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) November 30, 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 (Commission (IRS Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
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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(Former Name or Former Address, if Changed Since Last Report)
ITEM 2. ACQUISITION OF ASSETS.
On November 30, 1998, Unidigital Inc., a Delaware corporation (the
"Company"), consummated the acquisition (the "Acquisition") of all of the issued
and outstanding capital stock of SuperGraphics Holding Company, Inc., a Delaware
corporation ("SuperGraphics"). As a result of the Acquisition, SuperGraphics
became a wholly-owned subsidiary of the Company. SuperGraphics provides grand
format, digitally printed vehicle graphics. The Company intends to continue such
line of business. The purchase price included a cash payment of approximately
$15,900,000, the issuance of 135,393 shares of restricted Common Stock of the
Company (approximately $600,000) and the issuance of five-year warrants to
purchase 225,000 shares of the Company's Common Stock at an exercise price of
$5.64 per share. The purchase price also includes a deferred cash payment equal
to the difference between (i) EBITDA, as defined, multiplied by six and (ii)
$16,500,000. Such deferred cash payment, if any, is payable no later than March
15, 1999. In addition, subject to certain limitations, the Company granted
"piggyback" registration rights to the sellers of SuperGraphics. Of the purchase
price, approximately $233,000 in cash and 135,393 shares of restricted Common
Stock of the Company is being held in escrow for a period of one year to satisfy
any indemnification claims.
In determining the purchase price, the Company considered, among other
factors: (i) the composition of the assets of SuperGraphics, in particular, the
strength of its balance sheet; (ii) the business, operations and prospects of
SuperGraphics; (iii) the financial statements and other relevant financial and
operating data of SuperGraphics; (iv) the historical and projected financial
information prepared by the management of SuperGraphics; and (v) the past and
projected revenues generated from the customers of SuperGraphics.
The Company funded the cash portion of the purchase price from proceeds of
a term loan from Canadian Imperial Bank of Commerce ("CIBC") and a subordinated
loan from CIBC Wood Gundy Capital Corp. ("CWGCC"). See "Item 5. Other Events."
below.
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ITEM 5. OTHER EVENTS.
In order to consummate the Acquisition, the Company amended its credit
facility with CIBC to increase its term loan from $25,000,000 to $32,000,000. As
a result, the Company's aggregate credit facilities with CIBC increased from
$45,000,000 to $52,000,000. Upon consummation of the Acquisition, SuperGraphics
became a wholly-owned subsidiary of the Company. As such, CIBC required
SuperGraphics and its wholly-owned subsidiary, SuperGraphics Corporation, a
California corporation ("Sub"), to guarantee the Company's credit facilities
with CIBC. In addition, the Company supplemented its security agreement and
pledge agreement with CIBC such that the assets and common stock of
SuperGraphics acquired in the Acquisition will be included as collateral for
such credit facilities. SuperGraphics also pledged all of its equity interests
in Sub as collateral for such credit facilities.
In addition to the foregoing, the Company borrowed a principal amount of
$10,000,000 pursuant to a subordinated unsecured loan (the "Subordinated Loan")
from CWGCC. The Subordinated Loan matures on March 31, 2004 and bears interest
at a rate per annum equal to the sum of (i) 12.50% plus (ii) an additional
percentage amount equal to 0.25% commencing on November 30, 1999 and increasing
by 0.25% following the last day of each 90-day period thereafter. Until November
30, 1999, at the option of CWGCC, interest is payable in additional notes,
Common Stock of the Company or warrants to purchase Common Stock of the Company.
Thereafter, interest is payable in either additional notes or cash, depending on
certain coverage ratios and, in the case of cash interest payments, the approval
of CIBC. The Company will incur an additional premium of 5.0% on any prepayments
of the Subordinated Loan made prior to November 30, 1999. Such additional
premium will be reduced by 100 basis points on December 1, 1999 and shall be
reduced by such amount on each December 1st thereafter until December 1, 2003.
In connection with the Subordinated Loan, the Company issued ten-year warrants
to CWGCC to purchase 440,000 shares of the Company's Common Stock at an exercise
price not to exceed $5.00 per share. In the event the Company has not paid the
loan in full by November 30, 1999 (subject to extension in certain instances),
the Company will issue ten-year warrants to CWGCC to purchase an additional
200,000 shares of the Company's Common Stock at an exercise price not to exceed
$5.00 per share. In the event the Subordinated Loan has not been paid in full by
May 31, 2001, the exercise price of such warrants shall be reduced by $1.00 per
share and, on each anniversary of such date, such exercise price shall be
reduced by an additional $1.00 per share. In addition, subject to certain
limitations, the Company granted registration rights, including "demand"
registration rights, to CWGCC.
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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 February 13, 1999.
(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 February 13, 1999.
(c) Exhibits.
Exhibit No. Description of Exhibit
4.1 Form of Warrant Agreement issued to
the stockholders of SuperGraphics
Holding Company, Inc.
4.2 Warrant Agreement dated as of November
25, 1998 by and between Unidigital
Inc. and CIBC Wood Gundy Capital Corp.
4.3 Registration and Equity Rights
Agreement by and between Unidigital
Inc. and CIBC Wood Gundy Capital
Corp.
10.1 Agreement for Purchase and Sale of
Stock dated as of November 16, 1998 by
and among Unidigital Inc.,
SuperGraphics Holding Company, Inc.
("Holding"), SuperGraphics Corporation
and the stockholders of Holding.
10.2 Amendment No. 3 to Credit Agreement
dated as of November 30, 1998 by and
among Unidigital Inc., the several
lenders from time to time parties
thereto and Canadian Imperial Bank of
Commerce.
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10.3 Securities Purchase Agreement dated as
of November 25, 1998 by and among
Unidigital Inc., Unison (NY), Inc.,
Unison (MA), Inc., Unidigital Elements
(NY), Inc., Unidigital Elements (SF),
Inc. and Mega Art Corp.
10.4 Senior Subordinated Increasing Rate
Note dated November 30, 1998 of
Unidigital Inc. payable to CIBC
Wood Gundy Capital Corp. in the
principal amount of $10,000,000.
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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: December 14, 1998