Exhibit 1(a)
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THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS NOTE ARE
SUBORDINATED TO THE PAYMENT OF SUPERIOR INDEBTEDNESS (AS DEFINED HEREIN) AND THE
RIGHTS OF THE HOLDERS OF SUPERIOR INDEBTEDNESS UPON THE TERMS OF SUBORDINATION
SET FORTH HEREIN.
UNIDIGITAL INC.
LINOGRAPHICS CORPORATION
ELEMENTS (UK) LIMITED
UNIDIGITAL ELEMENTS (SF), INC.
UNISON (NY), INC.
UNISON (MA), INC.
MEGA ART CORP.
SUPERGRAPHICS HOLDING COMPANY, INC.
SUPERGRAPHICS CORPORATION
REGENT GROUP LIMITED
INTERFACE GRAPHICS LIMITED
14% Senior Subordinated Note due September 14, 2006
No. R-
$
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UNIDIGITAL INC., LINOGRAPHICS CORPORATION, ELEMENTS (UK) LIMITED,
UNIDIGITAL ELEMENTS (SF), INC., UNISON (NY), INC., UNISON (MA), INC., MEGA ART
CORP., SUPERGRAPHICS HOLDING COMPANY, INC., SUPERGRAPHICS CORPORATION, REGENT
GROUP LIMITED, and INTERFACE GRAPHICS LIMITED (collectively, the "Companies";
each, a "Company"), for value received, hereby jointly and severally promise to
pay to, or registered assigns, the principal amount
-----------------------
of DOLLARS ($ ) on September 14, 2006, with interest (computed on the
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basis of a 360-day year of twelve 30-day months) on the unpaid balance of such
principal amount at the rate of 14% per annum, from the date hereof, payable
semi-annually on the last day of each February and August after the date hereof,
commencing on [February 29, 2000/ the first such date next succeeding the date
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hereof], until the principal hereof shall have become due and payable (whether
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at maturity or at a date fixed for prepayment or by declaration or otherwise),
and with interest on any overdue principal (including any overdue prepayment of
principal) and (to the extent permitted by applicable law) premium, if any, and
(to the
Exhibit 1(a)
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extent permitted by applicable law) on any overdue installment of interest, at
the rate of 16% per annum until paid, payable semi-annually as aforesaid or, at
the option of the holder hereof, on demand and, upon acceleration of this Note,
together with the premium, if any, specified in the Securities Purchase
Agreements hereinafter referred to, as liquidated damages and not as a penalty;
provided that in no event shall the amount payable by any Company as interest on
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this Note exceed the highest lawful rate permissible under any law applicable
hereto. Payments of principal, premium, if any, and interest hereon shall be
made in lawful money of the United States of America by the method and at the
address for such purpose specified in the Securities Purchase Agreements
hereinafter referred to, and such payments shall be overdue for purposes hereof
if not made on the originally scheduled date of payment therefor, without giving
effect to any applicable grace period and notwithstanding that such payment may
be prohibited under the terms of subordination applicable hereto.
As further provided herein, the Companies may, at their option, defer the
payment of a portion of the interest due on this Note on any regularly scheduled
interest payment date until maturity (whether by declaration, acceleration, or
otherwise) and such amount shall be deemed to be added to the principal amount
of this Note, and all references herein (or in any of the other Operative
Documents (as defined in the Securities Purchase Agreements)) to the principal
amount of this Note shall be deemed, unless the context clearly requires
otherwise, to include the amount of such interest.
This Note is one of the Companies' 14% Senior Subordinated Notes due
September 14, 2006, limited to $20,000,000 (subject to adjustment) aggregate
principal amount, issued pursuant to those certain Securities Purchase
Agreements dated September 14, 1999 (such agreements, as amended, modified and
supplemented from time to time, the "Securities Purchase Agreements") among the
Companies and the institutional investors named therein, and the holder hereof
is entitled to the benefits of the Securities Purchase Agreements and the other
Operative Documents referred to in the Securities Purchase Agreements and may
enforce the agreement contained therein and exercise the remedies provided for
thereby or otherwise available in respect thereof, all in accordance with the
terms thereof.
This Note is subject to prepayment only as specified in the Securities
Purchase Agreements (subject to the provisions of Section 2 hereof).
Capitalized terms used herein without definition have the meanings ascribed
to them in the Securities Purchase Agreements.
Exhibit 1(a)
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1. Provisions Concerning Deferred Interest.
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1.1. Option of the Companies to Capitalize a Portion of Interest. The
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Companies may, at their option (upon notice as provided in section 1.2), in lieu
of paying cash, defer the payment of up to 2/14th (or 14.28571%) of the amount
of interest which is due and payable on this Note on any regularly scheduled
interest payment date (the portion of interest that is not so paid in cash on
any regularly scheduled interest payment date being hereinafter referred to as
the "Deferred Interest") until maturity (whether by declaration, acceleration or
otherwise). Such Deferred Interest shall be deemed to be included in the
principal amount of this Note, as of such regularly scheduled interest payment
date (any such date on and as of which the interest is deferred shall be
referred to as an "Adjustment Date"), provided that (a) the Companies exercise
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such option proportionately with respect to all of the Notes then outstanding
and (b) on such regularly scheduled interest payment date, the Companies pay in
-
cash in full all interest (other than interest that is deferred pursuant to this
section 1) which is due and payable on such date on all of the Notes then
outstanding. If the Companies shall, in accordance with the terms of this
section 1, exercise such option, then, from and after each Adjustment Date, the
Deferred Interest shall be treated as if it were part of the principal amount of
each Note.
1.2. Notice from the Companies. To exercise the option under section 1.1,
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the Companies shall deliver to each holder of any Note not less than 10 or more
than 30 days prior to an Adjustment Date, an Officer's Certificate which shall
specify:
(a) the applicable Adjustment Date;
(b) (i) the portion of the interest which is due and payable on such
-
Adjustment Date on the Notes to be treated as Deferred Interest, (ii) the
--
aggregate amount of Deferred Interest to be treated as of such Adjustment
Date as part of the principal amount of the Notes then outstanding and
(iii) the amount of Deferred Interest to be treated as of such Adjustment
---
Date as if it were part of the principal amount of each Note then held by
such holder;
(c) the aggregate amount of interest to be paid in cash on such
Adjustment Date on all of the Notes then outstanding and the amount of
interest to be paid in cash on such Adjustment Date with respect to each
Note then held by such holder;
(d) the aggregate principal amount and deferred interest of the Notes
then outstanding and the principal amount and deferred interest of each
Note then held by such holder, in each case both before and after giving
effect to the adjustments to be made as of such Adjustment Date;
Exhibit 1(a)
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(e) the aggregate amount of each interest payment to be made on and
after such Adjustment Date on all of the Notes then outstanding (if paid
entirely in cash) and the amount of each such interest payment on each Note
then held by such holder; and
(f) in reasonable detail, all computations made in determining the
foregoing.
In the absence of manifest error, the computations set forth in such Officer's
Certificate shall be deemed final binding and conclusive upon the Companies and
the holders of the Notes, unless, in any case, the Required Holders of the Notes
shall notify the Companies in writing of their objection (in reasonable detail)
to any portion of such Officer's Certificate within 30 days of the date upon
which such Officer's Certificate was furnished to the holders of the Notes. In
such event, the Companies shall, at their expense, within 15 Business Days
following the receipt of any such notice from the Required Holders of the Notes,
deliver to the holders of the Notes a certificate signed by a firm of
independent certified public accountants of recognized national standing (which
may be the regular auditors of the Companies), setting forth in reasonable
detail any adjustments which, in the opinion of such accountants, should be made
to the amounts set forth in such Officer's Certificate in order for such amounts
to be correct and consistent with the terms hereof and of the other Operative
Documents and, in reasonable detail, all computations made in determining any
such adjustments. The certificate of any such firm of accountants shall be
conclusive evidence of the correctness of such amounts under this section 1.2.
1.3 Limitations on the Option of the Companies to Capitalize Interest.
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Notwithstanding anything to the contrary contained in this section 1, the
Companies may not defer any interest pursuant to the provisions of this section
1 on any Adjustment Date if on such Adjustment Date any Default or Event of
Default shall have occurred and be continuing.
2. Subordination of Subordinated Indebtedness. The payment of the Subordinated
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Indebtedness and the rights of the holders thereof are subordinated to the
payment of the Superior Indebtedness and the rights of the holders thereof to
the extent specified in this section 2.
2.1. Certain Definitions. As used in this section 2, the following terms
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have the following respective meanings:
"Bankruptcy Code" shall mean 11 U.S.C. ss. 101 et seq., as from time
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to time hereafter amended, and any successor or similar statute.
Exhibit 1(a)
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"Blockage Period" shall mean a Payment Default Blockage Period and/or
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a Covenant Default Blockage Period.
"Covenant Default" and "Covenant Default Blockage Period" shall have
-------- ------- -------- ------- -------- ------
the respective meanings specified in section 2.4.
"Enforcement Notice" shall have the meaning specified in section 2.11.
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"Liquidation Payment" shall have the meaning specified in section 2.3.
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"Payment Blockage Notice" shall have the meaning specified in section
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2.4.
"Payment Default" and "Payment Default Blockage Period" shall have the
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respective meanings specified in section 2.4.
"Permissible Securities" shall mean (a) any debt securities the
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payment of which is subordinated, at least to the extent provided in this
section 2 with respect to the Subordinated Indebtedness, to the payment of
all Superior Indebtedness at the time outstanding and all securities issued
in exchange therefor and (b) any Shares of any Company.
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"Subordinated Indebtedness" shall mean the principal amount of the
------------ ------------
Debt for borrowed money evidenced by the Subordinated Notes, together with
any interest (including any interest accruing after the commencement of any
action or proceeding under any bankruptcy, insolvency or other similar law,
and any interest that would have accrued but for the commencement of any
such proceeding, whether or not any such interest is allowed as an
enforceable claim in such proceeding), premium, if any, fee, collection
expense or other amount due thereon or payable with respect thereto or due
or payable in connection with any of the other Operative Documents,
including, without limitation, as further provided in the Securities
Purchase Agreements, any amount payable by any Company in respect of any
Warrants or Warrant Shares pursuant to Section 12 of the Securities
Purchase Agreements or otherwise.
"Subordinated Notes" shall mean the Companies' 14% Senior Subordinated
------------ -----
Notes due September 14, 2006, as amended or modified from time to time,
together with any notes issued in exchange therefor or replacement thereof,
of which this Note is one.
"Superior Indebtedness" shall mean the principal amount of any Debt of
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the Companies for borrowed money now outstanding or hereafter created,
incurred, assumed or guaranteed, together with any interest (including any
interest
Exhibit 1(a)
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-5-
accruing after the commencement of any action or proceeding under any
bankruptcy, insolvency or other similar law, and any interest that would
have accrued but for the commencement of any such proceeding, whether or
not any such interest is allowed as an enforceable claim in such
proceeding), premium, if any, fee and collection expense due thereon or
payable with respect thereto, provided that (a) such indebtedness (i) was
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incurred in compliance with sections 14.5(b), (c) and (d) of the Securities
Purchase Agreements (other than any indebtedness expressly subordinated to
the Subordinated Indebtedness on terms and conditions acceptable to the
Required Holders of the Subordinated Indebtedness) or (ii) was incurred
--
under the Fleet Documents (or any agreement executed in connection with any
extension, refinancing, refunding or renewal thereof) and the outstanding
principal amount thereof does not exceed $80,000,000 and (b) in no event
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shall Debt arising under any Capital Lease or Debt constituting the
deferred purchase price of property constitute Superior Indebtedness.
"Unscheduled Payment" shall have the meaning specified in section 2.4.
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2.2. Subordinated Indebtedness Subordinated to Superior Indebtedness; No
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Amendments.
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(a) Each Company, for itself and its successors and assigns, covenants
and agrees, and each holder of any Subordinated Indebtedness, by its
acceptance thereof, shall be deemed to have agreed, notwithstanding
anything to the contrary in any of the Subordinated Notes or any other
agreement, document or instrument related thereto, that the payment of the
Subordinated Indebtedness shall be subordinated to the extent and in the
manner set forth in this section 2, to the prior payment in full in cash or
cash equivalents of all Superior Indebtedness, and that each holder of
Superior Indebtedness, whether now outstanding or hereafter created,
incurred, assumed or guaranteed, shall be deemed to have acquired Superior
Indebtedness in reliance upon the provisions contained in this section 2.
No present or future holder of Superior Indebtedness shall be prejudiced in
the right to enforce the subordination of the Subordinated Indebtedness
effected pursuant to this section 2 by (i) any act or failure to act on the
-
part of any Company or (ii) any merger or consolidation of, or any sale,
--
lease or other transfer of any or all of the properties and assets by, any
Company.
(b) Neither this section 2, nor any other terms in any of the
Operative Documents expressly providing for the subordination of the
Subordinated Indebtedness, nor any of the terms of the Subordinated
Indebtedness relating to the timing or amount of any redemption, payment
(or prepayment) of the principal of or premium, if any, or interest on the
Subordinated Indebtedness, shall be amended without the written consent of
the holder or holders of at least 66-2/3%
Exhibit 1(a)
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-6-
in aggregate principal amount of the Superior Indebtedness at the time
outstanding.
2.3. Dissolution, Liquidation, Reorganization, etc. Upon any payment or
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distribution of the assets of any Company of any kind or character, whether in
cash, property or securities, to creditors upon any dissolution, winding-up,
total or partial liquidation, reorganization, composition, arrangement,
adjustment or readjustment of any Company or its securities, whether voluntary
or involuntary, or in bankruptcy, insolvency, reorganization, liquidation or
receivership proceedings, or upon a general assignment for the benefit of
creditors, or any other marshalling of the assets and liabilities of any
Company, or otherwise (hereinafter a "Liquidation Payment"), then and in any
such event:
(a) the holders of the Superior Indebtedness shall be entitled to
receive payment in full in cash or cash equivalents (or to have such
payment duly provided for in cash or cash equivalents in a manner
reasonably satisfactory to the holders of Superior Indebtedness) of all
amounts due or to become due on or in respect of all Superior Indebtedness,
before any Liquidation Payment, whether in cash, property or securities
(other than Permissible Securities), is made on account of or applied to
any of the Subordinated Indebtedness;
(b) the Subordinated Indebtedness shall forthwith become due and
payable, and any Liquidation Payment, whether in cash, property or
securities (other than Permissible Securities), to which any holder of the
Subordinated Indebtedness would be entitled except for the provisions of
this section 2, shall be paid or delivered by any debtor, custodian,
liquidating trustee, agent or other Person making such Liquidation Payment,
directly to the holders of the Superior Indebtedness, or their
representative or representatives, ratably according to the aggregate
amounts remaining unpaid on account of the Superior Indebtedness, for
application to the payment thereof, to the extent necessary to pay the
Superior Indebtedness in full in cash or cash equivalents after giving
effect to any concurrent payment or distribution in cash or cash
equivalents, or provision therefor, to the holders of such Superior
Indebtedness; and
(c) each holder of the Subordinated Indebtedness at the time
outstanding (i) hereby irrevocably authorizes and empowers the holders of
-
the Superior Indebtedness or such holders' representative to collect and
receive such holder's ratable share of any Liquidation Payment and to
receipt therefor, and, if any holder of Subordinated Indebtedness fails to
file a claim therefor at least ten (10) calendar days prior to the date
established by rule of law or order of court for such filing, to file and
prove (but not to vote) such claim therefor, provided that the holders of
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Superior Indebtedness shall concurrently send written notice thereof to
each holder of Subordinated Indebtedness together with a copy of the proof
of
Exhibit 1(a)
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claim so filed, (ii) agrees to execute and deliver to the holders of
--
Superior Indebtedness at the time outstanding, or their representative or
representatives, all such further instruments as are necessary to confirm
the foregoing authorization and (iii) agrees not to initiate or prosecute
---
or encourage any other Person to initiate or prosecute any claim, action or
other proceeding challenging the enforceability of the Superior
Indebtedness or any Liens securing the same.
Upon any payment or distribution of assets referred to in this section 2,
the holders of the Subordinated Indebtedness shall be entitled to rely upon any
order or decree made by any court of competent jurisdiction in which such
bankruptcy, insolvency, reorganization, liquidation, receivership or other
proceeding is pending, or a certificate of the debtor, custodian, liquidating
trustee, agent or other Person making any such payment or distribution to such
holders, for the purpose of ascertaining the Persons entitled to participate
therein, the holders of the Superior Indebtedness, the then outstanding
principal amount of the Superior Indebtedness and any and all amounts payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this section 2.
2.4. No Payments With Respect to Subordinated Indebtedness in Certain
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Circumstances.
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(a) The Companies will not, directly or indirectly, make or agree to
make, and neither the holder nor any assignee or successor holder of any
Subordinated Indebtedness will accept or receive any payment (in cash,
property or securities (other than Permissible Securities)) on the
Subordinated Indebtedness if, at the time of such payment or distribution
or immediately after giving effect thereto:
(i) all of the following four conditions shall exist:
(A) a default in the payment when due of all or any portion
of the principal of or interest on any Superior Indebtedness
shall have occurred (a "Payment Default"); and
(B) the Companies and the holder or holders of Subordinated
Indebtedness shall have received written notice prohibiting
payment on the Subordinated Indebtedness (each a "Payment
Blockage Notice") from the requisite holder or holders of such
Superior Indebtedness, or their representative or
representatives, of such Payment Default (which notice to be
effective must state that it is a Payment Blockage Notice or
contain other language to that effect); and
Exhibit 1(a)
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-8-
(C) such Payment Default shall not have been cured by the
Companies or waived in writing by the requisite holder or holders
of the Superior Indebtedness with respect to which such Payment
Default shall have occurred; and
(D) less than 360 days shall have elapsed after the date of
receipt by the Companies and the holders of Subordinated
Indebtedness of such Payment Blockage Notice (any period during
which the restrictions imposed by this section 2.4(a)(i) are in
effect being hereinafter referred to as a "Payment Default
Blockage Period"); or
(ii) all of the following four conditions shall exist:
(A) a material default (other than a Payment Default) shall
have occurred with respect to any Superior Indebtedness which
permits the holder or holders thereof to immediately accelerate
the maturity thereof (a "Covenant Default"); and
(B) the Companies and the holder or holders of Subordinated
Indebtedness shall have received a Payment Blockage Notice from
the requisite holder or holders of the Superior Indebtedness, or
their representative or representatives, of such Covenant Default
(which notice to be effective must state that it is a "Payment
Blockage Notice" or contain other language to that effect); and
(C) such Covenant Default shall not have been cured by the
Companies or waived in writing by the requisite holder or holders
of the Superior Indebtedness with respect to which such Covenant
Default shall have occurred; and
(D) less than 180 days shall have elapsed after the date of
receipt by the Companies and the holders of the Subordinated
Indebtedness of such Payment Blockage Notice (any period during
which the restrictions imposed by this section 2.4(a)(ii) are in
effect being hereinafter referred to as a "Covenant Default
Blockage Period");
provided that, for the purpose of this section 2.4, (1) Payment Default Blockage
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Periods shall not be in effect for more than an aggregate of 360 days during any
period of 540 consecutive days, (2) Covenant Default Blockage Periods shall not
-
be in effect for more than an aggregate of 180 days during any period of 360
Exhibit 1(a)
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consecutive days, (3) Blockage Periods shall not be in effect for more than an
-
aggregate of 360 days during any period of 540 consecutive days, (4) not more
-
than four Payment Blockage Notices may be given and (5) no Payment Default or
-
Covenant Default known to the holders of Superior Indebtedness giving any
Payment Blockage Notice on the date any Payment Blockage Notice is given may be
used or shall be effective as a basis for any subsequent Payment Blockage
Notice.
(b) The restrictions imposed by section 2.4(a) shall cease to apply
and the Companies may resume payments in respect of the Subordinated
Indebtedness (including any payments which shall not have been made on
account of the provisions of this section 2, but excluding any payments
which may have become due upon any acceleration of the maturity of the
Subordinated Indebtedness) or any judgment with respect thereto upon the
earliest to occur of (i) the cure of the Payment Default or Covenant
-
Default by the Companies, (ii) the written waiver thereof by the requisite
--
holder or holders of the Superior Indebtedness with respect to which such
Payment Default or Covenant Default shall have occurred, (iii) the
---
expiration of the applicable Blockage Period or (iv) the termination of
--
such Blockage Period by such requisite holder or holders of such Superior
Indebtedness.
(c) If (i) the holder or holders of any Superior Indebtedness shall
-
accelerate Superior Indebtedness in accordance with the terms thereof
(which acceleration has not been rescinded or annulled) and (ii) the
--
Companies and the holder or holders of Subordinated Indebtedness shall have
received a Payment Blockage Notice from the requisite holder or holders of
such Superior Indebtedness, or their representative or representatives, of
such acceleration (which notice to be effective must state that it is a
"Payment Blockage Notice" or contain other language to that effect), then
from and after the date such Payment Blockage Notice is given, the
Companies will not, directly or indirectly, make or agree to make, and
neither the holder nor any assignee or successor holder of any Subordinated
Indebtedness will accept or receive any payment (in cash, property or
securities (other than Permissible Securities)) on the Subordinated
Indebtedness until such Superior Indebtedness is paid in full in cash or
cash equivalents (or provision for such payment in cash or cash equivalents
shall be made in a manner reasonably satisfactory to the holder or holders
of such Superior Indebtedness).
(d) The holders of Subordinated Indebtedness shall not be entitled to
accept and retain any payment from any Company on the Subordinated
Indebtedness other than a regularly scheduled payment of interest
(hereinafter, an "Unscheduled Payment") if (i) the making of such
-
Unscheduled Payment shall have caused an event of default under the Fleet
Agreement and (ii) the holders of Subordinated Indebtedness shall have
--
received written notice from the holders of
Exhibit 1(a)
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Superior Indebtedness under the Fleet Agreement, or their representative or
representatives, of such event of default caused by the making of such
Unscheduled Payment and demanding that such Unscheduled Payment be held in
trust and paid over as provided in section 2.5, provided that such notice
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is given not later than the earlier of (A) 90 days after the holders of
-
Subordinated Indebtedness shall have received such Unscheduled Payment and
(B) 20 days after such holders of Superior Indebtedness under the Fleet
-
Agreement, or their representative or representatives, shall have received
written notice that such Unscheduled Payment is to be (or has been) made,
if any, from any Company or any holder of Subordinated Indebtedness (it
being agreed that no such notice of the kind referred to in this clause (B)
is required to be given).
2.5. Payments and Distributions Received. If any payment or distribution of
-----------------------------------
any kind or character, whether in cash, property or securities (other than
Permissible Securities), shall be received by any holder of any of the
Subordinated Indebtedness in contravention of this section 2, such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered and transferred to, the holders of the Superior Indebtedness, or
their representative or representatives, ratably according to the aggregate
amount remaining unpaid on account of such Superior Indebtedness, for
application to the payment of the Superior Indebtedness, to the extent necessary
to pay all such Superior Indebtedness in full in cash or cash equivalents, after
giving effect to any concurrent payment or distribution in cash or cash
equivalents, or provision therefor, to the holders of such Superior
Indebtedness. In the event of the failure of any holder of any of the
Subordinated Indebtedness to endorse or assign any such payment or distribution,
the holders of the Superior Indebtedness (or such holders' representative) are
(is) hereby irrevocably authorized to endorse or assign the same.
2.6. Subrogation. Subject to the payment in full of all Superior
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Indebtedness in cash or cash equivalents and the termination of all commitments
to fund Superior Indebtedness, in case cash, property or securities otherwise
payable or deliverable to the holders of the Subordinated Indebtedness shall
have been applied pursuant to this section 2 to the payment of Superior
Indebtedness, then and in each such case, the holders of the Subordinated
Indebtedness shall be subrogated to the rights of each holder of Superior
Indebtedness to receive any further payment or distribution in respect of or
applicable to the Superior Indebtedness; and, for the purposes of such
subrogation, no payment or distribution to the holders of Superior Indebtedness
of any cash, property or securities to which any holder of Subordinated
Indebtedness would be entitled except for the provisions of this section 2
shall, and no payment over pursuant to the provisions of this section 2 to the
holders of Superior Indebtedness by the holders of the Subordinated Indebtedness
shall as between the Companies, their respective creditors other than the
holders of Superior Indebtedness and the holders of Subordinated Indebtedness,
be deemed to be a payment by the Companies to or on account of Superior
Indebtedness.
Exhibit 1(a)
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The holders of Subordinated Indebtedness waive, to the fullest extent permitted
by law, any right to require any marshalling of assets of any Company.
2.7. Certain Notices. In the event that (a) any Superior Indebtedness or
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Subordinated Indebtedness shall be transferred and/or shall become due and
payable before the expressed maturity thereof as the result of the occurrence of
a default or any event of default, (b) any notice of any default or event of
-
default shall be given under any Superior Indebtedness or Subordinated
Indebtedness or (c) any term or provision of any agreement, document or
-
instrument related to the Superior Indebtedness or Subordinated Indebtedness
shall be amended, modified or supplemented, or compliance therewith waived, the
Companies will give immediate written notice in writing of such event to each
holder of Subordinated Indebtedness and Superior Indebtedness (together with
copies of all related agreements, documents and instruments). Each notice of any
transfer of any Superior Indebtedness or Subordinated Indebtedness shall include
the name and address of the applicable transferee for purposes of this section
2. The holder or holders of Superior Indebtedness shall be obligated to give a
Payment Blockage Notice (as defined in section 2.4) to a holder of Subordinated
Indebtedness other than the initial holders thereof only if the holder or
holders of Superior Indebtedness shall have been furnished written notice of
such other holder's address for purposes of this section 2. No holder of
Subordinated Indebtedness shall be obligated to give any notice under section
2.11 to any holder of Superior Indebtedness unless such holder of Subordinated
Indebtedness shall have been furnished written notice of the address of such
holder of Superior Indebtedness for purposes of this section 2. The addresses of
the initial holders of the Subordinated Indebtedness for purposes of this
section 2 (until changed by notice to such effect given in accordance with this
section 2.7) are as set forth on Schedule I to the Securities Purchase
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Agreements. The address of the holders of Superior Indebtedness under the Fleet
Agreement for purposes of this section 2 (until changed by notice to such effect
given in accordance with this section 2.7) is: Fleet Bank, N.A., Administrative
Agent, 1185 Avenue of the Americas, New York, New York 10036, Attention: Ms.
Beth Goodman, Telecopy No.: (212) 819-4120. Any notice given pursuant to this
section 2 shall be deemed given and effective only upon and at the time of
receipt, unless such notice is mailed by certified mail (return receipt
requested), in which case it shall be deemed to have been received on (x) the
third Business Day following the mailing thereof or (y) the day of its
acknowledged receipt, if a Business Day or the next succeeding Business Day,
whichever of (x) and (y) is earlier.
2.8. Subordination Not Affected, etc. The terms of this section 2, the
-----------------------------------
subordination effected hereby and the rights created hereby of the holders of
the Superior Indebtedness shall not be affected by (a) any amendment or
-
modification of or supplement to any Superior Indebtedness (or any renewal,
extension, refinancing or refunding thereof) or any agreement, document or
instrument relating thereto (i) to the extent permitted by the Securities
-
Purchase Agreement or (ii) in the case of any Superior Indebtedness arising
--
under any of the Fleet Documents (or any documents executed in
Exhibit 1(a)
------------
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connection with any renewal, extension, refinancing or refunding thereof) so
long as such amendment, modification or supplement does not (1) increase the
-
principal amount of the Superior Indebtedness to an amount in excess of the
amount permitted under the definition of Superior Indebtedness as set forth
herein, (2) increase the interest rate with respect to such Superior
-
Indebtedness by more than fifty (50) basis points in excess of the highest rate
specified under the Fleet Agreement (as in effect on the Closing Date), (3)
-
extend the final maturity of such Superior Indebtedness to a date later than May
12, 2005 or (4) shorten the time of payment with respect to any principal amount
-
of such Superior Indebtedness, (b) any exercise or non-exercise of any right,
-
power or remedy under or in respect of any Superior Indebtedness (or any
security or collateral therefor) or pursuant to any agreement, document or
instrument relating thereto, (c) any waiver, consent, release, indulgence, delay
-
or other action, inaction or omission, in respect of any Superior Indebtedness
(or any security or collateral therefor) or pursuant to any agreement, document
or instrument relating thereto, (d) the failure of any holder of Superior
-
Indebtedness (i) to give any notice (other than one expressly required herein)
-
which may be required, whether by law, statute, rule, regulation or otherwise,
to preserve intact any rights of any holder of any Superior Indebtedness,
including, without limitation, any demand, presentment and protest, proof of
notice of nonpayment under any Superior Indebtedness or notice of any failure on
the part of any Company to perform and comply with any covenant, agreement, term
or condition of any Superior Indebtedness or (ii) to comply with the
--
requirements of any law, statute, rule or regulation, to mitigate damages
resulting from any default under any Superior Indebtedness or for diligence, in
each case whether or not any holder of any Subordinated Indebtedness shall have
had notice or knowledge of any of the foregoing. Each Company and the holders of
the Subordinated Indebtedness agrees that the holders of Superior Indebtedness
may enforce any and all of their rights arising under this section 2 by suit,
either in equity or law, for specific performance of any agreement contained in
this section 2 or for judgment at law and any other relief whatsoever
appropriate to such action or procedure.
2.9. Obligations Unimpaired. The provisions of this section 2 are solely
-----------------------
for the purpose of defining the relative rights of the holders of Superior
Indebtedness on the one hand and the holders of Subordinated Indebtedness on the
other hand, and (a) subject to the rights, if any, under this section 2 of the
-
holders of Superior Indebtedness, nothing in this section 2 shall (i) impair as
-
between the Companies and any holder of any Subordinated Indebtedness, the
obligations of the Companies, which are unconditional and absolute, to pay to
the holder thereof all amounts due thereon in accordance with the terms thereof
or (ii) except as otherwise provided in section 2.11, prevent the holder of any
--
Subordinated Indebtedness from exercising all remedies available to such holder,
whether arising under any agreement, document or instrument related thereto,
applicable law or otherwise, and (b) no Person is entitled to any third party
-
beneficiary rights or other similar rights on account of or under this section 2
other than the holders of the Superior Indebtedness. The failure to make any
payment due in respect of any of the
Exhibit 1(a)
------------
-13-
Subordinated Indebtedness or to comply with any of the terms and conditions of
any of the agreements, documents and instruments related to any of the
Subordinated Indebtedness by reason of any provision of this section 2 shall not
be construed as preventing the occurrence of any default or event of default
with respect to the Subordinated Indebtedness.
2.10. Holders of Subordinated Indebtedness Entitled to Assume Payments Not
---------------------------------------------------------------------
Prohibited in Absence of Notice. No holder of Subordinated Indebtedness shall at
- -------------------------------
any time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to it, unless and until such holder shall
have received written notice thereof from the Companies or from any holder of
Superior Indebtedness or any agent or representative thereof. Prior to the
receipt of any such notice, each holder of Subordinated Indebtedness shall be
entitled to assume conclusively that no such facts exist, without, however,
limiting any right of any holder of Superior Indebtedness under this section 2
to recover from any holder of the Subordinated Indebtedness any payment made in
contravention of this section 2. Each payment on the Subordinated Indebtedness
by the Companies shall be deemed to constitute a representation of the Companies
that such payment is permitted to be paid by the Companies under this section 2.
Each holder of Subordinated Indebtedness shall be entitled to rely on the
delivery to it of a written notice by a Person representing himself to be a
holder of Superior Indebtedness or to be the agent or representative of any
holder of Superior Indebtedness to establish that such notice has been given by
any such Person.
2.11. Limitation on Right of Action. Notwithstanding anything to the
--------------------------------
contrary contained in any of the Subordinated Notes or any other agreement,
document or instrument related thereto, each of the holders of the Subordinated
Indebtedness agrees that:
(a) if any Superior Indebtedness (or any commitment to fund Superior
Indebtedness) is outstanding, such holder of the Subordinated Indebtedness
will not accelerate any of the Subordinated Indebtedness or take any other
enforcement action with respect to the Subordinated Indebtedness on account
of any Default or Event of Default, unless:
(i) the holder or holders of any Superior Indebtedness shall have
accelerated any Superior Indebtedness or shall have foreclosed upon
any significant or material portion of collateral securing the same;
(ii) a proceeding under the Bankruptcy Code or any similar state
statute or law (including any law providing for the appointment of a
receiver or other similar official) shall have been commenced by or
against
Exhibit 1(a)
------------
-14-
any Company by Persons other than the holders of the Subordinated
Indebtedness; or
(iii) both (A) an Event of Default under (and as defined in) the
-
Securities Purchase Agreements shall have occurred and (B) not less
-
than 20 days prior to accelerating any of the Subordinated
Indebtedness or taking any other enforcement action with respect to
the Subordinated Indebtedness, such holder of Subordinated
Indebtedness shall have given the Companies and the holders of the
Superior Indebtedness written notice of the same (an "Enforcement
Notice"), which Enforcement Notice shall specify in reasonable detail
the Event of Default on the basis of which such holder of the
Subordinated Indebtedness then intends to accelerate the Subordinated
Indebtedness and/or take any other enforcement action, provided that
--------
for purposes of this clause (iii) if, at the time of giving such
Enforcement Notice (or during the 20 days immediately following the
giving of such Enforcement Notice) a Blockage Period shall have been
commenced and shall be continuing, then such holder of Subordinated
Indebtedness shall not accelerate any of the Subordinated Indebtedness
or take enforcement action with respect to the Subordinated
Indebtedness until the earliest of (1) in the case of a Payment
-
Default Blockage Period, the cure of the Payment Default on the basis
of which such Blockage Period was commenced (provided no other
--------
Blockage Period is then in effect), (2) the written waiver of such
-
Payment Default or Covenant Default by the requisite holder or holders
of the Superior Indebtedness with respect to which such Payment
Default or Covenant Default shall have occurred (provided no other
--------
Blockage Period is then in effect), (3) the expiration of such
-
Blockage Period, (4) the termination of such Blockage Period by such
-
requisite holder or holders of such Superior Indebtedness or (5) the
-
expiration of 180 days from the date upon which such Enforcement
Notice shall have been so given; and
(b) if (i) such holder of Subordinated Indebtedness shall accelerate
-
any of the Subordinated Indebtedness or take any other enforcement action
with respect to the Subordinated Indebtedness, in each case solely on
account of the Event of Default arising as a result of the acceleration of
any Superior Indebtedness, and (ii) the requisite holder or holders of such
--
Superior Indebtedness shall rescind such acceleration of such Superior
Indebtedness, then such holder of Subordinated Indebtedness shall rescind
such acceleration of such Subordinated Indebtedness and shall cease any
such other enforcement action with respect to such Subordinated
Indebtedness.
Exhibit 1(a)
------------
-15-
2.12. Legends, etc. The Companies covenant to cause each Subordinated Note
--------------
(or other instrument evidencing any of the Subordinated Indebtedness) now or
hereafter issued to contain a provision or legend in substantially the following
form:
THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS NOTE ARE
SUBORDINATED TO THE PAYMENT OF SUPERIOR INDEBTEDNESS (AS HEREINAFTER
DEFINED) AND THE RIGHTS OF THE HOLDERS OF SUPERIOR INDEBTEDNESS UPON
THE TERMS OF SUBORDINATION SET FORTH HEREIN.
2.13. Reinstatement. The obligations of the holder or holders of
-------------
Subordinated Indebtedness under the terms of subordination set forth in this
section 2 shall continue to be effective, or be reinstated, as the case may be,
if at any time any payment in respect of any Superior Indebtedness is rescinded
or must otherwise be restored or returned by any holder of Superior Indebtedness
upon the occurrence of any proceeding of the kind referred to in section 2.3,
including, without limitation, upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, any
Company or any substantial part of its property, or otherwise, all as though
such payment in respect of the Superior Indebtedness had not been made, provided
--------
that in no event shall any holder or holders of Subordinated Indebtedness be
obligated pursuant to this section 2.13 to disgorge or repay any payment in
respect of any Subordinated Indebtedness received by it more than 90 days prior
to the time such payment of Senior Indebtedness is so rescinded, restored or
returned by any holder of Superior Indebtedness.
2.14. Successors and Assigns. The terms of subordination set forth in this
----------------------
section 2 shall inure to the benefit of each holder from time to time of any
Superior Indebtedness and shall be binding upon each holder from time to time of
any Subordinated Indebtedness.
3. General.
-------
3.1. Registered Notes, etc. This Note is in registered form and is
------------------------
transferable only by surrender hereof at the principal executive office of the
Companies as provided in the Securities Purchase Agreements. The Companies may
treat the person in whose name this Note is registered on the Note register
maintained at such office pursuant to the Securities Purchase Agreements as the
owner hereof for all purposes, and the Companies shall not be affected by any
notice to the contrary.
3.2. Events of Default. In case an Event of Default, as defined in the
------------------
Securities Purchase Agreements, shall occur and be continuing, the unpaid
balance of the principal of this Note may be declared and become due and payable
in the manner and with the effect provided in the Securities Purchase
Agreements.
Exhibit 1(a)
------------
-16-
3.3. Certain Waivers. The parties hereto, including the makers and all
----------------
guarantors and endorsers of this Note, hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance or enforcement of this Note.
3.4. Governing Law; Jurisdiction; Waiver of Jury Trial. This Note shall be
--------------------------------------------------
construed in accordance with and governed by the domestic substantive laws of
the State of New York without giving effect to any choice of law or conflicts of
law provision or rule that would cause the application of domestic substantive
laws of any other jurisdiction. Each Company and each holder of this Note, to
the extent that it may lawfully do so, hereby consents to service of process,
and to be sued, in the State of New York and consents to the jurisdiction of the
courts of the State of New York and the United States District Court for the
Southern District of New York, as well as to the jurisdiction of all courts to
which an appeal may be taken from such courts, for the purpose of any suit,
action or other proceeding arising out of any of its obligations hereunder, and
expressly waives any and all objections it may have as to venue in any such
courts. Each Company and each holder of this Note further agrees that a summons
and complaint commencing an action or proceeding in any of such courts shall be
properly served and shall confer personal jurisdiction if served personally or
by certified mail to it at its address set forth in section 23 of the Securities
Purchase Agreements or as otherwise provided under the laws of the State of New
York. Notwithstanding the foregoing, each Company and each holder of this Note
agrees that nothing contained in this section 3.4 shall preclude the institution
of any such suit, action or other proceeding in any jurisdiction other than the
State of New York. EACH COMPANY AND EACH HOLDER OF THIS NOTE IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING INSTITUTED
BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS HEREUNDER.
3.5. Severability. In case any provision in this Note shall be invalid,
------------
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be effected and impaired thereby.
[The remainder of this page is intentionally left blank.]
Exhibit 1(a)
------------
-17-
IN WITNESS WHEREOF, the Companies have executed this Note as an instrument
under seal as of the date first above written.
UNIDIGITAL INC.
By:
------------------------------------
(Title)
LINOGRAPHICS CORPORATION
By:
------------------------------------
(Title)
ELEMENTS (UK) LIMITED
By:
------------------------------------
(Title)
UNIDIGITAL ELEMENTS (SF), INC.
By:
------------------------------------
(Title)
UNISON (NY), INC.
By:
------------------------------------
(Title)
Exhibit 1(a)
------------
-18-
UNISON (MA), INC.
By:
-------------------------------------
(Title)
MEGA ART CORP.
By:
-------------------------------------
(Title)
SUPERGRAPHICS HOLDING
COMPANY, INC.
By:
-------------------------------------
(Title)
SUPERGRAPHICS CORPORATION
By:
-------------------------------------
(Title)
REGENT GROUP LIMITED
By:
-------------------------------------
(Title)
Exhibit 1(a)
------------
-19-
INTERFACE GRAPHICS LIMITED
By:
-------------------------------------
(Title)
Exhibit 1(a)
------------
-20-
FORM OF ASSIGNMENT
[To be signed only upon transfer of Note]
For value received, the undersigned hereby sells, assigns and transfers
unto the within Note, and appoints
Attorney to transfer such Note on the books of UNIDIGITAL INC., LINOGRAPHICS
CORPORATION, ELEMENTS (UK) LIMITED, UNIDIGITAL ELEMENTS (SF), INC., UNISON (NY),
INC., UNISON (MA), INC., MEGA ART CORP., SUPERGRAPHICS HOLDING COMPANY, INC.,
SUPERGRAPHICS CORPORATION, REGENT GROUP LIMITED and INTERFACE GRAPHICS LIMITED
with full power of substitution in the premises.
Date: , .
----------------------------------------------
(Signature must conform in all respects to name
of Holder as specified on the face of the Note)
Signed in the presence of
- -------------------------------
Exhibit 1(a)
------------
-21-