxes under Section 4999 of the Internal Revenue Code
of 1986, as amended.
7.4.3 Upon 45 days' prior written notice, the Employee may terminate
his employment with the Company other than for good reason. If
the Employee voluntarily terminates his employment with the
Company other than for good reason, no further payment shall
be due the Employee pursuant to Section 4 above (other than
payments for accrued and unpaid Base Salary and expenses
incurred but not repaid to the Employee, in each case prior to
such termination).
7.5 Effect of Termination on Certain Obligations. No termination of the
employment of the Employee, whether voluntary or involuntary, shall
terminate, affect or impair any of the obligations or rights of the
parties set forth in this Section 7, all of which obligations and
rights shall survive any termination of employment of the Employee
hereunder.
8. Indemnification. To the fullest extent permitted or required by the laws
of the State of New York, the Company shall indemnify and hold harmless
(including the advance payment of expenses) the Employee, in accordance
with the terms of such laws, if the Employee is made a party, or
threatened to be made a party, to any threatened, pending, or contemplated
suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that the Employee is or was an
officer or director of the Company or any subsidiary or Affiliate, against
expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with any such action, suit or proceeding. The Company's
obligations under this paragraph will survive the termination of this
Agreement for any reason whatsoever.
9. D&O Liability Insurance. During the Employment Period, the Company shall
maintain customary directors' and officers' liability insurance.
<PAGE> 111
10. Assignment. This Agreement as it relates to the employment of the
Employee, is a personal contract and the rights and interests of the
Employee hereunder may not be sold, transferred, assigned, pledged or
hypothecated, except as otherwise set forth herein. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors
and assigns, including without limitation, any Person into which the
Company is merged or which acquires all of the outstanding shares of the
Company's capital stock, or all or substantially all of the assets of the
Company; provided, however, that the Company shall not be released from
its obligations hereunder without the prior written consent of the
Employee, which consent shall not be unreasonably withheld.
11. Rights to Payments. Employee shall not under any circumstances have any
option or right to require payments hereunder otherwise than in accordance
with the terms hereof. To the extent permitted by law, and except as
otherwise provided herein, the Employee shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder,
and all rights and benefits of the Employee shall be for the sole personal
benefit of the Employee, and no other Person shall acquire right, title or
interest hereunder by reason of any sale, assignment, transfer, claim or
judgment or bankruptcy proceedings against the Employee.
12. Notices. Any notice or communications required or permitted hereunder
shall be in writing and shall be deemed effective (a) upon personal
delivery, if delivered by hand; (b) one day after the date of delivery by
Federal Express or other nationally recognized courier service that
provides a delivery receipt, if delivered by priority overnight delivery
between any two points within the United States; or (c) three (3) days
after deposit in the mails, if mailed by certified or registered mail
(return receipt requested) between any two points within the United States
and in each case of mailing, postage prepaid, addressed as follows: (i) if
to Employee, at 40 Central Park South, New York, New York 10019 and (ii)
if to the Company at Twenty-One Penn Plaza, New York, New York 10001,
Attn: President, or at such other address as any such party shall
designate by written notice to the other party.
13. Waiver. The waiver by either party of a breach of any provision of this
Agreement shall be effective only if in writing and shall not operate or
be construed as a waiver of any other breach of such provision or any
other provision of this Agreement.
14. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and not in any way affect or render invalid or
unenforceable any provisions of this Agreement, and this Agreement shall
be carried out as if such invalid or unenforceable provisions were not
embodied therein.
15. Governing Law. This Agreement shall be governed by the laws of the State
of New York regardless of the laws that might be applicable under
conflicts of law.
16. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall
be an original but all
<PAGE> 112
such counterparts together shall constitute one and the same instrument.
Each counterpart may consist of two copies hereof each signed by one of
the parties hereto.
17. Headings. The headings in this Agreement are for reference only and shall
not affect the interpretation of this Agreement.
18. Definition. "Person" includes any natural person, corporation, joint stock
company, limited liability company, partnership, joint venture,
unincorporated association, trust, government or any agency, authority or
instrumentality thereof, or any group of the foregoing acting in concert.
19. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein.
This Agreement supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether written or oral, of
the parties hereto relating to the transactions contemplated by this
Agreement; provided, however, that it is the intention of the parties that
this Agreement shall be interpreted and applied in conjunction with the
terms of any option, warrant or other right now in existence or
hereinafter granted to the Employee to acquire shares of capital stock of
the Company. In the event of any conflict, however, the terms of this
Agreement shall govern and prevail. This Agreement may be amended only in
writing executed by the parties hereto affected by such amendment.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
EMPLOYER:
KATZ DIGITAL TECHNOLOGIES, INC.
By:
------------------------------
Name:
Title:
EMPLOYEE:
------------------------------
RONALD KRIVOSHEIW
<PAGE> 113
<PAGE> 114
SCHEDULE 1
(A) The bonus payable in accordance with Section 4.2 of the Employment
Agreement to which this Schedule is attached (the "Agreement") with respect to
each of the fiscal years of the Company (as defined in the Agreement) during the
term of the Agreement shall equal, if the Company's earnings per share of Common
Stock, as stated on the Company's audited consolidated financial statements (the
"EPS") for such fiscal year equals or exceeds the Target EPS (as hereinafter
defined) for such fiscal year, $50,000 plus the product of (i) $10,000 and (ii)
the amount (in whole cents), if any, by which the EPS for such fiscal year
exceeds the Target EPS for such fiscal year. Any such bonus shall be paid,
subject to amounts required to be withheld under applicable law, in cash within
five (5) days after the completion of the audit of the Company's financial
statements for such fiscal year by the Company's independent auditors.
(B) The "Target EPS" for the Company's fiscal year ending December 31,
1998 is $.42, and shall be determined by the Company in consultation with the
Employee for each subsequent fiscal year during the term of this Agreement,
provided that, in the event of any merger, consolidation, capital
reorganization, stock split, combination of shares, stock dividend or other
recapitalization of the Company, the Target EPS shall be proportionately or
otherwise equitably adjusted.
<PAGE> 115
Schedule 1.38
Excluded Assets
(i) All artwork (framed and unframed) on walls of 342 Madison Avenue, New
York, New York location and the 4' x 5' cabinet (and contents thereof)
located at 342 Madison Avenue, New York, New York location.
(ii) All personal objects, files and documents belonging to Ronald Krivosheiw
and members of his family located at 342 Madison Avenue.
(iii) The safe located in the Controller's office at 342 Madison Avenue.
(iv) The Cash Component of the Purchase Price and any interest accrued thereon.
<PAGE> 116
Schedule 1.54
Real Property Leases
See Schedule 1.29, Documents 1-13.
<PAGE> 117
Schedule 1.65
KATZ DIGITAL TECHNOLOGIES, INC.
SUBORDINATED PROMISSORY NOTE
$2,000,000.00 January 1, 1998
KATZ DIGITAL TECHNOLOGIES, INC., a Delaware corporation with its principal
place of business at Twenty-One Penn Plaza, New York, New York 10001 ("MAKER"),
hereby promises to pay to MOONDANCE, INC., a New York corporation, at 342
Madison Avenue, New York, New York 10173-1062, or its permitted assigns
("HOLDER"), or such other place as the HOLDER may from time to time designate in
writing, the principal amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00),
plus interest calculated on the unpaid principal balance hereof until this Note
is paid in full at a rate of seven percent (7%) per annum, based on a 365-day
year. All payments shall be made in lawful money of the United States of America
by wire transfer of immediately available funds to the account or accounts
designated by HOLDER or by check if such designation is not received one (1)
business day prior to the date a payment is due. Anything to the contrary herein
provided notwithstanding, the interest rate provided for herein shall not in any
event exceed that permitted by applicable law.
REPAYMENT - The principal amount of this Note shall be paid in 36 equal
monthly installments, together with interest accrued on the outstanding
principal amount, in accordance with the payment schedule annexed hereto, on the
1st day of each calendar month, commencing February 1, 1998 until January 1,
2001, when the entire amount due under this Note shall be paid in full.
This Note is being issued and delivered pursuant to an Asset Acquisition
Agreement dated as of January 1, 1998 among MAKER, HOLDER and certain other
parties (the "Agreement") and is subject to the provisions thereof, all of which
are incorporated by this reference herein.
The rights of MAKER under this Note and the payment and enforcement hereof
are subject to the provisions of a Subordination Agreement dated as of January
8, 1998, made by MAKER in favor of The Bank of New York, all of which are
incorporated by this reference herein.
MISCELLANEOUS - In case any payment herein provided for shall not be paid
when due, MAKER promises to pay all costs of collection, including all
reasonable attorneys' fees.
Subject to applicable securities laws, upon surrender of this Note for
transfer or exchange, a new Note or new Notes of the same tenor, dated the date
to which interest has been paid on the surrendered note and in the aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to the transferee or transferees.
<PAGE> 118
JURISDICTION - This Note shall be governed by and construed under the laws
of the State of New York. Any action brought to enforce this Note shall be
brought in the State of New York, and MAKER hereby consents to the personal
jurisdiction of the federal and state courts located in the State of New York,
and agrees that unless applicable law requires a different method, service of
process in any such action may be made by first class mail upon MAKER at its
address set forth in the beginning of this Note or at such other address as
MAKER shall advise HOLDER by written notice.
NOTICES - MAKER and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of non-payment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note. All notices required to be made hereunder shall be made and be
effective according to the notice provisions of the Agreement.
IN WITNESS WHEREOF, MAKER, by its duly authorized officer, has executed
and delivered this Note as of the date first set forth above.
KATZ DIGITAL TECHNOLOGIES INC.
By:
------------------------------
GARY KATZ
Chairman, Chief Executive Officer
<PAGE> 119
================================================================================
Balance Before Balance After
Date Principal Interest Total Payment Payment Payment
- --------------------------------------------------------------------------------
2/1/98 55,555.56 11,890.41 67,4456.97 2,000,000.00 1,944,444.44
- --------------------------------------------------------------------------------
3/1/98 55,555.56 10,441.40 65,996.96 1,944.444.44 1,888,888.88
- --------------------------------------------------------------------------------
4/1/98 55,555.56 11,229.83 66,785.39 1,888,888.88 1,833,333.32
- --------------------------------------------------------------------------------
5/1/98 55,555.56 10,867.58 66,423.14 1,833,333.32 1,777,777.76
- --------------------------------------------------------------------------------
6/1/98 55,555.56 10,899.54 66,455.10 1,777,777.76 1,722,222.20
- --------------------------------------------------------------------------------
7/1/98 55,555.56 10,228.31 65,783.87 1,722,222.20 1,666,666.64
- --------------------------------------------------------------------------------
8/1/98 55,555.56 10,238.96 65,794.52 1,666,666.64 1,611,111.08
- --------------------------------------------------------------------------------
9/1/98 55,555.56 9,908.68 65.464.24 1,611,111.08 1,555,555.52
- --------------------------------------------------------------------------------
10/1/98 55,555.56 9,269.41 64,824.97 1,555,555.52 1,499,999.96
- --------------------------------------------------------------------------------
11/1/98 55,555.56 9,248.10 65,803.66 1,499,999.96 1,444,444.40
- --------------------------------------------------------------------------------
12/1/98 55,555.56 8,630.14 64,185.70 1,444,444.40 1,388,888.84
- --------------------------------------------------------------------------------
1/1/99 55,555.56 8,587.52 64,143.08 1,388,888.84 1,333,333.28
- --------------------------------------------------------------------------------
2/1/99 55,555.56 8,257.23 63,812.79 1,333,333.28 1,277,777.72
- --------------------------------------------------------------------------------
3/1/99 55,555.56 7,159.82 62,715.38 1,277,777.72 1,222,222.16
- --------------------------------------------------------------------------------
4/1/99 55,555.56 7,596.65 63,152.21 1,222,222.16 1,166,666.60
- --------------------------------------------------------------------------------
5/1/99 55,555.56 7,031.96 62,587.52 1,166,666.60 1,111,111.04
- --------------------------------------------------------------------------------
6/1/99 55,555.56 6,936.07 62,491.63 1,111,111.04 1,055,555.48
- --------------------------------------------------------------------------------
7/1/99 55,555.56 6,392.69 61,948.25 1,055,555.48 999,999.92
- --------------------------------------------------------------------------------
8/1/99 55,555.56 6,275.49 61,831.05 999,999.92 944,444.36
- --------------------------------------------------------------------------------
9/1/99 55,555.56 5,945.21 61,500.77 944,444.36 888,888.80
- --------------------------------------------------------------------------------
10/1/99 55,555.56 5,433.79 60,989.35 888,888.80 833,333.24
- --------------------------------------------------------------------------------
11/1/99 55,555.56 5,284.63 60,840.19 833.333.24 777,777.68
- --------------------------------------------------------------------------------
12/1/99 55,555.56 4,794.52 60,350.08 777,777.68 722,222.12
- --------------------------------------------------------------------------------
1/1/00 55,555.56 4,624.05 60,179.61 722,222.12 666,666.56
- --------------------------------------------------------------------------------
2/1/00 55,555.56 4,293.76 59,849.32 666,666.56 611,111.00
- --------------------------------------------------------------------------------
3/1/00 55,555.56 3,579.91 59,135.47 611,111.00 555,555.44
- --------------------------------------------------------------------------------
4/1/00 55,555.56 3,633.18 59,188.74 555,555.44 499,999,88
- --------------------------------------------------------------------------------
5/1/00 55,555.56 3,196.35 58,751.91 499,999.88 444,444.32
- --------------------------------------------------------------------------------
<PAGE> 120
================================================================================
Balance Before Balance After
Date Principal Interest Total Payment Payment Payment
- --------------------------------------------------------------------------------
6/1/00 55,555.56 2,972.60 58,528.16 444,444.32 388,999.76
- --------------------------------------------------------------------------------
7/1/00 55,555.56 2,557.08 58,112.64 388,888.76 333,333.20
- --------------------------------------------------------------------------------
8/1/00 55,555.56 2,312.02 57,867.58 333,333.20 277,777.64
- --------------------------------------------------------------------------------
9/1/00 55,555.56 1,981.73 57,537.29 277,777.64 222,222.08
- --------------------------------------------------------------------------------
10/1/00 55,555.56 1,598.17 57,153.73 222,222.08 166,666.52
- --------------------------------------------------------------------------------
11/1/00 55,555.56 1,321.16 56,876.72 166,666.52 111,110.96
- --------------------------------------------------------------------------------
12/1/00 55,555.56 958.90 56,514.56 111,110.96 55,555.40
- --------------------------------------------------------------------------------
1/1/01 55,555.56 660.58 56,215.98 55,555.40 (0.00)
================================================================================
<PAGE> 121
Schedule 1.80
SUBORDINATION AGREEMENT
dated as of January 8, 1998 (this "Agreement")
between Speed Graphics, Inc., a New York corporation
("Creditor"), and The Bank of New York,
a New York banking corporation (the "Bank")
In order to induce the Bank at its discretion, to extend or to continue to
extend financial accommodations from time to time to or on account of, or in
reliance on the guaranty of, Katz Digital Technologies, Inc., a Delaware
corporation, having offices at 21 Penn Plaza, New York, New York 10001 (the
"Borrower"), up to such aggregate principal amount, with such maturity or
maturities, to bear such rate or rates of interest, to be unsecured or secured
by such collateral security, to be direct or indirect, absolute or contingent,
and to contain such other terms and provisions all as may be agreed upon from
time to time between the Bank and the Borrower, including, without limitation,
all obligations of the Borrower to the Bank under that certain Loan Agreement
dated as of January 8, 1998 among the Borrower, certain guarantors and the Bank,
as it may be amended or modified from time to time (the "Loan Agreement") (all
such financial accommodations and extensions of credit and all other
indebtedness, liabilities and obligations of every kind and nature of the
Borrower to the Bank, whether joint, several, or joint and several, direct or
indirect or acquired by assignment or otherwise, absolute or contingent, secured
or unsecured, now or hereafter existing or incurred, due or to become due,
including any indebtedness, liability or obligation arising after payment in
full of any prior indebtedness of the Borrower, together with all extensions,
renewals or modifications thereof, all of which being hereinafter collectively
referred to as the "Superior Indebtedness"), the undersigned, to whom the
Borrower is now indebted (hereinafter called the "Creditor", whether one or more
creditors executes this instrument) under the Note (as defined below), hereby
warrants and represents to and agrees with the Bank, and the Bank hereby agrees
with the Creditor, as follows:
As of the date hereof, the Borrower is indebted to the Creditor in the
principal amount of $2,000,000.00 represented by that certain Subordinated
Promissory Note made by Borrower dated January __, 1998 in the original
principal amount of $2,000,000.00 (the "Note").
The Note is not subject to any counterclaim, defense or offset of any
kind, and no part thereof has previously been assigned, incumbered or disposed
of by the Creditor. Except as disclosed to the Bank, the Note is not in default.
The Creditor hereby subordinates the payment of the principal, interest,
fees and all other amounts owing on the Note (all such principal, interest, fees
and other amounts being hereinafter collectively referred to as the
"Subordinated Indebtedness"), to the prior, final and irrevocable payment in
full of the principal, interest (including interest accruing after the
bankruptcy of Borrower), fees and all other amounts owing on the Superior
Indebtedness. Notwithstanding the subordination of the Subordinated
Indebtedness, the Bank agrees that the Borrower may make, and the Creditor may
accept, the regularly scheduled payments of principal and interest on the
Subordinated Indebtedness, provided (i) the Borrower remains in compliance
(before and after giving effect to the proposed payment on the Subordinated
Indebtedness) with the provisions of Section 5.03(b) (Fixed Charge Coverage
Ratio) of the Loan Agreement and (ii) no Event of Default (as defined in the
Loan Agreement) exists at the time of, or would result from, the proposed
payment on the Subordinated Indebtedness. The Borrower and the Creditor agree
that they will not amend, modify or change the principal amortization schedule
or the interest rate on the Subordinated Indebtedness without the express
written consent of the Bank.
In order to bring about and accomplish the intent and purpose of this
Subordination Agreement (hereinafter referred to as the "Agreement"), the
Creditor hereby agrees that until the Superior Indebtedness has been irrevocably
repaid in full, and until the Commitment (as defined in the Loan Agreement), or
any other commitment on the part of the Bank to lend to the Borrower, has
terminated, the Subordinated Indebtedness, any notes, instruments or other
writings evidencing
<PAGE> 122
the Subordinated Indebtedness and any collateral security at any time held
therefor, will indicate by a notation thereon that they are subject to this
Agreement.
In furtherance of the foregoing, the Creditor hereby grants to the Bank
irrevocable authority in the name, place and stead of the Creditor or in the
Bank's name but for its use, at any time or times after an Event of Default
under the Loan Agreement, in the Bank's absolute discretion to demand, collect,
compromise, file proofs of claim with respect to, receive (by way of dividends
or otherwise) and take any and all legal proceedings for the recovery of any and
all moneys due or to become due on account of the Subordinated Indebtedness, and
to vote, give consents and take any other action with respect thereto. Any and
all moneys collected, received and retained by the Bank after first deducting
the expenses hereinafter authorized shall be applied on account of the
principal, interest, fees and any other amounts then outstanding on the Superior
Indebtedness, provided, however, that upon the payment to the Bank of moneys
collected, received and retained on account of Subordinated Indebtedness and on
account of Superior Indebtedness aggregating an amount equivalent to all
Superior Indebtedness, including principal, interest, fees, any other amounts
owing thereon and the expenses hereinafter authorized, the Bank shall pay over
to the Creditor the excess, if any, of all moneys so received, collected and
retained on the Subordinated Indebtedness and on the Superior Indebtedness over
the amounts due on the Superior Indebtedness and release the balance of the
Subordinated Indebtedness and Superior Indebtedness which is still unpaid, and
deliver to the Creditor any and all writings, without any warranties of any
nature or type whatsoever with respect thereto (endorsed to the Creditor without
recourse in the case of negotiable instruments) evidencing such Subordinated
Indebtedness and Superior Indebtedness. If the Bank receives written notice of
any claim or demand, whether reasonable or unreasonable, adverse to the rights
or interests, as hereinabove set forth, of the Creditor in respect of the
Subordinated Indebtedness, or any moneys received and held by the Bank pursuant
to this paragraph, the Bank shall be entitled to retain any and all such moneys,
and writings evidencing such Subordinated Indebtedness and Superior Indebtedness
without incurring any liability or debt to the Creditor, until the adjudication
or final settlement of the rights of such claimant, and the Creditor hereby
agrees to pay to the Bank on demand, all reasonable expenses, including
reasonable counsel fees, which the Bank may incur in enforcing any of its rights
hereunder.
The Creditor further agrees that so long as any Superior Indebtedness
remains unpaid, or as long as the Commitment, or any other commitment on the
part of the Bank to lend to the Borrower, has not terminated, and except as
otherwise expressly permitted by this Agreement, the Creditor will not accept
any payment (whether for principal, interest, fees or otherwise) on account of,
or any collateral security for, any Subordinated Indebtedness whether from the
Borrower or any other person liable with respect to the Subordinated
Indebtedness. After the occurrence of an Event of Default, in the event that the
Borrower or any other person liable with respect to the Subordinated
Indebtedness shall offer any payment on account of, or any collateral security
for, any Subordinated Indebtedness, the Creditor will direct that the same be
made or delivered to the Bank, and if any moneys and/or collateral security
shall come into the hands of the Creditor on account of any Subordinated
Indebtedness from any source whatsoever, the Creditor will receive the same
solely as the Bank's agent and will immediately turn the same, in the form
received, except for the endorsement of the Creditor when appropriate, over to
the Bank for application on account of the Superior Indebtedness, and that until
so delivered, the Creditor will hold the same in trust as the Bank's property.
After the occurrence of an Event of Default, if the Creditor shall fail or
refuse to endorse any writing for the payment of money payable to the Creditor
or to the order of the Creditor, which has been delivered to the Bank, the Bank
is hereby irrevocably constituted and appointed attorney-in-fact for the
Creditor with full power to make such endorsement.
The Creditor shall notify the Bank of any default in the Subordinated
Indebtedness (a "Subordinated Default Notice"). The Bank shall use its best
efforts to notify ("Senior Default Notice") the Creditor of the occurrence of
any Event of Default or any other default in the payment of any of the Superior
Indebtedness. Any failure by the Bank to so notify the Creditor shall not affect
the Bank's rights or the Creditor's obligations under this Agreement. The Bank
agrees to respond to any request made by the Creditor in writing (provided that
such a request is not made more than once during each calendar quarter) as to
whether an Event of Default has occurred under the Loan Agreement or whether any
payment default has occurred under any Superior Indebtedness. If any such Event
of Default or other payment default has occurred, the response of Bank with
regard to same shall be deemed a Senior Default Notice. The Creditor shall have
<PAGE> 123
no right to exercise any rights and remedies against the Borrower to enforce or
collect upon the Subordinated Indebtedness, take possession of assets of the
Borrower or foreclose upon any such assets, whether by judicial action or
otherwise, unless and until all of the Senior Indebtedness shall have been fully
and finally paid and satisfied with interest and the Commitment, or any other
commitment on the part of the Bank to lend to the Borrower, terminated;
provided, however, that the Creditor shall be entitled, subject to the right of
the holder of the Senior Indebtedness to receive prior full and final payment in
accordance with the terms of this Subordination Agreement, to accelerate the
Subordinated Indebtedness upon expiration of the earlier of the following
periods (each such period, a "Standstill Period"):
(a) The Standstill Period commencing from and after receipt by the
Creditor of a Senior Default Notice and ending on the earlier of (x) the date on
which the Event of Default described in the Senior Default Notice shall have
been waived in writing by the Bank or (y) two hundred seventy (270) days after
the date the Senior Default Notice is so given.
(b) The Standstill Period commencing from and after receipt by the
Bank of a Subordinated Default Notice and ending on the earlier of (x) the date
on which such default described in the Subordinated Default Notice shall have
been cured or waived in writing by the Creditor or (y) two hundred seventy (270)
days after the date the Subordinated Default Notice is so given.
Notwithstanding anything to the contrary in this Agreement, no new Standstill
Period shall be effective unless and until (i) ninety (90) days have elapsed
since the last Standstill Period and (ii) all scheduled payments of principal
and interest on the Note that have come due have been paid in full in cash. No
default that existed or was continuing on the date of delivery of any Senior
Default Notice or Subordinated Default Notice shall be, or be made, the basis
for a subsequent Standstill Period unless such default shall have been waived
for a period of not less than ninety (90) days.
After all Superior Indebtedness is paid in full and until the Creditor is
paid in full, to the extent that holders of Superior Indebtedness have received
cash, securities or other property in respect of the repayment of Superior
Indebtedness, which cash, securities or other property, but for the operation of
this Agreement would have been paid to the Creditor, such Creditor shall be
subrogated to any rights of holders of Superior Indebtedness in collecting cash,
securities or other property in satisfaction of the obligations of the Borrower
to the Creditor hereunder and under the Notes.
If requested by the Bank, the Creditor shall (a) give the Bank, upon
request from time to time, and during reasonable business hours, full and free
access to the Creditors' books pertaining to the Subordinated Indebtedness, with
the right to make copies thereof, and (b) furnish the Bank, upon request from
time to time, a statement of the account between the Creditor and the Borrower
with respect to the Subordinated Indebtedness.
This Agreement is a continuing agreement and, unless the Bank shall have
specifically consented in writing to its revocation, shall remain in full force
in all respects whether or not the Borrower shall at any time be indebted to the
Bank until the earlier of (i) the repayment in full of the Superior Indebtedness
and the termination of the Commitment, or any other commitment on the part of
the Bank to lend to the Borrower or (ii) the repayment of the Subordinated
Indebtedness. If after the payment of principal, interest, fees and all other
amounts owing on all Superior Indebtedness and any expenses hereinafter
authorized and provided for, the Borrower shall thereafter become liable to the
Bank on account of any new Superior Indebtedness, this Agreement shall thereupon
be applicable in all respects to any such new Superior Indebtedness without the
necessity of any further action, notice, understanding or writing by, between or
among the Bank, the Creditor and/or the Borrower.
If, during the term of this Agreement, the Creditor receives any payment
(other than a payment of regularly scheduled principal or interest) on account
of or any collateral security for any Subordinated Indebtedness at a time when
there is no outstanding Superior Indebtedness, the Creditor shall immediately
notify the Bank in writing of the receipt thereof and such payment or collateral
security shall be subject to the terms of this Agreement. If the Creditor fails
to
<PAGE> 124
notify the Bank, and a new Superior Indebtedness is thereafter created, and if
the Borrower defaults with respect to the payment of such new Superior
Indebtedness, in addition to and not in limitation of any other rights or
remedies available to the Bank hereunder, the Bank shall have the right to
receive and the Creditor will immediately pay to the Bank an amount equal to any
such payment or the value of any such security received by the Creditor and not
reported to the Bank.
Except as may otherwise be expressly required by this Agreement, with or
without notice to or further assent from the Creditor, the Bank may at any time
or times, in its absolute discretion, either prior to or after any default on
the part of the Borrower with respect to either the Subordinated Indebtedness or
the Superior Indebtedness: (i) extend, renew or change, refuse to extend, renew
or change any of the Superior Indebtedness, waive any default, modify, rescind
or waive any provision of any related agreement or collateral undertaking,
including, but not by way of limitation, any provision relating to acceleration
of maturity, (ii) fail to set off any deposit balances or any part thereof on
its books in favor of the Borrower and release the same, (iii) release,
exchange, fail to resort to, or realize upon, or apply, any collateral security
or any part thereof held by or available to it for the Superior Indebtedness,
and (iv) generally deal with the Borrower in such manner as the Bank may see
fit, all without impairing or affecting its rights and remedies under this
Agreement. Except as otherwise expressly provided in this Agreement, the
Creditor hereby waives any and all notice of the receipt and acceptance of this
Agreement by the Bank and of the creation, renewal, extension or accrual of any
of the Superior Indebtedness, present or future, in whole or in part, by the
Bank or of the reliance by the Bank on this Agreement at any time or times, and
further waives notice of any default at any time on the part of the Borrower.
The Creditor waives any right to interpose any defense, counterclaim or offset
with respect to the Superior Indebtedness or the Subordinated Indebtedness.
Nothing in this Subordination Agreement shall impair, as between the
Borrower and the Creditor, the obligations of the Borrower in respect of the
Subordinated Indebtedness, which are unconditional and absolute, to pay the
Creditor the principal and interest thereon and any other liabilities
encompassed within the Subordinated Indebtedness, all in accordance with their
respective terms.
This Agreement shall continue in full force and effect notwithstanding the
death or incapacity of the Creditor (if the Creditor is an individual) or the
dissolution of the Creditor (if the Creditor is a partnership or corporation)
and shall be binding on the Creditor and the Creditor's estate and the personal
representatives, heirs, successors and assigns of the Creditor and the Bank may
continue to act in reliance upon this Agreement until the earlier of the
repayment in full of the Superior Indebtedness or the Subordinated Indebtedness.
Notwithstanding anything herein to the contrary, nothing in this Agreement shall
prohibit, limit or restrict the ability of the Creditor or any shareholder or
affiliate of the Creditor to transfer the Note and the rights and obligations
hereunder to any of its shareholders or affiliates or, after any such transfer,
to the Creditor.
The Creditor agrees to pay to the Bank on demand all reasonable expenses,
including reasonable counsel fees, which it may incur in enforcing its rights
hereunder.
If this Agreement is executed by more than one Creditor, the liability and
obligations of the Creditor hereunder shall be joint and several.
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 when
delivered by hand, or if sent by certified mail, three days after the day in
which mailed, or, in the case of telecopier, when evidence of receipt is
obtained, or, in the case of overnight courier service, one business day after
delivery to such courier service, addressed as set forth below, or to such other
address as may be hereafter notified by the respective parties hereto.
The Bank: The Bank of New York
530 Fifth Avenue
New York, New York 10036
<PAGE> 125
Attention: Katz Digital Technologies,
Inc. Account Officer
The Creditor Speed Graphics, Inc.
342 Madison Avenue
New York, New York 10173
Attention: President
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.
The Creditor waives trial by jury, and the right to interpose any defense,
counterclaim or offset of any nature or description in any litigation arising
out of or in any way connected with this Agreement, and agrees that the venue of
any such litigation shall be the county in which is located the Bank's office
making the loan or Superior Indebtedness to the Borrower.
No delay on the Bank's part in exercising any right or rights hereunder or
in failing to exercise the same shall operate as a waiver of such right or
rights, and no notice to or demand on the Borrower or the Creditor shall be
deemed a waiver of the Bank's right to take further action without notice or
demand; nor in any event shall any modification, alteration or waiver of any of
the provisions hereof be effective unless in writing and signed for or on behalf
of the Bank and then only in the specific instance for which given.
This Agreement shall be deemed to be a contract made in the State of New
York and entered into under and pursuant to the laws of said State and shall be
governed, construed and enforced and all rights and obligations hereunder shall
be determined in accordance with the laws of said State.
Capitalized terms used but not defined herein shall have the meanings
given such terms in the Loan Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the Creditor and
the Bank on this 8th day of January, 1998.
SPEED GRAPHICS, INC.
By:
--------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
--------------------------------
Name: Scott E. Silverstein
Title: Vice President
<PAGE> 126
STATE OF NEW YORK )
COUNTY OF NEW Y0RK ) ss.:
On the 8th day of January, 1998, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he maintains an office at 324 Madison Avenue, New York, New York; that
he is the _____________ of Speed Graphics, 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.
--------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On the 8th day of January, 1998, before me personally came Scott E.
Silverstein, to me known, who, being by me duly sworn, did depose and say that
he maintains an office at 530 Fifth Avenue, New York, New York; that he is a
Vice President of The Bank of New York, Inc., the banking 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 banking corporation.
--------------------------
Notary Public
<PAGE> 127
ACKNOWLEDGEMENT OF BORROWER
The undersigned, the Borrower referred to in the Subordination Agreement
and Assignment to which this Acknowledgment is annexed, hereby agrees to do and
perform all acts necessary to enable the Bank and the Creditor to fulfill all of
their obligations under the Agreement, and agrees to refrain from doing all acts
(including, but without limitation, making payments on the Subordinated
Indebtedness) which would cause Creditor or the Bank to violate such
obligations. Borrower further agrees that if any violation of this Agreement
shall occur, all of the obligations (including the Superior Indebtedness) of
Borrower to the Bank shall become immediately due and payable, any term,
covenant or condition contained in any other agreement or in the instrument
evidencing such obligations to the contrary notwithstanding.
Dated: January 8, 1998 KATZ DIGITAL TECHNOLOGIES, INC.
By
-------------------
Name: Gary Katz
Title: President
<PAGE> 128
Schedule 3.2
Purchase Price Allocation
A portion of the Purchase Price, as adjusted pursuant to Section 3.3 of
the Asset Acquisition Agreement, that is equal to the Final Closing Book Value
(or such other fair market vlaue determined by Daily-Hodkins Appraisal Corp.)
shall be allocated to equipment and other tangible property that constitute the
Acquired Assets. The difference between (i) the Purchase Price, as adjusted
pursuant to Section 3.3 of the Asset Acquisition Agreement, and (ii) the Final
Closing Book Value shall be allocated to goodwill.
<PAGE> 129
Schedule 4.2(ii)
[FORM OF OPINION]
January 9, 1998
Katz Digital Technologies, Inc.
Katz N.Y. Acquisition, Inc.
21 Penn Plaza
360 West 31st Street
New York, New York 10001
Gentlemen:
We have acted as counsel to Speed Graphics, Inc., a New York corporation
("SGI"), DDP, Inc., a New York corporation ("DDP"), and Ronald Krivosheiw
("RK"), in connection with the negotiation, execution and delivery of, and the
transactions contemplated by, the (i) Asset Acquisition Agreement dated as of
January 1, 1998 (together with the disclosure schedules thereto, the
"Agreement"), among Speed, DDP, RK, Katz Digital Technologies, Inc., a Delaware
corporation ("KDTI"), and Katz N.Y. Acquisition, Inc., a Delaware corporation
("KDTI-NY"); (ii) Bill of Sale dated as of January 1, 1998 (the "Bill of Sale"),
from SGI and DDP to KDTI-NY; (iii) Assignment and Assumption Agreement dated as
of January 1, 1998 (the "Assignment and Assumption Agreement"), among SGI, DDP,
KDTI and KDTI-NY; (iv) the Employment Agreement dated as of January 9, 1998 (the
"Employment Agreement"), between KDTI and RK; (v) the Assignment and Assumption
of Lease dated as of January 1, 1998 (the "45th Street Assignment"), between SGI
and KDTI-NY, relating to that certain lease dated as of June 22, 1995, between
575 Realties, Inc. and SGI; and (vi) the Assignment and Assumption of Lease
dated as of January 1, 1998 (the "342 Madison Assignment"), between SGI and
KDTI-NY, relating to that certain lease dated as of May 31, 1985, as amended,
between 342 Madison Avenue Associates Limited Partnership and SGI.
Capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Agreement. The Agreement, Bill
of Sale, Assignment and Assumption Agreement, the 45th Street Assignment and the
342 Madison Assignment, each a "Transaction Document," are hereinafter referred
to collectively as the "Transaction Documents." We are rendering this opinion to
you pursuant to Section 4.2(i) of the Agreement.
In rendering this opinion, we have examined executed counterparts of
the Transaction Documents, and we have assumed the due authorization, execution
and delivery thereof by, and the binding effect thereon as to, each party
thereto (other than SGI, DDP and RK) and that each party thereto (other than
SGI, DDP and RK) has performed all of such party's obligations thereunder and
has complied with all the requirements of law applicable to such party and the
Transaction Documents. When relevant facts were not independently established,
we also have examined and relied upon
<PAGE> 130
Katz Digital Technologies, Inc.
Katz N.Y. Acquisition, Inc.
January 9, 1998
Page 45
(i) such corporate records and certificates of public officials or officers of
SGI, DDP and RK and other persons, as applicable, (ii) the representations and
warranties as to factual matters made in (or pursuant to) the Transaction
Documents and (iii) such additional documents, and made such further inquiries
and examinations, as we have deemed necessary to enable us to render the
opinions set forth herein. In our examination, we have assumed the genuineness
of all signatures (other than those of SGI, DDP and RK), the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. We also have assumed the
legal capacity and competency of all natural persons executing the documents
submitted to us.
Based upon and subject to the qualifications and assumptions set
forth herein, and having due regard for legal considerations we deem relevant,
we are of the opinion that:
1. Each of SGI and DDP is a corporation validly existing and in good
standing under the laws of the State of New York. Each of Speed and DDP has all
requisite corporate power and authority to (i) carry on its business as now
being conducted and to own, lease and operate its respective properties used in
connection therewith and (ii) to enter into and perform the Transaction
Documents and the transactions contemplated thereby.
2. The execution and delivery by each of SGI and DDP of the Transaction
Documents, the performance by each of SGI and DDP of its obligations thereunder,
and the transactions contemplated thereby, have been duly authorized by all
necessary corporate action on the part of SGI and DDP, respectively. Each of the
Transaction Documents has been duly executed and delivered by SGI and DDP,
respectively, and each constitutes the valid and binding obligation of each of
SGI and DDP, respectively, enforceable against each of SGI and DDP,
respectively, in accordance with its terms, except as such enforcement may be
subject to (i) bankruptcy, liquidation, conservation, dissolution, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the effects of general
principles of equity (regardless of whether considered in a proceeding at equity
or at law), including, without limitation, (A) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and (B)
concepts of materiality, reasonableness, good faith and fair dealing.
3. RK has duly executed and delivered the Agreement and the Employment
Agreement, each of which constitutes his valid and binding obligation,
enforceable against him in accordance with its terms, except as such enforcement
may be subject to (i) bankruptcy, liquidation, conservation, dissolution,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the effects of general
principles of equity (regardless of whether considered in a proceeding at equity
or at law), including, without limitation, (A) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and (B)
concepts of materiality, reasonableness, good faith and fair dealing.
4. Except as disclosed in the Transaction Documents, the execution,
delivery and performance of the Transaction Documents by each of SGI and DDP
does not, and the consummation of the transactions contemplated thereby will
not, (i) violate, conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws of
<PAGE> 131
Katz Digital Technologies, Inc.
Katz N.Y. Acquisition, Inc.
January 9, 1998
Page 46
SGI and DDP, respectively; (ii) violate, conflict with or result in the breach
or material modification of any of the terms of, or constitute (or with notice
or lapse of time or both constitute) a default under, or otherwise give any
other contracting party the right to accelerate or terminate, any Contract
included on Schedule 1.29 to the Agreement; (iii) violate any Order of any
Governmental Body known to us against, or binding upon, SGI or DDP or upon any
of their respective assets which violation could reasonably be expected to have
a Material Adverse Effect; or (iv) violate any statute, law or regulation of the
United States of America or the State of New York which violation could
reasonably be expected to have a Material Adverse Effect.
5. Except as disclosed in the Transaction Documents, the execution,
delivery and performance of the Agreement and the Employment Agreement by RK
does not, and the consummation of the transactions contemplated thereby will not
(i) violate, conflict with or result in the breach or material modification of
any of the terms of, or constitute (or with notice or lapse of time or both
constitute) a default under, or otherwise give any other contracting party the
right to accelerate or terminate, any Contract included on Schedule 1.29 to the
Agreement; (ii) violate any Order of any Governmental Body known to us against,
or binding upon, RK or upon his assets which violation could reasonably be
expected to have a Material Adverse Effect; or (iii) violate any statute, law or
regulation of the United States of America or the State of New York which
violation could reasonably be expected to have a Material Adverse Effect.
We express no opinion herein as to (i) the applicability to the
obligations of SGI, DDP or RK (or the enforceability thereof) of Section 548 of
the U.S. Bankruptcy Code or any other provision of law relating to fraudulent
transfers, conveyances and obligations, (ii) the securities or "blue sky" laws
of any State, (iii) the bulk sales or transfer laws of any jurisdiction or (iv)
the enforceability of Section 8.12 of the Agreement or Article VI of the
Employment Agreement.
The opinions expressed herein are qualified to the extent that the
validity, binding nature and enforceability against SGI, DDP and RK of the
Transaction Documents may be limited or otherwise affected by the
unenforceability under certain circumstances of provisions indemnifying, or
prospectively releasing, a party against liability for its own wrongful or
negligent acts or where a release or indemnification provision is contrary to
public policy.
We do not express an opinion herein concerning any law other than
the laws of the State of New York and the federal laws of the United States of
America.
References made in this letter to "knowledge" (or words of like
import) mean the actual knowledge, without any duty of inquiry, of those
partners, counsel and associates who have given substantive attention to the
Transaction Documents.
The opinions contained herein are limited to those matters expressly
covered by numbered paragraphs 1 through 5 above; no opinion is to be implied in
respect of any other matter. The opinions set forth in numbered paragraphs 1
through 5 are as of the date hereof and we disclaim any undertaking to update
this letter or otherwise advise
<PAGE> 132
Katz Digital Technologies, Inc.
Katz N.Y. Acquisition, Inc.
January 9, 1998
Page 47
you as to any changes of law or fact which may hereafter be brought to our
attention. These opinions may not be relied on by any person or entity other
than you without our prior written consent.
Very truly yours,
Rogers & Wells
Prepared by: Dana Anagnostou
Reviewed by: Joseph A. Adams
Signed by : Steven A. Hobbs
<PAGE> 133
Schedule 4.3(iv)
January 9, 1998
Mr. Ronald Krivosheiw
40 Central Park South
New York, New York
Speed Graphics, Inc.
DDP, Inc.
342 Madison Avenue
New York, New York 10001
Gentlemen:
We have acted as counsel to Katz Digital Technologies, Inc., a Delaware
corporation ("KDTI"), and Katz N.Y. Acquisition, Inc., a Delaware corporation
("KDTI-NY"), in connection with that certain Asset Acquisition Agreement dated
January 1, 1998, among Speed Graphics, Inc., a New York corporation, DDP, Inc.,
a New York corporation (Speed Graphics, Inc. and DDP, Inc. are collectively
referred to as "Speed"), Ronald Krivosheiw ("Ronald"), KDTI, and KDTI-NY,
governing the acquisition of the assets of Speed by KDTI-NY (the "Purchase
Agreement"). Capitalized terms used herein without definition shall have the
meanings set forth in the Purchase Agreement unless otherwise defined herein.
For purposes of rendering this opinion, we have examined and relied upon
originals or copies of the following documents and agreements (hereinafter
collectively referred to, together with all exhibits and schedules thereto, as
the "Transaction Documents"):
1. the Purchase Agreement;
2. the Promissory Note;
3. the Share Certificates;
4. the Employment Agreement dated January 9, 1998 between Ronald
Krivosheiw and KDTI;
5. the Assignment and Assumption Agreement dated as of January 1, 1998,
among Speed and KDTI-NY;
6. the Assignment and Assumption of Lease dated as of January 1, 1998,
between Speed Graphics, Inc. and KDTI-NY, relating to that certain
Lease dated as of June 22, 1995, between 575 Realties, Inc. And
Speed Graphics, Inc.;
<PAGE> 134
Mr. Ronald Krivosheiw
January 9, 1998
Page 49
7. the Assignment and Assumption of Lease dated as of January 1, 1998,
between Speed Graphics, Inc. and KDTI-NY, relating to that certain
Lease dated as of May 31, 1985, as amended, between 342 Madison
Avenue Associates Limited Partnership and Speed Graphics, Inc.
We have also reviewed such other documents and made such other
investigations and examinations as to matters of law and fact as we have deemed
necessary in order to render the opinions expressed herein. As to matters of
fact, we have relied, without independent verification, upon Certificates of the
office of the Secretary of State of Delaware and of officers of KDTI and KDTI-NY
and upon the factual representations made by KDTI and KDTI-NY in the Purchase
Agreement.
This opinion letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The Law (as defined in the Accord) covered by the
opinions expressed herein is limited to the federal laws of the United States,
the State of New York and the General Corporation Law of Delaware. The opinions
set forth below are subject to the General Qualifications, as defined in the
Accord.
The opinions expressed herein are subject to the following specific
qualifications and assumptions:
(a) The opinions expressed herein are limited by and subject to the
effect of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws of general application from time to time in
effect affecting the enforcement of creditors' rights and remedies, and by
statutes, rules or procedures and applicable case law limiting the
availability of or prescribing procedural requirements for the exercise of
creditors' rights and remedies. We express no opinion as to the
availability of equitable relief, including, without limitation, specific
performance of any agreement or injunctive relief in any situation arising
out of the transactions to which the opinions expressed herein relate.
(b) We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as
copies, whether certified or not, and we have assumed that such documents
are valid and binding on all parties thereto.
(c) We have assumed that each party to any document or instrument
referred to in this opinion, other than KDTI and KDTI-NY, has all
requisite power and authority in the case of a corporation, and capacity,
in the case of an individual, and has taken all necessary action, to
execute and deliver the documents and instruments delivered by such party
and to consummate the transactions contemplated thereby, and that said
documents and instruments are binding on such party.
<PAGE> 135
Mr. Ronald Krivosheiw
January 9, 1998
Page 50
(d) We have assumed that you and your counsel have communicated to
us all factual matters of which you or they have knowledge and which the
person having such knowledge knows, or reasonably should know, would
affect our opinion.
(e) In rendering our opinion in Paragraph 5 below, we have relied
upon the representations, warranties and covenants of Speed and Ronald
contained in the Transaction Documents with respect to the Shares,
Additional Shares and the Promissory Note.
(f) The opinions expressed herein are qualified to the extent that
the validity, binding effect and enforceability against KDTI or KDTI-NY of
the Transaction Documents may be limited or otherwise affected by the
unenforceability under certain circumstances of provisions indemnifying,
or prospectively releasing, a party against liability for its own wrongful
or negligent acts or where a release or indemnification provision is
contrary to public policy.
References made in this letter to "knowledge" (or words of like import)
mean the actual knowledge, without any duty of inquiry, of those partners and
associates who have given substantive attention to the Transaction Documents.
This opinion is limited to the matters stated herein, and no opinion is to
be implied or may be inferred beyond the matters expressly stated.
Based on the foregoing, and subject to the qualifications, assumptions and
limitations stated herein, it is our opinion that:
1. KDTI and KDTI-NY is each a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
2. KDTI and KDTI-NY each has the corporate power and authority to (i)
carry on its business as now being conducted and to own, lease and operate its
respective properties used in connection therewith and (ii) to execute, deliver
and perform the Transaction Documents and the transactions contemplated thereby
and has duly authorized the execution, delivery and performance of the
Transaction Documents. Each of the Transaction Documents has been duly executed
and delivered by KDTI and KDTI-NY, and each of the Transaction Documents
constitutes the legal, valid and binding obligations of each of KDTI and
KDTI-NY, respectively, enforceable against each of KDTI and KDTI-NY in
accordance with its terms.
3. The execution, delivery and performance by KDTI and KDTI-NY of the
Transaction Documents to which each is a party will not: (i) violate, breach or
constitute a default under their respective Certificates of Incorporation or
By-Laws; (ii) violate any statute, law or regulation of the United States of
America, the State of New York or Delaware, (iii) to our knowledge, violate,
breach or constitute (or with notice or lapse of time or both constitute) a
default under or a material modification of any of the terms of any agreement to
which either is a party, which violation, breach or default would have a
material adverse effect on their ability to execute, deliver or perform the
Purchase Agreement and the Transaction Documents to which each
<PAGE> 136
is a party; (iv) to our knowledge, violate any order, writ, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against, or binding upon KDTI or KDTI-NY or any of their
respective assets.
4. The issuance and delivery of the Shares, the Additional Shares, if any,
and the Promissory Note in accordance with the Purchase Agreement have been duly
authorized by all required corporate action of KDTI; and upon delivery in
accordance with the Purchase Agreement, the Shares and the Additional Shares, if
any, will have been validly issued, and be fully paid and non-assessable and, to
our knowledge, not subject to any liens, charges, restrictions, claims or
encumbrances other than those set forth in the Transaction Documents.
5. The offering, issuance and delivery to Speed Graphics, Inc. by KDTI of
the Promissory Note, the Shares and any Additional Shares are not, and will not
be, required to be registered under the Securities Act or any applicable Blue
Sky Laws.
No person except the addressees named herein may rely on this opinion for
any purpose. This opinion may not be disclosed to any other person or for any
purpose other than in connection with the transactions and documents referred to
herein and is not to be used, circulated, quoted or otherwise referred to
without the prior written consent of this firm. We assume no obligation to
advise the addressees of this opinion of any changes concerning the above,
whether or not deemed material, which may hereafter come or be brought to our
attention.
Very truly yours,
FEDER, KASZOVITZ, ISAACSON, WEBER,
SKALA & BASS, LLP
By:
-----------------------------
Geoffrey A. Bass
A Member of the Firm
<PAGE> 137
Schedule 6.2
Stockholders and Capitalization of Speed
Ronald Krivosheiw owns 150 shares of common stock of Speed, which
represents all the issued and outstanding capital stock of Speed. Ronald
Krivosheiw owns 100 shares of common stock of DDP, Inc., which represents all
the issued and outstanding shares of capital stock of DDP, Inc.
<PAGE> 138
Schedule 6.3.2
Absence of Adverse Changes
(i) The following employees were given salary increases since the Balance Sheet
Date:
Annual Salary
Employee Name @ 6/30/97 @ 12/31/97
Robert John Curran [Omitted to maintain confidentiality and
filed separately with the Commission]
Robert J. Murphy
Gary Semon
Lawrence W. Lebrocq
(ii) Cledic vs. Speed - Speed settled this action for $15,000, pursuant to an
Agreement and Release dated December 8, 1997. $7,500 of the settlement was
paid to Ms. Cledic in December, 1997, and the remaining $7,500 is payable
in January, 1998.
(iii) During the month of November, 1997, and December, 1997, Speed made an
aggregate of $500,000 and $100,000, respectively, in distributions to its
sole shareholder, Ron Krivosheiw.
(iv) On behalf of Speed, Williamson, Picket, Gross, Inc. reviewed the leases at
Speed's 342 Madison Avenue location to determine if there were any
adjustments or overbillings related to the facility leases. (A copy of
Williamson, Picket's report is attached to this Schedule 6.3.2 as Annex
A-1). Based upon Williamson Picket's analysis, Speed believes it has made
overpayments related to porter's wages and similar items of approximately
$120,000. Williamson Picket reviewed its findings with the landlord, which
agreed that overpayments had in fact occurred. However, the landlord has
not refunded any of the overpayments to Speed. Accordingly, Speed reduced
its December 1997 rental payment by $50,000. A copy of the letter
accompanying that payment is attached to this Schedule 6.3.2 as Annex A-2.
The management agent for the Madison Avenue location has agreed to settle
the dispute described above for $75,000 (as evidenced in the letter
attached as Annex A-3 to this Schedule 6.3.2), $50,000 of which is
comprised of the December 1997 rental payment reduction described above
and $25,000 of which will be applied as a reduction towards future rent
escalations. A letter embodying this settlement arrangement is expected
after the Closing.
(v) Fleet Bank has waived (copy attached as Annex B to this Schedule 6.3.2. )
certain restrictions in the Credit Agreement with respect to distributions
to Ronald Krivosheiw above a certain level.
<PAGE> 139
(vi) Speed entered into the following equipment financing arrangements since
the Balance Sheet Date:
TOTAL AMOUNT
OF PAYMENTS MONTHLY FINAL EQUIPMENT
LEASEHOLDER DUE PAYMENT PAYMENT DESCRIPTION
STERLING NATIONAL(1) $87,912.00 $2,442.00 AUG 2000 CLC 1000
WASCO FUNDING CORP $51,300.00 $1,425.00 JUL 2000 COLORPASS 8000
WASCO FUNDING CORP $162,396.00 $4,511.00 JUN 2000 CONTEX RIP N STRIP
WASCO FUNDING CORP $49,572.00 $1,377.00 JUN 2000 ADP 8800
(vii) On November 28, 1997, Speed entered into a one-year employment contract
with Joseph S. Ragusa, a MAC Technician. A copy of this Agreement
previously has been provided to Purchaser, but has not yet been signed by
Mr. Ragusa.
(viii) [Omitted to maintain confidentiality and filed seperately with the
Commission.]
(ix) [Omitted to maintain confidentiality and filed seperately with the
Commission.]
(x) Speed had a change in an estimate related to the useful life of its
printing presses. The life was changed from a standard MACRS life to an
10-year straight-line life. Additionally, Speed Graphics, Inc. changed
the method of accounting for one of its Heidelberg Quickmaster leases
from an operating to a capital lease.
(xi) Speed entered into a Letter of Intent dated September 16, 1997 to be
acquired by Purchaser.
(xii) Since the Balance Sheet Date, Speed has repaid an aggregate of $1,400,000
under the Credit Agreement.
- ----------
(1) This lease was originally between Speed and Gramercy Leasing Services,
Inc., dated as of April 24, 1997, and assigned to Sterling National after
the Balance Sheet Date. See Document 71 on Schedule 1.29.
<PAGE> 140
Annex A-1 to Schedule 6.3.2
[WILLIAMSON PICKET, GROSS, INC. Letterhead]
SPEED GRAPHICS LEASE AUDIT
ITEMS IN DISPUTE REASONING
Fire Safety Director Total amount payable for the entire building
is $500. Assuming 2080 hours worked, cost
would be .24 not .6154. However, this fringe
benefit should not be included at all
because the Fire Safety Director is usually
the Chief Engineer, Handiman or Porter but
not "Other" Classification which is basis
for Porter's Wage Calculation.
Relief Time We are calculating all time based upon
2080 hours. If an individual is relieved
there is not an extra individual "Other"
personnel replacing them.
Mandatory Overtime There is no mention in the union
contract of Mandatory Overtime.
Disability/Workers Compensation Have requested back-up for these
computations and have not received it. We do
not believe their explanation.
Vacation Time Calculations include four weeks instead of
two weeks.
Suite 260 Being charged on a penny and a half per
penny increase when the formula should be
penny for penny.
Miscellaneous Benefits, including vacation, birthday,
social security, workmen's compensation and
pension are not consistent from lease to
lease for the same escalation year and in
many instances are miscalculated to begin
with.
<PAGE> 141
Annex A-2 to Schedule 6.3
[SPEED GRAPHICS Letterhead]
December 2, 1997
Ms. Elaine Cooperman
Odin Management, L.P.
500 West Putnam Avenue
Greenwich, Connecticut 06830
Dear Ms. Cooperman:
As you know, it is our contention that we have been grossly overcharged in our
lease at 3242 Madison Avenue. Over the last two years, we have tried to work
with your managing agent to come up with an equitable solution. This, however,
has proved to be a waste of time. Even when mistakes were admitted new mistaken
interpretations were added to offset the original errors.
Left with no other choice, please be advised that we will be paying December's
rent less $50,000 which is less than one half of the amount which has been
overcharged us. The reason that we have not deducted the entire overpayment or
paid the rent to escrow is to show our good faith and to encourage you to help
us resolve this matter as quickly as possible. If we do not have a resolution of
this matter before year-end, we will pay the next monthly payment to escrow
until such time as this matter can be resolved. In the meantime. I am still open
to trying to settle this matter so we can potentially avoid what will
undoubtedly be an unnecessarily unpleasant experience for everyone.
Please, we ask you to look into this matter immediately.
Thank you for your time and consideration
Very truly yours,
Robert E. Heck, Jr.
Executive Vice President
Chief Financial Officer
cc: Martha Meli, Ron Krivosheiw, file
<PAGE> 142
Annex A-3 to Schedule 6.3.2
[INSIGNIA/ESG Letterhead]
Friday, January 09, 1998
Mr. Bob Heck
Speed Graphics, Inc.
342 Madison Avenue
Fourth Floor
New York, New York 10173
Re: 342 Madison Avenue
Dear Bob:
This letter will confirm our understanding in connection with the Porters Wage
Escalations charged to Speed Graphics at the building above referenced.
1. Both parties agree that the Landlord will credit Speed Graphics $75,000
2. This credit will be against monthly escalation charges until the full amount
of the credit is reached.
3. The Porters Wage Escalation will be adjusted as of January, 1998 to reflect
the changes in the formulations of the charges going forward. An outline of
these changes will be forwarded under a separate cover.
4. In exchange for this agreement, Speed Graphics, will release the Landlord
from any past or future claims with respect to the Porters Wage Escalation.
The above agreement will be contingent upon the execution, by both parties, of
an agreement satisfactory in both form and substance to the Landlord.
Sincerely,
/s/
Jeffrey A. Bernstein
Managing Director
<PAGE> 143
Annex B to Schedule 6.3.2
[FLEET Letterhead]
November 26, 1997
Speedgraphics, Inc.
342 Madison Avenue
New York, NY 10173
Attention: Ron Krivoshiew
Reference is made to a letter dated August 11, 1997 between Speedgraphics, Inc.
(the "Company") and Fleet Bank, NA (the "Bank") in which the Company's line of
credit with the Bank is described (the "Letter Agreement"). The Company has
requested and the Bank hereby agrees to amend the terms of the Letter Agreement
as follows:
Section 7(d) of the Letter Agreement is hereby amended for the 1997 Fiscal Year
end to waive the Company's maximum dividends covenant. On a going forward basis,
all terms and conditions of the referenced Section shall remain in full force
and effect.
All Capitalized terms used herein, unless otherwise defined herein, shall have
the same meanings provided therefor in the Letter Agreement.
Except as expressly amended by this letter, all of the terms and conditions
contained in the Letter Agreement shall continue in full force and affect, and
payment of the obligations thereunder shall continue to be secured by the
collateral referred to herein.
Sincerely,
Fleet Bank, NA
By: /S/
-----------------------------
Name: Judah Zweiter
Title: Assistant Vice President
Agreed and Accepted:
Speedgraphics, Inc.
By: /s/
-----------------------------
Name: Ron Krivoshiew
Title: President
By: /s/
-----------------------------
Name: Ron Krivoshiew
Guarantor
By: /s/
-----------------------------
Name: Ron Krivoshiew
<PAGE> 144
Title: President, DDP, Inc.
Corporate Guarantor
<PAGE> 145
Schedule 6.4
Location of Books and Records
(i) The minute books of Speed do not contain a complete record of all
stockholder and/or board of directors resolutions for the period prior to
the Closing Date.
(ii) Speed's books and records are located at 342 Madison Avenue, New York, NY
10173.
<PAGE> 146
Schedule 6.5.1
Condition of Leased Premises
(i) Structural alterations have been made to the leased premises with the
landlord's consent. However, the landlord may require that such premises
be restored to original condition at the end of the lease. Speed has
already been notified (See Annex A to this Schedule 6.5.1) of this
possibility with respect to the 527 West 34th Street location. $15,000 are
reflected on the Balance Sheet Date Balance Sheet as an accrual for any
costs associated with such restoration. Speed shall indemnify KDTI for any
expenses in excess of $15,000 in accordance with the terms of the AAA.
(ii) See Schedule 6.3.2(iv).
<PAGE> 147
Annex A to Schedule 6.5.1
December 2, 1997
Certified Z 020-874-799
Mr. Ronald Krivosheiw
President
Speed Graphics, Inc.
342 Madison Avenue
New York, New York 10173
Re: 527 West 34th Street
Basement Lease - Speed Graphics, Inc.
Dear Mr. Krivosheiw:
This letter is to inform you that the lease for the basement space will expire
on December 31, 1997. Our recent inspection indicated that the space still
contains some materials. The lease requires the premises to be left in "broom
clean" condition. We noted that the bannister rail is missing from the staircase
leading to the street. This is an important safety item that has to be replaced.
The offices constructed by your company have not been demolished and removed as
required under the lease. We are willing to leave the offices in present
condition at this time subject to a new tenant accepting these offices. We will
notify you as soon as we obtain a new tenant and advise you of the decision to
remove the offices or let them remain "as is." Please notify us whether the
offer is acceptable, otherwise you will be required to remove the offices by the
end of December, 1997.
Please communicate with me should you have any questions.
Very truly yours,
Alexander Dorogoff
Executive Vice President
<PAGE> 148
[SPEED GRAPHICS Letterhead]
December 24, 1997
Via Fax 212-750-9255
Mr. Alexander Dorogoff
Executive Vice President
Downing Management Corp.
12 East 49th Street
New York, NY 10017
Dear Mr. Dorogoff:
Sorry for any miscommunication related to your letter dated December 2, 1997
regarding the terminating lease for the space at 527 West 34th Street
(Basement).
As you are aware, we have already replaced the bannister rail noted in the
letter.
Additionally, we thank you for your consideration related to leaving the offices
constructed by Scotch Screen and later assumed by Speed Graphics, Inc. in tact
until such time as you have a new tenant for that space. We agree that, if your
next tenant does not accept these offices, we will remove the offices noted in
your letter at our cost.
However, should your new tenant decide not to accept these offices, we must be
allowed to either contract directly or approve of another contractor to perform
the demolition and removal of the offices noted.
Thank you again for your time and consideration.
Very truly yours,
/s/
Robert E. Heck, Jr.
Executive Vice President
Chief Financial Officer
cc: Geoffrey Chin
Joseph Adams
<PAGE> 149
Schedule 6.5.2
Title to Assets; Encumbrances
See Schedule 1.29, Documents 14-90.
<PAGE> 150
Schedule 6.5.3
Machinery and Equipment; Encumbrances
(i) There are unpaid late charges under a number of the equipment leases
aggregating approximately $7,000. These amounts have been accrued on the
Balance Sheet Date Balance Sheet.
(ii) A list of equipment which has been moved from 342 Madison Avenue to 228
East 45th Street is attached as Annex A to this Schedule.
<PAGE> 151
Annex A to Schedule 6.5.3
SPEED GRAPHICS, INC.
List of Assets moved from 342 Madison to 228 E. 45th Street
<TABLE>
<CAPTION>
===============================================================================================
Description Believed Lessor Speed Lease Number
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Select-Set 7000 with Cobra RIP EKCC #154
- -----------------------------------------------------------------------------------------------
Stausser Frame Researching
- -----------------------------------------------------------------------------------------------
Kodak 700 Processor Researching Believed to be EKCC
- -----------------------------------------------------------------------------------------------
Iris 4012, Iris 3024, (2) Iris 3047's GECC and EAB 3047-#166 & #174,
4012-EAB #165
- -----------------------------------------------------------------------------------------------
PS-2 (for Iris's) General Electric Credit Corp. #166
- -----------------------------------------------------------------------------------------------
VO Whisper (for Iris) General Electric Credit Corp. #166
- -----------------------------------------------------------------------------------------------
(10) MAC 950 Quadra's Misc. Various Leases Primarily attached to
eq. Moved
- -----------------------------------------------------------------------------------------------
Photo CD (PCD 225) European American Bank #167
- -----------------------------------------------------------------------------------------------
Horizon Flatbed Scanner EKCC #154
- -----------------------------------------------------------------------------------------------
Kodak Contact Frame Researching Believed to be EKCC
- -----------------------------------------------------------------------------------------------
MAC Workgroup Server 95 Researching
===============================================================================================
</TABLE>
<PAGE> 152
Schedule 6.6
Contracts
(i) See Schedule 1.29
(ii) See Schedule 6.3.2.(iv) and (v)
(iii) See Schedule 6.5.3.
(iv) All of Speed's employees have been requested to enter into a
confidentiality agreement in the form attached as Annex A to this Schedule
6.6.
(v) See Schedule 6.19.
<PAGE> 153
Annex A to Schedule 6.6
CONFIDENTIALITY AGREEMENT
I hereby acknowledge that during the course of my employment I may
be exposed to confidential or proprietary information which is the exclusive
property of SPEED GRAPHICS, INC. (the "Company"). I agree that I will not
disclose such information to third persons without first having obtained written
permission from the Company. This requirement is not limited in time to the
duration of my employment but extends after my employment, irrespective of the
reason for its termination.
Confidential information, as used in this agreement, includes any
technical, economic, financial, marketing or other information which is not
common knowledge among, or readily available to, competitors or other companies
who may like to possess such confidential information or may find it useful.
Some examples of confidential information in our business might be items in
research or development, scientific studies or analyses, details of training
methods, new products or new uses for old products, merchandising and selling
techniques, customer lists, contracts and licenses, purchasing, accounting,
business systems and computer programs, long-range planning, financial plans and
results, etc. This list is merely illustrative and confidential information is
not limited to these illustrations.
I further agree that all proprietary or confidential information
that I develop during or as a result of my employment will become property of
the Company unless a written release is given to me by the Company.
I acknowledge that this agreement is not intended and does not
constitute a contract between me and the Company limiting the right of either of
us to terminate my employment by the Company at any time, for any reason, with
or without cause.
Dated:
---------------------- ---------------------------------------
Signature of Employee
<PAGE> 154
Schedule 6.7
Litigation
See Schedule 6.8(ii).
<PAGE> 155
Schedule 6.8
Taxes
(i) In the past, some of Speed's Tax Returns have been filed after the
required filing dates.
(ii) There is a regular interval audit pending by the New York State Department
of Labor (See letter attached as Annex A to this Schedule 6.8.)
<PAGE> 156
Annex A to Schedule 6.8
[STATE OF NEW YORK, DEPARTMENT OF LABOR Letterhead]
December 5, 1997
Re: ER# 73-08940 7
Speed Graphics, Inc.
342 Madison Avenue
New York, NY 10173
Attn: Controller
Dear Employer:
It is our policy to verify, at regular intervals, the reports submitted to us by
employers. Authorization for such audits is contained in section 575 of the New
York State Unemployment Insurance Law.
Your account has been scheduled for an audit.
To facilitate the audit and assure completion, copies of the following records
for the year ending December 1996 should be made available at the entrance
conference.
1. General description of payroll and vendor transaction files.
2. Quarterly Social Security tax reports (Form 941).
3. Federal Unemployment Insurance tax reports (Form 940).
4. Quarterly NYS Unemployment Insurance tax reports (Form IA 5).
5. General ledger chart of accounts.
6. Return of Tip Income and Allocated Tips (Form 8027), if applicable.
7. Third Party Sick pay reporting with evidence of NYSUI reporting.
8. Annual report to Stockholders and Employee handbook.
9. Any other records pertaining to payments for services.
Due to the size of your organization, the audit will be conducted using the
appropriate software. It is therefore requested that you complete the attached
questionnaire, with the assistance of a member of your EDP staff, indicating the
most convenient date, within the next twenty days for an entrance conference,
and return in the self-addressed envelope. The appointment will be confirmed by
the undersigned.
We suggest that representatives of the controller's office, EDP unit, personnel
department, payroll department and corporate counsel be present at the meeting
to answer any relevant New York State Unemployment Insurance tax issues which
may be raised, and to acquaint us with your operations and hiring practices.
Sincerely,
/s/
Vinston L. Lothian
U.I. Tax Auditor
<PAGE> 157
Attachment A
Computer Questionnaire
Employer Name: Speed Graphics, Inc.
ER#: 73-08940 7
What date is convenient for an entrance conference? [January 15, 1998]
Our examination of your records may include the application of our software,
either on your system or ours.
1. Which of the following records are computer generated?
a. General Ledger [x]
b. Year end vendor master file [x]
c. Federal 1099 file ___
d. Year end payroll master file [from ADP]
e. Federal W-2 file [from ADP]
f. Payroll transaction file [from ADP]
g. Vendor transaction file [x]
2. What payroll system do you use [ADP]
3. What accounts payable system do you use? [SBT Accounting Systems]
4. If you engage the services of an outside computer service to
generate your records, please complete the following:
a. Name of Service Company [ADP]
b. Address of Service Company ___
c. Type of records generated [payroll, w-2, and related information]
Indicate contact person(s) such as Payroll, MIS, or Accounts Payable
Name: [ Ellen Seivers ] Title: [Accounting] Phone: [212] 682-6520]
Name: [ Krisna Basbew ] Title: [Payroll] Phone: [212] 682-6520]
Name: [ Robert Heck ] Title: [CFO] Phone: [212] 682-6520]
Place where books and records will be available: [342 Madison Avenue, 4th
Floor, NYC, NY
Remarks: [We have been preparing for an acquisition of Speed Graphics by Katz
Digital Technologies and have not been able to determine a
convenient day because of workload and lack of sufficient staff
personnel to accommodate the required support.]
<PAGE> 158
Schedule 6.9
Liabilities
Note Payable - Fleet Bank 500,900
Construction Loan - 45th Street 298,100
Capital Leases (see itemized list attached as Annex
A to this Schedule 6.9): 2,497,100
Total Future Payments 327,400
---------
Interest included in Future Payments 2,169,700
---------
Total Capital Lease Payable
Total Speed Graphics, Inc. Borrowing 2,968,700
DDP, Inc. - Note in connection with Item 75 on 320,800
Schedule 1.29 ---------
Total Speed and DDP Combined Borrowings 3,289,500
=========
<PAGE> 159
Annex A to Schedule 6.9
SPEED GRAPHICS, INC.
Analysis of Capital Lease Balances @ 12/31/97
================================================================================
Ref. Lessor-Name Lease Monthly Balance
No. Term Payment 12/31/97
- --------------------------------------------------------------------------------
148 Carter Capital Corporation 1/93-10/97 $ 3,569.00 $ 0
- --------------------------------------------------------------------------------
153 Eastman Kodak Credit Corp* 6/93-3/98 $ 4,033.08 $ 4,033
- --------------------------------------------------------------------------------
154 Eastman Kodak Credit Corp* 11/93-8/98 $ 15,064.00 $ 30,128
- --------------------------------------------------------------------------------
162 Canon Financial Services, Inc.** 1/95-12/97 $ 2,351.70 ($ 0)
- --------------------------------------------------------------------------------
163 European American Bank 10/94-9/98 $ 6,633.00 $ 59,697
- --------------------------------------------------------------------------------
164 Canon Financial Services, Inc.** 2/95-1/98 $ 1,201.20 $ 0
- --------------------------------------------------------------------------------
165 Canon Financial Services, Inc.** 3/95-2/98 $ 1,170.00 $ 1,170
- --------------------------------------------------------------------------------
167 European American Bank 6/95-5/99 $ 17,230.00 $ 292,910
- --------------------------------------------------------------------------------
169 Gramercy Leasing Services 8/95-6/98 $ 2,312.00 $ 13,872
- --------------------------------------------------------------------------------
177 The CIT Group 2/96-1/01 $ 7,129.00 $ 263,773
- --------------------------------------------------------------------------------
179 Colonial Pacific Leasing** 4/96-3/00 $ 4,484.54 $ 116,598
- --------------------------------------------------------------------------------
180 European American Bank 6/96-5/00 $ 6,414.00 $ 186,006
- --------------------------------------------------------------------------------
181 Sterling National Bank 6/96-4/99 $ 3,324.00 $ 53,184
- --------------------------------------------------------------------------------
184 Phoenixcor Inc.*** 11/96-9/2001 $ 9,130.00 $ 410,850
- --------------------------------------------------------------------------------
185 Summit Leasing Corp. 11/96-9/2000 $ 10,325.00 $ 340,725
- --------------------------------------------------------------------------------
183 Summit Leasing Corp. 11/96 - 2003 $ 6,108.49 $ 427,595
- --------------------------------------------------------------------------------
200 Gramercy/Wasco Lease 8/97 - 7/2000 $ 2,442.00 $ 75,702
- --------------------------------------------------------------------------------
210-1 Gramercy/Wasco Lease 8/97 - 7/2000 $ 1,425.00 $ 44,175
- --------------------------------------------------------------------------------
210-2 Gramercy/Wasco Lease 7/97 - 6/2000 $ 1,377.00 $ 41,310
- --------------------------------------------------------------------------------
210-3 Gramercy/Wasco Lease 7/97 - 6/2000 $ 4,511.00 $ 135,330
- --------------------------------------------------------------------------------
XXX TOTAL CAPITAL LEASES $110,234.00 $2,497,058
- --------------------------------------------------------------------------------
XXX DEFERRED INTEREST AMOUNT (327,357)
- --------------------------------------------------------------------------------
XXX NET CAPITAL LEASES $2,169,701
================================================================================
* Quarterly Payments-5 year term
** Checks cut and mailed one month in advance of due date.
<PAGE> 160
Schedule 6.10
Intellectual Property
Speed has been using the service mark "Speed Graphics" since July 1, 1978.
Speed has registered the service mark "Speed Graphics" in New York State
(Registration No. 511,271).
Speed filed an application to register the service mark "Speed Graphics" with
the U.S. Patent and Trademark Office on July 25, 1988 (Serial No. 73-742,220),
but abandoned such application.
<PAGE> 161
Schedule 6.13
Insurance
<TABLE>
<CAPTION>
=============================================================================================================================
AMOUNT OR TERM IN POLICY
COVERAGE LIMITS YEARS EXPIRES COMPANY NUMBER PREMIUM
- -----------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C>
5. MASTER PACKAGE* 01 05/01/98 KEMPER INS. TPK03746403 $17,367
Loc #1 342 Madison Avenue
Contents $ 950,000
Business $ 1,340,000*
Loc #2 228 East 45th Street
Contents $ 250,000
Business Income $ 660,000
Comprehensive General
Liability 1MM/2MM
Loc #1 342 Madison Avenue
Loc #2 19 West 21st Street
Loc #3 228 East 45th Street
6. COMPUTER & All Risk 01 05/12/98 KEMPER INS. 3AT60528902 $19,212
TELEPHONE FLOATER & Per
NEGATIVE FILM Schedule
FLOATER & MASTER
EQUIPMENT FLOATER
7. WORKERS
COMPENSATION Statutory 01 05/31/98 KEMPER INS. 3CE577981 $61,007
Audit 01 [05/31/97] 3CE577981 $ 7,290
8. UMBRELLA POLICY 2MM/2MM 01 05/12/98 KEMPER INS. 3SB01087105 $ 3,607
9. AUTOMOBILE POLICY $1,000,000 01 05/12/98 KEMPER INS. E3H00296203 $11,702
(Scheduled Autos)
Hired & Non-Owned
10. DISABILITY BENEFITS Statutory 01 07/01/97 NATIONAL 1565510 Based on
PAYROLL BENEFITS Payroll
TBD
11. NYS DISABILITY Statutory NATIONAL 0152110
BENEFITS BENEFITS
12. PENSION BOND $ 200,000 03 06/02/99 KEMPER INS. 3F192369 $378
</TABLE>
===========================================================================
COVERAGE COMMENTS
- ---------------------------------------------------------------------------
5. MASTER PACKAGE* Special Forms, Includes Water Damage,
Loc #1 342 Madison Avenue and Employee Benefits Liability,
Contents Additional Insureds, Landlords
Business
* Based on last year's Business
Loc #2 228 East 45th Street Income Work
Contents
Business Income
Comprehensive General
Liability
Sales $20M
Loc #1 342 Madison Avenue
Loc #2 19 West 21st Street
Loc #3 228 East 45th Street
6. COMPUTER & All Risk Including
TELEPHONE FLOATER & Theft & Flood
NEGATIVE FILM
FLOATER & MASTER
EQUIPMENT FLOATER
7. WORKERS
COMPENSATION Based on 9.2M Payroll
8. UMBRELLA POLICY
9. AUTOMOBILE POLICY
(Scheduled Autos)
Hired & Non- Owned
10. DISABILITY BENEFITS
PAYROLL
11. NYS DISABILITY
BENEFITS
12. PENSION BOND
<PAGE> 162
<TABLE>
<CAPTION>
=============================================================================================================================
AMOUNT OR TERM IN POLICY
COVERAGE LIMITS YEARS EXPIRES COMPANY NUMBER PREMIUM
- --------------------------------------------------------------------------------------------------------------- -------------
<C> <S> <C> <C> <C> <C> <C> <C>
13. Medical Benefit Plan Oxford Freedom SG086 Annually by
Plan schedule
14. Life & AD&D Ins. $15,000-$50,000 Phoenix Home 057-0000D Based on
Life 057-3630-00 Payroll
=============================================================================================================================
</TABLE>
===========================================================================
COVERAGE COMMENTS
- ---------------------------------------------------------------------------
13. Medical Benefit Plan Depends on whether the employee
takes single or family coverage
14. Life & AD&D Ins.
===========================================================================
<PAGE> 163
Schedule 6.14
Suppliers and Customers
(i) Ten largest suppliers:
[Omitted to maintain confidentiality and filed separately with the Commission]
(ii) Ten largest customers:
[Omitted to maintain confidentiality and filed separately with the Commission]
<PAGE> 164
Schedule 6.15
Employment Relations
(i) Since the announcement of the transactions contemplated by the Asset
Acquisition Agreement, the following employees have resigned from Speed:
NAME EFFECTIVE DATE POSITION
---- -------------- --------
[Omitted to maintain confidentiality and filed separately with the Commission]
<PAGE> 165
Schedule 6.16
Personnel
(i) See Annex A to this Schedule 6.16 for a list of employees, sales agents,
sales representatives and compensation.
(ii) Speed is required to make the following payments for severance to the
individuals described below:
Nature of
Name Amount Payment
---- ------ -------
[Omitted to maintain confidentiality and filed Severance
separately with the Commission] Severance
(iii) Speed is required to make payments for accrued vacation pay and sick leave
as set forth on Annex A to Schedule 1.3.
(iv) Victoria Sulava, a Speed employee, owes $500 to Speed in connection with
an employee loan previously made by Speed to Ms. Sulava.
(v) See Items 96-98, 101 and 102 on Schedule 1.29.
- ----------
(2) The amount to be paid is based upon an oral agreement with the ex-employee
that Speed would pay him severance (not to exceed eight weeks) until he
finds gainful employment.
(3) The amount to be paid is based upon an oral agreement with the ex-employee
that Speed would pay him severance (not to exceed four weeks) until he
finds gainful employment.
<PAGE> 166
Schedule 6.17
Changes since the Balance Sheet Date
See Schedule 6.3.2
<PAGE> 167
Schedule 6.18
Valid Agreements; Restrictive Documents
See Schedule 6.19.
<PAGE> 168
Schedule 6.19
Approvals for Speed
Consent is required to assign to KDTI contracts 2 (Rooms 400 and 436), 15, 17-90
and 99 listed on Schedule 1.29. On December 19, 1997, Speed requested such
consents to assignment. As of January 8, 1998, Speed has received the forms of
consent attached to this Schedule 6.19.
<PAGE> 169
Schedule 6.21
Environmental Conditions
(i) SPEED does not own (1) hazardous waste facilities, (2) waste disposal
sites or (3) underground storage tanks. Hazardous materials used in the
course of the SPEED business are disposed of or recycled by Greymart
Environmental Services ("GES") (See the letter attached as Annex A to this
Schedule 6.21, from GES to SPEED, dated December 11, 1997). GES has acted
exclusively in the disposal of hazardous waste materials for SPEED for
over 10 years.
(ii) See the letter attached as Annex A to this Schedule 6.21, from GES to
SPEED, dated December 11, 1997
(iii) None.
<PAGE> 170
Annex A to Schedule 6.21
[GREYMART ENVIRONMENTAL SERVICES Letterhead]
December 11, 1997
Mr. Jeffrey Chin
Speed Graphics
342 Madison Ave.
New York, NY 10173
Dear Jeffrey,
This will confirm that Greymart Environmental Services transports your hazardous
waste materials for disposal.
Greymart is a fully licensed New York State Part 364 permitted hazardous waste
transporter. Your waste is transported to Chemical Pollution Control Co. located
in Bay Shore, NY. Chemical Pollution Control is licensed by EPA to operate as a
hazardous waste Transfer, Storage and Disposal Facility (TSDF).
If you any questions or need any additional information please do not hesitate
to contact me at any time.
Wishing you a happy holiday season.
Very truly yours,
/s/
Larry Richek
Executive Vice President
<PAGE> 171
Schedule 6.22
Health and Safety Conditions
None.
<PAGE> 172
SCHEDULE 7.4
1. Consents to the contracts listed on Schedule 6.6.
2. Approval of the stockholders of KDTI to the amendment of the Option Plan
increasing the number of options grantable thereunder.
<PAGE> 173
SCHEDULE 7.6
KATC 1996 Form 10KSB
KATC March 31, 1997 Form 10Q
KATC June 30, 1997 Form 10Q
KATC September 30, 1997 Form 10Q
KATC June 30, 1996 Form 10Q
KATC September 30, 1996 Form 10Q
KATC 1996 Annual Report to Shareholders
KATC 1997 Proxy Statement
Financial statement forecast as distributed to banks on October 9, 1997
Revised financial statement forecast distributed to the Bank of New York on
December 23, 1997
Committal letter from Bank of New York to KATC dated November 17, 1997
List of KATC five top customers
List of KATC employees including department and salaries
KATC employee handbook
KATC Form SB-2 and Exhibits and Amendments
KATC Forms 8-K and 8-KA regarding the acquisition of the assets of The Sarabande
Press
KATC Forms 8-K regarding the acquisition of the assets of Advanced digital
Services, Inc.
<PAGE> 174
Schedule 8.8
Employees; Assumed Plans
(i) Agreement dated August 22, 1997, between Robert E. Heck Jr. and Speed
(ii) Speed Graphics, Inc. 401(k) Profit Sharing Plan effective as of January
1, 1992, as amended by the Amendment dated August 12, 1994 and the Second
Amendment dated as of February 20, 1996.
(iii) Speed terminated Michael Constantino and authorized an 8-week severance
package totalling $19,231. $12,109.25 of this severance package will be
reflected as an accrual on the Closing Date Balance Sheet.
(iv) Speed terminated Richard Vitale and authorized a 4-week severance package
totalling $7,692. $1,923.00 of this severance package will be reflected
as an accrual on the Closing Date Balance Sheet.
(v) Items 3 and 6-10 on Schedule 6.13.
(vi) Oral employment agreement between Speed and Steve Greenberg, as
memorialized on Annex A-1 to this Schedule 8.8.
(vii) Oral employment agreement between Speed and Robert J. Dito, as
memorialized on Annex A-2 to this Schedule 8.8.
(viii) Oral employment agreement between Speed and Joseph Ragusa, as reflected
on Annex A-3 to this Schedule 8.8.
<PAGE> 175
Annex A-1 to Schedule 8.8
[Omitted to maintain confidentiality and filed separately with the Commission]
<PAGE> 176
Annex A-2 to Schedule 8.8
[Omitted to maintain confidentiality and filed separately with the Commission]
<PAGE> 177
Annex A-3 to Schedule 8.8
[Omitted to maintain confidentiality and filed separately with the Commission]
<PAGE> 178
Schedule 8.10
Options to Purchase KDTI Common Stock
================================================================================
NAME POSITION NUMBER OF SHARES
- ---- -------- ----------------
- --------------------------------------------------------------------------------
RON KRIVOSHEIW PRESIDENT 45,000
- --------------------------------------------------------------------------------
<PAGE> 179
Schedule 8.10 (cont.)
================================================================================
NAME POSITION NUMBER OF SHARES
- ---- -------- ----------------
- --------------------------------------------------------------------------------
[Omitted to maintain confidentiality and filed separately with the Commission]
================================================================================
================================================================================
TOTAL 345,000
================================================================================
<PAGE> 1
Exhibit 4.2
<PAGE> 2
LOAN AGREEMENT
Dated as of January 8, 1998
KATZ DIGITAL TECHNOLOGIES, INC., a Delaware corporation, having its
principal place of business at 21 Penn Plaza, New York, New York 10001 (the
"Borrower"), ADVANCED DIGITAL SERVICES, INC., a New York corporation, having its
principal place of business at 21 Penn Plaza, New York, New York 10001
("Advanced" or a "Guarantor"), KATZ N.Y. ACQUISITION, INC., a Delaware
corporation, having its principal place of business at 21 Penn Plaza, New York,
New York 10001 ("KNYA" or a "Guarantor") and THE BANK OF NEW YORK, a New York
banking corporation, having an office at 530 Fifth Avenue, New York, New York
10036 (the "Bank") hereby agree as follows:
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):
"Acquisition Agreement" means the Asset Acquisition Agreement dated
as of January 1, 1998 among the Borrower, KNYA, Speed, DDP, Inc. and Ronald
Krivosheiw, as it may be amended or supplemented.
"Adjusted Borrowing Base" means the difference between (i) the
Borrowing Base and (ii) Outstanding L/C Obligations.
"Adjusted LIBOR Rate" means, with respect to any Eurodollar Loan for
any Interest Period, an interest rate per annum (rounded, if not already a whole
multiple of 1/100th of one (.01%) percent to the nearest 1/100th of one (.01%)
percent) equal to the quotient of (a) the LIBOR Rate divided by (b) a percentage
equal to 100% minus the Eurocurrency Reserve Requirement on the date the
Adjusted LIBOR Rate is determined.
"Adjusted Tangible Net Worth" means, as to the Credit Parties on a
consolidated basis, the sum of (i) Consolidated Tangible Net Worth plus (ii)
Consolidated Subordinated Debt.
"ADS Notes" means the Non-Negotiable Promissory Notes issued by
Advanced (formerly Katz Digital Acquisition Inc.) to David Katz and Gary Ritkes
each dated on July 31, 1997 and guaranteed by the Borrower, each in the original
principal amount of $125,000.00, bearing interest at 7% per annum and payable in
twenty (20) equal quarterly installments beginning October 1, 1997 and ending on
July 1, 2002.
- 2 -
<PAGE> 3
"Affiliate" means, as to any Person (i) a Person which directly or
indirectly controls, or is controlled by, or is under common control with, such
Person; (ii) a Person which directly or indirectly beneficially owns or holds
five (5%) percent or more of any class of voting stock of, or five (5%) percent
or more of the equity interest in, such Person; or (iii) a Person five (5%)
percent or more of the voting stock of which, or five (5%) or more of the equity
interest of which, is directly or indirectly beneficially owned or held by such
Person. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Loan Agreement, as amended, supplemented or
modified from time to time.
"Alternate Base Rate" means, for any day, an interest rate per annum
equal to the higher of (a) the Prime Rate (computed on the basis of the actual
number of days elapsed over a year of 360 days) in effect on such day or (b) the
Federal Funds Effective Rate in effect on such day plus one-half of one (1/2%)
percent (computed on the basis of the actual number of days elapsed over a year
of 360 days). For purposes of this Agreement, any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective on the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively. If for any reason the Bank shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Federal Funds Effective Rate for any reason,
including, without limitation, the inability or failure of the Bank to obtain
sufficient bids or publications in accordance with the terms thereof, the
Alternate Base Rate shall be determined without regard to clause (b) of the
first sentence of this definition, as appropriate, until the circumstances
giving rise to such inability no longer exist.
"Alternate Base Rate Loan" means a Loan bearing interest at the
Alternate Base Rate in accordance with the provisions of Article II hereof.
"Applicable Margin" shall have the meaning given such term in
Section 2.10 of this Agreement.
"Asset Sale Proceeds" means the proceeds received by the Borrower
from the sale of any asset outside of the Borrower's ordinary course of
business, less reasonable and customary out of pocket expenses, including,
without limitation, any investment banking or advisory fees, broker's
commissions, finder's fees or similar fees or expenses (other than any such fees
or expenses
- 3 -
<PAGE> 4
paid to an Affiliate of the Borrower), incurred by the Borrower in connection
with such sale.
"Board of Governors" means the Board of Governors of
the Federal Reserve System of the United States of America.
"Borrowing Base" means eighty five (85%) percent of Eligible
Accounts Receivable. The Bank reserves the right, in the exercise of its
reasonable discretion and based on the results of any Field Examination to be
conducted in accordance with Section 5.01(g), to adjust the advance rate for
Eligible Accounts Receivable, provided that the advance rate shall in no event
be reduced to less than eighty (80%) percent.
"Borrowing Base Certificate" means a certificate, in the form
annexed hereto as Exhibit C, evidencing the Borrowing Base, with appropriate
calculations therefor.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City, provided that, if the relevant
day relates to a Eurodollar Loan, a Eurodollar Interest Period, or notice with
respect to a Eurodollar Loan, the term "Business Day" shall mean a day on which
dealings in dollar deposits are also carried on in the London Interbank Market
and banks are open for business in London.
"Capital Expenditures" means, as to any Person, the aggregate amount
of any expenditures (including purchase money Liens) by such Person for capital
assets (including fixed assets acquired under Capital Leases) which it is
contemplated will be used or usable in fiscal years subsequent to the year of
acquisition.
"Capital Lease" means a lease which, in accordance with GAAP, has
been or should be capitalized on the books of the lessee.
"Collateral" means all property which is subject or is to be subject
to the Lien granted by the Security Agreement.
"Commitment" means the Bank's obligation to make Revolving Credit
Loans to the Borrower or to issue Letters of Credit for the account of the
Borrower pursuant to the terms and subject to the conditions of this Agreement.
"Commitment Fee Factor" shall have the meaning given such term in
Section 2.12 of this Agreement.
"Consolidated Subordinated Debt" means, as to the Credit Parties on
a consolidated basis, the aggregate
- 4 -
<PAGE> 5
Subordinated Debt of the Credit Parties, computed and consolidated in accordance
with GAAP.
"Consolidated Tangible Net Worth" means, as to the Credit Parties on
a consolidated basis, the difference between (i) Consolidated Total Assets, less
all intangible assets properly classified as such in accordance with GAAP,
including, but without limitation, patents, patent rights, trademarks, trade
names, franchises, copyrights, licenses, permits and goodwill, and (ii)
Consolidated Total Liabilities.
"Consolidated Total Assets" means, as to the Credit Parties on a
consolidated basis, the aggregate net book value of the consolidated assets of
the Credit Parties after all appropriate adjustments in accordance with GAAP
(including without limitation, reserves for doubtful receivables, obsolescence,
depreciation and amortization and excluding the amount of any write-up or
revaluation of any asset other than any write-up or revaluation of any "Acquired
Assets" (as defined in the Acquisition Agreement) which are so written-up or
revalued upon consummation of the Acquisition Agreement), computed and
consolidated in accordance with GAAP.
"Consolidated Total Liabilities" means, as to the Credit Parties on
a consolidated basis, all of the consolidated liabilities of the Credit Parties,
including all items which, in accordance with GAAP would be included on the
liability side of the balance sheet (other than capital stock, treasury stock,
capital surplus and retained earnings) computed and consolidated in accordance
with GAAP.
"Credit Parties" means the Borrower, the Guarantors and any other
Person which is or is required to be, included in the consolidated financial
statements referred to in Section 5.01(b) of this Agreement.
"Debt" means, as to any Person, (i) all indebtedness or liability of
such Person for borrowed money; (ii) indebtedness of such Person for the
deferred purchase price of property or services (including trade obligations);
(iii) obligations of such Person as a lessee under Capital Leases; (iv) current
liabilities of such Person in respect of unfunded vested benefits under any
Plan; (v) obligations of such Person under letters of credit issued for the
account of such Person; (vi) obligations of such Person arising under acceptance
facilities; (vii) all guaranties, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any other
Person, or otherwise to assure a creditor against loss; (viii) obligations
secured by any Lien on property owned by such Person whether or not the
obligations have been assumed; and (ix) all other liabilities recorded as such,
or which should be
- 5 -
<PAGE> 6
recorded as such, on such Person's financial statements in accordance with GAAP.
"Default" means any of the events specified in Section 6.01 of this
Agreement, whether or not any requirement for notice or lapse of time or any
other condition has been satisfied.
"Dollars" and the sign "$" mean lawful money of the
United States of America.
"Drawdown" shall have the meaning given such term in Section 2.01 of
this Agreement.
"EBITDA" means, with respect to the Credit Parties on a consolidated
basis, for any period, the sum of (i) net income (excluding extraordinary gains
and including extraordinary losses) plus (ii) interest expense plus (iii) the
provision for taxes plus (iv) depreciation expense plus (v) amortization of
intangible assets plus (vi) deferred rent, all measured or calculated for such
period.
"Eligible Accounts Receivable" means those accounts receivable of
the Borrower which (i) arise in the ordinary course of business, (ii) are
subject to a first, perfected security interest of the Bank and (iii) are
evidenced by an invoice or other documentary evidence reasonably satisfactory to
the Bank provided, however no account receivable shall be an Eligible Account
Receivable if:
(a) it arises out of a sale made by the Borrower to an
Affiliate of the Borrower or to a Person controlled by such an Affiliate;
(b) it is due or unpaid more than ninety (90) days after
its invoice;
(c) the account receivable is from an account debtor of
which fifty (50%) percent or more of such account debtor's accounts receivable
are otherwise ineligible hereunder;
(d) any covenant, representation or warranty contained
in this Agreement or any other Loan Document with respect to such account
receivable has been breached;
(e) the account debtor has commenced a voluntary case
under the federal bankruptcy laws, as now constituted or hereafter amended, or
made an assignment for the benefit of creditors, or a decree or order for relief
has been entered by a court having jurisdiction in the premises in respect of
the account debtor in an involuntary case under any state or federal bankruptcy
laws, as now constituted or hereafter amended,
- 6 -
<PAGE> 7
or if any other petition or other application for relief under any state or
federal bankruptcy law has been filed against the account debtor, or if the
account debtor has failed, suspended business, ceased to be solvent, called a
meeting of its creditors, or consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a significant
portion of its assets of affairs;
(f) the sale to the account debtor is on a guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;
(g) the account debtor is the United States of America,
any state or any department, agency or instrumentality of the United States of
America or any state;
(h) the account debtor is not domiciled in the United
States
(i) the goods giving rise to such account receivable
have not been shipped and delivered to or have been rejected by the account
debtor or the services giving rise to such receivable have not been performed by
the Borrower or have been rejected by the account debtor or the account
receivable otherwise does not represent a final sale;
(j) the account debtor is also a creditor or
supplier of the Borrower or has disputed liability, or has made any claim with
respect to any other account receivable due to the Borrower, or the account
receivable otherwise is or may become subject to any right of set-off;
(k) the Borrower has made any agreement with the
account debtor for any deduction therefrom (except for discounts or allowances
made in the ordinary course of business for prompt payment, all of which
discounts or allowances are reflected in the calculation of the face value of
each respective invoice related thereto) provided, that only the amount of any
such deduction shall be ineligible pursuant to this clause (k);
(l) any return, rejection or repossession of the
merchandise has occurred;
(m) such account receivable is not payable to the
Borrower;
(n) the Bank, in good faith and in the exercise of its
discretion in a reasonable manner, believes that collection of such account
receivable is insecure or that such account receivable may not be paid by reason
of the account debtor's inability to pay, or the accounts receivable of the
- 7 -
<PAGE> 8
account debtor exceed a credit limit determined by the Bank, in good faith and
in the exercise of its discretion in a reasonable manner, provided that only the
amount of such excess shall be ineligible; or
(o) the Bank determines in its reasonable discretion,
that such account receivable, or such category of accounts receivable, is
ineligible. The Bank reserves the right, based on the results of the Field
Examination to be conducted in accordance with Section 5.01(g), or otherwise in
the exercise of its good faith discretion, to revise this definition of
"Eligible Accounts Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, the regulations promulgated thereunder and the
published interpretations thereof as in effect from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which together with any other Person would be treated, with such
Person, as a single employer under Section 4001 of ERISA.
"Eurocurrency Reserve Requirement" means, with respect to the
Adjusted LIBOR Rate for an Interest Period, the daily average of the stated
maximum rate (expressed as a decimal) at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained at the
beginning of such Interest Period under any regulation (including, but without
limitation, Regulation D) promulgated by the Board of Governors (or any
successor thereto or other governmental authority having jurisdiction over the
Bank) by the Bank against "Eurocurrency liabilities" (as such term is used in
Regulation D), but without benefit or credit for proration, exemptions or
offsets that might otherwise be available to the Bank from time to time under
Regulation D. Without limiting the effect of the foregoing, the Eurocurrency
Reserve Requirement shall reflect any other reserves required to be maintained
by the Bank against (1) any category of liabilities that includes deposits by
reference to which the Adjusted LIBOR Rate is to be determined; or (2) any
category of extension of credit or other assets that include loans bearing an
Adjusted LIBOR Rate.
"Eurodollar Loan" means a Loan bearing interest at a rate based on
the Adjusted LIBOR Rate in accordance with the provisions of Article II hereof.
"Event of Default" means any of the events specified in Section 6.01
of this Agreement, provided that any requirement for notice or lapse of time or
any other condition has been satisfied.
- 8 -
<PAGE> 9
"Federal Funds Effective 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 which is a Business Day, the average of the quotations for such day
on such transactions received by the Bank from three (3) federal funds brokers
of recognized standing selected by it.
"Field Examination" means an examination of the accounts receivable
and inventory of the Borrower and the Guarantors and all other Collateral
subject to the Lien of the Security Agreement, and all books and records and
other information relating thereto, financial or otherwise, to be performed by
employees or other representatives of the Bank.
"Fixed Charge Coverage Ratio" means, with respect to the Credit
Parties on a consolidated basis, for any period, the ratio of (i) EBITDA to (ii)
Fixed Charges. The Fixed Charge Coverage Ratio shall be tested quarterly and,
except as provided in Section 5.03(b) of this Agreement, for the four
consecutive fiscal quarters then ended.
"Fixed Charges" means, with respect to the Credit Parties, on a
consolidated basis, for any period, the sum of (i) the scheduled payments for
all Debt (including the scheduled payments for all Capital Leases and all
Subordinated Debt but excluding scheduled payments on the Sarabande Notes, the
ADS Notes and the Speed Equipment Notes and excluding payments on accounts
payable, accrued liabilities and trade obligations which are not incurred for
borrowed money) plus (ii) interest expense plus (iii) Capital Expenditures
(without duplication with respect to payments on Capital Leases) plus (iv)
income taxes paid (excluding payments of deferred taxes) plus (v) dividends
paid.
"Funded Debt" means all Debt (including Subordinated Debt) which is
(i) indebtedness or liability for borrowed money, (ii) obligations under Capital
Leases, (iii) indebtedness or liability for the deferred purchase price of
property (excluding trade obligations) and (iv)obligations under deferred
payment letters of credit and trade acceptances payable.
"Funded Debt to EBITDA Ratio" means, with respect to the Credit
Parties on a consolidated basis, as of the last day of any fiscal quarter, the
ratio of (i) Funded Debt as of such date to (ii) EBITDA for the four consecutive
fiscal quarters then ended.
"GAAP" means Generally Accepted Accounting Principles.
- 9 -
<PAGE> 10
"Generally Accepted Accounting Principles" means those generally
accepted accounting principles and practices which are recognized as such by the
American Institute of Certified Public Accountants acting through the Financial
Accounting Standards Board ("FASB") or through other appropriate boards or
committees thereof and which are consistently applied for all periods so as to
properly reflect the financial condition, operations and cash flows of a Person,
except that any accounting principle or practice required to be changed by the
FASB (or other appropriate board or committee of the FASB) in order to continue
as a generally accepted accounting principle or practice may be so changed. Any
dispute or disagreement between the Borrower and the Bank relating to the
determination of Generally Accepted Accounting Principles shall, in the absence
of manifest error, be conclusively resolved for all purposes hereof by the
written opinion with respect thereto, delivered to the Bank, of the independent
accountants selected by the Borrower and approved by the Bank for the purpose of
auditing the periodic financial statements of the Borrower.
"Guarantor" or "Guarantors" means each of, or both of, as the
context requires, those Guarantors named in the preamble to this Agreement, and
any other Person to the extent required to guarantee the obligations of the
Borrower in accordance with Section 5.01(l) of this Agreement.
"Guaranty" or "Guaranties" means a guaranty or guaranties required
to be executed and delivered by a Guarantor or Guarantors pursuant to Section
3.01 (h) and Section 5.01 (l) of this Agreement.
"Hazardous Materials" includes, without limit, any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or related materials defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended (42 U.S.C. Sections 9601, et seq.), the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sections 9601 et. seq.),
and in the regulations adopted and publications promulgated pursuant thereto, or
any other federal, state or local environmental law, ordinance, rule or
regulation.
"Interest Determination Date" means the date on which an Alternate
Base Rate Loan is converted to a Eurodollar Loan and, in the case of a
Eurodollar Loan, the last day of the applicable Interest Period.
"Interest Payment Date" means (i) as to each Eurodollar Loan, (x) in
the case of Eurodollar Loans with Interest Periods of one or two months, the
last day of such Interest Period and (y) in the case of Eurodollar Loans with
Interest Periods of
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<PAGE> 11
three or six months, the last Business Day of each quarter during the applicable
Interest Period and the last day of such Interest Period and (ii) as to each
Alternate Base Rate Loan, the last Business Day of each month.
"Interest Period" means as to any Eurodollar Loan, the period
commencing on the date of such Eurodollar Loan and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect (or, if there is no numerically
corresponding day, on the last Business Day of such month); provided, however,
(i) no Interest Period shall end later than the Maturity Date, (ii) if any
Interest Period would end on a day which shall not be a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day,
(iii) interest shall accrue from and including the first day of such Interest
Period to but excluding the date of payment of such interest and (iv) no
Interest Period of particular duration with respect to a Eurodollar Loan may be
selected by the Borrower if the Bank determines, in its sole discretion, that
Eurodollar Loans with such maturities are not generally available.
"Investment" means any stock, evidence of Debt or other security of
any Person, any loan, advance, contribution of capital, extension of credit or
commitment therefor, including without limitation the guaranty of loans made to
others (except for current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms in the ordinary course of business) and any purchase of
(i) any security of another Person or (ii) any business or undertaking of any
Person or any commitment or option to make any such purchase, or any other
investment.
"L/C Documents" means all documents required to be executed and
delivered by the Borrower in connection with the issuance of Letters of Credit
in accordance with the usual and customary practices of the Bank.
"Letters of Credit" means standby letters of credit issued by the
Bank pursuant to this Agreement.
"LIBOR Rate" means the rate per annum (rounded upwards, if necessary
to the nearest one-tenth (1/10th) of one (1%) percent) quoted at approximately
11:00 a.m. London time by the Bank two (2) Business Days prior to the requested
Interest Period, for the offering by the Bank to prime commercial banks in the
London interbank market of dollar deposits in immediately available funds for a
period, and in an amount, comparable to
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<PAGE> 12
such Interest Period and principal amount of such Eurodollar Loan, respectively.
"Lien" means any mortgage, deed of trust, pledge, security interest,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority, or other security agreement or preferential
arrangement, charge, or encumbrance of any kind or nature whatsoever, including,
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction to evidence any of the
foregoing.
"Loan" or "Loans" means one or more, as the context requires, of the
Term Loan or the Revolving Credit Loans and includes Alternate Base Rate Loans
and Eurodollar Loans, as the context may require.
"Loan Documents" means this Agreement, the Notes, the Guaranties,
the Security Agreements, the L/C Documents and any other document executed or
delivered pursuant to this Agreement.
"Material Adverse Change" means, as to the Borrower or any
Guarantor, (i) a material adverse change in the financial condition, business,
operations, properties, prospects or results of operations of such Person or
(ii) any event or occurrence which could have a material adverse effect on the
ability of such Person to perform its obligations under the Loan Documents.
"Maturity Date" means December 31, 2001.
"Multiemployer Plan" means a Plan described in Section 4001(a)(3) of
ERISA which covers employees of the Borrower or any ERISA Affiliate.
"New Financing Proceeds" means the proceeds resulting from the
issuance by the Borrower of any common stock, preferred stock, bonds or other
instruments or evidence of Debt permitted by this Agreement and the other Loan
Documents, less reasonable and customary out of pocket expenses, including,
without limitation, any underwriting discounts, agency fees, broker's
commissions or similar fees or expenses (other than any such fees or expenses
paid to an Affiliate of the Borrower), incurred by the Borrower in connection
with such issuance.
"Note" or "Notes" means one or both, as the context requires, of the
Term Loan Note or the Revolving Credit Note.
"Outstanding L/C Obligations" means, at any time, the sum of (i) the
undrawn and available amount under Letters of
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<PAGE> 13
Credit issued by the Bank plus (ii) the unreimbursed amount of any drawings
under such Letters of Credit plus (iii) the aggregate amount which the Bank has
agreed to pay to Fleet Bank, N.A. and European American Bank pursuant to those
certain Letter of Credit Indemnity letters given by the Bank to such Banks dated
January 8, 1998 (the "Indemnity Letters").
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Investments" means (i) direct obligations of the United
States of America or any governmental agency thereof, or obligations guaranteed
by the United States of America, provided that such obligations mature within
one year from the date of acquisition thereof; (ii) time certificates of deposit
having a maturity of one year or less issued by any commercial bank organized
and existing under the laws of the United States or any state thereof and having
aggregate capital and surplus in excess of $1,000,000,000.00; (iii) money market
mutual funds having assets in excess of $2,500,000,000.00; (iv) commercial paper
rated not less than P-1 or A-1 or their equivalent by Moody's Investor Services,
Inc. or Standard & Poor's Corporation, respectively; or (v) tax exempt
securities rated Prime 2 or better by Moody's Investor Services, Inc. or A-1 or
better by Standard & Poor's Corporation.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, limited liability company, trust,
unincorporated association, joint venture or other entity or a federal, state or
local government, or a political subdivision thereof or any agency of such
government or subdivision.
"Plan" means any employee benefit plan established, maintained, or
to which contributions have been made by the Borrower or any ERISA Affiliate.
"Prime Rate" means the prime commercial lending rate of the Bank as
publicly announced to be in effect from time to time, each change in the Prime
Rate to be effective on the date such change is announced to become effective.
"Prohibited Transaction" means any transaction set forth in Section
406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended
from time to time.
"Regulation D" means Regulation D of the Board of Governors, as the
same may be amended and in effect from time to time.
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<PAGE> 14
"Regulation G" means Regulation G of the Board of Governors, as the
same may be amended and in effect from time to time.
"Regulation T" means Regulation T of the Board of Governors, as the
same may be amended and in effect from time to time.
"Regulation U" means Regulation U of the Board of Governors, as the
same may be amended and in effect from time to time.
"Regulation X" means Regulation X of the Board of Governors, as the
same may be amended and in effect from time to time.
"Reportable Event" means any of the events set forth in Section 4043
of ERISA.
"Revolving Credit Loans" shall have the meaning assigned to such
term in Section 2.06 of this Agreement.
"Revolving Credit Note" means a promissory note of the Borrower
payable to the order of the Bank, in substantially the form of Exhibit B annexed
hereto, evidencing the aggregate indebtedness of the Borrower to the Bank
resulting from Revolving Credit Loans made by the Bank to the Borrower pursuant
to this Agreement.
"Sarabande Note" means the Non-Negotiable Convertible Promissory
Note issued by the Borrower to The Sarabande Press, Inc. and dated August 1,
1996 in the original principal amount of $500,000.00, bearing interest at the
prime rate (as defined therein) and payable in three (3) equal annual
installments.
"Security Agreement" or "Security Agreements" means one or more of
the security agreements to be executed and delivered pursuant to Section 3.01(i)
and Section 5.01 (l) of this Agreement.
"Speed" means Speed Graphics, Inc., a New York corporation, and DDP,
Inc., a New York corporation.
"Speed Acquisition" means the acquisition by KNYA of certain assets
and the assumption by KNYA of certain liabilities of Speed, pursuant to the
Acquisition Agreement.
"Speed Equipment Notes" means the Loan and Security Agreements,
dated June 9, 1994 and June 10, 1994, respectively, in the original principal
amounts of $903,000.00 and $159,862.37, respectively, made by KNYA (as
successors to DDP, Inc.) payable to Phoenixcor, Inc.
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<PAGE> 15
"Subordinated Debt" means Debt of any Person, the repayment of which
the obligee has agreed in writing, on terms which have been approved by the Bank
in advance in writing, shall be subordinate and junior to the rights of the Bank
with respect to Debt owing from such Person to the Bank.
"Subsidiary" means, as to any Person, any corporation, partnership,
limited liability company or joint venture whether now existing or hereafter
organized or acquired (i) in the case of a corporation, of which a majority of
the securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by such Person and/or one or more
Subsidiaries of such Person or (ii) in the case of a partnership, limited
liability company or joint venture, of which a majority of the partnership,
membership or other ownership interests are at the time owned by such Person
and/or one or more Subsidiaries of such Person.
"Term Loan" shall have the meaning assigned to such term in Section
2.01 of this Agreement.
"Term Loan Note" means a promissory note of the Borrower payable to
the order of the Bank, in substantially the form of Exhibit A annexed hereto,
evidencing the indebtedness of the Borrower to the Bank resulting from the Term
Loan made by the Bank to the Borrower pursuant to the Agreement.
"Unfunded Consolidated Capital Expenditures" means, as to the Credit
Parties on a consolidated basis, the Capital Expenditures of the Credit Parties
funded other than by Debt or Capital Leases, computed in accordance with GAAP.
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
means "to and including".
SECTION 1.03. Accounting Terms. Except as otherwise herein
specifically provided, each accounting term used herein shall have the meaning
given to it under GAAP.
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<PAGE> 16
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
SECTION 2.01. The Term Loan. The Bank agrees, on or after the date
of this Agreement, but in no event later than thirty (30) days after the date of
this Agreement, on the terms and conditions of this Agreement and in reliance
upon the representations and warranties set forth in this Agreement, to lend to
the Borrower (the "Drawdown") the principal amount of Six Million
($6,000,000.00) Dollars, and the Borrower agrees to borrow such amount from the
Bank by executing and delivering to the Bank the Term Loan Note. The Term Loan,
or portions thereof, shall be an Alternate Base Rate Loan or a Eurodollar Loan
(or a combination thereof) as the Borrower may request subject to and in
accordance with Section 2.07 hereof. The Bank may at its option make any
Eurodollar Loan by causing a foreign branch or affiliate to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of the Term Loan Note.
SECTION 2.02. Term Loan Note. The Term Loan shall be evidenced by
the Term Loan Note of the Borrower. The Term Loan Note shall be dated the date
of the Drawdown and shall mature on the Maturity Date at which time the entire
outstanding principal balance and all interest thereon shall be due and payable.
The Term Loan Note shall be entitled to the benefits and subject to the
provisions of this Agreement.
SECTION 2.03. Repayment of Term Loan Note. The principal balance of
the Term Loan Note shall be payable in sixteen (16) quarterly installments, each
due on the last Business Day of each calendar quarter beginning on the first
such day after the Drawdown and continuing on the last Business Day of each
calendar quarter thereafter. Each of the first fifteen (15) such quarterly
principal installments shall be in the amount of $375,000.00 and the sixteenth
(16th) such quarterly principal installment shall be in an amount equal to the
then outstanding principal balance of the Term Loan Note.
SECTION 2.04. Payment of Interest on the Term Loan Note. (a) In the
case of an Alternate Base Rate Loan, interest shall be payable at a rate per
annum (computed on the basis of the actual number of days elapsed over a year of
360 days) equal to the Alternate Base Rate. Such interest shall be payable on
each Interest Payment Date, commencing with the first Interest Payment Date
after the date of such Alternate Base Rate Loan, on each Interest Determination
Date and on the Maturity Date. Any change in the rate of interest on the Term
Loan Note due to a change in the Alternate Base Rate shall take effect as of the
date of such change in the Alternate Base Rate.
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<PAGE> 17
(b) In the case of a Eurodollar Loan, interest shall be payable at a
rate per annum (computed on the basis of the actual number of days elapsed over
a year of 360 days) equal to the Adjusted LIBOR Rate plus the Applicable Margin
as in effect on the date of such Loan. Such interest shall be payable on each
Interest Payment Date, commencing with the first Interest Payment Date after the
date of such Eurodollar Loan, on each Interest Determination Date and on the
Maturity Date. In the event Eurodollar Loans are available, the Bank shall
determine the rate of interest applicable to each requested Eurodollar Loan for
the applicable Interest Period at 11:00 a.m., New York City time, or as soon as
practicable thereafter, two (2) Business Days prior to the commencement of such
Interest Period and shall notify the Borrower of the rate of interest so
determined. Such determination shall be conclusive absent manifest error.
SECTION 2.05. Use of Proceeds. The proceeds of the Term Loan shall
be used by the Borrower to partially finance the Speed Acquisition. No part of
the proceeds of the Term Loan may be used for any purpose that directly or
indirectly violates or is inconsistent with, the provisions of Regulation G, T,
U or X.
SECTION 2.06. The Revolving Credit Loans. The Bank agrees, on the
date of this Agreement, on the terms and conditions of this Agreement and in
reliance upon the representations and warranties set forth in this Agreement, to
lend to the Borrower prior to the Maturity Date such amounts as the Borrower may
request from time to time (individually, a "Revolving Credit Loan" or
collectively, the "Revolving Credit Loans"), which amounts may be borrowed,
repaid and reborrowed; provided, however, that the aggregate amount of such
Revolving Credit Loans outstanding at any one time shall not exceed the lesser
of (i) Seven Million ($7,000,000.00) Dollars or (ii) the Adjusted Borrowing
Base, such lesser amount to be the maximum amount of the Bank's Commitment, or
such other amount of the Commitment as it may be reduced pursuant to Section
2.13 hereof.
Each Revolving Credit Loan shall be an Alternate Base Rate Loan or a
Eurodollar Loan (or a combination thereof) as the Borrower may request subject
to and in accordance with Section 2.07. The Bank may at its option make any
Eurodollar Loan by causing a foreign branch or affiliate to make such Loan,
provided that any exercise of such option shall not affect the obligation of the
Borrower to repay such Loan in accordance with the terms of the Revolving Credit
Note. Subject to the other provisions of this Agreement, Revolving Credit Loans
of more than one type may be outstanding at the same time.
SECTION 2.07. Notice of Revolving Credit Loans; Designations,
Conversions and Continuations of Loans.
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<PAGE> 18
(a) The Borrower shall give the Bank irrevocable
written, telex, telephonic (immediately confirmed in writing) or facsimile
notice (i) at least two (2) Business Days prior to each Revolving Credit Loan
(or prior to the initial designation for all or any part of the Term Loan)
comprised in whole or in part of one or more Eurodollar Loans (subject to
availability) and (ii) prior to 11:00 a.m. on the day of each Revolving Credit
Loan (or the first day of the Term Loan) consisting solely of an Alternate Base
Rate Loan. In the case of notices relating to Eurodollar Loans, notices received
after 11:00 a.m. on any Business Day shall be deemed to have been given and
received on the next Business Day. Such notice shall specify the date of such
borrowing, the amount thereof and whether such Loan is to be (or what portion or
portions thereof are to be) an Alternate Base Rate Loan or a Eurodollar Loan
and, if such Loan or any portion thereof is to consist of one or more Eurodollar
Loans, the principal amounts thereof and Interest Period or Interest Periods
with respect thereto. If no election as to a type of Loan is specified in such
notice, such Loan (or portion thereof as to which no election is specified)
shall be an Alternate Base Rate Loan. If no election as to the Interest Period
is specified in such notice with respect to any Eurodollar Loan, the Borrower
shall be deemed to have selected an Interest Period of one month's duration and
if a Eurodollar Loan is requested when such Loans are not available, the
Borrower shall be deemed to have requested an Alternate Base Rate Loan.
(b) The Borrower shall have the right, on such notice
to the Bank as is required pursuant to (a) above, (i) to continue any Eurodollar
Loan or a portion thereof into a subsequent Interest Period (subject to
availability) and (ii) to convert an Alternate Base Rate Loan into a Eurodollar
Loan (subject to availability) subject to the following:
(a) if a Default or an Event of Default
shall have occurred and be continuing at the time of any proposed conversion or
continuation only Alternate Base Rate Loans shall be available;
(b) in the case of the initial
designation of the Term Loan or a Revolving Credit Loan, or a continuation or
conversion of Loans, the aggregate principal amount of each Eurodollar Loan
continued or into which a Loan is converted shall be in the minimum principal
amount of $500,000.00 and in increased integral multiples of $50,000.00;
(c) each continuation or conversion shall
be effected by the Bank applying the proceeds of the new Loan to the Loan (or
portion thereof) being continued or converted;
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<PAGE> 19
(d) if the new Loan made as a result of a
continuation or conversion shall be a Eurodollar Loan, the first Interest Period
with respect thereto shall commence on the date of continuation or conversion;
(e) each request for a Eurodollar Loan
which shall fail to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one month and each request for a Eurodollar
Loan made when such Loans are not available shall be deemed to be a request for
an Alternate Base Rate Loan; and
(f) in the event that the Borrower shall
not give notice to continue a Eurodollar Loan as provided above, such Loan shall
automatically be converted into an Alternate Base Rate Loan at the expiration of
the then current Interest Period.
SECTION 2.08. Revolving Credit Note. Each Revolving Credit Loan
shall be (i) in the case of each Alternate Base Rate Loan in the minimum
principal amount of $250,000.00, and in increased integral multiples of
$50,000.00 and (ii) in the case of each Eurodollar Loan in the minimum principal
amount of $500,000.00 and in increased integral multiples of $50,000.00 (except
that, if any such Alternate Base Rate Loan so requested shall exhaust the
remaining available Commitment, such Alternate Base Rate Loan may be in an
amount equal to the amount of the remaining available Commitment). Each
Revolving Credit Loan shall be evidenced by the Revolving Credit Note of the
Borrower. The Revolving Credit Note shall be dated the date hereof and be in the
principal amount of Seven Million ($7,000,000.00) Dollars, and shall mature on
the Maturity Date, at which time the entire outstanding principal balance and
all interest thereon shall be due and payable. The Revolving Credit Note shall
be entitled to the benefits and subject to the provisions of this Agreement.
At the time of the making of each Revolving Credit Loan and at the
time of each payment of principal thereon, the holder of the Revolving Credit
Note is hereby authorized by the Borrower to make a notation on the schedule
annexed to the Revolving Credit Note of the date and amount, and the type and
Interest Period of the Revolving Credit Loan or payment, as the case may be.
Failure to make a notation with respect to any Revolving Credit Loan shall not
limit or otherwise affect the obligation of the Borrower hereunder or under the
Revolving Credit Note with respect to such Revolving Credit Loan, and any
payment of principal on the Revolving Credit Note by the Borrower shall not be
affected by the failure to make a notation thereof on said schedule.
SECTION 2.09. Payment of Interest on the Revolving Credit Note.
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<PAGE> 20
(a) In the case of an Alternate Base Rate Loan,
interest shall be payable, in arrears, at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 360 days) equal to the
Alternate Base Rate. Such interest shall be payable on each Interest Payment
Date, commencing with the first Interest Payment Date after the date of such
Alternate Base Rate Loan, on each Interest Determination Date and on the
Maturity Date. Any change in the rate of interest on the Revolving Credit Note
due to a change in the Alternate Base Rate shall take effect as of the date of
such change in the Alternate Base Rate.
(b) In the case of a Eurodollar Loan, interest shall be
payable, in arrears, at a rate per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days) equal to the Adjusted LIBOR Rate
plus the Applicable Margin as in effect on the date of such Loan. Such interest
shall be payable on each Interest Payment Date, commencing with the first
Interest Payment Date after the date of such Eurodollar Loan, on each Interest
Determination Date and on the Maturity Date. In the event Eurodollar Loans are
available, the Bank shall determine the rate of interest applicable to each
requested Eurodollar Loan for each Interest Period at 11:00 a.m., New York City
time, or as soon as practicable thereafter, two (2) Business Days prior to the
commencement of such Interest Period and shall notify the Borrower of the rate
of interest so determined. Such determination shall be conclusive absent
manifest error.
SECTION 2.10. Applicable Margin. The Applicable Margin shall be
determined on the basis of the Funded Debt to EBITDA Ratio, as calculated based
on the Borrower's consolidated financial statements for its most recent fiscal
year or quarter. The Applicable Margin shall be determined as follows:
(i) The initial Applicable Margin shall be
200 basis points for the Term Loan and 175 basis points for Revolving Credit
Loans and shall be applicable until delivery of the Borrower's consolidated
financial statements and related certificates for its fiscal year ending
December 31, 1997 pursuant to Section 5.01(b) hereof (subject to increase in the
event that the Borrower fails to deliver such statements as required below).
Beginning with delivery of the Borrower's
consolidated financial statements and related certificates for the fiscal year
ending December 31, 1997, and for each fiscal quarter or year thereafter:
(ii) If the Funded Debt to EBITDA Ratio as
of the end of such fiscal quarter or year is less than
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<PAGE> 21
1.00 to 1.00, the Applicable Margin shall be 100 basis points for the Term Loan
and for Revolving Credit Loans.
(iii) If the Funded Debt to EBITDA
Ratio as of the end of such fiscal quarter or year is equal to or greater than
1.00 to 1.00 but less than 2.00 to 1.00, the Applicable Margin shall be 150
basis points for the Term Loan and 137.5 basis points for Revolving Credit
Loans.
(iv) If the Funded Debt to EBITDA Ratio as
of the end of such fiscal quarter or year is equal to or greater than 2.00 to
1.00, the Applicable Margin shall be 200 basis points for the Term Loan and 175
basis points for Revolving Credit Loans.
The Applicable Margin shall be determined promptly by
the Bank upon receipt of the Borrower's financial statements for the relevant
fiscal year or quarter and, once so determined, shall remain in effect until it
is redetermined by the Bank upon receipt of the financial statements for the
next succeeding fiscal year or quarter. In the event that the Borrower fails to
deliver any financial statements and the related certificates within five (5)
days of the due date therefor set forth in Section 5.01(b)(i) or (ii) hereof,
unless an Event of Default is declared as a result of such failure, the
Applicable Margin shall be as set forth in clause (iv) above until the Borrower
delivers all required financial statements and certificates at which time the
Applicable Margin shall be redetermined as provided for in this Section 2.10.
Upon the occurrence and during the continuance of a
Default or an Event of Default the Applicable Margin may, as a result of changes
in the Funded Debt to EBITDA Ratio, increase but will not decrease.
SECTION 2.11. Use of Proceeds. The proceeds of the Revolving Credit
Loans shall be used by the Borrower (i) to partially finance the Speed
Acquisition and (ii) for working capital and other general corporate purposes.
No part of the proceeds of any Loan may be used for any purpose that directly or
indirectly violates or is inconsistent with, the provisions of Regulations G, T,
U or X.
SECTION 2.12. Commitment Fee. (a) The Borrower agrees to pay to the
Bank from the date of this Agreement and for so long as the Commitment remains
outstanding, on the last Business Day of each calendar quarter a commitment fee
(computed on a per annum basis and on the basis of the actual number of days
elapsed over 360 days) equal to the product of the Commitment Fee Factor and the
average daily unused amount of the Commitment during such quarter, or part
thereof, such commitment fee being payable for the calendar quarter, or part
thereof, preceding the payment
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<PAGE> 22
date. Such Commitment Fee Factor shall be calculated and determined in
accordance with (b) below.
(b) The Commitment Fee Factor shall be determined on
the basis of the Funded Debt to EBITDA Ratio, as calculated based on the
Borrower's financial statements for its most recent fiscal year or quarter. The
Commitment Fee Factor shall be determined as follows:
(i) The initial Commitment Fee Factor
shall be 25 basis points and shall be applicable until delivery of the
Borrower's financial statements and related certificates for its fiscal year
ending December 31, 1997 pursuant to Section 5.01(b) hereof (subject to increase
in the event that the Borrower fails to deliver such statements as required
below).
Beginning with delivery of the Borrower's
financial statements and related certificates for the fiscal year ending
December 31, 1997, and for each fiscal quarter or year thereafter:
(ii) If the Funded Debt to EBITDA Ratio as
of the end of such fiscal quarter or year is less than 1.00 to 1.00, the
Commitment Fee Factor shall be 15 basis points.
(iii) If the Funded Debt to EBITDA
Ratio as of the end of such fiscal quarter or year is equal to or greater than
1.00 to 1.00 but less than 2.00 to 1.00, the Commitment Fee Factor shall be 20
basis points.
(iv) If the Funded Debt to EBITDA Ratio as
of the end of such fiscal quarter or year is equal to or greater than 2.00 to
1.00, the Commitment Fee Factor shall be 25 basis points.
The Commitment Fee Factor shall be determined
promptly by the Bank upon receipt of the Borrower's financial statements for the
relevant fiscal year or quarter and once so determined, shall remain in effect
until it is redetermined by the Bank upon receipt of the financial statements
for the next succeeding fiscal year or quarter. In the event that the Borrower
fails to deliver any financial statements and the related certificates within
five (5) days of the due date therefor set forth in Section 5.01(b)(i) or (ii)
hereof, the Commitment Fee Factor shall be as set forth in clause (iv) above
until the Borrower delivers all required financial statements and certificates
at which time the Commitment Fee Factor shall be redetermined as provided for in
this Section 2.12.
Upon the occurrence and during the continuance of a
Default or an Event of Default the Commitment
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Fee Factor may, as a result of changes in the Funded Debt to EBITDA Ratio,
increase but will not decrease.
SECTION 2.13. Reduction of Commitment. Upon at least three (3)
Business Days' written notice to the Bank, the Borrower may irrevocably elect to
have the unused Commitment terminated in whole or reduced in part; provided,
however, that any such partial reduction shall be in a minimum amount of
$250,000.00 or whole multiples thereof. The Commitment, once terminated or
reduced, shall not be reinstated without the express written approval of the
Bank.
SECTION 2.14. Prepayment. (a) Mandatory. (i) All Revolving Credit
Loans shall be due and payable, if not required to be paid earlier pursuant to
this Agreement, on the Maturity Date. In addition, if at any time the aggregate
outstanding Revolving Credit Loans plus Outstanding L/C Obligations exceed the
Borrowing Base (a "Borrowing Base Deficiency"), the Borrower shall, without
notice or demand from the Bank, first, prepay so much of the Revolving Credit
Loans and second, if necessary, deposit cash collateral to secure Outstanding
L/C Obligations such that such remaining Revolving Credit Loans and the
remaining Outstanding L/C Obligations which are not so secured shall not exceed
the Borrowing Base.
(ii) In the event that the Borrower receives any Asset
Sale Proceeds or any New Financing Proceeds, the Borrower shall, without any
requirement or condition of notice or demand from the Bank, make a prepayment of
the Term Loan in the amount of such Asset Sale Proceeds or New Financing
Proceeds, as the case may be.
(b) Voluntary. (i) The Borrower shall have the right at any time and
from time to time to prepay any Alternate Base Rate Loan, in whole or in part,
without premium or penalty on one Business Day prior irrevocable written notice
to the Bank of such prepayment provided, however, that each such prepayment
shall be on a Business Day and shall be in a minimum principal amount of
$50,000.00 and in increased integral multiples of $25,000.00.
(ii) The Borrower shall have the right at any time and
from time to time, subject to the provisions of this Agreement, including,
without limitation Section 2.15, to prepay any Eurodollar Loan, in whole or in
part, on three (3) Business Days' prior irrevocable written notice to the Bank,
provided however, that each such prepayment shall be in the minimum principal
amount of $100,000.00 and in increased integral multiples of $25,000.00.
(iii) The notice of prepayment under this Section 2.14
shall set forth the prepayment date and the principal amount of the Loan being
prepaid and shall be
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irrevocable and shall commit the Borrower to prepay such Loan by the amount and
on the date stated therein. All prepayments shall be accompanied by accrued
interest on the principal amount being prepaid to the date of prepayment. Each
prepayment under this Section 2.14 shall be applied first towards unpaid
interest on the amount being prepaid and then towards the principal in whole or
partial prepayment of Loans by the Borrower. In the absence of such
specification, amounts being prepaid shall be applied first to any Alternate
Base Rate Loan then outstanding and then to Eurodollar Loans in the order of the
expiration of their respective Interest Periods. Any partial prepayment of the
Term Loan shall be applied to the installments of principal of the then most
distant maturity.
SECTION 2.15. Reimbursement by Borrower. The Borrower shall
reimburse the Bank upon the Bank's demand for any loss, cost or expense incurred
or to be incurred by it (in the Bank's sole determination) as a result of any
prepayment or conversion (whether voluntarily or by acceleration) of any
Eurodollar Loan other than on the last day of the Interest Period for such Loan,
or if the Borrower fails to borrow the Eurodollar Loan (or is not able to borrow
because of a Default or an Event of Default or for any other reason hereunder)
after having given the irrevocable notice of borrowing required by this
Agreement. Such reimbursement shall include, but not be limited to, any loss,
cost or expense incurred by the Bank in obtaining, liquidating or redeploying
any funds used or to be used in making or maintaining the Eurodollar Loan.
SECTION 2.16. Increased Costs. If, after the date of this Agreement,
the adoption of, or any change in, any applicable law, regulation, rule or
directive, or any interpretation thereof by any authority charged with the
administration or interpretation thereof:
(i) subjects the Bank to any tax with respect to the
Commitment, the Loans, the Notes, the Letters of Credit or on any amount paid or
to be paid under or pursuant to this Agreement, the Loans, the Notes, the
Letters of Credit (other than any tax measured by or based upon the overall net
income of the Bank);
(ii) changes the basis of taxation of payments to the
Bank of any amounts payable hereunder (other than any tax measured by or based
upon the overall net income of the Bank);
(iii) imposes, modifies or deems applicable any reserve,
capital adequacy or deposit requirements against any assets held by, deposits
with or for the account of, or loans made by, or letters of credit issued by,
the Bank; or
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(iv) imposes on the Bank any other condition affecting
its Commitment, the Loans, the Notes, the Letters of Credit or this Agreement;
and the result of any of the foregoing is to increase the cost to the Bank of
maintaining this Agreement or the Commitment or making the Loans, or issuing the
Letters of Credit, or to reduce the amount of any payment (whether of principal,
interest or otherwise) receivable by the Bank or to require the Bank to make any
payment on or calculated by reference to the gross amount of any sum received by
it, in each case by an amount which the Bank in its sole judgment deems
material, then and in any such case:
(a) the Bank shall promptly advise the
Borrower of such event, together with the date thereof,
the amount of such increased cost or reduction or
payment and the way in which such amount has been
calculated; and
(b) the Borrower shall pay to the Bank,
within ten (10) days after the advice referred to in
subsection (a) hereinabove, such an amount or amounts as
will compensate the Bank for such additional cost,
reduction or payment for so long as the same shall
remain in effect.
The determination of the Bank as to additional amounts
payable pursuant to this Section 2.16 shall be conclusive evidence of such
amounts absent manifest error. The Bank agrees to apply the provisions of this
Section 2.16 to the Borrower only if it is applying similar clauses in loan
agreements to substantially all borrowers similarly situated.
SECTION 2.17. Capital Adequacy. If the Bank shall have determined
that the applicability of any law, rule, regulation or guideline, or the
adoption after the date hereof of any other law, rule, regulation or guideline
regarding capital adequacy, or any change in any of the foregoing or in the
interpretation or administration of any of the foregoing by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank (or any lending office of the
Bank) or the Bank's holding company with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on the Bank's capital or on the capital of the Bank's holding
company, if any, as a consequence of its obligations hereunder to a level below
that which the Bank or the Bank's holding company could have achieved but for
such adoption, change or compliance (taking into consideration the Bank's
policies and the policies of the Bank's holding company with respect to capital
adequacy) by an amount
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<PAGE> 26
deemed by the Bank to be material, then from time to time the Borrower shall pay
to the Bank such additional amount or amounts as will compensate the Bank or the
Bank's holding company for any such reduction suffered. The Bank agrees to apply
the provisions of this Section 2.17 to the Borrower only if it is applying
similar clauses in loan agreements to substantially all borrowers similarly
situated.
SECTION 2.18. Change in Legality. (a) Notwithstanding anything to
the contrary contained elsewhere in this Agreement, if any change after the date
hereof in law, rule, regulation, guideline or order, or in the interpretation
thereof by any governmental authority charged with the administration thereof,
shall make it unlawful for the Bank to make or maintain any Eurodollar Loan or
to give effect to its obligations as contemplated hereby with respect to a
Eurodollar Loan, then, by written notice to the Borrower, the Bank may:
(i) declare that Eurodollar Loans will not thereafter be
made hereunder, whereupon the Borrower shall be prohibited from
requesting such Eurodollar Loans hereunder unless such declaration
is subsequently withdrawn; and
(ii) require that, subject to the provisions of Section
2.15, all outstanding Eurodollar Loans made by it be converted to an
Alternate Base Rate Loan, whereupon all of such Eurodollar Loans
shall be automatically converted to an Alternate Base Rate Loan as
of the effective date of such notice as provided in paragraph (b)
below.
(b) For purposes of this Section 2.18, a notice to the
Borrower by the Bank pursuant to paragraph (a) above shall be effective, for the
purposes of paragraph (a) above, if lawful, and if any Eurodollar Loans shall
then be outstanding, on the last day of the then current Interest Period;
otherwise, such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.19. Indemnity. The Borrower will indemnify the Bank
against any loss or expense which the Bank may sustain or incur as a consequence
of any default in payment or prepayment of the principal amount of any
Eurodollar Loan or any part thereof or interest accrued thereon, as and when due
and payable (at the due date thereof, by notice of prepayment or otherwise), or
the occurrence of any Event of Default, including but not limited to any loss or
expense sustained or incurred in liquidating or employing deposits from third
parties acquired to affect or maintain such Eurodollar Loan or any part thereof.
When claiming under this Section 2.19, the Bank shall provide to the Borrower a
statement, signed by an officer of the Bank,
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<PAGE> 27
explaining the amount of any such loss or expense (including the calculation of
such amount), which statement shall, in the absence of manifest error, be
conclusive with respect to the parties hereto.
SECTION 2.20. Change in LIBOR; Availability of Rates. In the event,
and on each occasion, that, on the day the interest rate for any Eurodollar Loan
is to be determined, the Bank shall have determined (which determination, absent
manifest error, shall be conclusive and binding upon the Borrower) that dollar
deposits in the amount of the principal amount of the requested Eurodollar Loan
are not generally available in the London interbank market, or that the rate at
which such dollar deposits are being offered will not adequately and fairly
reflect the cost to the Bank of making or maintaining the principal amount of
such Eurodollar Loan during such Interest Period, such Eurodollar Loan shall be
unavailable. The Bank shall, as soon as practicable thereafter, give written,
telex or telephonic notice of such determination of unavailability to the
Borrower. Any request by the Borrower for an unavailable Eurodollar Loan shall
be deemed to have been a request for an Alternate Base Rate Loan. After such
notice shall have been given and until the Bank shall have notified the Borrower
that the circumstances giving rise to such notice no longer exist, each
subsequent request for an unavailable Eurodollar Loan shall be deemed to be a
request for an Alternate Base Rate Loan.
SECTION 2.21. Authorization to Debit Borrower's Account. The Bank is
hereby authorized to debit the Borrower's account maintained with the Bank for
(i) all scheduled payments of principal and/or interest under the Notes, (ii)
all reimbursement and other obligations of the Borrower under the Letters of
Credit and the L/C Documents and (iii) the commitment fee and all other fees and
amounts due hereunder; all such debits to be made on the days such payments are
due in accordance with the terms hereof.
SECTION 2.22. Late Charges, Default Interest. (a) If the Borrower
shall default in the payment of any principal installment of or interest on any
Loan or any other amount becoming due hereunder, the Borrower shall pay
interest, to the extent permitted by law, on such defaulted amount up to the
date of actual payment (after as well as before judgment) at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to two (2%) percent in excess of the higher of (i) the Alternate
Base Rate or (ii) the interest rate otherwise in effect.
(b) Upon the occurrence and during the continuation of
an Event of Default, the Borrower shall pay interest on all amounts owing under
the Notes and this Agreement (after as well as before judgment) at a rate per
annum (computed
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on the basis of the actual number of days elapsed over a year of 360 days) equal
to two (2%) percent in excess of the higher of (i) the Alternate Base Rate or
(ii) the interest rate otherwise in effect.
SECTION 2.23. Payments. All payments by the Borrower hereunder or
under the Note shall be made in Dollars in immediately available funds at the
office of the Bank by 3:00 p.m., New York City time on the date on which such
payment shall be due. Interest on the Notes shall accrue from and including the
date of each Loan to but excluding the date on which such Loan is paid in full
or refinanced with a Loan of a different type.
SECTION 2.24. Interest Adjustments. (a) If the provisions of this
Agreement or the Note would at any time otherwise require payment by the
Borrower to the Bank of any amount of interest in excess of the maximum amount
then permitted by applicable law the interest payments shall be reduced to the
extent necessary so that the Bank shall not receive interest in excess of such
maximum amount. To the extent that, pursuant to the foregoing sentence, the Bank
shall receive interest payments hereunder or under either of the Notes in an
amount less than the amount otherwise provided, such deficit (hereinafter called
the "Interest Deficit") will cumulate and will be carried forward (without
interest) until the termination of this Agreement. Interest otherwise payable to
the Bank hereunder and under either of the Notes for any subsequent period shall
be increased by such maximum amount of the Interest Deficit that may be so added
without causing the Bank to receive interest in excess of the maximum amount
then permitted by applicable law.
(b) The amount of the Interest Deficit shall be treated
as a prepayment penalty and paid in full at the time of any optional prepayment
by the Borrower to the Bank of all or any part of the Term Loan. The amount of
the Interest Deficit relating to the Notes at the time of any complete payment
of the Notes at that time outstanding (other than an optional prepayment
thereof) shall be cancelled and not paid.
SECTION 2.25. Participations, Etc. The Bank shall have the right at
any time, with or without notice to the Borrower, to sell, assign, transfer or
negotiate all or any part of the Term Loan Note, the Revolving Credit Note or
the Commitment or grant participations therein to one or more banks (foreign or
domestic, including an affiliate of the Bank), insurance companies or other
financial institutions, pension funds or mutual funds. The Bank agrees that
should it so sell, assign, transfer or negotiate part, but not all, of the Notes
or the Commitment, it shall act as agent for itself and the new lenders. The
Borrower and each of the Guarantors agrees and consents to the Bank providing
financial and other information
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<PAGE> 29
regarding its and their business and operations to prospective purchasers or
participants and further agree that to the extent that the Bank should sell,
assign, transfer or negotiate all or any part of the Notes or the Commitment,
the Bank shall be forever released and discharged from its obligations under the
Notes, the Commitment and this Agreement to the extent same is sold, assigned,
transferred or negotiated. Nothing herein shall be read or construed as
prohibiting or otherwise limiting the ability or right of the Bank to pledge any
Note to a Federal Reserve Bank.
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<PAGE> 30
ARTICLE IIA
THE LETTERS OF CREDIT
SECTION 2A.01. Letters of Credit. (a) On the terms and conditions
set forth herein, the Bank agrees, from time to time on any Business Day during
the period from the date of this Agreement to the Maturity Date to issue Letters
of Credit for the account of the Borrower. Subject to the terms and conditions
of this Agreement, the Borrower's ability to obtain Letters of Credit shall be
fully revolving, and, accordingly, the Borrower may, during the term of this
Agreement, obtain Letters of Credit to replace Letters of Credit which have
expired or which have been drawn upon and reimbursed.
(b) The Bank has no obligation to issue any Letter of Credit
if:
(i) any order, judgment or decree of any governmental
authority or arbitrator purports by its terms to enjoin or restrain
the Bank from issuing such Letter of Credit or any requirement of
law applicable to the Bank or any request or directive (whether or
not having the force of law) from any governmental authority with
jurisdiction over the Bank prohibits, or requests that the Bank
refrain from, the issuance of standby letters of credit generally or
such Letter of Credit in particular or imposes upon the Bank with
respect to such Letter of Credit any restriction, reserve or capital
requirement (for which the Bank is not otherwise compensated
hereunder) not in effect on the date of this Agreement, or imposes
upon the Bank any unreimbursed loss, cost or expense which was not
applicable on the date of this Agreement and which the Bank in good
faith deems material to it;
(ii) one or more of the applicable conditions contained
in Article III is not then satisfied;
(iii) the expiry date of any requested Letter of Credit
is (x) more than one (1) year from its date of issuance or (y) later
than five (5) Business Days prior to the Maturity Date;
(iv) the Outstanding L/C Obligations, after giving
effect to the requested Letter of Credit, (x) shall exceed
$1,000,000.00 or (y) when added to the principal amount of Revolving
Credit Loans, shall exceed the lesser of (1) $7,000,000.00 or (2)
the Borrowing Base; or
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<PAGE> 31
(v) any requested Letter of Credit is not in form and
substance acceptable to the Bank, or the issuance of a Letter of
Credit violates any applicable policies of the Bank.
SECTION 2A.02. Issuance of Letters of Credit. Each Letter of Credit
shall be issued upon the request of the Borrower (which request shall be
irrevocable), received by the Bank in accordance with arrangements between the
Bank and the Borrower to provide the Bank with the information necessary to
issue, amend or renew any such Letter of Credit. The arrangements between the
Borrower and the Bank are set forth in the L/C Documents (other than the Letters
of Credit) between the Bank and the Borrower. To the extent any term in any such
L/C Documents (other than a Letter of Credit) conflicts with or is inconsistent
with the terms of this Agreement, the term most favorable to the Bank shall
apply, and the Bank may exercise its rights under either such L/C Document or
this Agreement vis-a-vis the Borrower. If any such inconsistency exists, the
Bank shall not be deemed to have waived any rights hereunder, nor shall the Bank
be deemed to have waived any rights under such L/C Document, by reason of such
inconsistency.
SECTION 2A.03. Draws. The Bank will promptly notify the Borrower of
any drawing under a Letter of Credit. The Borrower shall reimburse the Bank for
the amount of such draw on each date that any amount is paid by the Bank under
any Letter of Credit. The Borrower shall also reimburse the Bank for any and all
amounts paid to Fleet Bank, N.A. or European American Bank pursuant to the
Indemnity Letters.
SECTION 2A.04 Fees. (a) The Borrower will pay to the Bank an annual
fee equal to three quarters of one (3/4%) percent on the average amount of
Letters of Credit issued and available to be drawn during the preceding calendar
quarter. Such fee will be calculated and paid quarterly, in arrears, on the last
Business Day of each March, June, September and December.
(b) The Borrower will pay interest on any amounts representing
unreimbursed draws on any Letter of Credit or any amounts paid pursuant to the
Indemnity Letters at the higher of (i) the rate provided for in the L/C
Documents or (ii) the rate described in Section 2.22(b).
(c) The Borrower shall pay the Bank's usual and customary fees and
commissions, including those for draws, extensions and modifications of any
Letter of Credit.
SECTION 2A.05 Role of the Bank. (a) The Bank shall not have any
responsibility to obtain any document in connection with paying any draw under a
Letter of Credit (other than any required sight or time draft, certificate and
other documents
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<PAGE> 32
expressly required by the Letter of Credit) or to ascertain or inquire as to the
validity or accuracy of any such document or the authority of the Person
executing or delivering any such document.
(b) The Borrower hereby assumes all risks of the acts or omissions
of any beneficiary or transferee with respect to its use of any Letter of
Credit; provided, however, that this assumption is not intended to, and shall
not, preclude the Borrower's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. In
furtherance and not in limitation of the foregoing: (i) the 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;
and (ii) the Bank shall not be responsible for the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reasons.
SECTION 2A.06. Obligations Absolute. The obligations of the Borrower
under this Agreement and any L/C Documents to reimburse the Bank for a drawing
under a Letter of Credit or amounts paid under the Indemnity Letters shall be
unconditional and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and the L/C Documents under all circumstances, including
the following:
(i) any lack of validity or enforceability of this
Agreement or any L/C Document;
(ii) 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 Letter of Credit or any other amendment
or waiver of or any consent to departure from all or any of the L/C
Documents;
(iii) the existence of any claim, setoff, defense or
other right that the Borrower may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting),
the Bank or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the L/C
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged,
fraudulent, invalid or insufficient in
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any respect or any statement therein being untrue or inaccurate in
any respect; or any loss or delay in the transmission or otherwise
of any document required in order to make a drawing under any Letter
of Credit;
(v) any payment by the Bank under a Letter of Credit
against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit, unless such
payment is determined to have resulted from the Bank's gross
negligence or willful misconduct; or any payment made by the Bank
under any Letter of Credit to any Person purporting to be a trustee
in bankruptcy, debtor-in-possession, assignee for the benefit of
creditors, liquidator, receiver or other representative of or
successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any insolvency
proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the
obligations of the Borrower in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to,
or a discharge of, the Borrower, other than the gross negligence or
willful misconduct of the Bank.
SECTION 2A.07. Uniform Customs and Practices. The Uniform Customs
and Practices for Documentary Credits as published by the International Chamber
of Commerce most recently at the time of issuance of any Letter of Credit shall
(unless otherwise expressly provided in the Letters of Credit) apply to
the Letters of Credit.
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ARTICLE III
CONDITIONS OF LENDING
SECTION 3.01. Conditions Precedent to the Making of the Term Loan
and the Initial Revolving Credit Loan. The obligation of the Bank to make the
Term Loan and the initial Revolving Credit Loan contemplated by this Agreement
is subject to the condition precedent that the Bank shall have received from the
Borrower and the Guarantors the following, in form and substance satisfactory to
the Bank and its counsel:
(a) The Term Loan Note and the Revolving Credit Note,
each duly executed and payable to the order of the Bank.
(b) Certified (as of the date of this Agreement) copies
of the resolutions of the board of directors of the Borrower authorizing the
Loans and authorizing and approving this Agreement and the other Loan Documents
and the execution, delivery and performance thereof and certified copies of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the other Loan Documents.
(c) Certified (as of the date of this Agreement) copies
of the resolutions of the Boards of Directors and the shareholders of each of
the Guarantors, authorizing and approving this Agreement, their Guaranties and
any other Loan Document applicable to the Guarantors, and the execution,
delivery and performance thereof and certified copies of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement, their Guaranties and the other Loan Documents.
(d) A certificate of the Secretary or an Assistant
Secretary (attested to by another officer) of the Borrower certifying: (i) the
names and true signatures of the officer or officers of the Borrower authorized
to sign this Agreement, the Notes and the other Loan Documents to be delivered
hereunder on behalf of the Borrower; and (ii) a copy of the Borrower's by-laws
as complete and correct on the date of this Agreement.
(e) A Certificate of the Secretary or an Assistant
Secretary (attested to by another officer) of each of the Guarantors certifying
(i) the names and true signatures of the officer or officers of the Guarantors
authorized to sign this Agreement, their Guaranties and any other Loan Documents
to be delivered hereunder on behalf of the Guarantors; (ii) a copy of each of
the Guarantors' by-laws as complete and correct on the
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date of this Agreement; and (iii) the stock ownership of each Guarantor.
(f) Copies of the certificates of incorporation and all
amendments thereto of the Borrower and each of the Guarantors, certified in each
case by the Secretary of State (or equivalent officer) of the state of
incorporation of the Borrower and each Guarantor and a certificate of existence
and good standing with respect to the Borrower and each Guarantor from the
Secretary of State (or equivalent officer) of the state of incorporation of the
Borrower and each Guarantor and from the Secretary of State (or equivalent
officer) of any state in which the Borrower and each Guarantor is authorized to
do business.
(g) An opinion of Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass LLP, counsel for the Borrower and the Guarantors as to certain
matters referred to in Article IV hereof and as to such other matters as the
Bank or its counsel may reasonably request.
(h) From each of the Guarantors, an executed Guaranty.
(i) From the Borrower and each Guarantor, an executed
Security Agreement giving to the Bank a first priority security interest in all
assets of the Borrower and each Guarantor including, but not limited to, all
personal property, equipment, fixtures, inventory, accounts, chattel paper and
general intangibles all whether now owned or hereafter acquired (the
"Collateral").
(j) From the Borrower and each Guarantor, UCC-1 filings
perfecting the Bank's security interests in the Collateral.
(k) From the Borrower and each Guarantor, a property
damage insurance policy for the Collateral in the amount of the replacement
value of the Collateral (excluding accounts receivable) naming the Bank as loss
payee with an insurance company acceptable to the Bank. The policy shall provide
for thirty (30) days notice to the Bank of cancellation or change.
(l) From any landlord of premises leased by the Borrower
or any Guarantor and in which premises Collateral is located, a landlord's lien
waiver, in form and substance satisfactory to the Bank.
(m) Receipt and satisfactory review by the Bank of a
completed Field Examination of the Borrower and Speed.
(n) Receipt and satisfactory review by the Bank of the
Acquisition Agreement, all employment, consulting and
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other similar agreements relating to the Speed Acquisition and all resolutions,
consents and other approvals relating to the Speed Acquisition.
(o) Receipt and satisfactory review by the Bank of the
due diligence report by Grant Thornton on the Speed Acquisition.
(p) Receipt and satisfactory review by the Bank of an
opening balance sheet and updated projections for the Borrower for a period of
at least four (4) years, after taking the Speed Acquisition into account,
including balance sheets, income statements and statements of cash flows, all
reviewed by Grant Thornton or other independent certified public accountants
satisfactory to the Bank.
(q) Receipt and satisfactory review by the Bank of all
documentation relating to the Borrower's acquisitions of The Sarabande Press,
Inc. and Advanced Digital Services, Inc. together with the Borrower's Forms 8-K
issued in connection with such acquisitions.
(r) Receipt and satisfactory review by the Bank of a
subordinated note and a subordination agreement related to the Subordinated Debt
to be payable to Speed which shall provide for at least $2,000,000.00 in such
Subordinated Debt, a repayment schedule satisfactory to the Bank and a
requirement that no payments on such Subordinated Debt be payable if, after
giving effect to any scheduled payment, the Borrower would fail to meet the
requirements of Section 5.03(b) of this Agreement.
(s) Receipt and satisfactory review by the Bank of an
assignment, as collateral, of a $3,500,000.00 key man life insurance policy on
Gary Katz.
(t) Receipt and satisfactory review by the Bank and its
counsel of evidence that, except for the payment of amounts to be funded by the
Loans, the Speed Acquisition has closed.
(u) From the Borrower, the initial Borrowing Base
Certificate, evidencing availability for the initial Revolving Credit Loan.
(v) The following statements shall be true and the Bank
shall have received a certificate signed by the President or Chief Financial
Officer of the Borrower dated the date hereof and dated the date of the Drawdown
and the initial Revolving Credit Loan, if later, stating that:
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(i) The representations and warranties
contained in Article IV of this Agreement and in the Loan Documents are true and
correct on and as of such date;
(ii) No Default or Event of Default has
occurred and is continuing, or would result from the making of the Term Loan or
the initial Revolving Credit Loan; and
(iii) The aggregate amount of the Term Loan
and the initial Revolving Credit Loan is not in excess of the cash portion of
the purchase price for the Acquisition plus related cash expenses, with
calculations or other evidence of the accuracy of such statement.
(w) All schedules, documents, certificates and other
information provided to the Bank pursuant to or in connection with this
Agreement shall be satisfactory to the Bank and its counsel in all respects.
(x) All legal matters incident to this Agreement and the
Loan transactions contemplated hereby shall be satisfactory to Cullen and
Dykman, counsel to the Bank.
(y) Receipt by the Bank of such other approvals,
opinions or documents as the Bank or its counsel may reasonably request.
(z) Receipt by the Bank of its facility fee (after
crediting amounts previously paid) of $45,000.00, and payment of the reasonable
legal fees and expenses of the Bank's counsel.
SECTION 3.02. Conditions Precedent to All Revolving Credit Loans.
The obligation of the Bank to make each Revolving Credit Loan (including the
initial Revolving Credit Loan) shall be subject to the further condition
precedent that on the date of such Loan:
(a) The following statements shall be true and the Bank
shall have received a certificate signed by the President or the Chief Financial
Officer of the Borrower dated the date of such Loan, stating that:
(i) The representations and warranties
contained in Article IV of this Agreement and in the Loan Documents are true and
correct on and as of such date as though made on and as of such date; and
(ii) No Default or Event of Default has
occurred and is continuing, or would result from such Loan.
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<PAGE> 38
(b) The Bank shall have received such other approvals,
opinions or documents as the Bank may reasonably request.
SECTION 3.03. Conditions Precedent to all Letters of Credit. The
obligation of the Bank to issue each Letter of Credit (including the initial
Letter of Credit) shall be subject to the condition precedent that on the date
of such issuance:
(a) The Borrower shall have executed and delivered all L/C
Documents;
(b) The following statements shall be true and the Bank shall have
received a certificate signed by the President or the Chief Financial Officer of
the Borrower dated the date of such Letter of Credit, stating that:
(i) The representations and warranties
contained in Article IV of this Agreement and in the L/C Documents are true and
correct on and as of such date as though made on and as of such date; and
(ii) No Default or Event of Default has
occurred and is continuing, or would result from such Letter of Credit.
(c) The Bank shall have received such other approvals, opinions or
documents as the Bank may reasonably request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties. On the date hereof and
on each date that the Borrower requests a Revolving Credit Loan or the issuance
of a Letter of Credit, the Borrower and each Guarantor represents and warrants
as follows:
(a) Subsidiaries. On the date hereof, Advanced and KNYA
are the only Subsidiaries of the Borrower and neither Advanced nor KNYA has any
Subsidiaries. All of the issued and outstanding shares of Advanced and KNYA are
owned by the Borrower, free and clear of any mortgage, pledge, lien or
encumbrance. Except as set forth on Schedule 4.01(a), there are not outstanding
any warrants, options, contracts or commitments of any kind entitling any Person
to purchase or otherwise acquire any securities or other equity interest of the
Borrower or any Guarantor, nor are there outstanding any instruments which are
convertible into or exchangeable for any securities or other equity interests of
the Borrower.
(b) Organization. The Borrower and each Guarantor is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with respect to the Borrower and KNYA, and New York,
with respect to Advanced and each has the power to own its assets and to
transact the business in which it is presently engaged and is duly qualified and
is in good standing in all other jurisdictions where the character or nature of
its business requires such qualification except where the failure to so qualify
or be in good standing would not result in a Material Adverse Change in the
Borrower or any Guarantor.
(c) Due Execution, etc. The execution, delivery and
performance by the Borrower and each Guarantor of this Agreement and the other
Loan Documents to which it is a party are within the Borrower's and each
Guarantor's corporate power and have been duly authorized by all necessary
corporate action and do not and will not (i) require any consent or approval of
the stockholders of the Borrower or any Guarantor; (ii) do not contravene the
Borrower's or any Guarantor's certificate of incorporation or by-laws; (iii)
violate any provision of or any law, rule, regulation, contractual restriction,
order, writ, judgment, injunction, or decree, determination or award binding on
or affecting the Borrower or any Guarantor; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement, or any
other agreement, lease or instrument to which the Borrower or any Guarantor is a
party or by which it or its properties may be bound or affected; and (v) result
in, or require, the creation or imposition of any Lien (other than the Lien of
the Loan
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<PAGE> 40
Documents) upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower or any Guarantor.
(d) No Authorization, etc. No authorization or approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution, delivery and performance
by the Borrower or any Guarantor of any Loan Document to which it is a party,
except authorizations, approvals, actions, notices or filings which have been
obtained, taken or made, as the case may be.
(e) Validity of Loan Documents. The Loan Documents when
delivered hereunder will have been duly executed and delivered on behalf of the
Borrower and each Guarantor and will be legal, valid and binding obligations of
the Borrower and each Guarantor, enforceable against the Borrower and each
Guarantor in accordance with their respective terms except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws or equitable principles affecting the enforcement of
creditor's rights.
(f) Financial Statements. The audited consolidated
financial statements of the Borrower for the fiscal year ended December 31,
1996, and the management prepared consolidated financial statements of the
Borrower for the nine (9) month fiscal period ended September 30, 1997, copies
of each of which have been furnished to the Bank, fairly present the
consolidated financial condition of the Borrower as at such dates and the
consolidated results of operations of the Borrower for the periods ended on such
dates, all in accordance with GAAP, and since such date there has been (i) no
material increase in the liabilities of the Borrower and the Guarantors and (ii)
no Material Adverse Change in the Borrower or any Guarantor.
(g) No Litigation. There is no pending or, to the best
knowledge of the Borrower and the Guarantors, threatened action, proceeding or
investigation affecting the Borrower or any Guarantor before any court,
governmental agency or arbitrator, which may either in one case or in the
aggregate, result in a Material Adverse Change in the Borrower or any Guarantor.
(h) Tax Returns. The Borrower has filed all federal,
state and local tax returns required to be filed (subject to extensions granted)
and has paid all taxes, assessments and governmental charges and levies shown
thereon to be due, including interest and penalties.
(i) Licenses, etc. The Borrower and each Guarantor
possesses all licenses, permits, franchises, patents, copyrights, trademarks and
trade names, or rights thereto, to conduct its business substantially as now
conducted and as
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<PAGE> 41
presently proposed to be conducted, and neither the Borrower nor any Guarantor
is, to the best knowledge of the Borrower and the Guarantors, in violation of
any similar rights of others.
(j) No Burdensome Agreements. Neither the Borrower nor
any Guarantor is a party to any indenture, loan or credit agreement or any other
agreement, lease or instrument or subject to any charter or corporate
restriction which could result in a Material Adverse Change in the Borrower or
any Guarantor.
(k) Margin Credit. Neither the Borrower nor any
Guarantor is engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation G, T, U or
X), and no proceeds of any Loan will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock or in any other way which will cause the Borrower or any
Guarantor to violate the provisions of Regulation G, T, U or X.
(l) Compliance with Law. The Borrower and each Guarantor
is in all material respects in compliance with all federal and state laws and
regulations in all jurisdictions where the failure to comply with such laws or
regulations could result in a Material Adverse Change in the Borrower or any
Guarantor.
(m) ERISA. The Borrower, each Guarantor and each ERISA
Affiliate of the Borrower or a Guarantor are in compliance in all material
respects with all applicable provisions of ERISA. Neither a Reportable Event nor
a Prohibited Transaction has occurred and is continuing with respect to any
Plan; no notice of intent to terminate a Plan has been filed nor has any Plan
been terminated; no circumstances exist which constitute grounds under Section
4042 of ERISA entitling the PBGC to institute proceedings to terminate, or
appoint a trustee to administer, a Plan, nor to the best knowledge of the
Borrower and the Guarantors, has the PBGC instituted any such proceedings;
neither the Borrower, any Guarantor nor any ERISA Affiliate of the Borrower or a
Guarantor has completely or partially withdrawn under Sections 4201 or 4204 of
ERISA from a Multiemployer Plan; the Borrower, each Guarantor and each ERISA
Affiliate of the Borrower or a Guarantor have met their minimum funding
requirements under ERISA with respect to all of their Plans and the present fair
market value of all Plan assets exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date of the Plan in
accordance with the provisions of ERISA for calculating the potential liability
of the Borrower, any Guarantor or any ERISA Affiliate of the Borrower or a
Guarantor to the PBGC or the Plan under Title IV of ERISA; and neither the
Borrower, any Guarantor
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<PAGE> 42
nor any ERISA Affiliate of the Borrower or a Guarantor has incurred any
liability to the PBGC under ERISA.
(n) Hazardous Material. The Borrower and each Guarantor
is in compliance with all federal, state or local laws, ordinances, rules,
regulations or policies governing Hazardous Materials and neither the Borrower
nor any Guarantor has used Hazardous Materials on, from, or affecting any
property now owned or occupied or hereafter owned or occupied by the Borrower or
any Guarantor in any manner which violates federal, state or local laws,
ordinances, rules, regulations or policies governing the use, storage,
treatment, transportation, manufacture, refinement, handling, production or
disposal of Hazardous Materials, and that to the best of the Borrower's and each
Guarantor's knowledge, no prior owner of any such property or any tenant,
subtenant, prior tenant or prior subtenant have used Hazardous Materials on,
from or affecting such property in any manner which violates federal, state or
local laws, ordinances, rules, regulations, or policies governing the use,
storage, treatment, transportation, manufacture, refinement, handling,
production or disposal of Hazardous Materials.
(o) Use of Proceeds. The proceeds of the Term Loan and
the Revolving Credit Loans shall be used exclusively for the purposes set forth
in Sections 2.05 and 2.11.
(p) Title to Assets. The Borrower and each Guarantor has
good and marketable title to all of its properties and assets. The properties
and assets of the Borrower and each Guarantor are not subject to any Lien other
than those described in Section 5.02(a) hereof.
(q) Casualty. Neither the business nor the properties of
the Borrower or any Guarantor are affected by any fire, explosion, accident,
strike, hail, earthquake, embargo, act of God or of the public enemy, or other
casualty (whether or not covered by insurance), which could result in a Material
Adverse Change in the Borrower or any Guarantor.
(r) Lien Priority. Except as disclosed on Schedule
4.01(r) or as permitted by Section 5.02(a), the Lien on the Collateral created
by the Security Agreements constitute valid first priority perfected security
interest in favor of the Bank.
(s) Credit Agreements. Schedule 4.01(s) is a complete
and correct list of all credit agreements, indentures, purchase agreements,
guaranties, Capital Leases, and other Investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which the Borrower or
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<PAGE> 43
any Guarantor is in any manner directly or contingently obligated, and the
maximum principal or face amounts of the credit in question, outstanding or to
be outstanding, are correctly stated, and all Liens of any nature given or
agreed to be given as security therefor are correctly described or indicated in
such Schedule.
(t) Intentionally Omitted.
(u) Financial or Other Advantage. The Guarantors
acknowledge they have derived or expect to derive a financial or other advantage
from the Loans obtained by the Borrower from the Bank.
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<PAGE> 44
ARTICLE V
COVENANTS OF THE BORROWER AND THE GUARANTORS
SECTION 5.01. Affirmative Covenants. So long as any amount shall
remain outstanding under the Term Loan Note or the Revolving Credit Note or any
Letter of Credit is outstanding, or so long as the Commitment shall remain in
effect, the Borrower and each Guarantor will, unless the Bank shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and orders, where the
failure so to comply could result in a Material Adverse Change in the Borrower
or any Guarantor.
(b) Reporting Requirements. Furnish to the Bank: (i)
Annual Financial Statements. As soon as available and in any event within ninety
(90) days after the end of each fiscal year of the Borrower, a copy of the
consolidated financial statements of the Credit Parties for such year, including
balance sheets with related statements of income and retained earnings and
statements of cash flows, all in reasonable detail and setting forth in
comparative form the figures for the previous fiscal year, together with an
unqualified opinion, prepared by independent certified public accountants
selected by the Borrower and satisfactory to the Bank, all such financial
statements to be prepared in accordance with GAAP.
(ii) Quarterly Financial Statements. As soon
as available and in any event within sixty (60) days after the end of each of
the first three fiscal quarters of each fiscal year of the Borrower, a copy of
the consolidated financial statements of the Credit Parties for such quarter,
including balance sheets with related statements of income and retained earnings
and statements of cash flows, all in reasonable detail and setting forth in
comparative form the figures for the comparable quarter and year to date for the
previous fiscal year, prepared by management of the Borrower, all such financial
statements to be prepared in accordance with GAAP.
(iii) Opening Balance Sheet. As soon as
available and in any event within ninety (90) days after the closing of the
Speed Acquisition (1) a copy of the audited balance sheet of the Borrower for
December 31, 1997, certified by Grant Thornton LLP; (2) a copy of the audited
balance sheet of Speed for December 31, 1997, certified by [still open]; and (3)
a copy of the balance sheet of the Borrower for the day of, and reflecting, the
Speed Acquisition, prepared by management of the Borrower and reviewed by Grant
Thornton LLP.
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<PAGE> 45
(iv) Management Letters. Promptly upon
receipt thereof, copies of any reports submitted to the Borrower or any
Guarantor by independent certified public accountants in connection with the
examination of the financial statements of the Borrower or any Guarantor made by
such accountants;
(v) Borrowing Base Certificate. As soon as
available and in any event within ten (10) Business Days after the end of each
month, a Borrowing Base Certificate and an accounts receivable aging schedule,
prepared and dated as of the end of such month.
(vi) Accountant's Report. Simultaneously
with the delivery of the annual financial statements referred to in Section
5.01(b)(i), a certificate of the independent certified public accountants who
audited such statements to the effect that, in making the examination necessary
for the audit of such statements, they have obtained no knowledge of any
condition or event which constitutes a Default or Event of Default, or if such
accountants shall have obtained knowledge of any such condition or event,
specify in such certificate each such condition or event of which they have
knowledge and the nature and status thereof.
(vii) Certificate of No Default.
Simultaneously with the delivery of the financial statements referred to in
Section 5.01(b)(i) and (ii), a certificate of the President or the Chief
Financial Officer of the Borrower, (1) certifying that no Default or Event of
Default has occurred and is continuing, or if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto; and (2) with computations
demonstrating compliance with the covenants contained in Section 5.03.
(viii) Notice of Litigation. Promptly after
the commencement thereof, notice of all actions, suits and proceedings before
any court or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting the Borrower or any Guarantor
which, if determined adversely to the Borrower could result in a Material
Adverse Change in the Borrower or any Guarantor.
(ix) Notice of Defaults and Events of
Default. As soon as possible and in any event within five (5) days after the
occurrence of each Default or Event of Default, a written notice setting forth
the details of such Default or Event of Default and the action which is proposed
to be taken by the Borrower with respect thereto.
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<PAGE> 46
(x) ERISA Reports. Promptly after the filing
or receiving thereof, copies of all reports, including annual reports, and
notices which the Borrower or any Guarantor files with or receives from the
PBGC, the Internal Revenue Service or the U.S. Department of Labor under ERISA;
and as soon as possible after the Borrower or any Guarantor knows or has reason
to know that any Reportable Event or Prohibited Transaction has occurred with
respect to any Plan or that the PBGC or the Borrower or any Guarantor has
instituted or will institute proceedings under Title IV of ERISA to terminate
any Plan, the Borrower will deliver to the Bank a certificate of the President
or the Chief Financial Officer of the Borrower setting forth details as to such
Reportable Event or Prohibited Transaction or Plan termination and the action
the Borrower proposes to take with respect thereto.
(xi) Reports to Other Creditors. Promptly
after the furnishing thereof, copies of any statement or report furnished to any
other party pursuant to the terms of any indenture, loan, or credit or similar
agreement and not otherwise required to be furnished to the Bank pursuant to any
other clause of this Section 5.01(b).
(xii) Proxy Statements, Etc. Promptly after
the sending or filing thereof, copies of all proxy statements, financial
statements and reports which the Borrower or any Guarantor sends to its public
stockholders, if any, and copies of all regular, periodic, and special reports,
all registration statements which the Borrower or any Guarantor files with the
Securities and Exchange Commission or any governmental authority which may be
substituted therefor, or with any national securities exchange and any press
releases or other notices or information publicly disseminated.
(xiii) Notice of Affiliates. Promptly after
any Person becomes an Affiliate of the Borrower, notice to the Bank of such
Affiliate.
(xiv) General Information. Such other
information respecting the condition or operations, financial or otherwise, of
the Borrower or any Guarantor as the Bank may from time to time reasonably
request.
(c) Taxes. Pay and discharge all taxes, assessments and
governmental charges upon the Borrower, any Guarantor, its or their income and
its or their properties prior to the dates on which penalties are attached
thereto, unless and only to the extent that (i) such taxes shall be contested in
good faith and by appropriate proceedings by the Borrower or a Guarantor, (ii)
there be adequate reserves therefor in accordance with GAAP entered on the books
of the Borrower or a Guarantor and (iii) no enforcement proceedings against the
Borrower or a
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<PAGE> 47
Guarantor have been commenced which may result in a Lien on any assets of the
Borrower or a Guarantor.
(d) Corporate Existence. Preserve and maintain the
Borrower's and each Guarantor's existence and good standing in the jurisdiction
of its incorporation and the rights, privileges and franchises of the Borrower
and each Guarantor in each case where failure so to preserve or maintain could
result in a Material Adverse Change in the Borrower or a Guarantor.
(e) Maintenance of Properties and Insurance. (i) Keep
the respective properties and assets (tangible or intangible) that are useful
and necessary in the Borrower's and each Guarantor's business in good working
order and condition, reasonable wear and tear excepted; (ii) maintain insurance
with financially sound and reputable insurance companies or associations in such
amounts and covering such risks as are either (x) usually carried by companies
engaged in similar businesses and owning properties doing business in the same
general areas in which the Borrower or a Guarantor operates or (y) consistent
with the Borrower's past practices and are prudent in the judgment of the
management of the Borrower; and (iii) cause the Bank to be named as loss payee
on any such insurance policies.
(f) Books of Record and Account. Keep adequate records
and proper books of record and account in which complete entries will be made in
a manner to enable the preparation of financial statements in accordance with
GAAP, reflecting all financial transactions of the Borrower and each Guarantor.
(g) Visitation; Field Examination. (i) At any reasonable
time, and from time to time, permit the Bank or any agents or representatives
thereof, to examine and make copies of and abstracts from the books and records
of, and visit the properties of, the Borrower or a Guarantor and to discuss the
affairs, finances and accounts of the Borrower or a Guarantor with any of the
respective officers or directors of the Borrower or a Guarantor or the
Borrower's or a Guarantor's independent accountants.
(ii) From time to time, upon reasonable
notice under the circumstances and during business hours, allow the Bank to
conduct, and cooperate with the Bank in connection therewith, a Field
Examination. The fees and expenses of one such Field Examination in each
calendar year shall be for the account of the Borrower, unless a Default or
Event of Default should occur and be continuing, in which event the Borrower
shall be responsible for the costs of all Field Examinations.
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<PAGE> 48
(h) Performance and Compliance with Other Agreements.
Perform and comply with each of the provisions of each and every agreement the
failure to perform or comply with which could result in a Material Adverse
Change in the Borrower or a Guarantor.
(i) Continued Perfection of Liens and Security Interest.
Record or file or rerecord or refile the Loan Documents or a financing statement
or any other filing or recording or refiling or rerecording in each and every
office where and when necessary to preserve and perfect the security interests
of the Loan Documents.
(j) Pension Funding. Comply with the following and cause
each ERISA Affiliate of the Borrower or a Guarantor to comply with the
following:
(i) engage solely in transactions which
would not subject any of such entities to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Internal Revenue Code in either case in an amount in excess of $25,000.00;
(ii) make full payment when due of
all amounts which, under the provisions of any Plan or ERISA, the Borrower, a
Guarantor or any ERISA Affiliate of any of same is required to pay as
contributions thereto;
(iii) all applicable provisions of the
Internal Revenue Code and the regulations promulgated thereunder, including but
not limited to Section 412 thereof, and all applicable rules, regulations and
interpretations of the Accounting Principles Board and the Financial Accounting
Standards Board;
(iv) not fail to make any payments in an
aggregate amount greater than $25,000.00 to any Multiemployer Plan that the
Borrower, a Guarantor or any ERISA Affiliate of the Borrower or a Guarantor may
be required to make under any agreement relating to such Multiemployer Plan, or
any law pertaining thereto; or
(v) not take any action regarding any Plan
which could result in the occurrence of a Prohibited Transaction.
(k) Licenses. Maintain at all times all material
licenses or permits necessary to the conduct of its business or as may be
required by any governmental agency or instrumentality thereof.
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<PAGE> 49
(l) New Affiliates. Cause any Affiliate of the Borrower
formed after the date of this Agreement to become a Guarantor of all obligations
of the Borrower to the Bank, whether incurred under this Agreement or otherwise
and to secure its obligations as a Guarantor by granting to the Bank a first
priority security interest in all personal property of such Affiliate.
(m) Life Insurance Policy. Deliver to the Bank, not
later than March 15, 1998, a duplicate original life insurance policy on Gary
Katz in the amount of $2,000,000.00, which policy has been assigned as
collateral, to the Bank.
SECTION 5.02. Negative Covenants. So long as any amount shall remain
outstanding under the Term Loan Note or the Revolving Credit Note or any Letter
of Credit is outstanding or so long as the Commitment shall remain in effect,
neither the Borrower nor any Guarantor will, without the written consent of the
Bank:
(a) Liens, Etc. Create, incur, assume or suffer to
exist, any Lien, upon or with respect to any of its properties, now owned or
hereafter acquired, except:
(i) Liens in favor of the Bank;
(ii) Liens for taxes or assessments or other
government charges or levies if not yet due and payable or if due and payable if
they are being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(iii) Liens imposed by law, such as
mechanics', materialmen's, landlords', warehousemen's, and carriers' Liens, and
other similar Liens, securing obligations incurred in the ordinary course of
business which are not past due or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(iv) Liens under workers' compensation,
unemployment insurance, Social Security, or similar legislation;
(v) Liens, deposits, or pledges to secure
the performance of bids, tenders, contracts (other than contracts for the
payment of money), leases (permitted under the terms of this Agreement), public
or statutory obligations, surety, stay, appeal, indemnity, performance or other
similar bonds, or other similar obligations arising in the ordinary course of
business;
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<PAGE> 50
(vi) Liens described in Schedule 5.02(a),
provided that no such Liens, other than Liens under Capital Leases or real
property mortgages, shall be renewed, extended or refinanced;
(vii) Judgment and other similar Liens
arising in connection with court proceedings (other than those described in
Section 6.01(f)), provided that the execution or other enforcement of such
judgment or Lien is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(viii) Easements, rights-of-way,
restrictions, and other similar encumbrances which, in the aggregate, do not
materially interfere with the Borrower's or a Guarantor's occupation, use and
enjoyment of the property or assets encumbered thereby in the normal course of
its business or materially impair the value of the property subject thereto;
(ix) Purchase money Liens on any property
hereafter acquired or the assumption of any Lien on property existing at the
time of such acquisition, or a Lien incurred in connection with any conditional
sale or other title retention agreement or a Capital Lease, provided that:
(1) Any property subject to any
of the foregoing is acquired by the Borrower or a Guarantor in the ordinary
course of its business and the Lien on any such property is created
contemporaneously with such acquisition;
(2) The obligation secured by
any Lien so created, assumed, or existing shall not exceed the lesser of cost or
fair market value of the property acquired as of the time of the Borrower or a
Guarantor acquiring the same;
(3) Each such Lien shall attach
only to the property so acquired and fixed improvements thereon and the proceeds
thereof to the extent provided by the New York Uniform Commercial Code; and
(4) The obligation secured by
such Lien is permitted by the provisions of Section 5.02(b).
(b) Debt. Create, incur, assume, or suffer to exist, any
Debt, except:
(i) Debt of the Borrower or a Guarantor
under this Agreement or the Notes or any other Debt of the Borrower or a
Guarantor owing to the Bank;
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<PAGE> 51
(ii) Debt described in Schedule 5.02(b),
provided that no such Debt, other than Debt arising under Capital Leases or real
property mortgages, shall be renewed, extended or refinanced;
(iii) Subordinated Debt;
(iv) Accounts payable to trade creditors for
goods or services and current operating liabilities (other than for borrowed
money) in each case incurred in the ordinary course of business and paid within
the specified time, unless contested in good faith and by appropriate
proceedings; and
(v) Debt of the Borrower or a Guarantor
secured by purchase money Liens permitted by Section 5.02(a)(ix).
(c) Lease Obligations. Create, incur, assume, or suffer
to exist any obligation as lessee for the rental or hire of any real or personal
property, except (i) Capital Leases permitted by Section 5.02(a), (ii) leases
for the use and occupation of real property or (iii) leases existing on the date
of this Agreement and any extensions or renewals thereof and other leases
entered into after the date of this Agreement (other than leases referred to in
clause (i) or (ii)) which do not in the aggregate require the Borrower and the
Guarantors to make payments (including taxes, insurance, maintenance, and
similar expenses which the Borrower and the Guarantors are required, in the
aggregate, to pay under the terms of any lease) in any fiscal year of the
Borrower in excess of $1,380,000.00 during the fiscal year ending December 31,
1998, (2) $1,560,000.00 during the fiscal year ending December 31, 1999, (3)
$1,740,000.00 during the fiscal year ending December 31, 2000 and (4)
$1,920,000.00 during the fiscal year ending December 31, 2001.
(d) Merger. Merge into, or consolidate with or into, or
have merged into it, any Person; and, for the purpose of this subsection (d),
the acquisition or sale by the Borrower or a Guarantor by lease, purchase or
otherwise, of all, or substantially all, of the common stock or the assets of
any Person or of it shall be deemed a merger of such Person with the Borrower or
a Guarantor; provided that this clause (d) shall not prohibit the Speed
Acquisition.
(e) Sale of Assets, Etc. Sell, assign, transfer, lease
or otherwise dispose of any of its assets, (including a saleleaseback
transaction) with or without recourse, except for (i) inventory disposed of in
the ordinary course of business; and (ii) the sale or other disposition of
assets no longer used or useful in the conduct of its business.
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<PAGE> 52
(f) Investments, Etc. Make any Investment other than
Permitted Investments.
(g) Transactions With Affiliates. Except in the ordinary
course of business and pursuant to the reasonable requirements of the Borrower's
or a Guarantor's business and upon fair and reasonable terms no less favorable
to the Borrower or a Guarantor than would be obtained in a comparable arm's
length transaction with a Person not an Affiliate, enter into any transaction,
including, without limitation, the purchase, sale, or exchange of property or
the rendering of any service, with any Affiliate.
(h) Prepayment of Outstanding Debt; Subordinated Debt.
(a) Pay, in whole or in part, any
outstanding Debt (other than Debt owing to the Bank) of the Borrower or a
Guarantor, which by its terms is not then due and payable or agree to any
acceleration of the schedule of principal installments on Subordinated Debt, the
Sarabande Note, the ADS Notes or the Speed Equipment Notes.
(b) Make any payment on Subordinated Debt
(whether by scheduled payment, prepayment or otherwise), if either (i) at the
time of such payment or (ii) after giving effect to such payment, the Borrower
is not, or shall fail to be, in compliance with Section 5.03(b).
(i) Guarantees. Guaranty, or in any other way become
directly or contingently obligated for any Debt of any other Person (including
any agreements relating to working capital maintenance, take or pay contracts or
similar arrangements) other than (i) the endorsement of negotiable instruments
for deposit in the ordinary course of business; or (ii) guarantees existing on
the date hereof and set forth in Schedule 5.02(i) annexed hereto.
(j) Change of Business. Materially alter the nature of
its business.
(k) Fiscal Year. Change the ending date of its fiscal
year from December 31.
(l) Losses. Incur a net loss for any fiscal year.
(m) Accounting Policies. Change any accounting policies,
except as permitted by GAAP.
(n) Change in Control. At any time from the date hereof,
Gary Katz shall fail or cease to maintain the voting
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<PAGE> 53
control (whether through ownership, irrevocable proxies, voting trusts or
similar devices or otherwise) of at least twenty five (25%) percent of the
voting stock of the Borrower.
(o) Management. Fail to retain Gary Katz as the Chairman
of the Board and Chief Executive Officer of the Borrower.
(p) Hazardous Material. Cause or permit any property
owned or occupied by the Borrower or a Guarantor to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer, produce
or process Hazardous Materials, except in compliance with all applicable
federal, state and local laws or regulations; or cause or permit, as a result of
any intentional or unintentional act or omission on the part of the Borrower, a
Guarantor or any tenant or subtenant, a release of Hazardous Materials onto any
property owned or occupied by the Borrower, a Guarantor or onto any other
property; or fail to comply with all applicable federal, state and local laws,
ordinances, rules and regulations, whenever and by whomever triggered; or fail
to obtain and comply with, any and all approvals, registrations or permits
required thereunder; or fail to execute any documentation required by the Bank
in connection with the representations, warranties and covenants contained in
this paragraph and Section 4.01(n) of this Agreement.
(q) Dividends, Etc. Declare or pay any dividends,
purchase, redeem, retire or otherwise acquire for value any of its capital stock
now or hereafter outstanding, or make any distribution of assets to its
stockholders as such, whether in cash, assets, or in obligations of the Borrower
or any Guarantor; or allocate or otherwise set apart any sum for the payment of
any dividend or distribution on, or for the purchase, redemption or retirement
of any shares of its capital stock; or make any other distribution by reduction
of capital or otherwise in respect of any share of its capital stock; provided,
that nothing herein shall prohibit the payment of dividends by any Subsidiary to
the Borrower or any Guarantor.
SECTION 5.03. Financial Requirements. So long as any amount shall
remain outstanding under the Term Loan Note or the Revolving Credit Note or any
Letter of Credit is outstanding or so long as the Commitment shall remain in
effect:
(a) Unfunded Consolidated Capital Expenditures. The
Borrower and the Guarantors will not make Unfunded Consolidated Capital
Expenditures, on a consolidated basis, in excess of $750,000.00 in the aggregate
during any fiscal year of the Borrower.
(b) Fixed Charge Coverage Ratio. The Borrower will
maintain a Fixed Charge Coverage Ratio (to be
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<PAGE> 54
tested quarterly, and except as set forth in (i) and (ii) below for the four
fiscal quarters then ended) of not less than (i) 1.15 to 1.00 for the fiscal
quarter ending March 31, 1998 and the two fiscal quarters ending June 30, 1998;
(ii) 1.17 to 1.00 for the three fiscal quarters ending September 30, 1998; (iii)
1.20 to 1.00 for the four fiscal quarters ending December 31, 1998; and (iv)
1.25 to 1.00 thereafter.
(c) Funded Debt to EBITDA Ratio. The Borrower will
maintain a Funded Debt to EBITDA Ratio (to be tested quarterly for the four
fiscal quarters then ended) of not more than 2.75 to 1.00. For purposes of
determining the Funded Debt to EBITDA Ratio, for the first three (3) fiscal
quarters of the Borrower following the closing of the Speed Acquisition, EBITDA
shall be measured only for the number of full or partial fiscal quarters that
have been completed since the date of this Agreement and then annualized,
subject to usual and customary year end adjustments, which adjustments shall be
disclosed and satisfactory to the Bank.
(d) Adjusted Tangible Net Worth. The Borrower will
maintain Adjusted Tangible Net Worth of not less than (i) beginning on the day
of the closing of the Speed Acquisition and through December 30, 1998, the
amount of Adjusted Tangible Net Worth as of the date of the Speed Acquisition,
but in no event less than ($575,000.00) and (ii) beginning on December 31, 1998
and on each succeeding December 31 and through the next succeeding December 30,
$1,000,000.00 in excess of the amount of Adjusted Tangible Net Worth (x) in the
case of December 31, 1998, on the closing of the Speed Acquisition and (y) in
the case of each succeeding December 31, on the preceding December 31.
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<PAGE> 55
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of
principal of, or interest on, the Term Loan Note or the Revolving Credit Note
within three (3) Business Days of when such installment or interest is due or
any reimbursement obligation under a Letter of Credit or L/C Document is not
paid when due or any fees or other amounts owed in connection with this
Agreement are not paid within three (3) Business Days of when such fees or other
amounts are due; or
(b) Any representation or warranty made by the Borrower
or any Guarantor herein or in the Loan Documents or which is contained in any
certificate, document, opinion, or financial or other statement furnished at any
time under or in connection with any Loan Document shall prove to have been
incorrect in any material respect when made; or
(c) The Borrower or any Guarantor shall (i) fail to
perform or observe in any material respect any term, covenant or agreement
contained in Section 5.01 of this Agreement within fifteen (15) Business Days
after such performance or observation is required or (ii) the Borrower or any
Guarantor shall fail to perform or observe in any material respect any other
term, covenant or agreement contained in this Agreement or in any other Loan
Document (other than the Notes) on its part to be performed or observed; or
(d) The Borrower or any Guarantor shall fail to pay any
Debt in the principal amount of $100,000.00 or more, (excluding Debt evidenced
by the Notes) of the Borrower or any Guarantor, or any installment, interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt; or any other default under any agreement or instrument
relating to any such Debt, or any other event shall occur and shall continue
after the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), prior to the stated maturity thereof;
or
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<PAGE> 56
(e) The Borrower or any Guarantor shall generally not
pay its Debts as such Debts become due, or 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 Guarantor 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, trustee, or other similar
official for it or for any substantial part of its property and if instituted
against the Borrower or any Guarantor shall remain undismissed for a period of
60 days; or the Borrower or any Guarantor shall take any action to authorize any
of the actions set forth above in this subsection (e); or
(f) Any judgment or order or combination of judgments or
orders for the payment of money, in excess of $100,000.00 in the aggregate,
which sum shall not be subject to full, complete and effective insurance
coverage, shall be rendered against the Borrower or any Guarantor and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 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
(g) Any of the following events occur or exist with
respect to the Borrower, any Guarantor or any ERISA Affiliate of the Borrower or
any Guarantor: (i) any Prohibited Transaction involving any Plan; (ii) any
Reportable Event with respect to any Plan; (iii) the filing under Section 4041
of ERISA of a notice of intent to terminate any Plan or the termination of any
Plan; (iv) any event or circumstance that might constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution of the PBGC of any such proceedings; (v) complete or partial
withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
reorganization, insolvency or termination of any Multiemployer Plan; and in each
case above, such event or condition, together with all other events or
conditions, if any, could in the opinion of the Bank subject the Borrower, any
Guarantor or any ERISA Affiliate of the Borrower or any Guarantor to any tax,
penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, or
otherwise (or any combination thereof) which in the aggregate exceeds or may
exceed $100,000.00; or
(h) Any Guarantor shall fail to perform or observe any
term or provision of its Guaranty or any representation or warranty made by any
Guarantor (or any of its
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<PAGE> 57
officers or partners) in connection with such Guarantor's Guaranty shall prove
to have been incorrect in any material respect when made; or
(i) This Agreement or any other Loan Document, at any
time after its execution and delivery and for any reason, ceases to be in full
force and effect or shall be declared to be null and void, or the validity or
enforceability of any document or instrument delivered pursuant to this
Agreement shall be contested by the Borrower, any Guarantor or any other party
to such document or instrument or the Borrower, any Guarantor or any other party
to such document or instrument shall deny that it has any or further liability
or obligation under any such document or instrument; or
(j) An event of default specified in any Loan Document
other than this Agreement shall have occurred and be continuing.
SECTION 6.02. Remedies on Default. Upon the occurrence and
continuance of an Event of Default the Bank may by notice to the Borrower, (i)
terminate the Commitment, (ii) demand that the Borrower deposit cash collateral
in an amount equal to all Outstanding L/C Obligations, (iii) declare the Term
Loan Note and the Revolving Credit Note, all interest thereon and all other
amounts payable under this Agreement to be forthwith due and payable, whereupon
the Commitment shall be terminated, the cash collateral shall become due, the
Notes, all such interest and all such 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 the Guarantors and
(ii) proceed to enforce its rights whether by suit in equity or by action at
law, whether for specific performance of any covenant or agreement contained in
this Agreement or any other Loan Document, or in aid of the exercise of any
power granted in either this Agreement or any other Loan Document or proceed to
obtain judgment or any other relief whatsoever appropriate to the enforcement of
its rights, or proceed to enforce any other legal or equitable right which the
Bank may have by reason of the occurrence of any Event of Default hereunder or
under any other Loan Document; provided, however, upon the occurrence of an
Event of Default referred to in Section 6.01(e), the Commitment shall be
immediately terminated, the cash collateral shall become due, the Notes, all
interest thereon and all other amounts payable under this Agreement shall be
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived by the Borrower and the
Guarantors. Any amounts collected pursuant to action taken under this Section
6.02 shall be applied to the payment of, first, any costs incurred by the Bank
in taking such action, including but without limitation reasonable attorneys
fees and expenses, second, to payment of the accrued
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<PAGE> 58
interest on the Notes, third, to the deposit of the required cash collateral and
fourth, to payment of the unpaid principal of the Notes, first to the Term Loan
Note and second to the Revolving Credit Note.
SECTION 6.03. Remedies Cumulative. No remedy conferred upon or
reserved to the Bank hereunder or in any other Loan Document is intended to be
exclusive of any other available remedy, but each and every such remedy shall be
cumulative and in addition to every other remedy given under this Agreement or
any other Loan Document or now or hereafter existing at law or in equity. No
delay or omission to exercise any right or power accruing upon any Event of
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Bank to
exercise any remedy reserved to it in this Article VI, it shall not be necessary
to give any notice, other than such notice as may be herein expressly required
in this Agreement or in any other Loan Document.
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<PAGE> 59
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment, modification,
termination or waiver of any provision of any Loan Document to which the
Borrower or any Guarantor is a party, nor consent to any departure by the
Borrower or any Guarantor from any provision of any Loan Document to which it is
a party, shall in any event be effective unless the same shall be in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 7.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic communication)
and mailed, telegraphed, sent by facsimile or delivered, if to the Borrower or
any Guarantor, at the address of the Borrower set forth at the beginning of this
Agreement and if to the Bank, at the address of the Bank set forth at the
beginning of this Agreement to the attention of Katz Digital Technologies, Inc.
Account Officer, or, as to each party, at such other address as shall be
designated by such party in a written notice complying as to delivery with the
terms of this Section 7.02 to the other parties. All such notices and
communications shall be effective when mailed, telegraphed or delivered.
SECTION 7.03. No Waiver, Remedies. No failure on the part of the
Bank to exercise, and no delay in exercising, any right, power or remedy under
any Loan Document, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any Loan Document preclude any other or
further exercise thereof or the exercise of any other right. The remedies
provided in the Loan Documents are cumulative and not exclusive of any remedies
provided by law.
SECTION 7.04. Costs, Expenses and Taxes. The Borrower agrees to pay
on demand all costs and expenses of the Bank in connection with the preparation,
execution, delivery and administration of this Agreement, the Notes, the Letters
of Credit and any other Loan Documents, including, without limitation, the
reasonable fees and expenses of counsel for the Bank with respect thereto and
with respect to advising the Bank as to its rights and responsibilities under
this Agreement, and all costs and expenses, if any (including reasonable counsel
fees and expenses), in connection with the enforcement of this Agreement, the
Notes, the L/C Documents and any other Loan Documents. The Borrower and the
Guarantors shall at all times protect, indemnify, defend and save harmless the
Bank from and against any and all claims, actions, suits and other legal
proceedings, and liabilities, obligations, losses, damages,
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<PAGE> 60
penalties, judgments, costs, expenses or disbursements which the Bank may, at
any time, sustain or incur by reason of or in consequence of or arising out of
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby. The Borrower and the Guarantors acknowledge
that it is the intention of the parties hereto that this Agreement shall be
construed and applied to protect and indemnify the Bank against any and all
risks involved in the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, all of which risks are
hereby assumed by the Borrower and the Guarantors, including, without
limitation, any and all risks of the acts or omissions, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority, provided that the Borrower and the Guarantors shall not
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Bank's gross negligence or willful misconduct. The provisions of this
Section 7.04 shall survive the payment of the Notes and the termination of this
Agreement.
SECTION 7.05. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank or
any affiliate of the Bank to or for the credit or the account of the Borrower or
any Guarantor against any and all of the obligations of the Borrower and the
Guarantors now or hereafter existing under this Agreement, the Notes, the
Letters of Credit and the other Loan Documents, irrespective of whether or not
the Bank shall have made any demand under this Agreement, the Notes, the Letters
of Credit or such other Loan Documents and although such obligations may be
unmatured. The rights of the Bank under this Section 7.05 are in addition to all
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
SECTION 7.06. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrower, the Guarantors and the Bank
and thereafter it shall be binding upon and inure to the benefit of the
Borrower, the Guarantors and the Bank and their respective successors and
assigns, except that the Borrower and the Guarantors shall not have any right to
assign its or their rights hereunder or any interest herein without the prior
written consent of the Bank.
SECTION 7.07. Further Assurances. Each of the Borrower and each
Guarantor agrees at any time and from time to time at its expense, upon request
of the Bank or its counsel, promptly to execute, to deliver, or to obtain or
cause to be
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<PAGE> 61
executed, delivered or obtained any and all further instruments and documents
and to take or to cause to be taken all such other action as the Bank may deem
desirable in obtaining the full benefits of, this Agreement or any other Loan
Document.
SECTION 7.08. Section Headings, Severability, Entire Agreement.
Section and subsection headings have been inserted herein for convenience only
and shall not be construed as part of this Agreement. Every provision of this
Agreement and each Loan Document is intended to be severable; if any term or
provision of this Agreement, any other Loan Document, or any other document
delivered in connection herewith shall be invalid, illegal or unenforceable for
any reason whatsoever, the validity, legality and enforceability of the
remaining provisions hereof or thereof shall not in any way be affected or
impaired thereby. All exhibits and schedules to this Agreement shall be annexed
hereto and shall be deemed to be part of this Agreement. This Agreement, the
other Loan Documents and the exhibits and schedules attached hereto and thereto
embody the entire agreement and understanding among the Borrower, the Guarantors
and the Bank and supersede all prior agreements and understandings relating to
the subject matter hereof.
SECTION 7.09. Governing Law. This Agreement, the Notes and all other
Loan Documents shall be governed by, and construed in accordance with, the laws
of the State of New York.
SECTION 7.10. Waiver of Jury Trial. The Borrower, each Guarantor and
the Bank waive all rights to trial by jury in any action or proceeding
involving, directly or indirectly any matter (whether sounding in tort, contract
or otherwise) in any way, arising out of, relating to, or connected with this
Agreement, any other Loan Document or the relationship established hereunder.
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<PAGE> 62
SECTION 7.11. Execution in Counterparts. 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.
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.
KATZ DIGITAL TECHNOLOGIES, INC.
By____________________________
Name:
Title:
ADVANCED DIGITAL SERVICES, INC.
By____________________________
Name:
Title:
KATZ N.Y. ACQUISITION, INC.
By____________________________
Name:
Title:
THE BANK OF NEW YORK
By______________________________
Name: Scott E. Silverstein
Title: Vice President
<PAGE> 63
SCHEDULE 4.01(a)
WARRANTS, OPTIONS, ETC.
Warrants to purchase up to 160,000 shares of Common Stock of the Borrower issued
to Whale Securities Co., L.P. at an exercise price of $7.75 per share.
Grant to David Katz of Option to Purchase 120,000 shares of the Borrower's
Common Stock at the Purchase Price of $2.7688 per share
[Omitted to maintain confidentiality and filed separately with the Commission]
See Separate Schedule for other Options Granted Under ISO Plan
<PAGE> 64
SCHEDULE 4.01 (S)
Nature of Amount of Liens Securing
Creditor Agreement Credit Credit
- -------- --------- ------ ------
See Schedules 5.02(a) and 5.02(b)
<PAGE> 65
SCHEDULE 5.02(a)
Capital Leases Equipment Term Amount
- -------------- --------- ---- ------
Miles Financial Services, Accuset 3/94-2/99 26,800.42
Inc.
Wasco Funding Corp. Lineotype 2/95-1/98 4,977.92
Wasco Funding Corp. Dice 12/95-12/98 48,377.90
Phoenixcor Inc. Indigo1 3/95-1/00 220,833.63
Phoenixcor Inc. Finishing 3/95-1/00 21,929.15
Wasco Funding Corp. Heidl w/ SCI 3/96-2/01 607,695.38
Wasco Funding Corp. Sapphire film rec 6/96-5/99 34,133.04
CIT Group Indigo-2 4/96-3/01 341,833.72
Wasco Funding Corp. Orea/Lamin 10/96-9/99 23,142.59
Wasco Funding Corp. Sapphire2 10/96-9/99 30,914.31
GE Capital Dolev800/ 3/97-2/01 321,570.89
Spontane
Wasco Funding Corp. SGI O/S 3/97-2/00 35,099.06
Workstation
Wasco Funding Corp. Colex 4/97-3/00 30,083.03
Wasco Funding Corp. Dig Photo Equip 4/97-3/00 66,398.71
Wasco Funding Corp. Lightjet 4/97-3/01 167,276.44
Wasco Funding Corp. Cheetah 5/97-4/00 23,387.57
Wasco Funding Corp. Maestro-Dice 4/97-3/00 12,735.39
Wasco Funding Corp. SGI Origin 200 10/97-9/00 51,297.15
Tokai Financial Services, Waterproof 8/96-12/98 6,496.79
Inc.
MFG Lease Co. Computers 3/93-2/98 1,106.00
See attached copy of Schedule 1.29 to the Acquisition Agreement. The following
items represent Liens on assets to be acquired pursuant to the Acquisition
Agreement: Items 14 through 21; 23 through 26; 29; 31; 32; 34; 35; 37 through
45; 48; 51; 53; 54;
<PAGE> 66
56; 57; 60; 62 through 64; 67; 69; 71 through 75; 78; 79; 82 through 90
<PAGE> 67
SCHEDULE 5.02(b)
Debt Schedule
1. Sarabande Note
2. ADS Notes
3. Subordinated Non-negotiable Promissory Note in the principal amount of
$2,000,000.00 payable to Speed Graphics, Inc.
4. Irrevocable Letter of Credit issued by European American Bank, in the face
amount of $467,000.00 in favor of GHG Realty Company.
5. Irrevocable Letters of Credit issued by Fleet Bank, N.A., in the aggregate
face amount of $81,552.77 in favor of 342 Madison Avenue Associates Ltd.
Partnership.
6. See Schedule 5.02(a)
<PAGE> 68
SCHEDULE 5.02(i)
Description of All Guaranties:
ADS Notes - Payable by Advanced Digital Services, Inc. and
guaranteed by Katz Digital Technologies, Inc.
<PAGE> 69
EXHIBIT A
TERM LOAN NOTE
New York, New York
$6,000,000.00 _____________, 199_
FOR VALUE RECEIVED, KATZ DIGITAL TECHNOLOGIES, INC., a Delaware
corporation, having its principal place of business at 21 Penn Plaza, New York,
New York 10001("Borrower") promises to pay to the order of THE BANK OF NEW YORK
("Bank") at its office located at 530 Fifth Avenue, New York, New York 10036,
the principal sum of Six Million ($6,000,000.00) in sixteen (16) quarterly
principal installments, each of the first fifteen (15) such installments being
in the principal amount of $375,000.00, commencing on the last Business Day of
March, 1998, and continuing on the last Business Day of each quarter thereafter
until the Maturity Date, when any remaining principal amount and unpaid interest
shall be due and payable.
Borrower shall pay interest on the unpaid balance of this Note from
time to time outstanding at said office, at the rates of interest, at the times
and for the periods as set forth in the Agreement (as defined below).
All payments including prepayments on this Term Loan Note shall be
made in lawful money of the United States of America in immediately available
funds. Except as otherwise provided in the Agreement, if a payment becomes due
and payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and interest shall be payable
thereon at the rate herein specified during such extension.
This Term Loan Note is the term loan note referred to in that
certain Loan Agreement among Borrower, Advanced Digital Services, Inc., Katz
N.Y. Acquisition, Inc. and Bank of even date herewith (the "Agreement"), as such
Agreement may be further amended from time to time, and is subject to prepayment
and its maturity is subject to acceleration upon the terms contained in said
Agreement. All capitalized terms used in this Term Loan Note and not defined
herein shall have the meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Term Loan
Note or enforce any of its provisions, Borrower further agrees to pay all costs
and expenses of such action or proceeding and attorneys' fees and expenses and
further expressly waives any and every right to interpose any counterclaim in
any such action or proceeding. Borrower hereby submits to the jurisdiction of
the Supreme Court of the State of New York and agrees with Bank that personal
jurisdiction over Borrower shall
<PAGE> 70
rest with the Supreme Court of the State of New York for purposes of any action
on or related to this Term Loan Note, the liabilities hereunder, or the
enforcement of either or all of the same. Borrower hereby waives personal
service by manual delivery and agrees that service of process may be made by
post-paid certified mail directed to Borrower at Borrower's address designated
in the Agreement or at such other address as may be designated in writing by
Borrower to Bank in accordance with Section 7.02 of the Agreement, and that upon
mailing of such process such service be effective with the same effect as though
personally served. Borrower hereby expressly waives any and every right to a
trial by jury in any action on or related to this Term Loan Note, the
liabilities hereunder or the enforcement of either or all of the same.
Bank may transfer this Term Loan Note and may deliver the security
or any part thereof to the transferee or transferees, who shall thereupon become
vested with all the powers and rights above given to Bank in respect thereto,
and, except as otherwise provided in the Agreement, Bank shall thereafter be
forever relieved and fully discharged from any liability or responsibility in
the matter. The failure of any holder of this Term Loan Note to insist upon
strict performance of each and/or all of the terms and conditions hereof shall
not be construed or deemed to be a waiver of any such term or condition.
Borrower and all endorsers and guarantors hereof waive presentment
and demand for payment, notice of non-payment, protest, and notice of protest.
This Term Loan Note shall be construed in accordance with and
governed by the laws of the State of New York.
KATZ DIGITAL TECHNOLOGIES, INC.
By:__________________________
Name:
Title:
<PAGE> 71
EXHIBIT B
REVOLVING CREDIT NOTE
$7,000,000.00 New York, New York
_____________, 1997
FOR VALUE RECEIVED, on the Maturity Date, KATZ DIGITAL TECHNOLOGIES,
INC., a New York corporation, having its principal place of business at 21 Penn
Plaza, New York, New York 10001("Borrower"), promises to pay to the order of THE
BANK OF NEW YORK ("Bank") at its office located at 530 Fifth Avenue, New York,
New York 10036, the principal sum of the lesser of: (a) Seven Million
($7,000,000.00) Dollars; or (b) the aggregate unpaid principal amount of all
Revolving Credit Loans made by Bank to Borrower pursuant to the Agreement (as
defined below).
Borrower shall pay interest on the unpaid principal balance of this
Note from time to time outstanding, at said office, at the rates of interest, at
the times and for the periods set forth in the Agreement.
All payments including prepayments on this Note shall be made in
lawful money of the United States of America in immediately available funds.
Except as otherwise provided in the Agreement, if a payment becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and interest shall be payable
thereon at the rate herein specified during such extension.
Borrower hereby authorizes Bank to enter from time to time the
amount of each Loan to Borrower and the amount of each payment on a Loan on the
schedule annexed hereto and made a part hereof. Failure of Bank to record such
information on such schedule shall not in any way effect the obligation of
Borrower to pay any amount due under this Note.
This Note is the Revolving Credit Note referred to in that certain
Loan Agreement among Borrower, Advanced Digital Services, Inc., Katz N.Y.
Acquisition, Inc. and Bank of even date herewith (the "Agreement"), as such
Agreement may be further amended from time to time, and is subject to prepayment
and its maturity is subject to acceleration upon the terms contained in said
Agreement. All capitalized terms used in this Note and not defined herein shall
have the meanings given them in the Agreement.
If any action or proceeding be commenced to collect this Note or
enforce any of its provisions, Borrower further agrees to pay all costs and
expenses of such action or proceeding and attorneys' fees and expenses and
further expressly waives any and every right to interpose any counterclaim in
any such action or proceeding. Borrower hereby submits to the jurisdiction of
<PAGE> 72
the Supreme Court of the State of New York and agrees with Bank that personal
jurisdiction over Borrower shall rest with the Supreme Court of the State of New
York for purposes of any action on or related to this Note, the liabilities
hereunder, or the enforcement of either or all of the same. Borrower hereby
waives personal service by manual delivery and agrees that service of process
may be made by post-paid certified mail directed to Borrower at Borrower's
address set forth above or at such other address as may be designated in writing
by Borrower to Bank in accordance with Section 7.02 of the Agreement, and that
upon mailing of such process such service be effective with the same effect as
though personally served. Borrower hereby expressly waives any and every right
to a trial by jury in any action on or related to this Note, the liabilities
hereunder or the enforcement of either or all of the same.
The Bank may transfer this Note and may deliver the security or any
part thereof to the transferee or transferees, who shall thereupon become vested
with all the powers and rights above given to Bank in respect thereto, and,
except as otherwise provided in the Agreement, Bank shall thereafter be forever
relieved and fully discharged from any liability or responsibility in the
matter. The failure of any holder of this Note to insist upon strict performance
of each and/or all of the terms and conditions hereof shall not be construed or
deemed to be a waiver of any such term or condition.
Borrower and all endorsers and guarantors hereof waive presentment
and demand for payment, notice of non-payment, protest, and notice of protest.
This Note shall be construed in accordance with and governed by the
laws of the State of New York.
KATZ DIGITAL TECHNOLOGIES, INC.
By:_______________________________
Name:
Title:
<PAGE> 73
Schedule of Revolving Credit Loans
Amount of
Principal Unpaid Name of
Amount of Paid or Principal Person Making
Date Loan Prepaid Balance Notation
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<PAGE> 74
EXHIBIT C
KATZ DIGITAL TECHNOLOGIES, INC.
Borrowing Base Certificate
As of ______________, 199_
Katz Speed ADS Total
---- ----- --- -----
Accounts Receivable Aging
Current
31-60 Days
61-90 Days
Over 90 Days
Total
Eligible Accounts Receivable
Total as above
Less: Over 90 days
Less: Other ineligible
Total eligible receivables
Advance rate
Total qualified receivables
Current Outstandings
Loans
Letters of credit
Total Outstandings
Total Qualified Receivables
Less: Total Outstandings
Available Line of Credit
Note: Total Qualified Receivables may not exceed the total revolving
credit line of
I hereby certify that I have carefully read the information contained in the
within certificate and that all of the information is true and accurate to the
best of my knowledge and belief, knowing fully that THE BANK OF NEW YORK is
relying on the truth and accuracy of this information and upon my certification
in order to make advances or loans to the above captioned borrower. This
certificate is given by me as a representative of the borrower.
- ------------------------------- ---------------
Donald L. Flamm, Vice President Date
<PAGE> 1
Exhibit 4.5
<PAGE> 2
SUBORDINATION AGREEMENT
dated as of January 8, 1998 (this "Agreement")
between Speed Graphics, Inc., a New York corporation
("Creditor"), and The Bank of New York,
a New York banking corporation (the "Bank")
In order to induce the Bank at its discretion, to extend or to continue to
extend financial accommodations from time to time to or on account of, or in
reliance on the guaranty of, Katz Digital Technologies, Inc., a Delaware
corporation, having offices at 21 Penn Plaza, New York, New York 10001 (the
"Borrower"), up to such aggregate principal amount, with such maturity or
maturities, to bear such rate or rates of interest, to be unsecured or secured
by such collateral security, to be direct or indirect, absolute or contingent,
and to contain such other terms and provisions all as may be agreed upon from
time to time between the Bank and the Borrower, including, without limitation,
all obligations of the Borrower to the Bank under that certain Loan Agreement
dated as of January 8, 1998 among the Borrower, certain guarantors and the Bank,
as it may be amended or modified from time to time (the "Loan Agreement") (all
such financial accommodations and extensions of credit and all other
indebtedness, liabilities and obligations of every kind and nature of the
Borrower to the Bank, whether joint, several, or joint and several, direct or
indirect or acquired by assignment or otherwise, absolute or contingent, secured
or unsecured, now or hereafter existing or incurred, due or to become due,
including any indebtedness, liability or obligation arising after payment in
full of any prior indebtedness of the Borrower, together with all extensions,
renewals or modifications thereof, all of which being hereinafter collectively
referred to as the "Superior Indebtedness"), the undersigned, to whom the
Borrower is now indebted (hereinafter called the "Creditor", whether one or more
creditors executes this instrument) under the Note (as defined below), hereby
warrants and represents to and agrees with the Bank, and the Bank hereby agrees
with the Creditor, as follows:
As of the date hereof, the Borrower is indebted to the Creditor in the
principal amount of $2,000,000.00 represented by that certain Subordinated
Promissory Note made by Borrower dated January __, 1998 in the original
principal amount of $2,000,000.00 (the "Note").
The Note is not subject to any counterclaim, defense or offset of any
kind, and no part thereof has previously been assigned, incumbered or disposed
of by the Creditor. Except as disclosed to the Bank, the Note is not in default.
The Creditor hereby subordinates the payment of the principal, interest,
fees and all other amounts owing on the Note (all such principal, interest, fees
and other amounts being hereinafter collectively referred to as the
"Subordinated Indebtedness"), to the prior, final and irrevocable payment in
full of the principal, interest (including interest accruing after the
bankruptcy of Borrower), fees and all other amounts owing on the Superior
Indebtedness. Notwithstanding the subordination of
<PAGE> 3
the Subordinated Indebtedness, the Bank agrees that the Borrower may make, and
the Creditor may accept, the regularly scheduled payments of principal and
interest on the Subordinated Indebtedness, provided (i) the Borrower remains in
compliance (before and after giving effect to the proposed payment on the
Subordinated Indebtedness) with the provisions of Section 5.03(b) (Fixed Charge
Coverage Ratio) of the Loan Agreement and (ii) no Event of Default (as defined
in the Loan Agreement) exists at the time of, or would result from, the proposed
payment on the Subordinated Indebtedness. The Borrower and the Creditor agree
that they will not amend, modify or change the principal amortization schedule
or the interest rate on the Subordinated Indebtedness without the express
written consent of the Bank.
In order to bring about and accomplish the intent and purpose of this
Subordination Agreement (hereinafter referred to as the "Agreement"), the
Creditor hereby agrees that until the Superior Indebtedness has been irrevocably
repaid in full, and until the Commitment (as defined in the Loan Agreement), or
any other commitment on the part of the Bank to lend to the Borrower, has
terminated, the Subordinated Indebtedness, any notes, instruments or other
writings evidencing the Subordinated Indebtedness and any collateral security at
any time held therefor, will indicate by a notation thereon that they are
subject to this Agreement.
In furtherance of the foregoing, the Creditor hereby grants to the Bank
irrevocable authority in the name, place and stead of the Creditor or in the
Bank's name but for its use, at any time or times after an Event of Default
under the Loan Agreement, in the Bank's absolute discretion to demand, collect,
compromise, file proofs of claim with respect to, receive (by way of dividends
or otherwise) and take any and all legal proceedings for the recovery of any and
all moneys due or to become due on account of the Subordinated Indebtedness, and
to vote, give consents and take any other action with respect thereto. Any and
all moneys collected, received and retained by the Bank after first deducting
the expenses hereinafter authorized shall be applied on account of the
principal, interest, fees and any other amounts then outstanding on the Superior
Indebtedness, provided, however, that upon the payment to the Bank of moneys
collected, received and retained on account of Subordinated Indebtedness and on
account of Superior Indebtedness aggregating an amount equivalent to all
Superior Indebtedness, including principal, interest, fees, any other amounts
owing thereon and the expenses hereinafter authorized, the Bank shall pay over
to the Creditor the excess, if any, of all moneys so received, collected and
retained on the Subordinated Indebtedness and on the Superior Indebtedness over
the amounts due on the Superior Indebtedness and release the balance of the
Subordinated Indebtedness and Superior Indebtedness which is still unpaid, and
deliver to the Creditor any and all writings, without any warranties of any
nature or type whatsoever with respect thereto (endorsed to the Creditor without
recourse in the case of negotiable instruments) evidencing such Subordinated
Indebtedness and Superior Indebtedness. If the Bank receives written notice of
any claim or demand, whether reasonable or unreasonable, adverse to the rights
or interests, as hereinabove set forth, of the Creditor in respect of the
Subordinated Indebtedness, or any moneys received and held by the Bank pursuant
to this paragraph, the Bank shall be entitled to retain any and all such moneys,
and writings evidencing such Subordinated
<PAGE> 4
Indebtedness and Superior Indebtedness without incurring any liability or debt
to the Creditor, until the adjudication or final settlement of the rights of
such claimant, and the Creditor hereby agrees to pay to the Bank on demand, all
reasonable expenses, including reasonable counsel fees, which the Bank may incur
in enforcing any of its rights hereunder.
The Creditor further agrees that so long as any Superior Indebtedness
remains unpaid, or as long as the Commitment, or any other commitment on the
part of the Bank to lend to the Borrower, has not terminated, and except as
otherwise expressly permitted by this Agreement, the Creditor will not accept
any payment (whether for principal, interest, fees or otherwise) on account of,
or any collateral security for, any Subordinated Indebtedness whether from the
Borrower or any other person liable with respect to the Subordinated
Indebtedness. After the occurrence of an Event of Default, in the event that the
Borrower or any other person liable with respect to the Subordinated
Indebtedness shall offer any payment on account of, or any collateral security
for, any Subordinated Indebtedness, the Creditor will direct that the same be
made or delivered to the Bank, and if any moneys and/or collateral security
shall come into the hands of the Creditor on account of any Subordinated
Indebtedness from any source whatsoever, the Creditor will receive the same
solely as the Bank's agent and will immediately turn the same, in the form
received, except for the endorsement of the Creditor when appropriate, over to
the Bank for application on account of the Superior Indebtedness, and that until
so delivered, the Creditor will hold the same in trust as the Bank's property.
After the occurrence of an Event of Default, if the Creditor shall fail or
refuse to endorse any writing for the payment of money payable to the Creditor
or to the order of the Creditor, which has been delivered to the Bank, the Bank
is hereby irrevocably constituted and appointed attorney-in-fact for the
Creditor with full power to make such endorsement.
The Creditor shall notify the Bank of any default in the Subordinated
Indebtedness (a "Subordinated Default Notice"). The Bank shall use its best
efforts to notify ("Senior Default Notice") the Creditor of the occurrence of
any Event of Default or any other default in the payment of any of the Superior
Indebtedness. Any failure by the Bank to so notify the Creditor shall not affect
the Bank's rights or the Creditor's obligations under this Agreement. The Bank
agrees to respond to any request made by the Creditor in writing (provided that
such a request is not made more than once during each calendar quarter) as to
whether an Event of Default has occurred under the Loan Agreement or whether any
payment default has occurred under any Superior Indebtedness. If any such Event
of Default or other payment default has occurred, the response of Bank with
regard to same shall be deemed a Senior Default Notice. The Creditor shall have
no right to exercise any rights and remedies against the Borrower to enforce or
collect upon the Subordinated Indebtedness, take possession of assets of the
Borrower or foreclose upon any such assets, whether by judicial action or
otherwise, unless and until all of the Senior Indebtedness shall have been fully
and finally paid and satisfied with interest and the Commitment, or any other
commitment on the part of the Bank to lend to the Borrower, terminated;
provided, however, that the Creditor shall be entitled, subject to the right of
the holder of the Senior Indebtedness to receive prior full and final payment in
<PAGE> 5
accordance with the terms of this Subordination Agreement, to accelerate the
Subordinated Indebtedness upon expiration of the earlier of the following
periods (each such period, a "Standstill Period"):
(a) The Standstill Period commencing from and after receipt by the
Creditor of a Senior Default Notice and ending on the earlier of (x) the date on
which the Event of Default described in the Senior Default Notice shall have
been waived in writing by the Bank or (y) two hundred seventy (270) days after
the date the Senior Default Notice is so given.
(b) The Standstill Period commencing from and after receipt by the
Bank of a Subordinated Default Notice and ending on the earlier of (x) the date
on which such default described in the Subordinated Default Notice shall have
been cured or waived in writing by the Creditor or (y) two hundred seventy (270)
days after the date the Subordinated Default Notice is so given.
Notwithstanding anything to the contrary in this Agreement, no new Standstill
Period shall be effective unless and until (i) ninety (90) days have elapsed
since the last Standstill Period and (ii) all scheduled payments of principal
and interest on the Note that have come due have been paid in full in cash. No
default that existed or was continuing on the date of delivery of any Senior
Default Notice or Subordinated Default Notice shall be, or be made, the basis
for a subsequent Standstill Period unless such default shall have been waived
for a period of not less than ninety (90) days.
After all Superior Indebtedness is paid in full and until the Creditor is
paid in full, to the extent that holders of Superior Indebtedness have received
cash, securities or other property in respect of the repayment of Superior
Indebtedness, which cash, securities or other property, but for the operation of
this Agreement would have been paid to the Creditor, such Creditor shall be
subrogated to any rights of holders of Superior Indebtedness in collecting cash,
securities or other property in satisfaction of the obligations of the Borrower
to the Creditor hereunder and under the Notes.
If requested by the Bank, the Creditor shall (a) give the Bank, upon
request from time to time, and during reasonable business hours, full and free
access to the Creditors' books pertaining to the Subordinated Indebtedness, with
the right to make copies thereof, and (b) furnish the Bank, upon request from
time to time, a statement of the account between the Creditor and the Borrower
with respect to the Subordinated Indebtedness.
This Agreement is a continuing agreement and, unless the Bank shall have
specifically consented in writing to its revocation, shall remain in full force
in all respects whether or not the Borrower shall at any time be indebted to the
Bank until the earlier of (i) the repayment in full of the Superior Indebtedness
and the termination of the Commitment, or any other commitment on the part of
the Bank to lend to the Borrower or (ii) the repayment of the Subordinated
Indebtedness. If after the payment of principal, interest, fees and all other
amounts owing on all Superior Indebtedness and any expenses hereinafter
authorized and provided for, the
<PAGE> 6
Borrower shall thereafter become liable to the Bank on account of any new
Superior Indebtedness, this Agreement shall thereupon be applicable in all
respects to any such new Superior Indebtedness without the necessity of any
further action, notice, understanding or writing by, between or among the Bank,
the Creditor and/or the Borrower.
If, during the term of this Agreement, the Creditor receives any payment
(other than a payment of regularly scheduled principal or interest) on account
of or any collateral security for any Subordinated Indebtedness at a time when
there is no outstanding Superior Indebtedness, the Creditor shall immediately
notify the Bank in writing of the receipt thereof and such payment or collateral
security shall be subject to the terms of this Agreement. If the Creditor fails
to notify the Bank, and a new Superior Indebtedness is thereafter created, and
if the Borrower defaults with respect to the payment of such new Superior
Indebtedness, in addition to and not in limitation of any other rights or
remedies available to the Bank hereunder, the Bank shall have the right to
receive and the Creditor will immediately pay to the Bank an amount equal to any
such payment or the value of any such security received by the Creditor and not
reported to the Bank.
Except as may otherwise be expressly required by this Agreement, with or
without notice to or further assent from the Creditor, the Bank may at any time
or times, in its absolute discretion, either prior to or after any default on
the part of the Borrower with respect to either the Subordinated Indebtedness or
the Superior Indebtedness: (i) extend, renew or change, refuse to extend, renew
or change any of the Superior Indebtedness, waive any default, modify, rescind
or waive any provision of any related agreement or collateral undertaking,
including, but not by way of limitation, any provision relating to acceleration
of maturity, (ii) fail to set off any deposit balances or any part thereof on
its books in favor of the Borrower and release the same, (iii) release,
exchange, fail to resort to, or realize upon, or apply, any collateral security
or any part thereof held by or available to it for the Superior Indebtedness,
and (iv) generally deal with the Borrower in such manner as the Bank may see
fit, all without impairing or affecting its rights and remedies under this
Agreement. Except as otherwise expressly provided in this Agreement, the
Creditor hereby waives any and all notice of the receipt and acceptance of this
Agreement by the Bank and of the creation, renewal, extension or accrual of any
of the Superior Indebtedness, present or future, in whole or in part, by the
Bank or of the reliance by the Bank on this Agreement at any time or times, and
further waives notice of any default at any time on the part of the Borrower.
The Creditor waives any right to interpose any defense, counterclaim or offset
with respect to the Superior Indebtedness or the Subordinated Indebtedness.
Nothing in this Subordination Agreement shall impair, as between the
Borrower and the Creditor, the obligations of the Borrower in respect of the
Subordinated Indebtedness, which are unconditional and absolute, to pay the
Creditor the principal and interest thereon and any other liabilities
encompassed within the Subordinated Indebtedness, all in accordance with their
respective terms.
<PAGE> 7
This Agreement shall continue in full force and effect notwithstanding the
death or incapacity of the Creditor (if the Creditor is an individual) or the
dissolution of the Creditor (if the Creditor is a partnership or corporation)
and shall be binding on the Creditor and the Creditor's estate and the personal
representatives, heirs, successors and assigns of the Creditor and the Bank may
continue to act in reliance upon this Agreement until the earlier of the
repayment in full of the Superior Indebtedness or the Subordinated Indebtedness.
Notwithstanding anything herein to the contrary, nothing in this Agreement shall
prohibit, limit or restrict the ability of the Creditor or any shareholder or
affiliate of the Creditor to transfer the Note and the rights and obligations
hereunder to any of its shareholders or affiliates or, after any such transfer,
to the Creditor.
The Creditor agrees to pay to the Bank on demand all reasonable expenses,
including reasonable counsel fees, which it may incur in enforcing its rights
hereunder.
If this Agreement is executed by more than one Creditor, the liability and
obligations of the Creditor hereunder shall be joint and several.
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 when
delivered by hand, or if sent by certified mail, three days after the day in
which mailed, or, in the case of telecopier, when evidence of receipt is
obtained, or, in the case of overnight courier service, one business day after
delivery to such courier service, addressed as set forth below, or to such other
address as may be hereafter notified by the respective parties hereto.
The Bank: The Bank of New York
530 Fifth Avenue
New York, New York 10036
Attention: Katz Digital Technologies,
Inc. Account Officer
The Creditor: Speed Graphics, Inc.
342 Madison Avenue
New York, New York 10173
Attention: President
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.
The Creditor waives trial by jury, and the right to interpose any defense,
counterclaim or offset of any nature or description in any litigation arising
out of or in any way connected with this Agreement, and agrees that the venue of
any such litigation shall be the county in which is located the Bank's office
making the loan or Superior Indebtedness to the Borrower.
<PAGE> 8
No delay on the Bank's part in exercising any right or rights hereunder or
in failing to exercise the same shall operate as a waiver of such right or
rights, and no notice to or demand on the Borrower or the Creditor shall be
deemed a waiver of the Bank's right to take further action without notice or
demand; nor in any event shall any modification, alteration or waiver of any of
the provisions hereof be effective unless in writing and signed for or on behalf
of the Bank and then only in the specific instance for which given.
This Agreement shall be deemed to be a contract made in the State of New
York and entered into under and pursuant to the laws of said State and shall be
governed, construed and enforced and all rights and obligations hereunder shall
be determined in accordance with the laws of said State.
Capitalized terms used but not defined herein shall have the meanings
given such terms in the Loan Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the Creditor and
the Bank on this 8th day of January, 1998.
SPEED GRAPHICS, INC.
By:_____________________________
Name:
Title:
THE BANK OF NEW YORK
By:_____________________________
Name: Scott E. Silverstein
Title: Vice President
<PAGE> 9
STATE OF NEW YORK )
COUNTY OF NEW Y0RK ) ss.:
On the 8th day of January, 1998, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he maintains an office at 324 Madison Avenue, New York, New York; that
he is the _____________ of Speed Graphics, 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.
--------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On the 8th day of January, 1998, before me personally came Scott E.
Silverstein, to me known, who, being by me duly sworn, did depose and say that
he maintains an office at 530 Fifth Avenue, New York, New York; that he is a
Vice President of The Bank of New York, Inc., the banking 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 banking corporation.
--------------------------
Notary Public
<PAGE> 10
ACKNOWLEDGEMENT OF BORROWER
The undersigned, the Borrower referred to in the Subordination Agreement
and Assignment to which this Acknowledgment is annexed, hereby agrees to do and
perform all acts necessary to enable the Bank and the Creditor to fulfill all of
their obligations under the Agreement, and agrees to refrain from doing all acts
(including, but without limitation, making payments on the Subordinated
Indebtedness) which would cause Creditor or the Bank to violate such
obligations. Borrower further agrees that if any violation of this Agreement
shall occur, all of the obligations (including the Superior Indebtedness) of
Borrower to the Bank shall become immediately due and payable, any term,
covenant or condition contained in any other agreement or in the instrument
evidencing such obligations to the contrary notwithstanding.
Dated: January 8, 1998 KATZ DIGITAL TECHNOLOGIES, INC.
By____________________________
Name: Gary Katz
Title: President
