SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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) September 2, 1998
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Unidigital Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-27664 13-3856672
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
229 West 28th Street, New York, New York 10001
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 244-7820
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545 West 45th Street, New York, New York 10036
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(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OF ASSETS.
On September 2, 1998, Unidigital Inc. (the "Company") consummated the
acquisition of all of the issued and outstanding capital stock of Mega Art Corp.
("Mega Art") located in New York City (the "Acquisition"). As a result of the
Acquisition, Mega Art became a wholly-owned subsidiary of the Company. Mega Art
provides wide format, digital prepress and printing services. The Company
intends to continue such line of business. The purchase price included an
initial cash payment of $5,800,000 and the issuance of $5,000,000 in restricted
Common Stock of the Company (754,148 shares). In addition, the purchase price
includes a deferred cash payment of $1,200,000 (the "Deferred Payment"), payable
180 calendar days after the closing date, and an earn-out payment of up to
$1,200,000 in cash and $1,200,000 in restricted Common Stock of the Company (the
"Earn-Out Payment"), payable on or before November 29, 1999.
The Deferred Payment is subject to adjustment in the event Mega Art
achieves, as of August 31, 1998, (i) a tangible net asset value of (A) less than
$800,000 or (B) greater than $1,000,000, or (ii) adjusted EBITDA of less than
$2,150,000 for the twelve months ended August 31, 1998. The Earn-Out Payment is
subject to adjustment in the event Mega Art fails to achieve adjusted EBITDA of
at least $2,250,000 for the fiscal year ending August 31, 1999. In addition, in
the event Mega Art achieves adjusted EBITDA of greater than $2,750,000 for the
fiscal year ending August 31, 1999, the Company shall grant options to purchase
shares of Common Stock of the Company to employees of Mega Art having an
aggregate fair market value equal to the amount of such excess, but in no event
greater than $250,000. The Deferred Payment and the Earn-Out Payment may also be
used to satisfy any indemnification claims.
In determining the purchase price, the Company considered, among other
factors: (i) the composition of Mega Art's assets, in particular, the strength
of Mega Art's balance sheet; (ii) the business, operations and prospects of Mega
Art; (iii) the financial statements and other relevant financial and operating
data of Mega Art; (iv) the historical and projected financial information
prepared by the management of Mega Art; and (v) the past and projected revenues
generated from the customers of Mega Art.
The Company funded the cash portion of the purchase price from proceeds
of an acquisition loan and a revolving credit loan from Canadian Imperial Bank
of Commerce ("CIBC"). See "Item 5. Other Events." below.
Ehud Aloni, the principal shareholder of Mega Art ("Aloni"), and the
Company entered into a three-year Employment Agreement pursuant to which Aloni
shall serve as the President of Mega Art at an initial annual salary of
$200,000.
In addition, Aloni and the Company entered into a Stockholders'
Agreement pursuant to which (i) Aloni granted the Company a right of first
refusal with respect to sales by Aloni of the Company's Common Stock and (ii)
Aloni agreed not to acquire more than 1,000,000 shares of the Company's Common
Stock without the prior written consent of the Company.
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ITEM 5. OTHER EVENTS.
Upon consummation of the Acquisition, Mega Art became a wholly-owned
subsidiary of the Company. As such, CIBC required Mega Art to guarantee the
Company's credit facilities with CIBC. In addition, the Company pledged all of
its equity interests in Mega Art as collateral for such credit facilities.
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. CIBC waived certain of
these covenants to permit the Company to consummate the Acquisition. Mega Art
has granted CIBC a first priority lien on all of its assets as security for the
credit facilities.
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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 November 16, 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 November 16, 1998.
(c) Exhibits.
Exhibit No. Description of Exhibit
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4.1 Stockholders' Agreement dated as of
September 2, 1998 by and between Unidigital
Inc. and Ehud Aloni.
10.1 Agreement of Purchase and Sale dated as
of August 3, 1998 by and among Unidigital
Inc., Mega Art Corp., Ehud Aloni, Amit
Primor, Jeffrey E. Rothman and Seligson,
Rothman & Rothman.
10.2 Employment Agreement dated as of September
2, 1998 by and between Mega Art Corp. and
Ehud Aloni.
SIGNATURES
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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: September 14, 1998