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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 2, 1998
GUNTHER INTERNATIONAL, LTD.
(Exact name of Registrant as specified in its charter)
DELAWARE 000-22994 51-0223195
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
ONE WINNENDEN, NORWICH, CONNECTICUT 06360
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 823-1427
N/A
(Former name or former address, if changed since last report)
This is Page 1 of 191 pages.
The Exhibit Index is on Page 6.
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Item 1. Changes in Control of Registrant.
On October 5, 1998, the registrant announced that it successfully
completed a comprehensive $5.7 million financing transaction, the proceeds of
which have been utilized to completely restructure and replace the Company's
pre-existing senior line of credit, fund a full settlement with the Company's
third party service provider, and provide additional working capital to fund the
Company's ongoing business operations.
Under the terms of the transaction, a newly formed limited liability
company organized by the Tisch Family Interests and Mr. Robert Spiegel (the "New
Lender") loaned an aggregate of $4 million to the Company. At the same time, the
Company's senior lender reached an agreement with the guarantor of a portion of
the Company's senior line of credit (the "Guarantor") whereby the Guarantor
consented to the liquidation of approximately $1.7 million of collateral and the
application of the proceeds of such collateral to satisfy and repay in full a
like amount of indebtedness outstanding under the senior credit facility. The
balance of the indebtedness outstanding under the senior credit facility,
approximating $350,000, was repaid in full from the proceeds of the new
financing. The Company executed a new promissory note in favor of the Guarantor
evidencing the Company's obligation to repay the amount of the collateral that
was liquidated by the senior lender. The Company's obligations to the Guarantor
are completely subordinated to the Company's obligations to the New Lender. In
addition, approximately $1.4 million of the new financing was utilized to pay
the Company's third party service provider all amounts that were due and owing
to the service provider for performing maintenance on Company systems.
To induce the New Lender to enter into the financing transaction, the
Company, the New Lender, Park Investment Partners, Inc. ("Park"), Gerald H.
Newman, the estate of Harold S. Geneen (the "Estate"), Four Partners, and Robert
Spiegel entered into a separate voting agreement (the "Voting Agreement"),
pursuant to which they each agreed to vote all shares of Gunther stock held by
them in favor of (i) that number of persons nominated by the New Lender
constituting a majority of the Board of Directors, (ii) one person nominated by
the Estate and (iii) one person nominated by Park. In addition, the Company
granted the New Lender a stock purchase warrant (the "Warrant") entitling the
New Lender, any time during the period commencing on January 1, 1999 and ending
on the fifth anniversary of the transaction, to purchase up to 35% of the pro
forma, fully diluted number of shares of the Common Stock of the Company,
determined as of the date of exercise. The exercise price of the Warrant is
$1.50 per share.
Contemporaneously with the consummation of the transaction, Frederick W.
Kolling III and James H. Whitney resigned from the Board of Directors, and
Thomas Steinberg and Robert Spiegel were elected to fill the vacancies created
by the resignations. Another inside director, Alan W. Morton, resigned from the
Board prior to the consummation of the transactions.
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The foregoing transactions may be deemed to constitute a change in control
of the Company. As discussed above, the Voting Agreement requires the parties
thereto to vote their shares of Common Stock in favor of that number of persons
nominated by the New Lender constituting a majority of the Board of Directors.
As of the date hereof, the Company believes that Park, Mr. Newman, the New
Lender and the Estate own, in the aggregate, 1,801,916 shares of Common Stock,
representing approximately 41.0% of the outstanding shares of Common Stock. In
addition, the Warrant entitles the New Lender to purchase directly from the
Company that number of shares of Common Stock that is equal to 35% of the pro
forma, fully diluted number of shares of Common Stock as of the date of
exercise, commencing as of January 1, 1999. As of the date hereof, the Company
believes the Warrant will be exercisable for approximately 2,591,616 shares of
Common Stock. Accordingly, the Company believes that the New Lender will be the
beneficial owner of approximately 4,393,532 shares, or 62.9% of the outstanding
shares, of Common Stock, commencing as of November 2, 1998, determined in
accordance with Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended. For more information concerning the identity of New Lender and
its beneficial ownership of shares of Common Stock, reference is hereby made to
the Schedule 13D of the New Lender being filed with the Securities and Exchange
Commission contemporaneously with this report.
Copies of the relevant documents and agreements providing for the
transactions discussed above are filed as exhibits to this report, and the
foregoing discussion is qualified in its entirety by reference to the complete
text of such documents and agreements.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits.
Exhibit No. Exhibit
----------- --------
99.1 Press Release of Gunther International, Ltd.
("Gunther") dated October 5, 1998.
99.2 Agreement, dated October 2, 1998, by and among
Gunther, June H. Geneen, Phil E. Gilbert, Jr., Thomas
W. Keesee and the United States Trust Company Of New
York, as Co-Executors of
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the Estate of Harold S. Geneen, Late of New York, New
York (the "Estate"), BankBoston, N.A. (successor by
merger to Bank of Boston Connecticut ("BOB") and
Gunther Partners, LLC ("Lender").
99.3 Promissory Note, dated October 2, 1998, made by
Gunther to the order of the Estate.
99.4 Security Agreement, dated October 2, 1998, by and
between Gunther and the Estate.
99.5 Loan and Security Agreement, dated October 2, 1998,
by and between Gunther and Lender.
99.6 $4,000,000 Term Note, dated October 2, 1998, made by
Gunther to the order of the Lender.
99.7 Subordination Agreement dated as of October 2, 1998,
between the Lender and Connecticut Innovations, Inc.
("CII").
99.8 Subordination Agreement, dated as of October 2, 1998,
between the Estate and CII.
99.9 Subordination and Intercreditor Agreement, dated
October 2, 1998, between the Lender and the Estate.
99.10 Warrant Agreement, dated October 2, 1998, by and
between the Lender and Gunther.
99.11 Registration Rights Agreement, dated October 2, 1998,
by and between Gunther and the Lender.
99.12 Voting Agreement, dated October 2, 1998, by and among
the Estate, Gerald H. Newman, Park Investment
Partners, Inc., the Lender, Robert Spiegel, Four
Partners and Gunther.
99.13 Settlement Agreement, dated September 30, 1998,
between Gunther and DataCard Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
GUNTHER INTERNATIONAL, LTD.
a Delaware corporation
Date: October 7, 1998 By: /s/ Marc I. Perkins
---------------------------------
Name: Marc I. Perkins
Title: Chief Executive Officer
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EXHIBIT INDEX
Exhibit No. Description Page No.
99.1 Press Release of Gunther International, Ltd.
("Gunther") dated October 5, 1998. 8
99.2 Agreement, dated October 2, 1998, by and among Gunther,
June H. Geneen, Phil E. Gilbert, Jr., Thomas W. Keesee
and the United States Trust Company Of New York, as
Co-Executors of the Estate of Harold S. Geneen, Late of
New York, New York (the "Estate"), BankBoston, N.A.
(successor by merger to Bank of Boston Connecticut
("BOB") and Gunther Partners, LLC ("Lender"). 11
99.3 Promissory Note, dated October 2, 1998, made by Gunther
to the order of the Estate. 25
99.4 Security Agreement, dated October 2, 1998, by and
between Gunther and the Estate. 29
99.5 Loan and Security Agreement, dated October 2, 1998, by
and between Gunther and Lender. 55
99.6 $4,000,000 Term Note, dated October 2, 1998, made by
Gunther to the order of the Lender. 99
99.7 Subordination Agreement dated as of October 2, 1998,
between the Lender and Connecticut Innovations, Inc.
("CII"). 105
99.8 Subordination Agreement, dated as of October 2, 1998,
between the Estate and CII. 115
99.9 Subordination and Intercreditor Agreement, dated October
2, 1998, between the Lender and the Estate. 127
99.10 Warrant Agreement, dated October 2, 1998, by and
between the Lender and Gunther. 140
99.11 Registration Rights Agreement, dated October 2, 1998, by
and between Gunther and the Lender. 159
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99.12 Voting Agreement, dated October 2, 1998, by and among 175
the Estate, Gerald H. Newman, Park Investment Partners,
Inc., the Lender, Robert Spiegel, Four Partners and
Gunther.
99.13 Settlement Agreement, dated September 30, 1998, between 185
Gunther and DataCard Corporation.
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GUNTHER ANNOUNCES COMPLETION OF
COMPREHENSIVE FINANCING TRANSACTION
NORWICH, CT, (October 2, 1998) Gunther International, Ltd. (NASDAQ: SORT)
today announced it has successfully completed a comprehensive $5.7 million
financing transaction, the proceeds of which have been utilized to completely
restructure and replace the Company's pre-existing senior line of credit, fund a
full settlement with the Company's third party service provider, and provide
additional working capital to fund the Company's ongoing business operations.
Under the terms of the transaction, a newly formed limited liability
company organized by the Tisch Family Interests and Mr. Robert Spiegel (the "New
Lender") loaned an aggregate of $4 million to the Company. At the same time, the
Company's senior lender reached an agreement with the guarantor of a portion of
the Company's senior line of credit (the "Guarantor") whereby the Guarantor
consented to the liquidation of approximately $1.7 million of collateral and the
application of the proceeds of such collateral to satisfy and repay in full a
like amount of indebtedness outstanding under the senior credit facility. The
balance of the indebtedness outstanding under the senior credit facility,
approximating $350,000, was repaid in full from the proceeds of the new
financing. The Company executed a new promissory note in favor of the Guarantor
evidencing the Company's obligation to repay the amount of the collateral that
was liquidated by the senior lender. The Company's obligations to the Guarantor
are completely subordinated to the Company's obligations to the New Lender. In
addition, approximately $1.4 million of the new financing was utilized to pay
the Company's third party service provider all amounts that were due and owing
to the service provider for performing maintenance on Company systems.
To induce the New Lender to enter into the financing transaction, the
Company, the New Lender, Park Investment Partners, Gerald H. Newman, the estate
of Harold S. Geneen (the "Estate"), Four Partners, and Robert Spiegel entered
into a separate voting agreement, pursuant to which they each agreed to vote all
shares of Gunther stock held by them in favor of (i) that number of persons
nominated by the New Lender constituting a majority of the Board of Directors,
(ii) one person nominated by the Estate and (iii) one person nominated by Park
Investment Partners. In addition, the Company granted the New Lender a stock
purchase warrant entitling the New Lender, any time during the period commencing
on January 1, 1999 and ending on the fifth anniversary of the transaction, to
purchase up to 35% of the pro forma, fully diluted number of shares of the
Common Stock of the Company, determined as of the date of exercise. The exercise
price of the warrant is $1.50 per share.
Contemporaneously with the consummation of the transaction, Frederick W.
Kolling III and James H. Whitney resigned from the Board of Directors, and
Thomas Steinberg and Robert Spiegel were elected to fill the vacancies created
by the resignations. Another inside director, Alan W. Morton, resigned from the
Board prior to the consummation of the transactions.
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The Company is continuing to review the previously announced issues
regarding the accumulation of contract costs and the recognition of revenues and
expenses relating to the Company's systems business. The Company expects to be
in a position to release information concerning the results of the review by the
end of October.
Gunther International, Ltd. is a leading manufacturer of intelligent
document finishing systems and ink jet printing solutions.
# # # #
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AGREEMENT
AGREEMENT made this 2nd day of October, 1998 by and among GUNTHER
INTERNATIONAL, LTD ("Gunther"), BANKBOSTON, N.A. (successor by merger to Bank
of Boston Connecticut ("BOB"), JUNE H. GENEEN, PHIL E. GILBERT, JR., THOMAS
W. KEESEE and the UNITED STATES TRUST COMPANY OF NEW YORK, as Co-Executors of
the Estate of Harold S. Geneen, late of New York, New York (the "Estate") and
GUNTHER PARTNERS, LLC ("New Lender").
W I T N E S S E T H :
WHEREAS, Gunther is indebted to BOB under and pursuant to that certain
Revolving Loan and Security Agreement dated as of May 31, 1996 between Gunther
and BOB, as amended (the "Revolving Loan Agreement") which indebtedness is also
evidenced by a certain $1,750,000 Revolving Loan Note dated May 31, 1996 made by
Gunther to the order of BOB, as amended (the "Facility A Note") and a certain
$500,000 Revolving Loan Note dated March 17, 1997 made by Gunther to the order
of BOB, as amended (the "Facility B Note"); and
WHEREAS, pursuant to a Limited Guaranty Agreement (the "Guaranty") dated
as of May 31, 1996 made by Harold S. Geneen ("Geneen") in favor of BOB, the
Estate is obligated to BOB with respect to a guaranty of the payment of the
Facility A Note and certain other "Liabilities" as defined in the Guaranty; and
WHEREAS, the obligations of the Estate under the Guaranty are secured by
the pledge of certain collateral owned by the Estate (the "Pledged Collateral")
pursuant to a certain Amended and Restated Pledge Agreement dated as of June 26,
1997 between Geneen and BOB (the "Pledge Agreement"); and
WHEREAS, Gunther has entered into a Settlement Agreement with DataCard
Corporation ("DataCard"), dated the date hereof, pursuant to which Gunther has
agreed to pay DataCard One Million Four Hundred Twenty-One Thousand Seven
Dollars and 30/100 ($1,421,007.30); and
WHEREAS, BOB, for the account of Gunther, has issued a $150,000 Letter of
Credit to a customer of Gunther and Gunther will be responsible for the
immediate reimbursement to BOB of any sums drawn upon such Letter of Credit (the
"Letter of Credit"); such Letter of Credit was issued as part of Facility B as
defined in the Revolving Loan Agreement; and
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WHEREAS, New Lender is willing to make a Four Million Dollar ($4,000,000)
loan (the "New Loan") to Gunther under the terms and conditions set forth in
this Agreement to help enable Gunther to meet its present and projected
financial obligations and to provide Gunther with necessary working capital; and
WHEREAS, the parties hereto desire to have the New Lender make such loan
as provided herein.
NOW, THEREFORE, the parties hereto, for good and valuable consideration,
each to the other paid, the receipt and sufficiency of which are hereby
acknowledged, do hereby agree as follows:
1. Payment of the Facility A Note.
(a) BOB, the Estate and Gunther acknowledge that as of the date hereof,
the indebtedness of Gunther under the Facility A Note is $1,701,168.75 in
principal plus interest through October 2, 1998, of $437.11. On the date hereof,
the Estate and Gunther hereby authorize BOB to liquidate and BOB will liquidate
a sufficient amount of the Pledged Collateral to pay in full the aforesaid
indebtedness of Gunther under the Facility A Note. BOB agrees that upon such
liquidation of Pledged Collateral, the Estate shall be released from any further
obligations under the Guaranty or Pledge Agreement and any excess funds
collected from such liquidation and all remaining Pledged Collateral shall be
returned to the Estate. BOB shall also execute and deliver to the Estate any UCC
Termination Statements required to release of record any security interest BOB
had in the Pledged Collateral. Gunther and the Estate acknowledge and agree that
BOB's liquidation of the Pledged Collateral is a commercially reasonable sale of
the Pledged Collateral under the Connecticut Uniform Commercial Code and
applicable law.
(b) Gunther and the Estate, on their own behalf and for their successors
and assigns, hereby waive, release and discharge BOB, and all officers,
employees, trustees and agents of BOB, from any and all claims, demands,
defenses, setoffs, counterclaims, actions or causes of action arising out of or
in any way relating to the Revolving Loan Agreement and any and all loan
documents executed in connection therewith, the Guaranty and the Pledge
Agreement, BOB's administration of the loans and the credit relationship between
BOB and Gunther and the Estate relative thereto, and any documents, agreements,
dealings or other matters connected therewith, including without limitation
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all known and unknown matters, claims, transactions or things occurring prior to
the date of the execution of this Agreement and related to the subject matter
thereof.
(c) Notwithstanding anything to the contrary contained herein, if at any
time (i) payment of all or any portion of the indebtedness evidenced by the
Facility A Note including without limitation attorney's fees, and/or payment
under the Guaranty, or (ii) any mortgage, lien or security interest provided to
BOB, by Gunther or the Estate, pursuant to or in connection with this Agreement
or otherwise (including without limitation the Pledge Agreement and the
Revolving Loan Agreement) is rescinded, avoided, set aside, undone, rendered
unenforceable, or otherwise must be restored by BOB, to Gunther or the Estate or
to any of the creditors of Gunther or the Estate or any representative of
Gunther or the Estate or representative of Gunther's or the Estate's creditors,
or otherwise, upon the insolvency, bankruptcy or reorganization of Gunther or
the Estate, or otherwise, then the Revolving Loan Agreement, the Facility A
Note, and the Guaranty shall continue to be effective and/or be reinstated, as
the case may be and the amounts which BOB is obligated to so restore or which
are so rescinded, shall automatically be due and payable by Gunther under the
Facility A Note and the Estate under the Guaranty, together with the amounts, if
any, then outstanding under the Facility A Note, and any and all obligations for
repayment of any payments so restored or rescinded shall be revived under the
Facility A Note, and the Guaranty, and in the case of any payment which must be
so restored by BOB, increase the amounts, if any, then owing under the Facility
A Note and the Guaranty, all as though such payments had not been made. BOB's
liens and security interests shall be restored to their former first priority
position, and the liens of the Estate and the New Lender as provided in this
Agreement shall be junior and subordinate to BOB's liens.
(d) Notwithstanding anything to the contrary contained herein, if at any
time (I) payment of all or any portion of the indebtedness evidenced by the
Facility B Note including without limitation attorney's fees, or (ii) any
mortgage, lien, or security interest provided to BOB, by Gunther, pursuant to or
in connection with this Agreement or otherwise (including without limitation the
Revolving Loan Agreement) is rescinded, avoided, set aside, undone, rendered
unenforceable, or otherwise must be restored by BOB, to Gunther or to any of the
creditors of Gunther or any representative of Gunther or representative of
Gunther's creditors, or otherwise, upon the insolvency, bankruptcy or
reorganization of Gunther or
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otherwise, the Revolving Loan Agreement and the Facility B Note shall continue
to be effective and/or be reinstated, as the case may be, and the amounts which
BOB is obligated to so restore or which are so rescinded shall automatically be
due and payable by Gunther under the Facility B Note, together with the amounts,
if any, then outstanding under the Facility B Note, and any and all obligations
for repayment of any payments so restored or rescinded shall be revived under
the Facility B Note, and in the case of any payment which must be so restored by
BOB, increase the amounts, if any, then owing under the Facility B Note, all as
though such payments had not been made. BOB's liens and security interests shall
be restored to their former first priority position, and the liens of the Estate
and the New Lender pursuant to this Agreement shall be junior and subordinate to
BOB's liens.
2. Gunther's Indebtedness to the Estate. In exchange for allowing the use
of a portion of the Pledged Collateral to pay Gunther's obligations under the
Facility A Note, Gunther shall execute and deliver to the Estate a Promissory
Note in the form of the Note attached hereto as Exhibit A (the "Estate Note")
and shall secure the same by executing and delivering to the Estate a Security
Agreement in the form of the Security Agreement attached hereto as Exhibit B
(the "Estate Security Agreement"). Gunther shall also execute and deliver to the
Estate UCC Financing Statements which shall be necessary to perfect the Estate's
security interest in and to the collateral described in the Estate Security
Agreement in which a security interest can be perfected by filing. The Estate
acknowledges and agrees that in lieu of any right of subrogation, its entire
rights to be paid by Gunther for the use of a portion of the Pledged Collateral
as provided above to pay the Facility A Note are contained in the Estate Note
and the Estate Security Agreement as the same may be affected by the other
documents described herein to which the Estate shall become a party and that the
Estate shall not otherwise become subrogated to any rights which BOB may have
had against Gunther by virtue of such use of the Pledged Collateral. Each of the
undersigned Co-Executors of the Estate of Harold S. Geneen does hereby authorize
and empower each other Co-Executor to execute and deliver on behalf of the
Estate any UCC-3 Subordination Statements contemplated by this Agreement and to
perform on behalf of the Estate any other act required or contemplated hereunder
or under the documents contemplated hereby.
3. Loan by New Lender.
(a) Simultaneously with its execution hereof, New Lender shall make a loan
to Gunther in the amount of Four
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Million Dollars ($4,000,000). The proceeds of such loan shall be used as
follows:
(i) to fund Gunther's obligation under the DataCard Agreement;
(ii) to fund and immediately provide to BOB cash collateral for
Gunther's repayment obligations to BOB with respect to the Letter of
Credit and to fund and immediately pay the outstanding principal balance
and accrued interest under the Facility B Note and the Revolving Loan
Agreement;
(iii) to fund trade payables of Gunther;
(iv) to fund work in process of Gunther;
(v) to fund the costs of the transactions described in this
Agreement; and
(vi) the balance to fund the working capital needs of Gunther.
(b) To evidence and secure Gunther's obligations to the New Lender with
respect to the New Loan, simultaneously with their execution hereof, the New
Lender and Gunther shall execute and deliver to each other a Loan and Security
Agreement in the form attached hereto as Exhibit C (the "Priority Loan
Agreement"). Gunther shall execute and deliver to the New Lender a Term Note in
the form attached hereto as Exhibit D (the "Priority Note"), and Gunther shall
execute and deliver to the New Lender UCC Financing Statements which shall be
necessary to perfect the New Lender's security interest in and to the collateral
described in the Priority Loan Agreement in which a security interest can be
perfected by filing.
4. Substitution of Collateral For Gunther's Reimbursement Obligations
Under the Letter of Credit. Simultaneously with the execution hereof, Gunther
shall deliver $150,000 to BOB as cash collateral (the "Substitute Collateral")
for Gunther's reimbursement obligations with respect to the Letter of Credit and
Gunther shall execute and deliver to BOB all documents and agreements required
to evidence such reimbursement obligations and security interest.
5. BOB's Release of Security Interest. BOB acknowledges that excluding (i)
Gunther's indebtedness to BOB under the Facility A Note which is provided for in
Section 1 above and (ii) Gunther's reimbursement obligations with respect to the
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Letter of Credit which will be secured by the Substitute Collateral as provided
in Section 4 above, Gunther is indebted to BOB under the Facility B Note and
under the Revolving Loan Agreement in the amount of $350,089.93 as of the date
hereof (such amount the "BOB Balance"). Upon (a) receipt of payment of the
Facility A Note as provided in Section 1 above; (b) receipt of the Substitute
Collateral and documents evidencing BOB's security interest therein and
Gunther's reimbursement obligations, as provided in Section 4 above and (c)
receipt of payment of the BOB Balance from the proceeds of the New Loan as
provided in Section 3 above and (d) receipt of payment of BOB's attorney's fees
and expenses incurred in connection with the loans evidenced by the Facility A
Note and the Facility B Note, BOB shall (i) return to Gunther the originals of
the Revolving Loan Agreement, the Facility A Note and the Facility B Note, each
marked "Cancelled" and (ii) execute and deliver to Gunther any UCC Termination
Statements which shall be required to release of record any security interest
BOB had in property of Gunther other than the Substitute Collateral.
6. Priority of Security Interests. Gunther acknowledges that Connecticut
Innovations, Inc. ("CII") currently holds a perfected security interest in
Gunther's personal property including but not limited to patents and trademarks
which are now owned or may hereafter be acquired by Gunther (such patents and
trademarks herein "Patents and Trademarks"). Gunther, the New Lender and the
Estate acknowledge that it is their intention that upon completion of the
transaction described in this Agreement (i) the New Lender should have a first
priority security interest in the personal property of Gunther whether now owned
or hereafter acquired other than Patents and Trademarks (such personal property
of Gunther other than Patents and Trademarks herein called the "Non-Patent and
Trademark Collateral") and a second priority security interest in the Patents
and Trademarks; (ii) the Estate should have a second priority security interest
in the Non-Patent and Trademark Collateral and a third priority security
interest in the Patents and Trademarks; and (iii) CII should have a first
priority security interest in Patents and Trademarks and a third priority
security interest in the Non-Patent and Trademark Collateral. In order to
arrange for the aforesaid priority, simultaneously with their execution of this
Agreement (i) Gunther shall cause CII to execute and deliver, to the New Lender
a Subordination Agreement in the form attached hereto as Exhibit E (the "CII-New
Lender Subordination") and a UCC-3 Subordination Statement in the form attached
hereto as Exhibit F; (ii) Gunther shall cause CII to execute and deliver to the
Estate a Subordination Agreement in the form attached hereto as Exhibit G (the
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"CII-Estate Subordination") and a UCC-3 Subordination Statement in the form
attached hereto as Exhibit H; (iii) Gunther and the New Lender shall execute and
deliver to each other and to CII the CII-New Lender Subordination; (iv) Gunther
and the Estate shall execute and deliver to each other and to CII the CII-Estate
Subordination; (v) Gunther, the Estate and the New Lender shall execute and
deliver to each other a Subordination and Intercreditor Agreement in the form
attached hereto as Exhibit I; and (vi) the Estate shall execute and deliver to
the New Lender a UCC-3 Subordination Statement in the form attached hereto as
Exhibit J.
7. Inducements to New Lender. As an inducement to the New Lender to make
the New Loan to Gunther, simultaneously with their execution hereof (i) Gunther
shall grant to the New Lender one or more stock purchase warrants substantially
in the form attached hereto as Exhibit K (the "Warrants"), entitling the New
Lender in the aggregate, to purchase from Gunther upon exercise of the Warrants
a number of shares of the Common Stock of Gunther that is equal to thirty-five
percent (35%) of the pro forma, fully diluted number of shares of Common Stock
of Gunther as of the date of exercise; (ii) Gunther and the New Lender shall
enter into a Registration Rights Agreement in the form attached hereto as
Exhibit L; (iii) Gunther shall cause Park Investment Partners, Inc. ("Park") and
Gerald H. Newman ("Newman") to execute and deliver to Gunther, the Estate and
the New Lender a Voting Agreement in the form attached hereto as Exhibit M (the
"Voting Agreement"); and (iv) Gunther, the Estate and the New Lender shall
execute and deliver to each other and to Park and Newman the Voting Agreement.
8. Purchase Price Allocation. Gunther and New Lender hereby agree that the
purchase price of the Priority Note evidencing the New Loan shall be Three
Million Six Hundred Fifty-Five Thousand Dollars ($3,655,000.00) and the purchase
price of the Warrants shall be Three Hundred Forty-Five Thousand Dollars
($345,000.00). Gunther and New Lender hereby agree to take reporting and other
positions with respect to the New Loan and the Warrants (collectively, the
"Securities") which are consistent with the purchase price of the Securities set
forth in the preceding sentence for all financial reporting purposes, unless
otherwise required by generally accepted accounting principles or the applicable
rules of the Securities and Exchange Commission.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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10. Exhibits. All Exhibits referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
11. Execution by Telefacsimile Transmission. Telefacsimile transmissions
of any executed original document and/or retransmission of any executed
telefacsimile transmission shall be deemed to be the same as the delivery of an
executed original. At the request of any party hereto, the other parties shall
confirm telefacsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties.
[Rest of This Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF: GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
Name: Name: James H. Whitney
Title: President & CEO
Name:
BANKBOSTON, N.A.
[signature illegible] By: /s/ Thomas D. Opie
Name: Name: Thomas D. Opie
Title: Vice President
Name:
THE ESTATE OF
HAROLD S. GENEEN
/s/ Robert Burns, II By: /s/ June H. Geneen
Name: June H. Geneen,
Its Co-Executor
[signature illegible]
Name:
/s/ David D. Howe By: /s/ Phil E. Gilbert, Jr.
Name: David D. Howe Phil E. Gilbert, Jr.
Its Co-Executor
/s/ Geert T.M.J. Raaijnakers
Name: Geert T.M.J. Raaijnakers
[signature illegible] By: /s/ Thomas W. Keesee
Name: Thomas W. Keesee,
Its Co-Executor
[signature illegible]
Name:
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SIGNATURE PAGE OMNIBUS AGREEMENT
<PAGE> 10
By: UNITED STATES TRUST
COMPANY OF NEW YORK,
Its Co-Executor
[signature illegible] By: /s/ Steven Scott Kirkpatrick
Name: Name: Steven Scott Kirkpatrick
Title: Vice President
[signature illegible]
Name:
GUNTHER PARTNERS, LLC
By: /s/ Thomas J. Tisch
Name: Name: Thomas J. Tisch
Title: Manager
Name:
STATE OF CONNECTICUT )
) ss. October __, 1998
COUNTY OF )
Personally appeared _________________________, signer and sealer of the
foregoing instrument personally known to me (or satisfactorily proven) who
acknowledged that he/she as ___________________ of GUNTHER INTERNATIONAL, LTD.,
is duly authorized to execute said instrument and further acknowledged the same
to be his/her free act and deed as ___________________ of GUNTHER INTERNATIONAL,
LTD., and the free act and deed of said GUNTHER INTERNATIONAL, LTD., before me,
the undersigned officer
__________________________________
Name:
Commissioner of the Superior Court
Notary Public
My Commission Expires
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SIGNATURE PAGE OMNIBUS AGREEMENT
<PAGE> 11
STATE OF MASSACHUSETTS )
) ss:
COUNTY OF SUFFOLK )
Personally appeared Thomas D. Opie, signer and sealer of the foregoing
instrument, personally known to me (or satisfactorily proven) who acknowledged
that he/she as Vice President of BANK BOSTON, N.A., is duly authorized to
execute said instrument and further acknowledged the same to be his/her free act
and deed as Vice President of BANK BOSTON, N.A., and the free act and deed of
said BANK BOSTON, N.A., before me, the undersigned officer.
/s/ Elizabeth R. Sandquist
Name:
Commissioner of the Superior Court
Notary Public
My Commission Expires: Aug. 5, 1999
STATE OF NEW HAMPSHIRE )
) ss:
COUNTY OF GRAFTON )
On this 1 day of October, 1998, before me, the undersigned officer,
personally appeared JUNE H. GENEEN, personally known to me (or satisfactorily
proven) who acknowledged herself to be the person whose name subscribed to the
within instrument and acknowledged that she executed the same for the purposes
therein contained.
In witness whereof I hereunto set my hand.
/s/ Annette L. Hicks
Name:
Notary Public
My Commission Expires April 2, 2002
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SIGNATURE PAGE OMNIBUS AGREEMENT
<PAGE> 12
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 1st day of October, 1998, before me, the undersigned officer,
personally appeared PHIL E. GILBERT, JR., personally known to me (or
satisfactorily proven) who acknowledged himself to be the person whose name
subscribed to the within instrument and acknowledged that he executed the same
for the purposes therein contained.
In witness whereof I hereunto set my hand.
/s/ Sarah Rosen
Name:
Notary Public
My Commission Expires: 3/30/99
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 1st day of October, 1998, before me, the undersigned officer,
personally appeared THOMAS W. KEESEE, personally known to me (or satisfactorily
proven) who acknowledged himself to be the person whose name subscribed to the
within instrument and acknowledged that he executed the same for the purposes
therein contained.
In witness whereof I hereunto set my hand.
/s/ Dawn M. Randazzo
Name:
Notary Public
My Commission Expires: July 6, 2000
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SIGNATURE PAGE OMNIBUS AGREEMENT
<PAGE> 13
STATE OF NEW YORK )
) ss:
COUNTY OF )
On this __ day of October, 1998, before me, the undersigned officer,
personally appeared Steven Scott Kirkpatrick, Vice President of UNITED STATES
TRUST COMPANY OF NEW YORK, personally known to me (or satisfactorily proven) who
acknowledged himself to be the person whose name subscribed to the within
instrument and acknowledged that he executed the same for the purposes therein
contained.
In witness whereof I hereunto set my hand.
/s/ Clay R. Serenbetz
Name:
Notary Public
My Commission Expires: Nov. 13, 1999
STATE OF NEW YORK )
) ss. October 1, 1998
COUNTY OF NEW YORK )
Personally appeared Thomas J. Tisch, signer and sealer of the foregoing
instrument personally known to me (or satisfactorily proven) who acknowledged
that he is the Manager of GUNTHER PARTNERS, LLC, is duly authorized to execute
said instrument and further acknowledged the same to be his free act and deed as
Manager of GUNTHER PARTNERS, LLC, and the free act and deed of said limited
liability company, before me, the undersigned officer
/s/ Nancy L. Berry
Name: Nancy L. Berry
Notary Public
My Commission Expires: Aug. 2, 1999
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SIGNATURE PAGE OMNIBUS AGREEMENT
<PAGE> 1
PROMISSORY NOTE
$1,701,168.75 October 2, 1998
Norwich, Connecticut
FOR VALUE RECEIVED, GUNTHER INTERNATIONAL, LTD., a Delaware corporation
having an office at One Winnenden Road, Norwich, Connecticut 06360 ("Borrower"),
hereby promises to pay to the order of JUNE H. GENEEN, PHIL E. GILBERT, JR.,
THOMAS W. KEESEE and the UNITED STATES TRUST COMPANY OF NEW YORK, as
Co-Executors of the Estate of Harold S. Geneen, Late of New York, New York
having an address c/o United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036 (collectively, the "Lender"), at its office set
forth above; or at such other place as the Lender may designate from time to
time in writing, the principal sum of One Million Seven Hundred One Thousand One
Hundred Sixty-eight and 75/100 DOLLARS ($1,701,168.75) together with (i)
interest from the date hereof on the unpaid principal balance (including any
accrued and unpaid interest which is added to the outstanding principal balance
as provided below) at the rate of five and forty-four hundredths percent (5.44%)
per annum; and (ii) any costs and expenses, including reasonable attorney's
fees, incurred in the collection of this Note or in the foreclosure of the
Security Agreement, as herein defined, or in protecting or sustaining the lien
on the Collateral described in the Security Agreement (the "Collateral"), or in
any litigation or controversy arising from or connected with this Note or the
Security Agreement.
Interest shall accrue from the date hereof and shall be payable as
provided below. If not sooner paid, the entire unpaid principal balance
outstanding hereunder, together with all accrued and unpaid interest thereon,
shall be payable on the earlier of (i) that date which is one (1) year following
payment in full of all of Borrower's obligations to GUNTHER PARTNERS, LLC (the
"New Lender") under that certain Loan and Security Agreement dated the date
hereof between the New Lenders and Borrower and that certain $4,000,000 Term
Note dated the date hereof made by Borrower to the order of the New Lenders; or
(ii) that date which is the sixth anniversary of the date of execution of this
Note; or (iii) such earlier date that this Note becomes due and payable as a
result of acceleration as hereinafter provided (the "Maturity Date"). All
amounts owing under this Note and interest thereon shall be payable in legal
tender of the United States of America.
<PAGE> 2
Interest shall be calculated by using a 360-day year, but shall be due for
the actual number of days elapsed during the period for which interest is being
paid.
Notwithstanding any provision contained in this Note or in the Security
Agreement to the contrary, interest shall accrue on the outstanding principal
balance of this Note from the expiration of any applicable grace periods of any
default or from the date of the right to accelerate payment of principal and
interest hereunder (so long as such default or right continues) and after
judgment and until collection, regardless of whether or not there has been an
acceleration of the payment of principal and interest as set forth herein, at
the rate that is four percent (4%) above the then applicable interest rate of
this Note (the "Default Rate").
Borrower shall have the right at any time and from time to time to pay
interest or to prepay in whole or in part, without penalty, the principal amount
of this Note; any principal prepayment shall be applied to reduce the amount of
the next maturing principal payment. The acceptance of any such prepayment when
there is a default continuing hereunder or under the Security Agreement shall
not constitute a waiver, release or accord and satisfaction thereof or of any
rights with respect thereto by the Lender.
If default shall be made in any payment when the same becomes due under
this Note or if any other Event of Default, as defined in the Security Agreement
shall occur, then the entire indebtedness with accrued interest thereon due
under this Note shall, at the option of the Lender, accelerate and become
immediately due and payable without demand or notice of any kind. Failure to
exercise such option shall not constitute a waiver of the right to exercise the
same in the event of any subsequent default.
This Note is secured by a Security Agreement of even date herewith between
Borrower and Lender (the "Security Agreement"), which Security Agreement is
incorporated herein by reference, which sets forth further terms and conditions
upon which the entire unpaid principal hereof and all interest hereon may become
due and payable prior to the stated maturity hereof, and generally as to further
rights of the Lender and duties of Borrower with respect hereto.
BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A COMMERCIAL
TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND
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<PAGE> 3
HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE
ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH
LENDER MAY DESIRE TO USE, and further waives diligence, demand, presentment for
payment, notice of nonpayment, protest and notice of protest, and notice of any
renewals or extensions of this Note, and all rights under any statute of
limitations.
BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT, ACTION
OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY RELATED TO
THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE ENFORCEMENT
OF ANY OF LENDER'S RIGHTS AND REMEDIES. BORROWER ACKNOWLEDGES THAT IT MAKES THIS
WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. NEITHER LENDER NOR ANY
REPRESENTATIVE OF LENDER HAS AGREED WITH OR REPRESENTED TO BORROWER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Any delay on the part of the Lender in exercising any right hereunder
shall not operate as a waiver of any such right, and any waiver granted for one
occasion shall not operate as a waiver in the event of any subsequent default.
This Note shall be governed by and construed in accordance with the laws
of the State of Connecticut. This Note shall bind the successors and assigns of
Borrower and shall inure to the benefit of Lender and its successors and
assigns. This Note shall not be changed or terminated orally, but only by an
agreement in writing signed by the party against whom enforcement of any change
or termination is sought.
THE OBLIGATIONS OF BORROWER PURSUANT TO THIS NOTE ARE EXPRESSLY
SUBORDINATED TO THE HOLDERS OF "PRIMARY OBLIGATIONS" TO THE EXTENT SET FORTH IN
THAT CERTAIN SUBORDINATION AND INTERCREDITOR AGREEMENT DATED THE DATE HEREOF BY
AND AMONG GUNTHER PARTNERS, LLC, BORROWER AND LENDER (THE "SUBORDINATION
AGREEMENT"). REFERENCE IS HEREBY MADE TO THE SUBORDINATION AGREEMENT FOR THE
PRECISE TERMS OF SUCH SUBORDINATION.
GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
Name: James H. Whitney
Title: President and CEO
Hereunto Duly Authorized
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<PAGE> 1
SECURITY AGREEMENT
THIS SECURITY AGREEMENT made this 2nd day of October, 1998, between
GUNTHER INTERNATIONAL, LTD. whose principal place of business is One Winnenden
Road, Norwich, Connecticut 06360 (the "Debtor"), and JUNE H. GENEEN, PHIL E.
GILBERT, JR., THOMAS W. KEESEE and the UNITED STATES TRUST COMPANY OF NEW YORK,
as Co-Executors of the Estate of Harold S. Geneen, Late of New York, New York
having an address c/o United States Trust Company of New York, 114 West 47th
Street, New York, New York 10036 (collectively, the "Secured Party").
WITNESSETH:
In consideration of the mutual covenants and agreements contained
herein and for other good and valuable consideration, receipt of which is hereby
acknowledged, Debtor and Secured Party agree as follows:
1. LOAN FROM SECURED PARTY. Simultaneously with the execution hereof,
Secured Party has made a loan to Debtor in the original principal amount of
$1,701,168.75 (the "Loan") which loan is evidenced by a certain $1,701,168.75
Promissory Note made by Debtor to the order of Security Party (the "Note").
2. SECURITY INTEREST. To secure payment and performance of each and all of
the Obligations, as herein defined, Debtor hereby assigns and grants to Secured
Party a continuing, (i)
<PAGE> 2
security interest in all of its tangible and intangible personal property
whether now owned or hereafter acquired, including, without limitation,
Accounts, Chattel Paper, Equipment, General Intangibles (excluding Patents and
Trademarks), Instruments, Fixtures and Inventory subject only to the lien
previously granted in such property to GUNTHER PARTNERS, LLC (the "New Lender")
and (ii) a security interest in Patents and Trademarks subject only to the liens
previously granted in such Patents and Trademarks to Connecticut Innovations,
Inc. and the New Lender; together, in each instance, with the renewals,
substitutions, replacements, additions, rental payments, products and proceeds
(including, without limitation, insurance proceeds) thereof, (hereinafter, all
of the property described in (i) and (ii) above collectively called the
"Collateral").
3. COLLECTION OF ACCOUNTS. Subject to the rights of the New Lender, at any
time after the occurrence of an Event of Default and during the continuance
thereof, Secured Party shall have the right to require Debtor to, and Debtor
shall, upon written notice from Secured Party:
(a) Make collections of proceeds upon its Accounts, as herein
defined, hold the proceeds received from collections in trust for Secured Party
and turn over such proceeds to Secured Party daily in the exact form in which
they are received, together with a collection report in form satisfactory
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<PAGE> 3
to Secured Party. Secured Party shall immediately apply, subject to collection,
such proceeds and any proceeds of Accounts received by it pursuant to the
following provisions of this Section 2 to the payment of the Obligations in such
order of application as Secured Party, in its sole discretion, may determine;
(b) Assign or endorse the Accounts to Secured Party, and notify
account debtors that the Accounts have been assigned and should be paid directly
to Secured Party;
(c) Turn over to Secured Party all Inventory, as herein defined,
returned in connection with any of the Accounts;
(d) Mark or stamp each of its individual ledger sheets or cards
pertaining to its Accounts with the legend "Assigned to June H. Geneen, Phil E.
Gilbert, Jr., Thomas W. Keesee and the United States Trust Company of New York,
as Co-Executors of the Estate of Harold S. Geneen and stamp or otherwise mark
and keep its books, records, documents and instruments relating to the Accounts
in such manner as Secured Party may require; and
(e) Mark or stamp all invoices with a legend satisfactory to Secured
Party so as to indicate that the same should be paid directly to Secured Party.
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<PAGE> 4
Notwithstanding the foregoing, subject to the rights of the New
Lender, Secured Party shall have the right, at any time after the occurrence of
an Event of Default, and during the continuance thereof, to itself so notify
such account debtors to make such payments of the Accounts directly to Secured
Party and Secured Party shall have the further right to notify the post office
authorities to change the address for delivery of mail of Debtor to an address
designated by Secured Party and to receive, open and dispose of all mail
addressed to Debtor relating to Accounts; all of Debtor's other mail received by
Secured Party shall be delivered by Secured Party to Debtor promptly after
receipt.
For the purpose of this Section 3, subject to the rights of the New
Lenders, Debtor hereby irrevocably constitutes Secured Party as Debtor's
attorney-in-fact to issue in the name and execute or endorse on behalf of Debtor
each and every notice, instrument and document necessary to carry out the
purposes of the provisions of this Section 3, and to take such action in
connection with the collection of the Accounts, including, without limitation,
suing thereon, compromising or adjusting the same, as Secured Party, in its sole
discretion, deems necessary. The power of attorney granted hereby shall be
self-executing, but Debtor shall promptly execute and deliver to Secured Party,
upon written request of Secured Party, such
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<PAGE> 5
additional separate powers of attorney, as Secured Party may from time to time
reasonably request.
4. DEFINITIONS.
(a) The term "Accounts" shall mean, any right to payment held by
Debtor, whether in the form of accounts receivable, notes, drafts, acceptances
or other forms of obligations and receivables now or hereafter received by or
belonging to Debtor for Inventory sold or leased by it or for services rendered
by it whether or not earned by performance, together with all guarantees and
security therefor and all proceeds thereof, whether cash proceeds or otherwise,
including, without limitation, all right, title and interest of Debtor in the
Inventory which gave rise to any such Accounts, including, without limitation,
the right of stoppage in transit and all returned, rejected, rerouted or
repossessed Inventory;
(b) The term "Chattel Paper" shall mean a writing or writings which
evidence both a monetary obligation and a security interest in or a lease of
specific goods, whether now or hereafter held by Debtor;
(c) The term "Equipment" shall mean all the machinery, equipment,
furniture, tools, goods and other tangible personal property, excluding Motor
Vehicles and Inventory, now owned or hereafter acquired by Debtor;
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<PAGE> 6
(d) The term "General Intangibles" shall mean any intangible
personal property (including, without limitation, things in action) now or
hereafter held by Debtor, other than Accounts, Chattel Paper and Instruments;
(e) The term "Instruments" shall mean a negotiable instrument or a
certificate security, as defined in the Uniform Commercial Code of Connecticut,
or any other writing which evidences a right to the payment of money and is not
itself a security agreement or lease and is of a type which, in the ordinary
course of business, is transferred by delivery with any necessary endorsement or
assignment, whether now or hereafter held by Debtor;
(f) The term "Inventory" shall mean all goods, merchandise, raw
materials, work in process, finished goods and products and other tangible
personal property now owned or hereafter acquired by Debtor and held for sale or
lease, or furnished or to be furnished under contracts of service or used or
consumed in Debtor's business;
(g) The term "Motor Vehicles" shall have the same meaning as that
contained in Chapter 246 of the Connecticut General Statutes;
(h) The term "Obligations" shall mean any and all loans,
indebtedness, obligations and liabilities of Debtor to Secured Party of every
kind and description, direct or indirect,
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<PAGE> 7
absolute or contingent, primary or secondary, due or to become due, now existing
or hereafter arising, under this Agreement and the Note, and all costs,
expenses, fees, charges and attorneys' and other professional fees incurred by
Secured Party in connection with any of the foregoing, or in any way connected
with or related to the preservation, realization, enforcement, protection or
defense of the Collateral, this Agreement, the Note, and the other Financing
Agreements, and the rights and remedies hereunder or thereunder.
(i) The term "Patents" shall mean all interests in patents now owned
or hereafter acquired by Debtor.
(j) The term "Trademarks" shall mean all interests in trademarks now
owned or hereafter acquired by Debtor.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Secured Party that as of the date hereof:
(a) Ownership of Assets. Debtor has good and marketable title to its
assets, free from any liens, mortgages, security interests, pledges or
encumbrances, except as shown on Exhibit A attached hereto. Except as shown on
Exhibit A, no financing statements covering all or any part of Debtor's assets
are on file in the Office of the Secretary of the State of Connecticut or in any
other federal, state or local governmental office, whether or not properly filed
under applicable law.
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<PAGE> 8
(b) Corporate Organization. Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and is duly qualified as a foreign corporation in good standing in every
jurisdiction in which such qualification is necessary. Debtor has corporate
power to enter into this Agreement and the Note and to borrow under the Note,
and has all requisite authorizations and permits to own and operate Debtor's
properties and assets and to carry on Debtor's business as now being conducted.
(c) Authority. The execution, delivery and performance of this
Agreement, the Note, and each and every other agreement, instrument and document
required to be executed or delivered to Secured Party by Debtor in connection
with the Loan have been duly authorized by all necessary corporate action; the
execution, delivery and performance of said agreements, instruments and
documents, the consummation of the transactions therein contemplated, and the
fulfillment of or compliance with the terms and provisions therein, are within
Debtor's powers and are not in contravention of any provisions of Debtor's
Certificate of Incorporation or By-Laws. The execution, delivery and performance
of said agreements, instruments and documents will not result in a violation of
any laws, or a breach of, or constitute a default under, or result in the
creation of any lien, charge or encumbrance upon any of
-8-
<PAGE> 9
Debtor's assets (other than the security interest granted to Secured Party
hereunder and the security interest granted to the New Lenders as identified on
Exhibit A) pursuant to any of the terms, conditions or provisions of any
agreement, instrument or other undertaking to which Debtor is a party or by
which Debtor is bound. No consent, approval, authorization or other order of, or
registration or filing with any governmental body is required in connection with
the execution, delivery and performance of said agreements, instruments and
documents.
(d) Business Location. The Collateral, the books and records
relating thereto, and the principal place of business of Debtor are all at the
address of Debtor first written above.
(e) Business Name. The name of Debtor has not changed for at least
the past ten (10) years and during such period, Debtor has conducted, and
currently conducts, its business solely in its own name without the use of a
tradename or the intervention of or through any entity of any kind.
6. AFFIRMATIVE COVENANTS. Debtor covenants and agrees that, from the date
hereof until the payment and performance of all the Obligations, unless Secured
Party otherwise agrees in writing, Debtor shall:
(a) Taxes and Other Liens. File all required federal, state and
local tax returns and pay when due all taxes, assessments and other charges of
every nature which may be
-9-
<PAGE> 10
levied or assessed against Debtor or its assets, including without limitation,
claims for labor, supplies and rent, except those liabilities being contested in
good faith and for which Debtor maintains reserves in amount and form
satisfactory to Secured Party.
(b) Casualty Insurance. Keep its properties insured against fire and
other hazards (so-called "All Risk" coverage) in amounts and with insurers
reasonably satisfactory to Secured Party, which insurance shall, subject to the
interests of the New Lenders, by the terms of the policy be payable to Secured
Party as its interest may appear pursuant to a loss payee/mortgagee clause
reasonably satisfactory to Secured Party. Subject to the rights of the New
Lender, Secured Party shall have the right to apply the proceeds of any such
insurance in reduction of the Obligations, whether or not then due and payable,
in such manner as Secured Party in its reasonable discretion may determine.
Without limiting the generality of the foregoing, such insurance must provide
that it may not be canceled without thirty (30) days prior written notice to
Secured Party. If Debtor fails to maintain the foregoing insurance, Secured
Party may, at its option, obtain such policies as it deems necessary and the
premiums therefor, together with interest at the Default Rate, as defined in the
Note, from the date of receipt of written demand therefor from
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<PAGE> 11
Secured Party to Debtor shall be payable by Debtor to Secured Party immediately
upon receipt of such demand. Subject to the rights of the New Lender, Debtor
hereby appoints Secured Party its attorney-in-fact, coupled with an interest, to
settle, adjust and compromise any insurance losses, to collect and receive
payments of insurance, and to endorse Debtor's name on all documents, checks and
drafts in connection therewith.
(c) Maintain Collateral. Maintain and preserve the Collateral in
good repair, working order and condition, and make all needed and proper
repairs, renewals, replacements, additions or improvements thereto, and
immediately notify Secured Party of any event causing material loss or
depreciation in the value of the Collateral and the amount of such loss or
depreciation.
(d) Inspection. Allow Secured Party by or through any of its
officers, agents, attorneys, or accountants designated by it, to enter the
offices and plants of Debtor to examine, inspect and make copies of the books
and records of Debtor and to inspect the Collateral, all at such times and as
often as Secured Party may reasonably request.
(e) Liability Insurance. Maintain general public liability insurance
against claims for personal injury, death or property damage in forms, amounts,
and with companies reasonably satisfactory to Secured Party, and workmen's
compensation
-11-
<PAGE> 12
insurance, employment or similar insurance, as required by applicable law.
(f) Defend Collateral. Defend the Collateral against all liens,
claims and demands of all persons, and allow Secured Party, at the expense of
Debtor, to contest or defend any such liens, claims and demands in Debtor's
name. Cause the security interest of Secured Party to be properly noted on all
certificates of title issued or outstanding with respect to any of the
Collateral and, unless the same are deposited with the New Lenders, deposit same
with Secured Party.
(g) Financing Statements. From time to time, at the request of
Secured Party, (i) execute, deliver and file one or more financing statements,
assignments, and other agreements, instruments or documents, and amendments and
renewals thereof, and do all other acts as Secured Party reasonably deems
necessary or desirable (x) to create and maintain a valid and enforceable second
priority security interest in the Collateral other than Patents and Trademarks
and (y) to create and maintain a valid and enforceable security interest in
Patents and Trademarks subject only to the liens currently granted to
Connecticut Innovations, Inc. and the New Lender and (ii) pay, upon demand,
Secured Party's costs, charges and expenses, including without limitations
attorneys' fees incurred by Secured Party in connection therewith.
-12-
<PAGE> 13
(h) Books and Records. Maintain complete and accurate books and
records relating to its financial affairs at all times in accordance with
generally accepted accounting principles, the Collateral, the Obligations, and
Debtor's covenants hereunder.
(i) Compliance with Laws. Comply in all material respects with all
laws, orders, rules and regulations applicable to Debtor of any governmental
body or agency, including without limitation, environmental and health and
safety laws, orders, rules and regulations.
(j) Notification of Default. Give prompt written notice to Secured
Party upon the occurrence of an Event of Default, or of any state of facts which
would constitute an Event of Default hereunder or, which, but for the giving of
notice or passage of time, or both, would constitute an Event of Default.
(k) ERISA; Labor Disputes. Give prompt written notice to Secured
Party of: (i) any event which causes Debtor to become subject to the Employee
Retirement Income Security Act of 1974 ("ERISA") and, upon becoming subject
thereto, comply in all respects with ERISA; and (ii) any labor dispute or
controversy resulting or likely to result in a strike or work stoppage against
Debtor.
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<PAGE> 14
7. NEGATIVE COVENANTS. Debtor covenants and agrees that, from the date
hereof until the payment and performance of the Obligations, unless Secured
Party otherwise agrees in writing, Debtor shall not change Debtor's name, adopt
any trade names or conduct Debtor's business under any trade name or style or
change Debtor's place of business or the present location of the Collateral, or
any records relating to the Collateral.
8. PAYMENTS BY SECURED PARTY. At its option, but without any liability for
failing to do so, Secured Party may pay for insurance on the Collateral and
taxes, assessments or other charges which Debtor fails to pay in accordance with
the provisions hereof. Any payment made, or expense incurred by Secured Party,
pursuant to this or any other Section of this Agreement shall be added to and
become a part of the Obligations, shall bear interest at the Default Rate, and
shall be payable immediately by Debtor upon receipt of written demand therefor
by Secured Party.
9. EVENTS OF DEFAULT. Subject to the rights of the New Lender, Secured
Party shall have the right at its option to declare all of the Obligations to be
immediately due and payable without demand or notice (except as otherwise
required by this Section 9) upon the occurrence of any one of the following
events (each being an "Event of Default"):
(a) The failure by Debtor to pay any of the Obligations when due;
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<PAGE> 15
(b) The failure by Debtor to observe, perform or comply with any
condition or covenant in this Agreement or any of the other Financing
Agreements; provided, however, that Debtor shall have an opportunity to cure any
such failure for a period of fifteen (15) days after such failure provided such
failure (i) does not constitute a failure of payment pursuant to Section 9(a)
above.
(c) If any representation or warranty made by Debtor in this
Agreement or in any of the other Financing Agreements, or any statement,
certificate or other data furnished by Debtor in connection with any of the
Obligations proves to be incorrect or untrue in any material respect when made;
(d) The entry of a judgment for the payment of money against Debtor,
which remains unsatisfied and in effect for any period of thirty (30)
consecutive days without a stay of execution, or appeal;
(e) The insolvency of Debtor (the term "insolvency" shall mean an
inability to pay Debtor's debts as they mature);
(f) The filing by or against Debtor of any petition seeking an
arrangement, reorganization or the like, the commencement of any proceedings
under any bankruptcy or insolvency law by or against Debtor, the adjudication of
Debtor as a bankrupt, the appointment of a receiver for all or any part of
Debtor's assets, or the making of an assignment for the
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<PAGE> 16
benefit of creditors, or the calling of a meeting of creditors, or the
appointment of a committee of creditors or liquidating agents, by, for, or of
Debtor, and in the case of any of the foregoing actions which are involuntary,
if such actions are not withdrawn, dismissed, discharged or removed, as the case
may be, within thirty (30) days after the commencement thereof;
(g) The dissolution, liquidation, insolvency, or termination of
legal existence of Debtor; or
(h) The failure by Debtor to pay when due any other indebtedness or
obligations owed to others for borrowed money which failure continues beyond any
applicable grace period with respect thereto.
10. REMEDIES OF SECURED PARTY; NOTICES. When the Obligations, or any of
them, become immediately due and payable, whether by reason of passage of time,
acceleration or otherwise, Secured Party may, in addition to and not in
limitation of Secured Party's rights set forth in Section 3 of this Agreement,
pursue any legal remedy available to it to collect the Obligations outstanding
at said time and to enforce any and all other rights or remedies available to it
both under the Uniform Commercial Code of Connecticut (the "Code") and
otherwise, including, without limitations the right to take possession of the
Collateral and dispose of the same on Debtor's premises, all without judicial
process, Debtor hereby waiving any right Debtor
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<PAGE> 17
might otherwise have to require Secured Party to resort to judicial process and
further waiving Debtor's right to notice and hearing under the Constitution of
the United States or any state or under any Federal or state law, and no such
action shall operate as a waiver of any other right or remedy of Secured Party
under the law, all rights and remedies of Secured Party being cumulative and not
alternative. In addition, Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties.
The net cash proceeds resulting from the collection, liquidation,
sale, lease or other disposition of the Collateral shall be applied first to the
expenses (including, without limitation, all reasonable attorneys' fees) of
retaking, holding, storing, processing and preparing for sale, selling,
collecting, liquidating and the like, and then to the satisfaction of all
Obligations, application as to particular Obligations or against principal or
interest to be in Secured Party's sole discretion. Any notice which Secured
Party is required to give Debtor under the Code shall be deemed to constitute
reasonable notice if such notice is mailed, postage prepaid, return receipt
requested, at least seven (7) days prior to such action. Debtor shall be liable
to Secured Party and shall pay to Secured Party on demand any deficiency which
may
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<PAGE> 18
remain after such sale, lease, disposition, collection or liquidation of the
Collateral. Debtor agrees that the powers granted hereunder, being coupled with
an interest, shall be irrevocable so long as any of the Obligations remain
outstanding.
All rights and remedies of Secured Party provided herein shall be
subject to the rights of the New Lenders.
11. SET-OFF. Debtor hereby grants to Secured Party a lien and right of
set-off for all Obligations upon or against all moneys, deposits, property,
collateral and securities and the proceeds thereof, now or hereafter held or
received by, or in transit to, Secured Party from or for Debtor, whether for
safekeeping, pledge, custody, transmission, collection or otherwise. Subject to
the rights of the New Lender, Secured Party may at any time after the
occurrence, and during the continuance, of an Event of Default, apply the same,
or any part thereof, to the Obligations, or any part thereof, whether or not
matured or demanded at the time of such application.
12. RIGHTS OF SECURED PARTY. With respect both to the Obligations and the
Collateral, Debtor hereby consents to any extension or postponement of the time
of payment or any other indulgence, to any substitution, exchange or release of
the Collateral, to the addition or release of any party or person primarily or
secondarily liable, to the acceptance of partial
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<PAGE> 19
payments thereon and the settlement, compromising or adjusting of any claims
thereof, all in such manner and at such time or times as Secured Party may deem
advisable. Secured Party shall have no duty as to the collection or protection
of the Collateral or any income thereon, nor as to the preservation of any
rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof. Secured Party may exercise
its rights with respect to the Collateral without resorting or regard to other
collateral or sources of reimbursement for the Obligations. Secured Party shall
not be deemed to have waived any of its rights upon or under the Obligations or
the Collateral unless such waiver is in writing and signed by Secured Party. No
delay or omission on the part of Secured Party in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any future
occasion. Secured Party may revoke any permission or waiver previously granted
to Debtor, and such revocation shall be effective whether given orally or in
writing. All rights and remedies of Secured Party with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
document, shall be cumulative and may be exercised singularly or concurrently.
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<PAGE> 20
13. GENERAL PROVISIONS.
(a) Expenses. Debtor will pay on demand all expenses of Secured
Party arising out of the collection, defense, protection, preservation or
enforcement of, or realization on, this Agreement, the Obligations, or any of
the Collateral, including, without limitation, reasonable attorneys' and other
professionals' reasonable fees, and the amounts of all such expenses shall,
until paid, be Obligations secured by the Collateral.
(b) Survival. This Agreement and the security interest granted to
Secured Party by Debtor and every representation, warranty, covenant and other
term contained herein shall survive until the Obligations have been paid in
full.
(c) Notices. Any notice required to be given hereunder shall be
effective when delivered in person, or one (1) day after delivery to a
nationally recognized overnight mail or messenger service or three (3) days
after being deposited in the United States mail, first class, postage prepaid,
registered or certified mail, return receipt requested, to Debtor or Secured
Party, as the case may be, at its address set forth above. Any such notice to
Debtor shall be sent to the attention President of Debtor at Debtor's address
set forth above and to the attention of Steven S. Kirkpatrick at Secured Party's
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<PAGE> 21
address set forth above. Either of the parties hereto may notify the other that
any such notice shall be given to such other address as such party may so
instruct by written notice similarly given.
(d) Entire Agreement. This Agreement is the entire agreement between
the parties hereto and cannot be amended or modified except by a writing signed
by Debtor and Secured Party.
(e) Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Connecticut. Secured Party and
Debtor each hereby consent to service of process, and to be sued, in the State
of Connecticut and consent to the jurisdiction of the courts of the State of
Connecticut and the United States District Court for the District of
Connecticut, for the purpose of any suit, action, or other proceeding arising
hereunder, and expressly waive any and all objections it may have to venue in
any such courts.
(f) Headings. Sections and subsection headings have been inserted
herein for convenience only and form no part of this Agreement and shall not be
deemed to affect the meaning or construction of any of the covenants,
agreements, conditions or terms hereof.
(g) Severability. If any term or provision of this Agreement shall
be invalid, illegal or unenforceable for any reason whatsoever, such term or
provision shall be severable
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<PAGE> 22
from the remainder of this Agreement and the validity, legality and
enforceability of the remaining terms and provisions shall not in any way be
affected or impaired thereby.
(h) Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
provided, however, that Debtor may not assign its rights hereunder without prior
written consent of Secured Party in its sole discretion, and any such attempted
assignment without such consent shall be null and void.
(i) Interpretation. As used herein, plural or singular include each
other, and pronouns of any gender are to be construed as masculine, feminine or
neuter, as context requires.
(j) Exhibits. All Exhibits referred to herein are intended to be and
hereby are specifically made a part of this Agreement.
14. PREJUDGMENT REMEDY WAIVER; WAIVERS. DEBTOR ACKNOWLEDGES THAT THE LOAN
EVIDENCED AND SECURED BY THIS AGREEMENT IS A COMMERCIAL TRANSACTION AND WAIVES
ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH SECURED PARTY MAY DESIRE TO USE, and further waives
diligence, demand, presentment
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<PAGE> 23
for payment, notice of nonpayment, protest and notice of protest, and notice of
any renewals or extensions of the Note, and all rights under any statute of
limitations.
15. WAIVER OF JURY TRIAL. DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY COURT
AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH
OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT IS A
PART AND/OR THE ENFORCEMENT OF ANY OF SECURED PARTY'S RIGHTS AND REMEDIES.
DEBTOR ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY
AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS. NO PARTY TO THIS AGREEMENT HAS AGREED WITH OR REPRESENTED TO ANY
OTHER PARTY HERETO THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
16. SUBORDINATION OF LIEN AND RIGHT TO PAYMENT. Secured Party acknowledges
and agrees that (i) pursuant to that certain Subordination and Intercreditor
Agreement dated the date hereof by and among Secured Party, the New Lender and
Debtor (the "Subordination and Intercreditor Agreement"), Secured Party has
subordinated (a) its lien and security interest in and to the Collateral to the
lien and security interest of the New Lender therein and (b) its right to
payment of the Obligations to the right of the New Lender to be repaid the
Primary Obligations, as defined in the Subordination and Intercreditor
Agreement, and
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<PAGE> 24
(ii) its rights and remedies hereunder are subject to the provisions of the
Subordination and Intercreditor Agreement.
17. EXECUTION BY TELEFACSIMILE TRANSMISSION. Telefacsimile transmissions
of any executed original document and/or retransmission of any executed
telefacsimile transmission shall be deemed to be the same as the delivery of an
executed original. At the request of any party hereto, the other parties shall
confirm telefacsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties.
[Rest of This Page Intentionally Left Blank.]
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<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
Name: James H. Whitney
Title: President & CEO
THE ESTATE OF HAROLD S. GENEEN
By: /s/ June H. Geneen
June H. Geneen,
Its Co-Executor
By: /s/ Phil E. Gilbert, Jr.
Phil E. Gilbert, Jr.,
Its Co-Executor
By: /s/ Thomas W. Keesee
Thomas W. Keesee,
Its Co-Executor
By: UNITED STATES TRUST
COMPANY OF NEW YORK,
Its Co-Executor
By: /s/ Steven Scott Kirkpatrick
Name: Steven Scott Kirkpatrick
Title: Vice President
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SIGNATURE PAGE SECURITY AGREEMENT
<PAGE> 1
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT made this 2nd day of October, 1998,
between GUNTHER INTERNATIONAL, LTD. whose principal place of business is One
Winnenden Road, Norwich, Connecticut 06360 (the "Debtor"), and GUNTHER PARTNERS,
LLC, having a mailing address c/o Thomas M. Steinberg, President, Tisch Family
Interests, 667 Madison Avenue, New York, New York, 10021 (the "Secured Party").
WITNESSETH:
In consideration of the mutual covenants and agreements contained
herein and for other good and valuable consideration, receipt of which is hereby
acknowledged, Debtor and Secured Party agree as follows:
1. TERM LOAN. Subject to the terms of this Agreement and Debtor's
satisfaction of the conditions precedent referred to in Section 6 hereof,
Secured Party agrees to make a term loan to the Debtor in the principal amount
of Four Million Dollars ($4,000,000) (the "Loan").
(a) Interest:
(i) Except as provided in Section 1(a)(ii) below,
Debtor shall pay interest to Secured Party on the outstanding principal
amount of the Loan at a rate per
<PAGE> 2
annum equal to eight percent (8%) per annum. Interest shall be paid by
Debtor on the first day of each calendar quarter beginning January 1,
1999 and continuing on the first (1st) day of each April, July, October
and January thereafter until the principal balance is paid in full.
Interest shall be calculated on the basis of a 360-day year for the
actual days elapsed.
(ii) Notwithstanding any provision contained herein
to the contrary, interest shall accrue on the outstanding principal
balance of the Loan from the Maturity Date, as herein defined, from the
date of an Event of Default (until the same has been cured) and after
judgment and until collection, regardless of whether or not there has
been an acceleration of the payment of principal and interest as set
forth herein, at the rate which is four percentage points (4%) per
annum over the otherwise applicable interest rate on the Loan (the
"Default Rate').
(b) Term Note; Installment Payments:
(i) The Debtor's obligation to repay the Loan is
evidenced by that certain $4,000,000 Term Note dated the date hereof
made by the Debtor to the order of the Secured Party (the "Term Note").
(ii) The principal of the Loan will be repaid in
thirteen payments as follows: (a) One Hundred Thousand
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<PAGE> 3
Dollars ($100,000.00) shall be paid on the first (1st) day of each
month commencing on November 1, 1998 and continuing to and including
September 1, 1999; (b) Four Hundred Thousand Dollars ($400,000.00)
shall be paid on October 1, 1999; and (c) the balance, together with
all accrued and unpaid interest and all other unpaid amounts due
hereunder or under the Financing Agreements, as herein defined, shall
be paid on October 1, 2003 or on such earlier date that the Loan
becomes due and payable as a result of acceleration as provided herein
(the "Maturity Date").
(c) Prepayments of the Loan. Debtor may, at any time and from
time to time, prepay all or any portion of the outstanding principal balance of
the Loan, without premium or penalty. Any prepayment made on the Loan (i) shall
be applied first to the payment of late charges and amounts (other than
principal and interest) otherwise due hereunder or under the Financing
Agreements, second to accrued and unpaid interest hereunder up to the date of
such prepayment, and third to outstanding principal in inverse order of
maturity.
(d) Use of Proceeds of the Loan. The proceeds of the Loan
shall be used by Debtor (i) to provide cash collateral for the reimbursement
obligation of Debtor to BankBoston, N.A. ("BOB") with respect to a certain
$150,000 letter of credit issued for Debtor's account by ("BOB"); (ii) to fund
trade
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<PAGE> 4
payables of Debtor; (iii) to fund work in progress of Debtor; (iv) to repay in
full simultaneously herewith a certain Facility B obligation of Debtor to BOB in
the principal amount of $________ plus accrued interest; (v) to fund Debtor's
obligations to Data Card Corporation; (vi) to fund transaction costs for the
Loan; and (vii) to fund Debtor's working capital needs.
(e) Late Charges. Without prejudice to any other rights of
Secured Party hereunder or under any of the other Financing Agreements, Debtor
shall pay to Secured Party a late charge equal to five percent (5%) of any
payment of principal, interest or other payment due on the Loan which is not
paid within ten (10) days of the due date thereof. Such late charge shall be
made on a monthly basis and for each month such payment is delinquent.
2. COLLECTION OF ACCOUNTS. At any time after the occurrence of an Event
of Default and during the continuance thereof, Secured Party shall have the
right to require Debtor to, and Debtor shall, upon written notice from Secured
Party:
(a) Make collections of proceeds upon its Accounts, as herein
defined, hold the proceeds received from collections in trust for Secured Party
and turn over such proceeds to Secured Party daily in the exact form in which
they are received, together with a collection report in form satisfactory
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<PAGE> 5
to Secured Party. Secured Party shall immediately apply, subject to collection,
such proceeds and any proceeds of Accounts received by it pursuant to the
following provisions of this Section 2 to the payment of the Obligations in such
order of application as Secured Party, in its sole discretion, may determine;
(b) Assign or endorse the Accounts to Secured Party, and
notify account debtors that the Accounts have been assigned and should be paid
directly to Secured Party;
(c) Turn over to Secured Party all Inventory, as herein
defined, returned in connection with any of the Accounts;
(d) Mark or stamp each of its individual ledger sheets or
cards pertaining to its Accounts with the legend "Assigned to Gunther Partners,
LLC" and stamp or otherwise mark and keep its books, records, documents and
instruments relating to the Accounts in such manner as Secured Party may
require; and
(e) Mark or stamp all invoices with a legend satisfactory to
Secured Party so as to indicate that the same should be paid directly to Secured
Party.
Notwithstanding the foregoing, Secured Party shall have the right, at
any time after the occurrence of an Event of Default, and during the continuance
thereof, to itself so notify such account debtors to make such payments of the
Accounts directly
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<PAGE> 6
to Secured Party and Secured Party shall have the further right to notify the
post office authorities to change the address for delivery of mail of Debtor to
an address designated by Secured Party and to receive, open and dispose of all
mail addressed to Debtor relating to Accounts; all of Debtor's other mail
received by Secured Party shall be delivered by Secured Party to Debtor promptly
after receipt.
For the purpose of this Section 2, Debtor hereby irrevocably
constitutes Secured Party as Debtor's attorney-in-fact to issue in the name and
execute or endorse on behalf of Debtor each and every notice, instrument and
document necessary to carry out the purposes of the provisions of this Section
2, and to take such action in connection with the collection of the Accounts,
including, without limitation, suing thereon, compromising or adjusting the
same, as Secured Party, in its sole discretion, deems necessary. The power of
attorney granted hereby shall be self-executing, but Debtor shall promptly
execute and deliver to Secured Party, upon written request of Secured Party,
such additional separate powers of attorney, as Secured Party may from time to
time reasonably request.
3. SECURITY INTEREST. To secure payment and performance of each and all
of the Obligations, as herein defined, Debtor hereby assigns and grants to
Secured Party a continuing, (i) first priority security interest in all of its
tangible and
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<PAGE> 7
intangible personal property whether now owned or hereafter acquired, including,
without limitation, Accounts, Chattel Paper, Equipment, General Intangibles
(excluding Patents and Trademarks), Instruments, Fixtures and Inventory and (ii)
a security interest in Patents and Trademarks subject only to the lien
previously granted in such Patents and Trademarks to Connecticut Innovations,
Inc.; together, in each instance, with the renewals, substitutions,
replacements, additions, rental payments, products and proceeds (including,
without limitation, insurance proceeds) thereof, (hereinafter, all of the
property described in (i) and (ii) above collectively called the "Collateral").
4. DEFINITIONS.
(a) The term "Accounts" shall mean, any right to payment held
by Debtor, whether in the form of accounts receivable, notes, drafts,
acceptances or other forms of obligations and receivables now or hereafter
received by or belonging to Debtor for Inventory sold or leased by it or for
services rendered by it whether or not earned by performance, together with all
guarantees and security therefor and all proceeds thereof, whether cash proceeds
or otherwise, including, without limitation, all right, title and interest of
Debtor in the Inventory which gave rise to any such Accounts, including,
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<PAGE> 8
without limitation, the right of stoppage in transit and all returned, rejected,
rerouted or repossessed Inventory;
(b) The term "Chattel Paper" shall mean a writing or writings
which evidence both a monetary obligation and a security interest in or a lease
of specific goods, whether now or hereafter held by Debtor;
(c) The term "Equipment" shall mean all the machinery,
equipment, furniture, tools, goods and other tangible personal property,
excluding Motor Vehicles and Inventory, now owned or hereafter acquired by
Debtor;
(d) The term "Financing Agreements" shall mean all agreements,
notes, instruments, security agreements and documents evidencing, securing or
relating in any way to the Loan;
(e) The term "General Intangibles" shall mean any intangible
personal property (including, without limitation, things in action) now or
hereafter held by Debtor, other than Accounts, Chattel Paper and Instruments;
(f) The term "Instruments" shall mean a negotiable instrument
or a certificated security, as defined in the Uniform Commercial Code of
Connecticut, or any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and is of a type which, in
the ordinary course of business, is transferred by delivery with any
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<PAGE> 9
necessary endorsement or assignment, whether now or hereafter held by Debtor;
(g) The term "Inventory" shall mean all goods, merchandise,
raw materials, work in progress, finished goods and products and other tangible
personal property now owned or hereafter acquired by Debtor and held for sale or
lease, or furnished or to be furnished under contracts of service or used or
consumed in Debtor's business;
(h) The term "Motor Vehicles" shall have the same meaning as
that contained in Chapter 246 of the Connecticut General Statutes;
(i) The term "Obligations" shall mean any and all loans,
indebtedness, obligations and liabilities of Debtor to Secured Party of every
kind and description, direct or indirect, absolute or contingent, primary or
secondary, due or to become due, now existing or hereafter arising, under this
Agreement and the Term Note, and all costs, expenses, fees, charges and
attorneys' and other professional fees incurred by Secured Party in connection
with any of the foregoing, or in any way connected with or related to the
preservation, realization, enforcement, protection or defense of the Collateral,
this Agreement, the Term Note, and the other Financing Agreements, and the
rights and remedies hereunder or thereunder.
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<PAGE> 10
(j) The term "Patents" shall mean all interests in patents now
owned or hereafter acquired by Debtor.
(k) The term "Trademarks" shall mean all interests in
trademarks now owned or hereafter acquired by Debtor.
6. CONDITIONS PRECEDENT TO THE MAKING OF THE LOAN. The obligation of
Secured Party to make the Loan to Debtor is subject to the condition precedent
that:
(a) The representations and warranties set forth in each of
the Financing Agreements shall be true and correct;
(b) Debtor shall be in compliance with all the terms and
provisions set forth in the Financing Agreements and no Event of Default or
state of acts which by the passage of time, giving of notice, or both, would
constitute an Event of Default, shall be in existence;
(c) Secured Party shall have received each of the following:
(i) The Term Note in the form of the Term Note
attached hereto as Exhibit A duly completed and executed by Debtor;
(ii) Financing Statements. Financing Statements duly
executed by Debtor in form and substance reasonably satisfactory to
Secured Party and its counsel;
(iii) Evidence of All Corporate Action by Debtor.
Certified (as of the date of this Agreement)
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<PAGE> 11
copies of all corporate action taken by Debtor, including resolutions
of the Board of Directors of Debtor, authorizing the execution,
delivery and performance of this Agreement and the other Financing
Agreements and each other document to be delivered by Debtor pursuant
to this Agreement;
(iv) Incumbency and Signature Certificate of Debtor.
A certificate (dated as of the date of this Agreement) of the Secretary
of Debtor certifying the names and true signatures of the officers of
Debtor authorized to sign this Agreement and the other Financing
Agreements;
(v) Opinion of Counsel for Debtor. An opinion of
counsel for Debtor in such form and covering such matters as shall be
satisfactory to the Secured Party exercising reasonable judgment;
(vi) Agreement among Creditors. Agreement duly
executed by all of the parties thereto in the form of the Agreement
attached hereto as Exhibit B;
(vii) Estate Note. Copy of $__________________
Promissory Note duly completed and executed by Debtor to the order of
June H. Geneen, Phil E. Gilbert, Jr., Thomas W. Keesee and the United
States Trust Company of New York, as co-executors of the Estate of
Harold S. Geneen, Late of
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<PAGE> 12
New York, New York (collectively, the "Estate") in the form of the Note
attached hereto as Exhibit C;
(viii) Security Agreement. Copy of Security Agreement
(the "Estate Security Agreement") duly completed and executed by Debtor
and the Estate;
(ix) Subordination Agreement with CII. Subordination
Agreement duly completed and executed by the parties thereto in the
form of the Subordination Agreement attached hereto as Exhibit D (the
"CII Subordination Agreement") together with UCC-3 Subordination
Statements relating to the CII Subordination Agreement executed by CII
in form and substance reasonably satisfactory to Secured Party and its
counsel;
(x) Subordination and Intercreditor Agreement with
the Estate. Subordination and Intercreditor Agreement duly completed
and executed by the parties thereto in the form of the Subordination
and Intercreditor Agreement attached hereto as Exhibit E (the "Estate
Subordination Agreement") together with UCC-3 Subordination Statements
relating to the Estate Subordination Agreement executed on behalf of
the Estate in form and substance reasonably satisfactory to Secured
Party and its counsel;
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<PAGE> 13
(xi) Voting Agreement. Voting Agreement duly
completed and executed by the parties thereto in the form of the Voting
Agreement attached hereto as Exhibit F;
(xii) Warrant Agreement. Warrant Agreement duly
completed and executed by the Debtor in the form of the Warrant
Agreement attached hereto as Exhibit G;
(xiii) Registration Rights Agreement. Registration
Rights Agreement duly completed and executed by the parties thereto in
the form of the Registration Rights Agreement attached hereto as
Exhibit H;
(xiv) Data Card Agreement. Copy of a Settlement
Agreement duly executed by Data Card Corporation and Debtor in the form
of the Settlement Agreement attached hereto; and Exhibit I
(xv) UCC-3 Termination Statements duly executed by
BOB releasing BOB's security interest in the Collateral; such
statements to be in form and substance reasonably satisfactory to
Secured Party and its counsel; and
(d) Alan W. Morton, Frederick W. Kolling, III and James H.
Whitney shall have resigned, or have been removed, from the Board of Directors
of Debtor.
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<PAGE> 14
7. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to
Secured Party that:
(a) Net Worth. The negative net worth of Debtor as of March
31, 1998, determined in accordance with generally accepted accounting principles
did not exceed $2,000,000.
(b) Ownership of Assets. Debtor has good and marketable title
to its assets, free from any liens, mortgages, security interests, pledges or
encumbrances, except (i) as permitted in Section 11(a) hereof, and (ii) as shown
on Exhibit J attached hereto. Except as shown on Exhibit J, no financing
statements covering all or any part of Debtor's assets are on file in the Office
of the Secretary of the State of Connecticut or in any other federal, state or
local governmental office, whether or not properly filed under applicable law.
(c) Corporate Organization. Debtor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified as a foreign corporation in good standing in
every jurisdiction in which such qualification is necessary. Debtor has
corporate power to enter into the Financing Agreements to which it is a party
and to borrow hereunder, and has all requisite authorizations and permits to own
and operate Debtor's
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<PAGE> 15
properties and assets and to carry on Debtor's business as now being conducted.
(d) Litigation; Taxes. Except as shown on Exhibit K attached
hereto, there are no actions, suits, proceedings, or investigations pending, or
judgments or orders outstanding, or, to the knowledge of Debtor, threatened
against Debtor, which if adversely decided against Debtor, could have a material
adverse effect on the condition, operations or prospects (financial or
otherwise) of Debtor, and Debtor has filed all required federal, state and local
tax returns, and has paid all taxes as shown on such returns, and has provided
adequate reserves for payment of any tax which is being contested.
(e) Authority. The execution, delivery and performance of this
Agreement, the Term Note, and each and every other agreement, instrument and
document required to be executed or delivered to Secured Party by Debtor in
connection with the Loan have been duly authorized by all necessary corporate
action; the execution, delivery and performance of said agreements, instruments
and documents, the consummation of the transactions therein contemplated, and
the fulfillment of or compliance with the terms and provisions therein, are
within Debtor's powers and are not in contravention of any provisions of
Debtor's Certificate of Incorporation or By-laws. The
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execution, delivery and performance of said agreements, instruments and
documents will not result in a violation of any laws, or a breach of, or
constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any of Debtor's assets (other than the security interest
granted to Secured Party hereunder and the security interest granted to the
Estate under the Estate Security Agreement) pursuant to any of the terms,
conditions or provisions of any agreement, instrument or other undertaking of
which Debtor is a party or by which Debtor is bound. No consent, approval,
authorization or other order of, or registration or filing with any governmental
body is required in connection with the execution, delivery and performance of
said agreements, instruments and documents.
(f) Defaults. Except as provided in Exhibit L attached hereto,
Debtor is not in default under any agreement, indenture, mortgage, deed of
trust, or any other agreement or any court order or other order issued by any
governmental body to which Debtor is a party or by which Debtor may be bound.
(g) Environmental, Health, Safety Laws. Debtor has not
received any notice, order, petition or similar document in connection with or
arising out of any violation of any environmental, health or safety law,
regulation, rule or order, and Debtor knows of no basis for any claim of such a
violation or of any threat thereof.
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(h) Other Laws. Debtor is not in violation of any law,
regulation, rule or order including, but not limited to, the laws, regulations,
rules and orders described in subparagraph (g) above, which violation materially
or adversely affects the financial condition of Debtor or the ability of Debtor
to perform hereunder.
(i) Business Location. The Collateral, the books and records
relating thereto, and the principal place of business of Debtor are all at the
address of Debtor first written above.
(j) Business Name. The name of Debtor has not changed for at
least the past ten (10) years and during such period, Debtor has conducted, and
currently conducts, its business solely in its own name without the use of a
tradename or the intervention of or through any entity of any kind.
10. AFFIRMATIVE COVENANTS. Debtor covenants and agrees that, from the
date hereof until the payment and performance of all the Obligations, unless
Secured Party otherwise agrees in writing, Debtor shall:
(a) Financial Reports. Commencing with the period ended
December 31, 1998, furnish to Secured Party:
(i) Within thirty (30) days after the end of each
month which does not constitute the end of a fiscal quarter of Debtor,
and within forty-five (45) days after the end of each month which does
constitute the end of a
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fiscal quarter of Debtor its unaudited balance sheet as of the end of
such month and statements of income and changes in equity for that
month and the portion of the fiscal year to date then ended, which
shall be prepared in conformity with generally accepted accounting
principles, and certified by the Chief Financial Office of Debtor, as
presenting fairly in all material respects the financial position of
Debtor as at the date of the period then ended and the results of
operations of Debtor as of and for the periods then ending, together
with a statement that no Event of Default then exists under this
Agreement or the Term Note.
(ii) Within ninety (90) days after the end of each
fiscal year of Debtor, its financial statements, including Debtor's
balance sheet as of the end of such fiscal year, statement of income,
statements of changes in equity, and statement of cash flows for the
year then ended, which shall be prepared in accordance with generally
accepted accounting principles. Each such financial statement shall be
reviewed by an independent certified public accountant satisfactory to
Secured Party. Such financial statements shall be accompanied by a
report in accordance with the Statement on Standards for Accounting and
Review Services, issued by the Accounting and Review
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Services Committee, as the same may be from time to time amended or
supplemented.
(iii) Promptly after Secured Party's written request,
such other information about the financial condition, operations, and
business of the Debtor as Secured Party may, from time to time,
reasonably request.
(b) Taxes and Other Liens. File all required federal, state
and local tax returns and pay when due all taxes, assessments and other charges
of every nature which may be levied or assessed against Debtor or its assets,
including without limitation, claims for labor, supplies and rent, except those
liabilities being contested in good faith and for which Debtor maintains
reserves in amount and form satisfactory to Secured Party.
(c) Casualty Insurance. Keep its properties insured against
fire and other hazards (so-called "All Risk" coverage) in amounts and with
insurers satisfactory to Secured Party, which insurance shall by the terms of
the policy be payable to Secured Party as its interest may appear pursuant to a
loss payee/mortgagee clause satisfactory to Secured Party. Secured Party shall
have the right to apply the proceeds of any such insurance in reduction of the
Obligations, whether or not then due and payable, in such manner as Secured
Party in its sole discretion may determine. Without limiting the generality of
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the foregoing, such insurance must provide that it may not be cancelled without
thirty (30) days prior written notice to Secured Party. If Debtor fails to
maintain the foregoing insurance, Secured Party may, at its option, obtain such
policies as it deems necessary and the premiums therefor, together with interest
at the Default Rate from the date of receipt of written demand therefor from
Secured Party to Debtor shall be payable by Debtor to Secured Party immediately
upon receipt of such demand. Debtor hereby appoints Secured Party its
attorney-in-fact, coupled with an interest, to settle, adjust and compromise any
insurance losses, to collect and receive payments of insurance, and to endorse
Debtor's name on all documents, checks and drafts in connection therewith.
(d) Maintain Collateral. Maintain and preserve the Collateral
in good repair, working order and condition, and make all needed and proper
repairs, renewals, replacements, additions or improvements thereto, and
immediately notify Secured Party of any event causing material loss or
depreciation in the value of the Collateral and the amount of such loss or
depreciation.
(e) Inspection. Allow Secured Party by or through any of its
officers, agents, attorneys, or accountants designated by it, to enter the
offices and plants of Debtor to examine, inspect and make copies of the books
and records of
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Debtor and to inspect the Collateral, all at such times and as often as Secured
party may reasonably request.
(f) Liability Insurance. Maintain general public liability
insurance against claims for personal injury, death or property damage in forms,
amounts and with companies satisfactory to Secured Party, and workmen's
compensation insurance, employment or similar insurance, as required by
applicable law.
(g) Defend Collateral. Defend the Collateral against all
liens, claims and demands of all persons, and allow Secured Party, at the
expense of Debtor, to contest or defend any such liens, claims and demands in
Debtor's name. Cause the security interest of Secured Party to be properly noted
on all certificates of title issued or outstanding with respect to any of the
Collateral and deposit same with Secured Party.
(h) Financing Statements. From time to time, at the request of
Secured Party, (i) execute, deliver and file one or more financing statements,
assignments, and other agreements, instruments or documents, and amendments and
renewals thereof, and do all other acts as Secured Party deems necessary or
desirable (x) to create and maintain a valid and enforceable first priority
security interest in the Collateral other than Patents and Trademarks and (y) to
create and maintain a valid and enforceable security interest in Patents and
Trademarks
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subject only to the prior lien currently granted to Connecticut Innovations,
Inc. and the lien granted to the Estate which is subordinate to Secured Party's
lien, and (ii) pay, upon demand, Secured Party's costs, charges and expenses,
including without limitations attorneys' fees incurred by Secured Party in
connection therewith.
(i) Books and Records. Maintain complete and accurate books
and records relating to its financial affairs at all times in accordance with
generally accepted accounting principles, the Collateral, the Obligations, and
Debtor's covenants hereunder.
(j) Compliance with Laws. Comply in all material respects with
all laws, orders, rules and regulations applicable to Debtor of any governmental
body or agency, including without limitation, environmental and health and
safety laws, orders, rules and regulations.
(k) Notification of Default. Give prompt written notice to
Secured Party upon the occurrence of an Event of Default, or of any state of
facts which would constitute an Event of Default hereunder or, which, but for
the giving of notice or passage of time, or both, would constitute an Event of
Default.
(l) Notification of Litigation. Give prompt written notice to
Secured Party of the commencement or threat of
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litigation, including arbitration proceedings, and any proceedings before any
governmental agency, or the occurrence of any other event, which, if decided
adversely to Debtor, could have an adverse effect upon the condition, operations
or prospects (financial or otherwise) of Debtor.
(m) ERISA; Labor Disputes. Give prompt written notice to
Secured party of: (i) any event which causes Debtor to become subject to the
Employee Retirement Income Security Act of 1974 ("ERISA") and, upon becoming
subject thereto, comply in all respects with ERISA; and (ii) any labor dispute
or controversy resulting or likely to result in a strike or work stoppage
against Debtor.
(n) Use of Proceeds. Use the proceeds of the Loan for the
purposes set forth in Section 1(d) hereof.
(o) Receivables and Inventory Reports. Within ten (10)
business days after the close of every calendar month, submit to Secured Party
(i) an aged report of its accounts receivable and accounts payable, which
reports shall include the names and addresses of the account debtors and
vendors, respectively, and (ii) an inventory designation listing Debtor's
respective amounts of raw materials, work-in-progress and finished goods, all in
form and content satisfactory to Secured Party.
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(p) Notification of Accounts Receivable. Give prompt written
notice to Secured Party of each of the following events: (i) rejection, return,
repossession or material loss of, or damage to, any goods giving rise to any
account receivable of Debtor, (ii) any request by an obligor on accounts
receivable of Debtor for credit or adjustment of any such receivable, (iii) any
adjustment by Debtor of the amount owing on any such receivable, (iv) any
dispute in connection with any such receivable, and (v) any other event
affecting any such receivable or the value or amount thereof.
11. NEGATIVE COVENANTS. Debtor covenants and agrees that, from the date
hereof until the payment and performance of the Obligations, unless Secured
Party otherwise agrees in writing, Debtor shall not:
(a) Encumbrances. Create or permit to exist any lien,
mortgage, encumbrance or security interest against any of its assets, whether
now owned or hereafter acquired, except for (i) security interests in favor of
Secured Party, (ii) liens for taxes not yet due and payable, (iii) pledges or
deposits in connection with or to secure worker's compensation, unemployment or
liability insurance, and (iv) liens listed on Exhibit J hereto.
(b) Dividends; Acquisition of Stock. Declare or pay any
dividends or authorize or make any other distribution on any
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shares of its capital stock (other than dividends payable solely in Debtor's
capital stock), or purchase, acquire, redeem, or retire, or make any commitment
to purchase, acquire, redeem or retire, directly or indirectly, any of the
capital stock of Debtor, whether now or hereafter outstanding.
(c) Limitation on Indebtedness. Create or assume any liability
for borrowed money from any person or entity other than (i) Secured Party and
(ii) the Estate pursuant to the Estate Note.
(d) Contingent Liabilities. Endorse, guaranty, assume or
become liable, directly or indirectly, contingently or otherwise for the
obligations, indebtedness, or liabilities of others, except for the endorsement
of negotiable instruments in the ordinary course of business.
(e) Loans; Investments. Make any loans or advances to, or
investments in, or purchase or otherwise acquire any securities of, any
individual, firm, entity or corporation, except obligations of the United States
of America, insured bank deposits, and deposits in Money Market Funds that
invest in United States Government or its agencies' securities.
(f) Mergers; Disposal of Assets. Become a party to any merger
or consolidation, or acquire all or any material part of the assets or stock of
any corporation, partnership, person, or other entity, or sell, lease, transfer,
factor, finance or
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otherwise dispose of any of its assets, whether now owned or hereafter acquired,
except for inventory in the ordinary course of business, or liquidate, dissolve
or otherwise terminate or alter Debtor's existence, form or method of conducting
Debtor's business.
(g) Name; Collateral. Change Debtor's name, adopt any trade
names or conduct Debtor's business under any trade name or style or change
Debtor's place of business or the present location of the Collateral, or any
records relating to the Collateral.
(h) Margin Stock. Use any part of the proceeds of the Loan,
directly or indirectly, for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, or to extend credit to any entity or person for the
purpose of purchasing or carrying any such margin stock.
(i) Leases and Rentals. Make any expenditures for any leases
of real or personal property, including, without limitation, capitalized or
operating leases, in excess of the sum of (A) amounts now annually expended for
such leases and (B) $100,000 per annum;
12. Intentionally Omitted.
13. PAYMENTS BY SECURED PARTY. At its option, but without any
liability for failing to do so, Secured Party may
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pay for insurance on the Collateral and taxes, assessments or other charges
which Debtor fails to pay in accordance with the provisions hereof, or of the
other Financing Agreements, and may discharge any security interest in or lien
upon the Collateral other than those described in Exhibit I hereto. No such
payment or discharge of any such security interest or lien shall be deemed to
constitute a waiver by Secured Party or the violation of any covenant hereunder
by Debtor as a result of Debtor's failure to make any such payment or Debtor's
suffering of any such security interest or lien. Any payment made, or expense
incurred by Secured Party, pursuant to this or any other section of this
Agreement, shall be added to and become a part of the Obligations, shall bear
interest at the Default Rate, and shall be payable immediately by Debtor upon
receipt of written demand therefor by Secured Party.
14. EVENTS OF DEFAULT. Secured Party shall have the right at its option
to declare all of the Obligations to be immediately due and payable without
demand or notice (except as otherwise required by this Section 14) upon the
occurrence of any one of the following events (each being an "Event of
Default"):
(a) The failure by Debtor to pay any of the Obligations when
due;
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(b) The failure by Debtor to observe, perform or comply with
any condition or covenant in this Agreement or any of the other Financing
Agreements; provided, however, that Debtor shall have an opportunity to cure any
such failure for a period of fifteen (15) days after such failure provided such
failure (i) does not constitute a failure of payment pursuant to Section 14(a)
above, does not constitute a failure to comply with Section 11(j) above, and
(iii) does not, in Secured Party's sole judgment, impair Debtor's ability to pay
any of the Obligations when due or impair the value of any collateral securing
any of the Obligations;
(c) The existence of an event of default under any of the
other Financing Agreements which continues beyond any applicable grace period;
(d) If any representation or warranty made by Debtor in this
Agreement or in any of the other Financing Agreements, or any statement,
certificate or other data furnished by Debtor in connection with any of the
Obligations proves to be incorrect or untrue in any material respect when made;
(e) The entry of a judgement for the payment of money against
Debtor, which remains unsatisfied and in effect for any period of thirty (30)
consecutive days without a stay of execution, or appeal;
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(f) The insolvency of Debtor (the term "insolvency" shall mean
an inability to pay Debtor's debts as they mature);
(g) The filing by or against Debtor of any petition seeking an
arrangement, reorganization or the like, the commencement of any proceedings
under any bankruptcy or insolvency law by or against Debtor, the adjudication of
Debtor as a bankrupt, the appointment of a receiver for all or any part of
Debtor's assets, or the making of a receiver for all or any part of Debtor's
assets, or the making of an assignment for the benefit of creditors, or the
calling of a meeting of creditors, or the appointment of a committee of
creditors or liquidating agents, by, for, or of Debtor, and in the case of any
of the foregoing actions which are involuntary, if such actions are not
withdrawn, dismissed, discharged or removed, as the case may be, within thirty
(30) days after the commencement thereof;
(h) The dissolution, liquidation, insolvency or termination of
legal existence of Debtor or merger or consolidation of Debtor with or into any
other person or entity; or
(i) The failure by Debtor to pay when due any other
indebtedness or obligations owed to others for borrowed money, or if any such
other indebtedness or obligations shall be accelerated.
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15. REMEDIES OF SECURED PARTY; NOTICES. When the Obligations, or any of
them, become immediately due and payable, whether by reason of passage of time,
acceleration or otherwise, Secured Party may, in addition to and not in
limitation of Secured Party's rights set forth in Section 2 of this Agreement,
pursue any legal remedy available to it to collect the Obligations outstanding
at said time, to endorse its rights under the Financing Agreements, and to
enforce any and all other rights or remedies available to it both under the
Uniform Commercial Code of Connecticut (the "Code") and otherwise, including,
without limitation the right to take possession of the Collateral and dispose of
the same on Debtor's premises, all without judicial process, Debtor hereby
waiving any right Debtor might otherwise have to require Secured Party to resort
to judicial process and further waiving Debtor's right to notice and hearing
under the Constitution of the United States or any state or under any Federal or
state law, and no such action shall operate as a waiver of any other right or
remedy of Secured Party under the terms of any of the Financing Agreements, or
the law, all rights and remedies of Secured Party being cumulative and not
alternative. In addition, Secured Party may require Debtor to assemble the
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties.
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The net cash proceeds resulting from the collection,
liquidation, sale, lease or other disposition of the Collateral shall be applied
first to the expenses (including, without limitation, all reasonable attorneys'
fees) of retaking, holding, storing, processing and preparing for sale, selling,
collecting, liquidating and the like, and then to the satisfaction of all
Obligations, application as to particular Obligations or against principal or
interest to be in Secured Party's sole discretion. Any notice which Secured
Party is required to give Debtor under the Code shall be deemed to constitute
reasonable notice if such notice is mailed, postage prepaid, return receipt
requested, at least seven (7) days prior to such action. Debtor shall be liable
to Secured Party and shall pay to Secured Party on demand any deficiency which
may remain after such sale, lease, disposition, collection or liquidation of the
Collateral. Debtor agrees that the powers granted hereunder, being coupled with
an interest, shall be irrevocable so long as any of the Obligations remains
outstanding.
16. SET-OFF. Debtor hereby grants to Secured Party a lien and right of
set-off for all Obligations upon or against all moneys, deposits, property,
collateral and securities and the proceeds thereof, now or hereafter held or
received by, or in transit to, Secured Party from or for Debtor, whether for
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safekeeping, pledge, custody, transmission, collection or otherwise. Secured
Party may at any time after the occurrence, and during the continuance, of an
Event of Default, apply the same, or any part thereof, to the Obligations, or
any part thereof, whether or not matured or demanded at the time of such
application.
17. RIGHTS OF SECURED PARTY. With respect both to the Obligations and
the Collateral, Debtor hereby consents to any extension or postponement of the
time of payment or any other indulgence, to any substitution, exchange or
release of the Collateral, to the addition or release of any party or person
primarily or secondarily liable, to the acceptance of partial payments thereon
and the settlement, compromising or adjusting of any claims thereof, all in such
manner and at such time or times as Secured Party may deem advisable. Secured
Party shall have no duty as to the collection or protection of the Collateral or
any income thereon, nor as to the preservation of any rights against prior
parties, nor as to the preservation of any rights pertaining thereto beyond the
safe custody thereof. Secured party may exercise its rights with respect to the
Collateral without resorting or regard to other collateral or sources of
reimbursement for the Obligations. Secured Party shall not be deemed to have
waived any of its rights under the Financing Agreements or upon or under the
Obligations or the
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Collateral unless such waiver is in writing and signed by Secured Party. No
delay or omission on the part of Secured Party in exercising any right shall
operate as a waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any future
occasion. Secured Party may revoke any permission or waiver previously granted
to Debtor, and such revocation shall be effective whether given orally or in
writing. All rights and remedies of Secured Party with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
document, shall be cumulative and may be exercised singularly or concurrently.
18. GENERAL PROVISIONS.
(a) Expenses. Debtor will pay on demand all expenses of
Secured Party arising out of this transaction or in connection with the
negotiation, preparation, administration, collection, defense, protection,
preservation or enforcement of, or realization on, this Agreement, the other
Financing Agreements, the Obligations, or any of the Collateral, or any waiver,
modification or amendment of any provision of any of the foregoing, including,
without limitation, reasonable attorneys' fees of outside counsel, and other
professionals' reasonable fees, and the reasonable allocation costs of in-house
legal counsel, and including, without limitation, any fees or expenses
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associated with any travel or other costs relating to any appraisals,
examinations, administration of this Agreement, the other Financing Agreements
or any of the Collateral, and the amounts of all such expenses shall, until
paid, be Obligations secured by the Collateral.
(b) Survival. This Agreement and the secured interest granted
to Secured Party by Debtor and every representation, warrant, covenant and other
term contained herein shall survive until the Obligations have been paid in
full.
(c) Notices. Any notice required to be given hereunder shall
be effective when delivered in person, or one (1) day after delivery to a
nationally recognized overnight mail or messenger service or three (3) days
after being deposited in the United States mail, first class, postage prepaid,
registered or certified mail, return receipt requested, to Debtor or Secured
Party, as the case may be, at its address set forth above. Any such notice to
Debtor shall be sent to the attention of the President of Debtor at Debtor's
address set forth above and to the attention of Thomas M. Steinberg at Secured
Party's address set forth above. Either of the parties hereto may notify the
other that any such notice shall be given to such other address as such party
may so instruct by written notice similarly given.
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(d) Entire Agreement. This Agreement is the entire agreement
between the parties hereto and cannot be amended or modified except by a writing
signed by Debtor and Secured Party.
(e) Governing Law. This Agreement and the other Financing
Agreements shall be construed in accordance with and governed by the laws of the
State of Connecticut. Secured Party and Debtor each hereby consent to service of
process, and to be sued, in the State of Connecticut and consent to the
jurisdiction of the courts of the State of Connecticut and the United States
District Court for the District of Connecticut, for the purpose of any suit,
action, or other proceeding arising hereunder, and expressly waive any and all
objections it may have to venue in any such courts.
(f) Headings. Sections and subsection headings have been
inserted herein for convenience only and form no part of this Agreement and
shall not be deemed to affect the meaning or construction of any of the
covenants, agreements, conditions or term hereof.
(g) Severability. If any term or provisions of this Agreement
shall be invalid, illegal or unenforceable for any reason whatsoever, such term
or provisions shall be severable from the remainder of this Agreement and the
validity, legality and enforceability of the remaining terms and provisions
shall not in any way be affected or impaired thereby.
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(h) Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns provided, however, that Debtor may not assign its rights hereunder
without prior written consent of Secured Party in its sole discretion, and any
such attempted assignment without such consent shall be null and void.
(i) Interpretation. As used herein, plural or singular include
each other, and pronouns of any gender are to be construed as masculine,
feminine or neuter, as context requires.
(j) Exhibits. All Exhibits referred to herein are intended to
be and hereby are specifically made a part of this Agreement.
19. PREJUDGMENT REMEDY WAIVER; WAIVERS. DEBTOR ACKNOWLEDGES THAT THE
LOAN EVIDENCED AND SECURED BY THIS AGREEMENT IS A COMMERCIAL TRANSACTION AND
WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT
GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH
RESPECT TO ANY PREJUDGMENT REMEDY WHICH SECURED PARTY MAY DESIRE TO USE, and
further waives diligence, demand, presentment for payment, notice of nonpayment,
protest and notice of protest, and notice of any renewals or extensions of the
Note, and all rights under any statute of limitations.
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20. WAIVER OF JURY TRIAL. DEBTOR HEREBY WAIVES TRIAL BY JURY IN ANY
COURT AND IN ANY SUIT, ACTION OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION
WITH OR IN ANY WAY RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS AGREEMENT
IS A PART AND/OR THE ENFORCEMENT OF ANY OF SECURED PARTY'S RIGHTS AND REMEDIES.
DEBTOR ACKNOWLEDGES THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY
AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS
ATTORNEYS. NO PARTY TO THIS AGREEMENT HAS AGREED WITH OR REPRESENTED TO ANY
OTHER PARTY HERETO THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
21. Execution By Telefacsimile Transmission. Telefacsimile
transmissions of any executed original document and/or retransmission of any
executed telefacsimile transmission shall be deemed to be the same as the
delivery of an executed original. At the request of any party hereto, the other
parties shall confirm telefacsimile transmissions by executing duplicate
original documents and delivering the same to the requesting party or parties.
[Rest of This Page Intentionally Left Blank.]
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<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
---------------------------------------
Name: James H. Whitney
Title: President & CEO
GUNTHER PARTNERS, LLC
By: /s/ Thomas J. Tisch
---------------------------------------
Thomas J. Tisch
Manager
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SIGNATURE PAGE LOAN AND SECURITY AGREEMENT
<PAGE> 39
EXHIBIT A
TERM NOTE
$4,000,000 October 2, 1998
Norwich, Connecticut
For value received, the undersigned, Gunther International, Ltd. (the
"Borrower") promises to pay to the order of GUNTHER PARTNERS, LLC ("Lender") at
the office of its agent, c/o Thomas M. Steinberg, Tisch Family Interests, 667
Madison Avenue, New York, New York, 10021 or at such other place as Lender may
designate, the principal sum of FOUR MILLION DOLLARS ($4,000,000), together with
interest on the unpaid balance of this Note at the rate of eight percent (8%)
per annum, beginning on the date hereof, before or after maturity or judgment,
which interest shall be computed on the basis of a 360-day year and actual days
elapsed, together with all taxes levied or assessed on this Note or the debt
evidenced hereby against Lender, and together with all costs, expenses and
reasonable attorneys' fees incurred in the collection of this Note, or to
enforce or foreclose any security agreement or other document including, without
limitation, the Agreement (as hereinafter defined), securing or relating to this
Note, or in protecting or defending the lien of said security agreement or other
document, or in any
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<PAGE> 40
litigation or matter arising from or connected with said security agreement,
other document, or this Note. This Note is the Term Note referred to in, and is
entitled to the benefits of, that certain Loan and Security Agreement dated the
date hereof between Borrower and Lender (the "Agreement"). Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Agreement. The Agreement, among other things, contains provisions for (i)
acceleration of the maturity of this Note upon the happening of certain stated
events, (ii) for prepayments on account of principal hereof prior to the
maturity of this Note upon the terms and conditions specified in the Agreement
and (iii) the payment of interest at the Default Rate under certain
circumstances. The Agreement and all other instruments either relating to or
securing the indebtedness evidenced hereby are made a part of this Note and
deemed incorporated in full.
Interest shall be paid on the first day of each calendar quarter
beginning January 1, 1999, and continuing on the first day of each April, July,
October and January thereafter, until the principal balance with accrued
interest thereon is paid in full. Principal shall be paid in thirteen payments
as follows: (a) One Hundred Thousand Dollars ($100,000) shall be paid on the
first day of each month commencing on November 1, 1998 and continuing to and
including September 1, 1999; (b) Four Hundred
-40-
<PAGE> 41
Thousand Dollars ($400,000) shall be paid on October 1, 1999 and (c) the balance
together with all accrued and unpaid interest and all other unpaid amounts due
hereunder or under the Financing Agreements, shall be due and payable on October
1, 2003 or on such earlier date that this Note becomes due and payable as a
result of acceleration as provided in the Agreement (the "Maturity Date").
Upon the occurrence of an Event of Default under and as defined in the
Agreement, the entire indebtedness, with accrued interest thereon, due under
this Note, shall, at the option of Lender, become immediately due and payable
without demand or notice of any kind.
If any amount due hereunder is not paid within ten (10) days after the
date it is due, without in any way affecting Lender's right to accelerate this
Note, a late charge equal to five percent (5%) of said amount shall be assessed
against Borrower for each month that said amount is late, and shall be
immediately due and payable without demand or further notice of any kind.
Borrower hereby grants to Lender a lien and right of setoff for all of
Borrower's liabilities to Lender under this Note and the Agreement upon and
against all the deposits, credits, collateral and property of Borrower, now or
hereinafter in the possession or control of Lender or in transit to it. Lender
-41-
<PAGE> 42
may, at any time after the occurrence, and during the continuance, of an Event
of Default, apply or set off the same, or any part thereof, to any liability of
Borrower, whether or not matured or demanded.
Notwithstanding any provisions of this Note to the contrary, the rate
of interest to be paid by Borrower to Lender under this Note shall not exceed
the highest or the maximum rate of interest permitted to be charged by Lender
under applicable laws. Any amounts paid by Borrower to Lender in excess of such
rate shall be deemed to be partial prepayments of principal hereunder.
No delay or omission by Lender in exercising any right hereunder, nor
failure by Lender to insist upon the strict performance of any terms herein,
shall operate as a waiver of such right, any other right hereunder, or any terms
herein. No waiver of any right shall be effective unless in writing and signed
by Lender, nor shall a waiver on one occasion be constituted as a bar to, or
waiver of, any such right on any future occasion.
BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTON OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE
ENFORCEMENT OF ANY OF LENDER'S RIGHTS AND REMEDIES. BORROWER ACKNOWLEDGES
-42-
<PAGE> 43
THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. NO PARTY
TO THIS NOTE HAS AGREED WITH OR REPRESENTED TO ANY OTHER PARTY HERETO THAT THE
PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A
COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER
903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE
OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH BANK MAY DESIRE TO
USE, and further waives diligence, demand, presentment for payment, notice of
nonpayment, protest, and notice of protest, and notice of any renewals or
extensions of this Note, and all rights under any statute of limitations.
This Note shall be governed by and construed in accordance with the
laws of the State of Connecticut.
GUNTHER INTERNATIONAL, LTD.
By:
----------------------------------
Name:
Title:
-43-
<PAGE> 1
TERM NOTE
$4,000,000 October 2, 1998
Norwich, Connecticut
For value received, the undersigned, Gunther International, Ltd. (the
"Borrower") promises to pay to the order of GUNTHER PARTNERS, LLC ("Lender") at
the office of its agent, c/o Thomas M. Steinberg, Tisch Family Interests, 667
Madison Avenue, New York, New York, 10021 or at such other place as Lender may
designate, the principal sum of FOUR MILLION DOLLARS ($4,000,000), together with
interest on the unpaid balance of this Note at the rate of eight percent (8%)
per annum, beginning on the date hereof, before or after maturity or judgment,
which interest shall be computed on the basis of a 360-day year and actual days
elapsed, together with all taxes levied or assessed on this Note or the debt
evidenced hereby against Lender, and together with all costs, expenses and
reasonable attorneys' fees incurred in the collection of this Note, or to
enforce or foreclose any security agreement or other document including, without
limitation, the Agreement (as hereinafter defined), securing or relating to this
Note, or in protecting or defending the lien of said security agreement or other
document, or in any
<PAGE> 2
litigation or matter arising from or connected with said security agreement,
other document, or this Note. This Note is the Term Note referred to in, and is
entitled to the benefits of, that certain Loan and Security Agreement dated the
date hereof between Borrower and Lender (the "Agreement"). Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them
in the Agreement. The Agreement, among other things, contains provisions for (i)
acceleration of the maturity of this Note upon the happening of certain stated
events, (ii) for prepayments on account of principal hereof prior to the
maturity of this Note upon the terms and conditions specified in the Agreement
and (iii) the payment of interest at the Default Rate under certain
circumstances. The Agreement and all other instruments either relating to or
securing the indebtedness evidenced hereby are made a part of this Note and
deemed incorporated in full.
Interest shall be paid on the first day of each calendar quarter
beginning January 1, 1999, and continuing on the first day of each April, July,
October and January thereafter, until the principal balance with accrued
interest thereon is paid in full. Principal shall be paid in thirteen payments
as follows: (a) One Hundred Thousand Dollars ($100,000) shall be paid on the
first day of each month commencing on November 1, 1998 and continuing to and
including September 1, 1999; (b) Four Hundred
-2-
<PAGE> 3
Thousand Dollars ($400,000) shall be paid on October 1, 1999 and (c) the balance
together with all accrued and unpaid interest and all other unpaid amounts due
hereunder or under the Financing Agreements, shall be due and payable on October
1, 2003 or on such earlier date that this Note becomes due and payable as a
result of acceleration as provided in the Agreement (the "Maturity Date").
Upon the occurrence of an Event of Default under and as defined in the
Agreement, the entire indebtedness, with accrued interest thereon, due under
this Note, shall, at the option of Lender, become immediately due and payable
without demand or notice of any kind.
If any amount due hereunder is not paid within ten (10) days after the
date it is due, without in any way affecting Lender's right to accelerate this
Note, a late charge equal to five percent (5%) of said amount shall be assessed
against Borrower for each month that said amount is late, and shall be
immediately due and payable without demand or further notice of any kind.
Borrower hereby grants to Lender a lien and right of setoff for all of
Borrower's liabilities to Lender under this Note and the Agreement upon and
against all the deposits, credits, collateral and property of Borrower, now or
hereinafter in the possession or control of Lender or in transit to it. Lender
-3-
<PAGE> 4
may, at any time after the occurrence, and during the continuance, of an Event
of Default, apply or set off the same, or any part thereof, to any liability of
Borrower, whether or not matured or demanded.
Notwithstanding any provisions of this Note to the contrary, the rate
of interest to be paid by Borrower to Lender under this Note shall not exceed
the highest or the maximum rate of interest permitted to be charged by Lender
under applicable laws. Any amounts paid by Borrower to Lender in excess of such
rate shall be deemed to be partial prepayments of principal hereunder.
No delay or omission by Lender in exercising any right hereunder, nor
failure by Lender to insist upon the strict performance of any terms herein,
shall operate as a waiver of such right, any other right hereunder, or any terms
herein. No waiver of any right shall be effective unless in writing and signed
by Lender, nor shall a waiver on one occasion be constituted as a bar to, or
waiver of, any such right on any future occasion.
BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY SUIT,
ACTON OR PROCEEDING ON ANY MATTER ARISING IN CONNECTION WITH OR IN ANY WAY
RELATED TO THE FINANCING TRANSACTIONS OF WHICH THIS NOTE IS A PART AND/OR THE
ENFORCEMENT OF ANY OF LENDER'S RIGHTS AND REMEDIES. BORROWER ACKNOWLEDGES
-4-
<PAGE> 5
THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER EXTENSIVE
CONSIDERATION OF THE RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEYS. NO PARTY
TO THIS NOTE HAS AGREED WITH OR REPRESENTED TO ANY OTHER PARTY HERETO THAT THE
PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS A
COMMERCIAL TRANSACTION AND WAIVES ITS RIGHTS TO NOTICE AND HEARING UNDER CHAPTER
903a OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY STATE
OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH BANK MAY DESIRE TO
USE, and further waives diligence, demand, presentment for payment, notice of
nonpayment, protest, and notice of protest, and notice of any renewals or
extensions of this Note, and all rights under any statute of limitations.
This Note shall be governed by and construed in accordance with the
laws of the State of Connecticut.
GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
-----------------------
Name: James H. Whitney
Title: President & CEO
-5-
<PAGE> 1
SUBORDINATION AGREEMENT
Agreement dated as of October 2, 1998, between GUNTHER PARTNERS, LLC
("Lender") and CONNECTICUT INNOVATIONS, INC. ("CII").
WHEREAS, Lender has agreed to make a loan (the "Priority Loan") to
GUNTHER INTERNATIONAL, LTD. ("Borrower") in the original principal amount of
Four Million Dollars ($4,000,000.00), which indebtedness shall be evidenced by,
among other things, a Loan and Security Agreement dated the date hereof between
Lender and Borrower ("Priority Loan Agreement"), and a $4,000,000 Term Note
dated the date hereof made by Borrower to the order of Lender (the "Priority
Note"); and
WHEREAS, as security for the payment and performance of the Priority
Loan, Borrower has granted to Lender a valid and perfected security interest in
and lien on all of Borrower's tangible and intangible personal property, whether
now owned or hereafter acquired, and all products and proceeds thereof, all as
more fully set forth in the Priority Loan Agreement (the "Collateral"); and
WHEREAS, Borrower is indebted to CII (the "CII Indebtedness") pursuant
to a certain Amendment and Restatement
<PAGE> 2
of Development Agreement made as of the 31st day of December, 1995 between
Borrower and CII ("CII Agreement"); and
WHEREAS, payment of the CII Indebtedness is secured by a valid and
perfected security interest in and lien on all of the Collateral, as
hereinbefore defined; and
WHEREAS, the Lender has conditioned its extension of the Priority Loan
to Borrower upon CII subordinating its lien in the Collateral (other than in
Collateral consisting of Patents and Trademarks of Borrower; said Collateral
consisting of Debtor's tangible and intangible personal property other than
Patents and Trademarks referred to herein as "Subordinated Collateral") to
Lender; and
WHEREAS, CII has agreed to subordinate its lien in the Subordinated
Collateral to Lender;
NOW, THEREFORE, Lender, CII and, by its consent and acknowledgment
hereto, Borrower, hereby agree as follows:
1. CII hereby subordinates its security interest and lien in the
Subordinated Collateral to the security interest and lien of the Lender therein.
Notwithstanding the date, time, manner or order of attachment or perfection of
the security interest and liens of the Lender or CII in any of the Subordinated
Collateral, and notwithstanding any provisions of the Uniform Commercial Code,
any applicable law, any decision of any court
-2-
<PAGE> 3
or tribunal of competent jurisdiction or whether Lender or CII holds possession
of all or any part of the Subordinated Collateral, the lien and security
interest of Lender in and to the Subordinated Collateral and all proceeds
thereof shall be prior in right to the lien and security interest of CII in and
to the Subordinated Collateral.
2. After the occurrence of a default in Gunther's obligations to the
Lender or CII which continues beyond any applicable grace period, the proceeds
from the disposition, sale or liquidation of any Subordinated Collateral shall
be applied, regardless of when the respective indebtedness of Lender or CII may
be due, first to pay the Priority Loan (including accrued interest, expenses and
other costs) and then, to pay all outstanding CII Indebtedness. At all times,
the Lender may exercise all of its rights and remedies under the Priority Loan
Agreement and Priority Note and, without limiting the foregoing, may take all
actions that it deems desirable to collect the Priority Loan as the case may be,
including without limitation, the repossessing foreclosing, selling, releasing
or disposing of any Subordinated Collateral and the commencement of, or joining
with other creditors in the commencement of, bankruptcy or insolvency actions
against Borrower.
-3-
<PAGE> 4
3. Each of Lender and CII shall give each other written notice of any
event of default or of the occurrence of any event of default under and as
defined in either the Priority Loan Agreement, the Priority Note or the CII
Agreement.
4. Unless otherwise agreed by the parties hereto, this Agreement shall
terminate upon the earlier of (a) the written agreement of all parties hereto,
or (b) the full and final satisfaction of either the Priority Loan or CII
Indebtedness.
5. All notices and other communications pursuant to this Agreement
shall be in writing and shall be deemed given when received as follows:
A. If to Lender:
Gunther Partners, LLC
c/o Thomas M. Steinberg
Tisch Family Interests
667 Madison Avenue
New York, New York 10021
Attention:
B. If to CII:
Connecticut Innovations, Inc.
999 West Street
Rocky Hill, CT 06067
Attention: Executive Director
6. This Agreement shall be governed by and construed in accordance with
the provisions of the laws of the State of
-4-
<PAGE> 5
Connecticut. This Agreement shall be effective as of October 2, 1998,
notwithstanding the actual date of execution.
7. CII hereby acknowledges that pursuant to a certain Subordination
Agreement dated the date hereof between June H. Geneen, Phil E. Gilbert, Jr.,
Thomas W. Keesee and United States Trust Company of New York, as Co-Executors of
the Estate of Harold S. Geneen, Late of New York, New York (collectively, the
"Estate"), CII and Borrower, CII has subordinated its lien and security interest
in and to the Subordinated Collateral to the lien and security interest therein
granted by Borrower to the Estate. CII further acknowledges that pursuant to a
certain Subordination and Intercreditor Agreement dated the date hereof by and
among the Estate, Lender and Borrower, the Estate has subordinated its lien and
security interest in and to the Collateral to the lien and security interest
therein granted by Borrower to Lender.
8. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
9. Telefacsimile transmissions of any executed original document and/or
retransmission of any executed telefacsimile transmission shall be deemed to be
the same as the delivery of an executed original. At the request of any party
hereto, the
-5-
<PAGE> 6
other parties shall confirm telefacsimile transmissions by executing duplicate
original documents and delivering the same to the requesting party or parties.
[Rest of This Page Intentionally Left Blank.]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SIGNED, SEALED AND DELIVER
IN THE PRESENCE OF: GUNTHER PARTNERS, LLC
By: /s/ Thomas J. Tisch
- -------------------------- --------------------------
Name: Thomas J. Tisch
Manager
- --------------------------
Name:
CONNECTICUT INNOVATIONS, INC.
/s/ Peter Longo By: Victor R. Budnick
- -------------------------- --------------------------
Name: Peter Longo Name: Victor Budnick
Title: President &
/s/ K. D. Coombs Executive Director
- --------------------------
Name: K. D. Coombs
The undersigned acknowledges and accepts the foregoing as of the 2nd
day of October, 1998.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF: GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
- -------------------------- --------------------------
Name: Name: James H. Whitney
Title: President & CEO
- --------------------------
Name:
-7-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 8
STATE OF NEW YORK )
) ss: October 1, 1998
COUNTY OF NEW YORK )
Personally appeared Thomas J. Tisch, signer and sealer of the foregoing
instrument, personally known to me (or satisfactorily proven) who acknowledged
that he is the Manager of GUNTHER PARTNERS, LLC, is duly authorized to execute
said instrument and further acknowledged the same to be his free act and deed as
Manager of GUNTHER PARTNERS LLC, and the free act and deed of said limited
liability company, before me, the undersigned officer.
/s/ Nancy L. Berry
------------------
Name: Nancy L. Berry
Notary Public
My Commission Expires Aug. 2, 1999
STATE OF CONNECTICUT )
) ss: Rocky Hill October 2, 1998
COUNTY OF HARTFORD )
Personally appeared Victor R. Budnick, signer and sealer of the
foregoing instrument, personally known to me (or satisfactorily proven) who
acknowledged that he/she as President & Executive Director of CONNECTICUT
INNOVATIONS, INC., is duly authorized to execute said instrument and further
acknowledged the same to be his/her free act and deed as President & Executive
Director of CONNECTICUT INNOVATIONS, INC., and the free act and deed of said
CONNECTICUT INNOVATIONS, INC., before me, the undersigned officer.
/s/ Heidi J. Bieber
-------------------
Name: Heidi J. Bieber
Commissioner of the Superior Court
Notary Public
My Commission Expires Dec. 31, 2002
-8-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 9
STATE OF CONNECTICUT )
) ss: October __,1998
COUNTY OF )
Personally appeared _________________________, signer and sealer of the
foregoing instrument personally known to me (or satisfactorily proven) who
acknowledged that he/she as ___________________ of GUNTHER INTERNATIONAL, LTD.,
is duly authorized to execute said instrument and further acknowledged the same
to be his/her free act and deed as ____________________ of GUNTHER
INTERNATIONAL, LTD., and the free act and deed of said GUNTHER INTERNATIONAL,
LTD., before me, the undersigned officer.
----------------------------------
Name:
Commissioner of the Superior Court
Notary Public
My Commission Expires
-9-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 1
SUBORDINATION AGREEMENT
Agreement dated as of October 2, 1998, by and among JUNE H. GENEEN,
PHIL E. GILBERT, JR., THOMAS W. KEESEE and the UNITED STATES TRUST COMPANY OF
NEW YORK, as Co-Executors of the Estate of Harold S. Geneen, Late of New York,
New York (collectively, the "Estate") and CONNECTICUT INNOVATIONS, INC. ("CII").
WHEREAS, the Estate has agreed to make a loan (the "Loan") to Gunther
International, Ltd. ("Borrower") in the original principal amount of One Million
Seven Hundred One Thousand One Hundred Sixty-eight and 75/100 Dollars
($1,701,168.75), which Loan shall be evidenced by a $1,701,168.75 Promissory
Note dated the date hereof made by Borrower to the order of the Estate (the
"Estate Note"); and
WHEREAS, as security for the payment and performance of the Estate
Note, Borrower has granted to the Estate a valid and perfected security interest
in and lien on all of Borrower's tangible and intangible personal property,
whether now owned or hereafter acquired, and all products and proceeds thereof,
all as more fully set forth in a Security Agreement dated the date hereof (the
"Estate Security Agreement") between the Borrower and the Estate (the
"Collateral"); and
<PAGE> 2
WHEREAS, Borrower is indebted (the "CII Indebtedness") pursuant to a
certain Amendment and Restatement of Development Agreement made as of the 31st
day of December, 1995 between Borrower and CII ("CII Agreement"); and
WHEREAS, payment of the CII Indebtedness is secured by a valid and
perfected security interest in and lien on all of the Collateral, as
hereinbefore defined; and
WHEREAS, the Estate has conditioned its extension of the Loan to
Borrower upon CII subordinating its lien in the Collateral (other than in
Collateral consisting of Patents and Trademarks of Borrower; said Collateral
consisting of Debtor's tangible and intangible personal property other than
Patents and Trademarks referred to herein as "Subordinated Collateral") to the
Estate; and
WHEREAS, CII has agreed to subordinate its lien in the Subordinated
Collateral to the Estate;
NOW, THEREFORE, the Estate, CII and, by its consent and acknowledgment
hereto, Borrower, hereby agree as follows:
1. CII hereby subordinates its security interest and lien in the
Subordinated Collateral to the security interest and lien of the Estate therein.
Notwithstanding the date, time, manner or order of attachment or perfection of
the security interest and liens of the Estate or CII in any of the Subordinated
-2-
<PAGE> 3
Collateral, and notwithstanding any provisions of the Uniform Commercial Code,
any applicable law, any decision of any court or tribunal of competent
jurisdiction or whether the Estate or CII holds possession of all or any part of
the Subordinated Collateral, the lien and security interest of the Estate in and
to the Subordinated Collateral and all proceeds thereof shall be prior in right
to the lien and security interest of CII in and to the Subordinated Collateral.
2. After the occurrence of a default in Gunther's obligations to the
Estate or CII which continues beyond any applicable grace period, the proceeds
from the disposition, sale or liquidation of any Subordinated Collateral shall
be applied, regardless of when the respective indebtedness of the Estate or CII
may be due, first to pay the Loan (including accrued interest, expenses and
other costs) and then, to pay all outstanding CII Indebtedness. At all times,
the Estate may exercise all of its rights and remedies under the Note and,
without limiting the foregoing may take all actions that it deems desirable to
collect the Loan as the case may be, including without limitation, the
repossessing foreclosing, selling, releasing or disposing of any Subordinated
Collateral and the commencement of, or joining with other creditors in the
-3-
<PAGE> 4
commencement of, bankruptcy or insolvency actions against Borrower.
3. Each of the Estate and CII shall give each other written notice of
any event of default or of the occurrence of any event of default under and as
defined in either the Note or the CII Agreement.
4. Unless otherwise agreed by the parties hereto, this Agreement shall
terminate upon the earlier of (a) the written agreement of all parties hereto,
or (b) the full and final satisfaction of either the Loan or CII Indebtedness.
5. All notices and other communications pursuant to this Agreement
shall be in writing and shall be deemed given when received as follows:
A. If to the Estate:
Co-Executors of the Estate of Harold S. Geneen
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Steven S. Kirkpatrick
B. If to CII:
Connecticut Innovations, Inc.
999 West Street
Rocky Hill, CT 06067
Attention: Executive Director
6. This Agreement shall be governed by and construed in accordance with
the provisions of the laws of the State of
-4-
<PAGE> 5
Connecticut. This Agreement shall be effective as of October 2, 1998,
notwithstanding the actual date of execution.
7. CII hereby acknowledges that pursuant to a certain Subordination and
Intercreditor Agreement dated the date hereof by and among the Estate, Gunther
Partners, LLC ("Priority Lender") and Borrower, the Estate has subordinated its
lien and security interest in and to the Collateral to the lien and security
interest therein granted by Borrower to the Priority Lender. CII further
acknowledges that pursuant to a certain Subordination Agreement dated the date
hereof between CII, the Priority Lender and Borrower, CII has subordinated its
lien and security interest in and to the Subordinated Collateral to the lien and
security interest therein granted by Borrower to the Priority Lender.
8. This Agreement may be executed in any number of counterparts, each
of which shall be deemed and original, but all of which together shall
constitute one and the same instrument.
9. Telefacsimile transmissions of any executed original documents
and/or retransmission of any executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original. At the request of any
party hereto, the other parties shall confirm telefacsimile transmissions by
-5-
<PAGE> 6
executing duplicate original documents and delivering the same to the requesting
party or parties.
[Rest of This Page Intentionally Left Blank.]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
SIGNED, SEALED AND DELIVERED
In the Presence of: THE ESTATE OF
HAROLD S. GENEEN
[signature illegible] By: /s/ June H. Geneen
- ---------------------------------- --------------------------
Name: June H. Geneen,
Its Co-Executor
[signature illegible]
- ----------------------------------
Name:
/s/ David D. Howe By: /s/ Phil E. Gilbert, Jr.
- ---------------------------------- --------------------------
Name: David D. Howe Phil E. Gilbert, Jr.,
Its Co-Executor
/s/ Geert T.M.J. Raaijnakers
- ----------------------------------
Name: Geert T.M.J. Raaijnakers
[signature illegible] By: /s/ Thomas W. Keesee
- ---------------------------------- --------------------------
Name: Thomas W. Keesee,
Its Co-Executor
[signature illegible]
- ----------------------------------
Name:
-7-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 8
By: UNITED STATES TRUST
COMPANY OF NEW YORK,
Its Co-Executor
[signature illegible] By: /s/ Steven Scott Kirkpatrick
- ---------------------------------- ------------------------------
Name: Name: Steven Scott Kirkpatrick
Title: Vice President
[signature illegible]
- ----------------------------------
Name:
CONNECTICUT INNOVATIONS, INC.
/s/ Peter Longo By: /s/ Victor R. Budnick
- ---------------------------------- ----------------------------
Name: Peter Longo Name: Victor Budnick
Title: President & Executive
Director
/s/ K. D. Coombs
- ----------------------------------
Name: K. D. Coombs
The undersigned acknowledges and accepts the foregoing as of the 2nd
day of October, 1998.
SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF: GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
- ---------------------------------- ------------------------
Name: Name: James H. Whitney
Title: President & CEO
- ----------------------------------
Name:
-8-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 9
STATE OF NEW HAMPSHIRE )
) ss:
COUNTY OF GRAFTON )
On this 1 day of October, 1998, before me, the undersigned officer,
personally appeared JUNE H. GENEEN, personally known to me (or satisfactorily
proven) who acknowledged herself to be the person whose name subscribed to the
within instrument and acknowledged that she executed the same for the purposes
therein contained.
In witness whereof I hereunto set my hand.
/s/ Annette L. Hicks
--------------------
Name: Annette L. Hicks
Notary Public
My Commission Expires Apr. 2, 2002
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 1st day of October, 1998, before me, the undersigned officer,
personally appeared PHIL E. GILBERT, JR., personally known to me (or
satisfactorily proven) who acknowledged himself to be the person whose name
subscribed to the within instrument and acknowledged that he executed the same
for the purposes therein contained.
In witness whereof I hereunto set my hand.
/s/ Sarah Rosen
---------------
Name: Sarah Rosen
Notary Public
My Commission Expires Mar. 30, 1999
-9-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 10
STATE OF NEW YORK )
) ss:
COUNTY OF WESTCHESTER )
On this 1st day of October, 1998, before me, the undersigned officer,
personally appeared THOMAS W. KEESEE, personally known to me (or satisfactorily
proven) who acknowledged himself to be the person whose name subscribed to the
within instrument and acknowledged that he executed the same for the purposes
therein contained.
In witness whereof I hereunto set my hand.
/s/ Dawn M. Randazzo
--------------------
Name: Dawn M. Randazzo
Notary Public
My Commission Expires July 6, 2000
STATE OF NEW YORK )
) ss:
COUNTY OF )
On this 1 day of October, 1998, before me, the undersigned officer,
personally appeared Steven Scott Kirkpatrick, Vice President of UNITED STATES
TRUST COMPANY OF NEW YORK, personally known to me (or satisfactorily proven) who
acknowledged himself to be the person whose name subscribed to the within
instrument and acknowledged that he executed the same for the purposes therein
contained.
In witness whereof I hereunto set my hand.
/s/ Clay R. Serenbetz
---------------------
Name: Clay R. Serenbetz
Notary Public
My Commission Expires Nov. 13, 1999
-10-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 11
STATE OF CONNECTICUT )
) ss: Rocky Hill
COUNTY OF Hartford )
Personally appeared Victor R. Budnick, signer and sealer of the
foregoing instrument, personally known to me (or satisfactorily proven) who
acknowledged that he/she as President & Executive Director of CONNECTICUT
INNOVATIONS, INC., is duly authorized to execute said instrument and further
acknowledged the same to be his/her free act and deed as President & Executive
Director of CONNECTICUT INNOVATIONS, INC., and the free act and deed of said
CONNECTICUT INNOVATIONS, INC., before me, the undersigned officer.
/s/ Heidi J. Bieber
-------------------
Name: Heidi J. Bieber
Commissioner of the Superior Court
Notary Public
My Commission Expires Dec. 31, 2002
STATE OF CONNECTICUT )
) ss. October __, 1998
COUNTY OF )
Personally appeared _________________________, signer and sealer of the
foregoing instrument personally known to me (or satisfactorily proven) who
acknowledged that he/she as ___________________ of GUNTHER INTERNATIONAL, LTD.,
is duly authorized to execute said instrument and further acknowledged the same
to be his/her free act and deed as ___________________ of GUNTHER INTERNATIONAL,
LTD., and the free act and deed of said GUNTHER INTERNATIONAL, LTD., before me,
the undersigned officer
----------------------------------
Name:
Commissioner of the Superior Court
Notary Public
My Commission Expires
-11-
SIGNATURE PAGE SUBORDINATION AGREEMENT
<PAGE> 1
SUBORDINATION AND INTERCREDITOR AGREEMENT
Subordination and Intercreditor Agreement entered into as of October 2,
1998 by and among GUNTHER PARTNERS, LLC ("New Lender"), JUNE H. GENEEN, PHIL
E. GILBERT, JR., THOMAS W. KEESEE and the UNITED STATES TRUST COMPANY OF NEW
YORK, as Co-Executors of the Estate of Harold S. Geneen, Late of New York, New
York (collectively, the "Estate") and GUNTHER INTERNATIONAL, LTD. ("Gunther").
WHEREAS, pursuant to a certain Loan and Security Agreement dated the
date hereof between Gunther and New Lender (the "Loan Agreement"), New Lender
has made a loan to Gunther in the amount of Four Million Dollars ($4,000,000)
which loan is evidenced by the Loan Agreement and a certain $4,000,000 Term Note
dated the date hereof made by Gunther to the order of the New Lender (the
"Priority Note"); and
WHEREAS, payment and performance of Gunther's obligations under the
Loan Agreement and the Priority Note are secured by a valid and perfected
security interest in, and lien on, all of Gunther's tangible and intangible
personal property, whether now owned or hereafter acquired, and all products and
proceeds thereof, all as more fully set forth in the Loan Agreement (the
"Collateral"); and
WHEREAS, Gunther is indebted to the Estate under a certain
$1,701,168.75 Promissory Note dated the date hereof made by Gunther to the order
of the Estate (the "Estate Note"); and
WHEREAS, payment and performance of Gunther's obligations to the Estate
under the Estate Note are secured by a valid perfected security interest in, and
lien on, all of the Collateral granted to the Estate by Gunther pursuant to a
certain Security Agreement dated the date hereof (the" Estate Security
Agreement"); and
WHEREAS, the Collateral is also encumbered by a valid perfected
security interest and lien granted by Gunther to Connecticut Innovations, Inc.
("CII") pursuant to an Amendment and Restatement of Development Agreement dated
as of December 31, 1995 between Gunther and CII; and
<PAGE> 2
WHEREAS, pursuant to a certain Subordination Agreement dated the date
hereof between CII, the New Lender and Gunther, CII has agreed to subordinate
its lien and security interest in all of the Collateral other than patents and
trademarks now owned or hereafter acquired by Gunther (such patents and
trademarks herein the "Patents and Trademarks") to the lien and security
interest therein held by the New Lender; and
WHEREAS, pursuant to a certain Subordination Agreement dated the date
hereof between CII, the Estate and Gunther, CII has agreed to subordinate its
lien and security interest in all of the Collateral other than Patents and
Trademarks to the lien and security interest therein held by the Estate; and
WHEREAS, it is in the best interests of the Estate if the New Lender
provide financing to Gunther pursuant to the Loan Agreement and the Priority
Note; and
WHEREAS, to induce the New Lender to provide financing to Gunther
pursuant to the Loan Agreement and the Priority Note, the Estate has agreed to
subordinate (i) all obligations of Gunther to the Estate under the Estate Note
and the Estate Security Agreement to all of Gunther's obligations to the New
Lender under the Loan Agreement and the Priority Note as the same may, from time
to time, be modified, amended or extended, and (ii) the Estate's lien and
security interest in and to the Collateral to the New Lender's lien and security
interest in and to the Collateral.
NOW THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. The Estate hereby subordinates its security interest and lien in the
Collateral to the security interest and lien of the New Lender therein.
Notwithstanding the date, time, manner or order of attachment or perfection of
the security interest and liens of the Estate or the New Lender in any of the
Collateral, and notwithstanding any provisions of the Uniform Commercial Code,
any applicable law, any decision of any court or tribunal of competent
jurisdiction or whether the Estate or the New Lender holds possession of all or
any part of the Collateral, the lien and security interest of the New Lender in
and to the Collateral and all proceeds thereof shall be prior in right to the
lien and security interest of the Estate in and to the Collateral.
-2-
<PAGE> 3
2. The Estate does hereby subordinate the payment of all debts,
obligations and liabilities of Gunther to the Estate under the Estate Note and
the Estate Security Agreement, (all hereinafter referred to as "Secondary
Obligations") to the payment of any and all debts, obligations and liabilities
of Gunther to the New Lender under the Loan Agreement and the Priority Note (all
hereinafter referred to as the "Primary Obligations").
3. The Estate agrees to execute any assignment, UCC-1 financing
statement, UCC-3 subordination agreement, or any other instrument or document
requested by the New Lender and to take such further action as the New Lender
may at any time, and from time to time, reasonably request in order to
effectuate this Agreement.
4. Upon any distribution of any assets of Gunther whether by reason of
sale, reorganization, liquidation, dissolution, arrangement, bankruptcy,
receivership, assignment for the benefit of creditors, foreclosure or otherwise,
the New Lender shall be entitled to receive payment in full of said Primary
Obligations prior to the payment of all or any part of said Secondary
Obligations. To enable the New Lender to assert and enforce their rights
hereunder in any such proceeding or upon the happening of any such event, the
New Lender or any person whom the New Lender may designate is hereby irrevocably
appointed attorney in fact for the Estate with full power to act in the place
and stead of the Estate, including the right to make, present, file and vote
such proofs of claim against Gunther on account of all or any part of said
Secondary Obligations as the New Lender may deem advisable and to receive and
collect any and all dividends or other payments made thereon and to apply the
same on account of said Primary Obligations. By execution and delivery of this
Agreement, the Estate grants to the New Lender full power and authority to take
any and all acts as may be necessary to enforce any and all such Secondary
Obligations, to exercise any rights as assignee of any security for payment of
said Secondary Obligations, to effectuate the aforesaid power of attorney, and
to effect collection of any and all dividends or other payments which may be
made or required at any time on account thereof; and no further documents or
instruments of any kind whatsoever shall be required to effectuate the New
Lender's
-3-
<PAGE> 4
rights under this Agreement or to implement the provisions of this Agreement.
5. The Estate will not ask, demand, sue for, take or receive payment of
all or any part of said Secondary Obligations or exercise any rights which the
Estate may have as a secured party by agreement or by law, unless and until all
and every part of said Primary Obligations have been fully paid and discharged.
The Estate will not commence or join with any other creditors of Gunther in
commencing any bankruptcy, receivership, reorganization, insolvency or similar
proceeding against Gunther. The Estate will not take or permit or cause any
person or entity to take any action prejudicial to or inconsistent with the New
Lender's priority position over Gunther that is created by this Agreement.
6. The Estate has, to the extent deemed necessary by the Estate,
reviewed the existing agreements among the New Lender and Gunther and has had
its counsel fully explain to it such agreements and this Agreement, and
understands that there is no commitment or obligation on the New Lender's part
to make any loans or advances or to extend credit to Gunther except as may be
contained in current and presently effective written agreements between the New
Lender and Gunther; provided, however, that the Estate further understands that
such agreements may be modified, altered or amended, without notice to or
consent of the Estate.
7. The Estate will not sell, assign, transfer, pledge or hypothecate
all or any part of the Secondary Obligations, except to the New Lender.
8. The New Lender may at any time, in its discretion, renew or extend
the time of payment of all or any of said Primary Obligations or waive or
release any collateral which may be held therefor, and the New Lender may enter
into such agreements with Gunther as the New Lender may deem desirable without
notice to or further assent from the Estate and without in any way affecting the
New Lender's rights hereunder.
9. This Agreement is and shall be deemed to be a continuing
subordination and shall be and remain in full force and effect until payment in
full of the Primary Obligations.
-4-
<PAGE> 5
10. In the event any payments are made hereafter by Gunther to the
Estate or any amounts are received by the Estate contrary to the provisions of
this Agreement, the Estate shall hold all such amounts IN TRUST for the New
Lender and will promptly remit said payments or amounts to the New Lender. Upon
failure to so remit, the New Lender shall have the right to proceed directly
against the Estate for any such amount.
11. The Estate shall pay to the New Lender on demand, all expenses of
every kind, including reasonable attorneys' fees that the New Lender may incur
in enforcing any of its rights under this Agreement.
12. This Agreement is effective notwithstanding any defect in the
validity or enforceability of any instrument or document evidencing the Primary
Obligations.
13. This Agreement shall be governed by and construed under the laws of
the State of Connecticut.
14. The Estate shall execute and deliver to the New Lender such further
instruments and shall take such further action as the New Lender may at any time
and from time to time reasonably request in order to carry out the provisions
and intent of this Agreement.
15. The provisions of this Agreement are independent of and severable
from each other. If any provision hereof shall for any reason be held invalid or
unenforceable, such invalidity or unenforceability shall not affect the validity
or enforceability of any other provision hereof, and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
16. Neither the failure nor any delay on the part of the New Lender to
exercise any right, remedy, power or privilege hereunder shall operate as a
waiver thereof or give rise to an estoppel, nor be construed as an agreement to
modify the terms of this Agreement, nor shall any single or partial exercise of
any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of such right, remedy, power or privilege with respect to
any other occurrence. No waiver by the New Lender hereunder shall be effective
unless it is in writing
-5-
<PAGE> 6
and signed by the New Lender, and then only to the extent specifically stated in
such writing.
17. In order to induce the New Lender to provide financing to Gunther
pursuant to the Loan Agreement and the Priority Note, Gunther hereby
acknowledges this Agreement and agrees to be bound by all the terms, provisions
and conditions hereof. Gunther further agrees, without the New Lender's written
consent thereto first procured, not to repay all or any part of the Secondary
Obligations while any portion of the Primary Obligations are outstanding.
18. This Agreement shall be binding upon the Estate and their
respective heirs, executors, administrators, successors, and assigns, and all of
the New Lender's rights hereunder shall inure to the benefit of the New Lender
and its successors and assigns.
19. All notices or other communications pursuant to this Agreement
shall be in writing and shall be deemed given when received at the addresses
provided below:
If to the Estate, to:
Co-Executors of the Estate of Harold S. Geneen
c/o United States Trust Company of New York
114 West 47th Street
New York, New York 10036
Attention: Steven M. Kirkpatrick
If to the New Lender, to:
Gunther Partners, LLC
c/o Thomas M. Steinberg, President
Tisch Family Interests
667 Madison Avenue
New York, New York 10021
If to Gunther, to:
Gunther International, Ltd.
One Winnenden Road
Norwich, Connecticut 06360
Attention: President
-6-
<PAGE> 7
Each party shall have the right to change its address by sending a
written notice thereof to the other parties by registered or certified mail
addressed as provided herein.
20. The Estate, the New Lender and Gunther hereby agree that any state
court or local court of the State of Connecticut and the United States District
Court for the District of Connecticut shall have exclusive jurisdiction to hear
and determine any claims or disputes between the Estate, the New Lender and
Gunther pertaining directly or indirectly to this Agreement, or to any matter
arising herefrom. The Estate, the New Lender and Gunther expressly submit and
consent in advance to such jurisdiction in any action or proceeding commenced in
such courts, hereby waiving personal service of the summons and complaint, or
other process or papers issued therein, and agreeing that service of such
summons and complaint, or other process or papers may be made by registered or
certified mail addressed to the Estate, the New Lender and Gunther, as the case
may be, at the address of the New Lender, the Estate or Gunther, as the case may
be, set forth above. The exclusive choice of forum set forth in this paragraph
shall not be deemed to preclude the enforcement of any judgment obtained in such
forum, in any appropriate jurisdiction.
21. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
22. Telefacsimile transmissions of any executed original document
and/or retransmission of any executed telefacsimile transmission shall be deemed
to be the same as the delivery of an executed original. At the request of any
party hereto, the other parties shall confirm telefacsimile transmissions by
executing duplicate original documents and delivering the same to the requesting
party or parties.
[Rest of This Page Intentionally Left Blank.]
-7-
<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed the day and year first above written.
GUNTHER PARTNERS, LLC
By: /s/ Thomas J. Tisch
- ----------------------------------- ------------------------------------
Name: Thomas J. Tisch
Manager
- -----------------------------------
Name:
THE ESTATE OF
HAROLD S. GENEEN
[signature illegible] By: /s/ June H. Geneen
- ----------------------------------- ------------------------------------
Name: June H. Geneen,
Its Co-Executor
[signature illegible]
- ----------------------------------- ------------------------------------
Name:
/s/ David D. Howe By: /s/ Phil E. Gilbert, Jr.
- ----------------------------------- ------------------------------------
Name: David D. Howe Phil E. Gilbert, Jr.,
Its Co-Executor
/s/ Geert T.M.J. Raaijnakers
- -----------------------------------
Name: Geert T.M.J. Raaijnakers
[signature illegible] By: /s/ Thomas W. Keesee
- ----------------------------------- ------------------------------------
Name: Thomas W. Keesee,
Its Co-Executor
[signature illegible]
- -----------------------------------
Name:
-8-
SIGNATURE PAGE SUBORDINATION AND INTERCREDITOR AGREEMENT
<PAGE> 9
By: UNITED STATES TRUST
COMPANY OF NEW YORK,
Its Co-Executor
[signature illegible] By: /s/ Steven Scott Kirkpatrick
- ----------------------------------- ------------------------------------
Name: Name: Steven Scott Kirkpatrick
Title: Vice President
[signature illegible]
- -----------------------------------
Name:
GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
- ----------------------------------- ------------------------------------
Name: Name: James H. Whitney
Title: President & CEO
- -----------------------------------
Name:
STATE OF NEW YORK )
) ss. October 1, 1998
COUNTY OF NEW YORK )
Personally appeared Thomas J, Tisch, signer and sealer of the foregoing
instrument personally known to me (or satisfactorily proven) who acknowledged
that he is the Manager of GUNTHER PARTNERS LLC, is duly authorized to execute
said instrument and further acknowledged the same to be his free act and deed as
Manager of GUNTHER PARTNERS, LLC, and the free act and deed of said limited
liability company, before me, the undersigned officer
/s/ Nancy L. Berry
-----------------------------------------
Name: Nancy L. Berry
Notary Public
My Commission Expires Aug. 2, 1999
-9-
SIGNATURE PAGE SUBORDINATION AND INTERCREDITOR AGREEMENT
<PAGE> 10
STATE OF NEW HAMPSHIRE )
) ss:
COUNTY OF GRAFTON )
On this 1 day of October, 1998, before me, the undersigned officer,
personally appeared JUNE H. GENEEN, personally known to me (or satisfactorily
proven) who acknowledged herself to be the person whose name subscribed to the
within instrument and acknowledged that she executed the same for the purposes
therein contained.
In witness whereof I hereunto set my hand.
/s/ Annette L. Hicks
-----------------------------------------
Name: Annette L. Hicks
Notary Public
My Commission Expires Apr. 2, 2002
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 1st day of October, 1998, before me, the undersigned officer,
personally appeared PHIL E. GILBERT, JR., personally known to me (or
satisfactorily proven) who acknowledged himself to be the person whose name
subscribed to the within instrument and acknowledged that he executed the same
for the purposes therein contained.
In witness whereof I hereunto set my hand.
/s/ Sarah Rosen
-----------------------------------------
Name: Sarah Rosen
Notary Public
My Commission Expires Mar. 30, 1999
-10-
SIGNATURE PAGE SUBORDINATION AND INTERCREDITOR AGREEMENT
<PAGE> 11
STATE OF NEW YORK )
) ss:
COUNTY OF WESTCHESTER )
On this 1st day of October, 1998, before me, the undersigned officer,
personally appeared THOMAS W. KEESEE, personally known to me (or satisfactorily
proven) who acknowledged himself to be the person whose name subscribed to the
within instrument and acknowledged that he executed the same for the purposes
therein contained.
In witness whereof I hereunto set my hand.
/s/ Dawn M. Randazzo
-----------------------------------------
Name: Dawn M. Randazzo
Notary Public
My Commission Expires July 6, 2000
STATE OF NEW YORK )
) ss:
COUNTY OF )
On this 1 day of October, 1998, before me, the undersigned officer,
personally appeared Steven Scott Kirkpatrick, Vice President of UNITED STATES
TRUST COMPANY OF NEW YORK, personally known to me (or satisfactorily proven) who
acknowledged himself to be the person whose name subscribed to the within
instrument and acknowledged that he executed the same for the purposes therein
contained.
In witness whereof I hereunto set my hand.
/s/ Clay R. Serenbetz
-----------------------------------------
Name: Clay R. Serenbetz
Notary Public
My Commission Expires Nov. 13, 1999
-11-
SIGNATURE PAGE SUBORDINATION AND INTERCREDITOR AGREEMENT
<PAGE> 12
STATE OF CONNECTICUT )
) ss. October __, 1998
COUNTY OF )
Personally appeared _________________________, signer and sealer of the
foregoing instrument personally known to me (or satisfactorily proven) who
acknowledged that he/she as ___________________ of GUNTHER INTERNATIONAL, LTD.,
is duly authorized to execute said instrument and further acknowledged the same
to be his/her free act and deed as ___________________ of GUNTHER INTERNATIONAL,
LTD., and the free act and deed of said GUNTHER INTERNATIONAL, LTD., before me,
the undersigned officer
-----------------------------------------
Name:
Commissioner of the Superior Court
Notary Public
My Commission Expires
-12-
SIGNATURE PAGE SUBORDINATION AND INTERCREDITOR AGREEMENT
<PAGE> 1
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "AGREEMENT") is dated as of
October 2, 1998 by and between Gunther International, Ltd., a Delaware
corporation (the "CORPORATION"), and Gunther Partners, LLC, a limited liability
company organized and existing under the laws of the State of Delaware (the
"WARRANT HOLDER").
RECITALS:
A. The Warrant Holder is a party to that certain Agreement
dated as of the date hereof (the "OMNIBUS AGREEMENT"), by and among (i) the
Company; (ii) BankBoston N.A., successor by merger to Bank of Boston
Connecticut ("BOB"); (iii) June H. Geneen, Phil E. Gilbert, Jr., Thomas W.
Keesee and the United States Trust Company of New York, as Co-Executors of the
Estate of Harold S. Geneen, Late of New York, New York (the "Estate"); and (iv)
the Warrant Holder.
B. The Omnibus Agreement generally sets forth the terms and
conditions under which the Warrant Holder is willing to provide $4,000,000 of
emergency funding to the Company.
C. In partial consideration of the entering into Omnibus
Agreement by the Warrant Holder, the Company has agreed to issue and deliver to
the Warrant Holder stock purchase warrants entitling the Warrant Holder to
purchase, in the aggregate, up to that number of shares of the Company's common
stock, par value $.01 per share ("COMMON STOCK"), that would result in the
Warrant Holder owning thirty-five percent (35%) of the pro forma, fully diluted
number of shares of the Company's Common Stock at the time of exercise.
D. This is the warrant agreement contemplated by the Omnibus
Agreement.
E. Subject to the terms and provisions hereof, each Common
Stock purchase warrant (individually, a "WARRANT", and collectively, the
"WARRANTS") issued under this Agreement shall be evidenced by a Warrant
Certificate in the form of Exhibit A entitling the Warrant Holder to purchase a
number of shares of Common Stock determined as provided therein at the per
share Exercise Price (as defined herein)(subject to adjustment hereunder).
NOW, THEREFORE, in consideration of the mutual agreements
contained herein and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties intending to be
legally bound hereby agree as follows:
<PAGE> 2
ARTICLE I
FORM OF WARRANT
The Warrants shall be evidenced by a certificate (the "WARRANT
CERTIFICATE"). The text of the Warrant Certificate (and the related forms of
exercise and assignment) shall be substantially in the form attached hereto as
Exhibit A and may have such identification, designation and information thereon
as the Company may deem appropriate and as is not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation adopted pursuant thereto.
ARTICLE II
EXERCISE PRICE, RIGHTS, TERM, AND METHOD OF EXERCISE
Section 2.01. Exercise Price. Unless adjusted as provided in Article III
hereof, the exercise price ("EXERCISE PRICE") for each share of Common Stock
purchased upon exercise of a Warrant issued hereunder shall be $1.50.
Section 2.02. Warrant Rights And Term. Each Warrant shall entitle the
Warrant Holder, upon exercise thereof and subject to the provisions thereof and
of this Agreement, including the provisions relating to adjustments upon the
occurrence of certain events as set forth in Article III hereof, to purchase
from the Company one fully paid and nonassessable share of Common Stock at the
then Exercise Price. The Warrants issued hereunder and evidenced by the Warrant
Certificate shall not be exercisable prior to January 1, 1999 and shall expire
and no longer be exercisable at 5:00 p.m. on October 1, 2003 (the "EXPIRATION
DATE").
Section 2.03. Expiration. Each Warrant not exercised by 5:00 p.m. on the
Expiration Date shall become void, and all rights thereunder and all rights in
respect thereof under this Agreement shall thereupon cease.
Section 2.04. Method Of Exercise.
(a) The Warrant Holder may exercise its rights with respect to
all or any whole number of Warrants evidenced by the Warrant Certificate.
Exercise shall be effected by surrender of the Warrant Certificate, with the
exercise form thereon duly executed, to the Company at its offices as designated
in Section 5.04 hereof, together with the Exercise Price for each Warrant that
is exercised. Payment of the Exercise Price shall be made by (a) certified check
payable in lawful money of the United States of America to the order of the
Company, (b) wire transfer of immediately available funds to an account
designated by the Company, or (c) surrender and cancellation of outstanding
indebtedness due and owing from the Company to the Warrant Holder at face value
(including both principal and any interest accrued and payable thereon) in an
amount equal to the aggregate Exercise Price payable with respect to the portion
of the Warrant then being exercised.
-2-
<PAGE> 3
(b) Upon receipt of the Warrant Certificate with the exercise form duly
executed and accompanied by full and proper payment of the Exercise Price for
the shares of Common Stock purchased thereby, the Company shall deliver to, or
in accordance with the instructions of, the Warrant Holder certificates for
the total number of shares of Common Stock for which the Warrants evidenced by
such Warrant Certificate are being exercised.
(c) In the event that the Warrant Holder shall exercise rights with
respect to less than all of the Warrants evidenced by the Warrant Certificate
surrendered upon the exercise of Warrants, a new Warrant Certificate for the
balance of such Warrants shall be delivered to, or in accordance with the
instructions of, the Warrant Holder. The amount of the balance shall be
expressed as a percentage equal to the aggregate percentage specified in the
surrendered Warrant Certificate less the percentage represented by the Warrants
that have been exercised.
Section 2.05. Cancellation of Warrants. In the event the Company shall
purchase or otherwise acquire the Warrants, the same shall thereupon be
delivered to the Company and be cancelled by it and retired. The Company shall
cancel any Warrant surrendered for exchange, substitution, transfer or
exercise in whole or in part.
Section 2.06. Transferability. Prior to the Expiration Date and subject to
compliance with applicable laws, the Warrants and all rights thereunder and
hereunder are transferable by the holder of the Warrants, in whole or in part,
at the office or agency of the Company referred to herein. Any such transfer
shall be made upon surrender of the Warrant Certificate together with a duly
completed Form of Assignment in the form attached hereto as Exhibit B properly
endorsed.
ARTICLE III
ADJUSTMENTS TO WARRANTS UPON CERTAIN EVENTS
Section 3.01. Definition: Mechanical Adjustments.
(a) Except as otherwise provided herein, for purposes of the applicable
percentages set forth in the Warrants issued pursuant to this Agreement, the
pro forma, fully diluted number of shares of the Company's Common Stock shall
be deemed to mean and include (i) all shares of Common Stock issued and
outstanding on the date of exercise; and (ii) all shares of Common Stock that
are issuable upon the exercise of any then exercisable rights, options or
warrants to purchase shares of Common Stock (including any unexercised Warrants
issued pursuant to this Warrant Agreement); and (iii) all shares of Common
Stock that are issuable upon the conversion of securities then convertible into
shares of Common Stock; provided, however, that the pro forma, fully diluted
number of shares of the Company's Common Stock shall not be deemed to include
any shares of Common Stock (X) issued after the date hereof in a bona fide
public offering registered under the Securities Act of 1933, as amended, or (y)
any shares of Common Stock issuable upon the exercise of any stock purchase
warrants issued in connection
-3-
<PAGE> 4
with the Company's initial public offering consummated on December 20, 1993
(including any such warrants issued to the underwriters of such offering or
upon the exercise of the over-allotment option granted to such underwriters)
unless the expiration date of such warrants is extended beyond the expiration
date in effect as of the date hereof (in which case, such warrants shall be
deemed to be included in the calculation of the pro form, fully diluted number
of shares of Common Stock).
(b) The Exercise Price for each share of Common Stock purchasable
upon the exercise of each Warrant (such shares being referred to in this Article
III as the "WARRANT SHARES") shall be subject to adjustment in the event that
the Company shall (i) pay a dividend in shares of Common Stock or make a
distribution in shares of Common Stock, (ii) subdivide or reclassify its
outstanding shares of Common Stock into a greater number of shares or (iii)
combine or reclassify its outstanding shares of Common Stock into a smaller
number of shares (each, an "ADJUSTMENT EVENT"). As a result of any such
Adjustment Event, the Exercise Price per Warrant Share in effect immediately
prior to the Share Adjustment Event shall be adjusted by multiplying the
Exercise Price by a fraction, the numerator or which shall be one (1) and the
denominator of which shall be the aggregate number of shares (or fraction
thereof) into which a single share of the Common Stock would be converted as a
result of the Adjustment Event.
Section 3.02. Notice of Adjustment. Whenever the Exercise Price of
Warrant Shares is adjusted, as herein provided, the Company shall promptly
provide to the Warrant Holder, in accordance with Section 5.04, a notice of
such adjustment or adjustments which sets forth the Exercise Price of the
Warrant Shares after such adjustment, a brief statement of the facts requiring
such adjustment and the computation by which such adjustment was made.
Section 3.03. Effect of Sale, Merger or Consolidation.
(a) In the event of (i) any reclassification (other than a change in
par value) of the Common Stock or the exchange or cancellation of outstanding
shares of Common Stock, (ii) any conversion of the Common Stock into securities
or property (including cash) of another corporation, (iii) the consolidation of
the Company with, or the merger of the Company with or into, any other
corporation or (iv) in the event of the sale of all or substantially all of
the properties and assets of the Company to any person in exchange for
securities or other property (including cash) (each such event hereinafter
being referred to as a "CAPITAL EVENT"), each Warrant shall thereafter be
exercisable upon the terms and conditions specified in this Agreement for the
number of shares of stock or other securities or property (including cash) of
the Company or of the person into which shares of Common Stock are converted or
resulting from such consolidation or surviving such merger or to which such
sale shall be made, as the case may be, to which the shares of Common Stock
issuable (immediately prior to such Capital Event) upon exercise of such
Warrant would have been entitled upon such Capital Event. In any such case, if
necessary, the provisions set forth in this Article III with respect to the
rights and interests thereafter of the Warrant Holder shall be appropriately
adjusted so as to be reasonably applicable
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<PAGE> 5
to any shares of stock or other securities or property thereafter deliverable on
the exercise of the Warrants.
(b) The subdivision or combination of shares of Common Stock at any time
outstanding into a greater or lesser number of shares of Common Stock shall not
be deemed to be a reclassification of the Common Stock of the Company for the
purpose of this Section 3.03. The Company shall not effect any transaction
resulting in a Capital Event, unless prior to or simultaneously with the
consummation thereof, any successor person or person purchasing such assets
shall assume, by written instrument executed and delivered to the Warrant
Holder, the obligation to deliver to the holder of each Warrant such shares of
stock, securities or property (including cash) as the Warrant Holder may be
entitled to receive upon exercise of the Warrants in accordance with the
foregoing provisions, and the other obligations of the Company under this
Warrant Agreement.
Section 3.04 Notice of Certain Events. In case at any time prior to the
Expiration Date:
(a) the Company shall authorize the granting to all holders of Common
Stock of rights to subscribe for or purchase any shares of stock of any class or
of any other rights; or
(b) there shall be any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding Common Stock); or
(c) there shall be any capital reorganization by the Company; or
(d) there shall be a consolidation or merger involving the Company or sale
of all or substantially all of the Company's property and assets (except a
merger or other reorganization in which the Company shall be the surviving
corporation or a consolidation, merger or sale with a wholly-owned subsidiary);
or
(e) there shall be voluntary or involuntary dissolution, liquidation and
winding up by the Company or dividend or distribution to holders of Common Stock
(other than the Company's customary cash and stock dividends); or
(f) any other event described in Section 3.01.
then in any one or more of said cases, the Company shall cause to be delivered
to the Warrant Holder, at the earliest practicable time (and, in any event, not
less than fifteen (15) days before any record date or other date set for
definitive action), notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or subscription
rights or such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up shall take place, as the case may be. Such notice
shall also set forth such facts as shall indicate the effect of such action (to
the extent such effect may be known at the date of such notice) on the Exercise
Price and the kind and amount of the shares of stock and other securities and
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date, if
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<PAGE> 6
known, as of which the holders of record of the Common Stock shall participate
in said dividend, distribution or subscription rights or shall be entitled to
exchange their shares of the Common Stock for securities or other property
(including cash) deliverable upon such reorganization, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
Section 3.05. Effect of Adjustment on Warrant Certificates. The form of
Warrant Certificate need not be changed because of any change in the Exercise
Price, the number of Warrant Shares issuable upon the exercise of a Warrant or
the number of Warrants outstanding pursuant to this Article III, and Warrant
Certificates issued before or after such change may state the same Exercise
Price, the same number of Warrants and the same number of Warrant Shares
issuable upon exercise of Warrants as are stated in the Warrant Certificates
theretofore issued pursuant to this Agreement. The Company may, however, at any
time, in its sole discretion, make any change in the form of Warrant Certificate
that it may deem appropriate and that does not affect the substance thereof, and
any Warrant Certificates thereafter issued, whether in exchange or substitution
for an outstanding Warrant Certificate or otherwise, may be in the form as so
changed.
ARTICLE IV
RIGHTS OF WARRANT HOLDER; OTHER AGREEMENTS
Section 4.01. No Rights as Stockholders. The Warrant Holder, as such, shall
not be entitled to vote or to receive dividends or otherwise be deemed to be the
holder of shares of Common Stock for any purpose, nor shall anything contained
herein or in any Warrant Certificate be construed to confer upon any Warrant
Holder, as such, any of the rights of a stockholder of the Company or any right
to vote upon or give or withhold consent to any action of the Company (whether
upon any reorganization, issuance of securities, reclassification or conversion
of Common Stock, consolidation, merger, sale, lease, conveyance or otherwise),
receive notice of meetings or other action affecting stockholders (except for
notices expressly provided for in this Agreement) or receive dividends or
subscription rights, until such Warrant Certificates shall have been surrendered
for exercise accompanied by full and proper payment of the Exercise Price as
provided in this Agreement and shares of Common Stock thereunder shall have
become issuable and until such person shall have been deemed to have become a
holder of record of such shares. If, at the date of surrender of such Warrant
Certificate and payment of such Exercise Price, the transfer books for the
Common Stock shall be closed, certificates for the shares of Common Stock shall
be issuable on the date on which such books shall next be open (whether before,
on or after the Expiration Date) and, until such date, the Company shall be
under no duty to deliver any certificate for such shares of Common Stock. The
Warrant Holder shall, upon the exercise of Warrants, not be entitled to any
dividends if the record date with respect to payment of such dividends shall be
a date prior to the date such shares of Common Stock became issuable upon the
exercise of such Warrants.
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<PAGE> 7
Section 4.02. Replacement Warrants. If any Warrant Certificate is lost,
stolen, mutilated or destroyed, the Company may, upon receipt of evidence
satisfactory to the Company of such loss, theft, mutilation or destruction and
on such terms as to indemnity or otherwise as the Company may in its discretion
require (which shall, in the case of a mutilated Warrant Certificate, include
the surrender thereof), issue a new Warrant Certificate of like denomination and
tenor as the lost, stolen, mutilated or destroyed Certificate. Applicants for
such substitute Warrant Certificates shall also comply with such other
reasonable regulations and pay any such reasonable charges as the Company may
prescribe. In the event any Warrant Certificate is lost, stolen, mutilated or
destroyed, and the owner thereof desires to exercise the Warrants evidenced
thereby, the Company may, in lieu of issuing a substitute Warrant Certificate,
authorize the exercise thereof upon receipt of the above evidence and on such
terms of indemnity as it may require.
Section 4.03. Maintenance of Sufficient and Proper Shares of Common Stock.
(a) The Company shall at all times reserve and keep available a number
of authorized shares of Common Stock sufficient to permit the exercise in full
of all outstanding Warrants and shall use its best efforts to cause all shares
of Common Stock issued upon the exercise of the Warrants to be listed on any
exchanges on which the Common Stock is then listed.
(b) If at any time the taking of any action would cause an adjustment in
the Exercise Price so that the exercise of a Warrant while such Exercise Price
is in effect would cause a share of Common Stock to be issued at a price below
its then par value, the Company shall take such action as may, in the opinion of
its counsel, be necessary in order that it may validly and legally issue fully
paid and nonassessable shares of Common Stock upon the exercise of the Warrants
at such Exercise Price.
Section 4.04. Fractional Warrants. Anything herein to the contrary
notwithstanding, the Company shall not be required to issue fractions of
Warrants on any distribution of Warrants to Warrant Holders or to distribute
Warrant Certificates that evidence fractional Warrants.
Section 4.05. Legend. The Warrant Certificates shall bear the legend set
forth in Exhibit A hereto and the shares of Common Stock issuable upon the
exercise of the Warrants shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO
AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS.
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<PAGE> 8
A STATEMENT SUMMARIZING THE VOTING POWERS, DESIGNATIONS, PREFERENCES,
LIMITATIONS, RESTRICTIONS AND RELATIVE RIGHTS OF THE VARIOUS CLASSES
OF STOCK OR SERIES THEREOF MAY BE OBTAINED BY THE STOCKHOLDERS OF THE
COMPANY, WITHOUT CHARGE, FROM THE PRINCIPAL OFFICES OF THE COMPANY."
Section 4.06. No Dilution or Impairment. The Company will not, by amendment
of its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of the Warrants, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Warrant Holder
against dilution or other impairment. Without limiting the generality of the
foregoing, the Company (a) will not increase the par value of any shares of
Common Stock receivable on the exercise of the Warrants above the amount payable
therefor on such exercise and (b) will not effect a subdivision or split-up of
shares or similar transaction with respect to any class of Common Stock of the
Company without effecting an equivalent transaction with respect to all other
classes of Common Stock of the Company.
4.07. No Liens, etc. All securities that may be issued upon exercise of the
Warrants (and pursuant to this Agreement) will, upon issuance, be validly
issued, fully paid, nonassessable and free from all taxes, liens and charges
with respect to the issue thereof.
4.08. Registration Rights. The shares issued upon exercise of the Warrants
shall be Registrable Securities as defined in that certain Registration Rights
Agreement between the Company, the Warrant Holder and certain other signatories,
dated as of even date herewith (the "REGISTRATION RIGHTS AGREEMENT"). This
Warrant Agreement is subject to the terms and conditions of the Registration
Rights Agreement and the Warrant Holder is entitled to the rights set forth
therein.
4.09. Financial Statements and Information. The Company will deliver to the
Warrant Holder:
(a) As soon as practicable, but in any event not later than the date
on which such financial statements are delivered to any other preferred or
common stockholders of the Company in their capacities as such, the consolidated
balance sheet of the Company and its subsidiaries, each as at the end of such
year, and the related consolidated statement of income and consolidated
statement of cash flow and consolidating statement of income and consolidating
statement of cash flow for such year, each setting forth in comparative form the
figures for the previous fiscal year and all such consolidated and consolidating
statements to be reasonable detail, prepared in accordance with generally
accepted accounting principles, and, with respect to such consolidated financial
statements, certified by independent certified public accountants of nationally
recognized standing selected by the Company;
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<PAGE> 9
(b) as soon as practicable, but in any event not later than the date
on which such financial statements are delivered to any other preferred or
common stockholders of the Company in their capacities as such, copies of the
unaudited consolidated balance sheet of the Company and its subsidiaries and the
unaudited consolidating balance sheet of the Company and its subsidiaries, each
as at the end of such quarter, and the related consolidated statement of income
and consolidated statement of cash flow and consolidating statement of income
and consolidating statement of cash flow for the portion of the Company's fiscal
year then elapsed, all in reasonable detail and prepared in accordance with
generally accepted accounting principles, together with a certification by the
principal financial or accounting officer of the Company that the information
contained in such financial statements fairly presents the financial position of
the Company and its subsidiaries on the date thereof (subject to year-end
adjustments);
(c) contemporaneously with the filing or mailing thereof, copies of
all material of a financial nature filed with the Securities and Exchange
Commission or sent to the common stockholders of the Company; and
(e) from time to time such other financial data and information as the
Warrant Holder may reasonably request.
So long as the Omnibus Agreement remains in effect, the Company shall be
deemed to have satisfied its obligations under this Section 4.09 by delivering
to the Warrant Holder the information which it is required to deliver under the
Omnibus Agreement at the times required by the Omnibus Agreement. After the
termination of the Omnibus Agreement, the Company shall deliver the information
specified in this Section 4.09 to the Warrant Holder. The Warrant Holder hereby
agrees (i) to receive and hold in strict confidence any and all information that
may be delivered to it pursuant to the provisions of this Section 4.09, unless
and until such information otherwise becomes public knowledge, (ii) not to
disclose such information to a third party, except as required by law or legal
process, and (iii) not to make use of such information for purposes of any
transactions unrelated to the transactions contemplated hereby. The provisions
of this paragraph shall survive the exercise of the Warrants and the termination
of this Agreement.
ARTICLE V
GENERAL
Section 5.01. Taxes on Issuance of Shares of Common Stock. The Company
shall pay all taxes and other governmental charges that may be imposed in
respect to the issue or delivery of shares of Common Stock other than taxes
imposed on net income of the Warrant Holder as a result of the exercise of the
Warrants and receipt of shares of Common Stock. The Company shall not be
required, however, to pay any tax or other charge imposed in connection with any
transfer involved in the issue of any certificate for shares of Common Stock in
any name other
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<PAGE> 10
than that of the registered holder of the Warrant surrendered in connection with
the purchase of such shares, and in such case the Company shall not be required
to issue or deliver any stock certificate until such tax or other charge has
been paid or it has been established to the Company's satisfaction that no tax
or other charge is due.
Section 5.02. Dates and Times. If any date set forth in this Agreement
shall fall on a day other than a business day in Norwich, Connecticut, said date
shall be deemed to be the next full business day succeeding that date. All times
shall be the legal time then in effect in Norwich, Connecticut.
Section 5.03. Binding Agreement. All of the covenants and provisions of
this Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder. Nothing expressed in
this Agreement and nothing that may be implied from any of the provisions hereof
is intended, or shall be construed, to confer upon or give to any person or
corporation other than the Company and the Warrant Holder, any legal or
equitable right, remedy or claim under or by reason of this Agreement or of any
covenant, condition, stipulation, promise or agreement herein, and all
covenants, conditions, stipulations, promises and agreements contained in this
Agreement shall be for the sole and exclusive benefit of the Company, the
Warrant Holder and their respective successors and assigns.
Section 5.04. Notices. All notices under this Agreement shall be in writing
and shall be delivered by personal service or telecopy or certified mail return
receipt requested (if such service is not available, then by first class mail),
postage prepaid, to such address as may be designated from time to time by the
relevant party, and which shall initially be:
(a) If to the Company:
Gunther International, Ltd.
One Winnenden Road
Norwich, CT 06360
Attention: President
Telecopy: 860-886-8889
With a copy to:
Murtha, Cullina, Richter and Pinney LLP
CityPlace I
185 Asylum Street
Hartford, Connecticut 06103
Attention: Richard S. Smith, Jr.
Telecopy: 860-240-6150
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<PAGE> 11
(b) If to the Warrant Holder to the address set forth on the signature
page hereto
With a copy to:
Ravitch & Rice LLP
610 Fifth Avenue
Suite 420
New York, NY 10020
Attention: Donald S. Rice, Esq.
Telecopy: 212-218-7888
Any notice sent by certified mail shall be deemed to have been given three
(3) days after the date on which it is mailed. All other notices shall be deemed
given when received. No objection may be made to the manner of delivery of any
notice actually received in writing by an authorized agent of a party.
Section 5.05. Governing Law Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to the conflict of laws provisions thereof. The parties irrevocably agree
that all actions arising directly or indirectly as a result or in consequence of
this Agreement and the transactions contemplated hereby shall be instituted and
litigated only in federal, state or local courts sitting in the City of
Wilmington, Delaware, and each of the parties hereto hereby consents to the
exclusive jurisdiction and venue of any such court, and waives any objection
based on forum non conveniens.
Section 5.06. Headings. The Article and Section headings herein are for
convenience only and are not part of this Agreement and shall not affect the
interpretation thereof.
Section 5.07. Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, and
all such counterparts shall together constitute but one and the same instrument.
Section 5.08. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
Section 5.09. Entire Agreement. This Agreement and the Registration Rights
Agreement (and all exhibits and/or schedules attached) are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or understandings, other than those set forth or referred
to herein with respect to the registration rights granted by the Company with
respect to the securities now or hereafter owned by the Warrant Holder.
-11-
<PAGE> 12
Section 5.10. Modification and Waiver. This Agreement, the Warrant
Certificate and any provision hereof or thereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of the same is sought.
Section 5.11. Execution by Telefacsimile Transmission. Telefacsimile
transmissions of any executed original document and/or retransmission of any
executed telefacsimile transmission shall be deemed to be the same as the
delivery of an executed original. At the request of any party hereto, the other
parties hereto shall confirm telefacsimile transmissions by executing duplicate
original documents and delivering the same to the requesting party or parties.
[Rest of This Page Intentionally Left Blank.]
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<PAGE> 13
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
THE COMPANY:
GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
---------------------------
President
THE WARRANT HOLDER:
GUNTHER PARTNERS, LLC
By: /s/ Thomas J. Tisch
---------------------------
Name: Thomas J. Tisch
Title: Manager
-13-
SIGNATURE PAGE WARRANT
AGREEMENT
<PAGE> 14
EXHIBIT A
(Form of Warrant Certificate)
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF
COMMON STOCK UNDERLYING SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
No. 1 October 2, 1998
Warrants to Purchase 35.0% of Pro Forma Shares
GUNTHER INTERNATIONAL, LTD.
WARRANT TO PURCHASE COMMON STOCK
VOID AFTER 5:00 P.M., NORWICH, CONNECTICUT
ON OCTOBER 1, 2003 (UNLESS EXTENDED OR EARLIER TERMINATED)
This Warrant Certificate certifies that Gunther Partners, LLC, a limited
liability company organized and existing under the laws of the State of
Delaware, ("WARRANT HOLDER") or registered assigns, is the registered holder of
warrants (the "WARRANTS") to purchase that number of shares of the common
stock, par value $.01 per share ("COMMON STOCK") of Gunther International,
Ltd., a Delaware corporation (the "Company") that upon exercise will constitute
Thirty-Five percent (35.0%) (the "APPLICABLE PERCENTAGE") of the pro forma,
fully diluted number of shares of the Company's Common Stock as of the date of
exercise. For purposes hereof, the pro forma, fully diluted number of shares of
Common Stock shall be deemed to mean the sum of the following: (i) all shares
of Common Stock that are issued and outstanding as of the date of exercise;
(ii) all shares of Common Stock that are issuable upon the exercise of any then
exercisable rights, options or warrants to purchase shares of Common Stock
(including any unexercised Warrants evidenced by this Warrant Certificate and
any other Warrant Certificates issued pursuant to the Warrant Agreement (as
defined below)); and (iii) all shares of Common Stock that are issuable upon
the conversion of securities then convertible into shares of Common Stock, but
shall not include any shares of Common Stock (x) issued after October 1, 1998,
by the Company in a bona fide public offering registered under the applicable
provisions of the Securities Act of 1993, as amended, or (y) any shares of
Common Stock issuable upon the
<PAGE> 15
exercise of any stock purchase warrants issued in connection with the Company's
initial public offering consummated on December 20, 1993 (including any such
warrants issued to the underwriters of such offering or upon the exercise of
the over-allotment option granted to such underwriters) unless the expiration
date of such warrants is extended beyond the expiration date in effect as of
October 2, 1998 (in which case, such warrants shall be deemed to be included in
the calculation of the pro forma, fully diluted number of shares of Common
Stock).
Each Warrant entitles the holder thereof, upon proper exercise and subject
to the provisions of the Warrant Agreement, dated as of October 2, 1998 (the
"WARRANT AGREEMENT"), between the Company and the Warrant Holder, to purchase
one fully paid and non-assessable share of Common Stock. In order to exercise
the Warrants evidenced by this Warrant Certificate, the Warrant Holder shall
surrender this Warrant Certificate to the Company (together with the Form of
Election to Purchase duly executed) at the corporate office of the Company,
together with proper payment of the Exercise Price (as defined below). Subject
to adjustment as provided in the Warrant Agreement, the exercise price
("EXERCISE PRICE") for each Warrant evidenced hereby shall be $1.50 per share of
Common Stock. The Warrants will expire on the Expiration Date (as defined in the
Warrant Agreement). Payment of the Exercise Price shall be made in accordance
with the terms of the Warrant Agreement. As provided in the Warrant Agreement,
the Exercise Price is, upon the occurrence of certain events, subject to
modification or adjustment. The Applicable Percentage provided for herein is not
subject to modification or adjustment.
This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, including the provisions thereof relating
to the amendment thereof, which Warrant Agreement is hereby incorporated herein
by reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full description of the rights, limitations of rights,
obligations, duties and immunities of the Company and the holder of this
Warrant Certificate. Capitalized terms not otherwise defined herein have the
meanings ascribed to them in the Warrant Agreement.
If this Warrant Certificate shall be exercised in part, the holder hereof
shall be entitled to receive upon surrender hereof another Warrant Certificate
evidencing the portion of the Applicable Percentage not exercised.
No holder of this Warrant Certificate shall be deemed to be the holder of
Common Stock or any other securities of the Company that may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
in the Warrant Agreement or herein be construed to confer upon the holder of
this Warrant Certificate as such any of the rights of a stockholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any reorganization, issuance of
stock, reclassification or conversion of stock, change of par value, or
exchange of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise, until this Warrant Certificate shall have
been exercised and the Common Stock issuable upon the exercise hereof shall
have become issued as provided in the Warrant Agreement.
<PAGE> 16
This Warrant Certificate is expressly assignable and transferable by the
holder.
WITNESS the signature of a proper officer of the Company.
Date: October 2, 1998 GUNTHER INTERNATIONAL, LTD.
By: /s/ James H. Whitney
--------------------------
Name: James H. Whitney
Title: President & CEO
<PAGE> 17
FORM OF
ELECTION TO EXERCISE
TO: GUNTHER INTERNATIONAL, LTD.
The undersigned hereby irrevocably elects to exercise __________ percent
(______%) of the Warrants represented by this Warrant Certificate, and to
purchase the Common Stock issuable upon the exercise of such Warrants, and
requests that certificates for such shares shall be issued in the name of
_________________________________________________
(Name)
_________________________________________________
(Address)
_________________________________________________
(Social Security or other Identifying Number)
and be delivered to
_________________________________________________
(Name)
at________________________________________________
(Address)
and, if said number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be delivered to the undersigned at the address stated above.
Dated: _____________________________________
Name of Warrant Holder:_____________________
(Please Print)
Signature:__________________________________
Address:____________________________________
<PAGE> 18
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and transfers
unto ________________ the right represented by the within Warrant to purchase
____________ Warrant Shares and appoints ____________________ attorney-in-fact
to transfer such right on the books of Gunther International, Ltd. with full
power of substitution in the premises.
Dated: __________________________ _______________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
______________________________________
(Address)
Signed in the presence of:
_________________________________
<PAGE> 1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT ("AGREEMENT"), is dated as of
October 2, 1998, and is entered into by and among Gunther International, Inc., a
Delaware corporation (the "COMPANY"), and the persons whose signatures appear on
the signature pages hereto as of the date hereof or hereafter.
RECITALS:
A. The total number of shares of all classes of capital stock ("CAPITAL
STOCK") which the Company is authorized to issue is 16,501,000, consisting of
(i) 16,000,000 shares of common stock, par value $.001 per share ("COMMON
STOCK"); (ii) 500 shares of Series B Common Stock, par value $.001 per share
("SERIES B COMMON STOCK"); (iii) 500,000 shares of Preferred Stock, par value
$.001 per share ("PREFERRED STOCK"); and (iv) 500 shares of Class B Senior
Non-Convertible Preferred Stock, par value $.001 per share ("CLASS B PREFERRED
STOCK").
B. The Company; BankBoston N.A., successor by merger to Bank of Boston
Connecticut; June H. Geneen, Phil E. Gilbert, Jr., Thomas W. Keesee and the
United State Trust Company of New York as Co-Executors of the Estate of Harold
S. Geneen, Late of New York, New York (the "Estate"); and Gunther Partners, LLC,
a limited liability company organized and existing under the laws of the State
of Delaware (the "New Lender"), have entered into a certain Agreement, dated as
of the date hereof (the "OMNIBUS AGREEMENT"), pursuant to which the New Lender
has agreed to lend the Company $4,000,000 in immediately available funds (the
"LOANS").
C. In connection with the provision by the New Lender of the Loans, the
Company and the New Lender have entered into a separate Warrant Agreement (the
"WARRANT AGREEMENT") dated as of this date, pursuant to which the New Lender in
the aggregate may purchase up to Thirty-Five Percent (35%) of the pro forma,
fully diluted number of shares of the Common Stock, as of the date of exercise.
D. The execution and delivery of this Agreement is a condition
precedent to the willingness of the New Lender to make the Loans to the Company.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements herein contained and of other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE> 2
1. Definitions.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
"AGREEMENT" has the meaning set forth in the Recitals.
"CAPITAL STOCK" has the meaning set forth in the Recitals.
"CLASS B PREFERRED STOCK" has the meaning set forth in the Recitals.
"COMMON STOCK" has the meaning set forth in the Recitals.
"COMPANY" has the meaning set forth in the Recitals.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar or successor federal statute and the rules and regulations of the
SEC promulgated thereunder, all as the same shall be in effect at the time.
"HOLDER" means any Person who executes a counterpart of this Agreement
on or after the date hereof and any Person who becomes a Holder after the date
of this Agreement pursuant to Section 13(a).
"INDEMNIFIED PARTY" has the meaning set forth in Section 7(c).
"INDEMNIFYING PARTY" has the meaning set forth in Section 7(c).
"NEW LENDER" has the meaning set forth in the recitals.
"NASD" means the National Association of Securities Dealers, Inc.
"PERSON" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof, or any other entity of any kind.
"PREFERRED STOCK" has the meaning set forth in the Recitals.
"REGISTERED SECURITIES" means Registrable Securities which have been
registered under the Securities Act pursuant to a registration statement filed
with and declared effective by the SEC.
"REGISTRABLE SECURITIES" means (i) the Shares; (ii) the shares of
Common Stock issued or issuable as dividends on, or other distributions with
respect to the Shares; and (iii) any other
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<PAGE> 3
security issued or issuable in exchange for, or in replacement of, any of the
Shares, in each case until any such security ceases to be a Registrable Security
in accordance with Section 2 hereof.
"REGISTRATION EXPENSES" means all expenses (excluding Selling Expenses)
incident to the Company's performance of or compliance with Sections 3 and 4 of
this Agreement, including without limitation all registration and filing fees,
including fees with respect to filings required to be made with any stock
exchange or the NASD, fees and expenses of compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities),
messenger, telephone and delivery expenses, costs of printing prospectuses, fees
and expenses of all independent certified public accountants of the Company
(including the expenses of any special audit and "cold comfort" letters required
by or incident to such performance) and the fees and expenses of (i) counsel for
the Company, (ii) counsel for the underwriters and (iii) one counsel for the
Selling Holders.
"REGISTRATION STATEMENT" means any registration statement of the
Company which includes any of the Registrable Securities pursuant to the
provisions of this Agreement, including the prospectus included or deemed
included in the Registration Statement and all amendments and supplements to the
Registration Statement or the prospectus, including post-effective amendments,
and all exhibits to, and all materials incorporated by reference in, such
registration statement.
"SEC" means the United States Securities and Exchange Commission or any
similar agency then having the authority to enforce the Exchange Act or the
Securities Act.
"SECTION 7(a) INDEMNITEE" has the meaning set forth in Section 7(a).
"SECTION 7(b) INDEMNITEE" has the meaning set forth in Section 7(b).
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar or successor statute, and the rules and regulations of the SEC
promulgated thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" means all discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities.
"SELLING HOLDERS" has the meaning set forth in Section 5(b).
"SERIES B PREFERRED STOCK" has the meaning set forth in the Recitals.
"SHARES" means the Warrants and the shares of Common Stock that may be
acquired by the New Lender pursuant to the Warrant Agreement.
"THRESHOLD AMOUNT" mean the Holders of a majority of the Registrable
Securities.
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"WARRANT AGREEMENT" has the meaning set forth in the recitals.
"WARRANT(S)" means the stock purchase warrants issued by the Company
pursuant to the Warrant Agreement.
2. Securities Subject to this Agreement. The securities entitled to the
benefits of this Agreement are the Registrable Securities, but such benefits
shall continue with respect to each such security only so long as such security
continues to be a Registrable Security. A security ceases to be a Registrable
Security when (a) a Registration Statement covering the sale of such Registrable
Security has been declared effective under the Securities Act and the
Registrable Security has been sold in accordance with the Registration
Statement; (b) it is distributed to the public pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act; (c) a new certificate
representing such security has been delivered (to the original Holder or any
subsequent transferee) by the Company free from any restrictive legend and
without issuance of stop transfer or other instructions to the Company's
transfer agent and the Holder of such security has been advised by counsel
acceptable to it that subsequent disposition of such security will not require
registration or qualification under the Securities Act or any state "blue sky"
or similar law then in effect; or (d) the security has ceased to be outstanding.
3. Registration under Securities Act: Demand Registration.
(a) One-Time Demand for Registration. At any time following
the date hereof, the Holders may by written notice request that the Company
effect the registration under the Securities Act of all or any portion of the
Registrable Securities. In order to be effective, the demand must be made by the
Threshold Amount of the Holders. Within 60 days of such a demand the Company
shall file with the SEC all documentation necessary to effect such registration,
and thereafter the Company shall use its best efforts to effect such
registration. Each notice given pursuant to this paragraph (a) shall set forth
(i) the aggregate number of Shares to be included, (ii) the names of the Selling
Holders and the number of Shares to be sold by each such Selling Holder, and
(iii) the proposed manner of sale.
(b) Limitations on Company's Obligation. Except as set forth
below, the Company is obligated to effect only one registration pursuant to
paragraph (a) above, and thereafter the Company shall have no obligation to
include any Registrable Securities in any registration pursuant to this Section
3. In the event that a registration requested pursuant to this Section 3 fails
to become effective or if a stop order shall have been issued or the
registration shall have been terminated prior to the sale of the Registrable
Securities (other than as a result of revocation by the Holders constituting at
least the Threshold Amount), a request for registration shall be deemed not to
have been made for the purposes of this Section 3.
(d) Underwritten Offer. If the Holders making a request
pursuant to paragraph (a) above desire to distribute Registrable Securities
covered by such request by means of an underwriting, they shall so advise the
Company as a part of their request. The Holders shall select an underwriter
(which shall be reasonably acceptable to the Company) for such
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<PAGE> 5
underwriting and shall together with the Company enter into an underwriting
agreement in customary form with the underwriter.
4. Registration under the Securities Act: Piggy-Back Registration.
(a) Piggy-Back Registration. If at any time the Company
proposes to register for itself or any of its stockholders any of its Common
Stock under the Securities Act in connection with the public offering of such
securities on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the Securities Act, then:
(i) the Company in each case shall notify in
writing each Holder of its intention to effect such a registration at least 45
days prior to the proposed filing of a Registration Statement in connection
therewith; and
(ii) the Company shall offer each Holder the
opportunity to include in such registration all or such lesser amount of
Registrable Securities as each Holder may request. Upon the request of one or
more Holders given in writing within 20 days after receipt of the notice
described under clause (i) above, the Company, subject to the provisions of
Section 4(b), shall cause any of the Registrable Securities specified by such
Holder to be included in the Registration Statement.
(b) Limitations on Company's Obligations to Effect Piggy-Back
Registration. Notwithstanding the provisions of Section 4(a) above:
(i) in connection with an underwritten public
offering, if and to the extent that the managing underwriter(s) of such
underwritten public offering advises the Company in writing that, in its good
faith determination, inclusion of the number of Registrable Securities held by
Holders requesting inclusion in the Registration Statement would materially
interfere with the underwriter's ability to effectuate the registration and sale
of securities proposed to be offered and sold pursuant to the Registration
Statement, the managing underwriter(s) shall select the permissible quantity of
Registrable Securities to be sold by the Holders (which may be none) by reducing
the total number of securities to be sold (but not the number of securities to
be sold by the Company) as follows: (A) holders of the Company's securities
which are not Registrable Securities shall be cut back first with respect to
such securities to the full extent of the securities that such holders wished to
include in an underwriting and (B) Holders of Registrable Securities shall be
cut back as required by the managing underwriter on a pro rata basis. For
purposes of apportionment pursuant to this Section 4(b), for any selling holder
that is a partnership or a corporation, the affiliates of such partnership or
corporation shall collectively with such holder be deemed to be one "selling
holder," and any pro rata reduction with respect to such "selling holder" shall
be based upon the aggregate amount of shares carrying registration rights owned
by entities and individuals included in such "selling holder;" and
(ii) if, at any time after giving such written notice
of its intention to register any of its securities and prior to the effective
date of the applicable Registration Statement filed in connection with such
registration, the Company shall determine for any reason
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<PAGE> 6
not to register such securities, the Company may, at its election, give written
notice of such determination to each holder of Registrable Securities and
thereupon shall be relieved of its obligation to register any Registrable
Securities in connection with such registration.
(c) Underwritten Offer. If the registration of which the
Company gives written notice under Section 4(a)(i) above involves an
underwriting, the Company shall so advise in such written notice and shall use
its best efforts to cause the managing underwriter(s) of the proposed
underwritten offering to permit Holders to include their Registrable Securities
in the underwriting on the same terms and conditions as similar terms of the
Company included therein. In such event the right of any Holder to registration
pursuant to Section 4(a) shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in such underwriting. All Holders proposing to distribute their Registrable
Securities through such underwriting shall (together with the Company and the
other holders distributing their Registrable Securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by the Company. If
any Holder disapproves of the terms of any such underwriting, such Holder may
elect to withdraw from the underwriting by prompt written notice to the Company
and the underwriter.
5. Registration Obligations of the Company. In connection with the
filing of a Registration Statement pursuant to Sections 3 or 4, the Company
shall:
(a) Use its best efforts to cause such Registration Statement
to remain in effect until the earlier of (i) the completion of the distribution
of the Registrable Securities included in the Registration Statement, and (ii)
one year after the date on which the Registration Statement is declared
effective.
(b) Notify the Holders whose Registrable Securities are
included in such Registration Statement (the "SELLING HOLDERS") as to the filing
of the Registration Statement and of all amendments or supplements thereto filed
prior to the effective date of such Registration Statement;
(c) Notify the Selling Holders, promptly after the Company
shall receive notice thereof, of the time when such Registration Statement
became effective or when any amendment or supplement to any prospectus forming a
part of said Registration Statement has been filed;
(d) Notify the Selling Holders promptly of any request by the
SEC for the amending or supplementing of such Registration Statement or
prospectus or for additional information;
(e) During the period in which the Company is obligated to use
its best efforts to keep a Registration Statement effective pursuant to Section
5(a) above, prepare and promptly file with the SEC and promptly notify the
Selling Holders of the filing of any amendments or supplements to such
Registration Statement or prospectus as may be necessary to correct any
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<PAGE> 7
statements or omissions if, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the Securities Act, any
event with respect to the Company shall have occurred as a result of which any
such prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading; and, in addition, during such
period, prepare and file with the SEC, promptly upon the Selling Holders'
written request, any amendments or supplements to such Registration Statement or
prospectus which may be reasonably necessary or advisable in connection with the
distribution of the Registrable Securities;
(f) Prepare, promptly upon request of the Selling Holders or
any underwriters for the Selling Holders made during the period in which the
Company is obligated to use its best efforts to keep a Registration Statement
effective, such amendment or amendments to such Registration Statement and such
prospectus or prospectuses as may be reasonably necessary to permit compliance
with the requirements of Section 10(a)(3) of the Securities Act;
(g) Advise the Selling Holders promptly after the Company
shall receive notice or obtain knowledge of the issuance of any stop order by
the SEC suspending the effectiveness of any such Registration Statement or
amendment thereto or of the initiation or threatening of any proceeding for that
purpose, and promptly use its best efforts to prevent the issuance of any stop
order or obtain its withdrawal promptly if such stop order should be issued;
(h) Use its best efforts to qualify the Registrable Securities
as soon as reasonably practicable for sale under the securities or blue sky laws
of such states and jurisdictions within the United States as shall be reasonably
requested by the Selling Holders; provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business, to become subject to taxation or to file a consent to service of
process generally in any of the aforesaid states or jurisdictions;
(i) Furnish the Selling Holders, as soon as available, copies
of any Registration Statement and each preliminary or final prospectus, or
supplement or amendment required to be prepared pursuant hereto, all in such
quantities as the Selling Holders may from time to time reasonably request;
(j) Furnish each Selling Holder with copies of such opinions
of counsel and accountants' "comfort" letters as it reasonably may request with
respect to the registration of its Registrable Securities, the Registration
Statement covering such Registrable Securities and the financial statements
included therein;
(k) Apply for listing and use its best efforts to list the
Registrable Securities, if any, being registered on any national securities
exchange on which a class of the Company's equity securities is listed (and to
maintain such listing during the pendency of the relevant registration
period) or, if the Company does not have a class of equity securities listed on
a national securities exchange, apply for qualification and use its best efforts
to qualify the Registrable Securities, if any, being registered for inclusion on
the automated quotation system of the NASD (and to maintain such qualification
during the pendency of the relevant registration
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period);
(l) In connection with the preparation and filing of each
Registration Statement registering Registrable Securities under the Securities
Act, give the holders of Registrable Securities on whose behalf such Registrable
Securities are to be so registered and their underwriters, if any, and their
respective counsel and accountants, the opportunity to participate in the
preparation of such Registration Statement, each prospectus included therein or
filed with the SEC, and each amendment thereof or supplement thereto, and give
each of them such access to its books and records and such opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders and such underwriters, or their respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act; and
(m) Make senior executives of the Company available to assist
the underwriters with respect to, and accompany the underwriters on the
so-called "road show", in connection with marketing efforts for, and the
distribution and sale of Registrable Securities pursuant to, a Registration
Statement.
6. Expenses. The Company will pay all Registration Expenses in
connection with registrations of Registrable Securities effected pursuant to
Sections 3 and 4. All Selling Expenses in connection with any registration
effected pursuant to this Agreement shall be borne by the Company, the holders
of securities included in such registration other than Registrable Securities
and the holders of the Registrable Securities so registered, pro rata on the
basis of the number of shares of Common Stock included in the registration for
the account of the Company and each such holder.
7. Indemnification.
(a) To the extent permitted by applicable law, the Company
will indemnify each Holder of the Registrable Securities requesting or joining
in a registration, each Person who controls such Holder within the meaning of
Section 15 of the Securities Act, and each underwriter of the securities so
registered and each Person who controls such underwriter, and their respective
officers, directors, partners, agents, employees and successors (each a "SECTION
7(a) INDEMNITEE"), against all costs, expenses, demands, claims, losses,
damages, liabilities, fines and penalties (or actions in respect thereof), joint
or several, to which such Section 7(a) Indemnitee may become subject under the
Securities Act, the Exchange Act or otherwise, insofar as such claims, losses,
damages, liabilities, fines and penalties arise out of or are based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any Registration Statement or prospectus, or arise out of or are based upon any
omission (or alleged omission) to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law, and will
reimburse each such Section 7(a)
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<PAGE> 9
Indemnitee for (and will make periodic advances to cover) any legal and any
other expenses reasonably incurred in connection with investigating or defending
any such demand, claim, loss, damage, liability or action promptly after
submission of supporting materials with respect to such expenses; provided,
however, that the Company shall not be required to indemnify any Section 7(a)
Indemnitee for any cost, expense, demand, claim, loss, damage, liability, fine
or penalty which arises out of or is based upon any written information provided
by any such Section 7(a) Indemnitee expressly for inclusion in the Registration
Statement.
(b) To the extent permitted by applicable law, each Holder
requesting or joining in a registration, severally and not jointly, will
indemnify the Company, each of its officers, directors, employees, agents,
successors and controlling persons (within the meaning of Section 15 of the
Exchange Act) and each underwriter of the securities so registered and each
Person who controls such underwriter (each a "SECTION 7(b) INDEMNITEE"), against
all costs, expenses, demands, claims, losses, damages, liabilities, fines and
penalties, joint or several (or actions in respect thereof) to which each such
Section 7(b) Indemnitee may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities arise out of or are based upon an untrue statement (or alleged
untrue statement) of a material fact contained in any Registration Statement or
prospectus, or arise out of or are based upon the omission (or alleged omission)
to state therein a fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) was made in any Registration Statement or prospectus in
reliance upon and in conformity with written information furnished to the
Company by such Holder requesting or joining in a registration specifically for
use in the preparation thereof; provided, however, that (i) the obligations of
such Holders hereunder shall be limited to an amount equal to the proceeds to
each Holder of the Registrable Securities sold in connection with such
registration and (ii) the Holders shall not be required to indemnify any Section
7(b) Indemnitee for any cost, expense, demand, claims, loss, damage, liability,
fine or penalty which arises out of or is based upon any written information
provided by any such Section 7(b) Indemnitee expressly for inclusion in the
Registration Statement.
(c) Each party entitled to indemnification under this Section
7 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has received written notice of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom, provided such counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld or delayed). The Indemnified Party may participate in such
defense at such Indemnified Party's expense; provided, however, that the
Indemnifying Party shall bear the expense of such defense of the Indemnified
Party if (i) the Indemnifying Party has agreed in writing to pay such expenses,
(ii) the Indemnifying Party shall have failed to assume the defense of such
claim or employ counsel reasonably satisfactory to the Indemnified Party, or
(iii) in the reasonable judgment of the Indemnified Party, based upon the
written advice of such Indemnified Party's counsel, representation of both
parties by the same counsel would be inappropriate due to actual or
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<PAGE> 10
potential conflicts of interest. The Indemnified Party shall not make any
settlement without the prior written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or delayed. The failure of any
Indemnified Party to give notice as provided herein shall relieve the
Indemnifying Party of its obligations under this Section 7 only to the extent
that such failure to give notice shall materially adversely prejudice the
Indemnifying Party in the defense of any such claim or any such litigation. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the prior written consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation in form and substance reasonably satisfactory to such Indemnified
Party.
8. Contribution.
(a) If the indemnification provided for in Section 7 from the
Indemnifying Party is unavailable to or unenforceable by the Indemnified Party
in respect to any costs, fines, penalties, losses, claims, damages, liabilities
or expenses referred to herein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such costs, fines, penalties,
losses, claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Parties in connection with the actions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the costs, fines, penalties, losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 7, any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
(b) The Company and the Holders agree that it would not be
just and equitable if contribution pursuant to this Section 8 were determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(c) If indemnification is available under Section 7, the
Indemnifying Parties shall indemnify each Indemnified Party to the full extent
provided in Section 7 without regard to the relative fault of the Indemnifying
Party or Indemnified Party or any other equitable consideration provided for in
this Section 8.
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9. Hold-Back Agreements.
(a) Restrictions on Public Sale by Holder of Registrable
Securities. To the extent requested by the Company and the managing underwriter
with respect to the applicable Registration Statement, each Holder whose
Registrable Securities are included in a Registration Statement filed pursuant
to Sections 3 and 4 hereof agrees not to effect any public sale or distribution
of the issue being registered or any similar security of the Company, including
a sale pursuant to Rule 144 or Rule 144A under the Securities Act, during the
7-day period prior to, and during the 90-day period beginning on, the effective
date of such Registration Statement, to the extent such sales may prevent the
Company from being in compliance with the Exchange Act; provided, however, that
all Holders holding not less than the number of shares of common stock held by
such Holder (including, shares of common stock issuable upon exercise of the
Warrants, or other convertible securities, or upon the exercise of options,
warrants or rights) and all officers and directors of the Company enter into
similar agreements. Such agreement shall be in writing reasonably satisfactory
to the Company and such managing underwriter.
(b) Restrictions on Public Sale by the Company and Others. The
Company shall not effect any public or nonpublic sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for any such securities or similar securities,
during the 7-day period prior to, and during the 90-day period beginning on, the
effective date of any Registration Statement in which holders of Registrable
Securities are participating or the commencement of a public distribution of
Registrable Securities pursuant to any such Registration Statement (except (i)
as part of such registration or pursuant to registrations on SEC Forms S-4 or
S-8 or any similar or successor form, or on any form filed in connection with an
exchange offer or an offering of securities solely to the existing stockholders
or employees of the Company, or (ii) for sales or other issuances of securities
pursuant to outstanding options, warrants, rights or similar obligations).
10. Reserved.
11. Obligations of Holder.
(a) Each Holder of Registrable Securities included in any
registration shall furnish to the Company such information regarding such Holder
and the distribution proposed by such Holder as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
(b) Each Holder of the Registrable Securities agrees by
acquisition of such Registered Securities that upon receipt of any notice from
the Company pursuant to Section 5(g), such Holder will forthwith discontinue
such Holder's disposition of Registered Securities pursuant to the Registration
Statement relating to such Registered Securities until such Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
5(g) and if so directed by the Company, will deliver to the Company (at the
Company's expense) all
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copies, other than permanent file copies, then in such Holder's possession of
the prospectus relating to such Registered Securities at the time of receipt of
such notice.
12. Mergers, etc..
The Company shall not, directly or indirectly, enter into any merger,
consolidation or reorganization in which the Company shall not be the surviving
corporation unless the surviving corporation shall, prior to such merger,
consolidation or reorganization, agree in writing to assume the obligations of
the Company under this Agreement, and for that purpose references hereunder to
"REGISTRABLE SECURITIES" shall be deemed to include the securities which the
Holders would be entitled to receive in exchange for Common Stock under any such
merger, consolidation or reorganization, provided that to the extent such
securities to be received are convertible into shares of common stock of the
issuer thereof, then any such shares of common stock or other securities as are
issued or issuable upon conversion of said convertible securities shall also be
included within the definition of "REGISTRABLE SECURITIES."
13. Miscellaneous.
(a) Transfer of Certain Rights. The rights granted to the
Holders under this Agreement may be transferred only to a transferee who
delivers to the Company, within a reasonable time after such transfer, a written
instrument by which such transferee agrees to be bound by the applicable terms
of this Agreement. Notwithstanding the foregoing, nothing herein shall prohibit:
(i) any Holder from transferring any of its rights under this Agreement to any
wholly-owned subsidiary of such Holder or to any entity which merges or
consolidates with or acquires all or substantially all of the equity securities
or assets of such Holder, (ii) any Holder which is a partnership from
transferring any of its rights under this Agreement to a partner of such
partnership where such partner receives Registrable Securities in a distribution
from such partnership, (iii) any Holder who is an individual from transferring
any of its rights under this Agreement to such Holder's spouse or to other
relatives, or to a trust for the benefit of the Holder, his or her spouse or
other relatives, or (iv) any trustee of a trust which holds Registrable
Securities from distributing such Registrable Securities to the beneficiaries of
such trust; provided that any such transferee under subparagraphs (i), (ii),
(iii) or (iv) above will hold the Registrable Securities subject to the terms
and conditions of this Agreement. Upon any transfer of the rights of a Holder
permitted by and completed in compliance with the terms of this Agreement, the
transferee shall become a "Holder" for purposes of this Agreement.
(b) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
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(c) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given without the written
consent of the Company and Holders of 100% of the Registrable Securities
affected by such amendment, modification, supplementation, waiver or consent.
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof with respect to a matter which relates exclusively to the
rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and which does not directly or indirectly
affect the rights of other Holders of Registrable Securities may be given by the
Holders of a majority of the Registrable Securities being sold by such Holders,
provided that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence.
(d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing and shall be delivered by hand,
overnight courier service, registered or certified first-class mail, return
receipt requested, or telecopier; if to a Holder, at the address set forth
opposite such Holder's name on the signature pages attached hereto or such other
address as may have been furnished to the Company in writing; if to the Company,
at One Winnenden Court, Norwich, Connecticut 06360, Attention: President, and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 13(d).
All such notices and communications shall be deemed to have
been duly given upon receipt.
(e) No Inconsistent Agreements. The Company shall not on or
after the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The Company has not previously entered into or become a party
to nor is it bound by any agreement with respect to its securities granting any
registration rights to any Person which is inconsistent with the rights granted
hereunder. The rights granted to the holders of Registrable Securities hereunder
do not in any way conflict with and are not inconsistent with the rights granted
to the holders of the securities of the Company under any other agreements.
(f) Governing Law; Forum. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware without
regard to the conflict of laws provisions thereof. The parties irrevocably agree
that all actions arising directly or indirectly as a result or in consequence of
this Agreement and the transactions contemplated hereby, shall be instituted and
litigated only in federal, state or local courts sitting in the City of
Wilmington, Delaware and each of the parties hereby consents to the exclusive
jurisdiction and venue of any such court, and waives any objection based on
forum non conveniens.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
-13-
<PAGE> 14
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) Entire Agreement. This Agreement (and all exhibits and/or
schedules attached hereto and thereto) are intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto and
supersedes all prior agreements and understandings, oral or written, among the
parties hereto with respect to the subject matter hereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the securities now or hereafter owned by the Holders.
(k) Execution by Telefacsimile Transmission. Telefacsimile
transmissions of any executed original document and/or retransmission of any
executed telefacsimile transmission shall be deemed to be the same as the
delivery of an executed original. At the request of any party hereto, the other
parties hereto shall confirm telefacsimile transmissions by executing duplicate
original documents and delivering the same to the requesting party or parties.
[Rest of This Page Intentionally Left Blank.]
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
THE COMPANY:
GUNTHER INTERNATIONAL, INC.
By: /s/ James H. Whitney
--------------------------------------
President
Telecopy: (860) 886-8889
THE HOLDER(S):
GUNTHER PARTNERS, LLC
By: /s/ Thomas J. Tisch
--------------------------------------
Name: Thomas J. Tisch
Title: Manager
-15-
SIGNATURE PAGE REGISTRATION RIGHTS AGREEMENT
<PAGE> 1
VOTING AGREEMENT
THIS VOTING AGREEMENT ("AGREEMENT") is dated as of October 2, 1998, and
is entered into by and among Gunther International, Ltd., a Delaware corporation
(the "COMPANY"), and the other parties signatories hereto.
RECITALS:
A. The total number of shares of all classes of capital stock ("STOCK")
which the Company is authorized to issue is 16,501,000, consisting of (i)
16,000,000 shares of common stock, par value $.001 per share ("COMMON STOCK");
(ii) 500 shares of Series B Common Stock, par value $.001 per share ("SERIES B
COMMON STOCK"); (iii) 500,000 shares of Preferred Stock, par value $.001 per
share ("PREFERRED STOCK"); and (iv) 500 shares of Class B Senior Non-Convertible
Preferred Stock, par value $.001 per share ("CLASS B PREFERRED STOCK").
B. The Company and the other parties hereto (either directly or through
one or more affiliates) are also parties to a certain Agreement, dated as of the
date hereof (the "OMNIBUS AGREEMENT"), which, among other things, sets forth the
terms and conditions under which the New Lender (as hereinafter defined) has
agreed to lend the Company $4,000,000 in immediately available funds (such
transaction being sometimes hereinafter referred to as the "LOAN TRANSACTION").
C. The Omnibus Agreement contemplates that, simultaneously with the
consummation of the Loan Transaction, the undersigned parties will enter into a
separate voting agreement specifying the way in which they will vote their
shares of Capital Stock (as hereinafter defined) with respect to the election of
directors of the Company.
D. This Agreement is the voting agreement contemplated by the Omnibus
Agreement, and the execution and delivery of this Agreement is a condition
precedent to the respective obligations of certain designated parties to the
Omnibus Agreement to proceed with and consummate the transactions contemplated
thereby.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
covenants and agreements herein contained and of other good and valuable
consideration, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; ETC.
1.1 Definitions. Except as otherwise herein expressly provided, the
following terms and phrases shall have the meanings set forth below:
<PAGE> 2
"AFFILIATE" shall mean (i) in the case of an entity, any person who or
which, directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, any specified person or (ii)
in the case of an individual, such individual's spouse, children, grandchildren
or parents or a trust primarily for the benefit of any of the foregoing.
"AGREEMENT" shall mean this Voting Agreement, as originally executed
and as amended, modified, supplemented or restated from time to time, as the
context requires.
"BOARD" shall mean the Board of Directors of the Company.
"DIRECTOR" shall mean a person appointed or elected as a member of the
Board.
"EHG" shall mean the Estate of Harold S. Geneen, late of New York, New
York.
"NEW LENDER" shall mean Gunther Partners, LLC, a limited liability
company organized and existing under the laws of the State of Delaware.
"PARK" shall mean Park Investment Partners, Inc., a corporation
organized and existing under the laws of the State of Delaware.
"PERSON" means any individual, corporation, association, limited
liability company, partnership, or any other entity.
"PUBLIC SALE" means any sale of Stock by a Stockholder to the public
(i) pursuant to a public offering registered under the Securities Act or (ii)
pursuant to the provisions of Rule 144 promulgated under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STOCKHOLDER" or "STOCKHOLDERS" shall mean the parties hereto (other
than the Company), their permitted successors and assigns and any person who is
a holder of Stock and is or is required to be a party hereto at the time of
reference thereto.
"TRANSFER" means to sell, transfer, assign, pledge, hypothecate or
otherwise dispose of, in any manner whatsoever.
1.2 Certain Other Defined Terms. The following terms are defined in the
Section of this Agreement set forth directly opposite such terms:
Term Section
---- -------
Class B Preferred Stock recitals
Common Stock recitals
Company recitals
-2-
<PAGE> 3
EHG Nominee 2.2(a)
Lender Nominees 2.2(a)
Loan Transaction recitals
Nominee 2.2(a)
Omnibus Agreement recitals
Park Nominee 2.2(c)
Preferred Stock recitals
Series B Common Stock recitals
Stock recitals
1.3 Article, Etc. References to an "ARTICLE" or a "SECTION" are, unless
otherwise specified, to one of the Articles or Sections of this Agreement.
ARTICLE II
ORGANIZATIONAL DOCUMENTS; ELECTION OF DIRECTORS; ETC.
2.1 Articles of Incorporation; By-Laws. From and after the date hereof,
each Stockholder shall vote all shares of Stock owned by such Stockholder at any
meeting of the stockholders of the Company or in any written consent executed in
lieu of such a meeting of stockholders of the Company and shall take all actions
necessary to insure that the Certificate of Incorporation and By-Laws of the
Company do not, at any time, conflict with the provisions of this Agreement and
shall take all necessary and required action to cause the Company to amend, or
amend and restate, the Certificate of Incorporation and By-Laws of the Company
as necessary to effectuate the purposes of this Agreement.
2.2 Election of Directors. Each Stockholder shall vote all shares of
Stock owned by such Stockholder at any regular or special meeting of the
stockholders of the Company at which vacancies on the Board are to be filled, or
in any written consent executed in lieu of such a meeting of stockholders and
shall take all actions necessary (excluding the exercise of any options,
warrants or rights held by such Stockholder) and shall use its reasonable best
efforts to cause the Directors nominated by it pursuant to this Agreement to
take all actions necessary (including the nomination for election as Directors
of the persons specified below), to ensure, to the extent legally possible, the
election to the Board of the following individuals:
(a) a number of individuals nominated by the New Lender that is equal
to the lowest whole number which would comprise a majority of the Board,
determined by adding (i) one (1), plus (ii) one-half of the total number of
persons comprising the full Board, and rounding the sum down to the nearest
whole number (the "LENDER NOMINEES");
(b) one individual nominated by EHG (the "EHG NOMINEE"); and
(c) one individual nominated by Park (the "PARK NOMINEE").
-3-
<PAGE> 4
The Lender Nominees, the EHG Nominee and the Park Nominee are sometimes
hereinafter referred to collectively as the "NOMINEES" and individually as a
"NOMINEE."
2.3 Replacement and Removal of Nominees. If, prior to his election to
the Board pursuant to Section 2.2, any Nominee shall be unable or unwilling to
serve as a Director of the Company, the Stockholder or Stockholders who
nominated any such Nominee shall be entitled to nominate a replacement within 30
days of learning of such fact, which replacement shall then be a Nominee for
purposes of Section 2.2.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1 Endorsement on Stock Certificates. Each and every certificate
evidencing Stock shall contain upon its face, or on the reverse side thereof,
the following legend until such time as the Stock represented thereby is no
longer subject to the provisions of this Agreement:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF THAT CERTAIN VOTING AGREEMENT DATED AS OF OCTOBER 2,
1998, AS AMENDED FROM TIME TO TIME, AMONG THE COMPANY AND EACH OF THE
STOCKHOLDERS SPECIFIED THEREIN, COPIES OF WHICH ARE AVAILABLE AT THE
PRINCIPAL OFFICES OF THE COMPANY AT NO COST. A STATEMENT SUMMARIZING
THE VOTING POWERS, DESIGNATIONS, PREFERENCES, LIMITATIONS, RESTRICTIONS
AND RELATIVE RIGHTS OF THE VARIOUS CLASSES OF STOCK OR SERIES THEREOF
MAY BE OBTAINED BY THE STOCKHOLDERS OF THE COMPANY, WITHOUT CHARGE,
FROM THE PRINCIPAL OFFICES OF THE COMPANY."
The legend set forth above shall be removed from the certificates evidencing
shares of Stock upon the earlier of (i) the date on which any such shares of
Stock have been transferred in a Public Sale, or (ii) the date on which this
Agreement terminates in accordance with Section 3.3 hereof.
3.2 Transfers. Prior to Transferring any shares of Stock (other than in
a Public Sale) to any person, the transferring Stockholder shall cause the
prospective transferee to execute and deliver to the Company and the other
Stockholders a counterpart copy of this Agreement. Any Transfer or attempted
Transfer of any shares of Stock in violation of this or any other provisions of
this Agreement will be void, and the Company will not record such Transfer on
its books or treat any purported transferee of such shares of Stock to the owner
of such shares for any purpose.
3.3 Termination. This Agreement shall terminate upon the earlier to
occur of the
-4-
<PAGE> 5
following events:
(a) the voluntary agreement, in writing, of all of the
New Lender, EHG and Park; or
(b) the date on which the Company repays in full all
outstanding indebtedness and accrued interest issued
under the Omnibus Agreement.
3.4 Stock Subject to this Agreement.
(a) This Agreement shall apply to all Stock at any time owned
or acquired by the Stockholders, including, without limitation, (i) the Stock
held by the Stockholders on the date hereof, (ii) any Stock issued to any
Stockholder pursuant to such Stockholder's exercise of an option, warrant or
convertible or exchangeable security and (iii) any Stock otherwise purchased,
acquired or issued to any Stockholder.
(b) If, at any time, and from time to time, the Company shall
declare and pay a dividend upon any of the Stock, or shall validly issue shares
in lieu of, or in exchange for, or in addition to, any of the Stock without the
receipt of additional consideration therefor, then any such shares subsequently
issued with respect to the Stock then subject to this Agreement shall constitute
additional Stock subject to this Agreement.
3.5 Notices. Any and all notices or other communications provided for
herein shall be in writing and shall be considered duly given upon the earliest
to occur of (a) personal delivery, (b) two (2) days after being delivered to a
national recognized overnight delivery courier or service, (c) three (3) days
after being mailed by registered or certified mail, return receipt requested,
postage prepaid or (d) the delivering parties receipt of a written confirmation
of a facsimile transmission. All notices shall be addressed to the Company at
its principal office and to the Stockholders at their addresses, as shown on
Exhibit A attached hereto. Any party hereto may change his or its address by
giving notice to the other parties hereto as provided herein.
3.6 Pronouns and Headings. As used herein, all pronouns shall include
the masculine, feminine, neuter, singular and plural wherever the context and
facts require such construction. The descriptive headings in the sections of
this Agreement are inserted for convenience of reference only and shall not
control or affect the meaning or construction of any of the provisions hereof.
3.7 Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such
provision shall be severed and the remaining provisions hereof shall be enforced
to the extent possible or modified in such a way as to make it enforceable, and
the invalidity, illegality or unenforceability thereof shall not affect the
validity, legality or enforceability of the remaining provisions of this
Agreement.
3.8 Modification Amendment. No modification or amendment of this
Agreement
-5-
<PAGE> 6
shall be valid unless the same shall be in writing executed by all of
the New Lender and EHG.
3.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflict of laws provisions thereof.
3.10 Binding Effect; Complete Agreement. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns. This
Agreement constitutes the entire agreement among the parties hereto and
supersedes all prior agreements and understandings, oral or written, among the
parties hereto with respect to the subject matter hereof.
3.11 Specific Performance. The parties acknowledge that given the
nature of the obligations of the parties hereto that any non-breaching party
will be irreparably damaged by a breach of this Agreement. The parties hereto
therefore acknowledge and agree that any nonbreaching party hereto may seek
specific performance of the provisions hereof and that no party hereto may
assert adequacy of a remedy at law as a defense to an action for specific
performance hereunder.
3.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
3.13. Execution by Telefacsimile Transmission. Telefacsimile
transmissions of any executed original document and/or retransmission of any
executed telefacsimile transmission shall be deemed to be the same as the
delivery of an executed original. At the request of any party hereto, the other
parties hereto shall confirm telefacsimile transmissions by executing duplicate
original documents and delivering the same to the requesting party or parties.
[Rest of This Page Intentionally Left Blank.]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
GUNTHER INTERNATIONAL, INC.
By: /s/ James H. Whitney
--------------------------
James H. Whitney
President/CEO
Telecopy: (860) 886-8889
PARK INVESTMENT PARTNERS, INC.
By: /s/ Gerald H. Newman
--------------------------
Gerald H. Newman
Title: Secretary Treasurer
/s/ Gerald H. Newman
--------------------------
Gerald H. Newman, Individually
GUNTHER PARTNERS, LLC
By: /s/ Thomas J. Tisch
--------------------------
Name: Thomas J. Tisch
Title: Manager
THE ESTATE OF HAROLD S. GENEEN
By: /s/ June H. Geneen
--------------------------
June H. Geneen
Co-Executor
By: /s/ Phil E. Gilbert, Jr.
--------------------------
Phil E. Gilbert, Jr.
Co-Executor
-7-
SIGNATURE PAGE VOTING AGREEMENT
<PAGE> 8
By: /s/ Thomas W. Keesee
--------------------------------
Thomas W. Keesee
Co-Executor
By: The United States Trust Company of
New York
By: /s/ Steven Scott Kirkpatrick
--------------------------------
Name: Steven Scott Kirkpatrick
Title: Vice President
FOUR PARTNERS
By: /s/ Thomas J. Tisch
--------------------------------
Name: Thomas J. Tisch
Title: Managing Trustee of the Thomas J.
Tisch 1991 Trust, a General Partner
/s/ Robert Spiegel
--------------------------------
Robert Spiegel, Individually
-8-
SIGNATURE PAGE VOTING AGREEMENT
<PAGE> 9
EXHIBIT A
ADDRESS LIST
Gunther International, Ltd.
One Winnenden Road
Norwich, CT 06360
Attention: President
Telecopy: (860) 886-8889
Park Investment Partners, Inc.
900 3rd Avenue
27th Floor
New York, New York 10022
Attention: Gerald H. Newman
Telecopy: (212) 644-8522
Gerald H. Newman
900 3rd Avenue
27th Floor
New York, New York 10022
Telecopy: (212) 644-8522
Gunther Partners, LLC
c/o Tisch Family Interests
667 Madison Avenue
New York, NY 10021
Attention: Thomas M. Steinberg, President
Telecopy: (212) 521-2915
The Estate of Harold S. Geneen
c/o The United States Trust Company of New York
114 West 47th Street, #C-1
New York, NY 10036-1594
Attention: Steven S. Kirkpatrick, Esq.
Telecopy: (212) 852-3852
Four Partners
c/o Tisch Family Interests
667 Madison Avenue
New York, NY 10021
Attention: Thomas M. Steinberg, President
Telecopy: (212) 521-2915
Robert Spiegel
19850 Beach Road
Tequesta, FL 33469
Telecopy: (212) 521-2915
(c/o Thomas M. Steinberg)
-9-
<PAGE> 1
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the "Settlement Agreement") is dated as of
this 30th day of September, 1998, and is by and between DataCard Corporation, a
Delaware corporation with its principal place of business at 11111 Bren Road
West, Minnetonka, Minnesota 55343 ("DataCard"), and Gunther International, Ltd.,
a Delaware corporation with its principal place of business at One Winnenden
Road, Norwich, Connecticut 06360 ("Gunther").
WHEREAS, DataCard provides third-party maintenance services to certain
purchasers of Gunther equipment pursuant to the terms of that certain third
Party Product Service Agreement dated October 13, 1992 (the "Service
Agreement"); and
WHEREAS, Gunther is contractually obligated to make monthly payments to
DataCard in consideration of DataCard providing such services to Gunther's
customers (the "Trade Payables"); and
WHEREAS, Gunther is contractually obligated to make quarterly payments
on that certain promissory note dated September 15, 1992 (the "Note Payable");
and
WHEREAS, Gunther has been and remains in default under the Service
Agreement and Note Payable as a result to its failure to pay to DataCard when
due certain Trade Payables and certain balances under the Note Payable; and
WHEREAS, as a result of Gunther's defaults, DataCard filed suit against
Gunther in Hennepin County District Court, State of Minnesota, on August 14,
1998, to collect the amounts then owing from Gunther to DataCard (the "DataCard
Collection Action"); and
WHEREAS, subsequent to the filing of the DataCard Collection Action,
Gunther has made a series of One Hundred Thousand Dollar ($100,000) weekly
payments (the "Weekly Payments") and the parties have negotiated a resolution to
their disputes, which resolution is more fully described below; and
WHEREAS, the cumulative Trade and Note Payable balance due and owing
from Gunther to DataCard on October 1, 1998 (excluding amounts billed in
September, 1998 but not yet due), including interest through September 30, 1998,
is One Million Four Hundred Twenty-One Thousand Seven and 30/100 Dollars
($1,421,007.30) (the "October 1 Balance") (the calculation made to arrive at the
October 1 Balance is shown on Attachment A hereto).
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, DataCard and Gunther hereby agree as
follows:
1. OCTOBER 1 PAYMENT BY GUNTHER. Gunther shall pay to DataCard before the close
of business on October 1, 1998, by wire transfer to the same account to which
Gunther
<PAGE> 2
has been wiring the Weekly Payments, the October 1 Balance. Following such
payment, the Note Payable shall be deemed paid in full and all Trade Payables
which have an invoice due date on or before October 1, 1998 shall be deemed paid
in full.
2. RECONCILIATION OF BILLINGS FOR TIME PERIOD APRIL 1, 1998 TO PRESENT. During
the month of October, 1998, the parties hereto shall review all invoices
submitted by DataCard to Gunther with invoice dates from April 1, 1998 to the
present, and the parties shall make any adjustments (by way of credit or
invoice, as applicable) necessary to correct any billing errors contained on
those invoices. For purposes of the reconciliation, both parties accept and
agree to the interest charges and rates which were agreed to by James Whitney of
Gunther and Dwayne Denchfield of DataCard and which were more fully described in
the Amendment and Attachment F-1 to the Service Agreement which was signed by
Dwayne Denchfield of DataCard on May 20, 1998 and submitted to James Whitney of
Gunther. The DataCard Representative (as defined in Subparagraph 5a below) and
the Gunther Representative (as defined in Subparagraph 5a below) shall
coordinate the reconciliation and, between themselves, agree on any and all
adjustments which may be necessary.
3. CONTINUING SERVICE BY DATACARD. In consideration of Gunther paying the
October 1 Balance, and continuing to pay on a current basis all now billed but
not yet due Trade Payables and all Trade Payables billed on or after the date
hereof, DataCard covenants to continue to provide service to those Gunther
customers which it is currently servicing, at current rates and pursuant to the
terms of the Service Agreement, which Service Agreement remains in full force
and effect subject only to any modifications contained in this Settlement
Agreement.
4. PAYMENT TERMS.
a. CONTINUING PAYMENTS BY GUNTHER. Gunther shall make all
payments on the Trade Payables described in Paragraph 3 above
on or before the invoice due date. In the event that Gunther
fails to pay any amount when due, interest on the unpaid
balance shall accrue at the rate of twelve percent (12%) per
annum until the entire balance has been paid, and DataCard
shall, following written notice of nonpayment to Gunther and a
ten (10) business day cure period, have the right to
immediately discontinue service and to immediately terminate
the Service Agreement. Following termination of the Service
Agreement, neither Gunther nor DataCard shall have any further
obligation or liability one to the other (including
obligations or liabilities which arise under this Settlement
Agreement), except for the obligation of Gunther to pay
DataCard in full, with interest, for all services rendered
prior to the termination date and for which DataCard was not
paid prior to the date of termination.
b. SECTION 4.1 OF SERVICE AGREEMENT. Section 4.1 of the
Service Agreement shall be superseded in its entirety by the
following:
2
<PAGE> 3
"The Contracted Maintenance Charge for each subcontract
hereunder shall be payable net thirty (30) days from the date
of invoice therefor. All other charges arising hereunder
including taxes shall be invoiced upon occurrence and are
payable in full within thirty (30) days after date of invoice.
DataCard shall submit, by delivery service which issues
receipts, monthly standard invoices for Basic Monthly
Maintenance Charges to Customer for receipt not later than the
fifth (5th) business day following the invoice date. DataCard
shall submit, by regular mail, all other invoices (for
example, invoices for after-hours maintenance) to Customer for
receipt not later than the fifth (5th) business day following
the invoice date. Should Customer challenge the validity of
any charge on the invoice, DataCard shall be notified by
Customer, via facsimile, within ten (10) days of receipt of
the invoice for such charge, of the challenge. Any requested
documentation for the charge shall be provided, via facsimile,
to Customer, within ten (10) days of receipt of the challenge.
DataCard shall further use best efforts (including the use of
overnight delivery services, if necessary) to ensure that
Customer receives charges for services not later than sixty
(60) days after the date on which the service was performed.
5. ACCOUNT TRANSITION. In consideration of and contingent upon payment by
Gunther of the October 1 Balance and in consideration of and contingent upon
Gunther's paying on or before the due date all additional amounts which become
due and owing, DataCard hereby agrees to transition to Gunther service
responsibility for all Gunther accounts currently being services by DataCard.
a. TRANSITION OF ALLSTATE, CNA AND SAFECO ACCOUNTS. Between
April 1, 1998 and May 1, 1999 (the specific dates to be
determined by Dwayne Denchfield or his successor [the
"DataCard Representative"] and Joe Lamborghini or his
successor [the "Gunther Representative"]), Gunther shall
assume responsibility for servicing the Allstate, CNA and
Safeco accounts. Prior to Gunther assuming such
responsibility, the DataCard Representative and the Gunther
Representative shall implement a plan pursuant to which
Gunther may make offers of employment to those DataCard
customer service engineers who devote the majority of their
time to the servicing of Gunther equipment at the Allstate,
CNA and Safeco accounts. Additionally, at the mutual agreement
of the DataCard Representative and the Gunther Representative,
Gunther may also be permitted to make offers of employment to
certain other DataCard customer service engineers who devote a
significant amount of their time (but not the majority of
their time) to the servicing of Gunther equipment at the
Allstate, CNA and Safeco accounts. For clarification purposes,
the terms of any offer of employment to be made by Gunther
pursuant to this Subparagraph 5a shall be determined by
Gunther without the need to secure approval of the DataCard
Representative; the timing of the offers of employment,
however,
3
<PAGE> 4
shall be mutually agreed upon between the Gunther
Representative and the DataCard Representative.
b. TRANSITION OF ALL OTHER ACCOUNTS. Between May 1, 1999 and
March 31, 2000 (the specific dates to be determined by the
DataCard Representative and the Gunther Representative),
Gunther shall assume responsibility for servicing all other
accounts then serviced by DataCard. Prior to Gunther assuming
such responsibility, the DataCard Representative and the
Gunther Representative shall implement a plan pursuant to
which Gunther may make offers of employment to those DataCard
customer service engineers who devote the majority of their
time to the servicing of Gunther equipment at the accounts
being transitioned. Additionally, at the mutual agreement of
the DataCard Representative and the Gunther Representative,
Gunther may also be permitted to make offers of employment to
certain other DataCard customer service engineers who devote a
significant amount of their time (but not the majority of
their time) to the servicing of Gunther equipment at the
accounts being transitioned. For clarification purposes, the
terms of any offer of employment to be made by Gunther
pursuant to this Subparagraph 5b shall be determined by
Gunther without the need to secure approval of the DataCard
Representative; the timing of the offers of employment,
however, shall be mutually agreed upon between the Gunther
Representative and the DataCard Representative.
c. NO REPRESENTATIONS OR WARRANTIES. Although DataCard, via
the DataCard Representative, will assist Gunther in making
offers of employment to those DataCard customer service
engineers described above, DataCard makes no representations
or warranties that the persons who receive job offers will
accept the offers.
6. RELEASES.
a. RELEASE BY DATACARD. Effective upon payment by Gunther of
the October 1 Balance, DataCard, its affiliates and their
respective present and former directors, officers, employees,
successors, agents and assigns, forever release and discharge
Gunther and its affiliates, and their respective present and
former directors, officers, employees, successors, agents and
assigns (the "Gunther Released Persons"), for and from any and
all liabilities, actions, suits, claims, demands, damages,
injuries and causes of action of whatever kind and nature
(including claims for attorneys' fees and expenses), whether
known or unknown, whether contingent, liquidated or otherwise,
that they or any of them have against any or all of the
Gunther Released Persons arising out of the subject matter of
the Service Agreement; provided, however, that nothing in this
Subparagraph 6a shall release any of the Gunther Related
Persons from any agreements, covenants or obligations which
any of them may continue to have after the date hereof under
this Settlement Agreement or the Service Agreement.
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b. RELEASE BY GUNTHER. Effective upon payment by Gunther of
the October 1 Balance, Gunther, its affiliates and their
respective present and former directors, officers, employees,
successors, agents and assigns, forever release and discharge
DataCard and its affiliates, and their respective present and
former directors, officers, employees, successors, agents and
assigns (the "DataCard Released Persons"), for and from any
and all liabilities, actions, suits, claims, demands, damages,
injuries and causes of action of whatever kind and nature
(including claims for attorneys' fees and expenses), whether
known or unknown, whether contingent, liquidated or otherwise,
that they or any of them have against any or all of the
DataCard Released Persons arising out of the subject matter of
the Service Agreement; provided, however, that nothing in this
Subparagraph 6b shall release any of the DataCard Related
Persons from any agreements, covenants or obligations which
any of them may continue to have after the date hereof under
this Settlement Agreement or the Service Agreement.
7. DISMISSAL OF DATACARD ACTION. Immediately following receipt by DataCard of
the October 1 Balance, the parties shall file a stipulation with the Hennepin
County District Court to dismiss the DataCard Collection Action with prejudice,
including all claims and counterclaims which were or could have been asserted
therein. The filing of such stipulation shall not bar DataCard from filing
subsequent collection or other actions in the event of a breach by Gunther of
the terms of this Settlement Agreement or the terms of the Service Agreement.
8. MISCELLANEOUS PROVISIONS.
a. BINDING NATURE AND ASSIGNMENT. This Settlement Agreement
shall be binding upon the parties and their respective
affiliates, present and former directors, officers, employees,
successors, agents, assigns and all other persons directly or
indirectly involved in the performance of the Service
Agreement. Neither party shall have the power to assign or
delegate its rights or duties under this Settlement Agreement
to any third party without the prior written consent of the
other party.
b. CHOICE OF LAW; VENUE; ATTORNEYS' FEES AND COSTS. The
construction, enforceability, validity and interpretation of
this Settlement Agreement shall be governed by the laws of the
state of Minnesota, without giving effect to its provisions
relating to conflict of laws. Any action between the parties
based on or arising out of this Settlement Agreement or the
Service Agreement shall be venued in state district court for
the district of Hennepin County, Minnesota, or federal
district court for the district of Minnesota. In the event of
any such action, the prevailing party shall be awarded
attorneys' fees and legal costs.
c. ENTIRE AGREEMENT AND MODIFICATIONS. This Settlement
Agreement constitutes the entire and exclusive statement of
the agreement between the parties with respect to its subject
matter and there are no oral or written
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representations, understandings or agreements relating to this
Settlement Agreement which are not fully expressed herein.
Notwithstanding, expect as expressly modified by this Settlement
Agreement, the Service Agreement remains unmodified and in full force
and effect. No waiver, modification, change or amendment hereof shall
be valid unless such is in writing and signed by an authorized
representative of the party against which such waiver, modification,
change or amendment is sought to be enforced.
d. FACSIMILE SIGNATURES. This Settlement Agreement shall be signed by
authorized representatives of both parties, it being expressly agreed
that facsimile signatures shall be acceptable for purposes of binding
the parties to the terms hereof. In the event that the parties elect to
use facsimile signatures, they shall as soon thereafter as practicable
exchange fully executed originals of this Settlement Agreement.
IN WITNESS WHEREOF, the parties have executed this Settlement Agreement
as of the date first above-written.
DATACARD CORPORATION GUNTHER INTERNATIONAL, LTD.
By: /s/ Dwayne Denchfield By: /s/ James H. Whitney
Its VP General Counsel & Secretary Its CEO
Date: 9/30/98 Date: 9/30/98
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