SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of March 24, 1998, made by
UNIDIGITAL Inc., a Delaware corporation (the "Borrower") and each subsidiary of
the Borrower which is a signatory hereto (together with the Borrower,
collectively, the "Loan Parties") in favor of CANADIAN IMPERIAL BANK OF
COMMERCE, as administrative agent (in such capacity, the "Administrative Agent")
for the lenders (the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE (in such
capacity, the "Issuing Lender") parties to the Credit Agreement referred to
below.
RECITALS
Pursuant to the Credit Agreement, dated as of March 24, 1998
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Borrower, the various lenders from time to time a party
thereto (the "Lenders"), the Issuing Lender and the Administrative Agent, the
Lenders have severally agreed to make loans to and the Issuing Lender has agreed
to issue letters of credit for the account of the Borrower upon the terms and
subject to the conditions set forth therein, such loans to be evidenced by the
Notes issued by the Borrower thereunder. It is a condition precedent to the
obligation of the Lenders to make their respective loans to the Borrower, and of
the Issuing Lender to issue its letters of credit, under the Credit Agreement
that the Loan Parties shall have executed and delivered this Security Agreement
to the Administrative Agent for the ratable benefit of the Lenders and the
Issuing Lender.
NOW, THEREFORE, in consideration of the premises and to induce
the Lenders, the Issuing Lender and the Administrative Agent to enter into the
Credit Agreement and to induce the Lenders to make their respective loans to the
Borrower, and the Issuing Lender to issue its letters of credit, under the
Credit Agreement, each Loan Party hereby agrees with the Administrative Agent,
for the ratable benefit of the Lenders and the Issuing Lender, as follows:
1. Defined Terms. (a) Unless otherwise defined herein,
capitalized terms which are defined in the Credit Agreement and used herein
shall have the meanings given to them in the Credit Agreement; the following
terms which are defined in the Uniform Commercial Code in effect in the State of
New York on the date hereof are used herein as so defined: Accounts, Chattel
Paper, Documents, Equipment, Farm Products, General
Intangibles, Instruments, Inventory and Proceeds; and the following terms shall
have the following meanings:
"Bank Account": a deposit, custody, or other account (whether,
in any case, time or demand or interest or non-interest bearing) maintained by a
Loan Party with any bank or other financial institution, all of which are set
forth on Schedule I.
"Bank Account Deposits": all cash and securities from time to
time standing to the credit of each Bank Account, and all interest, principal
and other distributions payable on or with respect to, such Bank Account.
"Blocked Account Agreement": an agreement, substantially in
the form attached hereto as Annex A, among a Loan Party, the Administrative
Agent and the bank at which such Loan Party maintains a Designated Bank Account.
"Code": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral": as defined in Section 2 of this Security
Agreement.
"Collateral Account": any collateral account established
by the Administrative Agent as provided in Section 3(d) or 8.
"Contracts": the contracts and agreements listed on Schedule
II hereto, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (a) all rights of any Loan
Party to receive moneys due and to become due to it thereunder or in connection
therewith, (b) all rights of any Loan Party to damages arising out of, or for,
breach or default in respect thereof and (c) all rights of any Loan Party to
perform and to exercise all remedies thereunder.
"Designated Bank Account": a deposit, custody, money-market or
other account of any Loan Party for which a Blocked Account Agreement has been
executed by the Borrower, the bank at which such Designated Bank Account has
been established and the Administrative Agent.
"Hedge Agreement": as to any Person, any swap, cap, collar or
similar arrangement entered into by such Person providing for protection against
fluctuations in interest rates or currency exchange rates or the exchange of
nominal interest obligations, either generally or under specific contingencies.
"Secured Obligations": with respect to any Loan Party, the
collective reference to (a) the Obligations, and (b) all obligations and
liabilities of such Loan Party to the Administrative Agent and the Lenders,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, which may arise under, out of or in connection
with any Hedge Agreement entered into by any Loan Party with any Lender and any
other document made, delivered or given in connection therewith, whether on
account of
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principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses (including, without limitation, all fees and disbursements of counsel
to the Administrative Agent or to the Lenders that are required to be paid by
such Loan Party pursuant to the terms of such Hedge Agreement or other
documents) or otherwise.
"Security Agreement": this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
"Trademarks": (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, all prints or
labels on which any of the foregoing appear, and all designs and general
intangibles of a like nature, and the goodwill associated therewith or
symbolized thereby, and all other assets, rights and interests that uniquely
embody such goodwill, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, or otherwise and (b) all
extensions or renewals thereof.
"Trademark License": any agreement, written or oral, providing
for the grant by or to the Borrower of any right to use any Trademark.
"Vehicles": all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title law of any
State and, in any event, including, without limitation, the vehicles listed on
Schedule III hereto and all tires and other appurtenances to any of the
foregoing.
(b) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Security Agreement shall refer to this Security
Agreement as a whole and not to any particular provision of this Security
Agreement, and Section, Schedule. Annex, and Exhibit references are to this
Security Agreement unless otherwise specified. The meanings given to terms
defined herein shall be equally applicable to both the singular and plural forms
of such terms.
2. Grant of Security Interest. As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Secured Obligations, each Loan
Party hereby grants to the Administrative Agent for the ratable benefit of the
Lenders and the Issuing Lender a security interest in all of the following
property now owned or at any time hereafter acquired by any Loan Party or in
which any Loan Party now has or at any time in the future may acquire any right,
title or interest (collectively, the "Collateral"):
(i) all Accounts;
(ii) all Bank Accounts;
(iii) all Bank Account Deposits;
(iv) all Chattel Paper;
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(v) all Contracts;
(vi) all Documents;
(vii) all Equipment;
(viii) all General Intangibles;
(ix) all Instruments;
(x) all Inventory;
(xi) all Trademarks;
(xii) all Trademark Licenses;
(xiii) all Vehicles;
(xiv) all books and records pertaining to the
Collateral; and
(xv) to the extent not otherwise included, all
Proceeds and products of any and all of the
foregoing.
3. Rights of Administrative Agent and Lenders; Limitations on
Administrative Agent's and Lenders' Obligations.
(a) Each Loan Party Remains Liable under Accounts and
Contracts. Anything herein to the contrary notwithstanding, each Loan Party
shall remain liable under each of the Accounts and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account and in accordance with and pursuant to the terms and
provisions of each such Contract. None of the Administrative Agent, any Lender
nor the Issuing Lender shall have any obligation or liability under any Account
(or any agreement giving rise thereto) or under any Contract by reason of or
arising out of this Security Agreement or the receipt by the Administrative
Agent any such Lender or the Issuing Lender of any payment relating to such
Account or Contract pursuant hereto, nor shall the Administrative Agent nor any
Lender nor the Issuing Lender be obligated in any manner to perform any of the
obligations of any Loan Party under or pursuant to any Account (or any agreement
giving rise thereto) or under or pursuant to any Contract, to make any payment,
to make any inquiry as to the nature or the sufficiency of any payment received
by it or as to the sufficiency of any performance by any party under any Account
(or any agreement giving rise thereto) or under any Contract, to present or file
any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
(b) Notice to Account Debtors and Contracting Parties. Upon
the request of the Administrative Agent at any time after the occurrence and
during the continuance of an Event of Default, any Loan Party so instructed
shall notify account debtors on the Accounts and parties to the Contracts that
the Accounts and the Contracts have been assigned to the Administrative Agent
for the ratable benefit of the Lenders and the Issuing Lender and that payments
in respect thereof shall be made directly to the Administrative Agent.
(c) Analysis of Accounts and Contracts. The Administrative
Agent shall have the right to make test verifications of the Accounts in any
manner and through any medium that it reasonably considers advisable, and each
Loan Party shall furnish all such
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assistance and information as the Administrative Agent may require in connection
therewith. At any time and from time to time, upon the Administrative Agent's
request and at the expense of the Loan Parties, each Loan Party so instructed
shall cause independent public accountants or others satisfactory to the
Administrative Agent to furnish to the Administrative Agent reports showing
reconciliations, aging and test verifications of, and trial balances for, the
Accounts. The Administrative Agent may in its own name or in the name of others
communicate with account debtors on the Accounts and parties to the Contracts to
verify with them to its satisfaction the existence, amount and terms of any
Accounts or Contracts.
(d) Collections on Accounts. The Administrative Agent hereby
authorizes each Loan Party to collect the Accounts, subject to the
Administrative Agent's direction and control, and the Administrative Agent may
curtail or terminate said authority at any time after the occurrence and during
the continuance of an Event of Default. If required by the Administrative Agent
at any time when an Event of Default shall have occurred and be continuing, any
payments of Accounts, when collected by each Loan Party, shall be forthwith
(and, in any event, within two Business Days) deposited by the Borrower in the
exact form received, duly endorsed by such Loan Party to the Administrative
Agent if required, in a special collateral account maintained by the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders and the Issuing Lender only, as hereinafter provided,
and, until so turned over, shall be held by such Loan Party in trust for the
Administrative Agent, the Lenders and the Issuing Lender, in an account
segregated from other funds of such Loan Party (the "Collateral Account"). Each
deposit of any such Proceeds shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
All Proceeds constituting collections of Accounts while held by the
Administrative Agent (or by the Loan Parties in trust for the Administrative
Agent, the Lenders and the Issuing Lender) shall continue to be collateral
security for all of the Secured Obligations and shall not constitute payment
thereof until applied as hereinafter provided. At such intervals as may be
agreed upon by the Loan Parties and the Administrative Agent, or, if an Event of
Default shall have occurred and be continuing, at any time at the Administrative
Agent's election, the Administrative Agent shall apply all or any part of the
funds on deposit in said Collateral Account on account of the Secured
Obligations in such order as the Administrative Agent may elect, and any part of
such funds which the Administrative Agent elects not so to apply and deems not
required as collateral security for the Secured Obligations shall be paid over
from time to time by the Administrative Agent to the Loan Party or to whomsoever
may be lawfully entitled to receive the same. At the Administrative Agent's
request, the Loan Parties shall deliver to the Administrative Agent all original
and other documents evidencing, and relating to, the agreements and transactions
which gave rise to the Accounts, including, without limitation, all original
orders, invoices and shipping receipts.
(C) Upon the occurrence and during the continuance of an Event
of Default, the Administrative Agent may notify the Loan Parties in writing that
such Event of Default has occurred and is continuing, and that, pursuant to the
Blocked Account Agreement, the Administrative Agent shall have access to any or
all Designated Bank Accounts; provided that no such notice need be given by the
Administrative Agent to the Loan Parties if such Event of Default is an Event of
Default specified in either Section 11(f)(i) or (ii) of the Credit Agreement.
Upon the giving of such notice, or upon the occurrence of an Event of Default
specified in either Section 11(f)(i) or (ii) of the Credit
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Agreement, the Administrative Agent shall be entitled, at the Administrative
Agent's sole discretion, to withdraw all or any portion of funds deposited in
Designated Bank Accounts and apply such funds to the payment of the Secured
Obligations in such order as the Administrative Agent may elect.
4. Representations and Warranties. Each Loan Party hereby
represents and warrants that:
(a) Title; No Other Liens. Except for the Liens granted to the
Administrative Agent for the ratable benefit of the Lenders and the
Issuing Lender pursuant to this Security Agreement, and the other Liens
permitted to exist on the Collateral pursuant to the Credit Agreement,
each Loan Party owns each item of the Collateral free and clear of any
and all Liens or claims of others. No security agreement, financing
statement or other public notice with respect to all or any part of the
Collateral is on file or of record in any public office, except such as
may have been filed in favor of the Administrative Agent, for the
ratable benefit of the Lenders and the Issuing Lender, pursuant to this
Security Agreement or as may be permitted pursuant to the Credit
Agreement.
(b) Perfected First Priority Liens. When financing statements
have been filed in the offices in the jurisdictions listed in Schedule
7.16 to the Credit Agreement, the Liens granted pursuant to this
Security Agreement will constitute perfected Liens in favor of the
Administrative Agent, for the ratable benefit of the Lenders and the
Issuing Lender, in the Collateral, which can be perfected by such
filing, as collateral security for the Secured Obligations, which Liens
are prior to all other Liens on the Collateral created by the Loan
Parties and in existence on the date hereof and which are enforceable
as such against all creditors of and purchasers from the Loan Parties
and against any owner or purchaser of the real property where any of
the Equipment or Inventory is located and any present or future
creditor obtaining a Lien on such real property.
(c) Accounts. The amount represented by each Loan Party to the
Administrative Agent from time to time as owing by each account debtor
or by all account debtors in respect of the Accounts will at such time
be the correct amount actually owing by such account debtor or debtors
thereunder. No amount payable to any Loan Party under or in connection
with any Account is evidenced by any Instrument or Chattel Paper which
has not been delivered to the Administrative Agent. The place where
each Loan Party keeps its records concerning the Accounts is set forth
on Schedule IV.
(d) Contracts. No consent of any party (other than the Loan
Party which is a party to such Contract) to any Contract is required,
or purports to be required, in connection with the execution, delivery
and performance of this Security Agreement. Each Contract is in full
force and effect and constitutes a valid and legally enforceable
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obligation of the parties thereto, except as enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws affecting the
enforcement of creditor's rights generally and general equitable
principles (whether considered in a proceeding in equity or at law). No
consent or authorization of, filing with or other act by or in respect
of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of
the Contracts by any party thereto other than those which have been
duly obtained, made or performed, are in full force and effect and do
not subject the scope of any such Contract to any material adverse
limitation, either specific or general in nature. Neither the Loan
Party which is a party to any Contract nor (to the best of such Loan
Party's knowledge) any other party to any Contract is in default or is
likely to become in default in the performance or observance or any of
the terms thereof. Each Loan Party has fully performed all its
obligations under each Contract. The right title and interest of each
Loan Party in, to and under each Contract are not subject to any
defense, offset, counterclaim or claim which could reasonably be
expected to have a Material Adverse Effect, nor have any of the
foregoing been asserted or alleged against any Loan Party as to any
Contract. Each Loan Party has delivered to the Administrative Agent a
complete and correct copy of each Contract, including all amendments,
supplements and other modifications thereto. No amount payable to any
Loan Party under or in connection with any Contract is evidenced by any
Instrument or Chattel Paper which has not been delivered to the
Administrative Agent.
(e) Inventory and Equipment. The Inventory and the Equipment
are kept at the locations listed on Schedule V hereto.
(f) Chief Executive Office. The chief executive office and
chief place of business of each Loan Party is set forth on Schedule VI
hereto.
(g) Farm Products. None of the Collateral constitutes, or is
the Proceeds of, Farm Products.
(h) Insurance Policies. None of the Collateral constitutes an
interest or claim in or under any policy of insurance or contract for
annuity, except to the extent the same constitutes Proceeds.
(i) Vehicles. Schedule III is a complete and correct list of
all Vehicles owned by each Loan Party.
(j) Governmental Obligors. None of the obligors on any
Accounts, and none of the parties to any Contracts, is a Governmental
Authority.
(k) Blocked Account Agreements. For each deposit, custody,
money-market or other accounts (whether, in any case, time or demand or
interest or non-interest bearing) maintained by each Loan Party with
any bank or any other financial institution, a Blocked Account
Agreement among such bank, such Loan Party and the Administrative Agent
shall have been executed.
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(l) Patents and Trademarks. No Credit Party has any patents or
registered trademarks.
5. Covenants. Each Loan Party covenants and agrees with the
Administrative Agent, the Lenders and the Issuing Lender that, from and after
the date of this Security Agreement until the Secured Obligations are paid in
full and the Commitments have expired or been terminated:
(a) Maintenance of Perfected Security Interests; Further
Documentation; Pledge of Instruments and Chattel Paper. Each Loan Party
shall maintain the security interest created by this Security Agreement
as a perfected security interest having at least the priority described
in Section 4(b) hereof and shall defend such security interest against
the claims and demands of all Persons whomsoever. At any time and from
time to time, upon the written request of the Administrative Agent, and
at the sole expense of the Loan Parties, the Loan Parties so instructed
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Security Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in
any jurisdiction with respect to the Liens created hereby. Each Loan
Party also hereby authorizes the Administrative Agent to file any such
financing or continuation statement without the signature of any Loan
Party to the extent permitted by applicable law. A carbon, photographic
or other reproduction of this Security Agreement shall be sufficient as
a financing statement for filing in any jurisdiction. If any amount
payable under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, such Instrument or
Chattel Paper shall be immediately delivered to the Administrative
Agent, duly endorsed in a manner satisfactory to the Administrative
Agent, to be held as Collateral pursuant to this Security Agreement.
(b) Indemnification. Each Loan Party agrees to pay, and to
save the Administrative Agent, the Lenders and the Issuing Lender
harmless from, any and all liabilities, costs and expenses (including,
without limitation, legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other
taxes which may be payable or determined to be payable with respect to
any of the Collateral, (ii) with respect to, or resulting from, any
delay in complying with any Requirement of Law applicable to any of the
Collateral or (iii) in connection with any of the transactions
contemplated by this Security Agreement. In any suit, proceeding or
action brought by the Administrative Agent, any Lender or the Issuing
Lender under any Account or Contract for any sum owing thereunder, or
to enforce any provisions of any Account or Contract, each Loan Party
will save, indemnify and keep the Administrative Agent, such Lender and
the Issuing Lender harmless from and against all expense, loss or
damage suffered by reason of any defense, setoff, counterclaim,
recoupment or reduction or liability whatsoever of the account debtor
or obligor thereunder, arising out of a breach by any Loan Party of any
obligation thereunder or
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arising out of any other agreement, indebtedness or liability at any
time owing to or in favor of such account debtor or obligor or its
successors from such Loan Party.
(c) Maintenance of Records. Each Loan Party will keep and
maintain at its own cost and expense satisfactory and complete records
of the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the Accounts.
Each Loan Party will mark its books and records pertaining to the
Collateral to evidence this Security Agreement and the security
interests granted hereby. Upon the occurrence and during the
continuance of an Event of Default, the Loan Parties shall turn over
any books and records pertaining to the Collateral to the
Administrative Agent or to its representatives during normal business
hours at the request of the Administrative Agent.
(d) Right of Inspection. The Administrative Agent, the Lenders
and the Issuing Lender shall at all times have full and free access
during normal business hours to all the books, correspondence and
records of the Loan Parties, and the Administrative Agent, the Lenders
and the Issuing Lender or their respective representatives may examine
the same, take extracts therefrom and make photocopies thereof, and the
Loan Parties agree to render to the Administrative Agent, the Lenders
and the Issuing Lender, at the Borrower's cost and expense, such
clerical and other assistance as may be reasonably requested with
regard thereto. The Administrative Agent, the Lenders and the Issuing
Lender and their respective representatives shall at all times also
have the right to enter into and upon any premises where any of the
Inventory or Equipment is located for the purpose of inspecting the
same, observing its use or otherwise protecting its interests therein.
(e) Compliance with Laws, etc. Each Loan Party will comply in
all material respects with all Requirements of Law applicable to the
Collateral or any part thereof or to the operation of any Loan Party's
business; provided, however, that any Loan Party may contest any
Requirement of Law in any reasonable manner which shall not, in the
sole opinion of the Administrative Agent, adversely affect the
Administrative Agent's, the Lenders' or the Issuing Lender's rights or
the priority of its Liens on the Collateral.
(f) Compliance with Terms of Contracts, etc. Each Loan Party
will perform and comply in all material respects with all its
obligations under the Contracts and all its other Contractual
Obligations relating to the Collateral.
(g) Payment of Obligations. Each Loan Party will pay promptly
when due all taxes, assessments and governmental charges or levies
imposed upon the Collateral or in respect of its income or profits
therefrom, as well as all claims of any kind (including, without
limitation, claims for labor, materials and supplies) against or with
respect to the Collateral, except that no such charge need be paid if
(i) the validity thereof is being contested in good faith by
appropriate proceedings, (ii) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of
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the Collateral or any interest therein and (iii) such charge is
adequately reserved against on the Borrower's books in accordance with
GAAP.
(h) Limitation on Liens on Collateral. No Loan Party will
create, incur or permit to exist, will defend the Collateral against,
and will take such other action as is necessary to remove, any Lien or
claim on or to the Collateral, other than the liens created hereby and
other than as permitted pursuant to the Credit Agreement, and will
defend the right, title and interest of the Administrative Agent, the
Lenders and the Issuing Lender in and to any of the Collateral against
the claims and demands of all Persons whomsoever.
(i) Limitations on Dispositions of Collateral. No Loan Party
will sell, transfer, lease or otherwise dispose of any of the
Collateral, or attempt, offer or contract to do so except for (x) sales
of Inventory in the ordinary course of its business and (y) so long as
no Default or Event of Default has occurred and is continuing, sales,
transfers and other dispositions of Collateral permitted under Section
10 of the Credit Agreement.
(j) Limitations on Modifications of Contracts and Agreements
Giving Rise to Accounts; Exercise of Rights; Notices. No Loan Party
will (i) amend, modify, terminate or waive any provision of any
Contract or any agreement giving rise to an Account in any manner which
could reasonably be expected to materially adversely affect the value
of such Contract or such Account as Collateral, (ii) other than in the
ordinary course of business as generally conducted by any such Loan
Party over a period of time, fail to exercise promptly and diligently
each and every material right which it may have under each Contract and
each agreement giving rise to an Account (other than any right of
termination) or (iii) fail to deliver to the Administrative Agent a
copy of each material demand, notice or document received by it
relating in any way to any Contract or any agreement giving rise to an
Account that questions the validity or enforceability of such Contract
or Accounts constituting more than 5% of the aggregate amount of the
Accounts.
(k) Limitations on Discounts, Compromises, Extensions of
Accounts. Other than in the ordinary course of business consistent with
its past practice, no Loan Party will (i) grant any extension of the
time of payment of any Account, (ii) compromise, compound or settle any
Account for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Account, or (iv)
allow any credit or discount whatsoever on any Account.
(l) Maintenance of Equipment. Each Loan Party will maintain
each item of Equipment in good operating condition, ordinary wear and
tear and immaterial impairments of value and damage by the elements
excepted, and will provide all maintenance, service and repairs
necessary for such purpose, except that the Loan Parties' obligations
pursuant to this Section 5(l) shall not extend to obsolete Equipment.
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(m) Maintenance of Insurance. Each Loan Party will maintain,
with financially sound and reputable companies, insurance policies (i)
insuring the Inventory, Equipment and Vehicles against loss by fire,
explosion, theft and such other casualties as may be reasonably
satisfactory to the Administrative Agent in amounts comparable to
amounts of insurance coverage obtained by similar businesses of similar
size acting prudently and (ii) insuring each Loan Party, the
Administrative Agent, the Lenders and the Issuing Lender against
liability for personal injury and property damage relating to such
Inventory, Equipment and Vehicles, such policies to be in such form and
amounts and having such coverage as shall be comparable to forms,
amounts and coverage, respectively, obtained by similar businesses of
similar size acting prudently, with losses payable to the respective
Loan Party, the Administrative Agent, the Lenders and the Issuing
Lenders as their respective interests may appear or, in the case of
liability insurance, showing the Administrative Agent, the Lenders and
the Issuing Lender as additional insured parties. All such insurance
shall (i) provide that no cancellation, material reduction in amount or
material change in coverage thereof shall be effective until at least
30 days after receipt by the Administrative Agent of written notice
thereof, (ii) name the Administrative Agent, the Lenders and the
Issuing Lender as insured parties and loss payees, (iii) include a
breach of warranty clause and (iv) be reasonably satisfactory in all
other respects to the Administrative Agent. Each Loan Party shall
deliver to the Administrative Agent a report of a reputable insurance
broker with respect to such insurance during the month of March in each
calendar year and such supplemental reports with respect thereto as the
Administrative Agent may from time to time reasonably request.
(n) Further Identification of Collateral. Each Loan Party will
furnish to the Administrative Agent from time to time statements and
schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as the Administrative
Agent may reasonably request, all in reasonable detail.
(o) Notices. Each Loan Party will advise the Administrative
Agent and the Lenders promptly, in reasonable detail, at their
respective addresses set forth in the Credit Agreement, (i) of any Lien
(other than Liens created hereby or permitted under the Credit
Agreement) on, or claim asserted against, any of the Collateral and
(ii) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of
the Collateral or on the Liens created hereunder.
(p) Changes in Locations, Name, etc. No Loan Party will (i)
change the location of its chief executive office/chief place of
business from that specified in Section 4(f) or remove its books and
records concerning the Accounts from the location specified in Section
4(c), (ii) permit any of the Inventory or Equipment to be kept at a
location other than those listed on Schedule V hereto or (iii) change
its name, identity or corporate structure to such an extent that any
financing statement filed by the Administrative Agent in connection
with this Security Agreement would become seriously misleading.
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(q) Trademarks.
(i) Each Loan Party (either itself or through
licensees) will, except with respect to any Trademark that the
Borrower shall reasonably determine is of negligible economic
value to it, (A) continue to use each Trademark on each and
every trademark class of goods applicable to its current line
as reflected in its current catalogs, brochures and price
lists in order to maintain such Trademark in full force free
from any claim of abandonment for non-use, (B) maintain as in
the past the quality of products and services offered under
such Trademark, (C) employ such Trademark with the appropriate
notice of registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark
unless the Administrative Agent, for the ratable benefit of
the Lenders and the Issuing Lender, shall obtain a perfected
security interest in such mark pursuant to this Security
Agreement, and (E) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
(ii) Each Loan Party shall from time to time execute
and deliver any and all agreements, instruments, documents,
and papers as the Administrative Agent may request to evidence
the Administrative Agent's security interest for the ratable
benefit of the Lenders and the Issuing Lender in any Trademark
and the goodwill and general intangibles of each Loan Party
relating thereto or represented thereby, and each Loan Party
hereby constitutes the Administrative Agent its
attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby
ratified and confirmed, such power being coupled with an
interest is irrevocable until the Secured Obligations are paid
in full and the Commitments are terminated.
(r) Vehicles. Each Loan Party will maintain each Vehicle in
good operating condition, ordinary wear and tear and immaterial
impairments of value and damage by the elements excepted, and will
provide all maintenance, service and repairs necessary for such
purpose. Each Loan Party will notify the Administrative Agent of each
acquisition or sale of a Vehicle, promptly following the acquisition or
sale thereof. If an Event of Default shall occur and be continuing, at
the request of the Administrative Agent the Borrower shall, within five
Business Days after such request, file applications for certificates of
title indicating the Administrative Agent's first priority Lien for the
ratable benefit of the Lenders and the Issuing Lender on the Vehicles
covered by such certificates, together with any other necessary
documentation, in each office in each jurisdiction which the
Administrative Agent shall deem advisable to perfect its Liens on the
Vehicles.
(s) Inventory. None of the Inventory of the Borrower shall be
evidenced by a warehouse receipt.
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(t) Bank Accounts. Each Credit Party will maintain all of its
Bank Accounts, as set forth on Schedule I, as Designated Bank Accounts.
6. Administrative Agent's Appointment as Attorney-in-
Fact.
(a) Powers. The Borrower hereby irrevocably constitutes and
appoints the Administrative Agent and any officer or Administrative
Agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place
and stead of the Borrower and in the name of the Borrower or in its own
name, from time to time in the Administrative Agent's discretion, for
the purpose of carrying out the terms of this Security Agreement, to
take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to
accomplish the purposes of this Security Agreement, and, without
limiting the generality of the foregoing, the Borrower hereby gives the
Administrative Agent the power and right, on behalf of the Borrower,
without notice to or assent by the Borrower, to do the following:
(i) in the name of the Borrower or its own name, or
otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for
the payment of moneys due under any Account, Instrument,
General Intangible or Contract or with respect to any other
Collateral and to file any claim or to take any other action
or proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose
of collecting any and all such moneys due under any Account,
Instrument, General Intangible or Contract or with respect to
any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral, to effect any
repairs or any insurance called for by the terms of this
Security Agreement and to pay all or any part of the premiums
therefor and the costs thereof;
(iii) in the case of any Trademark, to execute and
deliver any and all agreements, instruments, documents and
papers as the Administrative Agent may request to evidence the
Administrative Agent's and the Lenders' security interest in
such Trademark and the goodwill and general intangibles of the
Borrower relating thereto or represented thereby;
(iv) to execute, in connection with any sale provided
for in Section 9 hereof, any indorsements, assignments or
other instruments of conveyance or transfer with respect to
the Collateral; and
(v) (A) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due or to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall
direct; (B) to ask or demand for, collect, receive payment of
and receipt
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for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any
Collateral; (C) to sign and endorse any invoices, freight or
express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices
and other documents in connection with any of the Collateral;
(D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any thereof and to
enforce any other right in respect of any Collateral; (E) to
defend any suit, action or proceeding brought against the
Borrower with respect to any Collateral; (F) to settle,
compromise or adjust any such suit, action or proceeding and,
in connection therewith, to give such discharges or releases
as the Administrative Agent may deem appropriate; (G) to
assign any Trademark (along with the goodwill of the business
to which any such Trademark pertains), throughout the world
for such term or terms, on such conditions, and in such
manner, as the Administrative Agent shall in its sole
discretion determine; and (H) generally, to sell, transfer,
pledge and make any agreement with respect to or otherwise
deal with any of the Collateral as fully and completely as
though the Administrative Agent were the absolute owner
thereof for all purposes, and to do, at the Administrative
Agent's option and the Borrower's expense, at any time, or
from time to time, all acts and things which the
Administrative Agent deems necessary to protect, preserve or
realize upon the Collateral and the Administrative Agent's,
Liens thereon for the ratable benefit of the Lenders and the
Issuing Lender and to effect the intent of this Security
Agreement, all as fully and effectively as the Borrower might
do.
Anything in this Section 6(a) to the contrary notwithstanding,
the Administrative Agent agrees that it will not exercise any rights
under the power of attorney provided for in this Section unless an
Event of Default has occurred and is continuing.
The Borrower hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. This power of
attorney is a power coupled with an interest and are irrevocable.
(b) No Duty on Administrative Agent's, Lenders' or Issuing
Lender's Part. The powers conferred on the Administrative Agent, the
Lenders and the Issuing Lender hereunder are solely to protect the
Administrative Agent's, the Lenders' and the Issuing Lender's interests
in the Collateral and shall not impose any duty upon the Administrative
Agent, any Lender or Issuing Lender to exercise any such powers. Each
of the Administrative Agent, the Lenders and the Issuing Lender shall
be accountable only for amounts that it actually receives as a result
of the exercise of such powers, and neither they nor any of their
officers, directors, employees or Administrative Agents shall be
responsible to the Borrower for any act or failure to act hereunder,
except for its own gross negligence or willful misconduct.
7. Performance by Administrative Agent of Borrower's
Obligations. If the Borrower fails to perform or comply with any of its
agreements contained herein, the
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Administrative Agent, at its option, but without any obligation to do so, may
itself perform or comply, or otherwise cause performance or compliance, with
such agreement. The expenses of the Administrative Agent incurred in connection
with such performance or compliance, together with interest thereon at a rate
per annum 2.0% above the Base Rate, shall be payable by the Borrower to the
Administrative Agent on demand and shall constitute Secured Obligations secured
hereby.
8. Proceeds. In addition to the rights of the Administrative
Agent, the Lenders and the Issuing Lender specified in Section 3(d) with respect
to payments of Accounts, it is agreed that (a) all Proceeds received by the
Borrower consisting of cash, checks and other near-cash items shall be held by
the Borrower in trust for the Administrative Agent, the Lenders and the Issuing
Lender, segregated from other funds of the Borrower, and shall, forthwith upon
receipt by the Borrower, be turned over to the Administrative Agent in the exact
form received by the Borrower (duly endorsed by the Borrower to the
Administrative Agent, if required), and held by the Administrative Agent in a
Collateral Account maintained under the sole dominion and control of the
Administrative Agent. Any and all such Proceeds held by the Administrative Agent
in a Collateral Account (or by the Borrower in trust for the Administrative
Agent and the Lenders and the Issuing Lender) shall continue to be held as
collateral security for the Secured Obligations and shall not constitute payment
thereof until applied as provided in this Section. At such intervals as may be
agreed upon between the Administrative Agent and the Borrower or, if an Event of
Default shall have occurred and be continuing, at any time at the Administrative
Agent's election, the Administrative Agent may apply all or any part of the
Proceeds held in any Collateral Account or otherwise received by the
Administrative Agent against the Secured Obligations (whether matured or
unmatured), such application to be in such order as the Administrative Agent
shall elect. Any balance of such Proceeds remaining after the Secured
Obligations shall have been paid in full and the Commitments shall have expired
or been terminated shall be paid over to the Borrower or to whomsoever may be
lawfully entitled to receive the same.
9. Remedies. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders and the Issuing
Lender, may exercise, in addition to all other rights and remedies granted to it
in this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the Secured Obligations, all rights and remedies of a
secured party under the Code. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon the Borrower or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent, any Lender or
the Issuing Lender or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk. The
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Administrative Agent, any Lender or the Issuing Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Borrower, which right
or equity is hereby waived or released. The Borrower further agrees, at the
Administrative Agent's request, to assemble the Collateral and make it available
to the Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at the Borrower's premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent, the Lenders and the
Issuing Lender arising out of the exercise by the Administrative Agent
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
such order as the Administrative Agent may elect, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the Code, need the Administrative Agent account for the surplus,
if any, to the Borrower. To the extent permitted by applicable law, the Borrower
waives all claims, damages and demands it may acquire against the Administrative
Agent, any Lender or the Issuing Lender arising out of the exercise by the
Administrative Agent, any Lender or the Issuing Lender of any of its rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Borrower shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Secured Obligations
and the fees and disbursements of any attorneys employed by the Administrative
Agent, any Lender or the Issuing Lender to collect such deficiency.
10. Grant of License to Use Trademark Collateral. For the
purpose of enabling the Administrative Agent to exercise rights and remedies
under Section 9 hereof at such time as the Administrative Agent shall be
lawfully entitled to exercise such rights and remedies, the Borrower hereby
grants to the Administrative Agent an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to the Borrower)
to use, license or sublicense any of the Trademarks, now owned or hereafter
acquired by the Borrower, and wherever the same may be located, and including in
such license reasonable access to all media in which any of the licensed items
may be recorded or stored. The use of such license by the Administrative Agent
shall be exercised, at the option of the Administrative Agent for any purpose
appropriate in connection with the exercise of remedies hereunder, only upon the
occurrence and during the continuance of an Event of Default, provided that any
license, sublicense or other transaction entered into by the Administrative
Agent in accordance herewith shall be binding upon the Borrower notwithstanding
any subsequent cure of an Event of Default. The Administrative Agent agrees to
apply the net proceeds received from any license as provided in Section 8
hereof.
11. Limitation on Duties Regarding Presentation of Collateral.
The Administrative Agent's sole duty with respect to the custody, safekeeping
and physical
- 16 -
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar property for its own account. None of
the Administrative Agent, Lender, nor the Issuing Lender nor any of their
respective directors, officers, employees or Administrative Agents shall be
liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of the Borrower or any
other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof. The powers conferred on the Administrative
Agent, the Lenders and the Issuing Lender hereunder are solely to protect the
Administrative Agent's, the Lenders' and the Issuing Lender's interests in the
Collateral and shall not impose any duty upon the Administrative Agent, any
Lender or the Issuing Lender to exercise any such powers. The Administrative
Agent, the Lenders and the Issuing Lender shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or Administrative
Agents shall be responsible to the Borrower for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.
12. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
13. Notices. Notices, requests and demands to or upon the
Administrative Agent or the Borrower hereunder shall be effected in the manner
set forth in Section 13.2 of the Credit Agreement.
14. Authority of Administrative Agent. The Borrower
acknowledges that the rights and responsibilities of the Administrative Agent
under this Security Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative Agent
of any option, voting right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Security Agreement shall, as
between the Administrative Agent, the Lenders and the Issuing Lender, be
governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Borrower, the Administrative Agent shall be
conclusively presumed to be acting as Administrative Agent for the Lenders and
the Issuing Lender with full and valid authority so to act or refrain from
acting, and the Borrower shall be under no obligation, or entitlement, to make
any inquiry respecting such authority.
15. Severability. Any provision of this Security Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
- 17 -
16. Paragraph Headings. The paragraph headings used in this
Security Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
17. No Waiver; Cumulative Remedies. None of the Administrative
Agent, any Lender nor the Issuing Lender shall by any act (except by a written
instrument pursuant to Section 18 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, any Lender or the Issuing
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
any Lender or the Issuing Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, such Lender or the Issuing Lender would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
18. Waivers and Amendments; Successors and Assigns; Governing
Law. None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Borrower and the Administrative Agent, provided that any
provision of this Security Agreement may be waived by the Administrative Agent
in a written instrument executed by the Administrative Agent. This Security
Agreement shall be binding upon the successors and assigns of the Borrower and
shall inure to the benefit of the Administrative Agent, the Lenders and the
Issuing Lender and their respective successors and assigns. This Security
Agreement shall be governed by, and construed and interpreted in accordance
with, the laws of the State of New York.
19. Additional Grantors. Each Subsidiary of the Borrower is
required pursuant to Section 9.9 of the Credit Agreement to become party to this
Security Agreement and shall become a Grantor for all purposes of this Security
Agreement upon execution and delivery by such Subsidiary of a Supplement in the
form of Annex B hereto.
[SIGNATURE PAGE FOLLOWS]
- 18 -
IN WITNESS WHEREOF, the Borrower has caused this Security
Agreement to be duly executed and delivered as of the date first above written.
V-1
UNIDIGITAL INC.
By /s/ William E. Dye
----------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNIDIGITAL ELEMENTS (NY), INC.
By /s/ William E. Dye
----------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNIDIGITAL ELEMENTS (SF), INC.
By /s/ William E. Dye
----------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNISON (NY), INC.
By /s/ William E. Dye
----------------------------
Name: William E. Dye
Title: Chief Executive Officer
UNISON (MA), INC.
By /s/ William E. Dye
----------------------------
Name: William E. Dye
Title: Chief Executive Officer
V-2