CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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) March 24, 1998
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Unidigital Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-27664 13-3856672
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
545 West 45th Street, New York, New York 10036
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(Address of Principal Executive Offices) (zip code)
(212) 337-0330
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(Registrant's telephone number, including
area code)
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OF ASSETS.
On March 25, 1998, Unidigital Inc. (the "Company"), through its
wholly-owned subsidiary, Unison (NY), Inc., consummated the acquisition of
substantially all of the assets of Kwik International Color, Ltd. (the "Seller")
located in New York City (the "Kwik Acquisition"). The Seller provided general
printing, color separation and large format printing services. The Company
intends to continue such line of business. The assets purchased included the
Seller's entire customer list, inventory, equipment, cash, accounts receivable
and trade name. The purchase price included cash payments of $20,590,349,
issuance of a 5.7% subordinated promissory note in the principal amount of
$750,000 (payable in 36 monthly installments commencing April 15, 1998),
issuance of 649,841 shares of restricted Common Stock of the Company and the
assumption of certain trade obligations of the Seller.
The purchase price is subject to adjustment in the event the Seller does
not achieve a certain net asset value as of the date of the acquisition. Such
determination shall be made within sixty (60) days of the date of closing. Of
the purchase price, $1,000,000 in cash and $1,000,000 of restricted Common Stock
of the Company (190,589 shares) is being held in escrow for a period of two
years to satisfy any purchase price adjustments or indemnification claims.
In determining the purchase price, the Company considered, among other
factors, (i) the composition of the Seller's assets, in particular, its cash
position and the strength of the Seller's balance sheet; (ii) the business,
operations and prospects of the Seller; (iii) the financial statements and other
relevant financial and operating data of the Seller; (iv) the historical and
projected financial information prepared by the management of the Seller; and
(v) the past and projected revenues generated from the customers of the Seller.
The Company funded the cash portion of the purchase price from proceeds of
a $25,000,000 term loan and a $10,000,000 revolving credit loan from Canadian
Imperial Bank of Commerce ("CIBC"). See "Item 5. Other Events." below.
Richard J. Sirota, the sole shareholder of the Seller ("Sirota"), and the
Company entered into a three-year Employment Agreement pursuant to which Sirota
shall serve as the Senior Vice President and Chief Operating Officer of the
Company at an initial annual salary of $250,000. Sirota also was appointed to
the Company's Board of Directors. Effective upon consummation of the Kwik
Acquisition, Peter Saad, formerly the Senior Vice President and Chief Operating
Officer of the Company, was named President of the Company.
In addition, on March 25, 1998, Sirota and William E. Dye, Chairman of the
Board and Chief Executive Officer of the Company ("Dye"), executed a
Stockholders' Agreement pursuant to which (i) Sirota and Dye granted the Company
and each other the right of first refusal with respect to their respective sales
of the Company's Common Stock, (ii) Sirota and Dye agreed to vote for each other
in the election of Directors of the Company and (iii) Sirota agreed not to
acquire more than 1,000,000 shares of the Company's Common Stock without the
prior written consent of Dye.
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ITEM 5. OTHER EVENTS.
On March 24, 1998, the Company terminated its financing facilities with The
Chase Manhattan Bank and entered into borrowing arrangements with CIBC in the
aggregate amount of $40,000,000, which consist of a: (i) $25,000,000 term loan;
(ii) $10,000,000 revolving line of credit facility which is available for
working capital purposes; and (iii) $5,000,000 credit facility which is
available for corporate acquisition purposes. Such credit facilities are
guaranteed by the Company's United States subsidiaries. In addition, the Company
pledged all of its equity interests in its United States subsidiaries and
two-thirds of its equity interests in its wholly-owned United Kingdom subsidiary
as collateral for such credit facilities. Interest under such credit facilities
is, at the Company's option, at the Base Rate or at the Eurodollar Rate, as
defined, plus an Applicable Margin, as defined, ranging from 0.75% to 3%
depending on the Company's consolidated debt to earnings ratio and the type of
loan. As of March 31, 1998, the Company had an outstanding balance of $8,350,000
under the revolving credit facility and $25,000,000 under the term loan. A
portion of the proceeds of such loans was used to repay in full promissory notes
previously issued by the Company in 1997 in the aggregate principal amount of
$4,000,000.
The credit facilities contain covenants which require the Company to
maintain certain earnings and debt to earnings ratio requirements based on the
combined operations of the Company and its subsidiaries. The credit facilities
are secured by a first priority lien on all of the assets of the Company and its
subsidiaries, a mortgage on the Company's facilities located at 545 West 45th
Street, New York, New York and a leasehold mortgage on the Company's facilities
acquired as part of the Kwik Acquisition located at 229 West 28th Street, New
York, New York. The Company, CIBC and Sirota entered into an intercreditor
subordination agreement with respect to CIBC's and Sirota's relative interests
in the Company.
The Company's agreement with CIBC restricts the Company's ability to pay
certain dividends without CIBC's prior written consent.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Information of Business Acquired.
To be filed by amendment. The Company believes that it is impracticable to
provide such financial information as of the date hereof. Such information shall
be filed with the Commission no later than June 7, 1998.
(b) Pro Forma Financial Information (unaudited).
To be filed by amendment. The Company believes that it is impracticable to
provide such financial information as of the date hereof. Such information shall
be filed with the Commission no later than June 7, 1998.
(c) Exhibits.
Exhibit No. Description of Exhibit
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4.1 Stockholders' Agreement dated as of March
25, 1998 by and among Unidigital Inc.,
William E. Dye and Richard J. Sirota.
10.1 Asset Purchase Agreement dated as of March
25, 1998 by and among Unidigital Inc.,
Unison (NY), Inc., Kwik International
Color, Ltd. and Richard J. Sirota.
10.2 Subordinated Promissory Note dated March
25, 1998 of Unidigital Inc. payable to Kwik
International Color, Ltd. in the principal
amount of $750,000.
10.3 Employment Agreement dated as of March
25, 1998 by and between Unidigital Inc.and
Richard J. Sirota.
10.4 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the fourth
floor, known as Room 401-405.
10.5 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the seventh
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floor, known as Room 706-714 and 707-
713.
10.6 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the eighth
floor.
10.7 Loft Lease dated March 1, 1997 between
S.N.Y., Inc. and Kwik International Color,
Ltd. for the property located at 229 W. 28th
Street, New York, New York, on the ninth
floor.
10.8 Credit Agreement dated as of March 24,
1998 by and among Unidigital Inc., the
lenders from time to time parties thereto and
Canadian Imperial Bank of Commerce.
10.9 Term Note dated March 24, 1998 of
Unidigital Inc. payable to Canadian Imperial
Bank of Commerce in the principal amount
of $25,000,000.
10.10 Acquisition Note dated March 24, 1998 of
Unidigital Inc. payable to Canadian Imperial
Bank of Commerce in the principal amount
of $5,000,000.
10.11 Revolving Credit Note dated March 24,
1998 of Unidigital Inc. payable to Canadian
Imperial Bank of Commerce in the principal
amount of $10,000,000.
10.12 Stock Pledge Agreement (U.S.) dated as of
March 24, 1998 made by Unidigital Inc. in
favor of Canadian Imperial Bank of
Commerce.
10.13 Mortgage dated as of March 24, 1998 made
by Unidigital Inc. in favor of Canadian
Imperial Bank of Commerce.
10.14 Security Agreement dated as of March 24,
1998 made by Unidigital Inc. in favor of
Canadian Imperial Bank ofCommerce.
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10.15 Subsidiaries Guarantee dated as of March
24, 1998 made by each of Unidigital
Elements (NY), Inc., Unidigital Elements
(SF), Inc., Unison (NY), Inc. and Unison
(MA), Inc., in favor of Canadian Imperial
Bank of Commerce.
10.16 Intercreditor and Subordination Agreement
dated as of March 25, 1998 by and among
Kwik International Color, Ltd., Unidigital
Inc. and Canadian Imperial Bank of
Commerce.
10.17 Mortgage, Assignment of Leases and Rents
and Security Agreement dated as of March
24, 1998 between Unidigital Inc. and
Canadian Imperial Bank of Commerce.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Unidigital Inc.
By: /s/William E. Dye
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William E. Dye, Chairman of
the Board and Chief Executive
Officer (Principal Executive,
Financial and Accounting Officer)
Date: April 8, 1998