<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
KATZ DIGITAL TECHNOLOGIES, INC.
(Name of Issuer)
COMMON STOCK, $.001 PAR VALUE
(Title of Class of Securities)
486093-107
(CUSIP Number)
JOHN J. HYLAND, ESQ.
JONES, DAY, REAVIS & POGUE
599 LEXINGTON AVENUE
NEW YORK, NY 10022
TELEPHONE: (212) 326-3959
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
SEPTEMBER 1, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13(d)-1(g), check the following
box [ ]
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CUSIP No.486093-107
- --------------------------------------------------------------------------------
1. Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
KDT Acquisition Corp. (IRS Identification No. 51-0384281)
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2. Check the Appropriate Box if a Member of a Group
(a)
(b)
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3. SEC Use Only
- --------------------------------------------------------------------------------
4. Source of Funds
OO (See Item 3)
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5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
[ ]
- --------------------------------------------------------------------------------
6. Citizenship or Place of Organization
State of Delaware
- --------------------------------------------------------------------------------
NUMBER 7. Sole Voting Power
OF SHARES 1,012,964 shares of common stock
-----------------------------------------------
BENEFICIALLY 8. Shared Voting Power
OWNED BY -0-
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EACH 9. Sole Dispositive Power
REPORTING 1,012,964 shares of common stock
-----------------------------------------------
PERSON WITH 10. Shared Dispositive Power
-0-
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11. Aggregate Amount Beneficially Owned by Each Reporting Person
1,012,964 shares of common stock (see Item 5)
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12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares
[ ]
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13. Percent of Class Represented by Amount in Row (11)
16.6%
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14. Type of Reporting Person
CO
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Item 1. Security and Issuer.
The class of equity securities to which this statement relates
is the common stock, $.001 par value (the "Katz Common Stock"), of Katz Digital
Technologies, Inc., a Delaware corporation ("Katz"). The principal executive
offices of Katz are located at 21 Penn Plaza, New York, New York 10001.
Item 2. Identity and Background.
This statement is being filed by KDT Acquisition Corp., a
Delaware corporation ("KDT"), in connection with the Stock Option Agreement
dated as of September 1, 1998 (the "Option Agreement"), among Photobition Group
plc, a company organized under the laws of England and Wales ("Photobition"),
KDT and Katz, as described in Item 5. The address of the principal business and
principal executive offices of KDT and Photobition is Eagle House, 224 London
Road, Mitcham Surrey CR4 3HD, United Kingdom. The name, business address,
present principal occupation or employment, and citizenship of each director and
executive officer of KDT is set forth on Attachment A. The name, business
address, present principal occupation or employment, and citizenship of each
director and executive officer of Photobition is set forth on Attachment B.
KDT is a wholly-owned subsidiary of Photobition formed for the
purpose of acquiring Katz pursuant to the Agreement and Plan of Merger, dated as
of September 1, 1998, between Photobition, KDT and Katz (the "Merger
Agreement"). Photobition is a supplier of graphics, media products and services
and operates in four core areas: graphics, sound, systems and digital equipment
sales. Photobition's shares are listed on the London Stock Exchange.
Neither KDT, Photobition nor, to the best of KDT's knowledge,
any of the persons named on Attachments A and B, has during the last five years:
(i) been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors); or (ii) been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
This Statement relates to an option granted to KDT by Katz to
purchase shares of Katz Common Stock from Katz as described below (the "Stock
Option"). The Stock Option entitles KDT to purchase up to 1,012,964 shares of
Katz Common Stock (the "Option Shares") under the circumstances specified in the
Option Agreement as described in Item 5 below, for a purchase price of $5.125
per share (the "Purchase Price").
The Stock Option was granted by Katz as an inducement and
condition to KDT's and Photobition's entering into the Merger Agreement.
Pursuant to the Merger Agreement, KDT will be merged with and into Katz (the
"Merger") with Katz as the surviving corporation, on the terms and subject to
the conditions thereof. At the Effective Time, each share of KDT Common Stock
issued and outstanding will be converted into one share of Katz Common Stock and
each
<PAGE> 5
share of Katz Common Stock (other than any Dissenting Share (as defined in the
Merger Agreement)) will be converted into the right to receive approximately
$8.78 in cash. If the Merger is consummated, the Stock Option will not be
exercised. No monetary consideration was paid by KDT or Photobition to Katz for
the Stock Option.
If KDT elects to exercise the Stock Option, it currently
anticipates that the funds to pay the Purchase Price will be provided through
funds internally generated and provided by Photobition and selective short term
and/or long term borrowings.
Item 4. Purpose of Transaction.
As stated above, the Stock Option was granted to KDT as an
inducement and condition to KDT's and Photobition's entering into the Merger
Agreement.
Item 5. Interest in Securities of the Issuer.
As a result of the issuance of the Stock Option, KDT may be
deemed to be the beneficial owner of 1,012,964 shares of Katz Common Stock,
which would represent approximately 16.6% of the shares of Katz Common Stock
outstanding upon exercise of the Stock Option (based on the number of shares of
Katz Common Stock outstanding on September 1, 1998, as set forth in the Merger
Agreement). KDT will have sole voting and dispositive power with respect to such
shares.
The Option Shares described herein are subject to the Stock
Option, which is not currently exercisable. The Stock Option will become
exercisable upon termination of the Merger Agreement in certain circumstances,
generally involving: (i) the approval or recommendation by Katz's Board of
Directors of another acquisition proposal; or (ii) the acceptance by Katz of
another acquisition proposal. Nothing herein shall be deemed to be an admission
by KDT as to the beneficial ownership of any shares of Katz Common Stock; prior
to the exercise of the Stock Option, KDT disclaims beneficial ownership of all
Option Shares.
Except as described herein, neither KDT, Photobition nor, to
the best of KDT's knowledge, any other person referred to in Attachments A and B
beneficially owns or has acquired or disposed of any shares of Katz Common Stock
during the past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
As an inducement and condition to Photobition's and KDT's
entering into the Merger Agreement, Gary Katz and Rochelle Katz (the
"Stockholders") entered into a Stockholders Agreement with KDT and Photobition
dated as of September 1, 1998 (the "Stockholders Agreement"). Under the
Stockholders Agreement, the Stockholders have agreed to vote the Shares (as
defined in the Stockholders Agreement) (representing 46.7% of the outstanding
Katz Common Stock) in favor of the Merger Agreement and the Merger and against
any Adverse Proposal (as defined in the Stockholders Agreement).
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Except for the Merger Agreement, the Option Agreement and the
Stockholders Agreement, none of the persons named in Item 2 has any contracts,
arrangements, understandings or relationships (legal or otherwise) with any
persons with respect to any securities of Katz, including but not limited to,
transfers or voting of any securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of profits
or loss, of the giving or withholding of proxies.
The summary contained in this Schedule 13D of certain
provisions of the Merger Agreement, the Option Agreement and the Stockholders
Agreement is qualified in its entirety by reference to the Merger Agreement, the
Option Agreement and the Stockholders Agreement attached as Exhibits 1, 2 and 3
hereto, respectively, and incorporated herein by reference.
3
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Item 7. Materials to be Filed as Exhibits.
Exhibit 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 (the "Merger Agreement").
Exhibit 2 Stock Option Agreement among Photobition Group plc, KDT
Acquisition Corp. and Katz Digital Technologies, Inc. dated as
of September 1, 1998 (the "Option Agreement").
Exhibit 3 Stockholders Agreement among Photobition Group plc, KDT
Acquisition Corp., Gary Katz and Rochelle Katz dated as of
September 1, 1998 (the "Stockholders Agreement").
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After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: October 30, 1998
KDT ACQUISITION CORP.
By: /s/ Steven Smith
Steven Smith
Vice President, Chief Financial Officer
and Secretary
5
<PAGE> 9
Attachment A
Executive Officers and Directors of KDT Acquisition Corp.
The names and titles of the executive officers and the names of
the directors of KDT and each of their business addresses and principal
occupations are set forth below. If no address is given, the director's or
executive officer's business address is that of KDT. Unless otherwise indicated,
each occupation set forth opposite an individual's name refers to such
individual's position at KDT, and each individual is a citizen of the United
Kingdom.
<TABLE>
<CAPTION>
Executive Officers Position
- ------------------ --------
<S> <C>
J.E.T. Marchbanks President and Chief Executive Officer
Steven Smith Vice President, Chief Financial Officer and Secretary
Directors Present Principal Occupation; Address
- --------- -------------------------------------
J.E.T. Marchbanks President and Chief Executive Officer
Photobition Group plc
Eagle House
224 London Road
Mitcham Surrey CR4 3HD
United Kingdom
Steven Smith Chief Financial Officer
Photobition Group plc
Eagle House
224 London Road
Mitcham Surrey CR4 3HD
United Kingdom
</TABLE>
6
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Attachment B
Executive Officers and Directors of Photobition Group plc
The names and titles of the executive officers and the names of
the directors of Photobition and each of their business addresses and principal
occupations are set forth below. If no address is given, the director's or
executive officer's business address is that of Photobition. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
such individual's position at Photobition, and each individual is a citizen of
the United Kingdom.
<TABLE>
<CAPTION>
Executive Officers Position
- ------------------ --------
<S> <C>
J.E.T. Marchbanks President and Chief Executive Officer
Steven Smith Chief Financial Officer
Directors Present Principal Occupation; Address
- --------- -------------------------------------
J.E.T. Marchbanks President and Chief Executive Officer
Steven Smith Chief Financial Officer
Richard Bradley Retired
Richard Reynolds Retired
</TABLE>
7
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
Exhibit 1 Agreement and Plan of Merger by and among Photobition A-1
Group plc, KDT Acquisition Corp. and Katz Digital
Technologies, Inc. dated as of September 1, 1998.
Exhibit 2 Stock Option Agreement among Photobition A-2
Group plc, KDT Acquisition Corp. and Katz
Digital Technologies, Inc. dated as of
September 1, 1998.
Exhibit 3 Stockholders Agreement among Photobition A-3
Group plc, KDT Acquisition Corp., Gary Katz
and Rochelle Katz dated as of September 1, 1998.
</TABLE>
8
<PAGE> 1
Exhibit 1
CONFORMED COPY
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
<PAGE> 2
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:
<PAGE> 3
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
2
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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
3
<PAGE> 5
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.
5
<PAGE> 7
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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<PAGE> 8
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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<PAGE> 9
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
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is bound, or (B) any judgment, order or decree to which Photobition
or any of its Subsidiaries 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)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 of another Person, enter into any "keep well" or
other agreement to maintain any financial statement condition of
another Person or enter
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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;
(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;
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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. 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
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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 have under this
Section 6.7 except to the extent such failure prejudices such party), and shall
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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.
7.5 STOCKHOLDER APPROVAL. This Agreement and the Merger shall have
received the Requisite Stockholder Approval.
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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 Agreement and the Merger fail to receive the Requisite
Stockholder Approval.
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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 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
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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 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
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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
New York, NY 10001
Attn: Gary Katz, Chairman
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(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, 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.
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<PAGE> 45
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.
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<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:President and Chief Executive Officer
KDT ACQUISITION CORP.
By: /s/ J.E.T. Marchbanks
Name: J.E.T. Marchbanks
Title:President and Chief Executive Officer
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
45
<PAGE> 1
Exhibit 2
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 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.
<PAGE> 2
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 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
2
<PAGE> 3
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 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
3
<PAGE> 4
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 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.
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<PAGE> 5
(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
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.
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<PAGE> 6
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 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.
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<PAGE> 7
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 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.
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<PAGE> 8
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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<PAGE> 9
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/ S. M. Smith
Name: S. M. Smith
Title: Group Finance Director
KDT ACQUISITION CORP.
By: /s/ S. M. Smith
Name: S. M. Smith
Title: Group Finance Director
KATZ DIGITAL TECHNOLOGIES, INC.
By: /s/ Gary Katz
Name: Gary Katz
Title: Chairman and Chief Executive Officer
9
<PAGE> 1
Exhibit 3
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 reasonably
be expected to result in any of the conditions set forth in Article VII or VIII
of the Merger Agreement not being fulfilled.
<PAGE> 2
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:
(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
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<PAGE> 3
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.
(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
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<PAGE> 4
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
Fax No.: 011.441.81.687.7007
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<PAGE> 5
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.
(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.
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<PAGE> 6
(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]
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<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/ S. M. Smith
Name: S. M. Smith
Title: Group Finance Director
KDT ACQUISITION CORP.
By: /s/ S. M. Smith
Name: S. M. Smith
Title: Group Finance Director
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY
STOCKHOLDERS: OWNED OF RECORD:
<S> <C>
/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
</TABLE>
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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
8
