GENERAL SECURITY AGREEMENT (GUARANTORS)
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This General Security Agreement ("Agreement") dated May 12, 1999 is by
Unidigital Elements (NY), Inc., a New York corporation, Unison (NY), Inc. a
Delaware corporation, Unison (MA), Inc., a Delaware Corporation, Unidigital
Elements (SF), Inc., a Delaware corporation, Mega Art Corp., a New York
corporation, SuperGraphics Holding Company, Inc., a Delaware corporation, and
SuperGraphics Corporation, a California corporation (collectively, the
"Guarantors"), in favor of Fleet Bank N.A. a National Banking Association, as
Administrative Agent for itself and ratably for the benefit of the Lender
Parties and the Hedge Banks (the "Secured Party"). The Lender Parties and the
Hedge Banks are collectively referred to herein as the "Lenders."
W I T N E S S E T H
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WHEREAS, the Secured Party and the Lenders have entered or are about to
enter into certain financing arrangements with Unidigital Inc., a Delaware
corporation ("Borrower"), pursuant to which the Lenders may make loans and
provide other financial accommodations to Borrower; and
WHEREAS, Guarantors have executed and delivered or are about to execute
and deliver to the Secured Party a guarantee in favor of the Secured Party and
the Lenders, pursuant to which Guarantors absolutely and unconditionally
guarantee to the Secured Party and Lenders the payment and performance of all
now existing and hereafter arising obligations, liabilities and indebtedness of
Borrower to the Secured Party and the Lenders; and
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION
1. DEFINITIONS
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All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Guarantors, Borrower, the Secured Party
and the Lenders pursuant to the definitions set forth in the recitals hereto, or
to any other person herein, shall include their respective successors and
assigns. The words "hereof", "herein", "hereunder", "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any particular provision of this Agreement and as this Agreement
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced. The word "including" when used in this Agreement
shall mean "including, without limitation". An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 7.3 or is cured in a manner reasonably satisfactory to the Secured
Party, if such Event of Default is capable of being cured as reasonably
determined by the Secured Party. Any accounting term used herein unless
otherwise defined in this Agreement shall have the meanings customarily given to
such term in accordance with GAAP. For purposes of this Agreement, the following
terms shall have the respective meanings given to them below:
1.1 "Accounts" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Credit Agreement" shall mean the Credit Agreement, of even date
hereof, by and among Borrower, the Secured Party and the Lenders, as the same
now exists and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.3 "Equipment" shall mean all of Guarantors' now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.4 "Event of Default" shall have the meaning set forth in Section 6.1
hereof.
1.5 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied.
1.6 "Hedge Banks" shall have the meaning ascribed thereto in the Credit
Agreement.
1.7 "Information Certificate" shall mean the Information Certificate of
each Guarantor constituting Exhibit A hereto containing material information
with respect to each Guarantor, its business and assets provided by or on behalf
of Borrower or any Guarantor to the Secured Party or any of the Lenders in
connection with the preparation of this Agreement and the other Loan Documents
and the financing arrangements provided for herein.
1.8 "Inventory" shall mean all of each Guarantor now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.9 "Lender Parties" shall have the meaning ascribed thereto in the Credit
Agreement.
1.10 "Loan Documents" shall have the meaning ascribed thereto in the
Credit Agreement.
1.11 "Obligations" shall mean any and all obligations, liabilities and
indebtedness of every kind, nature and description owing by any Guarantor to the
Secured Party and/or any of the Lenders and/or their respective affiliates,
including principal, interest, charges, fees, costs and expenses, however
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evidenced, whether as principal, surety, endorser, guarantor or otherwise,
whether arising under the Credit Agreement, this Agreement and the other Loan
Documents or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of the Credit
Agreement or after the commencement of any case with respect to the Borrower or
any Guarantor under the United States Bankruptcy Code or any similar statute
(including the payment of interest and other amounts which would accrue and
become due but for the commencement of such case, whether or not such amounts
are allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by the Secured Party or any of the Lenders.
1.12 "Obligor" shall mean any other guarantor, endorser, acceptor, surety
or other person liable on or with respect to the Obligations or who is the owner
of any property which is security for the Obligations, other than Borrower.
1.13 "Person" or "person" shall have the meaning ascribed thereto in the
Credit Agreement.
1.14 "Records" shall mean all of Guarantor's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Guarantors with respect to the
foregoing maintained with or by any other person).
Any term defined in the Credit Agreement and used herein shall have the
respective meanings ascribed to it therein, unless specified otherwise herein.
SECTION 2. GRANT OF SECURITY INTEREST
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To secure payment and performance of all Obligations, each Guarantor
hereby grants to the Secured Party a continuing security interest in, a lien
upon, and a right of set off against, and hereby assigns to the Secured Party,
as security, the following property and interests in property, whether now owned
or hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
2.1 Accounts;
2.2 all present and future contract rights, general intangibles (including
tax and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper,
documents, instruments, letters of credit, bankers' acceptances and guaranties;
2.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of Guarantor now or hereafter held or
received by or in transit to the Secured Party, any of the Lenders or any of
their affiliates or at any other depository or other institution from or for the
account
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of each Guarantor whether for safekeeping, pledge, custody, transmission,
collection or otherwise, and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of Accounts and other
Collateral, including (a) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lien or secured party, (c) goods described in invoices, documents, contracts or
instruments with respect to, or otherwise representing or evidencing, Accounts
or other Collateral, including returned, repossessed and reclaimed goods, and
(d) deposits by and property of account debtors or other persons securing the
obligations of account debtors;
2.4 Inventory;
2.5 Equipment;
2.6 Records; and
2.7 all products and proceeds of the foregoing, in any form, including
insurance proceeds and any claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
SECTION 3. COLLATERAL COVENANTS
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3.1 Accounts Covenants.
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(a) Secured Party shall have the right at any time or times, in the
Secured Party's name or in the name of a nominee of the Secured Party, to verify
the validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.
(b) Each Guarantor shall deliver or cause to be delivered to the
Secured Party, with appropriate endorsement and assignment, with full recourse
to each such Guarantor, all chattel paper and instruments which each Guarantor
now owns or may at any time acquire immediately upon such Guarantor's receipt
thereof, except as the Secured Party may otherwise agree.
(c) The Secured Party may, at any time or times that an Event of
Default exists or has occurred and is continuing, (i) notify any or all account
debtors that the Accounts have been assigned to the Secured Party and that the
Secured Party has a security interest therein and the Secured Party may direct
any or all accounts debtors to make payment of Accounts directly to the Secured
Party, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Accounts or other obligations included in the Collateral
and thereby discharge or release the account debtor or any other party or
parties in any way liable for payment thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Accounts or such
other obligations, but without any duty to do so, and the Secured Party shall
not be liable for its failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action the Secured Party may deem necessary or desirable for the
protection of its interests. At any time that an Event of Default exists or has
occurred and is continuing, at the Secured Party's request, all invoices and
statements sent to any account debtor shall state that the Accounts and such
other obligations have been assigned to the Secured Party and are
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payable directly and only to the Secured Party and Guarantors shall deliver to
the Secured Party such originals of documents evidencing the sale and delivery
of goods or the performance of services giving rise to any Accounts as the
Secured Party may require.
3.2 Inventory Covenants. With respect to the Inventory: (a) each Guarantor
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shall at all times maintain inventory records reasonably satisfactory to the
Secured Party keeping correct and accurate records itemizing and describing the
kind, type, quality and quantity of Inventory, such Guarantor's cost therefor
and daily withdrawals therefrom and additions thereto; (b) no Guarantor shall
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of the Secured Party, except for sales of Inventory in
the ordinary course of such Guarantor's business and except to move Inventory
directly from one location set forth or permitted herein to another such
location; (c) each Guarantor shall produce, use, store and maintain the
Inventory, with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws
(including the requirements of the Federal Fair Labor Standards Act of 1938, as
amended and all rules, regulations and orders related thereto); (d) each
Guarantor assumes all responsibility and liability arising from or relating to
the production, use, sale or other disposition of the Inventory; (e) each
Guarantor shall not Inventory to any customer on approval, or any other basis
which entitles the customer to return or may obligate such Guarantor to
repurchase such Inventory; (f) each Guarantor shall keep the Inventory in good
and marketable condition; and (g) no Guarantor shall, without prior written
notice to the Secured Party, acquire or accept any Inventory on consignment or
approval.
3.3 Equipment Covenants. With respect to the Equipment: (a) each Guarantor
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shall keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (b) each Guarantor shall use the Equipment
with all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with all applicable laws; (c) the Equipment
is and shall be used in each Guarantor's business and not for personal, family,
household or farming use; (d) no Guarantor shall remove any Equipment from the
locations set forth or permitted herein, except to the extent necessary to have
any Equipment repaired or maintained in the ordinary course of the business of
each Guarantor or to move Equipment directly from one location set forth or
permitted herein to another such location and except for the movement of motor
vehicles used by or for the benefit of each Guarantor in the ordinary course of
business; (e) the Equipment is now and shall remain personal property and no
Guarantor shall permit any of the Equipment to be or become a part of or affixed
to real property; and (f) each Guarantor assumes all responsibility and
liability arising from the use of the Equipment.
3.4 Power of Attorney. Each Guarantor hereby irrevocably designates and
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appoints the Secured Party (and all persons designated by the Secured Party) as
each such Guarantor's true and lawful attorney-in-fact, and authorizes Secured
Party, in such Guarantor's or Secured Party's name, to: (a) at any time an Event
of Default or event which with notice or passage of time or both would
constitute an Event of Default exists or has occurred and is continuing (i)
demand payment on Accounts or other proceeds of Inventory or other Collateral,
(ii) enforce payment of Accounts by legal proceedings or otherwise, (iii)
exercise all of such Guarantor's rights and remedies to collect any Account or
other Collateral, (iv) sell or assign any Account upon such terms, for such
amount and at such time or times as the Secured Party deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign such Guarantor's name on any
proof of claim in bankruptcy or other similar document against an account
debtor, (viii) notify the post office authorities to change the address for
delivery of such Guarantor's mail to an address designated by the
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Secured Party and open and dispose of all mail addressed to such Guarantor, (ix)
do all acts and things which are necessary, in the Secured Party's
determination, to fulfill such Guarantor's obligations under this Agreement and
the other Loan Documents, (x) take control in any manner of any item of payment
or proceeds thereof, (xi) endorse such Guarantor's name upon any items of
payment or proceeds thereof and deposit the same in the Secured Party's account
for application to the Obligations, (xii) endorse such Guarantor's name upon any
chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Account or any goods pertaining thereto or any other Collateral
and (xiii) sign such Guarantor's name on any verification of Accounts and
notices thereof to account debtors and (b) at any time to (i) have access to any
lockbox or postal box into which such Guarantor's mail is deposited and (ii)
execute in such Guarantor's name and file any UCC financing statements or
amendments thereto. Each Guarantor hereby releases the Secured Party and its
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of the Secured Party's own gross
negligence or wilful misconduct as determined pursuant to a final non-appealable
order of a court of competent jurisdiction.
3.5 Right to Cure. The Secured Party may, at its option, (a) cure any
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default by any Guarantor under any agreement with a third party or pay or bond
on appeal any judgment entered against such Guarantor (b) discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (c) pay any amount, incur any
expense or perform any act which, in the Secured Party's judgment, is necessary
or appropriate to preserve, protect, insure or maintain the Collateral and the
rights of the Secured Party with respect thereto. The Secured Party may add any
amounts so expended to the Obligations and charge such Guarantor's account
therefor, such amounts to be repayable by such Guarantor on demand. The Secured
Party shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
such Guarantor. Any payment made or other action taken by the Secured Party
under this Section shall be without prejudice to any right to assert an Event of
Default hereunder and to proceed accordingly.
3.6 Access to Premises. From time to time as requested by the Secured
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Party, at the cost and expense of the appropriate Guarantor, (a) the Secured
Party or its designee shall have complete access to all of each Guarantor's
premises during normal business hours and after reasonable notice to such
Guarantor, or at any time and without notice to such Guarantor if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of such Guarantor's
books and records, including the Records, and (b) each Guarantor shall promptly
furnish to the Secured Party such copies of such books and records or extracts
therefrom as the Secured Party may request, and (c) use during normal business
hours such of such Guarantor's personnel, equipment, supplies and premises as
may be reasonably necessary for the foregoing, provided that such use does not
unreasonably disrupt the business of the Borrower, and if an Event of Default
exists or has occurred and is continuing for the collection of Accounts and
realization of other Collateral.
SECTION 4. REPRESENTATIONS AND WARRANTIES
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Each Guarantor hereby represents and warrants to the Secured Party and the
Lenders the following (which shall survive the execution and delivery of this
Agreement):
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4.1 Corporate Existence, Power and Authority; Subsidiaries. Each Guarantor
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is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing in all states or other jurisdictions where the nature and extent of the
business transacted by it or the ownership of assets makes such qualification
necessary, except for those jurisdictions in which the failure to so qualify
would not have a material adverse effect on such Guarantor's financial
condition, results of operation or business or the rights of the Secured Party
in or to any of the Collateral. The execution, delivery and performance of this
Agreement, the other Loan Documents and the transactions contemplated hereunder
and thereunder are all within such Guarantor's corporate powers, have been duly
authorized and are not in contravention of law or the terms of its certificate
of incorporation, by-laws, or other organizational documentation, or any
indenture, agreement or undertaking to which such Guarantor is a party or by
which such Guarantor or its property are bound. This Agreement and the other
Loan Documents constitute legal, valid and binding obligations of such Guarantor
enforceable in accordance with their respective terms. No Guarantor has any
subsidiaries except as set forth on its Information Certificate.
4.2 Chief Executive Office; Collateral Locations. The chief executive
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office of each Guarantor and its Records concerning Accounts are located only at
the address set forth below and its only other places of business and the only
other locations of Collateral, if any, are the addresses set forth in its
Information Certificate, subject to the right of such Guarantor to establish new
locations in accordance with Section 5.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by such Guarantor
and sets forth the owners and/or operators thereof, and to the best of such
Guarantor's knowledge, the holders of any mortgages on such locations.
4.3 Priority of Liens; Title to Properties. The security interests and
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liens granted to the Secured Party under this Agreement and the other Loan
Documents constitute valid and perfected first priority liens and security
interests in and upon the Collateral subject only to the liens indicated on
Schedule 4.3 hereto and the other liens permitted under Section 5.8 hereof. Each
Guarantor has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to the Secured Party and such others
as are specifically listed on Schedule 4.3 hereto or permitted under Section 5.8
hereof.
4.4 Tax Returns. Each Guarantor has filed, or caused to be filed, in a
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timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to the Secured Party). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Guarantor
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to such Guarantor and with respect to which adequate reserves have
been set aside on its books. Adequate provision has been made for the payment of
all accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
4.5 Litigation. Except as set forth on the Information Certificate, there
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is no present investigation by any governmental agency pending, or to the best
of each Guarantor's knowledge threatened, against or affecting such Guarantor or
its assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of each Guarantor's knowledge threatened, against
such Guarantor or its assets or goodwill, or against or affecting any
transactions contemplated by
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this Agreement, which if adversely determined against such Guarantor would
result in any material adverse change in the assets, business or prospects of
such Guarantor or which would impair the ability of such Guarantor to perform
its obligations hereunder or under any of the other Loan Documents to which it
is a party or of the Secured Party to enforce the Obligations or realize upon
any Collateral.
4.6 Compliance with Other Agreements and Applicable Laws. No Guarantor is
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not in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any of its assets are
bound and each Guarantor is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, State or local governmental authority.
4.7 Bank Accounts. All of the deposit accounts, investment accounts or
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other accounts in the name of or used by each Guarantor maintained at any bank
or other financial institution are set forth on Schedule 4.7 hereof, subject to
the right of such Guarantor to establish new accounts in accordance with Section
5.9 below.
4.8 Accuracy and Completeness of Information. All information furnished by
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or on behalf of each Guarantor, in writing to the Secured Party in connection
with this Agreement or any of the other Loan Documents or any transaction
contemplated hereby or thereby, including all information on the Information
Certificates is true and correct in all material respects on the date as of
which such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a material adverse affect on the business, assets or prospects of any Guarantor,
which has not been fully and accurately disclosed to the Secured Party in
writing.
4.9 Survival of Warranties; Cumulative. All representations and warranties
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contained in this Agreement or any of the other Loan Documents shall survive the
execution and delivery of this Agreement and shall be deemed to have been made
again to the Secured Party and the Lenders on the date of each additional
borrowing or other credit accommodation under the Credit Agreement and shall be
conclusively presumed to have been relied on by the Secured Party or any of the
Lenders regardless of any investigation made or information possessed by the
Secured Party or any of the Lenders. The representations and warranties set
forth herein shall be cumulative and in addition to any other representations or
warranties which any Guarantor shall now or hereafter give, or cause to be
given, to the Secured Party or any of the Lenders.
SECTION 5. AFFIRMATIVE AND NEGATIVE COVENANTS
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5.1 Maintenance of Existence. Each Guarantor shall at all times preserve,
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renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently conducted. Each
Guarantor shall give the Secured Party fifteen (15) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and such Guarantor shall deliver to the Secured Party a copy of the
amendment to the Certificate of Incorporation of such Guarantor providing for
the name change certified by the Secretary of State of the jurisdiction of
incorporation of such Guarantor as soon as it is available.
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5.2 New Collateral Locations. Each Guarantor may open any new location
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within the continental United States provided such Guarantor gives the Secured
Party fifteen (15) days prior written notice of the intended opening of any such
new location and executes and delivers, or causes to be executed and delivered,
to the Secured Party such agreements, documents, and instruments as the Secured
Party may deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including UCC financing statements.
5.3 Compliance with Laws, Regulations, Etc. Each Guarantor shall, at all
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times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any Federal, State or local
governmental authority applicable to it.
5.4 Payment of Taxes and Claims. Each Guarantor shall duly pay and
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discharge all taxes, assessments, contributions and governmental charges upon or
against it or its properties or assets, except for taxes the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Guarantor and with respect to which adequate reserves have
been set aside on its books. Each Guarantor shall be liable for any tax or
penalties imposed on the Secured Party as a result of the financing arrangements
provided for herein and such Guarantor agrees to indemnify and hold the Secured
Party harmless with respect to the foregoing, and to repay to the Secured Party
on demand the amount thereof, and until paid by such Guarantor such amount shall
be added and deemed part of the Loans, provided, that, nothing contained herein
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shall be construed to require such Guarantor to pay any income or franchise
taxes attributable to the income of the Secured Party from any amounts charged
or paid hereunder to the Secured Party. The foregoing indemnity shall survive
the payment of the Obligations, the termination of this Agreement and the
termination or non-renewal of the Credit Agreement.
5.5 Insurance. Each Guarantor shall, at all times, maintain with
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financially sound and reputable insurers insurance with respect to the
Collateral against loss or damage and all other insurance of the kinds and in
the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to the Secured Party
as to form, amount and insurer. Each Guarantor shall furnish certificates,
policies or endorsements to the Secured Party as the Secured Party shall require
as proof of such insurance, and, if such Guarantor fails to do so, the Secured
Party is authorized, but not required, to obtain such insurance at the expense
of such Guarantor. All policies shall provide for at least thirty (30) days
prior written notice to the Secured Party of any cancellation or reduction of
coverage and that the Secured Party may act as attorney for each Guarantor in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance. Each
Guarantor shall cause the Secured Party to be named as a loss payee and an
additional insured (but without any liability for any premiums) under such
insurance policies and each Guarantor shall obtain non-contributory the Secured
Party's loss payable endorsements to all insurance policies in form and
substance satisfactory to the Secured Party. Such Secured Party's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to the Secured Party as its interests may appear and further specify that the
Secured Party shall be paid regardless of any act or omission by Borrower, any
Guarantor or any of their affiliates. At its option, the Secured Party may apply
any insurance proceeds received by the Secured Party at any time to the cost of
repairs or replacement of Collateral and/or to payment of the Obligations,
whether or not then due, in any order and in such manner as the Secured Party
may determine or hold such proceeds as cash collateral for the Obligations.
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5.6 Financial Statements and Other Information. Each Guarantor shall keep
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proper books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
such Guarantor and its subsidiaries (if any) in accordance with GAAP. Each
Guarantor shall furnish or cause to be furnished to the Secured Party, to the
extent available (a) such financial statements (including balance sheets,
statements of income and loss, statements of cash flow and statement of
shareholders' equity) all in reasonable detail fairly presenting the financial
position and results of the operations of such Guarantor as of the end and
through such period as the Secured Party may from time to time reasonably
request and (b) such budgets, forecasts, projections and other information
respecting the Collateral and the business of such Guarantor as the Secured
Party may, from time to time, reasonably request. The Secured Party is hereby
authorized to deliver a copy of any financial statement or any other information
relating to the business of each Guarantor to any court or other government
agency or to any participant or assignee or prospective participant or assignee.
Each Guarantor hereby irrevocably authorizes and directs all accountants or
auditors to deliver to the Secured Party, at such Guarantor's expense, copies of
the financial statements of each Guarantor and any reports or management letters
prepared by such accountants or auditors on behalf of each Guarantor and to
disclose to the Secured Party such information as they may have regarding the
business of such Guarantor. Any documents, schedules, invoices or other papers
delivered to the Secured Party may be destroyed or otherwise disposed of by the
Secured Party one (1) year after the same are delivered to the Secured Party,
except as otherwise designated by a Guarantor to the Secured Party in writing.
5.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Except as
-----------------------------------------------------------
otherwise permitted under the Credit Agreement, no Guarantor shall, directly or
indirectly, (a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or (b)
sell, assign, lease, transfer, abandon or otherwise dispose of any stock or
indebtedness to any other Person or any of its assets to any other Person or (c)
form or acquire any subsidiaries, or (d) wind up, liquidate or dissolve or (e)
agree to do any of the foregoing.
5.8 Encumbrances. No Guarantor shall create, incur, assume or suffer to
------------
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including the
Collateral, except: (a) liens and security interests of the Secured Party and
------
(b) the liens and security interests set forth on Schedule 4.3 hereto, or
permitted by the Credit Agreement.
5.9 Additional Bank Accounts. No Guarantor shall directly or indirectly,
-------------------------
open, establish or maintain any deposit account, investment account or any other
account with any bank or other financial institution, other than the accounts
set forth in Schedule 4.7 hereto, except: (a) as to any new or additional
accounts which contain any Collateral or proceeds thereof, with the prior
written consent of the Secured Party and subject to such conditions thereto as
the Secured Party may establish and (b) as to any accounts used by such
Guarantor to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to the Secured Party.
5.10 Costs and Expenses. Each Guarantor shall pay to the Secured Party on
------------------
demand all costs, expenses, filing fees and taxes paid or payable in connection
with the preparation, negotiation, execution, delivery, recording,
administration, collection, liquidation, enforcement and defense of the
Obligations, the Secured Party's rights in the Collateral, this Agreement, the
other Loan Documents and all other documents related hereto or thereto,
including any amendments, supplements or consents which may
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hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including: (a) all costs and expenses of filing or recording
(including Uniform Commercial Code financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (b) all insurance premiums, appraisal fees and search fees; (c)
costs and expenses of preserving and protecting the Collateral; (d) costs and
expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of the Secured Party,
selling or otherwise realizing upon the Collateral, and otherwise enforcing the
provisions of this Agreement and the other Loan Documents or defending any
claims made or threatened against the Secured Party arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); and (e) the reasonable fees and
disbursements of counsel (including legal assistants) to the Secured Party in
connection with any of the foregoing.
5.11 Further Assurances. At the request of the Secured Party at any time
------------------
and from time to time, each Guarantor shall, at its expense, at any time or
times duly execute and deliver, or cause to be duly executed and delivered, such
further agreements, documents and instruments, and do or cause to be done such
further acts as may be necessary or proper to evidence, perfect, maintain and
enforce the security interests and the priority thereof in the Collateral and to
otherwise effectuate the provisions or purposes of this Agreement or any of the
other Loan Documents. Where permitted by law, each Guarantor hereby authorizes
the Secured Party to execute and file one or more UCC financing statements
signed only by the Secured Party.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES
------------------------------
6.1 Events of Default. The occurrence or existence of any Event of Default
-----------------
under the Loan Agreement is referred to herein individually as an "Event of
Default", and collectively as "Events of Default".
6.2 Remedies.
--------
(a) At any time an Event of Default exists or has occurred and is
continuing, the Secured Party shall have all rights and remedies provided in
this Agreement, the other Loan Documents, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by any Guarantor or any Obligor, except as such notice or consent
is expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to the Secured Party hereunder, under any of the
other Loan Documents, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in the Secured Party's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by any Guarantor of this
Agreement or any of the other Loan Documents. The Secured Party may, at any time
or times, proceed directly against any Guarantor or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, the Secured Party may, in its
discretion and without limitation, (i) accelerate the payment of all Obligations
and demand immediate payment thereof to the Secured Party (provided, that, upon
-------- ----
the occurrence of any Event of Default described in Section 6.01 of the Credit
Agreement, all
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Obligations shall automatically become immediately due and payable), (ii) with
or without judicial process or the aid or assistance of others, enter upon any
premises on or in which any of the Collateral may be located and take possession
of the Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require each Guarantor, at such Guarantor's
expense, to assemble and make available to the Secured Party any part or all of
the Collateral at any place and time designated by the Secured Party, (iv)
collect, foreclose, receive, appropriate, setoff and realize upon any and all
Collateral, (v) remove any or all of the Collateral from any premises on or in
which the same may be located for the purpose of effecting the sale, foreclosure
or other disposition thereof or for any other purpose, (vi) sell, lease,
transfer, assign, deliver or otherwise dispose of any and all Collateral
(including entering into contracts with respect thereto, public or private sales
at any exchange, broker's board, at any office of the Secured Party or
elsewhere) at such prices or terms as the Secured Party may deem reasonable, for
cash, upon credit or for future delivery, with the Secured Party having the
right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
such Guarantor, which right or equity of redemption is hereby expressly waived
and released by such Guarantor. If any of the Collateral is sold or leased by
the Secured Party upon credit terms or for future delivery, the Obligations
shall not be reduced as a result thereof until payment therefor is finally
collected by the Secured Party. If notice of disposition of Collateral is
required by law, five (5) days prior notice by the Secured Party to each
applicable Guarantor designating the time and place of any public sale or the
time after which any private sale or other intended disposition of Collateral is
to be made, shall be deemed to be reasonable notice thereof and each Guarantor
waives any other notice. In the event the Secured Party institutes an action to
recover any Collateral or seeks recovery of any Collateral by way of prejudgment
remedy, each Guarantor waives the posting of any bond which might otherwise be
required.
(c) The Secured Party may apply the cash proceeds of Collateral
actually received by the Secured Party from any sale, lease, foreclosure or
other disposition of the Collateral to payment of the Obligations, in whole or
in part and in such order as the Secured Party may elect, whether or not then
due. Guarantors shall remain liable to the Secured Party for the payment of any
deficiency with interest at the highest rate provided for in the Credit
Agreement and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
SECTION 7. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
--------------------------------
7.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
---------------------------------------------------------------------
(a) The validity, interpretation and enforcement of this Agreement
and the other Loan Documents and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of New York.
(b) Each Guarantor irrevocably consents and submits to the
non-exclusive jurisdiction of the State of New York and the United States
District Court for the Southern District of New York and waives any objection
based on venue or forum non conveniens with respect to any action instituted
----- --- ----------
therein arising under this Agreement or any of the other Loan Documents or in
any way connected or related or incidental to the dealings of each Guarantor and
the Secured Party in respect of this Agreement or the other Loan Documents or
the transactions related hereto or thereto, in each case whether now
-12-
existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agrees that any dispute with respect to any such matters shall be
heard only in the courts described above (except that the Secured Party shall
have the right to bring any action or proceeding against any Guarantor or its
property in the courts of any other jurisdiction which the Secured Party deems
necessary or appropriate in order to realize on the Collateral or to otherwise
enforce its rights against any Guarantor or its property).
(c) Each Guarantor hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at the Secured Party's option, by service upon each Guarantor's in any other
manner provided under the rules of any such courts. Within thirty (30) days
after such service, each Guarantor shall appear in answer to such process,
failing which such Guarantor shall be deemed in default and judgment may be
entered by the Secured Party against such Guarantor for the amount of the claim
and other relief requested.
(d) EACH GUARANTOR AND THE SECURED PARTY MUTUALLY HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR THE SECURED PARTY AND THE LENDERS TO ACCEPT THIS AGREEMENT AND
MAKE LOANS PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.
(e) The Secured Party shall not have any liability to Guarantors
(whether in tort, contract, equity or otherwise) for losses suffered by any
Guarantor in connection with, arising out of, or in any way related to the
transactions or relationships contemplated by this Agreement, or any act,
omission or event occurring in connection herewith, unless it is determined by a
final and non-appealable judgment or court order binding on the Secured Party
that the losses were the result of acts or omissions constituting gross
negligence or willful misconduct. In any such litigation, the Secured Party
shall be entitled to the benefit of the rebuttable presumption that it acted in
good faith and with the exercise of ordinary care in the performance by it of
the terms of this Agreement and the other Loan Documents.
7.2 Waiver of Notices. Each Guarantor hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Guarantor which the Secured Party may elect to give shall
entitle such Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
7.3 Amendments and Waivers. Neither this Agreement nor any provision
-----------------------
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of the
Secured Party, and as to amendments, as also signed by an authorized officer of
each Guarantor. The Secured Party shall not, by any act, delay, omission or
otherwise be deemed to have expressly or impliedly waived any of its rights,
powers and/or remedies
-13-
unless such waiver shall be in writing and signed by an authorized officer of
the Secured Party. Any such waiver shall be enforceable only to the extent
specifically set forth therein. A waiver by the Secured Party of any right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such right, power and/or remedy which the Secured Party would
otherwise have on any future occasion, whether similar in kind or otherwise.
7.4 Waiver of Counterclaims. Each Guarantor waives all rights to interpose
-----------------------
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
7.5 Indemnification. Each Guarantor shall indemnify and hold the Secured
---------------
Party, the Lenders and their directors, agents, employees and counsel, harmless
from and against any and all losses, claims, damages, liabilities, costs or
expenses imposed on, incurred by or asserted against any of them in connection
with any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Loan Documents, or
any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the reasonable fees and
expenses of counsel. To the extent that the undertaking to indemnify, pay and
hold harmless set forth in this Section may be unenforceable because it violates
any law or public policy, each Guarantor shall pay the maximum portion which it
is permitted to pay under applicable law to the Secured Party or any of the
Lenders, as the case may be, in satisfaction of indemnified matters under this
Section. The foregoing indemnity shall survive the payment of the Obligations,
the termination of this Agreement and the termination or non-renewal of the
Credit Agreement.
SECTION 8. MISCELLANEOUS
-------------
8.1 Notices. All notices, requests and demands hereunder shall be in
-------
writing and (a) made to the Secured Party as follows: Fleet Bank, N.A., an
Administrative Agent, 1185 Avenue of the Americas, New York, New York 10031,
Attention: Ms. Beth Goodman, Vice President and to each Guarantor at its chief
executive office set forth below, or to such other address as either party may
designate by written notice to the other in accordance with this provision, and
(b) deemed to have been given or made: if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
business day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.
8.2 Partial Invalidity. If any provision of this Agreement is held to be
-------------------
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
-14-
8.3 Successors. This Agreement, the other Loan Documents and any other
----------
document referred to herein or therein shall be binding upon each Guarantor and
its successors and assigns and inure to the benefit of and be enforceable by the
Secured Party and its successors and assigns, except that no Guarantor may
assign its rights under this Agreement, the other Loan Documents and any other
document referred to herein or therein without the prior written consent of the
Secured Party.
8.4 Counterparts. This Agreement may be executed in any number of
------------
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Agreement, it shall not be necessary
to produce or account for more then one counterpart thereof signed by each of
the parties hereto.
8.5 Entire Agreement. This Agreement, the other Loan Documents, any
-----------------
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
IN WITNESS WHEREOF, each Guarantor has caused these presents to be duly
executed as of the day and year first above written.
GUARANTORS:
-----------
UNIDIGITAL ELEMENTS (NY), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
UNIDIGITAL ELEMENTS (SF), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
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UNISON (NY), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
UNISON (MA), INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
MEGA ART CORP.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
SUPERGRAPHICS HOLDING COMPANY, INC.
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
-16-
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
SUPERGRAPHICS CORPORATION
By: /s/ William E. Dye
---------------------------------
Title: Chief Executive Officer
CHIEF EXECUTIVE OFFICE:
----------------------
229 West 28th Street
New York, New York 10001
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