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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):
September 11, 1998 (September 1, 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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ITEM 5. OTHER EVENTS
A. On September 1, 1998, Katz Digital Technologies, Inc. (the
"Registrant"), Photobition Group PLC ("Photobition") and KDT Acquisition Corp.
("KDTA") entered into an Agreement and Plan of Merger (the "Merger Agreement")
that provides for the merger of KDTA into the Registrant, upon the terms and
subject to the conditions set forth therein (the "Merger"). Subject to and upon
effectiveness of the Merger, the Registrant, as the surviving corporation of the
Merger, will become a wholly-owned subsidiary of Photobition, and:
(i) except as noted below, each holder of shares of the Registrant's
common stock, par value $.001 per share (the "Common Stock"), outstanding at the
time of effectiveness of the Merger (the "Effective Time") will become entitled
to receive in respect of each such share cash in an amount (the "Share Price")
equal to the quotient obtained by dividing (a) the sum of (1) $47 million and
(2) the total of the exercise prices that would be payable, and the face value
of convertible securities that would be converted, by the holders of all Vested
Options (as defined below) to acquire shares of Common Stock pursuant to such
Vested Options at the Effective Time, by (b) the sum of the number of shares of
Common Stock outstanding and the number of shares of Common Stock subject to
Vested Options at the Effective Time; and
(ii) each holder of an Option (as defined below) at the Effective
Time will become entitled to receive in respect of the share of Common Stock
subject to such Option cash in an amount equal to the excess of (a) the Share
Price over (b) the exercise price that would be payable, or the face value of
the convertible security that would be converted, by the holder of such Option
to acquire such share of Common Stock pursuant to such Option at the Effective
Time.
For these purposes, "Option" means a convertible security, option, warrant or
other right to purchase or otherwise acquire a share of Common Stock granted or
issued pursuant to certain Company Option Plans (as defined in the Merger
Agreement) or otherwise specified in the Merger Agreement, and "Vested Option"
means any Option that is vested in and exercisable by the holder thereof at the
Effective Time. Notwithstanding the foregoing, (1) any shares of Common Stock
owned directly or indirectly by the Registrant or beneficially owned by
Photobition or KDTA at the Effective Time will be cancelled at such time and no
payment of the Share Price will be required to be made with respect thereto;
and (2) each holder of Dissenting Shares (as defined in the Merger Agreement)
who asserts and perfects its appraisal rights under Section 262 of the Delaware
General Corporation Law (and who is eligible under such Section to do so and who
complies with the procedures and conditions set forth therein) will not become
entitled to receive the Share Price in respect of such shares, but will become
entitled instead only to receive the fair value of such shares determined in
accordance with such Section.
B. Under the Merger Agreement, the closing of the Merger (the
"Closing") is subject to several conditions, including, among others, the
approval of the Merger Agreement and the Merger by the Registrant's stockholders
in accordance with the Delaware
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General Corporation Law; the expiration or early termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended; the absence of any injunction or other order restraining or challenging
the Merger or any proceeding by a governmental authority seeking such an
injunction or order; and the absence of any material adverse change in the
business, operations, affairs, properties, assets, liabilities, obligations,
profits or condition (financial or otherwise) of the Registrant and its
subsidiaries, taken as a whole.
C. Until the Effective Time (or, if the Merger does not become
effective, the termination of the Merger Agreement), under the Merger Agreement:
(i) the Registrant and its subsidiaries are subject to various
restrictions on their business and operations, including a requirement that each
of them conducts its business only in the ordinary course of business, and
limitations on the ability to make capital expenditures, incur indebtedness,
make loans or advances, acquire or dispose of assets, amend its Certificate of
Incorporation or By-Laws, hire employees or independent contractors or increase
the compensation thereof; and
(ii) the Registrant may not solicit any proposal for the
acquisition of the Registrant or substantially all of its assets from any person
other than Photobition or its affiliates (an "Alternative Proposal"), or supply
confidential information to, or otherwise negotiate with, any such other person
with respect to any such Alternative Proposal; nor may the Registrant or its
Board of Directors withdraw its approval or endorsement of the Merger or approve
or endorse any Alternative Proposal, unless (a) such Alternative Proposal is
bona fide, in writing and unsolicited, (b) the Registrant's Board of Directors
determines in good faith that the Alternative Proposal is reasonably capable of
being completed on the terms proposed and would result in a transaction superior
to the Merger for the Registrant's stockholders, (c) the Registrant's Board of
Directors determines that its failure to consider such Alternative Proposal
would create a reasonable possibility that it would violate its fiduciary duties
to the Registrant's stockholders under applicable law, (d) the Registrant gives
to Photobition prior written notice of its actions with respect to such
Alternative Proposal, and (e) the Registrant pays the Termination Fee (as
defined in the Merger Agreement) described in Section F below.
D. The Merger Agreement is terminable:
(i) by mutual consent of the Registrant, Photobition and KDTA;
(ii) by any party if the Merger Agreement and the Merger is not
approved and adopted by the Registrant's stockholders at the special meeting to
be held for such purpose (the "Special Meeting");
(iii) by Photobition and KDTA (a) if the Registrant breaches any
material representation, warranty or covenant in the Merger Agreement in any
material respect and fails to cure such breach within 30 days after notice of
such breach is given to the Registrant
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by Photobition or KDTA, (b) at any time after November 30, 1998, if (1) the
Registrant fails to close even though the conditions precedent to its obligation
to close have been satisfied or (2) the conditions precedent to Photobition's
and KDTA's obligation to close have not been satisfied (other than by reason of
a breach by either of them of any representation, warranty or covenant in the
Merger Agreement), or (c) if (1) the Registrant's Board of Directors withdraws
its approval or endorsement of the Merger Agreement and the Merger, or approves
or endorses any Alternative Proposal, or (2) the Registrant enters into a letter
of intent or agreement relating to any such Alternative Proposal; and
(iv) by the Registrant (a) if Photobition or KDTA breaches any
material representation, warranty or covenant in the Merger Agreement in any
material respect and fails to cure such breach within 30 days after notice of
such breach is given to them by the Registrant, (b) at any time after November
30, 1998, if (1) Photobition fails to close even though the conditions precedent
to its obligation to close have been satisfied or (2) the conditions precedent
to the Registrant's obligation to close have not been satisfied (other than by
reason of a breach by the Registrant of any representation, warranty or covenant
in the Merger Agreement), or (c) if the Registrant accepts an Alternative
Proposal satisfying conditions (a), (b) and (c) of paragraph C(ii) above (a
"Superior Proposal").
E. Pursuant to the Merger Agreement, Photobition has deposited $2
million in escrow (the "Deposit") which (i) if the Merger becomes effective,
will be paid over to the Paying Agent (as defined in the Merger Agreement) and
included in the payments to be made to the Registrant's stockholders and holders
of Options; (ii) if the Registrant terminates the Merger Agreement pursuant to
clause (a) or (b)(1) or (2) (but only if, as to clause (b)(2), the
non-satisfaction of the Registrant's closing conditions include a breach in a
material respect of a representation, warranty, term, covenant, agreement or
condition in the Merger Agreement by Photobition or KDTA) of paragraph D(iv)
above), will be paid to the Registrant as liquidated damages; or (iii) if the
Merger Agreement is terminated for any other reason provided therein, will be
returned to Photobition.
F. Pursuant to the Merger Agreement, the Registrant has agreed to pay
to Photobition a Termination Fee in the amount of $2 million, as liquidated
damages, if the Merger Agreement is terminated by Photobition pursuant to clause
(b)(1) or (c) of paragraph D(iii) above, or by the Registrant or Photobition
pursuant to paragraph D(ii) above because the Registrant's stockholders subject
to the Stockholders' Agreement referred to below fail to vote their respective
shares in favor of the Merger at the Special Meeting (provided that the
Registrant is not also entitled to terminate the Merger Agreement pursuant to
clause (a) or (b) of paragraph D(iv) above). If the Merger Agreement is
terminated by the Registrant pursuant to clause (b) of paragraph D(iv) and at
such time an Alternative Proposal has been accepted by the Registrant, the
Registrant will be required to pay the Termination Fee to Photobition.
G. Under the Merger Agreement, the maximum liability of the Registrant,
on the one hand, or Photobition and KDTA, on the other, is limited to $2 million
for any losses,
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damages, expenses or costs arising by reason of any breach of or default under
any provision of the Merger Agreement.
H. Concurrently with entering into the Merger Agreement, the parties
thereto also entered into a Stock Option Agreement pursuant to which the
Registrant granted to KDTA an option to purchase at an exercise price of $5.125
per share up to an aggregate of 1,012,964 shares of Common Stock (but in no
event a number of shares in excess of 19.9% of the number of outstanding shares
of Common Stock immediately prior to the time of exercise of the option). The
number of shares subject to the option and the exercise price are subject to
adjustment in connection with certain recapitalizations or other transactions
specified therein. The Registrant also granted certain registration rights to
register the shares issuable upon exercise of the option under applicable
federal and state securities laws. The option is exercisable only for a one-year
period after the Registrant's Board of Directors approves or recommends an
Alternative Proposal or the Registrant enters into any agreement with respect to
an Alternative Proposal.
I. Concurrently with the Merger Agreement, Photobition, KDTA and
certain stockholders of the Registrant collectively holding of record
approximately 46.7% of the number of shares of Common Stock then outstanding
entered into a Stockholders Agreement, pursuant to which such stockholders
agreed to cause such shares to be voted at the Special Meeting to approve and
adopt the Merger Agreement and the transactions contemplated thereby, and
against any proposal or action that could reasonably be expected to result in a
breach by the Company in any material respect of any representation, warranty,
covenant or other obligation in the Merger Agreement or to result in any of the
conditions precedent to the Merger set forth in the Merger Agreement not being
fulfilled.
J. Also concurrently with the Merger Agreement, Gary Katz, the
Company's Chairman and Chief Executive Officer, agreed to indemnify Photobition
and KDTA and certain related parties against any damages asserted prior to the
first anniversary of the Effective Time arising from (a) the failure of the
Financial Statements (as defined in the Merger Agreement) to be, to his
knowledge, true, correct and complete in all material respects, but only if the
amount of such damages exceeds $10,000, (b) 50% of any broker's or finder's fees
payable to certain specified persons, or (c) any legal, investment banking,
financial advisor's, broker's or finder's fees, commissions or expenses in
connection with the proposed sale of the Registrant (with certain exceptions) in
excess of $325,000 in the aggregate; provided, however, that the aggregate
amount of indemnification required to be paid pursuant to such agreement shall
not exceed $500,000.
K. It is a condition to the closing of the Merger, that Mr. Katz's
employment agreement with the Company be terminated at the Effective Time, and
that he enter into a consulting agreement with the Registrant, as the surviving
corporation, which will provide for Mr. Katz to serve as a consultant to the
Registrant for a one year period after the Effective Time and pursuant to which
Mr. Katz will covenant not to engage in certain prohibited activities for a two
year period following the termination of his consulting
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engagement. The consulting agreement will also provide for Mr. Katz to be paid,
during the term of his consulting engagement, a monthly fee of $41,667, less the
amount of certain benefits he receives and the amount of any applicable payroll
or withholding taxes.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger dated as of September 1, 1998 among
Photobition, KDTA and the Registrant.
2.2 Letter dated September 1, 1998 from Photobition to the Registrant.
2.3 Stock Option Agreement dated as of September 1, 1998 among Photobition,
KDTA and the Registrant.
2.4 Stockholders Agreement dated as of September 1, 1998 among Photobition,
KDTA and certain stockholders of the Registrant.
2.5 Indemnity Agreement dated as of September 1, 1998 among Photobition,
KDTA and Gary Katz.
20.1 Press Release dated September 2, 1998.
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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: September 11, 1998
KATZ DIGITAL TECHNOLOGIES, INC.
By: /s/ Donald L. Flamm
-------------------
Donald L. Flamm
Vice President - Finance and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
2.1 Agreement and Plan of Merger dated as of September 1, 1998 among
Photobition, KDTA and the Registrant.
2.2 Letter dated September 1, 1998 from Photobition to the Registrant.
2.3 Stock Option Agreement dated as of September 1, 1998 among Photobition,
KDTA and the Registrant.
2.4 Stockholders Agreement dated as of September 1, 1998 among Photobition,
KDTA and certain stockholders of the Registrant.
2.5 Indemnity Agreement dated as of September 1, 1998 among Photobition,
KDTA and Gary Katz.
20.1 Press Release dated September 2, 1998.
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PHOTOBITION GROUP PLC
KDT ACQUISITION CORP.
AND
KATZ DIGITAL TECHNOLOGIES, INC.
DATED AS OF SEPTEMBER 1, 1998
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into this 1st day of September, 1998, by and among Photobition Group PLC, a
company organized under the laws of England and Wales ("Photobition"), KDT
Acquisition Corp., a Delaware corporation ("Newco"), and Katz Digital
Technologies, Inc., a Delaware corporation (the "Company").
BACKGROUND
A. The Board of Directors of Newco deems it advisable and in the best
interests of Newco and its stockholder, and the Board of Directors of the
Company deems it advisable and in the best interests of the Company and its
stockholders that Newco merge with and into the Company (the "Merger") pursuant
to this Agreement and the applicable provisions of the laws of the State of
Delaware.
B. Concurrently with the execution of this Agreement, and as an
inducement to Photobition and Newco to enter into this Agreement, the Principal
Stockholders (defined below) are entering into (i) a Stockholder Agreement,
dated as of the date hereof (the "Stockholder Agreement"), among Photobition,
Newco, the Principal Stockholder and certain other stockholders of the Company
providing, among other things, that each such stockholder will vote in favor of
the Merger, and (ii) an Indemnity Agreement, dated as of the date hereof (the
"Indemnity Agreement"), among Photobition, Newco and the Principal Stockholder
pursuant to which the Principal Stockholder has agreed to indemnify Photobition
and Newco for certain Damages (as defined in the Indemnity Agreement).
C. Concurrently with the execution of this Agreement, and as an
inducement to Photobition and Newco to enter into this Agreement, the Company is
entering into a Stock Option Agreement, dated as of the date hereof (the "Stock
Option Agreement"), pursuant to which the Company is granting to Newco an option
to purchase shares of Company Common Stock (defined below) upon the terms and
subject to the conditions set forth in the Stock Option Agreement.
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
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1 DEFINITIONS.
1.1 "1996 Option Plan" means the Company's Second Amended and
Restated 1996 Stock Option Plan, as amended.
1.2 "Acquisition Agreement" has the meaning set forth in Section
6.4(a) below.
1.3 "Acquisition Proposal" has the meaning set forth in Section
6.4(a) below.
1.4 "Aggregate Merger Consideration" means the sum of the
aggregate Merger Consideration payable to the holders of the Outstanding Common
Shares at the Effective Time and the Company Option Merger Consideration payable
to the holders of Vested Company Options at the Effective Time.
1.5 "Benefit Plans" has the meaning set forth in Section 4.13(a)
below.
1.6 "Charter Documents" has the meaning set forth in Section
4.1(a) below.
1.7 "Closing" has the meaning set forth in Section 3.1 below.
1.8 "Closing Date" has the meaning set forth in Section 3.1 below.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Company" has the meaning set forth in the preface above.
1.11 "Company Common Stock" means any share of the common stock,
$.001 par value per share, of the Company.
1.12 "Company Fairness Opinion" has the meaning set forth in
Section 4.22 below.
1.13 "Company's Financial Advisor" has the meaning set forth in
Section 4.22 below.
1.14 "Company Indemnified Parties" means the Company, its
Subsidiaries and their respective officers, directors, stockholders, employees,
consultants and agents, and any of their successors and assigns.
1.15 "Company Intellectual Property" means any Intellectual
Property owned by the Company or any of the Company's Subsidiaries.
1.16 "Company Option Merger Consideration" means the amount payable
to the holders of Vested Company Options at the Effective Time in accordance
with Section 2.2 (d).
1.17 "Company Option" means any convertible security, option,
warrant, or other right to purchase or otherwise acquire a share of Company
Common Stock outstanding under
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any of the Company Option Plans or otherwise set forth on Schedule 4.5 of the
Disclosure Schedule (whether or not vested in or exercisable by the holder
thereof).
1.18 "Company Option Plans" means (i) the 1996 Option Plan, (ii)
the Warrant Agreement dated March 25, 1996 between the Company and Whale
Securities Co., L.P., and (iii) the Non-Negotiable Convertible Promissory Note
dated July 16, 1996.
1.19 "Company Stockholder" means any holder of Company Common
Stock.
1.20 "Constituent Corporation" means either Newco or the Company.
1.21 "Copyright" means any United States or foreign copyright owned
by the Company or any of its Subsidiaries as of the date of this Agreement,
including any registration of copyrights in the United States Copyright Office
or the equivalent interest in any foreign country, as well as any application
for a United States or foreign copyright registration made by the Company or any
of its Subsidiaries.
1.22 "Definitive Proxy Materials" means the definitive proxy
materials relating to the Special Meeting.
1.23 "Delaware General Corporation Law" means the General
Corporation Law of the State of Delaware, as amended.
1.24 "Deposit" means the sum of US$2,000,000.00 which is being wire
transferred concurrently with the execution and delivery of this Agreement to
the Escrow Account.
1.25 "Disclosure Schedule" has the meaning set forth in Article 4
below.
1.26 "Dissenting Share" means any share of Company Common Stock
held of record by any stockholder who is entitled to but does not vote such
shares of Company Common Stock in favor of the Merger (or who does not provide
written consent to the Merger if approval is effected through written consent)
and who shall have properly and timely delivered to the Company a written demand
for appraisal of such shares of Company Common Stock in accordance with Section
262 of the Delaware General Corporation Law.
1.27 "Effective Time" has the meaning set forth in Section 3.3
below.
1.28 "Environmental Law" means any law, statute, regulation, rule,
order, decree, judgment, consent decree, settlement agreement or governmental
requirement that relates to or otherwise imposes liability or standards of
conduct concerning discharges, emissions, releases or threatened releases of
noises, odors or any pollutants, contaminants, or hazardous or toxic wastes,
substances or materials, whether as matter or energy, into ambient air, water or
land, or otherwise relating to the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, cleanup, transport or handling
of pollutants, contaminants, or hazardous or toxic wastes, substances or
materials, including (but not limited to) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund
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Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control
Act of 1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, any so-called "Superlien" law,
and any other similar federal, state or local laws.
1.29 "Environmental Permits" has the meaning set forth in Section
4.11(c) below.
1.30 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.31 "ERISA Affiliate" has the meaning set forth in Section 4.13(a)
below.
1.32 "Escrow Account" means an interest-bearing escrow account
maintained by the Escrowee at Citibank, N.A.
1.33 "Escrowee" means the firm of Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP, or any successor appointed pursuant to Section 3.2(e)
below.
1.34 "Financial Statements" means the financial statements of the
Company (including the related notes and schedules) included or incorporated by
reference in the Public Reports.
1.35 "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
1.36 "Governmental Body" means any applicable governmental
authority, agency, commission, official, instrumentality, court, tribunal or
arbitrator of any United States or foreign federal, state, provincial, county or
local government or political subdivision.
1.37 "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.38 "Hazardous Material" has the meaning set forth in Section
4.11(a) below.
1.39 "Hazardous Materials Activities" has the meaning set forth in
Section 4.11(b) below.
1.40 "Intellectual Property" means Marks, Patents and Copyrights,
collectively.
1.41 "Indemnity Agreement" has the meaning set forth in the preface
above.
1.42 "Knowledge" of any matter means (i) with respect to an
individual, the actual knowledge, but not constructive or imputed knowledge, of
such individual, after due inquiry of such matter and (ii) 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.
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1.43 "LSE" means the London Stock Exchange Limited.
1.44 "Mark" means all right, title, and interest in and to any
United States or foreign trademarks, service marks, and trade names now held by
the Company or any of its Subsidiaries, including any registration or
application for registration of any trademarks and service marks in the PTO or
the equivalent thereof in any state of the United States or in any foreign
country, as well as any unregistered marks used by the Company or any of its
Subsidiaries, and any trade dress (including logos, designs, company names,
business names, fictitious names and other business identities) used by the
Company or any of its Subsidiaries in the United States or any foreign country.
1.45 "Material Adverse Effect" upon a Person means any change or
changes or effect or effects that individually or in the aggregate have or may
reasonably be expected to have a material adverse effect upon the business,
operations, affairs, properties, assets, liabilities, obligations, profits or
condition (financial or otherwise) of such Person and its Subsidiaries, if any,
taken as a whole; provided, however, that, a decline in national or
international economic conditions affecting the Company or Photobition or events
or conditions generally affecting the industry in which Photobition operates
shall not be deemed to have a "Material Adverse Effect" with respect to either
such party.
1.46 "Merger" has the meaning set forth in the preface above.
1.47 "Merger Consideration" means the price per share of Company
Common Stock payable to the holders of the Outstanding Common Shares at the
Effective Time pursuant to Section 2.2(c) and to the holders of Company Options
at the Effective Time pursuant to section 2.2(d), as determined by the Share
Price Formula.
1.48 "Merger Documents" has the meaning set forth in Section 3.3
below.
1.49 "Most Recent Fiscal Quarter End" has the meaning set forth in
Section 4.7 below.
1.50 "Most Recent Fiscal Year End" has the meaning set forth in
Section 4.7 below.
1.51 "Newco" has the meaning set forth in the preface above.
1.52 "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
1.53 "Outstanding Company Shares" means all of the issued and
outstanding shares of the Company Common Stock.
1.54 "Parties" means Photobition, Newco and the Company,
collectively.
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1.55 "Patent" means any United States or foreign patent to which
the Company or any of its Subsidiaries has title as of the date of this
Agreement, as well as any application for a United States or foreign patent.
1.56 "Paying Agent" has the meaning set forth in Section 2.5(a)
below.
1.57 "Payment Fund" has the meaning set forth in Section 2.5(a)
below.
1.58 "Permits" means licenses, franchises, permits, consents,
approvals and other governmental authorizations required by, or any waiver,
exemption or non-applicability order of, any Governmental Body.
1.59 "Permitted Lien" means (i) any lien for Taxes not yet due or
delinquent or which is 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), and (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 is 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).
1.60 "Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a Governmental Body.
1.61 "Photobition" has the meaning set forth in the preface above.
1.62 "Photobition Offering" means any public or private offering of
securities of Photobition, the net proceeds of which may be applied principally
to fund the Aggregate Merger Consideration.
1.63 "Photobition-owned Share" means any share of Company Common
Stock that Photobition or Newco owns beneficially.
1.64 "Principal Stockholder" means Gary Katz.
1.65 "PTO" means the United States Patent and Trademark Office.
1.66 "Public Report" has the meaning set forth in Section 4.6
below.
1.67 "Requisite Stockholder Approval" means the affirmative vote of
the holders of a majority of the Outstanding Company Shares on the record date
for the Special Meeting in favor of this Agreement and the Merger.
1.68 "SEC" means the Securities and Exchange Commission.
1.69 "Securities Act" means the Securities Act of 1933, as amended.
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1.70 "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.71 "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialman's, and similar liens, (b) liens for taxes not yet due and payable or
for taxes that the taxpayer is contesting in good faith through appropriate
proceedings, (c) purchase money liens and liens securing rental payments under
capital lease arrangements, and (d) other liens arising in the Ordinary Course
of Business and not incurred in connection with the borrowing of money.
1.72 "Share Price Formula" means:
C + EP
------
OS + VO
where:
C = Forty Seven Million United States Dollars (US$47,000,000),
and
EP = the aggregate of the exercise prices payable and the
value of convertible securities exchanged by the holders of
the Vested Company Options at the Effective Time in order to
acquire the shares of Company Common Stock which are subject
thereto, and
OS = the number of Outstanding Company Shares at the Effective
Time, and
VO = the aggregate number of shares of Company Common Stock
which are subject to Vested Company Options at the Effective
Time.
1.73 "Special Meeting" has the meaning set forth in Section 6.5(b)
below.
1.74 "Stockholder Agreement" has the meaning set forth in the
preface above.
1.75 "Stock Option Agreement" has the meaning set forth in the
preface above.
1.76 "Subsidiary" means any corporation or other entity with
respect to which a specified Person (or a Subsidiary thereof) owns a majority of
the common stock or voting interests or has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or persons
performing a similar function.
1.77 "Suit" has the meaning set forth in Section 10.10 below.
1.78 "Superior Proposal" has the meaning set forth in Section
6.4(c) below.
1.79 "Surviving Corporation" has the meaning set forth in Section
2.1(a) below.
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1.80 "Tax" means any tax or similar governmental charge, impost or
levy (including without limitation income taxes, franchise taxes, transfer taxes
or fees, sales taxes, use taxes, gross receipts taxes, value added taxes,
employment taxes, excise taxes, ad valorem taxes, property taxes, withholding
taxes, payroll taxes, minimum taxes or windfall profit taxes) together with any
related penalties, fines, additions to tax or interest imposed by the United
States or any state, county, local or foreign government or Governmental Body.
1.81 "Tax Return" means any return (including any information
return), report, statement, schedule, notice, form, estimate, or declaration of
estimated tax relating to or required to be filed with any Governmental Body in
connection with the determination, assessment, collection or payment of any Tax.
1.82 "Termination Fee" means Two Million United States Dollars
(US$2,000,000.00).
1.83 "Third Party Intellectual Property" means any Intellectual
Property used or licensed by the Company or any of its Subsidiaries in any
respect that is not Company Intellectual Property.
1.84 "Transaction Agreements" means, collectively, this Merger
Agreement, the Stockholder Agreement, the Indemnity Agreement, the Stock Option
Agreement, the Consulting Agreement and the side letter referred to in Section
3.4.
1.85 "Unvested Company Option" means a Company Option that is not a
Vested Company Option.
1.86 "Vested Company Option" means, at any time, a Company Option
that is vested in and exercisable by the holder thereof at such time.
2 PLAN OF REORGANIZATION
2.1 THE MERGER
(a) The Merger. At the Effective Time (as defined in Section 3.3),
Newco shall be merged with and into the Company pursuant to this
Agreement and the separate corporate existence of Newco shall cease.
The Company, as it exists from and after the Effective Time, is
sometimes referred to as the "Surviving Corporation".
(b) Effects of the Merger. The Merger shall have the effects
provided therefor by the Delaware General Corporation Law.
(c) Articles of Incorporation; Bylaws; Directors and Officers. The
Certificate of Incorporation of the Surviving Corporation shall be
amended to be from and after the Effective Time identical to the
Certificate of Incorporation of Newco immediately prior
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to the Effective Time, until thereafter amended in accordance with the
provisions therein and as provided by the applicable provisions of the
Delaware General Corporation Law. The Bylaws of the Surviving
Corporation shall be amended to be from and after the Effective Time
identical to the Bylaws of Newco in effect immediately prior to the
Effective Time, until thereafter amended in accordance with their terms
and the Certificate of Incorporation of the Surviving Corporation and
as provided by the Delaware General Corporation Law. The initial
directors and officers of the Surviving Corporation shall be the
Persons serving in the corresponding offices of Newco immediately prior
to the Effective Time, in each case until their respective successors
are elected and qualified.
2.2 CONVERSION OF SECURITIES. Subject to the terms and provisions
of this Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of Photobition, Newco, the Company, or the holders of any
security of either Constituent Corporation, the shares of capital stock of each
of the Constituent Corporations shall be converted as follows:
(a) Capital Stock of Newco. Each issued and outstanding share of
capital stock of Newco shall continue to be issued and outstanding and
be converted into one share of validly issued, fully paid and
non-assessable common stock of the Surviving Corporation. Each stock
certificate of Newco evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
(b) Cancellation of Certain Shares of Capital Stock of the
Company. All shares of capital stock of the Company that are owned
directly or indirectly by the Company shall be cancelled and no Merger
Consideration shall be delivered in exchange therefor.
(c) Conversion of Capital Stock of the Company. At and as of the
Effective Time, (A) except as provided in Section 2.2(b), each
Outstanding Company Share at the Effective Time (other than any
Dissenting Share or Photobition-owned Share) shall be converted into
the right to receive an amount equal to the Merger Consideration in
cash (without interest), (B) each Dissenting Share shall be converted
into the right to receive payment from the Surviving Corporation with
respect thereto in accordance with the provisions of the Delaware
General Corporation Law, and (C) each Photobition-owned Share shall be
cancelled. No share of Company Common Stock shall be deemed to be
outstanding or to have any rights other than those set forth above in
this Section 2.2(c) after the Effective Time.
(d) Company Options. At and as of the Effective Time, the holder
of each Vested Company Option shall be entitled to receive, in lieu of
any Company Common Stock, an amount in cash (without interest) equal to
the difference between (A) the Merger Consideration and (B) the
exercise price that would be payable upon the exercise of such Vested
Company Option at the Effective Time. No Vested Company Option or the
shares of Company Common Stock subject thereto shall be deemed to be
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outstanding or to have any rights other than those set forth above in
this Section 2.2(d) after the Effective Time.
2.3 DISSENTING SHARES. At and as of the Effective Time, each
Dissenting Share shall be entitled to payment of the fair value of such shares
in accordance with the provisions of Section 262 of the Delaware Corporation
Law; provided, however, that (i) if any holder of Dissenting Shares shall
subsequently withdraw his demand for payment of the fair value of such
Dissenting Shares or (ii) if any holder fails to establish and perfect his
entitlement to the relief provided in Section 262 of the Delaware Corporation
Law, the rights and obligations of such holder to receive such fair value shall
terminate, and such Dissenting Shares shall be entitled to receive an amount
equal to the Merger Consideration in cash (without interest) in accordance with
Section 2.2(c). The Company shall give Photobition prompt notice of any demands
received by the Company for appraisal of Dissenting Shares, and Photobition
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the Company will not make
any payment with respect to, or settle or offer to settle, the demands of any
Dissenting Shares without the written consent of Photobition. The Company agrees
to comply with the notice provisions of Section 262 of the Delaware Corporation
Law.
2.4 PROCEDURE FOR PAYMENT.
(a) Immediately after the Effective Time, (A) Photobition will
cause the Surviving Corporation to furnish to a Person designated to
act as paying agent and reasonably acceptable to the Company (the
"Paying Agent"), cash in an amount sufficient, together with the amount
of the Deposit and any interest paid thereon through the Closing Date,
for the Paying Agent to make full payment of the portion of the
Aggregate Merger Consideration payable to the holders of all the
Outstanding Company Shares at the Effective Time (other than any
Dissenting Shares and Photobition-owned Shares) and full payment of the
Company Option Merger Consideration (the "Payment Fund"), and (B)
Photobition will cause the Paying Agent to mail a letter of transmittal
(with instructions for its use) in a form acceptable to the Paying
Agent to each record holder of Outstanding Company Shares at the
Effective Time for such holder to use in surrendering the certificates
which represented his or its shares of Company Common Stock against
payment of the Merger Consideration and a letter of transmittal (with
instructions for its use) in a form acceptable to the Paying Agent to
each record holder of Vested Company Options for such holder to use in
surrendering the agreement or certificate which represented his or its
Vested Company Option against payment of the Company Option Merger
Consideration. No interest will accrue or be paid to the holder of any
such Outstanding Company Shares or outstanding Vested Company Options.
(b) Photobition may cause the Paying Agent to invest the cash
included in the Payment Fund in one or more investments selected by
Photobition; provided, however, that the terms and conditions of the
investments shall be such as to permit the Paying Agent to make prompt
payment of the Aggregate Merger Consideration as necessary.
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Photobition may cause the Paying Agent to pay over to the Surviving
Corporation any net earnings with respect to the investments, and
Photobition will cause the Surviving Corporation to replace promptly
any portion of the Payment Fund which the Paying Agent loses through
investments.
(c) Photobition may cause the Paying Agent to pay over to the
Surviving Corporation any portion of the Payment Fund (including any
earnings thereon) remaining 180 days after the Effective Time, and
thereafter all former holders of Outstanding Company Shares or Vested
Company Options outstanding at the Effective Time shall only be
entitled to look to the Surviving Corporation (subject to abandoned
property, escheat, and other similar laws) as general creditors thereof
with respect to the Aggregate Merger Consideration to which they are
entitled hereunder.
(d) Photobition shall cause the Surviving Corporation to pay all
charges and expenses of the Paying Agent.
(e) Except as set forth in the Indemnity Agreement, Photobition
will indemnify each of the Company Indemnified Parties against any
claim, and hold the Company Indemnified Parties from any liability,
cost or expense (including reasonable attorneys fees), arising out of
or in connection with the Surviving Corporation's failure to pay the
Aggregate Merger Consideration to the holders of the Outstanding
Company Shares and the holders of the Vested Company Options, claims of
the holders of Dissenting Shares and the determination of any amounts
or other items of property due to holders of Dissenting Shares, and the
disbursement of the Payment Fund.
2.5 CLOSING OF TRANSFER RECORD. After the close of business on the
Closing Date, transfers of shares of Company Common Stock outstanding prior to
the Effective Time shall not be made on the stock transfer books of the
Surviving Corporation.
3 CLOSING; DEPOSIT
3.1 THE CLOSING. The closing of the Merger and other transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Feder Kaszovitz, Isaacson, Weber, Skala & Bass LLP, 750 Lexington Avenue, in
New York, New York, commencing at 9.00 a.m. local time on the fifth business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date, place and time as the Parties may mutually
determine (the "Closing Date").
3.2 THE DEPOSIT. Concurrently with Photobition's execution and
delivery of this Agreement, Photobition is paying the Deposit to the Escrowee's
Escrow Account via wire transfer.
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(a) Upon the Closing, Photobition will instruct the Escrowee to
transfer the Deposit and any interest paid thereon to the Paying Agent
for disbursement in accordance with Section 2.5.
(b) If the Company terminates this Agreement pursuant to Section
9.1(iii)(A) or 9.1(iii)(B)(1) or (2), the Deposit and any interest paid
on the Deposit shall be retained by the Company as liquidated damages
in respect of the fees, expenses and other costs (including lost
opportunity costs) incurred or suffered by the Company. If this
Agreement is terminated pursuant to Section 9.1(i), 9.1(ii),
9.1(iii)(B)(3), 9.1(iii)(C) or 9.1(iv), the Deposit and any interest
paid on the Deposit shall be paid to Photobition.
(c) The Escrowee shall hold the Deposit in escrow in the Escrow
Account (or as otherwise agreed in writing by the Company, Photobition
and Escrowee) and shall pay over or apply the Deposit in accordance
with the terms of this Section 3.2. Interest earned on the Deposit
shall be paid to the party entitled to the Deposit, and the party
receiving such interest shall pay any income taxes thereon. If for any
reason either the Company or Photobition makes a written demand upon
Escrowee for payment of the Deposit, the Escrowee shall give written
notice to the other party of such demand. If Escrowee does not receive
a written objection from the other party or its counsel to the proposed
payment within 10 business days after the giving of such notice,
Escrowee is hereby authorized to make such payment. If Escrowee does
receive such written objection within such 10 day period or if for any
other reason Escrowee in good faith shall elect not to make such
payment, Escrowee shall continue to hold such amount until otherwise
directed by written instructions from the Company and Photobition or a
final judgment of a court.
(d) Escrowee shall have the right at any time to deposit the
Deposit and interest thereon, if any, with the clerk of a court of the
State of New York. Escrowee shall given written notice of such deposit
to the Company and Photobition. Upon such deposit Escrowee shall be
relieved and discharged of all further obligations and responsibilities
hereunder. The parties acknowledge that Escrowee is acting solely as a
stakeholder at their request and for their convenience, that Escrowee
shall not be deemed to be the agent of either of the parties with
respect to the Deposit, and that Escrowee shall not be liable to either
of the parties for any act or omission on its part unless taken or
suffered in bad faith, in willful disregard of this Agreement or
involving gross negligence. The Company shall indemnify and hold
Escrowee harmless from and against all costs, claims and expenses,
including reasonable attorneys' fees, incurred in connection with the
performance of Escrowee's duties hereunder, except with respect to
actions or omissions taken or suffered by Escrowee in bad faith, in
willful disregard of this Agreement or involving gross negligence on
the part of Escrowee.
(e) The parties acknowledge that Escrowee is acting as counsel to
the Company in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement. The Escrowee or any member
thereof shall be permitted to act as counsel for the Company or any of
its officers, directors, stockholders, employees, agents or
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representatives in any dispute as to the disbursement of the Deposit or
any other dispute between Photobition and the Company or any such
Persons; provided that the Escrowee shall, prior to so acting, resign
and designate a successor escrowee or deposit the Deposit and interest
thereon, if any, with the clerk of a court of the State of New York.
(f) Photobition acknowledges that the agreements contained in this
Section 3.2 are an integral part of the transactions contemplated by
this Agreement and that, without these agreements, the Company would
not enter into this Agreement. Any payment of the Deposit to the
Company will be compensation and liquidated damages for the loss
suffered by the Company as a result of the failure of the Merger to be
consummated and as payment for all the Company's out-of-pocket costs
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby and to avoid the difficulty of
determining damages under the circumstances, and Photobition will not
have any other liability to the Company after such payment. The Deposit
will be paid by Photobition to the Company in immediately available
funds within two business days after the date of the event giving rise
to the obligation to make such payment occurs.
3.3 EFFECT. On the Closing Date, the certificate of merger or
other appropriate documents executed in accordance with the Delaware General
Corporation Law (the "Merger Documents"), together with any required officers'
certificates, shall be filed with the Secretary of State of the State of
Delaware in accordance with the provisions of the Delaware General Corporation
Law. The Merger shall become effective upon such filings or at such later time
as may be specified in such filings and agreed to by the parties (the "Effective
Time").
3.4 ACTIONS AT THE CLOSING. In addition to the matters set forth
in Section 3.2 above, at the Closing (i) the Company will deliver to Photobition
and Newco the various certificates, instruments, and documents referred to in
Article 7 below, (ii) Photobition and Newco will deliver to the Company the
various certificates, instruments, and documents referred to in Article 8 below,
(iii) Photobition will cause the Surviving Corporation to deliver the Payment
Fund to the Paying Agent in the manner provided in Section 2.5 above, (iv) the
Escrowee shall deliver the Deposit and all interest paid thereon through the
Closing Date to the Paying Agent, and (v) Photobition shall perform, or cause
the surviving Corporation to perform, its obligations under the letter agreement
being entered into by the Parties concurrently with this Agreement with respect
to the Unvested Company Options.
4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce Photobition and Newco to enter into this Agreement and
consummate the transactions contemplated hereby, the Company represents and
warrants to Photobition and Newco as follows, except as set forth on the
disclosure schedule accompanying this Agreement ("Disclosure Schedule").
4.1 DUE ORGANIZATION; SUBSIDIARIES.
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(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and is duly authorized and qualified
to do business under all applicable laws, regulations, ordinances and
orders of public authorities and to own, operate and lease its
properties and to carry on its business in the places and in the manner
as now conducted in which the failure to so qualify would have a
Material Adverse Effect. Each of the Company and its Subsidiaries is in
good standing as a foreign corporation in each jurisdiction in which it
has qualified to do business. The Company has delivered to Photobition
true, complete and correct copies of the Certificate of Incorporation
and Bylaws of the Company and each of its Subsidiaries. Such
Certificate of Incorporation and Bylaws of the Company and its
Subsidiaries are collectively referred to as the "Charter Documents".
Neither the Company nor any Subsidiary of the Company is in violation
of any Charter Documents.
(b) Schedule 4.1(b) of the Disclosure Schedule sets forth the name
and jurisdiction of incorporation or formation of each Subsidiary of
the Company. All the outstanding shares of capital stock of each such
Subsidiary have been validly issued and are fully paid and
nonassessable and are owned, directly or indirectly, by the Company,
free and clear of all Security Interests, except as set forth on
Schedule 4.1(b) of the Disclosure Schedule. Except for the capital
stock of the Subsidiaries described on Schedule 4.1(b) of the
Disclosure Schedule, the Company does not own, directly or indirectly,
any capital stock or other equity or ownership interest in any Person.
4.2 AUTHORIZATION; VALIDITY.
(a) The Company has all requisite corporate power and authority to
enter into each Transaction Agreement to which the Company is a party
and to consummate the transactions contemplated thereby. The execution
and delivery by the Company of each Transaction Agreement to which the
Company is a party and the performance by the Company of the
transactions contemplated therein have been duly and validly authorized
by the Board of Directors of the Company. Each of the Transaction
Agreements to which the Company is a party constitutes the legal, valid
and binding obligation of the Company, enforceable in accordance with
its terms. Notwithstanding anything in this Section 4.2 to the
contrary, the Company cannot consummate the Merger unless and until it
receives the Requisite Stockholder Approval.
(b) The Board of Directors of the Company has duly and validly
unanimously approved the Merger and each of the Transaction Agreements
to which the Company is a party and all of the transactions
contemplated hereby.
4.3 NO CONFLICTS; NOTICES. The execution, delivery and performance
of each Transaction Agreement to which the Company is a party, the consummation
of the transactions contemplated thereby, and the fulfillment of the terms
thereof will not:
(i) conflict with, or result in a breach or violation of, any of
the Charter Documents;
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(ii) except as set forth on Schedule 4.3 of the Disclosure Schedule,
conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or
both) under, or give rise to a right of termination, cancellation
or acceleration of any material obligation or loss of a material
benefit under, or result in the creation or imposition of any
lien, charge or encumbrance on any of the Company's or any of its
Subsidiaries' properties pursuant to (A) any document, agreement
or other instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound, or (B) any judgment, order or decree to
which the Company or any of its Subsidiaries is bound or any of
their respective properties is subject; and which in respect of
subclause (B) would, individually and together with all conflicts,
defaults, breaches and violations referred to in this Section 4.3,
have a Material Adverse Effect upon the Company.
(iii) result in termination or impairment of any material Permit of the
Company or any of its Subsidiaries which would, individually and
together with all conflicts, defaults, breaches and violations
referred to in this Section 4.3, have a Material Adverse Effect
upon the Company; or
(iv) violate any law, order, judgment, rule, regulation, decree or
ordinance to which the Company or any of its Subsidiaries is
subject or by which the Company's or any of its Subsidiaries'
properties is bound, which would, individually and together with
all conflicts, defaults, breaches and violations referred to in
this Section 4.3, have a Material Adverse Effect upon the Company.
Other than in connection with the provisions of the Hart-Scott-Rodino Act, the
Delaware General Corporation Law, and the Securities Exchange Act, none of the
Company and its Subsidiaries is required by law to give any notice to, make any
filings with, or obtain any Permit of any Governmental Body in order for the
Company to consummate the transactions contemplated by each of the Transaction
Agreements to which it is a party.
4.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of
the Company consists of 25,000,000 shares Company of Common Stock, of which
5,090,276 shares are issued and outstanding, and 5,000 shares of preferred
stock, US$.001 par value, of which no shares are issued and outstanding.
1,424,033 shares of Company Common Stock are reserved for issuance upon exercise
of Company Options under the Company Option Plans. Company Options to acquire
642,227 shares of Company Common Stock are currently both vested and exercisable
under the terms of the Company Option Plans. Company Options to acquire 769,806
shares of Company Common Stock are currently not vested under the terms of the
Company Option Plans. No shares of the Company's capital stock are issued and
held in the treasury of the Company. All of the issued and outstanding shares of
the capital stock of the
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Company have been duly authorized and validly issued, are fully paid and
nonassessable. All shares of Company Common Stock which may be issued pursuant
to the Stock Option Agreement or the exercise of outstanding Company Options
will be, when issued in accordance with the respective terms thereof, duly
authorized, validly issued, fully paid and nonassessable. All of the issued and
outstanding shares of the capital stock of the Company and its Subsidiaries were
offered, issued, sold and delivered by the Company and its Subsidiaries in
compliance with all applicable state and federal laws concerning the issuance of
securities in all material respects. Further, none of such shares was issued in
violation of any preemptive rights. Except for the Stockholder Agreement, the
Company is not a party to any voting agreements or voting trusts with respect to
any of the outstanding shares of the capital stock of the Company or any of its
Subsidiaries. From the date hereof to the Effective Time, there has been and
will be no change in the number of issued and outstanding shares of Company
Common Stock or Company Options (except as set forth on Schedule 6.3) other than
pursuant to the exercise of options to purchase Company Common Stock issued
pursuant to the Company Options and described in this Section 4.4.
4.5 TRANSACTIONS IN CAPITAL STOCK; ACCOUNTING TREATMENT. Except as
set forth on Schedule 4.5 of the Disclosure Schedule, no option, warrant, call,
subscription right, conversion right or other contract or commitment of any kind
exists of any character, written or oral, which may obligate the Company or any
of its Subsidiaries to issue, sell or otherwise cause to be outstanding any
shares of capital stock. Neither the Company nor any of its Subsidiaries has any
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. As a result of the Merger, Photobition
will be the record and beneficial owner of all outstanding capital stock of the
Surviving Corporation and rights to acquire capital stock of the Surviving
Corporation.
4.6 FILINGS WITH THE SEC. The Company has made all filings with
the SEC that it has been required to make under the Securities Act and the
Securities Exchange Act (collectively the "Public Reports"). Each of the Public
Reports has complied with the Securities Act and the Securities Exchange Act in
all material respects. None of the Public Reports, as of their respective dates,
contained any untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
4.7 FINANCIAL STATEMENTS. The Company has filed Quarterly Reports
on Form 10-QSB under the Securities Exchange Act for the fiscal quarters ended
June 30, 1998 (the "Most Recent Fiscal Quarter End") and March 31, 1998 and an
Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997 ("Most
Recent Fiscal Year End"). The Financial Statements have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, as to interim Financial Statements, contain all adjustments
(consisting of normal receiving accruals) which, in the opinion of management,
are deemed necessary for a fair presentation of the results for the interim
period, and present fairly the financial position of the Company and its
Subsidiaries as of the indicated dates and the results of operations of the
Company and its Subsidiaries for the indicated periods, are correct and complete
in all material respects, and are consistent with the books and records of
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the Company and its Subsidiaries, and as to interim Financial Statements,
contain all adjustments (consisting of normal receiving accruals) which, in the
opinion of management, are deemed necessary for a fair presentation of the
results for the interim period; provided, however, that the interim Financial
Statements do not contain footnotes required by GAAP.
4.8 EVENTS SUBSEQUENT TO MOST RECENT FISCAL QUARTER END. Since the
Most Recent Fiscal Quarter End, there has not been any change in the business,
financial condition, operations or results of operations of the Company and its
Subsidiaries, taken as a whole, which has had a Material Adverse Effect upon the
Company.
4.9 UNDISCLOSED LIABILITIES. None of the Company and its
Subsidiaries has any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes, except for (i) liabilities set forth on the face of the
Company's balance sheet dated as of the Most Recent Fiscal Quarter End and
included in the Form 10-QSB filed by the Company under the Securities Exchange
Act for the Most Recent Fiscal Quarter End (rather than in any notes thereto),
(ii) liabilities which have arisen after the Most Recent Fiscal Quarter End in
the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law and none of which would
have a Material Adverse Effect upon the Company, (iii) liabilities under this
Agreement, or (iv) liabilities described in the Disclosure Schedule.
4.10 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries are the true and lawful
owners of, or are licensed or otherwise possess legally enforceable
rights to use, the registered and unregistered Marks listed on Schedule
4.10 of the Disclosure Schedule. The Disclosure Schedule lists (i) all
of the Marks registered in the PTO or the equivalent thereof in any
state of the United States or in any foreign country, and (ii) all of
the unregistered Marks that the Company or any Subsidiary now owns or
uses in connection with its business. Except with respect to those
Marks shown as licensed on the Disclosure Schedule, the Company and its
Subsidiaries own all of the registered and unregistered trademarks,
service marks, and trade names that they use. The Marks listed on the
Disclosure Schedule will not cease to be valid rights of the Company or
any of its Subsidiaries by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
(b) All Patents and Copyrights are listed on Schedule 4.10 of the
Disclosure Schedule. The Company and its Subsidiaries are the true and
lawful owners of, or are licensed or otherwise possess legally
enforceable rights to use, the Patents, and the Copyrights. The Patents
and Copyrights constitute all patents and copyright registrations that
the Company and its Subsidiaries now use in connection with their
business. The Patents and Copyrights listed on the Disclosure Schedule
will not cease to be valid rights of the Company or any of its
Subsidiaries by reason of the execution,
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delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
(c) Except as indicated on Schedule 4.10 of the Disclosure
Schedule, neither the Company nor any Subsidiary has any obligation to
compensate any Person for the use of any Intellectual Property nor has
the Company or any Subsidiary granted to any Person any license, option
or other rights to use in any manner any Intellectual Property, whether
requiring the payment of royalties or not.
(d) The Company and its Subsidiaries are not, nor will they be as
a result of the execution and delivery of this Agreement or the
performance of their obligations hereunder, in violation of any Third
Party Intellectual Property license, sublicense or agreement. No claims
with respect to the Company Intellectual Property or Third Party
Intellectual Property are currently pending nor, to the Company's
Knowledge, do any grounds for any claims exist: (i) to the effect that
the manufacture, sale, licensing or use of any product as now used,
sold or licensed or proposed for use, sale or license by the Company or
any Subsidiary infringes on any copyright, patent, trademark, service
mark, trade name or trade secret; (ii) against the use by the Company
or any Subsidiary of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software programs
and applications used in the Company's or any Subsidiary's business as
currently conducted by the Company or any Subsidiary; (iii) challenging
the ownership, validity or effectiveness of any of the Company
Intellectual Property or other trade secrets material to the Company or
any Subsidiary; or (iv) challenging the Company's or any Subsidiary's
license or legally enforceable right to use of the Third Party
Intellectual Property. To the Company's Knowledge, there is no
unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property by any third party. Neither the Company
nor any of its Subsidiaries (x) has been sued or charged in writing as
a defendant in any claim, suit, action or proceeding which involves a
claim of infringement of trade secrets, any patents, trademarks,
service marks, trade name or copyrights and which has not been finally
terminated, (y) has been informed or notified by any third party that
the Company or any Subsidiary may be engaged in such infringement or
(y) has Knowledge of any infringement liability with respect to, or
infringement by, the Company or any of its Subsidiaries of any trade
secret, patent, trademark, service mark, trade name or copyright of
another.
4.11 ENVIRONMENTAL MATTERS
(a) Hazardous Material. Other than as set forth on Schedule 4.11
of the Disclosure Schedule, the Company has no Knowledge of the
presence of any substance that has been designated by any Governmental
Body or by applicable federal, state, local or other Environmental Law
to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos,
petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource
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Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial
supplies properly and safely maintained (a "Hazardous Material") in the
premises occupied or leased by the Company and its Subsidiaries. The
Company and its Subsidiaries do not and have never owned any real
property.
(b) Hazardous Materials Activities. The Company has no Knowledge
that the Company or any of its Subsidiaries is in violation of any
applicable Environmental Law and neither the Company nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of
or released, or exposed its employees or others to, Hazardous Materials
in violation of any law now in effect, nor has the Company or any of
its Subsidiaries disposed of, transported, sold or manufactured any
product containing a Hazardous Material (collectively, "Hazardous
Materials Activities") in violation of any Environmental Law in effect
prior to or as of the date hereof, which violations, if any, would have
a Material Adverse Effect upon the Company.
(c) Permits. The Company and its Subsidiaries collectively hold
all environmental Permits (the "Environmental Permits") required by any
Governmental Body necessary for the conduct of Hazardous Material
Activities and other business of the Company or any of its Subsidiaries
as such activities and business are currently being conducted, except
for Environmental Permits the lack of which would not have a Material
Adverse Effect upon the Company. Except as set forth on Schedule 4.11
of the Disclosure Schedule, all Environmental Permits are in full force
and effect. The Company and its Subsidiaries (A) are in compliance in
all material respects with all terms and conditions of the
Environmental Permits and (B) are in compliance in all material
respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any
regulation, code, plan, order, decree, judgment, notice or demand
letter issued, entered, promulgated or approved thereunder. To the
Company's Knowledge, there are no circumstances that may prevent or
interfere with such compliance in the future. The Disclosure Schedule
includes a listing and description of all Environmental Permits
currently held by the Company or any of its Subsidiaries.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending
concerning any Environmental Permit, Hazardous Material or any
Hazardous Materials Activity. Neither the Company nor any of its
Subsidiaries has received any written notice, suit or claim from any
Governmental Body or any other Person that the businesses of the
Company or its Subsidiaries or the operation of any of their respective
facilities is in violation of any Environmental Law or any
Environmental Permit or that it is responsible (or potentially
responsible) for the cleanup of any Hazardous Materials.
4.12 LABOR AND EMPLOYMENT MATTERS. With respect to employees of and
service providers to the Company and its Subsidiaries:
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(a) Except as set forth in Schedule 4.12 of the Disclosure
Schedule, the Company and its Subsidiaries are and have been in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours, including without limitation any such laws
respecting employment discrimination, workers' compensation, family and
medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements, and have not and are not engaged in any
unfair labor practice.
(b) There is not now, nor within the past three (3) years has
there been, any unfair labor practice complaint against the Company or
any of its Subsidiaries pending before the National Labor Relations
Board or any other comparable Governmental Body.
(c) There is not now, nor within the past three (3) years has
there been, any labor strike, slowdown or stoppage actually pending
against or directly affecting the Company or any of its Subsidiaries.
(d) To the Company's Knowledge, no labor representation
organization effort exists nor has there been any such activity within
the past three (3) years.
(e) No grievance or arbitration proceeding arising out of the
employment practices of the Company or any of its Subsidiaries is
pending and, to the Company's Knowledge, no claims therefor exist.
(f) The employees of the Company and its Subsidiaries are not and
have never been represented by any labor union, and no collective
bargaining agreement is binding and in force against the Company or any
of its Subsidiaries or currently being negotiated by the Company or any
of its Subsidiaries.
(g) Except as set forth on Schedule 4.12 of the Disclosure
Schedule, all Persons classified by the Company or any of its
Subsidiaries as independent contractors do satisfy and have satisfied
the requirements of law to be so classified, and the Company and its
Subsidiaries have fully and accurately reported their compensation on
IRS Forms 1099 when required to do so.
4.13 EMPLOYEE BENEFIT PLANS.
(a) The Disclosure Schedule sets forth a true and complete list
(or, in the case of an unwritten plan, a description) of all material
employee benefit plans, arrangements, contracts or agreements
(including employment agreements, severance agreements and managers'
insurance plans) of any type, statutory or otherwise (including but not
limited to plans described in Section 3(3) of ERISA), maintained by the
Company, any of its Subsidiaries or any trade or business, whether or
not incorporated (an "ERISA Affiliate"), which together with the
Company would be deemed a "single employer" within the meaning of
Section 414(b), 414(c) or 414(m) of the Code, or the regulations issued
under Section 414(o) of the Code ("Benefit Plans").
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(b) With respect to each Benefit Plan: (i) if intended to qualify
under Section 401(a) of the Code, such plan so qualifies, and its trust
is exempt from taxation under Section 501(a) of the Code, no condition
exists that would reasonably be expected to affect such qualification,
and except as set forth on Schedule 4.13 of the Disclosure Schedule,
there have been no amendments to any such Benefit Plan which are not
the subject of a favorable determination letter, (ii) such plan has
been administered in all material respects in accordance with its terms
and U.S. federal, state or local, statutes, orders or governmental
rules or regulations, including, but not limited to ERISA and the Code,
no notice has been issued by any governmental entity questioning or
challenging such compliance, and no condition exists that would be
expected to affect such compliance, (iii) no breaches of fiduciary duty
have occurred which might reasonably be expected to give rise to
material liability on the part of the Company, (iv) no disputes are
pending that might reasonably be expected to give rise to material
liability on the part of the Company, (v) no prohibited transaction
(within the meaning of Section 406 of ERISA) has occurred that would
give rise to material liability on the part of the Company, any ERISA
Affiliate or any of their employees, stockholders or directors, (vi)
all contributions and premiums due as of the date hereof in respect of
any Benefit Plan (taking into account any extensions for such
contributions and premiums) have been made in full or accrued on the
Company's balance sheet forming part of the Financial Statements, (vii)
as of the last applicable annual valuation date, the present value of
all benefits under such Plan did not exceed the value of the assets of
such Plan allocable to such benefits, on a projected benefits basis,
using the actuarial methods, factors and assumptions used for the most
recent actuarial report with respect to such Plan, (viii) there has
been no termination, partial termination or "reportable event" (as
defined in Section 4043 of ERISA) with respect to any such Plan, and
(ix) no Benefit Plan that is subject to Section 412 of the Code has
incurred any "accumulated funding deficiency" (as defined in Section
412 of the Code), whether or not waived.
(c) Except as set forth on Schedule 4.13 of the Disclosure
Schedule, neither the Company nor any ERISA Affiliate (i) has incurred
an accumulated funding deficiency, as defined in the Code and ERISA, or
(ii) has incurred any material liability under Title VI of ERISA with
respect to any employee benefit plan that is subject to Title VI of
ERISA.
(d) With respect to each Benefit Plan that is a "welfare plan" (as
defined in Section 3(1) of ERISA), except as disclosed in the
Disclosure Schedule, no such plan provides post-employment or retiree
welfare or death benefits of any kind with respect to current or former
employees of the Company or any of its Subsidiaries beyond their
termination of employment, other than as required by law.
(e) Except as set forth on Schedule 4.13 of the Disclosure
Schedule, neither the execution of this Agreement nor the consummation
of the transactions contemplated hereby will entitle any individual to
severance pay or accelerate the time of payment or vesting, or increase
the amount of compensation or benefits due to any individual.
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(f) There is no Benefit Plan that is a "multiemployer plan," as
such is defined in Section 3(37) of ERISA.
4.14 TAXES.
(a) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, the Company and each of its Subsidiaries has timely filed, or
will timely file, all Tax Returns due on or before the Closing Date,
and all such Tax Returns are or will be true, correct, and complete in
all material respects. Neither the Company nor any of its Subsidiaries
has received written notice of any claim or inquiry made by a
Governmental Body in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that the Company or any of its
Subsidiaries are or may be subject to taxation by that jurisdiction.
(b) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, the Company and its Subsidiaries have paid in full on a
timely basis all Taxes owed by them, whether or not shown on any Tax
Return.
(c) The amount of the Company's liability for unpaid Taxes as of
the Most Recent Fiscal Quarter End did not exceed the amount of the
current liability accruals for Taxes (excluding reserves for deferred
Taxes) shown on Form 10-QSB for the Most Recent Fiscal Quarter End
filed by the Company under the Securities Exchange Act and the amount
of the Company's liability for unpaid Taxes for all periods or portions
thereof ending on or before the Closing Date will not exceed the amount
of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals are reflected on the books and records
of the Company on the Closing Date. Since the Most Recent Fiscal
Quarter End, the Company has not incurred liability for any Taxes other
than in the Ordinary Course of Business.
(d) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, there are no ongoing examinations or claims against the
Company or any of its Subsidiaries for Taxes, and no notice of any
audit, examination or claim for Taxes, whether pending or threatened,
has been received.
(e) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has violated
any applicable law of any jurisdiction relating to the payment and
withholding of Taxes, including, without limitation, (x) withholding of
Taxes pursuant to Sections 1441 and 1442 of the Code and (y)
withholding of Taxes in respect of amounts paid or owing to any
employee, creditor, independent contractor, or other third party. The
Company and each of its Subsidiaries have, in the manner prescribed by
law, withheld and paid when due all Taxes required to have been
withheld and paid under all applicable laws.
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(f) There are no Security Interests upon the shares of Company
Common Stock or any of the assets or properties of the Company or any
of its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax when due.
(g) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has waived
any statute of limitations in any jurisdiction in respect of Taxes or
Tax Returns or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(h) Neither the Company nor any of its Subsidiaries has made a
change in accounting methods (nor has any taxing authority proposed in
writing any such adjustment or change of accounting method), received a
ruling from any taxing authority or signed an agreement with any taxing
authority which could have a Material Adverse Effect on the Company, or
has entered into any closing or similar agreement with any taxing
authority.
(i) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party
to, is bound by or has any obligation under any Tax sharing agreement,
Tax indemnification agreement or similar contract or arrangement.
(j) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, no power of attorney with respect to any matter relating to
Taxes or Tax Returns has been granted by or with respect to the Company
or any of its Subsidiaries.
(k) Neither the Company nor any of its Subsidiaries is a party to
any agreement, plan, contract or arrangement that could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code or the payment
of any amount that is not deductible by reason of Section 162(m) of the
Code.
(l) Neither the Company nor any of its Subsidiaries has filed a
consent pursuant to Section 341(f) of the Code (or any predecessor
provision) concerning collapsible corporations, or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a "subsection
(f) asset" (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its Subsidiaries.
(m) None of the Company or any of its Subsidiaries is a controlled
foreign corporation within the meaning of Section 957 of the Code or a
passive foreign investment company within the meaning of Section 1296
of the Code.
(n) Except as set forth in Schedule 4.14 of the Disclosure
Schedule, the Company has delivered to Photobition complete and
accurate copies of each of: (A) all audit, examination and similar
reports and all letter rulings and technical advice memoranda relating
to United States federal, state, local and foreign Taxes due from or
with respect to the Company and its Subsidiaries; (B) all United States
federal, state and
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local, and foreign Tax Returns, Tax examination reports and similar
documents filed by the Company and its Subsidiaries; and (C) all
closing agreements entered into by the Company and its Subsidiaries
with any taxing authority and all statements of Tax deficiencies
assessed against or agreed to by the Company and its Subsidiaries. The
Company will deliver to Photobition all materials with respect to the
foregoing for all matters arising after the date hereof.
(o) To the Company's Knowledge, there is no basis for the
assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any Security Interest on any of
the assets of the Company or its Subsidiaries or otherwise have a
Material Adverse Effect on the Company.
(p) None of the assets and properties of the Company or any of its
Subsidiaries is an asset or property that Photobition or any of its
affiliates is or will be required to treat as being (i) owned by any
other Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, and in effect immediately
before the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt
use property within the meaning of Section 168(h)(1) of the Code.
(q) No closing agreement pursuant to Section 7121 of the Code (or
any predecessor provision) or any similar provision of any state,
provincial, local or foreign law has been entered into by or with
respect to the Company or any of its Subsidiaries or any assets
thereof.
(r) The Company is not a "United States real property holding
corporation" as defined in Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(s) Except as set forth on Schedule 4.14 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries will be
required to include in a taxable period ending after the Closing Date
taxable income attributable to income that economically accrued in a
taxable period ending on or before the Closing Date as a result of the
installment method of accounting, the completed contract method of
accounting, any method of reporting revenue from contracts which are
required to be reported on the percentage of completion method (as
defined in Section 460(b) of the Code) but that were reported using
another method of accounting, or any other method of accounting.
Neither the Company nor any of its Subsidiaries is required to include
in income any adjustment pursuant to Section 481(a) of the Code (or
similar provisions of other laws or regulations) in its current or in
any future taxable period by reason of a change in accounting method;
nor does the Company or any of its Subsidiaries have any Knowledge that
the Internal Revenue Service (or other taxing authority) has proposed
or is considering proposing any such change in accounting method.
(t) Neither the Company nor any of its Subsidiaries has
participated in or cooperated with an international boycott within the
meaning of Section 999 of the Code
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or has been requested to do so in connection with any transaction or
proposed transaction.
(u) Each of the Company and its Subsidiaries has disclosed on its
federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Code.
(v) All material elections with respect to Taxes affecting the
Company or any of its Subsidiaries as of the date hereof are set forth
on Schedule 4.14 of the Disclosure Schedule.
(w) The Company and its Subsidiaries have not been members of any
group that has filed a combined, consolidated or unitary Tax Return,
other than such Tax Returns for which the period for assessment has
expired (taking into account any extension or waiver thereof) or for
groups solely made up of the Company and any of its Subsidiaries.
4.15 CONFORMITY WITH LAW; LITIGATION.
(a) The Company and its Subsidiaries have not violated any law or
regulation or any order of any Governmental Body having jurisdiction
over it, except such violations as have not had a Material Adverse
Effect on the Company.
(b) Except as set forth on Schedule 4.15 of the Disclosure
Schedule, there are no claims, actions, suits, proceedings or
investigations pending against or affecting the Company or any of its
Subsidiaries at law or in equity, or before or by any Governmental Body
having jurisdiction over it and (i) no written notice of any claim,
action, suit or proceeding, whether pending or threatened, has been
received, and (ii) none of the Company's Chief Executive Officer, Chief
Operating Officer or Chief Financial Officer have since June 1, 1998
received oral notice of any claim, action, suit or proceeding, whether
pending or threatened, involving an amount in excess of $50,000. There
are no outstanding judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative
agency or by arbitration) against the Company or any of its
Subsidiaries or against any of their properties or business.
4.16 ABSENCE OF CHANGES. Since the Most Recent Fiscal Quarter End, the
Company and each of its Subsidiaries have conducted their respective businesses
in the Ordinary Course of Business and, except as contemplated herein or as set
forth on Schedule 4.16 of the Disclosure Schedule, there has not been:
(i) any change, by itself or together with other changes, that has
had a Material Adverse Effect upon the Company;
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(ii) any declaration or payment of any dividend or distribution in
respect of the capital stock, or any direct or indirect
redemption, purchase or other acquisition of any of the
capital stock of the Company;
(iii) any granting by the Company or any of its Subsidiaries of any
options, warrants or other interests in the capital stock of
the Company or any of its Subsidiaries;
(iv) the commencement or written notice to the Company of any
lawsuit or proceeding against, or investigation of, the
Company or any of its Subsidiaries or any of its affairs; or
(v) the taking of any action proscribed by or the failure to take
any action required by Section 6.3.
4.17 DISCLOSURE. The Definitive Proxy Materials will comply with the
Securities Exchange Act in all material respects. The Definitive Proxy Materials
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made therein, in light of the
circumstances under which they will be made, not misleading; provided, however,
that the Company makes no representation or warranty with respect to any
information that Photobition or Newco will supply in writing specifically for
use in the Definitive Proxy Materials.
4.18 CONTRACTS. Except as set forth on Schedule 4.18 of the Disclosure
Schedule, each material contract or agreement to which the Company or any of its
Subsidiaries is a party is legally valid and binding and in full force and
effect in all material respects. The Company has previously provided or made
available for inspection by Photobition or its representatives all of such
material contracts and agreements. Neither the Company nor any of its
Subsidiaries has received a written notice that it is in violation of or in
default under (nor, except as set forth on Schedule 4.18 of the Disclosure
Schedule, to the Knowledge of the Company does there exist any condition which
upon the passage of time or the giving of notice or both would cause such a
violation of or default under) any such material contract, except to the extent
that such violation or default, individually and in the aggregate, would not
have a Material Adverse Effect upon the Company.
4.19 TITLE AND CONDITION OF PROPERTIES. The Company and its
Subsidiaries own title, free and clear of all Security Interests, to all of the
personal property and assets shown on the balance sheet included in the
Company's Financial Statements for the Most Recent Fiscal Quarter End, or
acquired after the Most Recent Fiscal Quarter End, except for (A) assets which
have been disposed of to nonaffiliated third parties since the Most Recent
Fiscal Quarter in the Ordinary Course of Business, (B) Security Interests
reflected in the Financial Statements, (C) Security Interests or imperfections
of title which are not individually or in the aggregate, material in character,
amount or extent and which do not materially detract from the value or
materially interfere with the present or presently contemplated use of the
assets subject thereto or affected thereby, and (D) Permitted Liens. All of the
equipment (including computer hardware) and other tangible personal property and
assets owned or used by the
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Company and its Subsidiaries is useable in the Ordinary Course of Business,
except for conditions which would not in the aggregate have a Material Adverse
Effect upon the Company.
4.20 PERMITS. Except as set forth on Schedule 4.20 of the Disclosure
Schedule, (i) the Company owns or holds all Permits necessary for the continued
operation of the Company's business as it is currently being conducted, (ii) the
Permits are valid, and the Company has not received any written notice that any
Governmental Body intends to modify, cancel, terminate or fail to renew any
Permit, (iii) no present or former officer, manager, member or employee of the
Company or any affiliate thereof, or any other Person, owns or has any
proprietary, financial or other interest in any Permits, (iv) the Company has
conducted and is conducting its business in compliance with the requirements,
standards, criteria and conditions set forth in the Permits and is not in
violation of any of the Permits, and (v) none of the Merger or any other
transactions contemplated by this Agreement will result in a default under, or a
breach or violation of, or adversely affect the rights or benefits afforded to
the Company by, any Permit.
4.21 INSURANCE. Schedule 4.21 of the Disclosure Schedule sets forth a
complete and accurate list of all insurance policies carried by the Company as
of the date of this Agreement. All premiums payable under all such policies have
been paid and the Company is otherwise in compliance with the material terms of
such policies. To the Knowledge of the Company, there have been no threatened
terminations of, material premium increases with respect to, or material
disputes arising under, any of such policies.
4.22 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of Business Valuation Services, Inc. (the "Company's Financial Advisor"), dated
the date hereof ("Company Fairness Opinion"), to the effect that, as of such
date, the Aggregate Merger Consideration to be received in the Merger is fair to
the Company's stockholders from a financial point of view. A copy of the
Fairness Opinion has been delivered to Photobition and Newco, it being
understood and agreed that such opinion is for the benefit of the Board of
Directors of the Company and may not be relied upon by Photobition or Newco or
their affiliates or stockholders.
4.23 BROKERS' FEES. Except as set forth on Schedule 4.23 of the
Disclosure Schedule, none of the Company and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
4.24 OFFERING CIRCULAR. The information to be provided to Photobition
by the Company for inclusion in any offering circular, prospectus, or other
disclosure documents prepared in connection with the Photobition Offering or any
communication to Photobition's shareholders in connection with the Merger will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made therein, in the light of the
circumstances under which they are made, not misleading.
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5 REPRESENTATIONS OF PHOTOBITION AND NEWCO
To induce the Company to enter into this Agreement and consummate the
transactions contemplated hereby, each of Photobition and Newco represents and
warrants to the Company as follows, except as set forth on the Disclosure
Schedule:
5.1 DUE ORGANIZATION. Each of Photobition and Newco is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction of incorporation, and each is duly authorized and
qualified to do business under all applicable laws, regulations, ordinances and
orders of public authorities to carry on their respective businesses in the
places and in the manner as now conducted in which the failure to so qualify
would have a Material Adverse Effect on Photobition or Newco. Neither
Photobition nor Newco is in violation of any provision of their respective
organizational documents. Photobition has delivered to the Company true and
correct copies of such organizational documents of Photobition and Newco. All of
the outstanding capital stock of Newco is owned, directly or indirectly, by
Photobition.
5.2 AUTHORIZATION: VALIDITY OF OBLIGATIONS. Photobition and Newco
have all requisite corporate power and authority to perform their obligations
pursuant to the terms of each Transaction Agreement to which it is a party, and
Photobition and Newco have the full legal right, power and corporate authority
to enter into each Transaction Agreement to which it is a party, and to
consummate the transactions contemplated thereby. The execution and delivery of
each Transaction Agreement to which Photobition and Newco is a party and the
performance by each of Photobition and Newco of the transactions contemplated
herein and therein have been duly and validly authorized by the respective
Boards of Directors of Photobition and Newco and by all other necessary
corporate action. Each of the Transaction Agreements to which Photobition or
Newco is a party is a legal, valid and binding obligation of each of Photobition
and Newco, enforceable in accordance with its terms.
5.3 NO CONFLICTS. The execution, delivery and performance of each
Transaction Agreement to which Photobition or Newco is a party, the consummation
of the transactions contemplated thereby and the fulfillment of the terms hereof
will not:
(i) Conflict with, or result in a breach or violation of, the
Articles of Association, Memorandum of Association or other
organizational or constitutional documents of Photobition or
the Certificate of Incorporation or Bylaws of Newco;
(ii) conflict with, or result in a default (or would constitute a
default but for any requirement of notice or lapse of time or
both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or
loss of a material benefit under, or result in the creation or
imposition of any lien, charge or encumbrance on any of
Prohibition's or any of its Subsidiaries' properties pursuant
to (A) any document, agreement or other instrument to which
Photobition or any of its Subsidiaries is a party or by which
Photobition or any of its Subsidiaries is bound, or (B) any
judgment, order or decree to which Photobition or any of its
Subsidiaries
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is bound or any of their respective properties is subject; and
which in respect of subclause, or (C) would, individually and
together with all conflicts, defaults, breaches and violations
referred to in this Section 5.3, have a Material Adverse
Effect upon Photobition;
(iii) result in termination or impairment of any material Permit of
Photobition or any of its Subsidiaries which would,
individually and together with all conflicts, defaults,
breaches and violations referred to in this Section 5.3, have
a Material Adverse Effect upon Photobition; or
(iv) violate any law, order, judgement, rule, regulation, decree or
ordinance to which Photobition or any of its Subsidiaries is
subject or by which Photobition or any of its Subsidiaries is
bound, which would, individually and together with all
conflicts, defaults, breaches and violations referred to in
this Section 5.3, have a Material Adverse Effect upon
Photobition.
Other than in connection with the provisions of the Hart-Scott-Rodino Act, the
Delaware General Corporation Law and the rules of the LSE, neither Photobition
nor Newco is required by law to give any notice to, make any filings with, or
obtain any Permit of any Governmental Body in order for it to consummate the
transactions contemplated by this Agreement.
5.4 BROKERS FEES. Except as set forth on Schedule 5.4 of the
Disclosure Schedule, neither Photobition, Newco nor any of their respective
Subsidiaries has any liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
5.5 PHOTOBITION'S LENDER'S COMMITMENT. Photobition has provided to
the Company a true, correct and complete copy of a letter from NatWest, dated
August 24, 1998, with respect to a proposed loan of pound sterling 35 million
from NatWest to Photobition in connection with the proposed Merger.
5.6 DISCLOSURE. The information to be provided to the Company by
Photobition or Newco which is included in the Definitive Proxy Materials will
comply with the Securities Exchange Act in all material respects, and will not
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made therein, in the light of the circumstances
under which they are made, not misleading.
6 COVENANTS.
6.1 COOPERATION.
(a) The Company, Photobition and Newco shall each deliver or cause
to be delivered to the other on the Closing Date, and at such other
times and places as shall
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be reasonably agreed to, such instruments as the other may reasonably
request for the purpose of carrying out this Agreement.
(b) Each Party hereto shall cooperate in obtaining all consents
and approvals required under this Agreement to effect the transactions
contemplated hereby.
6.2 ACCESS TO INFORMATION: CONFIDENTIALITY.
(a) Between the date of this Agreement and the Closing Date, the
Company will, and will cause its officers, employees, accountants,
financial advisors and other representatives to, afford Photobition and
its officers, directors, employees, counsel, auditors and advisors
reasonable access, upon reasonable notice during normal business hours
and at other reasonable times, to properties, books, contracts,
commitments, records, lenders and advisors of the Company in order to
permit Photobition to conduct its due diligence investigation of the
Company, including without limitation, access upon reasonable request
to the Company's and its Subsidiaries' employees, customers, vendors,
suppliers and creditors for due diligence inquiry. No information or
knowledge obtained in any investigation pursuant to this Section 6.2
shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the
Parties to consummate the Merger.
(b) Each Party (for the purposes of this Section 6.2(b) only,
Photobition and Newco being deemed the same Party) recognizes and
acknowledges that it had in the past, currently has, and in the future
may possibly have, access to certain confidential information of the
other Party and its Subsidiaries, such as lists of customers,
operational policies, and pricing and cost policies that are valuable,
special and unique assets of the other Party. Each Party agrees that,
until the Closing, it will not disclose confidential information with
respect to the other Party to any Person for any purpose or reason
whatsoever, except to authorized representatives of the Parties and
their respective counsel and other advisers, provided that such
advisers (other than counsel) first agree to the confidentiality
provisions of this Section 6.2(b), unless (i) such information becomes
known to the public generally through no fault of the disclosing Party,
(ii) disclosure is required by law, applicable securities exchange
requirements or the order of any Governmental Body under color of law,
or (iii) the disclosing party reasonably believes that such disclosure
is required in connection with the defense of a lawsuit against the
disclosing party, provided, that prior to disclosing any information
pursuant to clause (i), (ii), or (iii) above, the disclosing Party
shall give prior written notice thereof to the other Party and provide
such other Party with the opportunity to contest such disclosure and
shall cooperate with efforts to prevent such disclosure.
6.3 CONDUCT OF BUSINESS PENDING CLOSING. Except as set forth on
Schedule 6.3 of the Disclosure Schedule, between the date hereof and the
Effective Time, the Company will, and will cause each of the Company's
Subsidiaries to (except as agreed by Photobition, which agreement shall not be
unreasonably withheld or delayed):
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(i) conduct its and its Subsidiaries' business in the Ordinary
Course of Business;
(ii) use reasonable commercial efforts to preserve the goodwill of
the Company's and its Subsidiaries' respective customers,
employees, independent contractors, suppliers and others
having business relations with it to the extent consistent
with the Company's Ordinary Course of Business;
(iii) not make or incur any capital expenditures, except for any
single transaction in an amount not in excess of $25,000 or
$150,000 in the aggregate (excluding routine maintenance,
repair or replacement);
(iv) except pursuant to the exercise of outstanding Company Options
described in Section 4.4, not issue, deliver, sell, dispose
of, redeem, purchase, acquire, pledge or otherwise encumber
any shares of its capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of its capital stock;
(v) except for dividends of any subsidiary of the Company payable
to the Company, not declare, set aside for payment or pay any
dividends on, or make any other actual, constructive or deemed
distributions (whether in cash, stock or property) in respect
of, any of its capital stock or otherwise make any payments to
Company Stockholders in their capacity as such;
(vi) not alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure
or ownership of any Subsidiary;
(vii) not acquire by merger or consolidating with, or by purchasing
or by any other manner, any business, corporation, partnership
or other business organization;
(viii) not sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of any of its
properties or assets that are material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a
whole, except pursuant to an existing agreement, sales in the
Ordinary Course of Business for an amount not less than the
fair market value thereof, Permitted Liens and equipment
leases included under subparagraph (iii) above;
(ix) (A) not incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any
debt securities or other rights to acquire any debt
securities, guarantee any debt securities
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of another Person, enter into any "keep well" or other
agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the
economic effect of any of the foregoing, except to the extent
permitted by clause (B) of this paragraph and borrowings under
existing credit facilities, and other borrowings in the
Ordinary Course of Business and equipment lease financing
arrangements, or (B) not make (1) any loans, advances or
capital contributions to, or investments in, any other Person,
other than by the Company to any of its wholly-owned
Subsidiaries or by any of its Subsidiaries to the Company, or
another wholly-owned subsidiary thereof or (2) advances to
officers or employees for travel, business and entertainment
or relocation expenses other than in the Ordinary Course of
Business, and not in an amount in excess of $10,000 in the
aggregate at any one time outstanding;
(x) not pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than (i) payment, discharge,
settlement or satisfaction of the foregoing in the Ordinary
Course of Business, (ii) liabilities incurred in connection
with the Merger and the other transactions contemplated by the
Transaction Agreements or (iii) liabilities reflected or
reserved against in, or contemplated by, the financial
statement for the Most Recent Fiscal Quarter End;
(xi) not enter into any agreement providing for acceleration of
payment of any material obligation or performance of any
material benefit or payment or other consequence as a result
of a change of control of the Company or its Subsidiaries;
(xii) not permit any material insurance policy naming the Company or
its Subsidiaries as a beneficiary or loss payable payee to be
canceled or terminated unless it is replaced with a policy
providing comparative coverage;
(xiii) except in the Ordinary Course of Business, not make any
material Tax elections, settle or compromise any material Tax
liability or take or omit to take any other action, if any
such action or omission would have the effect of, in the
aggregate, materially increasing its Tax liabilities or
materially reducing its Tax assets;
(xiv) not settle or compromise any pending or threatened suit,
action or claim that relates to the transactions contemplated
by this Agreement;
(xv) not amend its Certificate of Incorporation or By-Laws;
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(xvi) not increase the compensation, benefits or severance payable
to any current or former officer, director or employee of the
Company, except for salary increases for such persons in the
Ordinary Course of Business; nor grant any bonuses except in
the Ordinary Course of Business and in an aggregate amount in
1998 not in excess of 110% of the aggregate amount of all
bonuses granted to employees in 1997, and unless prior to the
grant thereof the Company gives written notice of such
proposed bonus to Photobition; and not hire officers,
employees, agents, representatives or independent contractors
whose annual compensation is more than $100,000 or where such
hiring is not consistent with the past hiring and retention
practices of the Company and its Subsidiaries;
(xvii) not enter into, modify, amend or terminate any material
contract, except for such actions which are in the Ordinary
Course of Business and which in the aggregate do not have a
Material Adverse Effect upon the Company;
(xviii) not amend any of the terms of the Company Option Plans or
Company Options, including without limitation the vesting
thereof or grant any new options;
(xix) not make any change in any material accounting principle used
by it other than those required by GAAP or the SEC;
(xx) not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization (other than the
Merger); and
(xxi) not authorize any of, or commit or agree to take any of, the
foregoing actions.
6.4 NO SOLICITATION.
(a) After the date of this Agreement, the Company shall not, and
shall cause its Subsidiaries, and its and their respective officers, directors,
employees, financial advisors, attorneys, accountants and other representatives
not to, initiate or solicit from, provide any confidential information to, or
enter into any contract or agreement with, any Person (other than Photobition or
its affiliates) with respect to or for any Acquisition Proposal or participate
in any discussions or negotiations regarding any Acquisition Proposal. The
Company shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Person conducted heretofore
with respect to any Acquisition Proposal. In the event that any Person contacts
the Company or any of its officers, directors or employees, or to the Knowledge
of the Company, any of its representatives, with any Acquisition Proposal or
request for any information for the purpose of making an Acquisition Proposal,
the Company will promptly notify Photobition of the identity of such third party
and the nature and material terms, if any, of such Acquisition Proposal or
request for information.
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As used herein, the term "Acquisition Proposal" means a proposal for a merger,
sale of stock, sale of all or substantially all of the Company's assets, or
other similar transaction involving the Company or any of its Subsidiaries not
in the Ordinary Course of Business, including any Superior Proposal.
(b) Except as provided in Section 6.4(c), and subject to
compliance with Section 10.6, if applicable, neither the Board of Directors of
the Company nor any committee thereof shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Photobition the approval
or recommendation by the Board of Directors of the Company or such committee
thereof of the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or (iii) authorize
or otherwise cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement related to any
Acquisition Proposal (each, an "Acquisition Agreement").
(c) Notwithstanding the foregoing, the Company may furnish
information concerning its business, properties or assets to any Person, and may
negotiate and participate in discussions and negotiations with any Person
concerning an Acquisition Proposal if (x) such Person has on an unsolicited
basis first submitted a bona fide written Acquisition Proposal to the Company
which the Board of Directors of the Company determines in good faith that such
Acquisition Proposal is reasonably capable of being completed on the terms
proposed and would, if consummated, result in a superior transaction to the
Company's stockholders than the Merger (taking into account such factors deemed
relevant by the Board), (y) the Board of Directors of the Company is of the
opinion, in the exercise of its business judgment, that failure to provide such
information or access or to engage in such discussions or negotiations would
create a reasonable possibility that the Board of Directors of the Company would
violate its fiduciary duties to the stockholders of the Company under applicable
law (an Acquisition Proposal which satisfies clauses (x) and (y) being referred
to as a "Superior Proposal"), and (z) the Company gives Photobition prior
written notice of its engagement in such activities. Prior to furnishing
confidential information to, or entering into discussions or negotiations with,
any other Persons with respect to a Superior Proposal, the Company must obtain
from such other Persons a customary confidentiality agreement which agreement
may not include any provision calling for an exclusive right to negotiate with
such Persons and the Company must advise Photobition of the nature of such
confidential information delivered to such other Person reasonably promptly
following its delivery to the requesting party. Any information disclosed to
Photobition with respect to any such proposal or request shall be "Confidential
Information" within the meaning of Section 6.2(b) and be subject to the
provisions thereof.
(d) Nothing contained in this Section 6.4 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Securities Exchange Act or from making
any disclosure to the Company's stockholders if, in the good faith judgment of
the Board of Directors of the Company, after consultation with outside counsel,
failure so to disclose would be inconsistent with its obligations under
applicable law; provided, however, that neither the Company nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Agreement or
the Merger.
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(e) Subject to compliance with this Section 6.4 and Section 10.6
and prior to any meeting of the stockholders of the Company which has among its
purposes the approval of the Merger, the Board of Directors of the Company may
withdraw or modify its approval or recommendation of the Merger, approve or
recommend a Superior Proposal, or enter into an agreement with respect to a
Superior Proposal, provided that the Company shall have furnished Photobition
with written notice not later than 12:00 noon (New York time) at least five
business days in advance of the withdrawal or modification of its approval or
recommendation of the merger, the approval or recommendation of a Superior
Proposal, or the entering into of an agreement with respect to a Superior
Proposal.
6.5 REGULATORY MATTERS AND APPROVALS. Each of the Parties will
(and the Company will cause each of its Subsidiaries to) give any notice to,
make any filings with, and use its best efforts to obtain any authorizations,
consents, and approvals of any Governmental Body necessary to consummate the
transactions contemplated hereby. Without limiting the generality of the
foregoing:
(a) The Company will prepare and file with the SEC as soon as
practicable after the date of this Agreement preliminary proxy
materials under the Securities Exchange Act relating to the Special
Meeting. The Company will use its best efforts to respond to the
comments of the SEC thereon as soon as practicable. The Company will
provide Photobition with a draft of the proxy statement and any
amendments thereto prior to the filing thereof with the SEC in
sufficient time for Photobition to provide reasonable comments to the
form and content of the proposed disclosure. The Company will notify
Photobition promptly of the receipt of any comments from the SEC and of
any request by the SEC for amendments or supplements to the proxy
statement or for additional information, and will supply Photobition
with copies of all correspondence between the Company or any of its
representatives and the SEC with respect to the proxy statement. Any
fees payable in connection therewith shall be borne by the Company. The
Company will make any further filings (including amendments and
supplements) in connection therewith that may be necessary, proper or
advisable. Photobition will provide the Company with such information
and assistance in connection with the foregoing filings that the
Company may reasonably request or that the Company requires in order to
comply with the comments of the SEC.
(b) The Company will call a special meeting of its stockholders
(the "Special Meeting") as soon as practicable in order that the
stockholders may consider and vote upon the adoption of this Agreement
and the approval of the Merger in accordance with the Delaware General
Corporation Law. The Company will mail the Definitive Proxy Materials
to its stockholders as soon as practicable. The Definitive Proxy
Materials will contain the affirmative recommendation of the Board of
Directors of the Company in favor of the adoption of this Agreement and
the approval of the Merger; provided, however, that no director or
officer of the Company shall be required to violate any fiduciary duty
or other requirement imposed by law in connection therewith.
(c) Each of the Parties will comply with all notification and
other requirements of any anti-trust, competition or trade practice law
or regulations of any Governmental
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Body and file within two weeks after the date of this Agreement any
Notification and Report Forms and related material that it may be
required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the
Hart-Scott-Rodino Act, will use its reasonable efforts to obtain an
early termination of the applicable waiting period, and will make any
further filings pursuant thereto that may be necessary, proper or
advisable. Nothing in this Agreement will require either party to agree
to hold separate or to divest any of the businesses or assets of such
party or any of their respective subsidiaries or affiliates if such
holding separate or divestiture could reasonably be expected to have a
Material Adverse Effect on such Party. Any fees payable in connection
therewith shall be borne by Photobition.
6.6 DIRECTOR AND OFFICER RESIGNATIONS. The Company shall use
reasonable efforts to obtain a letter of resignation, effective as of the
Effective Time, from each person who is an officer or director of the Company or
any of its Subsidiaries.
6.7 INDEMNIFICATION OF COMPANY'S OFFERING DIRECTORS, ETC.
(a) Except as set forth in the Indemnity Agreement, the Company
shall, and, from and after the Effective Time the Surviving Corporation shall,
indemnify, defend, protect and hold harmless each person who is now, or has been
at any time prior to the date of this Agreement or who becomes such prior to the
Effective Time, an officer or director of the Company or any of its Subsidiaries
(the "Indemnified Parties") against (i) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was a director or officer of the Company or any
of its Subsidiaries, whether pertaining to any matter existing or occurring at
or prior to the Effective Time and whether asserted or claimed prior to, or at
or after, the Effective Time ("Indemnified Liabilities"), and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement, the Stock Option Agreement or the
transactions contemplated hereby or thereby; but, in each case, only to the
extent provided under the certificate or articles of incorporation, bylaws or
other constituent documents of the Company and its subsidiaries or any
indemnification agreement to which the Company or any of its subsidiaries is a
party as of the date of this Agreement, and provided, further, that such
indemnification shall only be to the fullest extent a corporation is permitted
under the applicable law of its jurisdiction of incorporation to indemnify its
own directors and officers, and such indemnification shall not be applicable to
any claims made against any Indemnified Party if a judgment or other final
adjudication established that (A) his or her acts or omissions were committed in
bad faith or were the result of active and deliberate dishonesty and were
material to the cause of action so deliberated, or (B) arising out of, based
upon or attributable to the gaining in fact of any financial profit or other
advantage to which he or she was not legally entitled. Any Indemnified Party
wishing to claim indemnification under this Section 6.7, upon learning of any
such claim, action, suit, proceeding or investigation, shall notify the Company
and the Surviving Corporation (but the failure to so notify an indemnifying
party shall not relieve it from any liability which it may
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have under this Section 6.7 except to the extent such failure prejudices such
party), and shall deliver to the Company (or after the Effective Time, the
Surviving Corporation) the undertaking contemplated by Section 145(e) of the
Delaware General Corporation Law.
(b) The provisions of this Section 6.7 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives.
7 CONDITIONS PRECEDENT TO OBLIGATIONS OF PHOTOBITION AND
NEWCO
The obligation of Photobition and Newco to effect the Merger is subject
to the satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
7.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All of the representations and warranties of the Company contained in this
Agreement shall be true, correct and complete in all material respects on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by the Company on or before the Closing Date shall have been duly
complied with, performed or satisfied in all material respects; and Photobition
shall have received a certificate signed by Gary Katz, Chairman and Chief
Executive Officer of the Company, dated the Closing Date, to such effect.
7.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
Merger shall be in effect, nor shall any proceeding brought by any Governmental
Body seeking any of the foregoing shall be pending.
7.3 NO MATERIAL ADVERSE CHANGE. There shall have been no changes
in the business, operations, affairs, properties, assets, liabilities,
obligations, profits or condition (financial or otherwise) of the Company or its
Subsidiaries, taken as a whole, which would have a Material Adverse Effect upon
the Company since the Most Recent Fiscal Quarter End; and Photobition shall have
received a certificate signed by Gary Katz, Chairman and Chief Executive Officer
of the Company, dated the Closing Date to such effect.
7.4 CONSENTS AND APPROVALS. All necessary consents of, and filings
with, any Governmental Body, relating to the consummation by the Company of the
transactions contemplated hereby, shall have been obtained and made. Any waiting
period applicable to the consummation of the Merger under the Hart-Scott-Rodino
Act shall have expired or been terminated, and no action by the Department of
Justice or Federal Trade Commission challenging or seeking to enjoin the
consummation of the transactions contemplated hereby shall be pending.
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7.5 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
received the Requisite Stockholder Approval.
7.6 GARY KATZ EMPLOYMENT AGREEMENT. The Employment Agreement
between Gary Katz and the Company shall be terminated concurrently with the
Merger, and Gary Katz and the Company shall have entered into a Consulting
Agreement in the form attached hereto as Exhibit 7.6.
7.7 OPTION PLANS. The Company Option Plans and Company Options
shall have been amended, supplemented or terminated to the extent requisite to
permit the termination of the rights of the holders thereof to receive Company
Common Stock or other securities or property of any Party or the Surviving
Corporation other than the right to receive the Company Option Holders' Merger
Consideration upon effectiveness of the Merger.
8 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligation of the Company to effect the Merger is subject to the
satisfaction or waiver, at or before the Effective Time, of the following
conditions and deliveries:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.
All of the representations and warranties of Photobition and Newco contained in
this Agreement shall be true, correct and complete in all material respects on
and as of the Closing Date with the same effect as though such representations
and warranties had been made as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by Photobition and Newco on or before the Closing Date shall have been
duly complied with, performed or satisfied in all material respects; and a
certificate to the foregoing effects dated the Closing Date and signed by the
President or any Vice President of Newco and a director of Photobition shall
have been delivered to the Company.
8.2 NO LITIGATION. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging the
Merger shall be in effect, nor shall any proceeding brought by any Governmental
Body seeking any of the foregoing shall be pending.
8.3 APPROVALS. Any waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Act shall have expired or been
terminated, and no action by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of the transactions
contemplated hereby shall be pending.
8.4 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
received the Requisite Stockholder Approval.
9 TERMINATION
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9.1 TERMINATION OF AGREEMENT. Any of the Parties may terminate
this Agreement with the prior authorization of its board of directors (whether
before or after stockholder approval) as provided below:
(i) The Parties may terminate this Agreement by mutual consent at
any time prior to the Effective Time;
(ii) Photobition and Newco may terminate this Agreement by giving
written notice to the Company at any time prior to the
Effective Time (A) in the event the Company has breached any
material representation, warranty, or covenant contained in
this Agreement in any material respect, Photobition or Newco
has notified the Company of the breach, and the breach has
continued without cure for a period of 30 days after the
notice of breach or (B) if the Closing shall not have occurred
on or before November 30, 1998 by reason of the failure of (1)
the Company to close, notwithstanding that the conditions
precedent to the Company's obligations to close set forth in
Article 8 have been satisfied, or (2) the condition precedents
set forth under Article 7 hereof (unless the failure results
from Photobition or Newco breaching any representation,
warranty or covenant contained in this Agreement) or (C) if
the Board of Directors of the Company or any committee thereof
shall have withdrawn its approval or recommendation of the
Merger and this Agreement, or approved or recommended any
Acquisition Proposal, or the Company shall have entered into
an Acquisition Agreement;
(iii) The Company may terminate this Agreement by giving written
notice to Photobition and Newco at any time prior to the
Effective Time (A) in the event Photobition or Newco has
breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the
Company has notified Photobition and Newco of the breach, and
the breach has continued without cure for a period of 30 days
after the notice of breach or (B) if the Closing shall not
have occurred on or before November 30, 1998 by reason of the
failure of (1) Photobition to close, notwithstanding that the
conditions precedent to Photobition's obligation to close set
forth in Article 7 have been satisfied, (2) the condition
precedent set forth in Section 8.1, or (3) any other condition
precedent under Article 8 hereof (unless the failure results
from the Company or any of its Subsidiaries breaching any
representation, warranty or covenant contained in this
Agreement), or (C) subject to compliance by the Company with
Sections 6.4 and 10.6, in connection with the acceptance of a
Superior Proposal; or
(iv) Any Party may terminate this Agreement by giving written
notice to the other Parties at any time after the Special
Meeting in the event this
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Agreement and the Merger fail to receive the Requisite
Stockholder Approval.
9.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 9.1, the party terminating this Agreement will promptly
notify the other party of such termination and the provision hereof pursuant to
which such termination is made. After such notice, all rights and obligations of
the Parties hereunder shall terminate without any liability of any Party to any
other Party (except for any liability of any Party then in breach); provided,
however, that the provisions contained in Sections 3.2, 6.2, 9.2 and Article 10
shall survive such termination.
10 GENERAL
10.1 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned, in whole or in part, by
operation of law or otherwise, by either party without the prior written consent
of the other party. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
10.2 ENTIRE AGREEMENT; AMENDMENT; WAIVER. The Transaction
Agreements set forth the entire understanding of the Parties hereto with respect
to the transactions contemplated hereby. The Disclosure Schedule is incorporated
herein by this reference and expressly made a part hereof. Any and all previous
agreements and understandings between or among the Parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement. This
Agreement shall not be amended or modified except by a written instrument duly
executed by each of the Parties hereto. Subject to applicable law, this
Agreement may be amended, modified and supplemented in any and all respects,
whether before or after the Special Meeting, by written agreement of the Parties
(by action of their respective Boards of Directors) at any time prior to the
Closing Date with respect to any terms contained herein; provided, however, that
after the Requisite Stockholder Approval, no such amendment, modification or
supplement shall reduce the amount or change the form of the Merger
Consideration. Any extension or waiver by any Party of any provision hereto
shall be valid only if set forth in an instrument in writing signed on behalf of
such Party.
10.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any Party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
10.4 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. The initial press
release with respect to the execution of this Agreement shall be a joint press
release acceptable to Photobition and the Company. Thereafter, for so long as
this Agreement is in effect, the Company and Photobition agree that they will
not, and will use their best efforts to cause their respective Subsidiaries and
affiliates and its and each of its Subsidiaries and affiliates directors,
officers, employees, advisors and other representatives not to, issue any press
release, public
40
<PAGE> 42
announcement or public statement or make any other public disclosure with
respect to the terms of this Agreement or any other facts relating to the
Merger, without the prior written approval of the other party as to the time of
issuance, extent of distribution, form and substance of such public disclosure;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or regulation or any listing or trading
agreement or rules concerning its publicly-traded securities (in which case the
disclosing Party will advise the other Party prior to making the disclosure in
sufficient time for the other Party to provide reasonable comments to the form
and content of the proposed disclosure).
10.5 EXPENSES. Except as otherwise provided by this Agreement, each
Party will bear their own respective expenses in connection with this Agreement
and the Merger (including without limitation legal, accounting and other
professional fees and due diligence expenses), and other related fees and
expenses.
10.6 TERMINATION FEES.
(a) If this Agreement is terminated by Photobition pursuant to
Section 9.1(ii)(B)(1) or 9.1(ii)(C) or by the Company or Photobition pursuant to
9.1(iv), because the Principal Stockholder or other Company Stockholders subject
to the Stockholders' Agreement fail to vote their respective shares of Company
Common Stock in favor of the Merger at the Special Meeting, the Company will pay
Photobition (provided the Company is not also entitled to terminate this
Agreement pursuant to Section 9.1(iii)(A) or (B)) the Termination Fee. If this
Agreement is terminated by the Company pursuant to Section 9.1(iii)(B) and at
the time of the termination of this Agreement an Acquisition Proposal has been
accepted by the Company, then the Company will pay Photobition the Termination
Fee.
(b) The Company acknowledges that the agreements contained in this
Section 10.6 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, Photobition would not enter into
this Agreement. Any payment of the Termination Fee will be compensation and
liquidated damages for the loss suffered by Photobition as a result of the
failure of the Merger to be consummated and as payment for all Photobition's
out-of-pocket costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby and to avoid the difficulty of determining
damages under the circumstances, and the Company will not have any other
liability to Photobition after such payment. The Termination Fee will be paid by
the Company to Photobition in immediately available funds within two business
days after the date of the event giving rise to the obligation to make such
payment occurs; provided, however, that the Company and its Subsidiaries may not
enter into any agreement providing for an Acquisition Proposal unless (i) at
least five business days prior thereto, the Company has provided Photobition
with the information required under Section 6.4 and (ii) the Company has paid
Photobition the Termination Fee.
10.7 SPECIFIC PERFORMANCE; REMEDIES. Each party hereto acknowledges
that the other Parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the covenants
or agreements contained in this Agreement, including without limitation, the
confidentiality obligations set forth in Section
41
<PAGE> 43
6.2. It is accordingly agreed that, in addition to any other remedies which may
be available upon the breach of any such covenants or agreements, each Party
hereto shall have the right to obtain injunctive relief to restrain a breach or
threatened breach of, or otherwise to obtain specific performance of, the other
Parties, covenants and agreements contained in this Agreement; provided,
however, that the provisions of Section 3.2 and 10.6 provide the sole and
exclusive remedies in respect of any loss, damages, expenses, costs or claims
therefor arising under the circumstances described therein, and provided,
further that the maximum liability of any Party hereto (for the purposes of this
proviso of Section 10.7, Photobition and Newco being deemed a single Party) for
any loss, damage, expenses or costs arising by reason of any breach of or
default under any provision hereof shall be $2,000,000.
10.8 INDEMNIFICATION BY PRINCIPAL STOCKHOLDER. If the closing of
the Merger occurs, then the Principal Stockholder shall indemnify, defend and
hold harmless Photobition, the Surviving Corporation and their respective
stockholders, officers, directors, employees and affiliates, from and against
all Damages (as defined in the Indemnity Agreement) in accordance with the terms
of the Indemnity Agreement.
10.9 NOTICES. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to Photobition, Newco or the Surviving Corporation to:
Photobition Group PLC
Eagle House
224 London Road
Mitcham
Surrey CR4 3HD
ENGLAND
Attn: Eddie Marchbanks, Chairman
and Steven Smith, Chief Financial Officer
(Telefax: 011-441-81-687-7007)
with a required copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, NY 10022
Attn: John J. Hyland, Esq.
(Telefax: (212) 755-7306)
If to the Company to:
Katz Digital Technologies, Inc.
Twenty-One Penn Plaza
42
<PAGE> 44
New York, NY 10001
Attn: Gary Katz, Chairman
(Telefax: (212) 502-6501)
and
Donald Flamm, Chief Financial Officer
(Telefax: (212) 502-6586)
with a required copy to:
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP
750 Lexington Avenue
New York, New York 10022
Attn: Murray L. Skala, Esq. and Geoffrey A. Bass, Esq.
(Telefax: (212) 888-7776)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given (i) as of the date so delivered (if delivered
personally or by telefax), (ii) on the fifth business day following dispatch (if
delivered by registered or certified mail), and (iii) on the second business day
following dispatch (if delivered by recognized courier service).
10.10 GOVERNING LAW. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of New York
without reference to the conflict of laws principles thereof. Any disputes
arising out of, in connection with or with respect to this Agreement, the
subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby shall be adjudicated
in a court of competent civil jurisdiction sitting in the City and State of New
York and nowhere else. Each of the Parties hereto hereby irrevocably submits to
the jurisdiction of such court for the purposes of any suit, civil action or
other proceeding arising out of, in connection with or with respect to this
Agreement, the subject matter hereof, the performance or non-performance of any
obligation hereunder, or any of the transactions contemplated hereby
(collectively, "Suit"). Each of the Parties hereto hereby waives and agrees not
to assert by way of motion, as a defense or otherwise in any such Suit, any
claim that it is not subject to the jurisdiction of the above courts, that such
Suit is brought in an inconvenient forum, or that the venue of such Suit is
improper. The Company hereby irrevocably designates and appoints Feder,
Kaszovitz, Isaacson, Weber, Skala & Bass LLP, 750 Lexington Avenue, New York, NY
10022-1200 to receive for it and on its behalf summonses and other legal process
in any Suit, and agrees that service upon Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass LLP shall constitute valid and effective service upon the Company.
Photobition and Newco each hereby irrevocably designate and appoint The
Corporation Trust Company, 1633 Broadway, New York, New York 10019, to receive
for it and on its behalf summonses and other legal process in any Suit, and each
agrees that service upon The Corporation Trust Company shall constitute valid
and effective service upon Newco or Photobition, as the case may be. Photobition
agrees that, so long as it has any rights or obligations under or arising out of
or in connection with this Agreement, the subject matter hereof or any of the
transactions contemplated hereby,
43
<PAGE> 45
it shall maintain The Corporation Trust Company or another competent Person to
act as a duly appointed agent for service of summonses and other legal process
in New York, New York. Nothing in this Agreement shall affect or diminish any
Party's right to serve summonses and other legal process in any other manner
permitted by law in connection with any Suit in the City and State of New York.
10.11 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable. If any provision shall be declared unenforceable due to its
amount, scope, breadth or duration, then it shall be modified without any
further action by the Parties as to the amount, scope, breadth or duration to
the maximum extent permitted by law and shall continue to be fully enforceable
as so modified.
10.12 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of
this Agreement is intended, nor will any provision be interpreted, to provide or
to create any third party beneficiary rights or any other rights of any kind in
any client, customer, affiliate, stockholder, employee or partner of any Party
hereto or any other Person; provided, however, that the provisions in Article 2
concerning the payment of the Merger Consideration are intended for the benefit
of the Company Stockholders.
10.13 MUTUAL DRAFTING. This Agreement is the mutual product of the
Parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the Parties, and in
interpreting the provisions of this Agreement, shall not be construed for or
against any Party hereto.
10.14 DISCLOSURE SCHEDULE. Any information contained in the
Disclosure Schedule with respect to any section, paragraph or other provisions
of this Agreement shall be deemed made with respect to each other section,
paragraph or clause of this Agreement provided that it is reasonably apparent
from the context of the information that such information relates to such other
section, paragraph, or clause of this Agreement.
10.15 NO OTHER REPRESENTATIONS. 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; provided
that it is reasonably apparent from the context of the Disclosure Schedule that
such information relates to such other section, paragraph or clause of this
Agreement.
44
<PAGE> 46
IN WITNESS WHEREOF, the Parties hereto and the Escrowee have executed
this Agreement as of the day and year first above written.
PHOTOBITION GROUP PLC
By: /S/ J. E. T. MARCHBANKS
-----------------------------------------
Name: J.E.T. Marchbanks
Title:
KDT ACQUISITION CORP.
By: /S/ J.E.T. MARCHBANKS
-----------------------------------------
Name: J.E.T. MARCHBANKS
Title:
KATZ DIGITAL TECHNOLOGIES, INC.
By: /S/ GARY KATZ
-----------------------------------------
Name: GARY KATZ
Title: Chairman and Chief Executive Officer
FEDER, KASZOVITZ, ISAACSON,
WEBER, SKALA & BASS LLP, as
Escrowee, solely for the
purposes of Section 3.2
By: /S/ MURRAY L. SKALA
-----------------------------------------
Name: MURRAY L. SKALA
Title: Partner
<PAGE> 47
KATZ DIGITAL TECHNOLOGIES, INC. / PHOTOBITION GROUP PLC
DISCLOSURE SCHEDULE
<TABLE>
<S> <C>
4.1(B) .............. Wholly-Owned Subsidiaries of Katz Digital Technologies, Inc.
4.3 .............. No Conflict; Notices
4.5 .............. Transaction in Capital Stock; Accounting Treatment
4.5A .............. Adjustments to the ADS Merger Consideration
4.5B .............. Options Schedule
4.9 .............. Undisclosed Liabilities
4.10 .............. Intellectual Property
4.11 .............. Environmental Matters
4.11A .............. Disposal Agreement with Greymart Environmental Services
4.11B .............. ECB Violations
4.12 .............. Labor and Employment Matters
4.13 .............. Employee Benefit Plan
4.14 .............. Taxes
4.15 .............. Litigation
4.16 .............. Absence of Changes
4.16A .............. Unaudited Management Report for July 1998
4.16B .............. Commission Structure for Sales People
4.18 .............. Contracts
4.20 .............. Permits
4.21 .............. Insurance
4.23 .............. Broker's Fees
6.3 .............. Conduct of Business Pending Close
6.3A .............. CompendiumConnection
</TABLE>
<PAGE> 48
SCHEDULE 4.1(b)
Subsidiaries
Advanced Digital Services, Inc. (a New York corporation)
Katz N.Y. Acquisition, Inc. (a Delaware corporation)
<PAGE> 49
SCHEDULE 4.3
No Conflicts; Notices
The following contracts and agreement may require notice to other parties or
consent to the merger:
- - LOAN AGREEMENT DATED AS OF JANUARY 8, 1998 AMONG KATZ DIGITAL
TECHNOLOGIES, INC. AND THE BANK OF NEW YORK.
- - IMPROVEMENT LOAN AGREEMENT DATED JUNE 22, 1995 BETWEEN 575 REALTIES, INC.,
AND SPEED GRAPHICS, INC.
- - $500,000.00 NON-NEGOTIABLE CONVERTIBLE PROMISSORY NOTE FROM KATZ DIGITAL
TECHNOLOGIES, INC. TO THE SARABANDE PRESS, INC. THE UNPAID BALANCE IS
$166,663.33. SUBJECT TO CONVERSION, THE POTENTIAL NUMBER OF SHARES TO BE
GIVEN IN LIEU OF CASH PAYMENTS WOULD BE 33,033.
- - LEASE AGREEMENT BETWEEN GHG REALTY AND KATZ TYPOGRAPHERS, INC., FOR THE
PROPERTY AT 360 WEST 31ST STREET includes the following:
Transfer of a majority of the stock of a corporate Tenant is not
deemed an assignment when involving another corporation into or with
which Tenant is merged or substantially all of Tenant's assets are
transferred, which is for a good business purpose and not
principally for the purpose of transferring the leasehold estate
created, and provided further, that the assignee has a net worth of
at least equal to or In excess of the net worth of the Tenant
immediately prior to such merger or transfer.
- - LEASE AGREEMENT BETWEEN 575 REALTIES, INC. AND SPEED GRAPHICS, INC. FOR
THE PROPERTY AT 228 EAST 45TH STREET includes the following:
(Paragraph) 38 of Rider: No assignment without Landlord's written
consent. (b) - Tenant will pay Landlord's attorneys' fees in
connection with any proposed assignment, not to exceed $1,500; (d)
Notwithstanding (Paragraph) 38(a), Tenant may upon prior written
notice to Landlord but without any requirement to obtain Landlord's
consent, assign its interest in the Lease to a "successor
corporation," defined, inter alia, as a corporation "acquiring the
Lease and the term and the estate hereby granted, the goodwill and
all or substantially all of the other property and assets of Tenant
. . ., provided that, immediately after giving effect to . . . such
acquisition and assumption . . . the corporation . . . acquiring
such assets and assuming such liabilities . . . shall have assets,
capitalization and net worth, similarly determined, equal to or
greater than that of Tenant at the beginning of the term of this
Lease." 38(e) - If an assignment pursuant to (Paragraph) 38(d) is to
take place, Tenant must first give Landlord a duplicate original
instrument of assignment and assumption, in form and substance
reasonably satisfactory to Landlord, duly executed by Tenant and
assignee, within 10 days after such execution.
<PAGE> 50
- - LEASE AGREEMENT BETWEEN 342 MADISON AVENUE ASSOCIATES, LP AND SPEED
GRAPHICS, INC. FOR THE PROPERTY AT 342 MADISON AVENUE includes the
following:
Pursuant to Schedule B - assignment is not permitted without
Landlord's written consent, however, "(1) If Tenant is a
corporation, the assignment or transfer of this lease, and the term
and estate hereby granted, to any corporation into which Tenant is
merged or with which Tenant is consolidated or to an entity to which
substantially all of Tenant's assets are transferred (provided such
transfer of assets is for a good business purpose and not
principally for the purpose of transferring the leasehold estate
created hereby and provided further that the transferee has a net
worth at least equal to or in excess of the net worth of Tenant
immediately prior to such transfer) (such corporation with which
Tenant is merged or consolidated and such entity to which Tenant's
assets are transferred being herein in this Schedule D called
"Assignee") without the prior written consent of Landlord shall not
be deemed to be prohibited hereby . . . ."
- - LEASE AGREEMENT BETWEEN FIFTH AVENUE PARTNERS, L.P., AND SPEED GRAPHICS,
INC. FOR THE PROPERTY AT 19 WEST 21ST STREET includes the following:
(Paragraph) 49.1 of Rider - "Tenant shall not assign this Lease or
sublet the Demised Premises or any part thereof without the prior
written consent of owner, which consent shall not be unreasonably
withheld or delayed. For purposes of this Lease, an assignment shall
include a sale of Tenant's business or any change in ownership of
Tenant, except that an assignment is permitted without Owner's
consent in the following circumstances: 1. bona fide sale of
Tenant's business, either by an assignment of this Lease or the sale
of Tenant's stock . . ."
- - LEASE AGREEMENT BETWEEN CABLE BUILDING ASSOCIATES AND KATZ DIGITAL
TECHNOLOGIES, INC. FOR THE PROPERTY AT 611 BROADWAY includes the
following:
The transfer of a majority of the stock of a corporate Tenant shall
be deemed an assignment. Assignment is not permitted without prior
consent of the Landlord.
- - LEASE AGREEMENT BETWEEN CHARTER BUILDING AND KATZ DIGITAL TECHNOLOGIES,
INC. FOR THE PROPERTY AT 5300 WEST ATLANTIC AVENUE, DELRAY BEACH, FL
includes the following:
The provision prohibiting assignment without prior consent of the
Landlord shall not apply to transactions with a corporation into or
with which Tenant is merged or to which substantially all of
Tenant's assets are transferred provided that (a) the successor to
the Tenant has a net worth at least equal to the greater of (I) the
net worth of the Tenant immediately prior to such merger or (ii) the
net worth of the
Tenant on the date of this lease; and (b) proof of such net worth
shall have been delivered to the Landlord 10 days prior to the
effective date of such transaction.
LEASE AGREEMENT FOR THE PROPERTY AT 27 EAST 31ST STREET.
<PAGE> 51
Equipment Leases and Related Agreements:
1. Lease dated November 29, 1994, between Speed and Canon Financial Services,
Inc., regarding NC500552 CLC 800.
2. Lease dated as of December, 1995, between Speed and Canon Financial
Services, Inc., regarding two film Scanner III.
3. Master Equipment Lease Agreement dated as of April 25, 1996, between Speed
and Colonial Pacific Leasing Corp., as amended.
4. Guaranty Agreement dated as of April 25, 1996 made by Ronald Krivosheiw in
favor of Colonial Pacific Leasing Corp.
5. Equipment Lease Guaranty dated April 11, 1996, made by Ronald Krivosheiw
in favor of Colonial Pacific Leasing Corporation.
6. 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.
7. Equipment Lease Agreement, 1995, between Katz Typographers, Inc. and the
CIT Group Equipment Financing, Inc.
8. 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.
9. Purchase Agreement dated January 31, 1996, between Speed and Durst ACS
Inc., regarding Durst Lamda 130 Large Format Digital Laser Imager.
10. Equipment Lease Agreement dated as of November 22, 1993, between Speed and
Eastman Kodak Credit Corporation, regarding Agfa SelectSet 7000, etc.
11. Assumption Agreement dated as of January 23, 1995, among Speed, Finest
Photoprint and AT&T Capital Leasing Services/Eaton Financial Corp.
12. Equipment Lease dated October 26, 1994, between Speed and European
American Bank, as assignee of Gramercy Leasing Services, Inc., regarding
photographic/production equipment.
13. 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.
<PAGE> 52
14. 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.
15. Master Lease Agreement dated as of March 15, 1995, between Speed and
General Electric Capital Corporation, as amended.
16. 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.
17. Master Lease Agreement dated as of October 23, 1995, between Speed and GE
Capital Corp.
18. Master Lease Agreement dated as of May 20, 1997, between Speed and
Gramercy Leasing Services, Inc., Schedule 1, Schedule 2, Schedule 3.
19. 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.
20. Agreement of Sale dated as of December 7, 1995, between Speed and Scitex
America Corp.; Lease Finance Proposal dated January 17, 1996; Interim
Funding Rider dated February 15, 1996; Assignment of Agreement of Sale;
Master Lease Agreement with an effective date of October 23, 1995.
21. 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.
22. 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.
23. 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.
24. Equipment Lease Agreement dated May 30, 1995 between Speed and Tilden
Financial Corp., regarding Heidelberg GTODIV 4 color press.
25. Master Lease dated March 12, 1996, between Speed and Summit Leasing
Corporation (formerly UJB Leasing), as amended.
<PAGE> 53
26. 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.
27. 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.
28. 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.
29. Lease Agreement dated September 17, 1997 between Speed and Water Cure
Systems, Inc., regarding counter top water filtration cooler.
30. Lease Agreement dated as of October 3, 1995, between Speed and Tokai
Financial Services, Inc.
31. Master Lease Agreement dated October 23, 1995, between Speed and GE
Capital Corp., regarding IRIS 3047 with Colorbase.
32. Xerox Order Agreement dated May 8, 1996, between Speed and Xerox Corp.,
regarding 5790 Edit Color Copier (2 agreements).
33. 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.
34. Master Lease Agreement dated June 16, 1995, between ADS and General
Electric Capital Corp.
35. Master Lease Agreement dated August 12, 1996, between ADS and General
Electric Capital Corp.
36. Telephone Equipment Lease, dated August 17, 1995, Between ADS and TIE
National Leasing Corp.
37. Lease Agreement dated September 19, 1995, between ADS and Quantum Lease
Associates, Ltd. n/k/a Colonial Pacific Leasing.
7
<PAGE> 54
SCHEDULE 4.5
Transactions in Capital Stock; Accounting Treatment
- - Warrant Agreement dated March 25, 1996 between Katz Digital Technologies,
Inc. and Whale Securities Co., L.P. The warrants from this agreement
(160,000) have not yet been exercised.
- - $500,000.00 Non-Negotiable Convertible Promissory Note from Katz Digital
Technologies, Inc. to The Sarabande Press, Inc. The unpaid balance is
$166,663.33. Subject to conversion, the potential number of shares to be
given in lieu of cash payments would be 33,033.
- - Stock Option Agreement dated July 31, 1997 between Katz Digital
Technologies, Inc. and Gary Ritkes (options granted for 120,000 shares)
and between Katz Digital Technologies, Inc. and David Katz (options
granted for 120,000 shares). Of those options 80,000 shares are subject to
accelerate based on net revenue goals for the year 1999 and 2000. See
attached Schedule 4.5-B.
- - Adjustment to the ADS Merger Consideration - noted on the attached
Schedule 4.5-A
- - Options Schedule for all outstanding options (except those under the
Warrant Agreement and Convertible Promissory Note listed above) - See
attached Schedule 4.5-B
8
<PAGE> 55
Schedule 4.5A
ADVANCED DIGITAL SERVICES, INC.
ADDITIONAL ACQUISITION CONSIDERATION
(BASED ON RECEIVABLES COLLECTIONS AFTER 90 DAYS BUT PRIOR TO
ONE YEAR AFTER ACQUISITION)
<TABLE>
Merger Consideration Allocation
Total -------------------------------------
Collections Cash (31%) Stock (53%) Note (16%)
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Total receivables collections after
expiration of 90 day period $124,619.87 $38,632.16 $66,048.53 $19,939.18
Cash actually paid out to DK & GR 124,619.87
-------------------------------------
Overpaid (Underpaid) 85,987.71 (66,048.53) (19,939.18)
Number of shares @ $2.7688 23,855
CALCULATION OF CORRECTION:
Final amount of note issued at closing 70,611.00
Payments on the above note through July 31, 1998 (14,122.20)
Additional note from post-90 day collections 19,939.18
-----------
76,427.98
cash due to Katz from overpayments 85,987.71
-----------
Repayment due to Katz Digital 9,559.73
-----------
Each 4,779.87
</TABLE>
/s/ David Katz
Agreed 8/26/98
/s/ Gary Ritkes
Agreed 8/27/98
<PAGE> 56
Schedule 4.5-B
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ACTIVITY IN 1998 VESTED AS OF -
GRANT EXPIRE OPTION OUTSTANDING ---------------- OUTSTANDING --------------
NAME DATE DATE PRICE 12/31/97 GRANTS CANCELS 9/30/98 12/31/96 12/31/97
---- ---- ---- ----- -------- ------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advanti, Haresh* 3/25/96 3/25/01 $ 5.0000 - -
Barsky, Geoffrey 3/25/96 3/25/01 $ 5.0000 12,000 12,000 4,000
Cohen, Mitchell* 3/25/96 3/25/01 $ 5.0000 - -
Dziomba, Eugene 3/25/96 3/25/01 $ 5.0000 5,000 5,000 1,667
Elkins, Stanley 3/25/96 3/25/01 $ 5.0000 25,000 25,000 8,334
Everett, Montague* 3/25/96 3/25/01 $ 5.0000 - -
Floro, Gregory 3/25/96 3/25/01 $ 5.0000 5,000 5,000 1,667
Gambuzza, Mario* 3/25/96 3/25/01 $ 5.0000 - -
Gittelman, Amy 3/25/96 3/25/01 $ 5.0000 5,000 5,000 1,667
Goldman, Rikki 3/25/96 3/25/01 $ 5.0000 500 500 167
Gordon, Juanita 3/25/96 3/25/01 $ 5.0000 5,000 5,000 1,667
Greene, Art* 3/25/96 3/25/01 $ 5.0000 - -
Greene, Howard* 3/25/96 3/25/01 $ 5.0000 - -
Harris, Darrell 3/25/96 3/25/01 $ 5.0000 1,000 1,000 334
Hing, Neil 3/25/96 3/25/01 $ 5.0000 1,000 1,000 334
Israel, Mike 3/25/96 3/25/01 $ 5.0000 1,000 1,000 1,000
Katz, Helene 3/25/96 3/25/01 $ 5.0000 12,000 12,000 4,000
Lekhraj, Rita 3/25/96 3/25/01 $ 5.0000 500 500 167
Lizzo, Carolyn 3/25/96 3/25/01 $ 5.0000 500 500 167
Miller, Scott 3/25/96 3/25/01 $ 5.0000 5,000 5,000 5,000
Moss, Michelle* 3/25/96 3/25/01 $ 5.0000 - -
O'Connell, Michael 3/25/96 3/25/01 $ 5.0000 12,000 12,000 4,000
Powell, Frank* 3/25/96 3/25/01 $ 5.0000 - -
Pratt, Stephen* 3/25/96 3/25/01 $ 5.0000 500 500 -
Rohas, Ignacio* 3/25/96 3/25/01 $ 5.0000 - -
Roopnaraine, Ballram 3/25/96 3/25/01 $ 5.0000 500 500 167
Roopnarine, Doodnaut* 3/25/96 3/25/01 $ 5.0000 500 500 -
Russell, Peter* 3/25/96 3/25/01 $ 5.0000 - -
Schaefer, William* 3/25/96 3/25/01 $ 5.0000 - -
Schwarz, Charles 3/25/96 3/25/01 $ 5.0000 500 500 167
Sklar, Lisa 3/25/96 3/25/01 $ 5.0000 12,000 12,000 4,000
Sklar, Michael 3/25/96 3/25/01 $ 5.0000 12,000 12,000 4,000
Strauber, Linda 3/25/96 3/25/01 $ 5.0000 5,000 5,000 1,667
Timem, John 3/25/96 3/25/01 $ 5.0000 25,000 25,000 8,334
Torres, Joseph 3/25/96 3/25/01 $ 5.0000 1,000 1,000 334
Wickline, Arthur* 3/25/96 3/25/01 $ 5.0000 - -
Scala, Murray 3/25/96 3/25/06 $ 5.0000 20,000 20,000 20,000
Ehrlich, Burtt 3/25/96 3/25/06 $ 5.0000 20,000 20,000 20,000
Grudberg, Ronald 3/25/96 3/25/06 $ 5.0000 20,000 20,000 20,000
Esposito, Anthony 4/1/96 4/1/01 $ 5.7500 25,000 25,000 8,334
Freedman, Joseph 8/1/96 8/1/01 $ 4.7500 25,000 25,000 8,334
Gittelman, Amy 8/12/96 8/12/01 $ 4.5000 5,000 5,000 1,667
Greenberg, Steven* 9/3/96 9/3/01 $ 4.0000 -
-----------------------------------------------------------------
TOTAL 1996 262,500 1,000 261,500 61,000 70,175
-----------------------------------------------------------------
-
Skala, Murray 1/1/97 1/1/07 $ 3.1250 5,000 5,000 5,000
Ehrlich, Burtt 1/1/97 1/1/07 $ 3.1250 5,000 5,000 5,000
Grudberg, Ronald 1/1/97 1/1/07 $ 3.1250 5,000 5,000 5,000
Katz, Gary* 2/20/97 2/20/02 $ 2.7500 - -
Katz, Gary 2/20/97 2/20/02 $ 2.7500 25,000 25,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
VESTED AS OF
------------
NAME 9/30/98 CUMUL 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
---- ------- ----- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Advanti, Haresh
Barsky, Geoffrey 4,000 8,000 4,000
Cohen, Mitchell* -
Dziomba, Eugene 1,667 3,334 1,666
Elkins, Stanley 8,333 16,667 8,333
Everett, Montague -
Floro, Gregory 1,667 3,334 1,666
Gambuzza, Mario* -
Gittelman, Amy 1,667 3,334 1,666
Goldman, Rikki 167 334 166
Gordon, Juanita 1,667 3,334 1,666
Greene, Art* -
Greene, Howard* -
Harris, Darrell 333 667 333
Hing, Neil 333 667 333
Israel, Mike 1,000
Katz, Helene 4,000 8,000 4,000
Lekhraj, Rita 167 334 166
Lizzo, Carolyn 167 334 166
Miller, Scott 5,000
Moss, Michelle* -
O'Connell, Michael 4,000 8,000 4,000
Powell, Frank* -
Pratt, Stephen* -
Rohas, Ignacio* -
Roopnaraine, Ballram 167 334 166
Roopnarine, Doodnaut* -
Russell, Peter* -
Schaefer, William* -
Schwarz, Charles 167 334 166
Sklar, Lisa 4,000 8,000 4,000
Sklar, Michael 4,000 8,000 4,000
Strauber, Linda 1,667 3,334 1,666
Timem, John 8,333 16,667 8,333
Torres, Joseph 333 667 333
Wickline, Arthur* -
Scala, Murray 20,000
Ehrlich, Burtt 20,000
Grudberg, Ronald 20,000
Esposito, Anthony 8,333 16,667 8,333
Freedman, Joseph 8,333 16,667 8,333
Gittelman, Amy 1,667 3,334 1,666
Greenberg, Steven* -
-----------------------------------------
TOTAL 1996 65,168 196,343 - 65,157
-----------------------------------------
Skala, Murray 5,000
Ehrlich, Burtt 5,000
Grudberg, Ronald 5,000
Katz, Gary* -
Katz, Gary 8,334 8,334 8,333 8,333
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<PAGE> 57
Schedule 4.5-B
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ACTIVITY IN 1998 VESTED AS OF -
GRANT EXPIRE OPTION OUTSTANDING ---------------- OUTSTANDING --------------
NAME DATE DATE PRICE 12/31/97 GRANTS CANCELS 9/30/98 12/31/96 12/31/97
---- ---- ---- ----- -------- ------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Flamm, Donald 3/18/97 3/18/02 $ 3.0000 35,000 35,000
Barsky, Geoffrey 3/18/97 3/18/02 $ 3.0000 5,000 5,000
O'Connell, Michael 5/15/97 5/15/02 $ 3.2500 5,000 5,000
Chipurnoi, Herbert 5/27/97 5/27/02 $ 2.8750 12,500 12,500
Chipurnoi, Stanley 5/27/97 5/27/02 $ 2.8750 12,500 12,500
Robert Natt* 6/26/97 6/26/02 $ 2.8750 500 500 -
Darrell Harris 6/26/97 6/26/02 $ 2.8750 500 500
Eugene Dziomba 6/26/97 6/26/02 $ 2.8750 5,000 5,000
Burtt Ehrlich 7/1/97 7/1/07 $ 2.6250 5,000 5,000 5,000
Murray L. Skala 7/1/97 7/1/07 $ 2.6250 5,000 5,000 5,000
Ronald Grudberg 7/1/97 7/1/07 $ 2.6250 5,000 5,000 5,000
Gary Katz 9/3/97 9/3/02 $ 3.8500 25,000 25,000
Michael Sklar 9/24/97 9/24/02 $ 5.1875 50,000 50,000
Geoffrey Barsky 9/24/97 9/24/02 $ 5.1875 25,000 25,000
Greg Floro 9/24/97 9/24/02 $ 5.1875 2,000 2,000
Joseph Torres 9/24/97 9/24/02 $ 5.1875 1,000 1,000
John Timen 9/24/97 9/24/02 $ 5.1875 2,500 2,500
Neil Hing 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Dino Garcia 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Carmen Laube* 9/24/97 9/24/02 $ 5.1875 1,000 1,000 -
Tom Carlone 9/24/97 9/24/02 $ 5.1875 1,000 1,000
James Mollo* 9/24/97 9/24/02 $ 5.1875 1,000 1,000 -
Mary Hovey* 9/24/97 9/24/02 $ 5.1875 1,000 1,000 -
Jeff Harris 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Russell Felber 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Sam Wong 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Farah Ali 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Leon Sims 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Megan Pugh 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Amy Zahn 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Alice Greenblatt 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Rikki Goldman 9/24/97 9/24/02 $ 5.1875 1,000 1,000
Chris Valero 9/24/97 9/24/02 $ 5.1875 500 500
Charlie Zanelotti 9/24/97 9/24/02 $ 5.1875 500 500
Nancy Baum 9/24/97 9/24/02 $ 5.1875 500 500
Carl Dreyer 9/24/97 9/24/02 $ 5.1875 500 500
Charles Susty 9/24/97 9/24/02 $ 5.1875 500 500
John Cusmano 9/24/97 9/24/02 $ 5.1875 1,500 1,500
Derek Awalt 9/24/97 9/24/02 $ 5.1875 1,500 1,500
Carolyn Lizzo 9/24/97 9/24/02 $ 5.1875 2,500 2,500
Greg Rogan 9/24/97 9/24/02 $ 5.1875 2,500 2,500
Lisa Sklar 9/24/97 9/24/02 $ 5.1875 20,000 20,000
Michael Windslow* 9/24/97 9/24/02 $ 5.1875 500 500 -
Burtt Ehrlich 10/1/97 10/1/07 $ 5.0000 5,000 5,000 5,000
Murray L. Skala 10/1/97 10/1/07 $ 5.0000 5,000 5,000 5,000
Ronald L. Grudberg 10/1/97 10/1/07 $ 5.0000 5,000 5,000 5,000
TOTAL 1997 297,500 4,000 293,500 - 45,000
DECEMBER 31, 1997 PLAN TO DATE 560,000 5,000 555,000 61,000 115,175
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
VESTED AS OF
------------
NAME 9/30/98 CUMUL 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
---- ------- ----- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Flamm, Donald 11,667 11,667 11,667 11,666
Barsky, Geoffrey 1,667 1,667 1,667 1,666
O'Connell, Michael 1,667 1,667 1,667 1,666
Chipurnoi, Herbert 4,167 4,167 4,167 4,166
Chipurnoi, Stanley 4,167 4,167 4,167 4,166
Robert Natt*
Darrell Harris 167 167 167 166
Eugene Dziomba 1,667 1,667 1,667 1,666
Burtt Ehrlich 5,000
Murray L. Skala 5,000
Ronald Grudberg 5,000
Gary Katz 8,334 8,334 8,333 8,333
Michael Sklar 16,667 16,667 16,667 16,666
Geoffrey Barsky 8,334 8,334 8,333 8,333
Greg Floro 667 667 667 666
Joseph Torres 334 334 333 333
John Timen 834 834 833 833
Neil Hing 334 334 333 333
Dino Garcia 334 334 333 333
Carmen Laube*
Tom Carlone 334 334 333 333
James Mollo*
Mary Hovey* -
Jeff Harris 334 334 333 333
Russell Felber 334 334 333 333
Sam Wong 334 334 333 333
Farah Ali 334 334 333 333
Leon Sims 334 334 333 333
Megan Pugh 334 334 333 333
Amy Zahn 334 334 333 333
Alice Greenblatt 334 334 333 333
Rikki Goldman 334 334 333 333
Chris Valero 167 167 167 166
Charlie Zanelotti 167 167 167 166
Nancy Baum 167 167 167 166
Carl Dreyer 167 167 167 166
Charles Susty 167 167 167 166
John Cusmano 500 500 500 500
Derek Awalt 500 500 500 500
Carolyn Lizzo 834 834 833 833
Greg Rogan 834 834 833 833
Lisa Sklar 6,667 6,667 6,667 6,666
Michael Windslow* -
Burtt Ehrlich 5,000
Murray L. Skala 5,000
Ronald L. Grudberg 5,000
TOTAL 1997 82,851 127,851 - 82,832 82,817 -
DECEMBER 31, 1997 PLAN TO DATE 148,019 324,194 - 147,989 82,817 -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<PAGE> 58
Schedule 4.5-B
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ACTIVITY IN 1998 VESTED AS OF -
GRANT EXPIRE OPTION OUTSTANDING ---------------- OUTSTANDING --------------
NAME DATE DATE PRICE 12/31/97 GRANTS CANCELS 9/30/98 12/31/96 12/31/97
---- ---- ---- ----- -------- ------ ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Burtt Ehrlich 1/1/98 1/1/08 $ 3.7500 5,000 5,000
Murray L. Skala 1/1/98 1/1/08 $ 3.7500 5,000 5,000
Ronald L. Grudberg 1/1/98 1/1/08 $ 3.7500 5,000 5,000
John Sheehan 1/9/98 1/8/03 $ 3.8750 27,500 27,500
Robert Curran 1/9/98 1/8/03 $ 3.8750 27,500 27,500
Burtt Ehrlich 4/1/98 4/1/08 $ 4.6250 5,000 5,000
Murray L. Skala 4/1/98 4/1/08 $ 4.6250 5,000 5,000
Ronald L. Grudberg 4/1/98 4/1/08 $ 4.6250 5,000 5,000
Robert Heck 5/11/98 5/11/03 $ 6.2500 30,000 30,000
John Sheehan 5/11/98 5/11/03 $ 6.2500 2,500 2,500
Robert Curran 5/11/98 5/11/03 $ 6.2500 2,500 2,500
Scott Krivosheiw 5/11/98 5/11/03 $ 6.2500 20,000 20,000
Bob Murphy 5/11/98 5/11/03 $ 6.2500 20,000 20,000
John De Acutis 5/11/98 5/11/03 $ 6.2500 15,000 15,000
George Fanno 5/11/98 5/11/03 $ 6.2500 15,000 15,000
Gary Semon 5/11/98 5/11/03 $ 6.2500 15,000 15,000
Larry Lebrocq 5/11/98 5/11/03 $ 6.2500 15,000 15,000
Pat Conides 5/11/98 5/11/03 $ 6.2500 10,000 10,000
Bob Rudolph 5/11/98 5/11/03 $ 6.2500 10,000 10,000
Carolyn Bryant 5/11/98 5/11/03 $ 6.2500 10,000 10,000
Tony Loiero 5/11/98 5/11/03 $ 6.2500 7,500 7,500
Jeff Carnesi 5/11/98 5/11/03 $ 6.2500 7,500 7,500
Gary Chipurnoi 5/11/98 5/11/03 $ 6.2500 7,500 7,500
George Brosnan 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Dorothy Cherbavaz 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Jay Seigerman 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Bruce Ferguson 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Marie Dick* 5/11/98 5/11/03 $ 6.2500 5,000 5,000 -
Geoffrey Chin 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Pete Carlucci 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Jean Lee 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Terry Henry 5/11/98 5/11/03 $ 6.2500 5,000 5,000
Anthony Hernandez 5/11/98 5/11/03 $ 6.2500 2,500 2,500
Dave Holgate 5/11/98 5/11/03 $ 6.2500 2,500 2,500
Bob Dito 5/11/98 5/11/03 $ 6.2500 2,000 2,000
Glenn Garcia 5/11/98 5/11/03 $ 6.2500 2,000 2,000
Oscar Arguinzoni 5/11/98 5/11/03 $ 6.2500 2,000 2,000
Maurice Rust 5/11/98 5/11/03 $ 6.2500 1,500 1,500
Bob Lawton 5/11/98 5/11/03 $ 6.2500 1,500 1,500
Tino Paduani* 5/11/98 5/11/03 $ 6.2500 -
Joe Ragusa 5/11/98 5/11/03 $ 6.2500 1,500 1,500
Rob Mangini 5,000 5,000
TOTAL 1998 338,000 5,000 333,000 - -
TOTAL PLAN TO DATE 560,000 338,000 10,000 888,000 61,000 115,175
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
VESTED AS OF
------------
NAME 9/30/98 CUMUL 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
---- ------- ----- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Burtt Ehrlich 5,000 5,000
Murray L. Skala 5,000 5,000
Ronald L. Grudberg 5,000 5,000
John Sheehan - 9,167 9,167 9,166
Robert Curran - 9,167 9,167 9,166
Burtt Ehrlich 5,000 5,000
Murray L. Skala 5,000 5,000
Ronald L. Grudberg 5,000 5,000
Robert Heck - 10,000 10,000 10,000
John Sheehan - 834 833 833
Robert Curran - 834 833 833
Scott Krivosheiw - 6,667 6,667 6,666
Bob Murphy - 6,667 6,667 6,666
John De Acutis - 5,000 5,000 5,000
George Fanno - 5,000 5,000 5,000
Gary Semon - 5,000 5,000 5,000
Larry Lebrocq - 5,000 5,000 5,000
Pat Conides - 3,334 3,333 3,333
Bob Rudolph - 3,334 3,333 3,333
Carolyn Bryant - 3,334 3,333 3,333
Tony Loiero - 2,500 2,500 2,500
Jeff Carnesi - 2,500 2,500 2,500
Gary Chipurnoi - 2,500 2,500 2,500
George Brosnan - 1,667 1,667 1,666
Dorothy Cherbavaz - 1,667 1,667 1,666
Jay Seigerman - 1,667 1,667 1,666
Bruce Ferguson - 1,667 1,667 1,666
Marie Dick* -
Geoffrey Chin - 1,667 1,667 1,666
Pete Carlucci - 1,667 1,667 1,666
Jean Lee - 1,667 1,667 1,666
Terry Henry - 1,667 1,667 1,666
Anthony Hernandez - 834 833 833
Dave Holgate - 834 833 833
Bob Dito - 667 667 666
Glenn Garcia - 667 667 666
Oscar Arguinzoni - 667 667 666
Maurice Rust - 500 500 500
Bob Lawton - 500 500 500
Tino Paduani* -
Joe Ragusa - 500 500 500
Rob Mangini 1,667 1,667 1,666
-
TOTAL 1998 30,000 30,000 - 101,010 101,003 100,987
TOTAL PLAN TO DATE 178,019 354,194 - 248,999 183,820 100,987 -
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<PAGE> 59
Schedule 4.5-B
NON QUALIFIED STOCK OPTIONS
<TABLE>
<CAPTION>
ACTIVITY IN 1997
GRANT EXPIRE OPTION ---------------- OUTSTANDING ACTIVITY IN 1998 OUTSTANDING
NAME DATE DATE PRICE GRANTS CANCELS 12/31/97 GRANTS CANCELS 9/30/98
---- ---- ---- ----- ------ ------- -------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Katz, David 7/31/97 7/30/07 $ 2.7688 120,000 120,000 120,000
Ritkes, Gary 7/31/97 7/30/07 $ 2.7688 120,000 120,000 120,000
Curran, Bob 6/2/98 6/2/03 $ 7.2500 15,000 15,000
Semon, Gary 6/2/98 6/2/03 $ 7.2500 15,000 15,000
Murphy, Bob 6/2/98 6/2/03 $ 7.2500 15,000 15,000
Lebrocq, Larry 6/2/98 6/2/03 $ 7.2500 15,000 15,000
Montes, Ray 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Kilduff, Chris 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Klinger, Julie* 6/2/98 6/2/03 $ 7.2500 1,000 1,000 -
Ramos, Carlos 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Derma, Bill 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Morganstern, Dawn 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Kim, Augustine 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Van Slyke, Anthony* 6/2/98 6/2/03 $ 7.2500 1,000 1,000 -
Bernhardt, Mark 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Millan, Ray 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Hado, Mark 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Kidd, Greg 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Rini, Bob 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Santiago, Jesus 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Chakrabarty, Sipra 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Sung, John 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Palumbo, mark 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Uler, Rich 6/2/98 6/2/03 $ 7.2500 1,000 1,000
Ehrlich, Burtt 7/1/98 7/1/08 $ 6.3750 5,000 5,000
Skala, Murray L. 7/1/98 7/1/08 $ 6.3750 5,000 5,000
Grudberg, Ronald 7/1/98 7/1/08 $ 6.3750 5,000 5,000
-
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL 240,000 - 240,000 93,000 2,000 331,000
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<TABLE>
<CAPTION>
VESTED AS OF -
--------------
NAME 9/30/98 12/31/98 12/31/99 12/31/00 12/31/01
---- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Katz, David 40,000 (subject to acceleration)
Ritkes, Gary 40,000 (subject to acceleration)
Curran, Bob 5,000 5,000 5,000
Semon, Gary 5,000 5,000 5,000
Murphy, Bob 5,000 5,000 5,000
Lebrocq, Larry 5,000 5,000 5,000
Montes, Ray 334 333 333
Kilduff, Chris 334 333 333
Klinger, Julie*
Ramos, Carlos 334 333 333
Derma, Bill 334 333 333
Morganstern, Dawn 334 333 333
Kim, Augustine 334 333 333
Van Slyke, Anthony*
Bernhardt, Mark 334 333 333
Millan, Ray 334 333 333
Hado, Mark 334 333 333
Kidd, Greg 334 333 333
Rini, Bob 334 333 333
Santiago, Jesus 334 333 333
Chakrabarty, Sipra 334 333 333
Sung, John 334 333 333
Palumbo, mark 334 333 333
Uler, Rich 334 333 333
Ehrlich, Burtt 5,000
Skala, Murray L. 5,000
Grudberg, Ronald 5,000
- ----------------------------------------------------------------------------------------
TOTAL 95,000 - 25,344 25,328 25,328
- ----------------------------------------------------------------------------------------
</TABLE>
* Cancelled
<PAGE> 60
SCHEDULE 4.9
Undisclosed Liabilities
See Schedule 6.3 (Conduct of business pending close)
See Schedule 4.14(D) (Taxes)
9
<PAGE> 61
SCHEDULE 4.10
Intellectual Property
(A) Trademarks
- "KATZ IT!" registered with the PTO.
- Applications for trademark registration rights have been filed with
the PTO for:
COMPENDIUM CONNECTION
FASTPROOF
(C) None
10
<PAGE> 62
SCHEDULE 4.11
Environmental Matters
(A) None
(B) Disposal Agreement with Greymart Environmental annexed hereto as
Schedule 4.11-A
(D) Environmental Liabilities:
The Company has received notice of the violations annexed hereto as
Schedule 4.11B
11
<PAGE> 63
SCHEDULE 4.11A
GREYMART ENVIRONMENTAL SERVICES
DIVISION OF GREYMART METAL COMPANY
824 MEEKER AVE., BROOKLYN, N.Y. 11223
TEL (718) 384-2144 - FAX: (718) 344-5623
In NJ: (201) 223-5749 - Outside NY State: 1-800-238-1813
COMMODITY AND RECYCLING SERVICES
Mr. Grant Mattis July 24, 1996
Katz Digital Technologies, Inc.
21 Penn Plaza
New York, NY 10001
GREYMART SILVER KEY PROGRAM PROVIDES:
- - Indemnification of Katz Digital Technologies, Inc. from fines for
specific discharge violations of New York City Department of
Environmental Protection regulations Section 1043(a) of the City
Charter, Section 19091 of Title 15 RCNY under term of contract.
- - Installation of new electrolytic silver recovery systems.
- - Reclamation of a minimum of 90% - 99% recovery as required by law.
- - Monthly and quarterly silver test and filing of all EPA reports and log
books.
Katz Digital Technologies, Inc ("Subscriber") agrees to subscribe to the
recycling program from Greymart Metal Company ("GMC").
Date: August 1, 1996 Length of Agreement: 36 Months
SERVICE & COMPLIANCE TESTING
Service - GMC shall maintain the described equipment and perform all servicing
Silver Key Monitoring and Testing at no charge. Subscriber will be billed for
replacement parts, chemical recovery cartridge, invoice or deduct from silver
after 30 days. GMC agrees to make all emergency service calls during normal
business hours.
Testing - Perform scheduled monthly silver test and log sheets as per New York
City Department of Environmental Protection regulations Section 1043(a) of the
City Charter, Section 19-01 of Title 15.RCNY.
COLLECTION OF RECLAIMED SILVER
Time of Collection (Reclaimed Silver) - Collections will be made every 90 days.
Chemical Recovery cartridges will be changed as needed. Pre-Treatment cartridges
every quarter.
Place of Collection - All collections will be made at subscribers location and
will be weighted on a mutually approved scale in the presence of the
subscriber's representative.
PAYMENTS AND PRICING
Price - The closing price of silver that is quoted by Handy and Harmon one day
following date of collection.
Reclaimed Silver - 75% of Refined Silver.
Chemical Recovery Cartridges - $79.95. EPAN Chamber $295.00
Scrap Film - Darkroom Scrap @ 35
Time of Payment - GMC agrees that subscriber will receive payment within 7 days
of receipt of a credit will be issued and deducted from balances due Greymart.
Statement of activity issued quarterly.
EQUIPMENT OWNERSHIP
Ownership - Title to and ownership of the silver recovery unit(s) shall remain
with Greymart until machines are paid in full. Equipment cost with service and
Silver Key Program $6,875.00 for each location (21 Penn Plaza & 611 Broadway)
Terms - Deposit with order $3,437.50; balance from recovered silver.
Accepted: Accepted:
________________________________ _______________________________
Greymart Metal Company Katz Digital Technologies, Inc.
Date: __________________________ Date: _________________________
<PAGE> 64
SCHEDULE 4.11B
ENVIRONMENTAL CONTROL BOARD
P.O. Box JAF 1640
New York, N.Y. 10116
DEF 105-423-57J S
00303 11 1 MAILING DATE OF THIS ORDER: 6/22/98
SPEED GRAPHICS INC. ***********************************
228 E. 45TH ST * DEFAULT DECISION AND ORDER *
***********************************
RESPONDENT: SPEED GRAPHICS INC.
PREMISES: 228 EAST 45TH STREET
MANHATTAN, NY 10017
DATE OF OCCURRENCE: 04/27/98
DEFAULT DATE: 06/17/98 ISSUING AGENCY: FIRE DEPARTMENT OF NYC
TOTAL DEFAULT PENALTY: $2,000.00
VIOLATION NUMBER: 105-423-57J AMOUNT PAID TO DATE: $0.00
PAY THIS AMOUNT: $2,000.00
A NOTICE OF VIOLATION HAVING NAMED ABOVE CHARGING VIOLATIONS(S) OF THE N.Y.C.
ADMINISTRATIVE CODE OR RULES PROMULGATED THEREUNDER, SAID ALLEGATIONS NOW
PENDING BEFORE THE ENVIRONMENTAL CONTROL BOARD AND RESPONDENT HAVING FAILED TO
APPEAR AS DIRECTED, NOW, THE UNDERSIGNED ADMINISTRATIVE LAW JUDGE FINDS AS
FOLLOWS ON THE RECORD BEFORE HIM AND RENDERS THE FOLLOWING DECISION AND ORDER.
FINDINGS OF
DEFAULT AND
VIOLATION: RESPONDENT NAMED ABOVE FAILED TO APPEAR AS DIRECTED ON THE DATE
SPECIFIED ABOVE AND IS THEREFORE HELD IN DEFAULT. IT IS FURTHER
FOUND THAT RESPONDENT DID CAUSE OR PERMIT THE VIOLATION(S)
CHARGED IN SAID NOTICE OF VIOLATION DESCRIBED BELOW.
ORDER: RESPONDENT IS THEREFORE ORDERED TO COMPLY FORTHWITH AND TO PAY
THE AMOUNT SHOWN ABOVE.
- -------------------------------------------------------------------------------
ADMINISTRATIVE CODE SECTION OR RULE: DEFAULT PENALTY:
RULE 16 $1,000.00
FAILED TO PROVIDE ADEQUATE VENTILATION
RULE 17 $1,000.00
FAILED TO OBTAIN CERTIFICATE OF FITNESS
***************************************************
* FAILURE TO RESPOND TO THIS ORDER BY
*NOTICE OF NOT PAYING THE TOTAL PENALTY SHOWN
*IMPENDING MAY RESULT IN A JUDGMENT BEING ENTERED
*JUDGMENT IN CIVIL COURT OF NYC OR OTHER COURT SO ORDERED:
* OF COMPETENT JURISDICTION
***************************************************
G15-DEFAULT ORDER
REV: SEE REVERSE SIDE FOR INSTRUCTIONS ADMINISTRATIVE LAW JUDGE
<PAGE> 65
SCHEDULE 4.12
Labor and Employment Matters
(G) None
12
<PAGE> 66
SCHEDULE 4.13
Employee Benefit Plans
(A)
- Katz Digital Technologies, Inc. medical plan with Oxford Health Plan
- Katz Digital Technologies, Inc. Section 125 Premium Conversion Plan.
- 1998 Target Bonus Plan
- Second Amended and Restated 1996 Stock Option Plan
- Katz Digital Technologies, Inc. Retirement Savings Plan (401k).
- Speed Graphics, Inc. 401k Plan - As of June 30, 1998, this plan merged
into Katz Digital Technologies, Inc. Retirement Savings Plan.
- Katz Digital Technologies, Inc. Profit Sharing Plan. Frozen, but still
holds assets.
- Advanced Digital Services, Inc. Profit Sharing Plan - being
terminated.
- Advanced Digital Services, Inc. Money Purchase Plan - being
terminated.
- Employment Agreements:
Gary Katz
Michael Sklar
Joseph Freedman
David Katz
Gary Ritkes
Anthony Esposito
John Sheehan
Donald Flamm
Robert E. Heck, Jr.
Robert John Curran
Marc Mandel
Geoffrey Barsky
Michael O'Connell
Lisa Sklar
Robert Murphy
Gary Semon
Lawrence W. Labrocq
Bob Rudolph
(C) None
(D) None
(E) None
See Also Schedule 4.21 (Insurance - including key man life insurance for Gary
Katz)
13
<PAGE> 67
SCHEDULE 4.14
Taxes
(D) The only pending dispute with regard to tax matters is a current New
York State sales tax audit for the period March 1996 to February 1998.
The audit is being managed for Katz Digital Technologies, Inc. by Grant
Thornton LLP. As of August 31, 1998, no assessments have been asserted.
(E) None
(G) None
(I) None
(J) Power of attorney was granted to Grant Thornton LLP. See document dated May
11, 1998.
(S) There are two IRC Section 481(a) adjustments that are includable in taxable
income after the date of the closing. Approximately $867,000 will be reflected
in income, one-half in each of the 1998 and 1999 tax years related to a change
from the cash to the accrual method of accounting for Katz Digital Technologies,
Inc. Also, an IRC Section 481(a) adjustment of at least $331,000 will be
reflected in income, one third in each of the 1998, 1999 and 2000 tax years
related to a change from the cash to the accrual method of accounting for
Advanced Digital Services, Inc.
14
<PAGE> 68
SCHEDULE 4.15
Litigation
- - There is a claim for a finder's fee made by Steven West as referenced by
correspondence between Steven West and Feder, Kaszovitz, Issacson, Weber,
Skala, & Bass, LLP, dated July 9th, 10th, 14th, and July 22, 1998.
- - There is a personal injury claim pending:
Emily Lee vs. Katz Digital Technologies, Inc. Supreme Court of the State of
New York, Kings County, - Index No. 1254/98. (The Company's insurance would
be adequate to cover this claim.)
15
<PAGE> 69
SCHEDULE 4.16
Absence of Changes
Expenses have been incurred in connection with a postponed stock offering not
recorded on the books as of June 30, 1998:
<TABLE>
<S> <C>
Legal Fees - $76,616.00
Accounting Fees - $72,227.00
</TABLE>
Expenses have been incurred in connection with a potential merger with
Photobition Group PLC not recorded on the books as of June 30, 1998:
<TABLE>
<S> <C>
Legal Fees - $43,000
</TABLE>
(i) The Company's unaudited management report for the month of July 1998 is
annexed hereto (4.16A) which indicates that the Company suffered a loss for
the month, which represents an adverse change from the same month of the
prior year and an adverse change from the previous quarter.
(ii) Effective July 1, 1998 the company has restructured its sales commission
plan.
See Attached Schedule 4.16-B.
(v) The following individuals were granted options:
Murray L. Skala 5,000 shares - effective July 1, 1998
Burtt Ehrlich 5,000 shares - effective July 1, 1998
Ronald Grudberg 5,000 shares - effective July 1, 1998
Rob Mangini 5,000 shares - effective July 28, 1998
- - See Schedule 4.5-A regarding adjustments to the Advanced Digital Services,
Inc. Merger Consideration.
16
<PAGE> 70
SCHEDULE 4.16A
Katz Digital Technologies, Inc.
Management Balance Sheets
<TABLE>
<CAPTION>
July 31, December 31,
1998 1997
---- ----
<S> <C> <C>
ASSETS
Cash and Equivalents 412,123 1,651,930
Accounts Receivable
(net of reserve of $370,238 at 7/31/98 and $140,238 at 12/31/97) 8,688,362 4,723,183
Inventory 436,133 100,483
Prepaid and Other 345,517 292,205
---------- ----------
Total Current Assets 9,882,135 6,767,801
Property and Equipment - Net 6,782,298 3,893,006
Goodwill 11,588,969 2,627,485
Other Assets 627,502 288,508
---------- ----------
28,880,904 13,576,800
========== ==========
LIABILITIES AND EQUITY
Accounts Payable and accruals 3,108,832 1,732,277
Current portion of notes payable 149,122
Current portion of term loan 2,000,000
Current Capital Lease Obligations 1,553,978 739,603
Income Taxes Payable 9,987
Deferred Taxes Payable 59,000 186,000
---------- ----------
Total Current Liabilities 6,880,919 2,657,880
Deferred Credits 447,078 410,774
Deferred Taxes Payable 85,000 85,000
Notes Payable 462,954 300,000
Revolving Credit 4,789,000
Term Loan 3,125,000
Capital Lease Obligations 2,163,210 1,351,568
---------- ----------
Total Liabilities 17,953,161 4,805,222
---------- ----------
Total Stockholders Equity 10,927,743 8,771,578
---------- ----------
28,880,904 13,576,800
========== ==========
</TABLE>
<PAGE> 71
SCHEDULE 4.16B
COMMISSION STRUCTURE FOR 342 SALES PEOPLE.
EFFECTIVE JULY 1, 1998
- - 11% flat rate for Senior Sales level Representatives, John Deacutis, Tony
Loiero, George Fanno and George Brosnan. Any account with an across the
board discount will result in a discounted commission according to existing
schedule.
- - 8% flat rate for Junior level Sales Representatives, John Biedrzycki, Mike
Haar and additional new hires handling existing accounts. Any across the
board discount will drop the commission rate to 6.7%.
- - New hire Kelly Gunn will remain on salary until an account list and
commission rate are determined.
- - Carolyn Bryant will be commissioned at a flat rate of 5% due to the high
level of across the board discounts on the majority of her sales.
<PAGE> 72
SCHEDULE 4.18
Contracts:
In connection with the Company's acquisition of Advanced Digital Services, Inc.
and Speed Graphics, Inc., The Sarabande Press, Inc., and Greeneman, the Company
did not receive all necessary consents to the transfer of assets from certain
lessors and other third parties.
See also Schedule 4.3 (No Conflicts; Notices)
17
<PAGE> 73
SCHEDULE 4.20
Permits
None
18
<PAGE> 74
SCHEDULE 4.21
Insurance
- - Katz Digital Technologies, Inc. Medical Plan with Oxford Health Plan.
- - Katz Digital Technologies, Inc., Section 125 Premium Conversion Plan.
- - Katz Digital Technologies, Inc. maintains "key man" life insurance on Gary
Katz for the amount of $2,000,000.
- - Also See Insurance Summary to follow:
19
<PAGE> 75
SCHEDULE 4.21
Katz Digital Technologies, Inc. - Schedule of Insurance
July 23, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
DATE POLICY BROKER CARRIER DESCRIPTION OF COVERAGE PREMIUM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1/01/99 Workers Comp - Tribus Hartford Statutory Employers Liability $ 326.00
Florida Each Accident: $100,000
Disease Policy Limit: $500,000
Disease Each Employee: $100,000
- ------------------------------------------------------------------------------------------------------------------------------------
1/01/99 Workers Comp - Lovell Safety State Insurance STAT $ 4,427.00
New York Management Fund
- ------------------------------------------------------------------------------------------------------------------------------------
7/19/00 Directors & Officers ARC Federal Insured Clause 1 (a) Each Insured Person: $4,000, $56,500.00
Insurance Co. All Insured Persons: $40,000
Insured Clause 2 (c) The Insured Organization:
$75,000 Non-SEC; $150,000 SEC Claims
- ------------------------------------------------------------------------------------------------------------------------------------
7/19/99 Employment ARC Fireman's Fund $3,000,000 Per Claim Limit $19,604.00
Practices Liability $3,000,000 Total Limit Each Policy Period
</TABLE>
INFORMATION CONTAINED HEREIN PERTAINING TO COVERAGE, EXCLUSIONS AND LIMITATIONS
IS NOT INTENDED TO BE A COMPLETE STATEMENT: FOR ALL DETAILS, REFER TO POLICY
FORMS
1
<PAGE> 76
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10/28/98 Package Tribus Hartford Property $30,442.32
Blanket Personal Property: $19,850,000
Blanket Business Income: $12,800,000
EDP Media: $ 2,950,000
Property in Transit Per Conveyance: $50,000
Valuable Papers: $71,000
Accounts Receivable: $100,000
Demolition, Increased Cost, Ordinance
of Law: $1,000,000
Salesmen Samples: $25,000
Any Other Location: $100,000
Off Premises Power Direct/Indirect: $100,000
Leasehold Interest: $1,000,000
Flood (Excluding Florida): $50,000
Earthquake: $500,000
Business Income in Transit: $100,000
Newly Acquired Property - 90 Days: $1,000,000
Consequential: $500,000
Pollution Clean-Up: $25,000
Appraisal Fee: $50,000
Deductibles
Combined: $ 5,000
Flood: $25,000
Earthquake: $25,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION CONTAINED HEREIN PERTAINING TO COVERAGE, EXCLUSIONS AND LIMITATIONS
IS NOT INTENDED TO BE A COMPLETE STATEMENT: FOR ALL DETAILS, REFER TO POLICY
FORMS
2
<PAGE> 77
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
General Liability
General Aggregate (Per Location): $2,000,000
Products and Completed Operations
Aggregate: $2,000,000
Personal and Advertising Injury: $1,000,000
Bach Occurrence: $1,000,000
Tenants Legal Liability: $1,000,000
Medical Expense (Any One Person): $10,000
Employee Benefits Liability: $1,000,000
Printers Errors & Omissions: $1,000,000
Additional Insured-Vendors: $1,000,000
Crime
Employee Dishonesty: $150,000
Forgery: $150,000
Money Inside: $50,000
Money Outside: $50,000
Computer Fraud: $150,000
Investigative Costs: $10,000
Deductibles: $5,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION CONTAINED HEREIN PERTAINING TO COVERAGE, EXCLUSIONS AND LIMITATIONS
IS NOT INTENDED TO BE A COMPLETE STATEMENT: FOR ALL DETAILS, REFER TO POLICY
FORMS
3
<PAGE> 78
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10/28/98 Automobile Tribus Kemper Liability: $1,000,000 $11,010.00
Personal Injury Protection: included
Additional PIP: included
Medical Payments: $10,000
Uninsured/Underinsured Motorist: $1,000,000
Employer's Non-owned and Hired
Auto Liability: $1,000,000
Hired Auto Physical Damage: $35,000
Collision Deductible: $500
Comprehensive Deductible: $500
Towing: $50
Rental Reimbursement ($50 a day/30 days)
Drive Other Car
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INFORMATION CONTAINED HEREIN PERTAINING TO COVERAGE, EXCLUSIONS AND LIMITATIONS
IS NOT INTENDED TO BE A COMPLETE STATEMENT: FOR ALL DETAILS, REFER TO POLICY
FORMS
4
<PAGE> 79
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
10/28/98 Boiler & Machinery Tribus Kemper Combined Property Damage/Business Interruption/ $2,800.00
Extra Expense: $10,000,000
Additional Expediting Expense: $250,000
Hazardous Substance: $250,000
Ammonia Contamination: $250,000
Water Damage: $250,000
Transit: $5,000
Utility Interruption: Electric, Water,
Gas Stream: $250,000
Errors & Omissions: $250,000
Demolition Increased Cost of
Construction: $250,000
Contract Penalty Clause: $25,000
Consequential Damage Coverage: $500,000
Deductibles
Property Damage: $5,000
Business Interruption/Extra Expenses: $5,000
Service Interruption: 8 hours
Spoilage: $5,000 or 10%
Whichever is Greater
====================================================================================================================================
10/28/98 Umbrella Tribus Hartford General Aggregate: $5,000,000 $3,000.00
Products - Completed Operations
Aggregate: $5,000,000
Bodily Injury by Disease Aggregate: $5,000,000
Each Occurrence: $5,000,000
Self-Insured Retention: $10,000
====================================================================================================================================
</TABLE>
INFORMATION CONTAINED HEREIN PERTAINING TO COVERAGE, EXCLUSIONS AND LIMITATIONS
IS NOT INTENDED TO BE A COMPLETE STATEMENT: FOR ALL DETAILS, REFER TO POLICY
FORMS
5
<PAGE> 80
SCHEDULE 4.23
Broker's Fees
None
20
<PAGE> 81
SCHEDULE 6.3
Conduct of Business Pending Close
The Company is currently negotiating the termination of its Lease Agreement for
the property at 228 East 45th Street, New York, NY and the related Improvement
Loan Agreement dated June 22, 1995 between 575 Realties, Inc., and Speed
Graphics, Inc. The Company is also negotiating the possibility of a new Lease
Agreement for property located at 132 West 31st Street, New York, NY.
The Company reserves the right to enter into and accept a licensing agreement
with Oracle, dated May 20, 1998 for the amount of $192,716.80 and the Company
reserves the right to enter into and accept a licensing agreement with
Archetype, Inc. (a/k/a Bitstream), dated May 29, 1998, for the amount of
$360,000 in connection with the Company's project called CompendiumConnection.
The Company currently deals with the Allied Group, Inc. as a distributor. The
Company reserves the right to enter into and accept an agreement with another
distributor. See attached Schedule 6.3-A.
With regard to Section 6.3 (iv), the Company will grant to David Brody, under
the 1996 Option Plan, an option to purchase 5,000 shares of Common Stock at a
purchase price of 5.125 vesting in equal installments as of August 31, 1999,
2000, 2001.
See Also Schedule 4.3
21
<PAGE> 82
SCHEDULE 6.3A
COMPENDIUM CONNECTION
HARDWARE AND SOFTWARE
<TABLE>
<CAPTION>
Annual Cost
Software Hardware Service
-------- -------- -------
<S> <C> <C> <C>
Oracle Server-Enterprise Edition 153,088.00
Technical Support Contract (annual) 39,628.80 payable quarterly
Archetype, Inc. (Mediabank ) 210,000.00
Maintenance Contract (3 years) 50,000.00 payable quarterly
Solstice Backup Software 11,250.00
Veritas Disk Management Software 6,295.00
Sun Computer and related 119,668.85
RSM Disk Array 107,442.00
Sun Gold Maintenance Contract (Computer) 12,384.86 payable semiannually
Sun Gold Maintenance Contract (Disk Array) 4,579.50 payable semiannually
Sun Gold Maintenance Contract (Enterprise Volume Manager) 1,615.68 payable semiannually
Tape Backup Unit 44,000.00 estimate
Tape Backup Unit Service Contract 6,000.00 estimate
-------------------------------------------
$380,633.00 $271,110.85 $108,208.84
-------------------------------------------
System Installation and Configuration 22,500.00
</TABLE>
<PAGE> 83
EXHIBIT 7.6
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (the "Agreement") is entered into this
__________ __, 1998, between ___________ (formerly known as Katz Digital
Technologies, Inc.), a Delaware corporation (the "Company"), and Gary Katz
("Consultant").
WHEREAS, on the date hereof, the Company became the successor in interest
to Katz Digital Technologies, Inc. ("KDTI") by virtue of the merger of KDT
Acquisition Corp. ("KDT") with and into KDTI (the "Merger") pursuant to that
certain Agreement and Plan of Merger, dated as of September 1, 1998 (the "Merger
Agreement"), among KDTI, KDT and Photobition Group PLC;
WHEREAS, at the Effective Time of the Merger, the employment agreement,
dated March 25, 1996 (the "Employment Agreement"), between KDTI and Consultant,
including all rights and obligations thereunder, terminated and became of no
further force and effect, except as provided in this Agreement, and Consultant
ceases to be an employee, officer and director of KDTI; and
WHEREAS, the Company desires to engage Consultant to provide consulting
services and Consultant desires to render such services, upon the terms and
conditions set forth herein.
NOW, THEREFORE, the Company and Consultant hereby agree as follows:
1. Term of Service. For a term (the "Term") commencing on the date hereof
and terminating on the first anniversary of the date hereof (unless sooner
terminated pursuant to Section 9 or 10), Consultant shall provide to the Company
the consulting services described in Section 3 of this Agreement. Such
consulting services shall be provided solely by Consultant.
2. Compensation. During the Term, the Company shall pay Consultant a
monthly fee (each payment, a "Consulting Payment") of $41,667 less the sum of
(i) the amount of any benefits for such month that Consultant was entitled to
receive under the Employment Agreement and that Consultant elects to continue
during the Term and (ii) any applicable payroll or withholding taxes; provided,
however, the total gross compensation payable to Consultant hereunder (inclusive
of benefits) shall not exceed $500,000 annually. Each Consulting Payment shall
be paid bi-weekly during the Term (each such date, a "Payment Date"). If any
Payment Date is a date other than a business day, the applicable Consulting
Payment shall be paid on the next business day.
3. Services. (a) During the Term, Consultant shall provide to the Company,
at the Company's request, the services set forth in Exhibit 1 and such other
consulting services from time to time as may be agreed upon by Consultant and
the Company (the "Services"). During the first 90 days of the Term, the
Consultant shall devote such time as may be required by the Company to perform
the Services, not to exceed 20 hours per week. During the remainder of the Term,
the Consultant shall devote such time as may be required by the Company to
perform the Services, not to exceed 10 hours per week.
<PAGE> 84
(b) Consultant shall at all times during the Term discharge all such
duties and responsibilities conscientiously, in good faith and to the best of
his ability, giving to the Company the full benefit of his knowledge, expertise,
skill and judgment. Consultant shall at all times observe and comply with all
rules and regulations of the Company and all directives, instructions or other
actions of the Company.
(c) Subject to Section 5, Consultant shall be entitled during the Term
to undertake employment and to engage in any and all business and other
activities, provided that such employment or business or other activities do not
prohibit Consultant from performing the Services in accordance with the terms
hereof.
(d) The duties to be performed by the Consultant hereunder shall be
performed primarily in New York, New York, subject to reasonable travel
requirements on behalf of the Company, provided that the Consultant will not be
required to travel outside of the United States on more than two (2) occasions
during the Term. The Company shall not relocate the Consultant outside of New
York, New York, without his prior written consent. Any travel required of
Consultant shall be made on the same basis as to class of service and level of
accommodations as were provided to Consultant prior to the date hereof during
the period of his employment by the Company's predecessor as Chairman and Chief
Executive Officer.
(e) During the Term, Consultant will be provided with the same or
substantially equivalent office and office equipment as he occupied and used
immediately prior to the date hereof as Chairman and Chief Executive Officer of
the Company's predecessor, and with such administrative assistance as may be
reasonably necessary to perform the requested Services.
4. Independent Contractor Status. Consultant shall be an independent
contractor with respect to the Company and shall not be considered an employee
or an agent of the Company. Consultant shall have no authority to bind the
Company or to hold himself out as having such authority, except as necessary to
perform the Services.
5. Restrictive Covenant.
(a) Consultant agrees that for a period of two years following the end
of the Term (the "Non-Compete Period"), Consultant shall not directly or
indirectly in the Non-Compete Territory:
(i) engage in or have any interest in any person, firm,
corporation or business, whether as employee, officer, director, agent,
security holder, creditor, consultant or otherwise, that engages in any
business activity which is the same as, similar to or competitive with
any business activity engaged in by the Company or its successors or
assigns, provided, however, that this Section 5(a)(i) shall not be
deemed to preclude Consultant from being a passive investor in any
firm, corporation or business of not more than 1% of the outstanding
equity interests in such firm, corporation or business;
(ii) employ, solicit for employment or endeavor in any way to
entice away from employment by the Company or any of its affiliates,
any person who is employed
2
<PAGE> 85
at any time during the Term or the Non-Compete Period by the Company
or any of its affiliates; and
(iii) intentionally and knowingly induce any vendor, supplier,
consultant, or advisor doing business with the Company or any of its
affiliates to cease doing business with the Company for the purpose
of adversely affecting the Company's relationship with such person
or in conjunction with an activity prohibited under subclause (i) or
(ii) of this paragraph.
(b) "Non-Compete Territory" means the United States of America, its
territories and possessions.
(c) Except as necessary to perform the Services, during the Term and
the Non-Compete Period, Consultant shall not use the name of the Company or any
of its affiliates in the conduct of any similar business or for his personal
use, except that Consultant shall be permitted to use his family name of "Katz"
in conjunction with another business which does not violate the provisions of
sub-clause (i) of Paragraph 5(a) above and provided that such name is not
confusingly similar to the name of the Company.
(d) Consultant acknowledges that the remedy at law for breach of its
covenants under this Section would be inadequate to compensate the Company for
its losses. In the event of any breach of the covenants contained in this
Section 5 by Consultant, the Company shall be entitled, in addition to any other
remedies that it may have under law or equity, to seek and obtain an injunction
restraining any such breach.
(e) It is the desire and intent of the parties hereto that the
provisions of this covenant be enforced to the fullest extent permissible under
the laws and public policies applied in each jurisdiction in which enforcement
is sought. Accordingly, to the extent any provision hereof is deemed
unenforceable because of its scope, geographic area or length of time, but may
be enforceable with limitations thereon, the parties agree that the same shall,
nevertheless, be enforceable to the fullest extent permissible under the laws
and public policies applied in such jurisdiction in which enforcement is sought.
6. Confidential Information. Consultant recognizes that there is
certain confidential information, or trade secrets, concerning the Company, KDTI
and its/their clients, including, without limitation, all lists of the Company's
and KDTI's customers and pricing policies of the Company and KDTI, all of which
constitute valuable, special and unique assets of the Company's and KDTI's
business and the protection of which is of great value to the Company.
Consultant agrees, therefore that during and after the term of his engagement
with the Company, he shall not make any use or disclosure of any such
confidential information or trade secrets to any person, firm or corporation
without the specific written consent of the Company, except as required in the
course of performing duties for the Company, and shall deliver promptly to the
Company upon termination of his engagement with the Company all memoranda,
notes, records, lists and other documents and all copies thereof relating to the
Company's business. The phrase "confidential information" as used in this
Agreement shall mean information disclosed to Consultant or known by Consultant
as a consequence of or through his prior engagement by KDTI, his engagement by
the Company, or his
3
<PAGE> 86
representation of KDTI or the Company to customers of the Company, which is not
generally known to persons not employed or engaged by the Company.
Notwithstanding anything in this Agreement to the contrary, confidential
information shall not include any information which (i) at the time of
disclosure is generally available to and known by the public (other than as a
result of a disclosure made directly or indirectly in violation of this
Agreement), (ii) becomes publicly available in the future (other than as a
result of a disclosure made directly or indirectly in violation of this
Agreement) or (iii) was available to a third party on a nonconfidential basis
from a source other than Consultant (provided that such source is not or was not
bound to maintain the confidentiality of such information). In the event that
Consultant becomes legally compelled (by deposition, interrogatory, request of
documents, subpoena, civil investigative demand or similar process) to disclose
any of the confidential information, Consultant shall provide the Company with
prompt prior written notice of such requirement so that it may seek a protective
order or other appropriate remedy and/or waive compliance with the terms of this
Agreement. In the event that such protective order or other remedy is not
obtained, or the Company waives compliance with the provisions hereof,
Consultant agrees to furnish only such portion of the confidential information
which is legally required to be furnished.
7. Remedies. Consultant acknowledges that the Company would have
been unwilling to execute this Agreement with Consultant if the above-described
provisions concerning non-competition and confidential information had not been
included. Therefore, Consultant agrees that in the event of the breach or
threatened breach of any provision of Section 5 on non-competition, or Section 6
on confidential information, the Company shall be entitled to seek an injunction
or other equitable relief from a court of competent jurisdiction restraining
Consultant from competing, or disclosing, in whole or in part, such confidential
information, or from rendering any services to any person, firm or corporation
to whom such information, in whole or in part, has been disclosed or is
threatened to be disclosed, or to prevent the continued breach by Consultant of
such provisions, because such breach would cause irreparable and immeasurable
harm to the Company. This Section 7 shall be construed as an agreement
independent of any claim or cause of action of Consultant against the Company,
whether predicated on this Agreement or otherwise, and shall not constitute a
defense to the enforcement by the Company of the provisions of this Section 7.
These provisions shall also not preclude the Company from any further remedies
available to it in law or in equity. If the Company is not able to obtain an
injunction or other equitable relief, then the Company shall be entitled to seek
damages or other relief against Consultant for any breach or threatened breach.
8. Expenses. Consultant shall be reimbursed for all out-of-pocket
expenses reasonably incurred by him in connection with the performance of the
Services, including, without limitation, customary and routine business travel
expenses, upon presentation by Consultant of appropriate documentation
substantiating such expenses, in accordance with the Company's then existing
policies.
9. Death of Consultant. In the event of Consultant's death during
the Term, this Agreement shall terminate immediately, and the Company shall pay
to the estate of Consultant on each Payment Date during the remaining Term 50%
of the Consulting Payment due on such Payment Date and shall promptly reimburse
the Consultant for all reasonable expenses
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incurred by Consultant on behalf of the Company prior to the date of his death
and for which he would have been entitled to reimbursement from the Company
under the terms of this Agreement.
10. Termination. (a) This Agreement may be terminated by the Company
immediately without notice except as provided in this Section 10 in the event of
(i) fraud or embezzlement by Consultant; (ii) commission by Consultant of a
dishonest act which either (A) results in his personal enrichment at the expense
of the Company, or (B) results in his conviction of, or plea of nolo contendere
to, a felony or other serious crime, not including a motor vehicle offense,
involving the Company's business activities; (iii) breach by Consultant of the
material terms of this Agreement following Consultant's receipt of written
notice from the Company specifying the actions or omissions of Consultant that
are in question and Consultant being allowed a reasonable time, which shall not
be less than fifteen (15) days, for Consultant to correct such behavior;
provided that such breach is susceptible of cure.
(b) Consultant may terminate this Agreement, for any reason or no reason,
by giving the Company thirty (30) days prior written notice of his resignation.
If Consultant terminates this Agreement without good cause, he shall not be
entitled to compensation for any period following such termination, but
Consultant shall be entitled to be reimbursed for all reasonable expenses
incurred by Consultant on behalf of the Company prior to the date of such
termination and for which he would have been entitled to reimbursement from the
Company under the terms of this Agreement. Consultant may terminate this
Agreement immediately without notice for good cause. "Good Cause" as used in
this paragraph (b) means (i) the failure by the Company to pay or provide to the
Consultant, 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 or (ii)
the breach in any material respect by the Company of any of its other material
obligations set forth herein, the Company being allowed a reasonable time, which
shall not be less than fifteen (15) days after written notice thereof from the
Consultant to correct such breach, provided that such breach is susceptible of
cure; in each case, during such period of time when Consultant was not in breach
of his material obligations under this Agreement. For the avoidance of doubt,
the failure by the Company to utilize Consultant's services, as contemplated by
this Agreement, shall not be deemed a breach by the Company of its obligations
under this Agreement, and if the Company fails to identify the specific nature
of the Services which Consultant is requested to perform, the failure by the
Consultant to perform any Services shall not be deemed a breach by the
Consultant of his obligations under this Agreement.
(c) If Consultant's services hereunder are terminated by the Company other
than pursuant to Section 10(a), or if the Consultant terminates this Agreement
for good cause, the Company shall pay to Consultant the entire balance of the
Consulting Payments due hereunder not later than two (2) business days following
the date of such termination, and shall reimburse Consultant for all reasonable
expenses incurred by Consultant on behalf of the Company prior to the date of
such termination and for which he would have been entitled to reimbursement from
the Company under the terms of this Agreement.
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(d) The covenants in Sections 5 and 6 shall survive termination of this
Agreement in accordance with their terms.
11. Miscellaneous. (a) This Agreement may be amended, or a new agreement
substituted, at any time and from time to time by a written instrument duly
authorized and executed by the Company and Consultant.
(b) The waiver by either party of a breach or violation of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach hereof.
(c) Any and all notices required or permitted to be given under this
Agreement will be sufficient if furnished in writing, and delivered personally
or sent by certified or registered mail, return receipt requested, postage
pre-paid to his last known address in the case of Consultant or its principal
office in the case of the Company.
(d) This Agreement shall be interpreted, construed and governed in
accordance with the laws of the State of New York. Each of Consultant and the
Company hereby expressly submits to the jurisdiction of the federal and state
courts of the State of New York in respect of the enforcement of their
respective obligations hereunder. In connection with any litigation, including
appellate proceedings, arising under the Agreement, the prevailing party in such
litigation shall be entitled to recover reasonable attorney fees and other costs
and expenses related to such litigation from the losing party.
(e) The rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
the Company. Consultant may not assign this Agreement without the prior written
consent of the Company.
(f) Paragraph headings contained in this Agreement are for convenience
only and shall not in any manner be construed as a part of this Agreement.
(g) This instrument contains the entire agreement of the parties hereto
with respect to the subject matter hereof.
(h) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and together shall constitute one and the same
Agreement, with one counterpart being delivered to each party hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE COMPANY:
By: __________________________________
Name:
Title:
CONSULTANT:
______________________________________
Gary Katz
<PAGE> 90
EXHIBIT 1
Consulting Services
Consultant shall provide the following consulting services (the
"Services"):
1. Advice in respect of the transition of control of KDTI to Photobition
Group PLC as a result of the Merger.
2. Advice in respect of the transition of operations of KDTI as a result of
the Merger.
3. Advice regarding potential mergers and acquisitions by the Company.
<PAGE> 1
EXHIBIT 2.2
September 1, 1998
Katz Digital Technologies, Inc.
Twenty-One Penn Plaza
New York, New York 10001
Attn: Gary Katz, Chairman
Gentlemen:
Reference is made to Section 3.4(v) of the Merger Agreement dated
September 1, 1998 (the "Merger Agreement") among Photobition Group PLC, KDT
Acquisition Corp. and Katz Digital Technologies, Inc. Capitalized terms used
herein and not otherwise defined herein will have the meanings set forth in the
Merger Agreement.
The undersigned agrees that, at the Effective Time, the holders of each
of the 769,806 outstanding Unvested Company Options at the Effective Time will
be entitled to receive from Photobition and/or the Surviving Corporation, in
lieu of each share of Company Common Stock issuable pursuant to such Company
Option, an amount in cash (without interest) equal to the difference between (A)
the Merger Consideration and (B) the exercise price payable upon the exercise of
such Company Option. No Unvested Company Option or share of Company Common Stock
subject thereto shall be deemed to be outstanding or to have any rights after
the Effective Time other than those set forth in this agreement.
The payment of consideration in respect of each Unvested Company Option
pursuant to this agreement shall be subject to the terms and conditions set
forth in the Merger Agreement, and shall be payable in accordance with the same
procedures set forth in the Merger Agreement with respect to the payment of
amounts in respect of Vested Company Options at the Effective Time.
<PAGE> 2
PHOTOBITION GROUP PLC
/S/ Eddie Marchbanks
---------------------------
Eddie Marchbanks
Chairman
<PAGE> 1
EXHIBIT 2.3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT ("Agreement"), dated as of September 1, 1998,
among Photobition Group PLC, a company organized under the laws of England
("Photobition"), KDT Acquisition Corp., a Delaware corporation ("KDT"), and Katz
Digital Technologies, Inc., a Delaware corporation (the "Company").
BACKGROUND
A. Photobition, KDT and the Company have entered into an Agreement and
Plan of Merger (as such agreement may hereafter be amended from time to time,
the "Merger Agreement"), which provides, among other things, for the merger of
KDT with and into the Company and the receipt by the stockholders of the Company
of the Merger Consideration (as defined in the Merger Agreement).
B. As an inducement and a condition to Photobition's and KDT's
willingness to enter into the Merger Agreement, Photobition and KDT have
required that the Company agree, and the Company has agreed, as set forth
herein, to grant to KDT an option to purchase certain authorized but unissued
shares of the common stock, par value $.001, of the Company ("Shares").
C. Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and in
the Merger Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION
1.1 The Company hereby grants to KDT an option, exercisable as provided
herein (the "Option"), to purchase for $5.125 per share (the "Exercise Price")
up to an aggregate of 1,012,964 Shares (the "Option Shares"); provided, however,
that in no event shall the number of Option Shares exceed 19.9% of the Company's
issued and outstanding Shares (without giving effect to any Shares subject to or
issued pursuant to this Option). The number of Option Shares that may be
received upon the exercise of the Option and the Exercise Price are subject to
adjustment as herein set forth.
1.2 In the event that any additional Shares are either (i) issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement) or (ii) redeemed, repurchased, retired or otherwise
cease to be outstanding after the date of this Agreement, the number of Option
Shares shall be increased or decreased, as appropriate, so that
<PAGE> 2
after such issuance, such number equals 19.9% of the number of Shares then
issued and outstanding without giving effect to any Shares subject to issuance
pursuant to the Option.
2. EXERCISE OF OPTION. The Option may be exercised by KDT at any time
within one year following the occurrence of a Triggering Event (as hereinafter
defined), in whole or in part. If KDT wishes to exercise the Option, KDT shall
give written notice to the Company of its intention to exercise the Option,
specifying the number of Option Shares it will purchase and a place, time and
date not earlier than one day and not later than five (5) days from the date
such notice is given for the closing of such purchase (a "Closing"). Each
Closing shall be held on the date specified in such notice unless, on such date,
there shall be any preliminary or permanent injunction or other order by any
court of competent jurisdiction or any other legal restraint or prohibition
preventing the consummation of such purchase, in which event such Closing shall
be held as soon as practicable following the lifting, termination or suspension
of such injunction, or on the date such order, restraint or prohibition
preventing the consummation of such purchase has expired or been terminated, but
in any event within two days thereof. The Company's obligation to issue Option
Shares upon exercise of the Option is subject to the conditions that (i) all
waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), required for the purchase of the Option Shares upon
such exercise shall have expired or been waived and (ii) there shall not be in
effect any preliminary injunction or other order issued by any governmental
entity prohibiting the exercise of the Option pursuant to this Agreement.
Photobition and the Company shall each promptly make such filings and provide
such information as may be required under the HSR Act with respect to the
purchase of the Option Shares, and Photobition shall pay any fees payable in
connection therewith. In the event any required waiting period under the HSR Act
has not expired or been terminated, the Closing will be postponed until the
expiration or early termination of any required waiting period under the HSR
Act.
The term "Triggering Event" shall mean the Board of Directors of the
Company shall have approved or recommended any Acquisition Proposal, or the
Company shall have entered into any agreement with respect to any Acquisition
Proposal (as such terms are defined in the Merger Agreement).
3. PAYMENT AND DELIVERY OF CERTIFICATES. At any Closing hereunder (a) KDT
shall make payment to the Company of the aggregate purchase price for the Option
Shares so purchased (i) in immediately available funds by certified or official
bank check or by wire transfer to a bank account designated by the Company to
KDT prior to such Closing, (ii) by actual or constructive transfer to the
Company of Company Common Stock owned by Photobition, KDT or their respective
affiliates, or (iii) by any combination of the foregoing methods of payment, and
(b) the Company shall deliver to or cause to be delivered to KDT a certificate
or certificates, duly executed by the Company and registered in the name of KDT,
representing the number of Option Shares so purchased. Company Common Stock that
is transferred by Photobition, KDT or their respective affiliates in payment of
all or any part of the purchase price will be valued at the Closing Price. The
requirement of payment in cash or shares of Company Common Stock will be deemed
satisfied if KDT makes arrangements with a broker that is a member of the
National Association of Securities Dealers, Inc. to sell a sufficient number of
the Option Shares which are being purchased pursuant to the exercise of the
Option so
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<PAGE> 3
that the net proceeds of the sale transaction will at least equal the amount of
the aggregate purchase price and pursuant to which the broker undertakes to
deliver to the Company the amount of the aggregate purchase price not later than
the date on which the sale transaction will settle in the ordinary course of
business. "Closing Price" means the closing price per share of Company Common
Stock on the American Stock Exchange ("AMEX") on the trading day immediately
preceding the date of notice of the exercise of the Option as reported on the
AMEX (or, if the Company Common Stock is not listed on the AMEX, as reported on
any other national securities exchange or national securities quotation system
on which the Company Common Stock is listed or quoted, as reported in the Wall
Street Journal (Northeast edition), or, if not reported thereby, any other
authoritative source).
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Photobition and KDT as follows:
(a) DUE AUTHORIZATION, ETC. The Company has the corporate
power and authority to enter into and perform all of its obligations under this
Agreement. The execution, delivery and performance of this Agreement by the
Company will not conflict with, or result in any violation of, or default (with
or without notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, any
agreement to which it is a party. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms. The Board of Directors of the Company has duly and validly approved the
transactions contemplated hereby and by the Merger Agreement, including the
Merger and the acquisition of Option Shares, for purposes of Section 203 of the
Delaware General Corporation Law, such approval occurring prior to the time KDT
became an "interested stockholder" as that term is defined in Section 203 of the
Delaware General Corporation Law.
(b) OPTION SHARES. The Company has taken all necessary
corporate action to authorize and reserve for issuance upon exercise of the
Option the Option Shares and will take all necessary corporate action to
authorize and reserve for issuance all additional Shares or other securities
which may be issued as a result of Section 6 hereof upon exercise of the Option.
The Shares (or such other securities) to be issued upon due exercise, in whole
or in part, of the Option, when paid for as provided herein, will be duly
authorized, validly issued, fully paid and nonassessable and free of preemptive
rights, without liability attaching to the ownership thereof, and will be
delivered free and clear of all claims, liens, encumbrances and security
interests of any kind whatsoever. The Option Shares represent 19.9% of the total
number of shares of Company Common Stock outstanding on the date hereof.
5. REPRESENTATIONS AND WARRANTIES OF PHOTOBITION AND KDT. Each of
Photobition and KDT hereby represents and warrants to the Company as follows:
(a) DUE AUTHORIZATION, ETC. Photobition and KDT each has the
corporate power and authority to enter into and perform all of its obligations
under this Agreement. The execution, delivery and performance of this Agreement
by each of Photobition and KDT will not
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<PAGE> 4
any conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a material benefit
under, or result in the creation of any lien upon any of the properties or
assets of Photobition, KDT or any of their respective Subsidiaries under, any
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Photobition and KDT and constitutes a
valid and binding agreement of each of Photobition and KDT, enforceable against
each of Photobition and KDT in accordance with its terms.
(b) NO DISTRIBUTION. KDT is acquiring the Option, and will
acquire the Option Shares issuable upon exercise of the Option, for its own
account and not with a view to or for sale in connection with any distribution
thereof, and KDT will not sell or otherwise dispose of the Option, or any Option
Shares, except in each case in compliance with the Securities Act and the rules
and regulations thereunder.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of any change in Company Common Stock by
reason of a stock dividend, split-up, merger, recapitalization, combination,
exchange of shares or similar transaction, the type and number of shares or
securities subject to the Option, and the Exercise Price therefor, will be
adjusted appropriately, and proper provision will be made in the agreements
governing such transaction so that KDT will receive upon exercise of the Option
the number and class of shares or other securities or property that KDT would
have received in respect of Company Common Stock if the Option had been
exercised immediately prior to such event or the record date therefor, as
applicable. If any additional shares of Company Common Stock are issued after
the date of this Agreement, the number of shares of Company Common Stock subject
to the Option will be adjusted so that, after such issuance, it equals 19.9% of
the number of shares of Company Common Stock then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the Option.
(b) Without limiting the parties' relative rights and
obligations under the Merger Agreement, in the event that the Company enters
into an agreement (i) to consolidate with or merge into any Person, other than
Photobition or one of its Subsidiaries, and the Company will not be the
continuing or surviving corporation in such consolidation or merger, (ii) to
permit any Person, other than Photobition or one of its Subsidiaries, to merge
into the Company and the Company will be the continuing or surviving
corporation, but in connection with such merger, the shares of Company Common
Stock outstanding immediately prior to the consummation of such merger will be
changed into or exchanged for stock or other securities of the Company or any
other Person or cash or any other property, or the shares of Company Common
Stock outstanding immediately prior to the consummation of such merger will,
after such merger, represent less than 50% of the outstanding voting securities
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any Person, other than Photobition or one of
its Subsidiaries, then, and in each such case, subject to clause (c) below, the
agreement governing such transaction shall make proper provision so that the
Option will, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted
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<PAGE> 5
to acquire the number and class of shares or other securities or property that
Photobition would have received in respect of Company Common Stock if the Option
had been exercised immediately prior to such consolidation, merger, sale or
transfer, or the record date therefor, as applicable.
(c) If the Company enters into any agreement pursuant to which
all outstanding shares of Company Common Stock are to be purchased for, or
converted into the right to receive, cash (a "Transaction"), the Company
covenants that proper provision will be made in such agreement to provide that,
if the Option shall not theretofore have been exercised, then upon the closing
of the Transaction (which in the case of a Transaction involving a tender offer
will be when shares of Company Common Stock are accepted for payment), KDT will
receive in exchange for the cancellation of the Option an amount in cash equal
to the Cash Consideration. For purposes of this Agreement, the term "Cash
Consideration" means the difference between (A) the amount of cash per share of
Company Common Stock to be received by a holder of Company Common Stock in the
Transaction and (B) the Exercise Price.
7. REGISTRATION RIGHTS. The Company will, if requested by Photobition at
any time and from time to time within three years of the exercise of the Option,
as expeditiously as possible prepare and file up to three registration
statements under the Securities Act if such registration is necessary in order
to permit the sale or other disposition of any or all shares of securities that
have been acquired by or are issuable to KDT upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by KDT,
including a "shelf" registration statement under Rule 415 under the Securities
Act or any successor provision, and the Company will use its best efforts to
qualify such shares or other securities under any applicable state securities
laws. The Company will use reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefor, and to keep such registration statement
effective for such period, not in excess of 180 calendar days from the day such
registration statement first becomes effective, as may be reasonably necessary
to effect such sale or other disposition. The obligations of the Company
hereunder to file a registration statement and to maintain its effectiveness may
be suspended for one or more periods of time not exceeding 60 calendar days in
the aggregate if the Board of Directors of the Company shall have determined
that the filing of such registration statement or the maintenance of its
effectiveness would require disclosure of nonpublic information that would
materially and adversely affect the Company. Any registration statement prepared
and filed under this Section 7, and any sale covered thereby, will be at the
Company's expense, except for underwriting discounts or commissions, brokers'
fees and the fees and disbursements of KDT's counsel related thereto. KDT will
provide all information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. If the Company effects a
registration under the Securities Act of Company Common Stock for its own
account or for any other stockholders of the Company (other than on Form S-4 or
Form S-8, or any successor form), it will allow KDT the right to participate in
such registration, and such participation will not affect the obligation of the
Company to effect demand registration statements for KDT under this Section 7;
provided that, if the managing underwriters of such offering advise the Company
in writing that in their opinion the number of shares of the Company Common
Stock requested to be included in such registration exceeds the number which can
be sold in such offering, the Company will include the shares requested to be
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<PAGE> 6
included therein by KDT pro rata with the shares intended to be included therein
by the Company. In connection with any registration pursuant to this Section 7,
the Company and KDT will provide each other and any underwriter of the offering
with customary representations, warranties, covenants, indemnification and
contribution in connection with such registration.
8. LISTING. If Company Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on a national securities exchange or
national securities quotation system, the Company, upon the request of KDT, will
promptly file an application to list the shares of Company Common Stock or other
securities to be acquired upon exercise of the Option on such national
securities exchange or national securities quotation system and will use
reasonable efforts to obtain approval of such listing as promptly as
practicable.
9. MISCELLANEOUS
9.1 ENTIRE AGREEMENT. This Agreement, the Transaction Agreements and any
other agreements to be executed pursuant hereto and thereto constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
9.2 ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties hereto,
provided that Photobition or KDT may assign, in their sole discretion, their
rights and obligations hereunder to any direct or indirect wholly owned
Subsidiary of Photobition, but no such assignment shall relieve Photobition or
KDT of its obligations hereunder if such assignee does not perform such
obligations.
9.3 AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
9.4 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received upon receipt) in accordance with the terms of
Section 10.9 of the Merger Agreement.
9.5 SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
9.6 SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money
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damages, and therefore in the event of any such breach the aggrieved party shall
be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
9.7 REMEDIES CUMULATIVE. All rights, powers and remedies provided under
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party
9.8 NO WAIVER. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect hereof
at law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, and any custom or practice of the parties at variance
with the terms hereof, shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance.
9.9 NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be for
the benefit of, and shall not be enforceable by, any person or entity who or
which is not a party hereto.
9.10 CONSENTS. Each of the parties hereto will use its best efforts to
obtain consents of all third parties and governmental entities necessary to the
consummation of the transactions contemplated by this Agreement.
9.11 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof. Any disputes arising out of, in
connection with or with respect to this Agreement, the subject matter hereof,
the performance or non-performance of any obligation hereunder, or any of the
transactions contemplated hereby shall be adjudicated in a court of competent
civil jurisdiction sitting in the City and State of New York and nowhere else.
Each of the Parties hereto hereby irrevocably submits to the jurisdiction of
such court for the purposes of any suit, civil action or other proceeding
arising out of, in connection with or with respect to this Agreement, the
subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby (collectively,
"Suit"). Each of the Parties hereto hereby waives and agrees not to assert by
way of motion, as a defense or otherwise in any such Suit, any claim that it is
not subject to the jurisdiction of the above courts, that such Suit is brought
in an inconvenient forum, or that the venue of such Suit is improper. The
Company hereby irrevocably designates and appoints Feder, Kaszovitz, Isaacson,
Weber, Skala & Bass LLP, 750 Lexington Avenue, New York, NY 10022-1200 to
receive for it and on its behalf summonses and other legal process in any Suit,
and agrees that service upon Feder, Kaszovitz, Isaacson, Weber, Skala & Bass LLP
shall constitute valid and effective service upon the Company. Photobition and
KDT each hereby irrevocably designate and appoint The Corporation Trust Company,
New York, New York to receive for it and on its behalf summonses and other legal
process in any Suit, and each agrees that service upon The Corporation Trust
Company, New York, New York shall constitute valid and effective service upon
KDT or Photobition, as the case may be. Photobition agrees that, so long as it
has any rights or obligations under or arising out of or in connection with this
Agreement, the subject matter
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hereof or any of the transactions contemplated hereby, it shall maintain a duly
appointed agent for service of summonses and other legal process in New York,
New York. Nothing in this Agreement shall affect or diminish any Party's right
to serve summonses and other legal process in any other manner permitted by law
in connection with any Suit in the City and State of New York.
9.12 WAIVER OF JURY TRIAL. Each party hereto hereby waives any right to a
trial by jury in connection with any action, suit or proceeding brought in
connection with this Agreement.
9.13 DESCRIPTIVE HEADINGS. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
9.14 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together, shall
constitute one and the same Agreement.
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by Photobition, KDT and the Company on the date first written above.
PHOTOBITION GROUP PLC
By: /s/ J.E.T. MARCHBANKS
----------------------------------------
Name: J.E.T. MARCHBANKS
--------------------------------------
Title:
------------------------------------
KDT ACQUISITION CORP.
By: /s/ J.E.T. MARCHBANKS
----------------------------------------
Name: J.E.T. MARCHBANKS
--------------------------------------
Title:
------------------------------------
KATZ DIGITAL TECHNOLOGIES, INC.
By: /S/ GARY KATZ
----------------------------------------
Name: GARY KATZ
--------------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
<PAGE> 1
Exhibit 2.4
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of September 1, 1998
(this"Agreement"), among Photobition Group PLC, a company organized under the
laws of England ("Photobition"), KDT Acquisition Corp., a Delaware corporation
("KDT"), and the individuals whose names and addresses are set forth on the
signature pages hereto (collectively, the "Stockholders", and each,
individually, a "Stockholder").
A. Photobition and KDT have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), with Katz Digital
Technologies, Inc., a Delaware corporation (the "Company"), which Merger
Agreement provides, among other things, that KDT will merge with and into the
Company (the "Merger").
B. As of the date hereof, the Stockholders are the record owners of,
and have the exclusive right to vote, the number of shares of common stock, par
value $0.001 per share, of the Company (the "Company Common Shares") set forth
opposite their respective names on the signature pages hereto.
C. Each of the Stockholders has agreed to enter into this Agreement
governing the voting of the Company Common Shares now or hereafter beneficially
owned by such Stockholder, including any Company Common Shares that such
Stockholder may acquire pursuant to a stock dividend, stock split,
recapitalization, combination or other transaction or upon the exercise of any
options to acquire Company Common Shares (as the same may be adjusted in the
manner described above) (the "Shares").
D. As a condition and inducement to Photobition's and KDT's willingness
to enter into the Merger Agreement, Photobition and KDT have requested that each
Stockholder agree, and each Stockholder has agreed, to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and covenants contained herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
1. Voting of Shares. Each Stockholder will cause the Shares owned by
such Stockholder to be voted at the Special Meeting or any other meeting of the
stockholders of the Company (and at any and all postponements and adjournments
thereof), however called, and in any action by written consent of the
stockholders of the Company (a) to adopt the Merger Agreement and to approve the
transactions contemplated thereby and any other matter that could reasonably be
expected to facilitate the Merger and (b) against any Adverse Proposal. For
purposes of this Agreement, "Adverse Proposal" means any action, proposal or
agreement that could reasonably be expected to result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of the Company under the Merger Agreement, or which could
<PAGE> 2
reasonably be expected to result in any of the conditions set forth in Article
VII or VIII of the Merger Agreement not being fulfilled.
2. No Disposition or Encumbrance of Shares. Each Stockholder hereby
agrees that such Stockholder will not, and will not offer or agree to, sell,
transfer, tender, assign, hypothecate or otherwise dispose of, such
Stockholder's Shares, or create or permit to exist any security interest, lien,
claim, pledge, option, right of first refusal, agreement, limitation on the
Stockholder's voting rights, charge or other encumbrance of any nature
whatsoever with respect to such Stockholder's Shares.
3. Reliance by Photobition and KDT. Each Stockholder understands and
acknowledges that Photobition and KDT are entering into the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this Agreement and the
Stockholder's representations, warranties and covenants contained herein.
4. Non-Interference. Each Stockholder will not take any action that
would make any representation or warranty of the Stockholder contained herein
untrue or incorrect.
5. Representations and Warranties of the Stockholders. Each Stockholder
hereby severally represents and warrants to Photobition and KDT with respect to
itself and its ownership of Shares as follows:
(a) No Conflict. The execution and delivery of this Agreement
by the Stockholder does not, and the performance of this Agreement by
the Stockholder will not, (i) require any consent, approval,
authorization or Permit of, or filing with or notification to (other
than pursuant to the Securities Exchange Act), any Governmental Body,
(ii) conflict with or violate any law, rule, regulation, order,
judgment, decree or agreement applicable to the Stockholder or by which
the Stockholder or any property or asset of the Stockholder is bound,
or (iii) result in the creation of a Security Interest on any of such
Stockholder's Shares pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, Permit, franchise or other
instrument or obligation to which such Stockholder is a party or by
which such Stockholder's Shares are bound.
(b) Title to the Shares. The Shares owned by the Stockholders
are all the securities of the Company owned, either of record or
beneficially, by the Stockholders. Except for any restrictions arising
under this Agreement, the Stockholder owns all such Shares free and
clear of all Security Interests, options, rights of first refusal,
agreements, limitations on the Stockholder's voting rights, charges and
other encumbrances of any nature whatsoever which would prohibit the
voting agreement contained herein, and the Stockholder has not
appointed or granted any proxy, which appointment or grant is still
effective, with respect to such Stockholder's Shares.
6. Representations and Warranties of Photobition and KDT. Each of
Photobition and KDT hereby represents and warrants to the Stockholders as
follows:
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<PAGE> 3
(a) Authority Relative to this Agreement. It has all necessary
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and
performance of this Agreement by it have been duly and validly
authorized by all necessary action on its part. This Agreement has been
duly and validly executed and delivered by it and, assuming the due
authorization, execution and delivery by each Stockholder, constitutes
a legal, valid and binding obligation of it, enforceable against it in
accordance with its terms.
(b) No Conflict. The execution and delivery of this Agreement
by it does not, and the performance of this Agreement by it will not,
(i) require any consent, approval, authorization or Permit of, or
filing with or notification to (other than pursuant to the Securities
Exchange Act), any Governmental Body, (ii) conflict with or violate its
constituent documents, (iii) conflict with or violate any law, rule,
regulation, order, judgment, decree or agreement applicable to it or by
which it or any of its property or assets is bound, or (iii) result in
the creation of a Security Interest on any of its property pursuant to
any note, bond, mortgage, indenture, contract, agreement, lease,
license, Permit, franchise or other instrument or obligation to which
it is a party or by which its properties are bound.
7. Miscellaneous.
(a) Termination. This Agreement will terminate and will have
no further force or effect as of the Termination Date. For the purposes
of this Agreement, "Termination Date" means the earliest of (i) the
termination of the Merger Agreement in accordance with its terms
following payment of any applicable Termination Fee, (ii) the Effective
Time, and (iii) the termination of this Agreement by the written
agreement of the parties hereto.
(b) Expenses. Except as otherwise provided herein or in the
Merger Agreement, all costs and expenses incurred in connection with
the transactions contemplated by this Agreement will be paid by the
party incurring such expenses.
(c) Enforcement. The parties hereto agree that (i) irreparable
damage would occur in the event any of the provisions of this Agreement
were not performed in accordance with the terms hereof, and (ii) the
parties will be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to specific performance of the terms
hereof, in addition to any other remedy to which they may be entitled
at law or in equity.
(d) Entire Agreement. This Agreement, together with the Merger
Agreement and the other Transaction Agreements (as such term is defined
in the Merger Agreement) constitutes the entire agreement between
Photobition, KDT and the Stockholders with respect to the subject
matter hereof and supersedes all prior agreements and understandings,
both written and oral, between Photobition, KDT and the Stockholders
with respect to the subject matter hereof.
3
<PAGE> 4
(e) Assignment. This Agreement may not be assigned, by
operation of law or otherwise, without the prior written consent of the
parties.
(f) Obligations of Successors; Parties in Interest. This
Agreement will be binding upon, inure solely to the benefit of, and be
enforceable by, the successors and permitted assigns of the parties
hereto. Nothing in this Agreement, express or implied, is intended to
or will confer upon any other Person any rights, benefits or remedies
of any nature whatsoever under or by reason of this Agreement.
(g) Amendment; Waiver. This Agreement may not be amended or
changed except by an instrument in writing signed by the parties
hereto. Any party hereto may (i) extend the time for the performance of
any obligation or other act of any other party hereto, (ii) waive any
inaccuracy in the representations and warranties contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with
any agreement or condition contained herein. Any such extension or
waiver will be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
(h) Severability. The validity or unenforceability of any
provision of this Agreement will not affect the validity or
enforceability of any other provision of this Agreement, which will
remain in full force and effect. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced,
the parties hereto will negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely
as possible to the fullest extent permitted by applicable law in a
mutually acceptable manner in order that the terms of this Agreement
remain as originally contemplated to the fullest extent possible.
(i) Notices. All notices, requests, claims, demands and other
communications hereunder will be in writing and may be given (and will
be deemed to have been duly given only upon actual receipt) by delivery
in person, by fax, by overnight courier service or by registered or
certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address
for a party as may be specified in a notice given in accordance with
this Section 7(i)):
(1) if to Photobition and KDT:
Photobition Group PLC
Eagle House
224 London Road
Mitcham
Surrey CR4 3HD
England
Attention: Eddie Marchbanks and Steven Smith
Telephone No.: 011.441.81.687.7000
4
<PAGE> 5
Fax No.: 011.441.81.687.7007
with a required copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: John J. Hyland, Esq.
Telephone No.: (212) 326-3959
Fax No.: (212) 755-7306
(2) if to any Stockholder:
at the respective addresses of such
Stockholder set forth on the signature pages
to this Agreement
with a required copy to:
Feder, Kaszovitz, Isaacson, Weber,
Skala & Bass LLP
750 Lexington Avenue
New York, New York 10022-1200
Attention: Murray L. Skala, Esq. and
Geoffrey A. Bass, Esq.
Telephone No.: (212) 888-8200
Fax No: (212) 888-7776
(j) Governing Law; Consent to Jurisdiction. This Agreement
will be governed by and construed in accordance with the laws of the
State of Delaware (regardless of the laws that might otherwise govern
under applicable Delaware principles of conflicts of law) as to all
matters, including, but not limited to, matters of validity,
construction, effect, performance and remedies. Each of Photobition and
KDT and each Stockholder (i) irrevocably submits to the jurisdiction of
any state or federal court sitting in New York, New York in any action
or proceeding arising out of or related to this Agreement, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction
by motion or other request for leave from any such court, and (iii)
agrees that it will not bring any action relating to this Agreement in
any court other than a federal or state court sitting in New York, New
York. Each of Photobition and KDT and each Stockholder irrevocably
consents to the service of process which may be served in any such
action or proceeding by certified mail, return receipt requested, by
delivering a copy of such process to such Person at the address
specified herein or by any other method permitted by law.
(k) Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and will not
affect in any way the meaning or interpretation of this Agreement.
5
<PAGE> 6
(l) Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed will be deemed to be an
original, but all of which taken together will be one and the same
agreement.
(m) WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT
IT MIGHT HAVE TO A JURY TRIAL OF ANY DISPUTE ARISING IN CONNECTION WITH
THIS AGREEMENT.
(n) Defined Terms. Capitalized terms used herein that are not
otherwise defined herein have the meanings set forth in the Merger
Agreement.
[Remainder of page intentionally left blank]
6
<PAGE> 7
IN WITNESS WHEREOF, Photobition, KDT and the Stockholders have duly
executed this Agreement as of the date first written above.
PHOTOBITION GROUP PLC
By: /s/ J.E.T. MARCHBANKS
-------------------------------------
Name: J.E..T. MARCHBANKS
Title:
KDT ACQUISITION CORP.
By: /s/ J.E.T. MARCHBANKS
-------------------------------------
Name: J.E.T. MARCHBANKS
Title:
STOCKHOLDERS: NUMBER OF SHARES BENEFICIALLY OWNED OF
RECORD:
/S/ GARY KATZ 1,068,355
- -------------------------------------
Gary Katz
Stockholder's Address for Notice:
41 Jefferson Lane
New City, New York 10956
Fax: (914) 639-0699
/S/ ROCHELLE KATZ 1,308,355
- -------------------------------------
Rochelle Katz
Stockholder's Address for Notice:
41 Jefferson Lane
New City, New York 10956
Fax: (914) 639-0699
<PAGE> 8
Until the Termination Date, the undersigned acknowledges and agrees not to
register the transfer of any Stockholder's Shares other than in accordance with
Section 2 of this Agreement.
KATZ DIGITAL TECHNOLOGIES, INC.
By: /s/ GARY KATZ
-------------------------------------
Name: GARY KATZ
-------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
<PAGE> 1
Exhibit 2.5
INDEMNITY AGREEMENT
This INDEMNITY AGREEMENT (this "Agreement") is made as of September 1,
1998 by and among Photobition Group PLC, a company organized under the laws of
England ("Photobition"), KDT Acquisition Corp., a Delaware corporation ("KDT"),
and Gary Katz (the "Principal Stockholder").
WHEREAS, Photobition and KDT have entered into an Agreement and Plan of
Merger, dated the date hereof (the "Merger Agreement"), with Katz Digital
Technologies, Inc., a Delaware corporation (the "Company"), pursuant to which
KDT will merge with and into the Company (the "Merger");
WHEREAS, the Principal Stockholder is the beneficial owner of 2,376,710
shares of common stock, par value $0.001 per share, of the Company ("Company
Common Stock"), and representing approximately 48% of the outstanding shares of
Company Common Stock;
WHEREAS, as a condition and inducement to Photobition's and KDT's
willingness to enter into the Merger Agreement, the Principal Stockholder has
agreed to enter into this Agreement, which provides for the Principal
Stockholder to indemnify the Indemnified Parties for certain Damages (each as
defined below) on the terms and subject to the limitations set forth in this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereby agree as follows:
ARTICLE I.
I.1 Indemnification. (a) The Principal Stockholder hereby agrees to
indemnify, defend and hold harmless Photobition and KDT (and their respective
directors, officers, affiliates, successors and assigns) (each, an "Indemnified
Party") from and against any losses, liabilities, damages, costs or expenses,
including, without limitation, interest, penalties and reasonable fees and
expenses of counsel (collectively, "Damages") asserted prior to the first
anniversary of the Effective Time of the Merger (as defined in the Merger
Agreement) based upon, arising out of or otherwise resulting from (i) the
failure of the Financial Statements (as defined in the Merger Agreement) to be,
to the knowledge of the Principal Stockholder, true, correct and complete in all
material respects, (ii) any broker's or finder's fee or commission payable by
the Company to Steven West, West Worldwide Industries or their affiliates, and
(iii) any legal, investment banking, financial advisor's, broker's or finder's
fees, commissions or expenses in connection with the proposed sale of the
Company (by merger or some other business combination) in excess of $325,000 in
the aggregate, excepting any legal fees related to any proxy contest, claim,
<PAGE> 2
action, suit or proceeding arising out of or otherwise relating to the Merger
Agreement and the transactions contemplated thereby.
(b) Limitations. The Indemnified Parties' rights to indemnification
under Section 1.1(a) shall be subject to the following limitations:
(i) The Indemnified Parties shall be entitled to
indemnification under Section 1.1(a)(i) only if the aggregate amount of
all Damages under Section 1.1(a)(i) exceeds $10,000 (the "Basket
Amount"), in which event the Indemnified Parties shall be entitled to
indemnification for all such Damages (including the Basket Amount). For
the avoidance of doubt, the Basket Amount shall not apply with respect
to any claims made pursuant to Section 1.1(a)(ii) or (iii).
(ii) The Indemnified Parties shall be entitled to
indemnification under Section 1.1(a)(ii) only for 50% of any Damages
with respect to claims made pursuant to Section 1.1(a)(ii).
(iii) In no event shall the aggregate amount paid by the
Principal Stockholder to the Indemnified Parties pursuant to this
Agreement exceed $500,000.
(c) Promptly after the receipt by an Indemnified Party of notice of any
third party claim or the commencement of any third party action, suit or
proceeding subject to indemnification hereunder (a "Third Party Claim"), such
Indemnified Party will, if a claim in respect thereto is to be made against the
Principal Stockholder, give the Principal Stockholder written notice of such
Third Party Claim; provided, however, that the failure to provide such notice
will not relieve the Principal Stockholder of any of his obligations, or impair
the right of the Indemnified Party to indemnification pursuant to this Article I
unless, and only to the extent that, such failure materially prejudices the
Principal Stockholder's opportunity to defend or compromise the Third Party
Claim. The Principal Stockholder shall have the right, at his option, to defend
at his own expense and by his own counsel any Third Party Claim, provided that
(i) the Principal Stockholder acknowledges in writing (at the time he elects to
assume such defense) his obligation under this Article I to indemnify the
Indemnified Party with respect to such Third Party Claim, (ii) such counsel is
reasonably satisfactory to the Indemnified Party, (iii) the Indemnified Party is
kept fully informed of all developments, and is furnished with copies of all
documents and papers related thereto and is given the right to participate in
the defense and investigation thereof as provided below, and (iv) such counsel
proceeds with diligence and in good faith in defending such Claim. If the
conditions of the foregoing sentence are not met, the Indemnified Party shall
have the right to assume and control the defense of such Claim. If the Principal
Stockholder shall undertake to defend any Third Party Claim, he shall notify the
Indemnified Party of his intention to do so promptly (and in any event no later
than 30 days) after receipt of notice of the Third Party Claim, and the
Indemnified Party agrees to cooperate in good faith with the Principal
Stockholder and his counsel in the defense of such Third Party Claim.
Notwithstanding
2
<PAGE> 3
the foregoing, the Indemnified Party shall have the right to participate in the
defense and investigation of any Third Party Claim with its own counsel at its
own expense. The Principal Stockholder, however, shall bear the expense of such
separate counsel if (A) there are or may be legal defenses available to the
Indemnified Party that are different from or additional to those available to
the Principal Stockholder, (B) the Principal Stockholder shall not have employed
counsel to represent the Indemnified Party within a reasonable time after notice
of the Third Party Claim is given to the Principal Stockholder or notice that
the Principal Stockholder intends to assume the defense of the Third Party Claim
is given to the Indemnified Party, or (C) the Principal Stockholder authorizes
the Indemnified Party to employ separate counsel at the expense of the Principal
Stockholder. The Principal Stockholder shall not settle any Third Party Claim
without the prior written consent of the Indemnified Party, which consent shall
not be unreasonably withheld; provided, however, that an Indemnified Party shall
not be required to consent to any settlement involving the imposition of
equitable remedies or which does not provide for a complete and unconditional
discharge and release of the Indemnified Party.
ARTICLE II.
MISCELLANEOUS
II.1 Notices. All notices, claims, requests, responses, objections and
other communications given or made pursuant to this Agreement shall be in
writing and dispatched by the same means to all of the parties on the same day
and shall be deemed to have been duly given if delivered (i) personally, (ii) by
facsimile, or (iii) by a nationally recognized courier service, to the parties
at the following address:
(a) If to Photobition or KDT:
Photobition Group PLC
Eagle House
224 London Road
Mitcham
Surrey, England CR4 3HD
Attn: Eddie Marchbanks and Steven Smith
(Telefax: 011.441.81.687.7007)
with a required copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: John J. Hyland, Esq.
(Telefax: (212) 755-7306)
3
<PAGE> 4
(b) If to the Principal Stockholder to:
41 Jefferson Lane
New City, New York 10956
Attn: Gary Katz
(Telefax: (914) 639-0699)
with a required copy to:
Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, LLP
750 Lexington Avenue
New York, New York 10022
Attn: Murray L. Skala, Esq. and Geoffrey A. Bass, Esq.
(Telefax: (212) 888-7776)
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or other communication shall
be deemed to have been given (x) as of the date so delivered (if delivered
personally or by telefax), and (y) on the second business day following dispatch
(if delivered by recognized courier service).
II.2 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but neither this Agreement, nor any of the rights, interests or
obligations hereunder shall be assigned (including by operation of law) by any
party hereto without the prior written consent of the other parties. This
Agreement is not intended, nor shall it be construed, to confer upon any person
except the parties hereto and their successors and permitted assigns any rights
or remedies under or by reason of this Agreement.
II.3 Governing Law; Venue. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of New York
without reference to the conflict of laws principles thereof. Any disputes
arising out of, in connection with or with respect to this Agreement, the
subject matter hereof, the performance or non-performance of any obligation
hereunder, or any of the transactions contemplated hereby shall be adjudicated
in a court of competent civil jurisdiction sitting in the City and State of New
York and nowhere else. Each of the parties hereto hereby irrevocably submits to
the jurisdiction of such court for the purposes of any suit, civil action or
other proceeding arising out of, in connection with or with respect to this
Agreement, the subject matter hereof, the performance or non-performance of any
obligation hereunder, or any of the transactions contemplated hereby
(collectively, "Suit"). Each of the parties hereto hereby waives and agrees not
to assert by way of motion, as a defense or otherwise in any such Suit, any
claim that it is not subject to the jurisdiction of the above courts, that such
Suit is brought in an inconvenient forum, or that the venue of such Suit is
improper.
4
<PAGE> 5
II.4 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which shall
constitute one and the same agreement. In proving this Agreement, it shall not
be necessary to produce or account for more than one such counterpart.
II.5 Headings. The heading references herein are for convenience
purposes only, do not constitute a part of this Agreement and shall not be
deemed to limit or affect any of the provisions hereof.
II.6 Severability. The invalidity, illegality or unenforceability of
any provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision; and if any provision is held to be
unenforceable as a matter of law, the other provisions shall not be affected
thereby and shall remain in full force and effect. If any provision shall be
declared unenforceable due to its amount, scope, breadth or duration, then it
shall be modified without any further action by the parties as to the amount,
scope, breadth or duration to the maximum extent permitted by law and shall
continue to be fully enforceable as so modified.
II.7 Amendment. This Agreement shall not be amended except in writing
signed by the parties.
(Signature Page Follows)
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the date first written above.
PHOTOBITION GROUP PLC
By: /s/ J.E.T. MARCHBANKS
-------------------------------
Name: J.E.T. MARCHBANKS
Title:
KDT ACQUISITION CORP.
By: /s/ J.E.T. MARCHBANKS
-------------------------------
Name: J.E.T. MARCHBANKS
Title:
/s/ GARY KATZ
---------------------------------------
Gary Katz, as the Principal Stockholder
<PAGE> 1
Exhibit 20.1
FOR IMMEDIATE RELEASE
KATZ DIGITAL TECHNOLOGIES TO BE ACQUIRED
BY PHOTOBITION GROUP PLC FOR
APPROXIMATELY $50.0 MILLION
IN CASH
NEW YORK, NEW YORK, September 2, 1998 . . . KATZ DIGITAL TECHNOLOGIES,
INC. (ASE:KTZ) announced today that it has entered into a merger agreement with
PHOTOBITION GROUP PLC (London Stock Exchange), Mitcham, England, under which
Katz Digital Technologies will become a wholly-owned subsidiary of Photobition.
The holders of outstanding shares of Katz Digital Technologies common stock and
vested options, warrants and other convertible securities are expected to
receive a total of approximately $47.0 million based on a price of approximately
$8.78 per share with the holders of unvested options to receive an additional
approximately $3.0 million.
The transaction, which is expected to close in mid-November 1998, is
subject to standard closing conditions, including the approval of Katz Digital
Technologies' stockholders. Photobition has deposited $2 million in escrow to be
paid to Katz Digital Technologies if the transaction fails to close under
certain conditions and Katz Digital Technologies has agreed to pay a break-up
fee in the same amount if the Company withdraws from the Merger to accept a
competing acquisition proposal or otherwise breaches the agreement. Gary Katz,
the Company's chairman, chief executive officer and largest shareholder and
family have agreed to vote their shares of stock in favor of the merger. The
Company has granted Photobition an option to acquire up to 19.9% of the
Company's stock in the event the Company accepts an alternative acquisition
proposal. The agreements also provide for Mr. Katz to remain with the Company
upon completion of the merger.
Gary Katz, chairman and chief executive officer of Katz Digital
Technologies said, "This is the right transaction at the right time for our
shareholders, employees and customers. It will give us the opportunity to become
an important part of a global graphics
<PAGE> 2
powerhouse." He said that the Company plans to set a date in the near future for
a special meeting of shareholders to consider to vote upon the proposed
transaction.
Photobition Chairman and Chief Executive Officer Eddie Marchbanks said,
"Katz Digital Technologies has built an enviable position in one of the world's
most important markets for high quality digital prepress and graphics services,
thus establishing an important position for Photobition's planned expansion
throughout the United States."
Founded in 1967, Photobition Group PLC, with sales of approximately
$150 million, is Europe's leading supplier of graphic services and products to
the exhibition, display and media industries.
Katz Digital Technologies, Inc. is a leading provider of digital
printing and digital prepress services.
The statements contained in this release which are not
historical facts may be deemed to constitute forward-looking
statements. Actual results may differ materially from those
projected in such statements due to a number of risks and
uncertainties, including, without limitation, demand and
competition for the Company's services, and other risks or
uncertainties detailed in the Company's filings with the
Securities and Exchange Commission.
COMPANY CONTACT: AGENCY CONTACT:
Donald L. Flamm Neil Berkman
Vice President - Finance & CFO Neil Berkman Associates
(212) 594-4800 (310) 277-5162
