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EXHIBIT 2.1
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ASSET ACQUISITION AGREEMENT
among
▇▇▇▇ DIGITAL TECHNOLOGIES, INC.,
▇▇▇▇ N.Y. ACQUISITION INC.,
SPEED GRAPHICS, INC.,
DDP, INC.
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
FOR THE
ACQUISITION OF THE ASSETS OF SPEED GRAPHICS, INC.
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TABLE OF CONTENTS
ARTICLE 1: DEFINITIONS......................................................2
1.1 Accountants......................................................2
1.2 Acquired Assets..................................................2
1.3 Acquired Liabilities.............................................3
1.4 Additional Shares................................................4
1.5 Affiliate........................................................4
1.6 Asserted Liability...............................................4
1.7 Assets...........................................................4
1.8 Assignment and Assumption Agreement..............................4
1.9 Audited 1995 and 1994 Financial Statements.......................5
1.10 Audited 1996 Financial Statements................................5
1.11 Audited Financial Statements.....................................5
1.12 Balance Sheet Date...............................................5
1.13 Balance Sheet Date Book Value....................................5
1.14 ▇▇▇▇ of Sale.....................................................6
1.15 Blue Sky Filing..................................................6
1.16 Blue Sky Laws....................................................6
1.17 Book Value.......................................................6
1.18 Book Value Adjustment............................................7
1.19 Business Day.....................................................7
1.20 Cash Component...................................................7
1.21 Claims...........................................................7
1.22 Claims Notice....................................................7
1.23 Closing..........................................................7
1.24 Closing Date.....................................................7
1.25 Closing Date Balance Sheet.......................................7
1.26 Code.............................................................8
1.27 Commission.......................................................8
1.28 Common Stock.....................................................8
1.29 Contracts........................................................8
1.30 Controlled Company...............................................8
1.31 Delivered Financial Statements...................................8
1.32 Determining Accountant...........................................8
1.33 Employment Agreement.............................................9
1.34 Environmental Claim..............................................9
1.35 Environmental Law................................................9
1.36 ERISA............................................................9
1.37 Exchange Act.....................................................9
1.38 Excluded Assets.................................................10
1.39 Excluded Liabilities............................................10
1.40 Final Closing Book Value........................................10
1.41 Financial Statements............................................10
1.42 GAAP............................................................10
1.43 Governmental Body...............................................10
1.44 Hazardous Materials.............................................11
1.45 Indemnifying Party..............................................11
1.46 Indemnitee......................................................11
1.47 Inspectors......................................................11
1.48 Intellectual Property...........................................11
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1.49 KDTI Indemnified Parties........................................11
1.50 KDTI Securities Claims..........................................11
1.51 Knowledge.......................................................12
1.52 Lease Assignment Documents......................................12
1.53 Leased Premises.................................................12
1.54 Leases..........................................................12
1.55 Licenses........................................................12
1.56 Machinery and Equipment.........................................12
1.57 Material Adverse Effect.........................................13
1.58 Notice of Disagreement..........................................13
1.59 Order...........................................................13
1.60 Other Documents.................................................13
1.61 Other Shares....................................................13
1.62 Permitted Lien..................................................13
1.63 Person..........................................................14
1.64 Present Accountants.............................................14
1.65 Promissory Note.................................................14
1.66 Purchase Price..................................................14
1.67 Records.........................................................14
1.68 Register; Registered; Registration; Registration Statement......14
1.69 Registrable Securities..........................................15
1.70 Securities Act..................................................15
1.71 Share Certificates..............................................15
1.72 Share Price.....................................................15
1.73 Shares..........................................................15
1.74 Shortfall Shares................................................15
1.75 SPEED Business..................................................15
1.76 SPEED Indemnified Parties.......................................16
1.77 SPEED Securities Claims.........................................16
1.78 SPEED Shares....................................................16
1.79 Statement.......................................................16
1.80 Subordination Agreement.........................................16
1.81 Tax.............................................................16
1.82 Tax Return......................................................16
1.83 Unaudited Financial Statements..................................17
ARTICLE 2: SALE AND PURCHASE OF ACQUIRED ASSETS; ASSUMPTION OF
ASSUMED LIABILITIES
...............................................................17
2.1 Sale and Purchase of Acquired Assets.
...............................................................17
2.2 Certain Assets..................................................17
2.3 Assumed Liabilities.............................................17
ARTICLE 3: PURCHASE PRICE..................................................18
3.1 Calculation of Purchase Price...................................18
3.2 Allocation......................................................18
3.3 Post Closing Adjustments to Purchase Price......................19
3.3.1. Preparation of Closing Date Balance Sheet and the
Statement............................................19
3.3.2. Adjustments to Purchase Price Based upon Book
Value Adjustment.....................................21
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ARTICLE 4: THE CLOSING.....................................................22
4.1 Closing.........................................................22
4.2 Deliveries by SPEED at Closing..................................22
4.3 Deliveries by KDTI and KDTI-NY at Closing.......................24
4.4 Delivery of Other Agreements at Closing.........................25
ARTICLE 5: REGISTRATION OF SHARES..........................................25
5.1 Demand Registration Right.......................................25
5.2 Piggy Back Registration Right...................................26
5.3 Lock Up Agreements..............................................27
5.4 Preparation and Filing of Registration Statement................28
5.5 Preparation; Reasonable Investigation...........................31
5.6 Other Registration Rights.......................................32
5.6.1. No Existing Agreements...............................32
5.6.2. Future Agreements....................................32
5.7 Other Conditions and Limitations................................33
5.8 Application to Subsequent Holders...............................34
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF SPEED AND ▇▇▇▇▇▇
.......................................................35
6.1 Existence and Good Standing.....................................35
6.2 Capital Stock...................................................35
6.3 Financial Statements............................................36
Absence of Adverse Changes......................................37
6.4 Books and Records...............................................37
6.5 Real Property; Personal Property; Machinery and Equipment.......38
6.5.1. Leasehold and other Real Property Interests..........38
6.5.2. Title to Acquired Assets.............................38
6.5.3. Machinery and Equipment. ............................39
Sufficiency of Assets...........................................39
6.6 Contracts.......................................................39
6.7 Litigation......................................................41
6.8 Taxes...........................................................41
6.9 Liabilities.....................................................42
6.10 Intellectual Property...........................................42
6.11 Compliance with Laws............................................43
6.12 Licenses........................................................43
6.13 Insurance.......................................................43
6.14 Supplier and Customer Relations.................................44
6.15 Employment Relations............................................44
6.16 Personnel; Compliance with ERISA................................45
6.16.1. SPEED's Personnel...................................45
6.16.2. Employee Benefit Plans. ............................45
6.17 No Changes Since the Balance Sheet Date.........................46
6.18 Valid Agreements; Restrictive Documents.........................47
6.19 Required Approvals, Notices and Consents........................48
6.20 Disclosure......................................................49
6.21 Environmental Conditions........................................49
6.22 Health and Safety Conditions....................................50
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Copies of Documents...................................................50
6.23 No Brokers......................................................51
6.24 Corporate Controls..............................................51
ARTICLE 7: REPRESENTATIONS OF KDTI AND KDTI-NY ............................51
7.1 Existence and Good Standing.....................................51
7.2 Shares..........................................................52
7.3 Valid Agreements; Restrictive Documents.........................52
7.4 Required Approvals, Notices and Consents........................54
7.5 No Brokers......................................................54
7.6 Disclosure......................................................54
7.8 Securities Laws.................................................55
ARTICLE 8: POST CLOSING COVENANTS..........................................55
8.1 General.........................................................56
8.4 Post-Closing Assistance.........................................57
8.5 Cooperation in Preparation of Securities Law Filings............57
8.6 Guarantees by ▇▇▇▇▇▇ and DDP....................................58
8.7 Election of ▇▇▇▇▇▇ to the KDTI Board............................58
8.8 Employees: Assumed Plans........................................59
8.9 Delivery of Financial Statements................................59
8.10 Employee Stock Options..........................................60
8.11 Third Party Consents............................................60
8.12 Non-competition.................................................63
8.13 Material Modifications to Bank Loan.............................63
ARTICLE 9: SURVIVAL OF REPRESENTATIONS; INDEMNITIES........................63
9.1 Survival of Representations and Warranties of SPEED and ▇▇▇▇▇▇. 63
9.2 Obligations of SPEED and ▇▇▇▇▇▇ to Indemnify....................64
9.2.1. General Indemnity....................................64
9.2.2. Limitation on Indemnification Obligation.............65
9.3 Survival of Representations and Warranties of KDTI and KDTI-NY..67
9.3.1. Obligation of KDTI and KDTI-NY to Indemnify..........67
9.3.2. Limitation on Indemnification Obligation.............69
9.4 Notice and Opportunity to Defend................................70
9.4.1. Notice of Asserted Liability.........................70
9.4.2. Opportunity to Defend................................71
9.4.3. Settlement...........................................72
9.5 Exclusive Provisions; No Rescission.............................73
ARTICLE 10: MISCELLANEOUS...................................................73
10.1 Expenses........................................................73
10.2 Governing Law...................................................73
10.3 Interchangeability of Schedules.................................73
10.4 Captions........................................................74
10.5 Notices.........................................................74
10.6 Parties in Interest.............................................74
10.7 Severability....................................................75
10.8 Counterparts....................................................75
10.9 Entire Agreement; Amendments....................................75
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INDEX TO SCHEDULES
Schedule 1.3 Acquired Liabilities
Schedule 1.8 Assignment and Assumption Agreement
Schedule 1.14 ▇▇▇▇ of Sale
Schedule 1.29 Contracts
Schedule 1.33 Employment Agreement
Schedule 1.38 Excluded Assets
Schedule 1.54 Leases
Schedule 1.65 Promissory Note
Schedule 1.80 Subordination Agreement
Schedule 4.2(ii) Opinion of SPEED's Counsel
Schedule 4.3(iv) Opinion of KDTI-NY's Counsel
Schedule 6.2 Stockholders and Capitalization of SPEED
Schedule 6.3.2 Changes to SPEED since the Balance Sheet Date
Schedule 6.4 Books and Records
Schedule 6.5.1 Real Property Encumbrances
Schedule 6.5.2 Title to Assets; Encumbrances
Schedule 6.5.3 Machinery and Equipment; Encumbrances
Schedule 6.6 Contracts
Schedule 6.7 Litigation
Schedule 6.8 Tax Liabilities
Schedule 6.9 Indebtedness for Borrowed Money
Schedule 6.10 Intellectual Property
Schedule 6.13 Insurance
Schedule 6.14 Suppliers and Customers
Schedule 6.15 Labor Agreements
Schedule 6.16 Personnel
Schedule 6.17 Changes since the Balance Sheet Date (SPEED)
Schedule 6.18 Valid Agreements; Restrictive Documents
Schedule 6.19 Approvals for SPEED
Schedule 6.21 Environmental Conditions
Schedule 7.4 Required Approvals, Notices and Consents (KDTI)
Schedule 7.6 Disclosure (KDTI)
Schedule 7.7 Changes since the Balance Sheet Date (KDTI)
Schedule 8.8 Assumed Plans
Schedule 8.10 Stock Option Grants
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ASSET ACQUISITION AGREEMENT
AGREEMENT dated as of January 1, 1998 ("Agreement") by and among ▇▇▇▇
DIGITAL TECHNOLOGIES, INC., a Delaware corporation, having an address at
Twenty-One ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (hereafter referred to as
"KDTI"); ▇▇▇▇ N.Y. ACQUISITION, INC., a Delaware corporation, having an address
at Twenty-One ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (hereafter referred to as
"KDTI-NY" or "Purchaser"); SPEED GRAPHICS, INC., a New York corporation, having
an address at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (hereafter
referred to as "SGI"); DDP, INC., a New York corporation, having an address at
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ (hereafter referred to as
"DDP", and, collectively with SGI referred to as "SPEED"); and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, an individual residing at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ (hereafter referred to as "▇▇▇▇▇▇").
W I T N E S S E T H :
WHEREAS, KDTI-NY, a wholly owned subsidiary of KDTI, wishes to acquire and
SPEED is willing to sell to KDTI-NY the Acquired Assets (as defined herein),
subject to the assumption by KDTI-NY of the Acquired Liabilities (as defined
herein), upon the terms and conditions hereof.
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NOW, THEREFORE, in consideration of the agreements herein set forth and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1: DEFINITIONS.
Capitalized terms used in this Agreement shall, unless the context
otherwise requires, have the meanings specified in this Article 1. Certain
additional defined terms are set forth elsewhere in this Agreement.
1.1 Accountants.
"Accountants" means the independent public accountants then regularly retained
by KDTI. All determinations to be made by the Accountants pursuant to the terms
of this Agreement shall be made, where stated, using GAAP.
1.2 Acquired Assets.
"Acquired Assets" means all of SPEED's right, title and interest in or to the
Assets as and to the extent existing on the Closing Date, including all
property, plant, machinery, equipment, computer hardware and software,
inventories, goodwill and other assets of every kind, character and description,
whether tangible or intangible, whether real, personal or mixed, and wherever
situated, employed or held in connection with the business or operations of
SPEED (other than the Excluded Assets), and including, without limitation, the
following:
i. all cash, cash equivalents, accounts receivable and all proceeds
thereof;
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ii. all inventory, work in process, product lines, tools, molds, parts,
supplies, furniture, fixtures and equipment, computer hardware and
software, spare parts and other tangible assets used in connection with
the SPEED Business;
iii. all Intellectual Property;
iv. all of the following relating to the SPEED Business and the
Intellectual Property: customer lists, account records, pricing
information, sales literature, promotional literature and all other books
and records, files, invoices, supplier lists, blueprints, specifications,
designs, drawings, prototypes, letters of credit, prepaid items and
deposits, and the name "Speed Graphics;"
v. SPEED's leasehold estate in the Leased Premises if and to the extent
each Lease relating thereto is assignable on the Closing Date, all
leasehold improvements (subject to any right of lessor under such Lease to
recover such improvements upon the expiration or termination of such
Lease) and all furniture, fixtures and equipment located at such Leased
Premises or otherwise used by SPEED in the conduct of its business,
wherever located, provided that, if any such Lease is not so assignable by
its terms, then SPEED will use all commercially reasonable efforts to
arrange for such assignment or a sublease of the premises to Purchaser or
its nominee, or otherwise to make such Leased Premises available for the
use and benefit of KDTI-NY;
vi. all Machinery and Equipment; and
vii. all Contracts and all warranties, claims and causes of action against
third parties relating to any of the Acquired Assets.
1.3 Acquired Liabilities.
"Acquired Liabilities" means (i) all of SPEED's liabilities as shown on SPEED's
June 30, 1997 balance sheet (including the notes thereto) as at the Balance
Sheet Date (other than those liabilities that have been paid or otherwise
satisfied or discharged prior to the Closing Date) and those liabilities of
SPEED arising in the ordinary course of business of SPEED since the Balance
Sheet Date, which are of the same nature as the liabilities set forth on such
balance sheet, (ii) all obligations (A) under real property and equipment leases
that are included in the Acquired Assets and (B) with respect to any current or
former employees or independent contractors,
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including without limitation obligations for accrued vacation pay, sick leave
and statutory and non-statutory severance benefits, (iii) all obligations of
SPEED for replacement of, or refund for, damaged, defective, or other returned
products or for warranty claims in respect of products sold by SPEED, (iv) all
obligations of SPEED under the Contracts and (v) all liabilities of SPEED in
connection with each action or matter set forth on Schedule 1.3 hereto, but
shall in any case exclude the Excluded Liabilities.
1.4 Additional Shares.
"Additional Shares" means any shares of Common Stock issued and delivered by
KDTI pursuant to Section 3.3.2.
1.5 Affiliate.
"Affiliate" means, with respect to any Person, any other Person, directly or
indirectly controlling, controlled by or under common control with such Person.
1.6 Asserted Liability.
"Asserted Liability" has the meaning given in Section 9.4.1.
1.7 Assets.
"Assets" means SPEED's assets shown on its unaudited balance sheet as at the
Balance Sheet Date.
1.8 Assignment and Assumption Agreement.
"Assignment and Assumption Agreement" has the meaning given in Section 4.2.
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1.9 Audited 1995 and 1994 Financial Statements.
"Audited 1995 and 1994 Financial Statements" means SPEED's combined balance
sheets, combined statements of income and retained earnings, and combined
statements of cash flow and related footnotes thereto as at and for the twelve
(12) month periods ending December 31, 1995 and December 31, 1994, respectively.
1.10 Audited 1996 Financial Statements.
"Audited 1996 Financial Statements" means SPEED's combined balance sheets,
combined statements of income and retained earnings, and combined statements of
cash flow and related footnotes thereto as at and for the twelve (12) month
period ending December 31, 1996, audited by the Present Accountants.
1.11 Audited Financial Statements.
"Audited Financial Statements" means the Audited 1996 Financial Statements and
the Audited 1995 and 1994 Financial Statements.
1.12 Balance Sheet Date.
"Balance Sheet Date" means June 30, 1997.
1.13 Balance Sheet Date Book Value.
"Balance Sheet Date Book Value" means Two Million Nine Hundred Four Thousand
Dollars ($2,904,000.00), which represents (i) the difference between (A) the
total assets of SPEED as shown on the Audited 1996 Financial Statements and (B)
the total liabilities of SPEED as shown on the Audited 1996 Financial Statements
plus (ii) Five Hundred Twenty Five Thousand Dollars ($525,000.00).
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1.14 ▇▇▇▇ of Sale.
"▇▇▇▇ of Sale" has the meaning given in Section 4.2.
1.15 Blue Sky Filing.
"Blue Sky Filing" means the filing of any application, registration, statement
or other document with any Governmental Body of any state, the District of
Columbia, or any territory or other jurisdiction in the United States necessary
to register or qualify the sale of the Registrable Securities in such
jurisdiction in or through the public securities markets.
1.16 Blue Sky Laws.
"Blue Sky Laws" means the laws of any state, the District of Columbia, or any
territory or other jurisdiction in the United States governing the purchase
and/or sale of securities in such jurisdiction.
1.17 Book Value.
"Book Value" means the difference between (i) the total assets of SPEED on the
Closing Date as reflected on the Closing Date Balance Sheet (excluding all
Excluded Assets) and (ii) the total liabilities of SPEED on the Closing Date as
reflected on the Closing Date Balance Sheet (excluding all Excluded
Liabilities), except that Book Value shall not include, and no adjustment
thereto pursuant to Section 3.3 shall be made in respect of, any contingent
liability for severance or other payments under the employment agreement dated
August 22, 1997 with ▇▇▇▇▇▇ ▇▇▇▇, or for any liability arising after the Closing
Date for amounts due to ▇▇▇▇▇▇▇ ▇▇▇▇▇ under a non-compete agreement dated
October 9, 1991, as amended August 16, 1995, or for contingent liabilities
arising after the Closing Date for the maintenance or repair of Machinery and
Equipment included in the Acquired Assets. Notwithstanding the foregoing, the
parties agree
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that all accruals required by GAAP with respect said agreements with Messrs.
Heck and ▇▇▇▇▇ and the maintenance or repair obligations shall be reflected in
the Closing Date Balance Sheet.
1.18 Book Value Adjustment.
"Book Value Adjustment" means the difference, if any, between the Final Closing
Book Value and the Balance Sheet Date Book Value.
1.19 Business Day.
"Business Day" means a day, other than Saturday, Sunday or a day on which banks
in New York City are required or permitted to be closed.
1.20 Cash Component.
"Cash Component" has the meaning given in Section 3.1.
1.21 Claims.
"Claims" has the meaning given in Section 9.2.1.
1.22 Claims Notice.
"Claims Notice" has the meaning given in Section 9.4.1.
1.23 Closing.
"Closing" means the closing of the transactions described in this Agreement
pursuant to Section 4 of this Agreement.
1.24 Closing Date.
"Closing Date" means the date of this Agreement.
1.25 Closing Date Balance Sheet.
"Closing Date Balance Sheet" has the meaning given in Section 3.3.1.
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1.26 Code.
"Code" means the Internal Revenue Code of 1986, as amended.
1.27 Commission.
"Commission" means the United States Securities and Exchange Commission.
1.28 Common Stock.
"Common Stock" means the shares of common stock, par value $.001 per share, of
KDTI.
1.29 Contracts.
"Contracts" means all contracts, leases, licenses, commitments, sales orders,
invoices, purchase orders and other agreements relating to the SPEED Business,
including the agreements listed on Schedule 1.29.
1.30 Controlled Company.
"Controlled Company" means (i) any Affiliate of SPEED and (ii) any Affiliate of
▇▇▇▇▇▇ which is engaged in a line of business which is similar to or competes
with the SPEED Business or acts as a supplier or customer of SPEED.
1.31 Delivered Financial Statements.
"Delivered Financial Statements" has the meaning given in Section 6.3.1.
1.32 Determining Accountant
"Determining Accountant" shall mean an accountant that has no past or existing
relationship with SPEED, KDTI or any of their respective Affiliates and that is
selected by the Accountants and the Present Accountants in accordance with this
Agreement, or, in the event of such two accountants' inability to select a
Determining Accountant, by a Judge of the Supreme Court of the State of New
York, County of New York, upon petition by either KDTI or SPEED.
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1.33 Employment Agreement.
"Employment Agreement" means the agreement between KDTI and ▇▇▇▇▇▇, in the form
annexed hereto as Schedule 1.33.
1.34 Environmental Claim.
"Environmental Claim" means any written notice, claim, demand, action, suit,
complaint, proceeding or other written communication by any Person alleging
liability or potential liability (including, without limitation, liability or
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resource damages, property damage, personal injury,
fines or penalties) arising out of or relating to (i) the discharge, emission,
release or threatened release of any Hazardous Materials, at any of Speed's
locations in violation of any Environmental Law, or (ii) the violation or
alleged violation by SPEED of any permit, license, registration or other
authorization required under applicable Environmental Laws.
1.35 Environmental Law.
"Environmental Law" means any existing applicable federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, notification and reporting requirements of any Governmental Body, or
requirements of law (including, without limitation, common law) relating in any
manner to contamination, pollution, or the conservation, preservation or
protection of human health or the environment.
1.36 ERISA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
1.37 Exchange Act.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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1.38 Excluded Assets.
"Excluded Assets" means all items described on Schedule 1.38.
1.39 Excluded Liabilities.
"Excluded Liabilities" means (i) accounts payable, obligations, liabilities and
debts of SPEED to (a) any Affiliate of SPEED, or (b) ▇▇▇▇▇▇ or any other
director or officer of SPEED or any Affiliate thereof; (ii) all unpaid dividends
or distributions to SGI's stockholder; (iii) all Tax liabilities for periods
prior to the Closing Date, other than such liabilities for which accruals or
reserves exist on the Closing Date Balance Sheet; and (iv) any other liabilities
and contingent liabilities not reflected on the Closing Date Balance Sheet (or
the footnotes thereto) that are not Acquired Liabilities.
1.40 Final Closing Book Value.
"Final Closing Book Value" has the meaning given in Section 3.3.
1.41 Financial Statements.
"Financial Statements" means the Audited Financial Statements and the Unaudited
Financial Statements.
1.42 GAAP.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
1.43 Governmental Body.
"Governmental Body" means any applicable court, tribunal, arbitrator or any
government or political subdivision thereof, whether federal, state, county or
local, or any agency, authority, official or instrumentality of any such
government or political subdivision.
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1.44 Hazardous Materials.
"Hazardous Materials" means any and all hazardous or toxic substances, wastes,
materials or chemicals, petroleum (including crude oil or any fraction thereof)
and petroleum products, asbestos and asbestos-containing materials, pollutants,
contaminants, polychlorinated biphenyls and any and all other materials and
substances regulated pursuant to any Environmental Laws.
1.45 Indemnifying Party.
"Indemnifying Party" has the meaning given in Section 9.4.1.
1.46 Indemnitee.
"Indemnitee" has the meaning given in Section 9.4.1.
1.47 Inspectors.
"Inspectors" has the meaning given in Section 5.5.
1.48 Intellectual Property.
"Intellectual Property" means United States and foreign patents, patent
applications, patent licenses, software licenses and know-how licenses, trade
names, trademarks, copyrights, service marks, trademark registrations and
applications (whether pending or abandoned), service ▇▇▇▇ registrations and
applications, copyright registrations and applications (whether pending or
abandoned), job or shop rights, rights to inventions and all other items of
intellectual property or other intangible property used in the SPEED Business.
1.49 KDTI Indemnified Parties.
"KDTI Indemnified Parties" has the meaning given in Section 9.2.1.
1.50 KDTI Securities Claims.
"KDTI Securities Claims" has the meaning given in Section 9.3.1.
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1.51 Knowledge
"Knowledge" of any matter means, with respect to an individual, the actual
knowledge, but not constructive or imputed knowledge, after due inquiry, of such
matter of such Person and, with respect to any Person that is not an individual,
such actual knowledge of each individual that is a director, officer, manager,
employee, counsel, accountant, investment banker or other professional advisor
of such Person.
1.52 Lease Assignment Documents
"Lease Assignment Documents" means the documents evidencing the assignment of
all right, title and interest of SPEED in the Leases to KDTI-NY, as lessee.
1.53 Leased Premises
"Leased Premises" means the premises used or occupied by SPEED under the Leases.
1.54 Leases.
"Leases" means the leases for all Leased Premises used or occupied by SPEED in
the SPEED Business, as listed on Schedule 1.54.
1.55 Licenses.
"Licenses" has the meaning given in Section 6.12.
1.56 Machinery and Equipment.
"Machinery and Equipment" means all machinery, equipment, vehicles and all
leases and subleases of machinery, equipment or vehicles, located at any plant,
facility or property of SPEED or used or held by SPEED in connection with its
business.
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1.57 Material Adverse Effect.
"Material Adverse Effect" means any change or changes or effect or effects that
individually or in the aggregate are or may reasonably be expected to be
materially adverse to the condition (financial or otherwise) of SPEED.
1.58 Notice of Disagreement.
"Notice of Disagreement" has the meaning given in Section 3.3.1.
1.59 Order.
"Order" means any judgment, writ, decree, injunction or similar order of any
Governmental Body, in each case whether preliminary or final.
1.60 Other Documents.
"Other Documents" means all Schedules and Exhibits to this Agreement and all
other instruments, agreements and documents executed or to be executed by any
party hereto in connection with the transactions contemplated hereby.
1.61 Other Shares.
"Other Shares" has the meaning given in Section 5.2.
1.62 Permitted Lien.
"Permitted Lien" means (i) any lien for Taxes not yet due or delinquent or being
contested in good faith by appropriate proceedings, provided that appropriate
reserves or other appropriate provisions are made therefor to the extent
required by GAAP, (ii) any statutory lien arising in the ordinary course of
business by operation of law with respect to an obligation or liability that is
not yet due or delinquent or which are being contested in good faith by
appropriate proceedings (provided that appropriate reserves or other appropriate
provisions are made therefor
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to the extent required by GAAP) and (iii) any minor imperfection of title or
similar lien or encumbrance which individually or in the aggregate with other
such imperfections of title, liens or encumbrances do not have a Material
Adverse Effect.
1.63 Person.
"Person" means and includes an individual, a partnership, a joint venture, a
joint stock company, a corporation, a limited liability company, a trust, an
unincorporated association or organization and a government or a department or
agency, authority, official or instrumentality thereof, or any group of the
foregoing acting in concert.
1.64 Present Accountants
"Present Accountants" means the firm of Berenson & Company LLP.
1.65 Promissory Note.
"Promissory Note" means the promissory note, in the form attached hereto as
Schedule 1.65.
1.66 Purchase Price.
"Purchase Price" has the meaning set forth in Section 3.1.
1.67 Records.
"Records" has the meaning given in Section 5.5.
1.68 Register; Registered; Registration; Registration Statement.
The terms "register," "registered," "registration" and "registration statement"
shall refer to a registration of securities to be offered and sold under a
registration statement filed with the Commission, that becomes effective
pursuant to the Securities Act or the Exchange Act and the applicable rules and
regulations under either such Act.
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1.69 Registrable Securities.
"Registrable Securities" has the meaning given in Section 5.1.
1.70 Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
1.71 Share Certificates.
"Share Certificates" means the certificates representing the Shares and any
Additional Shares, which shall bear the following legend:
Any transfer or other disposition of the shares represented by this
certificate is subject to the provisions of an Asset Acquisition Agreement
dated as of January 1, 1998, among ▇▇▇▇ Digital Technologies, Inc. (the
"Corporation"), ▇▇▇▇ N.Y. Acquisition, Inc., Speed Graphics, Inc., DDP,
Inc. and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇. The shares of stock represented by this
Certificate have not been registered under the United States Securities
Act of 1933, as amended (the "Act"), and may be transferred only if (i)
registered under the Act and the requirements of any state having
jurisdiction are complied with or (ii) the transfer is exempt from such
registration and state requirements and counsel reasonably acceptable to
the Corporation has delivered to the Corporation a written opinion
reasonably acceptable to the Corporation setting forth the basis for such
exemption.
1.72 Share Price.
"Share Price" means $3.403.
1.73 Shares.
"Shares" means 293,848 shares of Common Stock.
1.74 Shortfall Shares.
"Shortfall Shares" has the meaning given in Section 3.3.2.
1.75 SPEED Business.
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"SPEED Business" means SPEED's business and operations reflected in the
Unaudited Financial Statements as at and for the period ending on the Balance
Sheet Date and as conducted through the Closing Date.
1.76 SPEED Indemnified Parties.
"SPEED Indemnified Parties" has the meaning given in Section 9.3.1.
1.77 SPEED Securities Claims.
"SPEED Securities Claims" has the meaning given in Section 9.2.1.
1.78 SPEED Shares.
"SPEED Shares" means all of the issued and outstanding shares of capital stock
of SGI.
1.79 Statement.
"Statement" has the meaning given in Section 3.3.1.
1.80 Subordination Agreement.
"Subordination Agreement" means the Subordination Agreement in favor of the Bank
of New York, substantially in the form of Schedule 1.80.
1.81 Tax.
"Tax" means all federal, state, local and foreign income, profits, franchise,
sales, use, occupancy, excise and payroll taxes or charges imposed by any
Governmental Body, and includes any interest and penalties on or additions to
any such taxes and any expenses incurred in connection with the determination,
settlement or litigation of any liability for such taxes.
1.82 Tax Return.
"Tax Return" means any return, report, information return or other document
(including any related or supporting information) filed or required to be filed
with any federal, state, local or
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foreign Governmental Body in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
1.83 Unaudited Financial Statements.
"Unaudited Financial Statements" means SPEED's balance sheet, statement of
income and retained earnings, prepared by SPEED, for:
i. the six (6) month period ended June 30, 1997;
ii. the ten (10) month period ended October 31, 1997; and
iii. the eleven (11) month period ended November 30, 1997.
ARTICLE 2: SALE AND PURCHASE OF ACQUIRED ASSETS; ASSUMPTION OF
ASSUMED LIABILITIES
2.1 Sale and Purchase of Acquired Assets.
Subject to the terms and conditions set forth in this Agreement, SPEED
hereby agrees to sell to the Purchaser, and the Purchaser hereby agrees to
purchase from SPEED, at the Closing all of the Acquired Assets, free and clear
of any liabilities, liens, security interests, pledges, conditions or
encumbrances other than the Permitted Liens and Acquired Liabilities.
2.2 Certain Assets.
Immediately after the Closing Date, none of SPEED, ▇▇▇▇▇▇ or any
Controlled Company shall have or control any assets related to or necessary in
the conduct of the SPEED Business.
2.3 Assumed Liabilities.
Subject to the terms and conditions set forth in this Agreement, KDTI and
the Purchaser agree that, on the Closing Date, KDTI and the Purchaser shall
jointly and severally assume and
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thereafter pay, perform and discharge when due all of the Acquired Liabilities
arising under the Contracts, and the Purchaser shall assume and thereafter pay,
perform and discharge when due all other Acquired Liabilities.
ARTICLE 3: PURCHASE PRICE 3.1 Calculation of Purchase Price.
Subject to adjustment pursuant to Section 3.3, the aggregate purchase
price (the "Purchase Price") for the Acquired Assets is the sum of:
i. $9,214,000.00, as adjusted pursuant to Section 3.3.1 (the
"Cash Component"), payable as provided in Section 4.2;
ii. $2,000,000.00 payable in accordance with the terms of the
Promissory Note; and
iii. the Shares.
3.2 Allocation.
The Purchase Price is allocated (the "Purchase Price Allocation") among
the Acquired Assets as set forth on Schedule 3.2. Such Purchase Price Allocation
is being made consistent with Section 1060 of the Code. Each of the parties
hereto shall not, and shall not permit any of its Affiliates to, take a position
(except as required pursuant to any Order) on any Tax Return before any
Governmental Body charged with the collection of any Tax, or in any judicial
proceeding, that is in any way inconsistent with the Purchase Price Allocation
determined in accordance with this Section 3.2.
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3.3 Post Closing Adjustments to Purchase Price.
3.3.1. Preparation of Closing Date Balance Sheet and the Statement. As
promptly as practicable and in any event on or before February 16, 1998,
SPEED shall cause the Present Accountants to prepare and deliver to KDTI
(i) an audited balance sheet for SPEED as at the Closing Date (the
"Closing Date Balance Sheet") prepared in accordance with GAAP in the
manner used to prepare SPEED's balance sheet as at the Balance Sheet Date
and the Audited Financial Statements; provided, however, that for purposes
of preparing the Closing Date Balance Sheet only, no Excluded Assets and
no Excluded Liabilities shall be included in such balance sheet (and
liabilities shall not include any contingent liability for severance or
other payments under the employment agreement dated August 22, 1997 with
▇▇▇▇▇▇ ▇▇▇▇, or for any liability arising after the Closing Date for the
amounts due to a former stockholder under a non-compete agreement dated
October 9, 1991, as amended August 16, 1995, or for any liability arising
after the Closing Date for the maintenance or repair of Machinery and
Equipment included in the Acquired Assets; notwithstanding the foregoing,
the parties agree that all accruals required by GAAP with respect to said
agreements with Messrs. Heck and ▇▇▇▇▇ and the maintenance or repair
obligations shall be reflected in the Closing Date Balance Sheet, and (ii)
a statement (the "Statement") setting forth the Book Value. The costs and
expenses of the Present Accountants incurred after the Closing in
connection with the preparation and delivery of the Closing Date Balance
Sheet and the Statement shall be paid by SPEED, except that KDTI shall
reimburse SPEED for up to $35,000.00 of the amount charged by the Present
Accountants for such work. Not later than 15 business
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days after the Closing Date Balance Sheet and the Statement are delivered
to KDTI, KDTI shall notify SPEED in writing (the "Notice of Disagreement")
whether KDTI disagrees with the Closing Date Balance Sheet and the
Statement. If no Notice of Disagreement is received by SPEED within such
15-business day period, then the Closing Date Balance Sheet and the
Statement shall be deemed to be accepted and agreed to by KDTI. KDTI shall
have the right to review the ledgers, books, records and work papers of
SPEED and the Present Accountants utilized in preparing the Closing Date
Balance Sheet and the Statement. The Notice of Disagreement shall provide
specific reasons for the disagreement. If such Notice of Disagreement is
given, then KDTI and SPEED shall use reasonable efforts to resolve the
disagreement regarding the Closing Date Balance Sheet and the Statement.
If no agreement is reached between them within thirty (30) days after the
date on which KDTI gives its Notice of Disagreement, then the Determining
Accountant shall be appointed by the Accountants and the Present
Accountants within ten (10) days thereafter with instructions to resolve
the disagreement and provide a report of its determination of the amounts
in dispute within thirty (30) days of its appointment. The Determining
Accountant may examine all ledgers, books, records and work papers
utilized in connection with the accounting and preparation of the Closing
Date Balance Sheet and the Statement but the scope of its engagement will
be limited to resolving those items which KDTI identified in its Notice of
Disagreement as to which KDTI disagreed and determining whether such items
were properly reflected on the Statement in accordance with the
requirements of this Section 3.3; provided that the Determining Accountant
shall also make such other changes to the Closing Date
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Balance Sheet as are necessary and appropriate for the consistent
presentation thereof in light of its determination of the specific issues
in dispute. The decision of the Determining Accountant shall be delivered
in a written report addressed to KDTI and SPEED and shall be binding and
conclusive upon the parties hereto. The costs and fees of the Determining
Accountant shall be borne one-half by SPEED and one-half by KDTI. The Book
Value set forth in the Closing Date Balance Sheet and the Statement,
either as agreed to by SPEED and KDTI if the Closing Date Balance Sheet
and the Statement are not referred to the Determining Accountant or as
finally determined by the Determining Accountant, is referred to herein as
the "Final Closing Book Value."
3.3.2. Adjustments to Purchase Price Based upon Book Value Adjustment.
Upon the fifth Business Day after completion of the calculation of the
Final Closing Book Value, the Purchase Price shall be adjusted in the
manner set forth in this Section 3.3.2.
i. If the Final Closing Book Value is less than the Balance Sheet
Date Book Value, the Purchase Price shall be reduced by such
Book Value Adjustment, and SPEED shall deliver to KDTI (A) a
number of shares of Common Stock (the "Shortfall Shares")
equal to the quotient of (1) 50% of the lesser of (x) the Book
Value Adjustment and (y) $75,000 and (2) the Share Price, and
(B) by wire transfer of immediately available funds to an
account designated in writing by KDTI, an amount equal to the
balance of the Book Value Adjustment. In the event SPEED is
required to deliver to KDTI any Shortfall Shares pursuant to
the preceding sentence, SPEED shall deliver to KDTI, or the
transfer agent for the Common Stock, one or more certificates
representing the Shortfall Shares, which certificates shall be
duly endorsed, or accompanied by stock powers duly executed,
in such manner as is necessary to transfer the Shortfall
Shares to KDTI in accordance with Article 8 of the Uniform
Commercial Code of New York. In the event the total number of
shares of Common Stock represented by any certificate(s)
delivered to KDTI in accordance with the preceding sentence
exceeds the Shortfall Shares, KDTI shall deliver to SPEED new
certificates for such excess as may be directed by SPEED.
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ii. If the Final Closing Book Value is greater than the Balance
Sheet Date Book Value, the Purchase Price shall be increased
by such Book Value Adjustment, and KDTI shall deliver to SPEED
(A) a number of shares of Common Stock equal to the quotient
of (1) 50% of the lesser of (x) the Book Value Adjustment and
(y) $75,000 and (2) the Share Price, and (B) by wire transfer
of immediately available funds to an account designated in
writing by SPEED, an amount equal to the balance of the Book
Value Adjustment.
ARTICLE 4: THE CLOSING
4.1 Closing.
The Closing is taking place as of the opening of business on the date
hereof at the offices of KDTI's counsel, Feder, Kaszovitz, Isaacson, Weber,
▇▇▇▇▇ & Bass LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
4.2 Deliveries by SPEED at Closing.
At the Closing, SPEED is delivering, or causing to be delivered, to KDTI
and KDTI-NY:
i. the opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel for SPEED, in the form
annexed hereto as Schedule 4.2(i);
ii. a copy of SPEED's Certificate of Incorporation, including all
amendments, certified by the office of the Secretary of State
of New York and a certificate from the office of the Secretary
of State of New York and each state in which SPEED has
qualified as a foreign corporation to do business, to the
effect that such corporation is in good standing in each such
state and that it owes no taxes;
iii. a certificate signed by the Secretary of SPEED certifying as
to (a) the Certificate of Incorporation and By-Laws of SPEED
being true and correct as of the Closing Date, (b) resolutions
of the Board of Directors of SPEED, authorizing and approving
all matters in connection with this Agreement and the
transactions contemplated hereby, and (c) the
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incumbency of the officer(s) of SPEED executing this Agreement
and any related agreements;
iv. the Lease Assignment Documents;
v. an Assignment and Assumption Agreement (the "Assignment and
Assumption Agreement") substantially in the form of Schedule
1.8 and a ▇▇▇▇ of Sale (the "▇▇▇▇ of Sale") substantially in
the form of Schedule 1.14;
vi. a certificate signed by a duly authorized executive officer of
SPEED that the representations and warranties of SPEED
contained in this Agreement are true, correct and complete on
and as of the Closing Date and that SPEED has performed and
complied with all covenants and agreements required by this
Agreement to be performed or complied with by it on or prior
to the Closing Date;
vii. copies of written consents to assignment of the Leases (to the
extent necessary under the Leases) and other Contracts
included in the Acquired Assets or Assumed Liabilities,
executed by the counterparties thereto;
viii. a letter from the Present Accountants confirming that in
connection with any review of the Closing Date Balance Sheet
pursuant to Section 3.3.1, the Present Accountants will
cooperate with KDTI and make available its work papers with
respect thereto;
ix. the Subordination Agreement;
x. a Certificate of Amendment to the Certificate of Incorporation
of SGI, duly executed and in suitable form for filing by the
Department of State of New York, changing the name of SGI to
Moondance, Inc.; and
xi. such other instruments or documents as may be reasonably
necessary in order to consummate the transactions described in
this Agreement.
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4.3 Deliveries by KDTI and KDTI-NY at Closing.
At the Closing, KDTI and KDTI-NY are delivering, or causing to be
delivered, to SPEED:
i. the Cash Component (in effect on the Closing Date) in
immediately available funds by wire transfer to the account
designated by SPEED;
ii. the executed Promissory Note;
iii. the Share Certificates representing the Shares;
iv. the opinion of Messrs. Feder, Kaszovitz, Isaacson, Weber,
▇▇▇▇▇ & Bass LLP, counsel to KDTI and KDTI-NY, in the form
annexed hereto as Schedule 4.3(iv);
v. a copy of KDTI's and KDTI-NY's respective Certificates of
Incorporation, including all amendments, certified, in each
case, by the office of the Secretary of State of Delaware; and
certificates from the office of the Secretary of State of
Delaware to the effect that each of KDTI and KDTI-NY is in
good standing and owes no taxes in Delaware;
vi. certificates signed by the Secretary of each of KDTI and
KDTI-NY, certifying as to (a) the Certificate of Incorporation
and By-Laws of each of KDTI and KDTI-NY, respectively, (b)
resolutions of the Board of Directors of each of KDTI and
KDTI-NY, respectively, authorizing and approving all matters
in connection with this Agreement and the transactions
contemplated hereby, and (c) the incumbency of the officer(s)
of each of KDTI or KDTI-NY, respectively, executing this
Agreement and any related agreements;
vii. any Lease Assignment Documents to which KDTI or KDTI-NY is a
party;
viii. the Assignment and Assumption Agreement and the ▇▇▇▇ of Sale;
ix. a certificate signed by a duly authorized executive officer of
each of KDTI and KDTI-NY that the representations and
warranties of each of KDTI and KDTI-NY contained in this
Agreement are true, correct and complete on and as of the
Closing Date and that each of KDTI and KDTI-NY has performed
and complied with all covenants and agreements required by
this Agreement to be performed or complied with by it on or
prior to the Closing Date; and
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x. executing and delivering such other instruments or documents
as may be reasonably necessary in order to consummate the
transactions described in this Agreement.
4.4 Delivery of Other Agreements at Closing.
At the Closing, (i) KDTI and ▇▇▇▇▇▇ are executing and delivering the
Employment Agreement to one another and (ii) KDTI is delivering to each of ▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ options to purchase 27,500 shares of Common Stock,
respectively, at an exercise price equal to the fair market value per share of
Common Stock on the date of grant.
ARTICLE 5: REGISTRATION OF SHARES
5.1 Demand Registration Right.
SPEED shall have the one-time right at any time within three (3) years
after the Closing Date to make a written request that KDTI register the Shares
and any Additional Shares (the "Registrable Securities"), and KDTI thereafter
agrees to use its best efforts to file a registration statement with the
Commission and to have such registration statement declared effective, to
permit, when such registration statement becomes effective, the sale of the
Registerable Securities in the public securities markets. KDTI may include in
the registration statement filed pursuant to this Article 5 any authorized but
unissued shares of Common Stock for sale by KDTI or any issued and outstanding
securities for sale by others; provided, however, that if the sale of the
Registerable Securities is to be underwritten and if the managing underwriter or
representative of the underwriters advises KDTI in writing that marketing
factors require a limitation of the number of shares of Common Stock so to be
included in the registration, the
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number of Registrable Securities that may be included in the underwriting shall
be reduced only after all shares of Common Stock, other than Registrable
Securities, are excluded from the registration.
5.2 Piggy Back Registration Right.
If at any time during the three (3) year period following the Closing
Date, KDTI proposes to register any of its securities under the Securities Act
(other than pursuant to a Registration Statement on Form ▇-▇, ▇-▇ or similar or
successor form), KDTI shall give notice of such intention to ▇▇▇▇▇▇, and, if,
within ten (10) business days thereafter KDTI receives a written request by
SPEED to register the Registrable Securities (which request shall specify the
Registrable Securities intended to be sold or disposed of and shall state the
intended method of disposition of the Registrable Securities by SPEED), KDTI
will use its best efforts to register such Registrable Securities with the
securities being registered by KDTI to permit the sale or other disposition of
the Registrable Securities (in accordance with the intended methods thereof of
which KDTI has been given notice) by SPEED. In the event that the proposed
registration under this Section 5.2 is, in whole or in part, an underwritten
public offering of Common Stock of KDTI, any request pursuant to this Section
5.2 to register Registrable Securities may specify that such Registrable
Securities are to be included in the underwriting on the same terms and
conditions as the shares of Common Stock, if any, otherwise being sold through
underwriters under such registration; provided, however, that as to any
registration pursuant to this Section 5.2, (i) if the managing underwriter
determines and advises KDTI in writing that the inclusion of all Registrable
Securities proposed to be included in the underwritten public offering and other
issued and outstanding shares of Common Stock proposed to be included therein by
persons
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other than SPEED or KDTI (the "Other Shares") would interfere with the
successful marketing of such securities, then the number of Registrable
Securities and Other Shares excluded from such registration shall be allocated
pro rata among the holders of the Other Shares (based on the number of shares of
Common Stock requested by the holders thereof to be registered in such offering,
except for Other Shares included therein at the request of holders thereof
exercising demand registration rights with respect to such other Shares), and
(ii) in each case those shares of Common Stock that are excluded from the
underwritten public offering pursuant to this Section 5.2 shall be withheld from
the market by the holders thereof and SPEED for such period that the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
5.3 Lock Up Agreements.
SPEED agrees that, for so long as ▇▇▇▇ ▇▇▇▇ is subject to the volume
limitations on the resale of Common Stock provided by Rule 144 under the
Securities Act, SPEED will not sell, assign, pledge or otherwise transfer or
engage in short-selling or hedging transactions with respect to the Registrable
Securities, except with respect to that number of Registrable Securities which
could be sold at any time or in any period if the provisions of Rule 144e(1) (as
in effect on the date of this Agreement) applied to SPEED as if the Registrable
Securities were "restricted securities" as defined in Rule 144(a)(3),
notwithstanding that the Registrable Securities may have been registered for
sale under the Securities Act or that SPEED may not be an "affiliate" as defined
in Rule 144(a)(1); provided, however, that the foregoing restriction shall (i)
terminate immediately upon the termination of employment of ▇▇▇▇▇▇ under the
Employment Agreement for "Good Reason" (as defined in the Employment Agreement)
or other than for "Cause" (as
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defined in the Employment Agreement) and (ii) shall not prohibit or in any way
restrict the transfer of any or all of the Shares or Additional Shares, if any,
by Speed or its Affiliates to Speed or an Affiliate of Speed; provided, further,
however, that any transferee shall acquire such Shares subject to the provisions
of this Article 5. In addition, for so long as ▇▇▇▇▇▇ is a director or officer
of KDTI or holds beneficially or of record 5% or more of the shares of Common
Stock from time to time outstanding, SPEED shall agree to any restrictions on
its resale of the Registrable Securities, whether in public or non-public
transactions, as required by the managing underwriter, representative or selling
agent of any public or private offering of Common Stock by KDTI and shall
execute and deliver to KDTI and such managing underwriter, representative or
selling agent an agreement to such effect, if each other director and officer of
KDTI and holder of 5% or more of the shares of Common Stock from time to time
outstanding likewise agree to such restrictions on resale and executes and
delivers such an agreement.
5.4 Preparation and Filing of Registration Statement.
With respect to any registration statement to be prepared by KDTI under
this Agreement, KDTI shall, at its sole expense, as expeditiously as
practicable:
i. prepare and file with the Commission a registration statement
necessary to permit the sale of the Registrable Securities in
the public securities markets when such registration statement
becomes effective, and such amendments and supplements to such
registration statement and the prospectus included therein as
may be necessary, to the extent reasonably practicable, to
cause such registration statement to become effective; to
cause such registration statement to become effective; and to
maintain the effectiveness of such registration statement and
to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities
covered by such registration statement, in accordance with the
intended methods of disposition thereof; provided that KDTI
shall not be required to maintain such effectiveness for any
time after (a) the disposition of the Registrable Securities
in accordance with
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the intended methods of disposition thereof as set forth
therein or (b) nine months after the date of effectiveness of
such Registration Statement;
ii. furnish to SPEED such number of conformed copies of such
registration statement and of each amendment or supplement
thereto (in each case including all exhibits and documents
incorporated therein by reference), such number of copies of
any prospectus included in such registration statement and
such other documents, in each case, as SPEED may reasonably
request in order to facilitate the sale of the Registrable
Securities in the public securities markets;
iii. register or qualify the Registrable Securities under the Blue
Sky Laws of each state governing further purchase or sale of
securities as SPEED may reasonably request, keep such
registration or qualification in effect for so long as such
registration statement remains in effect and take any other
action that may be reasonably necessary or advisable to enable
SPEED to consummate the disposition in such states of the
Registrable Securities; provided that KDTI shall not be
required to keep such registration or qualification in effect
at any time after (a) the disposition of the Registrable
Securities in accordance with the manner of disposition set
forth in the registration statement relating thereto or (b)
nine months after the date such registration statement becomes
effective; and provided, further, that KDTI will not be
required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to
qualify but for this paragraph or (B) subject itself to
taxation in any such jurisdiction;
iv. notify SPEED promptly, and confirm such advice in writing:
(a) when the registration statement or any amendment thereto
has been filed and when it has become effective;
(b) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose; and
(c) of the registration or qualification of the Registrable
Securities for sale under the Blue Sky Laws of any
jurisdiction affecting such registration or qualification;
v. make every reasonable effort to obtain the withdrawal of any
Order suspending the effectiveness of the registration
statement;
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vi. cause all of the Registrable Securities covered by the
registration statement to be listed on each securities
exchange, or designated for inclusion in each automated
interdealer quotation system, on which the Common Stock is
listed or included;
vii. provide and cause to be maintained a transfer agent for all
Registrable Securities covered by the registration statement
from and after a date not later than the effective date of the
registration statement;
viii. cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other
Governmental Bodies as may be reasonably necessary to enable
each holder thereof to consummate the disposition of such
Registrable Securities; provided that KDTI shall not be
required to maintain such registration or approval for any
time after (a) the disposition of the Registrable Securities
in accordance with the intended methods of disposition thereof
as set forth therein or (b) nine months after the date of
effectiveness of such registration statement;
ix. furnish to SPEED a signed counterpart, addressed to SPEED (and
the underwriters, if any), of an opinion of counsel for KDTI,
dated the effective date of such registration statement (or,
if such registration relates to an underwritten public
offering, dated the date of any closing under the underwriting
agreement), if and in the form delivered to any underwriter or
other purchaser of securities offered thereunder, covering
substantially the same matters with respect to such
registration statement (and the prospectus included therein)
as are customarily covered in opinions of issuer's counsel
delivered to the underwriters in underwritten public offerings
of securities;
x. notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which any
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading,
and at the request of any such holder promptly prepare and
furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a
material fact required to be stated therein
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or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
and
xi. comply with all applicable rules and regulations of the
Commission, and make available to its securityholders, as soon
as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months, but not more than
eighteen (18) months, beginning with the first full calendar
month after the effective date of such registration statement,
which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder.
5.5 Preparation; Reasonable Investigation.
In connection with the preparation and filing of the registration
statement and any amendments thereto and any Blue Sky Filing, KDTI will give
SPEED and its counsel and accountant the opportunity to review, in each case, a
reasonable time prior to their filing, the registration statement, each
prospectus included therein or filed with the Commission, each document
incorporated by reference therein and each amendment thereof or supplement
thereto and any Blue Sky Filing in order to verify the accuracy of any factual
information concerning SPEED. KDTI will make available for inspection by SPEED,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by SPEED or any
such underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of KDTI (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause KDTI's officers, directors and employees to
supply all information reasonably requested by any such Inspector in connection
with such registration statement and permit the Inspectors to participate in the
preparation of such registration statement and any prospectus contained therein
and any amendment thereof or supplement thereto. Records which
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KDTI determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement, (ii) the release of such Records is
ordered pursuant to a subpoena or other Order from a court of competent
jurisdiction, or (iii) the information in such Records has been made generally
available to the public. The seller of Registrable Securities agrees by
acquisition of such Registrable Securities that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to KDTI and allow KDTI, at KDTI's expense, to undertake appropriate
action to prevent or limit disclosure of the Records deemed confidential. KDTI
shall pay for all registration and filing fees, printing expenses and fees and
disbursements of KDTI's counsel and one counsel for SPEED and KDTI's Accountants
in connection with the preparation, review and filing of the registration
statement or any Blue Sky Filing pursuant to this Article 5; provided, however,
that SPEED shall pay underwriting discounts and commissions applicable to the
sale of the Registrable Securities.
5.6 Other Registration Rights.
5.6.1. No Existing Agreements. KDTI represents and warrants to SPEED that
there is not in effect on the date hereof any agreement by KDTI (other
than this Agreement) pursuant to which any holders of securities of KDTI
have a right to cause KDTI to register or qualify such securities under
the Securities Act or any Blue Sky Law that would conflict or be
inconsistent with any provision of this Agreement.
5.6.2. Future Agreements. KDTI shall not hereafter agree with the holders
of any securities issued or to be issued by KDTI to register or qualify
such securities under the
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Securities Act or any Blue Sky Law unless such agreement specifically
provides that (a) such holder of such securities may not participate in
any registration under Section 5.1 except as provided in the proviso to
Section 5.1, and (b) the holder of such securities may not participate in
any registration under Section 5.2 except as provided in Section 5.2.
5.7 Other Conditions and Limitations.
Any other provision hereof notwithstanding:
(a) SPEED's registration rights under this Section 5 are subject to the
conditions that (i) in the case of a Registration under Section 5.1 relating to
an underwritten offering of Registrable Securities, the underwriting agreement
and other documents to which KDTI is a party or which purport to obligate KDTI
with respect to any matter be reasonably satisfactory to KDTI, and (ii) in the
case of a registration under Section 5.2 relating to an underwritten offering of
securities of KDTI, SPEED agrees to the terms and conditions of, and executes
and delivers the underwriting agreement, a custody or deposit agreement and a
power of attorney, each in the customary form required by the underwriters, and
such other underwriting documents as the underwriters may reasonably require as
a condition to effecting the offering or the inclusion of Registrable Securities
therein;
(b) the registration rights pursuant to Section 5.1 or 5.2 and KDTI's
obligations under this Article 5 shall be suspended at any time when KDTI does
not have a class of equity securities (as defined in Section 3(a)(11) of the
Exchange Act and Rule 3a11-1 thereunder) registered under Section 12(b) or 12(g)
of the Exchange Act; and
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(c) notwithstanding that a demand for registration has been duly made
pursuant to Section 5.1 or 5.2, KDTI shall not be obligated to prepare or file a
registration statement under the Securities Act with respect to any Registrable
Securities as to which such demand relates, or to register or to qualify any
such Registrable Securities under any applicable Blue Sky Law, and if such a
registration statement has been filed or Blue Sky Filing has been made, KDTI may
suspend or withdraw such registration statement or Blue Sky Filing, if the Board
of Directors of KDTI determines in good faith that such registration would or
could reasonably be expected to interfere with or adversely affect the prospects
of consummating, or result in terms or conditions less favorable to KDTI
relating to, any material acquisition or disposition of assets (within the
meaning and scope of Item 2 of Form 8-K under the Exchange Act) or any public or
private financing as to which KDTI has entered into a definitive agreement or is
engaged in substantive negotiations for a period of 180 days after such demand
for registration is made; provided that KDTI may not so delay or suspend such
registration on more than one occasion in any period of twelve (12) consecutive
months.
5.8 Application to Subsequent Holders.
The provisions of this Article 5 shall inure to the benefit of and be
binding upon any holder of Registrable Securities; provided that all such
holders shall be deemed to be represented by and act through ▇▇▇▇▇▇ (or, if he
shall die, resign or otherwise cease so to act, a successor designated by ▇▇▇▇▇▇
in a written notice given to KDTI, or if ▇▇▇▇▇▇ shall not so designate a
successor, a successor designated by the holders of a majority of the
Registrable Securities then outstanding in a written notice given to KDTI, the
designation of such successor to be effective upon actual receipt of such notice
by KDTI) and any notice or other documents required or
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permitted to be given or delivered pursuant to the provisions of this Article 5
to or by SPEED shall be deemed to be duly so given or delivered if given to or
by ▇▇▇▇▇▇ (or such successor) in accordance with Section 10.5, and any right of
the holders of Registrable Securities, including in connection with the
preparation of any documents or any investigation pursuant to Section 5.5
relating to any registration, shall be exercised or effected by or through
▇▇▇▇▇▇ (or such successor).
ARTICLE 6: REPRESENTATIONS AND WARRANTIES OF SPEED AND ▇▇▇▇▇▇
SPEED and ▇▇▇▇▇▇, jointly and severally, represent and warrant to KDTI and
KDTI-NY the following:
6.1 Existence and Good Standing
Each of SGI and DDP is a corporation, duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and has
all requisite corporate power and authority to own, lease and operate all its
properties and to carry on its business as now being conducted. Each of SGI and
DDP is duly qualified and in good standing in each jurisdiction in which the
failure to qualify would have a Material Adverse Effect.
6.2 Capital Stock.
The stockholders and capitalization of SGI and DDP, respectively, are set
forth on Schedule 6.2. All such outstanding shares have been duly authorized and
validly issued and are fully paid and non-assessable, and have not been issued
in violation of any preemptive rights of stockholders. No other class of capital
stock of SGI or DDP is authorized or outstanding.
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There are no outstanding options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the purchase, issuance or sale of any shares of the
capital stock of SGI or DDP except as set forth on Schedule 6.2. ▇▇▇▇▇▇ owns the
SPEED Shares free and clear of any liabilities, liens, security interests,
pledges, or encumbrances, except for Permitted Liens and except as set forth on
Schedule 6.2.
6.3 Financial Statements.
6.3.1. Financial Statements delivered by SPEED. SPEED has furnished or
made available to KDTI the following financial statements and Tax Returns
(the "Delivered Financial Statements"):
i. federal and state Tax Returns of SPEED for the fiscal years
ended December 31, 1995 and December 31, 1996;
ii. the Unaudited Financial Statements;
iii. the Audited 1996 Financial Statements; and
iv. the Audited 1995 and 1994 Financial Statements.
The Delivered Financial Statements, including the footnotes thereto, are,
and the Closing Date Balance Sheet, including the footnotes thereto, will
be true and correct in all material respects, and, except for the Tax
Returns referred to in clause (i) of this Subsection 6.3.1, the Delivered
Financial Statements have been and the Closing Date Balance Sheet will be
prepared on the same basis as the Audited 1996 Financial Statements were
prepared, and, except for the tax returns referred to in clause (i) of
this Subsection 6.3.1, all adjustments consist only of normal recurring
adjustments necessary for a fair presentation of the results of operations
and financial condition for the period covered by such Financial
Statement. The balance sheets included in the Delivered
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Financial Statements, taken together, fairly present, and the Closing Date
Balance Sheet will fairly present, in all material respects the financial
condition of SPEED as at the respective dates thereof and, except as
indicated therein, and, in the case of the Unaudited Financial Statements,
except for the absence of footnotes and normal recurring adjustments,
reflect, and in the case of the Closing Date Balance Sheet, will reflect,
in all material respects all known claims against and all debts and
liabilities of SPEED, fixed or contingent, as at the date thereof,
required by GAAP to be shown thereon and the related statements of
operations and cash flows for the periods indicated, taken together,
fairly present, in all material respects the results of operations and
financial condition for such periods. 6.3.2.Absence of Adverse Changes.
Since the Balance Sheet Date, except as set forth on Schedule 6.3.2 or on
the Closing Date Balance Sheet, there has been (a) no materially adverse
change in the assets or liabilities, or in the business or financial
condition, or in the results of operations of SPEED, and (b) to the
knowledge of SPEED or ▇▇▇▇▇▇, no fact or condition exists or is
contemplated or threatened which might cause such a materially adverse
change in the future. Notwithstanding the foregoing, if the Closing Date
Balance Sheet is revised in accordance with Section 3.3, such revision
shall not be considered a breach of this Section 6.3.2 or any other
provision of this Agreement.
6.4 Books and Records.
Except as set forth on Schedule 6.4, all accounts, books, ledgers, minute
books and official and other records of SPEED of whatsoever kind have been
properly and accurately kept and completed in all material respects, and there
are no material inaccuracies or discrepancies
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of any kind contained or reflected therein. SPEED does not own or possess any
records, systems, controls, data or information material or necessary to the
conduct of its business which is recorded, stored, maintained, operated or
otherwise wholly or partly dependent on or held by any means (including all
means of access thereto and therefrom) that are not under the exclusive
ownership and direct control of SPEED, other than financial records which are
maintained at the locations identified on Schedule 6.4 annexed hereto, and
which, after the Closing Date, are readily available to KDTI and KDTI-NY.
6.5 Real Property; Personal Property; Machinery and Equipment.
6.5.1. Leasehold and other Real Property Interests. SPEED does not own or
have any leasehold or other interest in any real property which is
presently necessary to conduct the development, production, marketing and
sale of the products and services offered as part of the SPEED Business
other than the Leased Premises demised under the Leases. Except as set
forth on Schedule 6.5.1, to the knowledge of SPEED, the Leased Premises
are in good condition and repair (normal wear and tear excepted)
consistent with their present use and are available for immediate use by
KDTI-NY. Except as set forth on Schedule 6.5.1, since January 1, 1993,
neither SPEED nor ▇▇▇▇▇▇ has received any written notice (that remains
outstanding) that the Leased Premises are presently in violation of any
environmental, zoning or similar laws.
6.5.2. Title to Acquired Assets. Except as set forth in Schedule 6.5.2,
SPEED has good title or holds a valid, existing, enforceable lease or
license to the Acquired Assets, subject to no encumbrance, lien, charge or
other restriction of any kind or character, other than Permitted Liens.
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6.5.3. Machinery and Equipment. Except as set forth in Schedule 6.5.3, the
Machinery and Equipment are, in the aggregate, in good operating
condition, normal wear and tear excepted. Except as set forth in Schedule
6.5.3, (i) all capital or operating leases under which SPEED leases
equipment; and (ii) each contract for the purchase of as yet undelivered
equipment is in full force and effect and constitutes a binding
obligation, enforceable in accordance with its terms, of SPEED, and to the
knowledge of SPEED and ▇▇▇▇▇▇, of each other party thereto, subject to the
qualifications that enforcement of the rights and remedies created thereby
is subject to (a) bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting the rights and remedies of
creditors, and (b) general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law).
Except as disclosed on Schedule 6.5.3, there are no existing defaults by
SPEED under any such lease beyond applicable notice and grace periods or
which have not been waived by the respective lessor.
6.5.4. Sufficiency of Assets. The Acquired Assets constitute all of the
assets used in connection with the SPEED Business and are available for
immediate use by KDTI-NY.
6.6 Contracts.
Except as set forth in Schedule 6.6 or any other schedule annexed hereto,
SPEED is not a party to or bound by any agreement, contract or commitment
relating to any collective bargaining agreement, any bonus, deferred
compensation, pension, profit sharing, stock option, retirement or other
employee benefit plan; any loan or advance to, or investment in, any other
Person or any agreement relating to the making of any such loan, advance or
investment; any
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guarantee or other contingent liability in respect of any indebtedness or
obligation of any other Person (other than the endorsement of negotiable
instruments for collection in the ordinary course of business); any management
service, employment, consulting or any other similar type of contract; any
agreement, contract or commitment limiting the freedom of SPEED to engage in any
line of business or to compete with any other Person; any secrecy or
confidentiality agreement with any Person, including any employee of or
consultant to SPEED; any agreement, contract or commitment which involves the
payment by SPEED of Twenty-Five Thousand Dollars ($25,000) or more, in the
aggregate, and is not cancelable without penalty within thirty (30) days; any
agreement with any officer or director of SPEED; any licensing or franchise
agreement; or any contract with customers or other third parties for the
delivery of goods or performance of services which involves payment by SPEED of
more than Twenty Five Thousand Dollars ($25,000.00).
Except as set forth on Schedule 6.6, there exists no default or event of
default by SPEED, or occurrence, condition, or act (including this transaction)
which, with the giving of notice, the lapse of time or the happening of any
other event or condition, would become a default or event of default thereunder.
Except as set forth on Schedule 6.6, SPEED has not violated any material terms
or conditions of any Contract which would permit termination or modification of
any such Contract, there are no outstanding written claims of breach or
indemnification or written notice of default or termination of any such Contract
and, to the knowledge of SPEED or ▇▇▇▇▇▇, all of the covenants to be performed
by any other party thereto have been substantially performed.
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6.7 Litigation.
Except as set forth in Schedule 6.7, there is no action, suit, proceeding
at law or in equity by any Person, or any arbitration or any administrative or
other proceeding by or before any Governmental Body, pending or, to the
knowledge of SPEED or ▇▇▇▇▇▇, threatened since the Balance Sheet Date, against
or affecting SPEED or any of its properties or rights or the operation of its
business, and to the knowledge of SPEED or ▇▇▇▇▇▇, there is no valid basis for
any such action, proceeding or investigation. Except as disclosed on Schedule
6.7, none of SPEED, ▇▇▇▇▇▇ or any Controlled Company is subject to any Order
entered in any lawsuit or proceeding which has a Material Adverse Effect or
which would prevent or interfere with the consummation of the transactions
contemplated hereby.
6.8 Taxes.
Except as set forth in Schedule 6.8 to this Agreement, SPEED has filed all
Tax Returns which are required to be filed by, or with respect to, its business.
Such Tax Returns reflect accurately, in all material respects, taxable income
and all liability for Taxes of SPEED for the periods covered thereby. Except as
set forth in Schedule 6.8, SPEED has paid within the time and manner prescribed
by law all Taxes payable by, or due from, SPEED (whether in its own right or as
transferee of the assets of, or successor to, any Person) or adequately provided
therefor by appropriate reserves as shown in the books and financial statements
of SPEED, and to the knowledge of SPEED or ▇▇▇▇▇▇, no other Tax of any nature
whatsoever will be payable by SPEED with respect to any Tax Return filed or
required to be filed through the Closing Date. Except as set forth in Schedule
6.8, the federal, state and local taxable income and Tax liability of SPEED have
never been finally determined for any fiscal period; and no audit or examination
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of any return of SPEED by any Taxing authority is currently in progress and no
notice of any proposed audit or examination has been received by SPEED or any
SPEED Stockholder; and there are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of SPEED.
6.9 Liabilities.
To the knowledge of SPEED or ▇▇▇▇▇▇, there are no outstanding claims,
liabilities or indebtedness, contingent or otherwise against SPEED, except as
set forth in Schedule 6.9 or in the Balance Sheet Date Balance Sheet of SPEED or
referred to in the footnotes thereto, other than (i) liabilities incurred
subsequent to the Balance Sheet Date in the ordinary course of business and
consistent with past practice and other liabilities which in the aggregate do
not have a Material Adverse Effect, or (ii) liabilities set forth on any
Schedule hereto or which are not required to be set forth on any Schedule hereto
because such liabilities are specifically excluded from disclosure on the
Schedules provided for by the provisions of this Agreement. Schedule 6.9 sets
forth a list of all current arrangements of SPEED for borrowed money and all
outstanding balances as of the date hereof with respect thereto, but excluding
accounts payable, wages payable and operating expenses payable. SPEED is not in
material default in respect of the terms or conditions of any such indebtedness.
6.10 Intellectual Property.
Schedule 6.10 contains a materially accurate and complete list of all
Intellectual Property owned or used or anticipated to be used by SPEED in the
development, production, marketing and sale of the products and services offered
as part of the SPEED Business. Except as set forth on Schedule 6.10, to the
knowledge of SPEED and ▇▇▇▇▇▇, no written claim of infringement
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or misappropriation of Intellectual Property has been made against SPEED and,
SPEED does not infringe or misappropriate any Intellectual Property of any third
party.
6.11 Compliance with Laws.
To the knowledge of SPEED or ▇▇▇▇▇▇, except with respect to any
Environmental Law, SPEED is in compliance with all applicable material federal,
state and local laws, regulations and Orders and all other applicable
requirements of any Governmental Body having jurisdiction. Except with respect
to any Environmental Law, SPEED is not now charged with, and, to the knowledge
of SPEED and ▇▇▇▇▇▇, SPEED is not now under investigation with respect to, any
violation of any law, regulation, or Order affecting its business, and SPEED has
filed all material reports required to be filed with any Governmental Body.
6.12 Licenses.
To the knowledge of SPEED or ▇▇▇▇▇▇, SPEED has all licenses and permits
and other governmental certificates, authorizations and approvals (collectively,
"Licenses") required by any Governmental Body for the development, production,
marketing and sale of the products and services offered as part of the SPEED
Business and the use of its properties as presently operated or used, except
where the failure to have such Licenses would not have a Material Adverse
Effect. To the knowledge of SPEED and ▇▇▇▇▇▇, all of such Licenses are in full
force and effect and no action or claim is pending to revoke or terminate any of
the Licenses or declare any License invalid.
6.13 Insurance.
Schedule 6.13 is a schedule of all insurance policies (including life
insurance) or binders maintained by SPEED. All such policies are in full force
and effect and all premiums that have
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become due have been currently paid. The coverage under such policies for
occurrences prior to the Closing shall not be materially adversely affected by
reason of the transactions contemplated hereby. Neither ▇▇▇▇▇▇ nor SPEED has
received written notice of cancellation or non-renewal of any such policy or
binder. Neither ▇▇▇▇▇▇ nor SPEED has received any written notice from any of its
insurance carriers that any premiums will be materially increased in the future
or that any insurance coverage listed on Schedule 6.13 will not be available in
the future on substantially the same terms now in effect.
6.14 Supplier and Customer Relations.
There has not been, and neither SPEED nor ▇▇▇▇▇▇ has any knowledge that
would lead them to anticipate, any material adverse change in relations with
SPEED's suppliers or customers as a result of the transactions contemplated by
this Agreement. Schedule 6.14 lists the ten largest suppliers and customers of
SPEED, as at the date hereof. Except as set forth on Schedule 6.14, to the
knowledge of SPEED and ▇▇▇▇▇▇, none of these current suppliers and none of these
current customers has advised SPEED or ▇▇▇▇▇▇, orally or in writing, formally or
informally, that (i) it is terminating or considering terminating, or is
materially dissatisfied with its business relationship with SPEED, as a whole or
in respect of any particular product or service, or (ii) any of these current
customers is contemplating reducing or discontinuing in any material respect its
purchases from SPEED, or that any of these suppliers is contemplating reducing
or discontinuing in any material respect its services or sales to SPEED.
6.15 Employment Relations.
To the knowledge of SPEED and ▇▇▇▇▇▇, SPEED has not committed any unfair
labor practices in connection with the SPEED business and there is no unfair
labor practice complaint
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pending against SPEED before any applicable government entity; there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against or
involving SPEED; no representation question exists respecting the employees of
SPEED; no grievance which might have a Material Adverse Effect on the SPEED
Business, nor any arbitration proceeding arising out of or under any collective
bargaining agreement with SPEED, is pending and no claim therefor has been
asserted. Except as set forth in Schedule 6.15, SPEED is not a party to any
collective bargaining agreement, and no collective bargaining agreement is
currently being negotiated by SPEED; and SPEED has not experienced any work
stoppage or any other labor difficulty during the last three (3) years. To the
knowledge of SPEED and ▇▇▇▇▇▇, there has not been, and SPEED does not
anticipate, any material adverse change in relations with employees as a result
of the transactions contemplated by this Agreement.
6.16 Personnel; Compliance with ERISA.
6.16.1. SPEED's Personnel. Schedule 6.16 contains a true and complete list
of all persons employed (and their latest rates of compensation) or
retained as independent contractors by SPEED as at the Closing Date.
Schedule 6.16 also lists all sales agents or sales representatives as at
the Closing Date. Except as set forth on Schedule 6.16, no employees of
SPEED are entitled to any accrued vacation pay, sick leave or
non-statutory severance benefits.
6.16.2. Employee Benefit Plans. With respect to any employee benefit plan,
program, arrangement or contract (including, without limitation, any
"employee benefit plan" as defined in Section 3(3) of ERISA), maintained
by SPEED or to which SPEED contributes, SPEED has made available to KDTI
and KDTI-NY a true and correct copy
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of (i) such employee benefit plan, (ii) each trust agreement relating to
such employee benefit plan, (iii) the most recent summary plan description
of the employee benefit plan, if any, and (iv) Internal Revenue Service
determination letters for all such employee benefit plans that are
intended to be tax-qualified under Section 401(a) of the Code. Forms 5500
for all such employee benefit plans have been timely and properly filed,
or a valid extension for filing has been obtained, and all employees
excluded from participating in any such employee benefit plans were
properly excludable by SPEED.
6.17 No Changes Since the Balance Sheet Date.
Since the Balance Sheet Date, except as specifically stated on Schedule
6.3.2 or Schedule 6.17 or reflected on the Closing Date Balance Sheet, SPEED has
not incurred any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise), except in the ordinary course of SPEED's
business; permitted any of its assets to be subjected to any mortgage, pledge,
lien, security interest, encumbrance, restriction or charge of any kind, other
than Permitted Liens; sold, transferred or otherwise disposed of any assets
except in the ordinary course of SPEED's business; made any single capital
expenditure or commitment therefor involving the expenditure of more than Fifty
Thousand Dollars ($50,000.00); made any bonus or profit sharing distribution or
payment of any kind; granted any increase in the rate of wages, salaries,
bonuses or other remuneration of any employee who after giving effect to such
increase or prior thereto receives compensation at an annual rate of $80,000.00
or more, except pursuant to a prior obligation or employment policy in the
ordinary course of SPEED's business; canceled or waived any claims or rights of
substantial value; made any change in any method of accounting or auditing
practice; otherwise conducted its business or entered into any transaction,
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except in the usual and ordinary manner and in the ordinary course of its
business; amended or terminated any agreement which is material to the business
of SPEED; renewed, extended or modified any Lease or, except in the ordinary
course of business, any lease of personal property; or agreed, whether or not in
writing, to do any of the foregoing; and there has been no adverse change in the
financial condition or results of operations of SPEED, which changes, in the
aggregate, do not have a Material Adverse Effect.
6.18 Valid Agreements; Restrictive Documents.
SPEED has corporate authority, and ▇▇▇▇▇▇ has the full legal right and
capacity, to execute, deliver and perform their respective obligations under
this Agreement and the Other Documents to which it or he is a party, and all of
the foregoing have been duly authorized by all necessary shareholder and
corporate action of SPEED. This Agreement and the Other Documents to which SPEED
or ▇▇▇▇▇▇ is a party have been duly executed and delivered by SPEED and ▇▇▇▇▇▇,
respectively, and constitute the valid and binding obligation of SPEED and
▇▇▇▇▇▇, respectively, enforceable against SPEED and ▇▇▇▇▇▇, respectively, in
accordance with their respective terms, except as the enforcement thereof may be
limited by bankruptcy, reorganization, moratorium, insolvency and other laws of
general applicability relating to or affecting creditors' rights or general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law). Except as set forth in Schedule 6.18, or in any
other Schedule to this Agreement, neither SPEED nor any SPEED Stockholder is
subject to, or a party to, any charter, by-law, mortgage, lien, lease, license,
permit, contract, instrument, law, regulation or, to the knowledge of SPEED or
▇▇▇▇▇▇, Order or any other restriction of any kind or character, which has a
Material Adverse Effect, or which would
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prevent consummation of the transactions contemplated by this Agreement and the
Other Documents or compliance by SPEED or ▇▇▇▇▇▇ with the terms, conditions and
provisions of this Agreement and the Other Documents. Except as set forth in
Schedule 6.18, the execution, delivery and performance of this Agreement and the
Other Documents and the consummation of the transactions contemplated hereby and
thereby will not violate, conflict with or result in the breach of any provision
of the charter documents or by-laws of SPEED; violate, conflict with or result
in the breach or material modification of any of the terms of, or constitute (or
with notice or lapse of time or both constitute) a default under, or otherwise
give any other contracting party the right to accelerate or terminate, any
material obligation, contract, agreement, lien, Order or other instrument to
which SPEED or ▇▇▇▇▇▇ is a party or by or to which it or his or any of its or
his respective assets or properties may be bound or subject; violate any Order
of any Governmental Body against, or binding upon SPEED or ▇▇▇▇▇▇ or upon any of
their respective Assets and which violation would have a Material Adverse
Effect; or violate any statute, law or regulation of the U.S. or New York and,
which violation would have a Material Adverse Effect.
6.19 Required Approvals, Notices and Consents.
Except as set forth on Schedule 6.19, or elsewhere in this Agreement, no
consent or approval of, other action by, or notice to, any Governmental Body, or
any third party is required in connection with the execution and delivery by
SPEED and ▇▇▇▇▇▇ of this Agreement and the Other Documents or the consummation
by SPEED and ▇▇▇▇▇▇ of the transactions contemplated hereby or thereby.
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6.20 Disclosure.
To the knowledge of SPEED or ▇▇▇▇▇▇, this Agreement, the Financial
Statements, or any Schedule hereto, or any certificate, document or statement in
writing to be delivered as required under this Agreement by or on behalf of
SPEED does not contain, or will not contain, any untrue statement of a material
fact, or omits, or will omit, any statement of a material fact required to be
stated or necessary in order to make the statements contained herein or therein
not misleading. To the knowledge of SPEED or ▇▇▇▇▇▇, there is no fact which
materially adversely affects the business or financial condition of SPEED which
has not been, or will not be, set forth in this Agreement or an Other Document
to be delivered at the Closing.
6.21 Environmental Conditions.
Schedule 6.21 sets forth the following, in each instance to the knowledge
of SPEED or ▇▇▇▇▇▇:
i. all treatment, storage and disposal facilities for Hazardous
Materials which are currently owned or used by SPEED; all
hazardous waste disposal sites which are or have been owned or
used by SPEED in connection with the SPEED Business; and all
underground storage tanks which are or were owned or used by
SPEED in connection with the SPEED Business. As to each such
facility, site or underground storage tank, Schedule 6.21
describes the time period used and the type of hazardous waste
treated, stored or disposed of and, in the case of the
underground storage tanks, the type of material stored;
ii. all sites at which hazardous wastes from the operation of the
SPEED Business have been disposed and, as to each such site,
Schedule 6.21 describes the time period used and the type of
waste disposed; and
iii. all internal environmental audits conducted by SPEED or ▇▇▇▇▇▇
with respect to SPEED since January 1, 1993 relating to the
SPEED Business.
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To the knowledge of SPEED or ▇▇▇▇▇▇, except as disclosed on Schedule 6.21
in connection with, or in any way related to, the SPEED Business:
iv. SPEED holds, and is in substantial compliance with, all
permits, licenses, registrations or other authorizations
required under applicable Environmental Laws, and is, and has
been, otherwise in substantial compliance with all applicable
Environmental Laws.
v. Since January 1, 1993, neither ▇▇▇▇▇▇ nor SPEED has received
any written notice of any Environmental Claim, and neither
▇▇▇▇▇▇ or SPEED is aware, without any duty of inquiry, of any
threatened Environmental Claim which remains outstanding.
vi. SPEED has not entered into or agreed to and is not subject to,
any judgment, decree or Order of any Governmental Body under
any Environmental Laws, including, without limitation,
relating to investigation, cleanup, remediation or removal of
Hazardous Materials;
vii. Hazardous Materials have not been generated, transported,
treated, stored, disposed of, released or threatened to be
released at, on, from or under any of the properties included
among the assets of SPEED in material violation of, or in a
manner or to a location that is likely to give rise to
material liability of SPEED under any Environmental Laws; and
viii. No approval is required under any Environmental Law for the
acquisition of the Acquired Assets pursuant to this Agreement.
6.22 Health and Safety Conditions.
SPEED has not conducted any internal health and safety audits, or
industrial hygiene surveys. Except as set forth on Schedule 6.22, to the
knowledge of SPEED or ▇▇▇▇▇▇, SPEED is in substantial compliance with the
requirements of the Occupational Safety and Health Act and all other federal,
state and local occupational health and safety laws, rules and regulations.
Copies of Documents.
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SPEED has caused to be made available for inspection and copying by KDTI
or its officers or advisers, true and correct copies of all documents referred
to in this Article 6 or in any Schedule furnished pursuant to this Article 6.
6.23 No Brokers.
No broker, finder, agent or similar intermediary has acted on behalf of
▇▇▇▇▇▇ or SPEED in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finder's fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with any of ▇▇▇▇▇▇ or SPEED, or any
action taken by any of them.
6.24 Corporate Controls.
None of SPEED or ▇▇▇▇▇▇ or any director, officer, agent, employee or other
Person, in each case, acting on behalf of SPEED, has, directly or indirectly,
given or made any contribution, gift, entertainment expense or payment, in any
case (i) in contravention of applicable law and (ii) in excess of $2,500 to
obtain preferential or favorable treatment in obtaining business or performing
services.
ARTICLE 7: REPRESENTATIONS OF KDTI AND KDTI-NY
KDTI and KDTI-NY, jointly and severally, represent and warrant to SPEED
and ▇▇▇▇▇▇ as follows:
7.1 Existence and Good Standing.
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KDTI and KDTI-NY are each corporations duly organized, validly existing
and in good standing under the laws of Delaware and each has all requisite
corporate power and authority to own, lease and operate all its properties and
to carry on its business as now being conducted. Neither KDTI-NY nor KDTI is
required to qualify to do business in any jurisdiction such that failure to
qualify would have an adverse effect on the conduct of its business. KDTI-NY is
a wholly-owned subsidiary of KDTI.
7.2 Shares.
The Shares have been duly authorized and, when delivered at the Closing,
will be validly issued, fully paid and non-assessable and will be free and clear
of any liabilities, liens, security interests, pledges or encumbrances of any
nature whatsoever, except such as may be created by SPEED or ▇▇▇▇▇▇ and except
as the sale, pledge or other disposition thereof is limited by the provisions of
Section 5.3 hereof, the Securities Act and other applicable federal securities
laws and Blue Sky Laws. The Additional Shares of Common Stock, if any, will,
when delivered pursuant to Section 3.3.2, be duly authorized, validly issued,
fully paid and non-assessable and will be free and clear of any liabilities,
liens, security interests, pledges or encumbrances of any nature whatsoever,
except such as may be created by SPEED or ▇▇▇▇▇▇ and except as the sale, pledge
or other disposition thereof is limited by the provisions of Section 5.3 hereof,
the Securities Act and other applicable federal securities laws and Blue Sky
Laws.
7.3 Valid Agreements; Restrictive Documents.
Each of KDTI and KDTI-NY has corporate authority to execute, deliver and
perform their respective obligations under this Agreement and the Other
Documents to which it is a party, including the Promissory Note, and all of the
foregoing have been duly authorized by all
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necessary stockholder and corporate action. This Agreement and the Other
Documents to which KDTI or KDTI-NY is a party, including the Promissory Note,
have been duly executed and delivered by KDTI and KDTI-NY, respectively, and
constitute a valid and binding agreement of KDTI and KDTI-NY, respectively,
enforceable against KDTI and KDTI-NY, respectively, in accordance with their
respective terms, except as the enforcement thereof may be limited by
bankruptcy, reorganization, moratorium, insolvency and other laws of general
applicability relating to or affecting creditors' rights or general principles
of equity (regardless of whether such enforcement is considered in a proceeding
in equity or at law). Except as set forth in any Schedule to this Agreement,
KDTI-NY and KDTI are not subject to, or a party to, any charter, by-law,
mortgage, lien, lease, license, permit, contract, instrument, law, rule,
ordinance, regulation, or, to their knowledge, Order or any other restriction of
any kind or character, which would prevent consummation of the transactions
contemplated by this Agreement and the Other Documents, including the Promissory
Note, or compliance by KDTI-NY or KDTI with the terms, conditions and provisions
of this Agreement and the Other Documents, including the Promissory Note. The
execution, delivery and performance of this Agreement and the Other Documents,
including the Promissory Note, and the consummation of the transactions
contemplated hereby and thereby will not (i) violate, conflict with or result in
the breach of any provision of the charter documents or by-laws of KDTI or
KDTI-NY; (ii) violate, conflict with or result in the breach or material
modification of any of the terms of, or constitute (or with notice or lapse of
time or both constitute) a default under, or otherwise give any other
contracting party the right to accelerate or terminate, any material obligation,
contract, agreement, lien, Order or other instrument to which KDTI or KDTI-NY is
a party or by or to
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which KDTI or KDTI-NY may be bound or subject; (iii) violate any Order of any
Governmental Body against, or binding upon, KDTI or KDTI-NY or any of their
assets which violation will or may reasonably be expected to be materially
adverse to the condition (financial or otherwise) of KDTI and KDTI-NY in the
aggregate; or (iv) violate any statute, law or regulation of the United States,
Delaware or New York which violation will or may reasonably be expected to be
materially adverse to the condition (financial or otherwise) of KDTI and KDTI-NY
in the aggregate.
7.4 Required Approvals, Notices and Consents.
Except as set forth on Schedule 7.4, no consent or approval of, other
action by, or notice to, any Governmental Body, or any third party is required
in connection with the execution and delivery by KDTI or KDTI-NY of this
Agreement and the Other Documents, including the Promissory Note, or the
consummation by KDTI or KDTI-NY of the transactions contemplated hereby or
thereby.
7.5 No Brokers.
No broker, finder, agent or similar intermediary has acted on behalf of
KDTI or KDTI-NY in connection with this Agreement or the transactions
contemplated hereby, and there are no brokerage commissions, finders' fees or
similar fees or commissions payable in connection therewith based on any
agreement, arrangement or understanding with KDTI, KDTI-NY, or any action taken
by KDTI or KDTI-NY.
7.6 Disclosure.
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To the knowledge of KDTI or KDTI-NY, each of this Agreement, any Other
Document to be delivered by or on behalf of KDTI or KDTI-NY and the financial
statements of KDTI and other written information provided by KDTI to SPEED
listed on Schedule 7.6 does not contain, and will not contain, any untrue
statement of a material fact, or omits or will omit, any statement of a material
fact required to be stated or necessary in order to make the statements
contained herein or therein not misleading. To the knowledge of KDTI and
KDTI-NY, there is no fact which materially adversely affects the business or
financial condition of KDTI or KDTI-NY, or KDTI's ability to perform its
obligations under the Promissory Note, which has not been, or will not be, set
forth in this Agreement or an Other Document to be delivered at the Closing.
7.7 Absence of Adverse Changes.
Since the Balance Sheet Date, there has been no materially adverse change
in the assets or liabilities, or in the business or financial condition, or the
results of operations of KDTI or KDTI-NY and, to the knowledge of KDTI and
KDTI-NY, no fact or condition exists or is contemplated or threatened which will
or could be reasonably expected to cause such a material adverse change in the
future.
7.8 Securities Laws.
The offering, issuance and delivery to SPEED by KDTI of the Promissory
Note, the Shares and any Additional Shares are not, and will not be, required to
be registered under the Securities Act or any applicable Blue Sky Laws.
ARTICLE 8: POST CLOSING COVENANTS
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8.1 General.
In case at any time after the Closing any further action is necessary to
carry out the purposes of this Agreement, each of the parties will take such
reasonable further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request. SPEED
acknowledges and agrees that from and after the Closing KDTI and KDTI-NY will be
entitled to possession of all documents, books, records (including tax records),
agreements and financial data of any sort relating to SPEED and the SPEED
Business.
8.2 Post-Closing Access.
Following the Closing, each party will afford to the other party, its
counsel and its accountants, during normal business hours, reasonable access to
the books, records and other data of SPEED or relating to the SPEED Business,
the Acquired Assets, the Acquired Liabilities or SPEED in its possession with
respect to periods prior to the Closing and the right to make copies and
extracts therefrom, to the extent that such access may be reasonably required by
the requesting party (a) to facilitate the investigation, litigation and final
disposition of any claims which may have been or may be made against any party
or its Affiliates and (b) for any other reasonable business purpose.
8.3 Record Retention.
Each party agrees that until the seventh anniversary of the Closing Date,
it shall not destroy or otherwise dispose of any of the books or records
relating to the SPEED business, the Acquired Assets, the Acquired Liabilities or
SPEED in its possession with respect to the periods prior to the Closing, after
which date it shall have the right to destroy all or part of such books
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and records, unless it gives each other party hereto 30 days' prior written
notice of any intended destruction or disposition and offers to deliver to any
other party, at the other parties' request and expense, custody of such books
and records as such party may intend to destroy or otherwise dispose of.
8.4 Post-Closing Assistance.
KDTI and SPEED will provide each other with such assistance as may
reasonably be requested in connection with the preparation of any Tax Return,
any audit or other examination by any Taxing authority, or any judicial or
administrative proceedings relating to liability for Taxes, and each will retain
and provide the requesting party with any records or information that may be
reasonably relevant to such return, audit or examination, proceedings or
determination. The party requesting assistance shall reimburse the other party
for reasonable out-of-pocket expenses (other than salaries or wages of any
employees of the parties) incurred in providing such assistance. Any information
obtained pursuant to this Section 8.4 or pursuant to any other Section hereof
providing for the sharing of information or the review of any Tax Return or
other schedule relating to Taxes shall be kept confidential by the parties
hereto.
8.5 Cooperation in Preparation of Securities Law Filings
SPEED agrees to cooperate to request the Present Accountants to cooperate
with KDTI and its accountants in the provision of such information and documents
as may be reasonably required in order to complete any filings required under
the Securities Act or other United States securities laws or Blue Sky Laws
relating to the acquisition transactions described in this Agreement. KDTI shall
reimburse SPEED and/or the Present Accountants for all reasonable
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fees and expenses incurred by SPEED and/or the Present Accountants in providing
such cooperation.
8.6 Guarantees by ▇▇▇▇▇▇ and DDP.
No later than five days after the Closing, KDTI shall use its commercially
reasonable best efforts to arrange for the elimination or satisfaction of all of
Ronald's personal guarantees and all of DDP's guarantees with respect to bank
indebtedness and equipment leases (to the extent such lease guarantees involve
Machinery and Equipment). In the event that ▇▇▇▇▇▇ or DDP is not released from
any guarantee of any lease of Machinery and Equipment by SPEED as of the Closing
Date, KDTI and KDTI-NY shall jointly and severally indemnify ▇▇▇▇▇▇ and DDP and
hold each of them harmless against any claim, obligation or liability
whatsoever, including reasonable attorneys' fees and reimbursable disbursements,
arising at any time under any such guarantee.
8.7 Election of ▇▇▇▇▇▇ to the KDTI Board.
KDTI's Board of Directors has approved an increase in the number of the
directors from five to six and the election of ▇▇▇▇▇▇ as a director effective
upon the Closing. KDTI shall cause its director and officer liability policy to
be amended to cover ▇▇▇▇▇▇. ▇▇▇▇▇▇ shall have the right to introduce to KDTI's
Board of Directors other possible candidates to serve as a member of such Board
of Directors, and if KDTI's Board of Directors finds any of such candidates
acceptable, the size of the Board of Directors will be increased from six to
seven and such candidate will thereupon be appointed to fill such vacancy,
except that nothing herein shall in any way obligate KDTI or its Board of
Directors to accept any of the candidates suggested by
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▇▇▇▇▇▇ and the Board of Directors will retain full discretion with respect to
any increase of its size and/or the acceptance of any candidate introduced by
▇▇▇▇▇▇.
8.8 Employees: Assumed Plans.
KDTI or KDTI-NY shall assume any severance or other similar costs incurred
in connection with the termination of employment of any employee of SPEED whose
employment is terminated by KDTI or KDTI-NY effective upon or after the Closing.
Without limiting KDTI's and KDTI-NY's obligations otherwise set forth in this
Agreement, effective as of the Closing, KDTI or KDTI-NY shall assume sponsorship
of each of SPEED's employee benefit plans, programs, agreements, policies and
arrangements listed on Schedule 8.8 (and all related funding arrangements) and
the liabilities associated therewith, and SPEED shall assign to KDTI or KDTI-NY
its rights thereunder, if and to the extent permitted by the terms thereof.
After the Closing, neither SPEED nor ▇▇▇▇▇▇ shall have any liabilities or
responsibilities arising after the Closing in respect of any current or former
employee of SPEED, other than such liabilities or responsibilities that are
Excluded Liabilities.
8.9 Delivery of Financial Statements.
As soon as practicable after the Closing, SPEED shall prepare and deliver
to KDTI SPEED's balance sheet, statement of income and retained earnings for (i)
the nine-month period ended September 30, 1997; (ii) the three-month period
ended March 31, 1997; and (iii) the nine-month period ended September 30, 1996.
Such financial statements shall be prepared on the same basis as the Audited
1996 Financial Statements were prepared and fairly present in all material
respects the financial condition and results of operations of SPEED at such date
for the respective periods then ended, and except as indicated therein and
except for the absence of
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footnotes, the balance sheets included therein shall reflect in all material
respects all known claims against and all debts and liabilities of SPEED, fixed
or contingent, as of the respective dates thereof, required by GAAP to be shown
thereon.
8.10 Employee Stock Options.
Subject to the approval of its stockholders, KDTI shall grant to the
employees listed on Schedule 8.10 options to purchase the number of shares of
Common Stock set forth opposite their respective names thereon, pursuant to
KDTI's Employee Stock Option Plan or pursuant to option agreements embodying an
exercise price and other such terms and conditions as would apply to options
granted under such plan; provided that such employee continues to be so employed
at the time of such grant. KDTI shall include a proposal relating to the grant
of such options in the proxy or information statement relating to the next
meeting of its stockholders (or solicitation of proxies with respect thereto or
consents in lieu thereof) and KDTI's Board of Directors shall recommend that
KDTI's stockholders vote in favor of such proposal. ▇▇▇▇ ▇▇▇▇, by letter dated
the date hereof, has agreed to vote all shares of Common Stock which he shall
have the direct or indirect power to vote at such meeting in favor of such
proposal. Promptly after the approval of the stockholders of KDTI with respect
to such proposal is obtained, KDTI shall prepare and execute and deliver
appropriate option agreements to the employees to whom such options are to be
granted.
8.11 Third Party Consents.
(a) SPEED, KDTI and Purchaser will cooperate and use their respective
commercially reasonable efforts to obtain as promptly as practicable all
consents, approvals and waivers which have not been obtained as of the Closing
Date required by third Persons to transfer the Contracts
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in a manner that will avoid any default, conflict or termination of rights under
the Contracts. Notwithstanding anything to the contrary in this Agreement,
nothing in this Section 8.11 shall require SPEED, KDTI, or Purchaser to expend
any material sum, make a material financial commitment or grant or agree to any
material concession to any third Person to obtain any such consent, approval or
waiver.
(b) In the event that any and all consents, approvals or waivers necessary
for the assignment, transfer or novation of any Contract, or any claim, right or
benefit arising thereunder or resulting therefrom, or consents relating to sale
of substantially all of Speed's assets, shall not have been obtained prior to
the Closing Date, then as of the Closing, this Agreement, to the extent
permitted by Law, shall constitute full and equitable assignment by SPEED to
Purchaser and KDTI of all of SPEED's right, title and interest in and to, and
all of SPEED's obligations and liabilities under, such Contract, and Purchaser
and KDTI shall each be deemed SPEED's agent for purposes of completing,
fulfilling and discharging all of SPEED's liabilities under any such Contract.
The parties shall take all necessary steps and actions to provide Purchaser and
KDTI with the benefits of such Contracts, and to relieve SPEED of the
performance and other obligations thereunder arising after the Closing Date.
Purchaser agrees to pay, perform and discharge, and Purchaser and KDTI, jointly
and severally, agree to indemnify SPEED against and hold SPEED harmless from,
all obligations and liabilities of SPEED relating to such performance or failure
to perform under such Contracts arising after the Closing Date. To the extent
required in order to obtain a consent, approval or waiver to the transfer of any
Contract described in Section 8.11(a), KDTI agrees to pay, perform and
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discharge all obligations and liabilities of SPEED relating to such performance
or failure to perform under any such Contract arising after the Closing Date.
(c) In the event SPEED shall be unable to make the equitable assignment
described in Section 8.11(b), or if such attempted assignment would give rise to
any right of termination, or would otherwise adversely affect the rights of
SPEED or Purchaser under such Contract, or would not assign all SPEED's rights
thereunder at the Closing, SPEED and Purchaser shall continue to cooperate and
use all reasonable efforts to provide Purchaser with all such rights. To the
extent that any such consents and waivers are not obtained, or until the
impediments to such assignments are resolved, SPEED shall use all reasonable
efforts to (i) provide to Purchaser, at the request of Purchaser, the benefits
of any such Contract, (ii) cooperate in any lawful arrangement designed to
provide such benefits to Purchaser, and (iii) enforce, at the request of and for
the account of Purchaser, any rights of SPEED arising from any such Contract
against any third Person, including the right to elect to terminate in
accordance with the terms thereof upon the advise of Purchaser. To the extent
that Purchaser is provided the benefits of any Contract referred to herein
(whether from SPEED or otherwise), Purchaser shall perform the obligations of
SPEED thereunder, and Purchaser agrees to pay, perform and discharge, and
Purchaser and KDTI, jointly and severally, agree to indemnify SPEED against and
hold SPEED harmless from, all obligations and liabilities of SPEED relating to
such performance or failure to perform (but only to the extent such obligations
or liabilities arise solely from acts of Purchaser after the Closing Date).
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8.12 Non-competition.
SPEED and ▇▇▇▇▇▇ agree to perform and comply with the non-competition
covenants included in the Employment Agreement, as though fully set forth herein
as applicable to, and enforceable against, both SPEED and ▇▇▇▇▇▇. SPEED and
▇▇▇▇▇▇ acknowledge that KDTI and KDTI-NY are relying on such non-competition
covenants as an essential inducement and condition precedent to their entering
into this Agreement and acquiring the Acquired Assets hereunder.
8.13 Material Modifications to Bank Loan.
KDTI agrees that it will not agree to any material modification to the
Loan Agreement between KDTI and The Bank of New York or the Superior
Indebtedness referred to in the Subordination Agreement without the approval of
KDTI's Board of Directors. In the event that ▇▇▇▇▇▇ is not a member of KDTI's
Board of Directors at the time such modification is submitted to the Board of
Directors for approval, KDTI will give ▇▇▇▇▇▇ notice at least fifteen (15) days
prior to its proposed entry into such material modification of the Loan
Agreement or the Superior Indebtedness and an opportunity to discuss such
modification with the members of the Board of Directors at or prior to the
meeting of the Board of Directors called to approve such modification.
ARTICLE 9: SURVIVAL OF REPRESENTATIONS; INDEMNITIES
9.1 Survival of Representations and Warranties of SPEED and ▇▇▇▇▇▇.
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The representations and warranties of SPEED and ▇▇▇▇▇▇ and the
indemnification obligations under Section 9.2 shall survive the execution and
delivery of this Agreement and the Other Documents and the Closing hereunder
until December 31, 1999, provided, however, that the covenants contained in
Section 3.3.2 and the representations and warranties made in Sections 6.2, 6.8,
6.16, 6.21 and 6.25 and the obligation to indemnify for Securities Claims, as
that term is defined in Section 9.2.1, shall survive the execution of this
Agreement and the Other Documents and the Closing hereunder until the date of
expiration of the relevant federal, state or other statute of limitations;
provided further, however, that as to matters as to which any Indemnitee has
given a proper Claims Notice under Section 9.4 on or prior to the expiration of
the applicable survival period aforesaid, the right to indemnification with
respect thereto shall survive the expiration of any such period until such claim
is finally resolved and any obligations with respect thereto are fully
satisfied.
9.2 Obligations of SPEED and ▇▇▇▇▇▇ to Indemnify.
9.2.1. General Indemnity. Subject to Section 9.1, SPEED and ▇▇▇▇▇▇,
jointly and severally, agree to indemnify, defend and hold harmless
KDTI-NY and KDTI, and their respective officers, directors, employees and
agents, and any of their successors and assigns (collectively, "KDTI
Indemnified Parties") from and against any and all losses, liabilities,
damages, deficiencies, demands, claims, actions, judgments or causes of
action, assessments, costs or expenses (including, without limitation,
interest, penalties and reasonable attorneys' fees and disbursements)
("Claims"), whether such Claims are incurred in KDTI-NY's or KDTI's
disputes with SPEED or ▇▇▇▇▇▇ or involving third-party claims against
KDTI-NY or KDTI, based upon, arising out of or otherwise in
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respect of (i) any inaccuracy in or any breach of any representation,
warranty, covenant or agreement of SPEED or ▇▇▇▇▇▇ contained in this
Agreement or any of the Other Documents, (ii) any Excluded Liability or
(iii) any Claim based upon the operation of the SPEED Business prior to
the Closing Date. In addition, ▇▇▇▇▇▇ shall indemnify and hold harmless
KDTI, each director of KDTI, each officer of KDTI who shall sign the
Registration Statement and any Person who controls KDTI within the meaning
of the Securities Act, against any and all Claims to which any of the
foregoing Persons may become subject under the Securities Act or
otherwise, insofar as such Claims arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in, or
omission or alleged omission of a material fact from, the Registration
Statement, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or any document incident
to the registration or qualification of the Shares in reliance upon and in
conformity with written information furnished to KDTI by ▇▇▇▇▇▇ solely for
use in the preparation thereof ("SPEED Securities Claims").
9.2.2. Limitation on Indemnification Obligation. No claim may be made
against SPEED or ▇▇▇▇▇▇ for indemnification pursuant to this Section 9.2
with respect to any individual Claim, unless the aggregate of all Claims
of the KDTI Indemnified Parties with respect to this Section 9.2 shall
exceed $135,000 and SPEED or ▇▇▇▇▇▇ shall not be required to pay or be
liable for the first $135,000 in aggregate amount of any such Claims. The
KDTI Indemnified Parties shall not be indemnified pursuant to this Section
9.2 with respect to any individual Claim if the aggregate of all Claims
for which the KDTI
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Indemnified Parties have received indemnification pursuant to this Section
9.2 shall have exceeded $8,500,000, except that any Claim (i) based upon
or relating to (a) any breach of the representations or warranties in
Sections 6.8, 6.16 or 6.25 or (b) any act of fraud with scienter by or on
behalf of SPEED or ▇▇▇▇▇▇ or (ii) asserted by a KDTI Indemnified Party by
way of defense, counterclaim or set off in connection with, and in an
amount not exceeding the amount of, any Claim by a SPEED Indemnified Party
(as defined below) against such KDTI Indemnified Party shall not be
subject to the foregoing upper limit. For the purposes of this Section 9,
in computing such individual or aggregate amounts of Claims, the amount of
each Claim shall be deemed to be an amount (i) net of any Tax benefit to
the applicable KDTI Indemnified Party or any Affiliate thereof, (ii) net
of any insurance proceeds and any indemnity, contribution or other similar
payment received any third party with respect thereto, and (iii) net of
any reserves provided for the situation in question which are included in
the Acquired Assets and reflected in the Closing Date Balance Sheet. Tax
benefits will be considered to be realized by a KDTI Indemnified Party for
the purposes of this Section 9.2 in the year in which a payment occurs,
and the amount of the Tax benefits shall be determined by assuming (i)
such KDTI Indemnified Party or Affiliate thereof is in the maximum Federal
income tax bracket after any deduction reportable with respect to a
payment hereunder and (ii) such KDTI Indemnified Party's or its
Affiliate's effective state and local income tax rate is its effective
rate for the most recent prior taxable year for which such information is
available. The foregoing notwithstanding, Securities Claims, any Claim
based upon a breach of the representations and warranties made in Section
6.2 (including,
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without limitation, the shareholders of SPEED as set forth on Schedule
6.2), and any claim for adjustment of the Purchase Price under Section 3.2
shall not be subject to, or included in calculating, the limitations
contained in this Paragraph 9.2.2.
9.3 Survival of Representations and Warranties of KDTI and KDTI-NY
KDTI's and KDTI-NY's representations and warranties, covenants and the
indemnification obligations under Section 9.3.1 shall survive the execution and
delivery of this Agreement and the Other Documents and the Closing until
December 31, 1999, provided however, that (i) the representations and warranty
made in Section 7.2, (ii) the covenants set forth in Sections 8.6 and 8.8 and
(iii) the obligation to indemnify for (A) KDTI's Securities Claims (as that term
is defined in Section 9.3.1), (B) in respect of any Acquired Liability or (C)
for any Claim incurred by SPEED or ▇▇▇▇▇▇ based upon, arising out of, or
otherwise in respect of, the operation of the SPEED Business on or after the
Closing Date, in each case as provided in Section 9.3.1, shall survive the
execution of this Agreement and the Other Documents and the Closing hereunder
until the date of expiration of the relevant federal, state or other statute of
limitations; and provided further however, that as to matters as to which any
Indemnitee has given a proper Claims Notice under Section 9.4 on or prior to the
expiration of the applicable period aforesaid, the right to indemnification with
respect thereto shall survive the expiration of any such period until such claim
is finally resolved and any obligations with respect thereto are fully
satisfied.
9.3.1. Obligation of KDTI and KDTI-NY to Indemnify. Subject to Section
9.3, KDTI and KDTI-NY agree, jointly and severally, to indemnify, defend
and hold harmless SPEED and ▇▇▇▇▇▇ and their respective officers,
directors, employees and agents, and
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any of their successors, heirs and assigns (collectively, "SPEED
Indemnified Parties") from and against any and all Claims based upon,
arising out of or otherwise in respect of (i) any inaccuracy in or any
breach of any representation or warranty or covenant or agreement of KDTI
or KDTI-NY contained in this Agreement or in any Other Document delivered
by KDTI or KDTI-NY, (ii) any Acquired Liability and (iii) any Claim
incurred by SPEED or ▇▇▇▇▇▇ resulting from the operation of the SPEED
Business on or after the Closing Date. In addition, KDTI and KDTI-NY
shall, jointly and severally, indemnify and hold harmless the SPEED
Indemnified Parties, within the meaning of the Securities Act, against any
and all Claims to which any of the SPEED Indemnified Parties may become
subject under the Securities Act or otherwise, insofar as such Claims
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or final prospectus contained therein, any document
incorporated by reference therein or any amendment or supplement thereto,
or any document prepared and/or furnished by KDTI or KDTI-NY or their
respective Affiliates incident to the registration or qualification of the
Registrable Securities, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein
in light of the circumstances under which they were made, not misleading,
or any violation by KDTI or KDTI-NY or their respective Affiliates of the
Securities Act or Blue Sky Laws applicable to them and relating to action
or inaction required of KDTI or KDTI-NY or their respective Affiliates in
connection with such
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registration or qualification under such Blue Sky Laws ("KDTI's Securities
Claims"); provided, however, that KDTI shall not be liable in any such
case to the extent that such Claims arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained
in, or omission or alleged omission of a material fact from, the
Registration Statement, such preliminary prospectus or such prospectus or
such amendment or supplement or any document incident to the registration
or qualification of the Registrable Securities in reliance upon and in
conformity with written information furnished to it by ▇▇▇▇▇▇ or any other
holder of such Registrable Securities or their respective agents solely
for use in the preparation thereof. 9.3.2.Limitation on Indemnification
Obligation. No claim may be made against KDTI or KDTI-NY for
indemnification pursuant to this Section 9.3.2 with respect to any
individual Claim, unless the aggregate of all Claims of the SPEED
Indemnified Parties with respect to this Section 9.3.2 shall exceed
$135,000 and KDTI or KDTI-NY shall not be required to pay or be liable for
the first $135,000 in aggregate amount of any such Claims. The SPEED
Indemnified Parties shall not be indemnified pursuant to this Section
9.3.2 with respect to any individual KDTI Securities Claim if the
aggregate of all KDTI Securities Claims for which the KDTI Indemnified
Parties have received indemnification pursuant to this Section 9.3.2 shall
have exceeded $8,500,000. For the purposes of this Section 9, in computing
such individual or aggregate amounts of Claims, the amount of each Claim
shall be deemed to be an amount (i) net of any Tax benefit to the
applicable SPEED Indemnified Party or any Affiliate thereof, (ii) net of
any insurance proceeds and any indemnity, contribution or other similar
payment received
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any third party with respect thereto, and (iii) net of any reserves
provided for the situation in question which are included in the Acquired
Assets and reflected in the Closing Date Balance Sheet. Tax benefits will
be considered to be realized by a SPEED Indemnified Party for the purposes
of this Section 9.2 in the year in which a payment occurs, and the amount
of the Tax benefits shall be determined by assuming (i) such SPEED
Indemnified Party or Affiliate thereof is in the maximum Federal income
tax bracket after any deduction reportable with respect to a payment
hereunder and (ii) such SPEED Indemnified Party's or its Affiliate's
effective state and local income tax rate is its effective rate for the
most recent prior taxable year for which such information is available.
9.4 Notice and Opportunity to Defend.
9.4.1. Notice of Asserted Liability. Promptly after receipt by any SPEED
Indemnified Party or KDTI Indemnified Party (the "Indemnitee") of notice
of any demand, claim or circumstance which, with the lapse of time, would
or might give rise to a Claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in any Claim, the Indemnitee shall promptly
give notice thereof (the "Claims Notice") to the party obligated to
provide indemnification pursuant to Section 9.2 or 9.3 (the "Indemnifying
Party"). The Claims Notice shall describe the Asserted Liability in
reasonable detail, shall contain supporting documentation (if applicable),
and shall indicate the amount (estimated, if necessary and to the extent
feasible) of the Claims that have been or may be suffered by the
Indemnitee. No indemnification obligation shall be imposed upon an
Indemnifying Party unless a
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proper Claims Notice is given to that Indemnifying Party on or before the
last day of the survival period for the representation, warranty, or
covenant, the alleged breach of which forms the basis for the Claim.
9.4.2. Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any
Asserted Liability. If the Indemnifying Party elects to compromise or
defend such Asserted Liability, it shall within thirty (30) days (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate with
the Indemnifying Party and shall provide the Indemnifying Party access to
its records and personnel relating to any such Asserted Liability, in each
case, at the expense of the Indemnifying Party, in the compromise of, or
defense against, such Asserted Liability. If the Indemnifying Party elects
not to compromise or defend the Asserted Liability or fails to notify the
Indemnitee of its election as herein provided, the Indemnitee may pay,
compromise or defend such Asserted Liability at the expense of the
Indemnifying Party. Subject to the limitations contained in Section 9.4.3
on the obligations of the Indemnifying Party in respect of proposed
settlements, the Indemnitee shall have the right to employ its own counsel
with respect to any Asserted Liability, but the fees and expenses of such
counsel shall be at the expense of such Indemnitee unless (a) the
employment of such counsel at the expense of the Indemnifying Party shall
have been authorized in writing by the Indemnifying Party in connection
with the defense of such action, or (b) such Indemnifying Party shall not
have, as provided above, promptly employed counsel reasonably satisfactory
to the Indemnitee to take charge of the defense
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of such action. The Indemnitee, at its own cost, may employ separate
counsel to assert, based on an opinion of counsel, one or more legal
defenses available to it which are different from or additional to those
available to such Indemnifying Party; the Indemnifying Party shall not
have the right to direct the defense of such action on behalf of the
Indemnitee in respect of such different or additional defenses. If the
Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents
within its control that are necessary or appropriate for such defense.
9.4.3. Settlement. Notwithstanding the provisions of Section 9.4.2,
neither the Indemnifying Party nor the Indemnitee may settle or compromise
any claim for which indemnification has been sought and is available
hereunder, over the reasonable objection of the other; provided, however,
that consent to settlement or compromise shall not be unreasonably
withheld or delayed. If, however, the Indemnitee refuses to consent to a
bona fide offer of settlement which the Indemnifying Party wishes to
accept, the Indemnitee may continue to pursue such matter, free of any
participation by the Indemnifying Party, at the sole expense of the
Indemnitee. In such event, the obligation of the Indemnifying Party to the
Indemnitee shall be equal to the lesser of (i) the amount of the offer of
settlement which the Indemnitee refused to accept plus the costs and
expenses of the Indemnitee prior to the date the Indemnifying Party
notified the Indemnitee of the offer of settlement, and (ii) the actual
out-of-pocket amount the Indemnitee is obligated to pay as a result of the
Indemnitee's continuing to pursue such matter.
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9.5 Exclusive Provisions; No Rescission.
Except as set forth in this Agreement, none of the parties hereto is
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. No party hereto shall be entitled to rescission of
this Agreement or the transactions contemplated hereby, except that the
foregoing provision shall not limit KDTI's or KDTI-NY's right to rescission or
to any other remedy or relief in any Claim based upon or relating to any act of
fraud with scienter, which is finally determined by a court of competent
jurisdiction, by or on behalf of SPEED or ▇▇▇▇▇▇.
ARTICLE 10: MISCELLANEOUS
10.1 Expenses.
Except as otherwise provided herein, the parties hereto shall pay all of
their own expenses relating to the transactions contemplated by this Agreement
and the Other Documents, including, without limitation, the fees and expenses of
their respective counsel and financial advisers.
10.2 Governing Law.
The interpretation and construction of this Agreement and the Other
Documents, and all matters relating hereto, shall be governed by the law of the
State of New York, without reference to its conflict of laws provisions.
10.3 Interchangeability of Schedules.
Any information contained on any Schedule to this Agreement or in the
Financial Statements shall be deemed to be contained on each and every other
Schedule to this Agreement.
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10.4 Captions.
The article and section captions used herein are for reference purposes
only, and shall not in any way affect the meaning or interpretation of this
Agreement.
10.5 Notices.
Any notice or other communications required or permitted hereunder shall
be in writing and shall be deemed effective (a) upon personal delivery, if
delivered by hand; (b) one day after the date of delivery by Federal Express or
other nationally recognized courier service that provides a delivery receipt, if
delivered by priority overnight delivery between any two points within the
United States; or (c) five days after deposit in the mails, if mailed by
certified or registered mail (return receipt requested) between any two points
within the United States, and in each case of mailing, postage prepaid,
addressed to a party at its address first set forth above, with copies to
Messrs. Feder, Kaszovitz, Isaacson, Weber, ▇▇▇▇▇ & Bass LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., and to
▇▇▇▇▇▇ & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attn: ▇▇▇▇▇▇ ▇.
▇▇▇▇▇, Esq. or such other address as shall be furnished in writing by like
notice by any such party.
10.6 Parties in Interest.
Except as otherwise provided in Section 5.8 or elsewhere herein or in the
Other Documents, this Agreement and the Other Documents may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement and the Other Documents shall be binding upon and shall
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns, Except as otherwise
provided in Section 5.8 or elsewhere herein, each party hereto intends that this
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Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto. Notwithstanding anything to
the contrary in this Agreement, but subject to Section 5.8 hereof and the
Securities Act, nothing in this Agreement shall prohibit or in any way restrict
the ability of SPEED or any of its Affiliates to transfer any or all of the
Shares and Additional Shares, if any, to SPEED or one or more Affiliates of
SPEED.
10.7 Severability.
In the event any provision of this Agreement or the Other Documents is
found to be void and unenforceable by a court of competent jurisdiction, the
remaining provisions of this Agreement or such Other Documents shall
nevertheless be binding upon the parties with the same effect as though the void
or unenforceable part had been severed and deleted.
10.8 Counterparts.
This Agreement may be executed in two or more counterparts, all of which
taken together shall constitute one instrument.
10.9 Entire Agreement; Amendments.
This Agreement, and the Other Documents, contain the entire understanding
of the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter. This Agreement may not
be changed orally, but only by an agreement in writing signed by all parties.
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IN WITNESS WHEREOF, the individual parties have executed and the corporate
parties have each caused its corporate name to be hereunto subscribed by their
respective duly authorized officers on the date first written above.
▇▇▇▇ DIGITAL TECHNOLOGIES, INC. ▇▇▇▇ N.Y. ACQUISITION INC.
By: By:
------------------------ -----------------------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
Chief Executive Officer President
SPEED GRAPHICS, INC. DDP, INC.
By: By:
------------------------ -----------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title:President Title:
------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Schedule 1.3
Acquired Liabilities
(i) Under the terms of a settlement agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇, Speed is
required to pay ▇▇. ▇▇▇▇▇▇ $7,500 in January, 1998. See Schedule
6.3.2(ii).
(ii) Speed is required to make the following payments for severance to the
individuals listed below:
Nature of
Name Amount Payment
---- ------ -------
[Omitted to maintain confidentiality and filed Severance
separately with the Commission] Severance
(iii) Speed is required to make payment for accrued vacation pay and sick leave
as set forth on Annex A to this Schedule 1.3.
----------
(1) The amount to be paid is based upon an oral agreement with the ex-employee
that Speed would pay him severance (not to exceed eight weeks) until he
finds gainful employment.
(2) The amount to be paid is based upon an oral agreement of the ex-employee
that Speed would pay him severance (not to exceed four weeks) until he
finds gainful employment.
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VACATION AND SICK TIME LIABILITY
--------------------------------------------------------------------------------
[Omitted to maintain confidentiality and filed separately with the Commission]
--------------------------------------------------------------------------------
GRAND TOTALS 14,799.87 4284.4462 291.952.36 4868.8 4284.4452 $70,239.26
================================================================================
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Schedule 1.8
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement, dated as of January __,
1998 (the "Agreement"), among Speed Graphics, Inc., a New York corporation
("SGI"), DDP, Inc., a New York corporation ("DDP"), ▇▇▇▇ Digital Technologies,
Inc., a Delaware corporation ("KDTI") and Katz N.Y. Acquisition, Inc., a
Delaware corporation ("Purchaser").
WHEREAS, by an Asset Acquisition Agreement dated as of January __,
▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇, DDP, Purchaser, KDTI and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, SGI and DDP have agreed to sell and assign the Acquired Assets to
Purchaser;
WHEREAS, in connection with the Purchase Agreement, the Purchaser
has agreed to assume the Acquired Liabilities and Purchaser and KDTI have
agreed, jointly and severally, to assume any liabilities under the Contracts;
and
WHEREAS, the parties hereto desire to execute this Agreement to
further evidence the assignment by SGI and DDP and assumption by Purchaser and
KDTI;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
i. Definitions. Except as otherwise provided herein, all capitalized
terms contained and not defined herein (including the recitals hereto) shall
have herein the respective meanings ascribed to them in the Purchase Agreement.
ii. Assignment. Each of SGI and DDP hereby sells, transfers,
conveys, assigns and sets over to Purchaser, its successors and assigns, all of
the Acquired Assets (other than the Contracts). Each of SGI and DDP hereby
sells, transfers, conveys, assigns and sets over to KDTI, its successors and
assigns, all the Contracts.
iii. Assumption of Acquired Liabilities. Purchaser hereby assumes
and undertakes to pay, perform and discharge the Acquired Liabilities (other
than with respect to or under the Contracts), and KDTI hereby assumes and
undertakes to pay, perform and discharge any liability or obligation under the
Contracts.
iv. Assignability of Contracts. To the extent that any of the
Contracts are not assignable without the consent of another party and such
consent has not been obtained on or prior to the Closing Date, this Agreement
shall not constitute an assignment or attempted assignment that would constitute
a breach thereof. Any obligation of Speed under the Purchase Agreement to effect
the transfer of any Contract to KDTI shall not be terminated or abridged by this
provision.
v. Further Assurances. At any time and from time to time after the
date hereof, at the request of Purchaser or KDTI, and without further
consideration, Speed shall
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execute and deliver such other instruments of sale, transfer, conveyance,
assignment and confirmation and take such other action as Purchaser or KDTI may
reasonably request as necessary or desirable in order to more effectively
transfer, convey and assign to Purchaser or KDTI, as the case may be, the
Acquired Assets.
vi. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to
principles of conflicts of law.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
SPEED GRAPHICS, INC.
Attest:
By:
---------------------------- -------------------------------
Name:
Title:
DDP, INC.
Attest:
By:
---------------------------- -------------------------------
Name:
Title:
▇▇▇▇ N.Y. ACQUISITION, INC.
Attest:
By:
---------------------------- -------------------------------
Name:
Title:
▇▇▇▇ DIGITAL TECHNOLOGIES, INC.
Attest:
By:
---------------------------- -------------------------------
Name:
Title:
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Schedule 1.14
▇▇▇▇ OF SALE
THIS ▇▇▇▇ OF SALE dated as of January ___, 1998, by SPEED GRAPHICS,
INC., a New York corporation ("SGI"), and DDP Inc., a New York corporation
("DDP", and together with SGI, "Speed"), to KATZ NEW YORK ACQUISITION, INC., a
Delaware corporation ("Purchaser").
W I T N E S S E T H:
WHEREAS, the Asset Acquisition Agreement, dated as of January 1,
▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇, DDP, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Purchaser and ▇▇▇▇
Digital Technologies, Inc., a Delaware corporation ("KDTI"), provides for, among
other things, the transfer and sale to the Purchaser of substantially all the
assets of Speed, all as more fully described in the Agreement, for consideration
in the amount and upon the terms provided in the Agreement; and
WHEREAS, by this instrument Speed is vesting in Purchaser all of the
properties, assets, and rights of Speed hereinafter described.
NOW, THEREFORE, in consideration of the premises and of other
valuable consideration to Speed in hand paid by Purchaser, at or before the
execution and delivery hereof, the receipt and sufficiency of which by Speed is
hereby acknowledged, Speed has conveyed, granted, bargained, sold, transferred,
set over, assigned, aliened, remised, released, delivered and confirmed, and by
this ▇▇▇▇ of Sale does convey, grant, bargain, sell, transfer, set over, assign,
alien, remise, release, deliver and confirm unto Purchaser, its successors and
assigns forever, all of Speed's right, title and interest in the Acquired Assets
(as defined in Section 1.2 of the Agreement) of every nature and description,
whether tangible or intangible, whether real, personal, or mixed, whether
accrued, contingent or otherwise, wherever located.
TO HAVE AND TO HOLD all of the Acquired Assets unto Purchaser, its
successors and assigns to its and their own use forever.
Speed hereby constitutes and appoints Purchaser, its successors and
assigns, Speed's true and lawful attorney and attorneys, with full power of
substitution, in Speed's name and stead, but on behalf and for the benefit of
Purchaser, its successors and assigns, to demand and receive any and all of the
Acquired Assets, and to give receipts and releases for and in respect of the
same, and any part thereof, and from time to time to institute and prosecute in
Speed's name, or otherwise, for the benefit of Purchaser, its successors and
assigns, any and all proceedings at law, in equity or otherwise, which
Purchaser, its successors and assigns, may deem proper for the collection or
reduction to possession of any of the Acquired Assets or for the collection and
enforcement of any claim or right of any kind hereby sold, conveyed, transferred
and assigned, or intended so to be, and to do all acts and things in relation to
the Acquired Assets which Purchaser, its successors and assigns shall deem
desirable, Speed hereby
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declaring that the foregoing powers are coupled with an interest and are and
shall be irrevocable by Speed or by its dissolution or in any manner or for any
reason whatsoever.
Speed hereby covenants that, from time to time after the delivery of
this instrument, at Purchaser's request and without further consideration, Speed
will do, execute, acknowledge, and deliver, or will cause to be done, executed,
acknowledged and delivered, all and every such further acts, deeds, conveyances,
transfers, assignments, powers of attorney and assurances as reasonably may be
required more effectively to convey, transfer to and vest in Purchaser, and to
put Purchaser in possession of, any of the Acquired Assets.
Nothing in this instrument, express or implied, is intended or shall
be construed to confer upon, or give to, any person, firm or corporation (other
than Purchaser and its successors and assigns) any remedy or claim under or by
reason of this instrument or any terms, covenants or condition hereof, and all
the terms, covenants and conditions, promises and agreements in this instrument
contained shall be for the sole and exclusive benefit of Purchaser and its
successors and assigns.
Nothing in this instrument, express or implied, is intended or shall
be construed to diminish in any way the rights and obligations of the parties
under the Agreement.
This instrument is executed by, and shall be binding upon, Speed,
its successors and assigns, for the uses and purposes above set forth and
referred to, effective immediately upon its delivery to Purchaser. This
instrument shall be governed by and construed in accordance with the laws of the
State of New York without regard to principles of conflicts of law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of SGI and DDP has caused this ▇▇▇▇ of Sale
to be executed on its behalf by its duly authorized officer as of the date first
above written.
SPEED GRAPHICS, INC.
By:
-------------------------------
Name:
Title:
ATTEST:
----------------------------
Name:
DDP, INC.
Attest:
By:
-------------------------------
Name:
Title:
ATTEST:
----------------------------
Name:
Receipt of the foregoing instrument acknowledged:
▇▇▇▇ NEW YORK ACQUISITION, INC.
By:
----------------------------
Name:
Title:
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Schedule 1.29
Contracts
Real Property Leases
1. Lease between ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates Limited Partnership and Speed
Graphics, Inc. ("Speed") dated as of May 31, 1985, as amended by a First
Supplemental Agreement dated May, 1986, a Second Supplemental Agreement
dated April, 1988, a Third Supplemental Agreement dated November, 1988, a
Fourth Supplemental Agreement dated April, 1989, a Fifth Supplemental
Agreement dated July, 1989, a Sixth Supplemental Agreement dated November
8, 1990, a Seventh Supplemental Agreement dated May, 1991, an Eighth
Supplemental Agreement dated January, 1992, a Ninth Supplemental Agreement
dated August, 1992, a Tenth Supplemental Agreement dated August, 1992, an
Eleventh Supplemental Agreement dated October, 1992, a Twelfth
Supplemental Agreement dated February 23, 1993, a Thirteenth Supplemental
Agreement dated February 23, 1993, a Fourteenth Supplemental Agreement
dated March, 1993, a Fifteenth Supplemental Agreement dated October, 1993,
a Sixteenth Supplemental Agreement dated October, 1993, a Seventeenth
Supplemental Agreement dated November, 1993, an Eighteenth Supplemental
Agreement dated November, 1993, a Nineteenth Supplemental Agreement dated
August, 1994, a Twentieth Supplemental Agreement dated August, 1994, a
Twenty-First Supplemental Agreement dated October, 1994, a Twenty-Second
Supplemental Agreement dated April, 1996, a Twenty-Third Supplemental
Agreement dated April, 1996 and as Twenty-Fourth Supplemental Agreement
dated December 1, 1996 (as so amended, the "Lease").
2. Riders to Lease, regarding:
- ▇▇▇▇ ▇▇▇
- ▇▇▇▇ ▇▇▇
- ▇▇▇▇ ▇▇▇
- ▇▇▇▇ 320
- Room 215
- Room 402/403
- ▇▇▇▇ ▇▇▇
- ▇▇▇▇ ▇▇▇
- ▇▇▇▇ ▇▇▇/▇▇▇
- ▇▇▇▇ 202
- Room 400
- Room 336
- Room 436
3. Letter Agreement dated April 8, 1992 from ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Associated
Limited Partnership to Speed.
93
4. Agreement of Lease dated as of June 22, 1995 between 575 Realties, Inc.
and Speed, regarding office space at 6th floor, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇.
5. Nondisturbance and Attornment Agreement dated as of June 27, 1995, between
1740 Advisors, Inc., as agent for ALLSA Life Insurance Company, Inc.,
Speed and 575 Realties, Inc.
6. Non-Disturbance Agreement dated as of June 22, 1995, among Beckrose
Estates, L.L.C., ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ and Speed.
7. Loan Agreement dated June 22, 1995, between 575 Realties, Inc. and Speed.
8. Improvement Loan Note dated as of June 22, 1995, by Speed to 575 Realties,
Inc.
9. Cancellation and Release Agreement dated as of November 15, 1996, between
Speed and Metropolitan Transportation Authority relating to the
cancellation of a Lease Agreement with an occupancy commencement date of
February 15, 1992 and rent commencement date of April 15, 1996, between
Speed and Metropolitan Transportation Authority, regarding office space on
ground floor of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
10. Agreement of Lease commencing April 1, 1992, between Fifth Avenue
Partners, L.P. and Speed, regarding commercial space at ▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇.
11. Lease Modification Agreement dated as of December 9, 1994, between Fifth
Avenue Partners, L.P. and Speed.
12. Consent to Sublease dated as of June 6, 1996, among Fifth Avenue Partners,
L.P., Speed and Progressive Casualty Insurance Company.
13. Sublease dated as of May 2, 1996, between Speed and Progressive Casualty
Insurance Company.
Equipment Leases and Related Agreements
14. Equipment Lease Agreement dated June 29, 1993, between Speed and ▇▇▇▇▇▇▇
Kodak Credit Corporation, regarding Springboard SCSI Emulator, etc.
15. Equipment Lease Agreement dated December 17, 1993, between Speed and
▇▇▇▇▇▇▇ Kodak Credit Corporation, regarding Linotype RIP 50 Upgrade.
16. Equipment Lease dated October 26, 1994, between Speed and European
American Bank, as assignee of Gramercy Leasing Services, Inc., regarding
photographic/production equipment.
17. Lease Dated November 16, 1994, between Speed and Canon Financial Services,
Inc., regarding NCS00544 CLC 800.
94
18. Equipment Acquisition Agreement dated October 18, 1994, between Speed and
MCS Business Machines, Inc., regarding NC500552 CLC 800.
19. Lease dated November 29, 1994, between Speed and Canon Financial Services,
Inc., regarding NC500552 CLC 800.
20. Lease dated October 8, 1994, between Speed and Canon Financial Services,
Inc.
21. Equipment Lease dated as of May 23, 1995, between Speed and European
American Bank as assignee of Gramercy Leasing Services, Inc., regarding
printing/imaging/computer equipment.
22. Guaranty dated as of May 23, 1995, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
Gramercy Leasing Services, Inc.
23. Master Lease Agreement dated as of March 15, 1995, between Speed and
General Electric Capital Corporation, as amended.
24. Agreement of Sale dated as of December 21, 1994, between Speed and Scitex
America Corp., regarding IRIS 3047, PS/Z Pentium, DAT tape drive, etc.
25. Sales Contract and Security Agreement dated as of May 30, 1995, between
Speed and General Electric Capital Corporation, as assignee of Heidelberg
USA, Inc., regarding Heidelberg GTODIV 4 color press.
26. Equipment Lease Agreement dated May 30, 1995 between Speed and ▇▇▇▇▇▇
Financial Corp., regarding Heidelberg GTODIV 4 color press.
27. Corporate Guaranty dated May 30, 1995 made by DDP, Inc. in favor of ▇▇▇▇▇▇
Financial Corp.
28. Personal Guaranty dated May 30, 1995 made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
▇▇▇▇▇▇ Financial Corp.
29. Equipment Lease dated August 23, 1995, between Speed and General Electric
Capital Corporation as assignee of Gramercy Leasing Services, Inc.
30. Guaranty dated August 23, 1995 made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
Gramercy Leasing Services, Inc.
31. Master Lease Agreement dated as of March 15, 1995, between Speed and
General Electric Capital Corporation.
32. Lease Agreement dated as of October 3, 1995, between Speed and Tokai
Financial Services, Inc.
95
33. Customer Service Maintenance Agreement dated as of September 14, 1995,
between Speed and AOE Ricoh, Inc.
34. Equipment Purchase Agreement dated September 14, 1995, between Speed and
AOE Ricoh, Inc.
35. Master Lease Agreement dated as of October 23, 1995, between Speed and GE
Capital Corp.
36. Guaranty dated November 1, 1995, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
General Electric Capital Corporation.
37. Agreement of Sale dated as of September 21, 1995, between Speed and Scitex
America Corp.
38. Equipment Acquisition Agreement dated October 4, 1995, between Speed and
MCS, regarding two Film Scanner III.
39. Lease dated as of December, 1995, between Speed and Canon Financial
Services, Inc., regarding two film Scanner III.
40. Agreement of Sale dated as of December 7, 1995, between Speed and Scitex
America Corp.
41. Master Lease Agreement dated October 23, 1995, between Speed and GE
Capital Corp., regarding IRIS 3047 with Colorbase.
42. Assumption Agreement dated as of January 23, 1995, among Speed, Finest
Photoprint and AT&T Capital Leasing Services/▇▇▇▇▇ Financial Corp.
43. Lease dated as of March 22, 1994, between Finest Photoprint and Graphics,
Inc. and ▇▇▇▇▇ Financial Corp., regarding display printer, advanced color
server with software, etc.
44. Assumption Agreement dated as of April 11, 1996, among Finest Photo Print,
Inc., Speed and National Marketing Network, Inc.
45. Lease dated as of March 23, 1994, between Finest Photo Print, Inc. and
Colonial Pacific Leasing Corporation as assignee of National Marketing
Network, Inc., regarding Apple Mac Quadra 800 Computer, etc.
46. Equipment Lease Guaranty dated April 11, 1996, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
in favor of Colonial Pacific Leasing Corporation.
96
47. Lease Guaranty dated as of March 12, 1996, made by Speed and ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ in favor of Gramercy Leasing Services, Inc., regarding
electronic and photographic imaging equipment and air conditioning
equipment.
48. Equipment Lease dated as of March 12, 1996, between Speed and The CIT
Group as assignee of Gramercy Leasing Services, Inc., regarding electronic
and photographic imaging equipment and air conditioning equipment.
49. Guaranty dated March 12, 1996, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
Gramercy Leasing Services, Inc.
50. Guaranty dated March 12, 1996, made by DDP Inc. in favor of Gramercy
Leasing Services, Inc.
51. Equipment Lease dated April 15, 1996, between Speed and, Summit Leasing
Corporation, as assignee of Gramercy Leasing Services, Inc., regarding
digital photo imaging equipment and computer equipment.
52. Guaranty dated April 15, 1996 made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
Gramercy Leasing Services, Inc.
53. Purchase Agreement dated January 31, 1996, between Speed and ▇▇▇▇▇ ACS
Inc., regarding ▇▇▇▇▇ Lamda 130 Large Format Digital Laser Imager.
54. Master Equipment Lease Agreement dated as of April 25, 1996, between Speed
and Colonial Pacific Leasing Corp., as amended.
55. Guaranty Agreement dated as of April 25, 1996 made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in
favor of Colonial Pacific Leasing Corp.
56. Agreement of Sale dated as of March 12, 1996, between Speed and Scitex
America Corp., regarding Kodak Approval Systems, Inc.
57. Equipment Lease dated as of May 9, 1996, between Speed and European
American Bank, as assignee of Gramercy Leasing Services, Inc., regarding
drum scanner, file server, CD jukebox.
58. Guaranty dated May 9, 1996, made by DDP, Inc. in favor of Gramercy Leasing
Service, Inc.
59. Guaranty dated May 19, 1996, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
Gramercy Leasing Service, Inc.
60. Equipment Lease dated May 30, 1996, between Speed and Sterling National
Bank & Trust Company of New York as assignee of Gramercy Leasing Services,
Inc., regarding computer equipment and jet stream.
97
61. Guaranty dated May 30, 1996, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
Gramercy Leasing Service, Inc.
62. Xerox Order Agreement dated May 8, 1996, between Speed and Xerox Corp.,
regarding 5790 Edit Color Copier (2 agreements).
63. Purchase Order Agreement dated as of September 19, 1996, among Speed,
Heidelberg USA Inc. and UJB Leasing, regarding Heidelberg Quickmaster
Model QMD1-46-4 Four Color Press.
64. Master Lease dated March 12, 1996, between Speed and Summit Leasing
Corporation (formerly UJB Leasing), as amended.
65. Individual Guaranty of Payment dated March 12, 1996, made by ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ in favor of UJB Leasing Corp.
66. Corporate Guaranty of Payment dated March 12, 1996, made by DDP, Inc. in
favor of UJB Leasing Corp.
67. Equipment Lease dated as of September 16, 1996, between Speed and P.C.
Leasing, a Division of Phoenixcor, Inc., as assignee of Gramercy Leasing
Services, Inc., regarding Heidelberg QMD1-46-4 Four Color Press.
68. Guaranty dated September 16, 1996, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
P.C. Leasing, a Division of Phoenixcor, Inc., as assignee of Gramercy
Leasing Services, Inc.
69. Equipment Lease dated as of August 8, 1996, between Speed and Summit Bank
Leasing as assignee of Gramercy Leasing Services, Inc., regarding digital
photo imaging equipment and computer equipment.
70. Guaranty dated August 8, 1996, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in favor of
Gramercy Leasing Services, Inc.
71. Equipment Lease dated April 24, 1997, between Speed and, Sterling National
Bank, as assignee of Gramercy Leasing Services, Inc., regarding Canon CLC
1000, Edit Board Al, Editor F1.
72. Equipment Acquisition Agreement dated March 31, 1997, between Speed and
MCS Business Solutions, Inc., regarding CLC 1000, Ed Board A1 and Editor
F1.
73. Master Lease Agreement dated as of May 20, 1997, between Speed and
Gramercy Leasing Services, Inc.
74. Quotation, Purchase and License Agreement dated June 20, 1997, between
Speed and NAPC, Inc.
98
75. Loan and Security Agreement dated as of June 9, 1994, between Phoenixcor,
Inc. and DDP, Inc., regarding loan for $903,000 for acquisition of color
system with Sun IPX Workstation, etc.
76. Individual Guaranty dated as of June 9, 1994, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ in
favor of Phoenixcor, Inc.
77. Corporate Guaranty dated as of June 9, 1994, made by Speed in favor of
Phoenixcor, Inc.
78. Agreement dated as of June 9, 1994, among Phoenixcor, Inc., Speed and DDP,
Inc. (acknowledged by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇).
79. Loan and Security Agreement dated as of June 10, 1994, between DDP, Inc.
and Phoenixcor, Inc., regarding loan for $159,862.37 for digital print
equipment.
80. Corporate Guaranty dated as of June 10, 1994, made by Speed in favor of
Phoenixcor, Inc.
81. Individual Guaranty dated as of June 10, 1994, made by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
in favor of Phoenixcor, Inc.
82. Equipment Lease Agreement dated as of November 22, 1993, between Speed and
▇▇▇▇▇▇▇ Kodak Credit Corporation, regarding Agfa SelectSet 7000, etc.
83. Lease Agreement dated September 17, 1997 between Speed and Water Cure
Systems, Inc., regarding counter top water filtration cooler.
84. New Jersey Motor Vehicle Lease Agreement dated November 28, 1997 between
Speed and Ford Motor Credit Company, as assignee of ▇▇▇▇ ▇▇▇▇▇▇▇ Ford,
regarding 1998 Ford Explorer.
85. [INTENTIONALLY OMITTED].
86. Consignment Inventory Stocking and Sales Agreement dated as of February
26, 1996, between Speed and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Company.
87. Consignment Contract dated as of April 23, 1996, between Speed and
Recognition Systems, Inc.
88. Equipment lease dated May 20, 1997, between Speed and Wasco Funding Corp
as assignee of Gramercy Leasing regarding Colorpass 8000 with Interface
board and command workstation.
99
89. Equipment lease dated May 20, 1997, between Speed and Wasco Funding Corp
as assignee of Gramercy Leasing regarding ADP 8800-197LE computer system
and all related peripherals.
90. Equipment lease dated June 26, 1997, between Speed and Wasco Funding Corp
as assignee of Gramercy Leasing regarding Octane computer including
upgrades, Contex Rip n' Strip as well as all related software and hardware
related to this equipment.
Miscellaneous
91. Letter Agreement (the "Credit Agreement") dated August 11, 1997, from
Fleet Bank, N.A. to Speed, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and DDP, Inc., regarding
credit line. Amounts outstanding will be paid off by KDTI at the Closing.
92. Promissory Note dated August 11, 1997, by Speed to Fleet Bank, N.A. for
$2,735,000 principal sum. Amounts outstanding will be paid off by KDTI at
the Closing.
93. Agreement for Production and Sale of Fine Art Watercolor and Silver
Italide Prints dated as of April 17, 1997 among ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and Speed.
94. Speed Graphics, Inc. 401(k) Profit Sharing Plan effective as of January 1,
992, as amended by the Amendment dated August 12, 1994 and the Second
Amendment dated as of February 20, 1996.
95. Incentive Program for ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇.
96. Letter Agreement dated August 22, 1997, between ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇. and
Speed.
97. Letter Agreement dated August 16, 1993, between ▇▇▇▇▇▇▇ ▇▇▇▇▇ and Speed.
98. Oral employment agreement between ▇▇▇▇▇▇ ▇▇▇▇▇▇ and Speed.
99. Indenticolor License Agreement dated as of February 8, 1989, between
Indenticolor International, Inc. and Speed.
100. Rental Agreement dated as of May 1, 1996, between Speed and Magic
Graphics, Inc.
101. Oral employment agreement between Speed and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
102. Oral employment agreement between Speed and ▇▇▇▇▇▇ ▇. ▇▇▇▇.
100
Schedule 1.33
EMPLOYMENT AGREEMENT dated as of January 9, 1998 by
and between ▇▇▇▇ DIGITAL TECHNOLOGIES, INC., a
Delaware corporation ("KDTI" or the "Company"), and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ (the "Employee").
---------------------------
The parties hereto desire to provide for the Employee's employment by the
Company in accordance with the terms and provisions set forth below:
NOW, THEREFORE, the parties agree as follows:
1. EMPLOYMENT; TERM.
The Company agrees to employ the Employee, and the Employee agrees to work
for the Company as its Chief Operating Officer for a period of three (3) years
commencing on the date hereof unless sooner terminated in accordance with
Section 7 hereof. Such period, together with the period of any extension or
renewal of such employment, is referred to herein as the "Employment Period."
2. DUTIES.
During the Employment Period, the Employee shall serve as the Chief
Operating Officer of the Company and its wholly owned subsidiary Katz N.Y.
Acquisition, Inc. ("KDTI-NY"), and perform such duties for the Company or an
Affiliate (as hereinafter defined) as shall, from time to time, be reasonably
assigned to the Employee by the Board of Directors or Chief Executive Officer of
the Company consistent with his position and abilities. The Employee shall have
such corporate power and authority as are necessary to perform the duties of
such office and any other office(s) that are so assigned to him. In his capacity
as Chief Operating Officer, the Employee shall formulate and implement a plan to
effect the operational combination of the business of Speed Graphics, Inc. and
its affiliate DDP, Inc., each a New York corporation (collectively, "Speed"),
with the business of KDTI and KDTI-NY (the assets of Speed having been acquired
by KDTI-NY concurrently with the execution of this Agreement), in order to
create maximum personnel, equipment and approving production efficiencies and
capacity. The Employee shall also be involved with identifying new acquisition
candidates, the due diligence process relating to such acquisitions and the
combination of the operations of any business or operation that may be acquired.
The duties to be performed by the Employee hereunder shall be performed
primarily in New York, New York, subject to reasonable travel requirements on
behalf of the Company. The Company shall not relocate the Employee outside of
New York, New York, without his prior written consent.
101
3. DEVOTION OF TIME.
During the Employment Period, the Employee shall: (i) expend substantially
all of his working time for the Company; (ii) devote his best efforts, energy
and skill to the services of the Company and the promotion of its interests; and
(iii) not, directly or indirectly, engage, participate or invest in, or render
any services for, any other business enterprise or activity engaged in a
business competitive to the business of the Company; provided, however, that the
foregoing notwithstanding, the Employee may own, directly or indirectly, solely
as an investment, securities of any Person (as hereinafter defined); provided
that such securities are listed on a registered securities exchange or actively
traded in the over-the-counter market; and provided further, that the Employee
is not a controlling Person of, or a member of a group that controls, such
Person and that the number or amount of such securities represents not more than
two percent (2%) of the total number or amount of such securities then
outstanding.
4. COMPENSATION; ADDITIONAL BENEFITS.
4.1 In consideration for the services to be performed by the Employee
during the Employment Period hereunder, the Company shall compensate
the Employee at an annual base salary from the date hereof at an
annual rate which is equal to the base salary paid by KDTI to its
Chief Executive Officer (the "Base Salary"), provided, however, that
the Employee's Base Salary for each of the twelve (12) calendar
month periods ending on the first, second and third anniversaries of
the date of this Agreement shall not be less than $385,000, $424,000
and $466,000 per annum, respectively, payable in accordance with the
Company's customary payroll practices.
4.2 Consistent with the Company's other senior executives, the Employee
shall be eligible to be granted an annual bonus in accordance with
the provisions of Schedule 1 attached hereto.
4.3 Employee shall be entitled to health insurance and other benefits
and perquisites similar to those provided to other executive
employees of KDTI; provided, however, that such health and other
benefits and perquisites shall be no less favorable than the health
and other benefits and perquisites afforded KDTI's Chief Executive
Officer. To the fullest extent possible under applicable law, the
Company shall waive any and all vesting periods, minimum service
periods and waiting periods that may otherwise apply to the Employee
under the Company's health, benefit and other employee benefit plans
available to the Company's key employees.
4.4 The Company shall pay directly, or reimburse the Employee for, all
other reasonable and necessary, documented business expenses and
disbursements incurred by him for and on behalf of the Company in
the performance of his duties under this Agreement. For such
purposes, the Employee shall submit to the
102
Company itemized reports of such expenses in accordance with the
Company's policies.
4.5 The Employee shall be entitled to six (6) weeks of annual vacation
and shall be subject to the Company's standard vacation policy
applicable to employees of his position and seniority.
4.6 The Company shall, at the Company's sole cost and expense, provide
or make available to the Employee (i) a 1987 Rolls Royce automobile
(VIN ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇) and a 1997 Lexus automobile (VIN
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇), (ii) full collision and liability insurance on
such automobiles, (iii) one full-time driver, and (iv) reimbursement
for all expenses associated with use of such automobiles, including
without limitation gasoline, garage and parking expenses,
maintenance and repairs, registration, taxes and tolls. Upon
termination of his employment hereunder, the Company shall, without
any payment or other consideration required to be made or given by
the Employee, assign and transfer to the Employee the Rolls Royce
automobile referred to above and, if and to the extent permitted
under such lease, the lease of the 1997 Lexus automobile referred to
above; provided that Employee pays any penalty or fee payable in
connection with the transfer under the lease and provided further
that, except as otherwise provided herein, the Company shall have no
further obligation under this Section 4.6 with respect to such
automobiles after such termination.
5. EMPLOYEE KNOWLEDGE.
5.1 Employee hereby agrees to communicate and make known to the Company
all knowledge possessed by him relating to any methods,
developments, inventions and/or improvements, whether patented,
patentable or unpatentable, which relate to the business of the
Company; whether acquired by him before or during the Employment
Period; provided, however, that nothing herein shall be construed as
requiring any such communication where the method, development,
invention and/or improvement is lawfully protected from disclosure
as the trade secret of a third party or by any other lawful bar to
such communications existing prior to the commencement of employment
hereunder.
5.2 Employee hereby agrees to keep all such records in connection with
the Employee's employment as the Company may from time to time
reasonably direct, and all such records shall be the sole and
exclusive property of the Company.
5.3 It is expressly agreed between the Employee and the Company that any
invention the Employee develops entirely on his own time without
using the Company's equipment, supplies, facilities or trade secret
information belongs to the Employee except for those inventions that
either: (a) relate at the time of conception or reduction to
practice of the invention to the Company's business or actual or
103
demonstrably anticipated research or development of the Company; or
(b) result from any work performed by the Employee for the Company.
6. RESTRICTIVE COVENANTS.
6.1 Definitions. Capitalized terms used herein, unless the context
otherwise requires, have the meanings specified below.
6.1.1 "Customer" means (i) any Person who is a customer of any of
the KDTI Companies at any time of determination or at any time
during the preceding two (2) year period; (ii) any customer of
Speed on the date hereof or at any time during the preceding
two (2) year period; or (iii) any prospective customer to whom
any of the KDTI Companies makes a bona fide presentation (or
similar offering of services) within a period of one (1) year
immediately preceding the time of determination.
6.1.2 "Affiliate" means any Person which, directly or indirectly,
controls or is controlled by or under common control with
KDTI.
6.1.3 "KDTI Companies" means KDTI, KDTI-NY and any other Affiliate.
6.1.4 "Restricted Period" means the period commencing on the day
next following the last day of the Employment Period and
ending on the third anniversary of the last day of the
Employment Period.
6.2 Acknowledgments by Employee. The Employee acknowledges that his
position with the Company will require the performance of services
which are special, unique, extraordinary and of an intellectual
character and places and will continue to place him in a position of
confidence and trust with the Customers of the Company. The Employee
further acknowledges that his performance of services for the
Company necessarily requires the disclosure to the Employee of
confidential information and trade secrets of the Company. The
Employee also acknowledges that he has developed prior to the date
hereof, as an employee and stockholder of Speed, the assets of which
were acquired by the Company pursuant to an Asset Acquisition
Agreement dated of even date herewith among KDTI, KDTI-NY, Speed,
and the Employee (the "Acquisition Agreement"), concurrently with
the execution and delivery of this Agreement, a personal
acquaintance and relationship with Customers of Speed and that he
will continue to develop such relationships with such Customers as
an employee of the Company. The Employee also acknowledges that in
the course of his employment by the Company he will develop a
personal acquaintanceship and relationship with other Customers of
KDTI and its Affiliates. The Employee further acknowledges that he
has and will acquire a knowledge of such Customers' affairs and
requirements which may constitute a primary contact of the Company
or KDTI and its Affiliates with such Customers, and that therefore,
the Company's and KDTI's and its other
104
Affiliates relationships with its Customers may be placed in the
Employee's hands in confidence and trust. The Employee therefore
agrees that it is reasonable and necessary for the protection of the
goodwill and business of the Company that the Employee make the
covenants contained herein and that making such covenants is an
essential inducement and a necessary condition precedent to the
Company (a) acquiring the assets of Speed pursuant to the
Acquisition Agreement, which acquisition results in a direct and
substantial pecuniary benefit to the Employee, and (b) employing the
Employee hereunder.
6.3 Covenants against Competition. Employee hereby covenants and agrees
that he will not, directly or indirectly, by himself, or through any
other Person:
6.3.1 during the Employment Period:
(a) render any services within the scope of the KDTI
Companies's respective businesses to or for a Customer,
unless such services are rendered as an employee of or
consultant to one of the KDTI Companies;
(b) attempt in any manner to solicit business that competes
with the KDTI Companies from any Customer (except on
behalf of the KDTI Companies), or persuade any Customer
to cease doing business or to reduce the amount of
business which any such Customer is doing or
contemplates doing with any of the KDTI Companies;
(c) employ or attempt to employ or assist any other Person
to employ any person (except on behalf of the KDTI
Companies) who is at such time, or at any time during
the twelve months preceding the date of this Agreement
was, in the employ of any of the KDTI Companies to
perform services;
(d) solicit or affect to the detriment of any of the KDTI
Companies, any relationship of any of the KDTI Companies
with any Customer or any supplier, service bureau,
vendor or employee of any of the KDTI Companies, or
cause any Customer, supplier, or vendor of any of the
KDTI Companies to refrain from entrusting additional
business to any of the KDTI Companies; or
(e) engage in any business activity which is competitive
with the services offered or products manufactured by
any of the KDTI Companies or competitive with services
or products the offering of which was under active
consideration by any of the KDTI Companies at such date;
105
6.3.2 during the Restricted Period, engage in any business activity,
enterprise or venture that produces products produced or
performs services performed, directly or indirectly, by any
KDTI Company, or that are being actively considered by any
KDTI Company or Speed, on the last day of the Employment
Period;
6.3.3 during the Restricted Period and for a further twelve (12)
month period ending on the fourth anniversary of the last day
of the Employment Period, solicit any Customer or solicit or
offer to employ or engage in any capacity any Person who is
then, or at any time within the preceding twelve (12) month
period was, an employee of any KDTI Company for any business
activity or purpose whatsoever; or
6.3.4 at any time after the date hereof, solicit any Customer or
solicit or offer to employ or engage in any capacity any
Person who is then, or at any time within the preceding twelve
(12) month period was, an employee of any KDTI Company for any
business activity or purpose that is competitive with the
business of any KDTI Company or Speed, or that are being
actively considered by any KDTI Company or Speed, on the last
day of the Employment Period;
provided, however, that the foregoing notwithstanding, the Employee
may own, directly or indirectly, solely as an investment, securities
of any Person; provided that such securities are listed on a
registered securities exchange or actively traded in the
over-the-counter market; and provided further, that the Employee is
not a controlling Person of, or a member of a group that controls,
such Person and that the number or amount of such securities
represents not more than two percent (2%) of the total number or
amount of such securities then outstanding.
6.4 Confidential Information. From and at all times after the date
hereof, the Employee shall keep secret and retain in strictest
confidence, and shall not use for the benefit of himself or others,
except in connection with the business and affairs of the KDTI
Companies, all confidential matters relating to the business of the
KDTI Companies, including, but not limited to, "know-how," trade
secrets, customer lists, subscription lists, pricing policies,
operational methods, marketing plans or strategies, product
development techniques or plans, information pertaining to Customers
and their requirements, business acquisition plans, new personnel
acquisition plans, formulae, methods of manufacture, technical
processes, designs and design projects, inventions and research
projects and other business affairs relating to the business and
affairs of the KDTI Companies, learned by the Employee at any time
and shall never disclose such matters to anyone outside of the KDTI
Companies, except (i) as required in the course of performing duties
for the KDTI Companies or as required by law or any court or
administrative body of competent jurisdiction (provided that the
Employee gives prompt notice of any such applicable requirement so
that KDTI may oppose such requirement, seek a protective order or
otherwise take such action as it may deem
106
desirable to afford confidential treatment to such information),
(ii) with KDTI's express written consent; or (iii) with respect to
such information which is generally known to the public or to
businesses engaged in the type of business in which any of the KDTI
Companies is engaged becomes known to the public or such businesses
though no fault of the Employee.
6.5 Enforcement Through Injunction. Employee acknowledges that the type
and periods of restriction imposed in this Section 6 are fair and
reasonable and are reasonably required for the protection of the
KDTI Companies. The Employee acknowledge that a breach of the
provisions of this Agreement would irreparably damage the KDTI
Companies, and that once such a breach has occurred, there may be no
accurate way of determining the amount of damage or loss suffered by
the KDTI Companies. The Employee therefore agrees that the terms of
this Agreement may be enforced (after posting any bond required by
applicable law) through preliminary or final injunctive relief or
other equitable remedy, without any of the KDTI Companies having to
prove irreparable injury or likelihood of success and without
limiting any other damages or remedies to which any of the KDTI
Companies may be entitled, including termination of any salary or
other payments required under this Agreement.
6.6 Blue Lining. If any of the provisions of this Agreement relating to
time, geographical area, services products, devices and/or
information are deemed by a court of competent jurisdiction to be
overly broad or for any other reason unenforceable, the parties
agree that such restrictions herein as to time, geographical area,
services, products, devices and/or information shall be reduced to
such time, geographical area, services, products, devices and/or
information as such court shall hold to be reasonable and legally
enforceable. In addition, if any court determines that any of the
restrictive covenants contained in this Agreement or any part
thereof, is invalid or unenforceable, the remainder of the
restrictive covenants shall not thereby be affected and shall be
given full effect without regard to the invalid portions.
The Employee acknowledges that the business of the KDTI Companies
extends beyond the geographic area of the State of New York and
accordingly, it is reasonable that the restrictive covenants set
forth above are not limited by specific geographic area but by the
location of the Customers. The Employee further acknowledges that
the Company and the Employee intend to and hereby confer
jurisdiction to enforce the covenants contained in this Agreement
upon the courts of any state within the geographical scope of such
covenants. In the event that the courts of one or more of such
states shall hold such covenants wholly unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect
the right of any of the KDTI Companies to the relief provided above
in the courts of any other states within the geographical scope of
such covenants, as to breaches of such covenants in such other
respective states, the above covenants as they relate to each state
being, for this purpose, severable into diverse and independent
107
covenants. Notwithstanding the foregoing, no action will be
commenced in more than one jurisdiction at a time unless one or more
of the provisions of this Agreement can only be enforced if an
action is brought in another jurisdiction or jurisdictions.
7. Termination. The Employee's employment hereunder may be terminated only
upon the expiration of the Employment Period or under the following
circumstances:
7.1 Death. The Employee's employment hereunder shall be terminated
automatically upon his death, in which event the Company shall pay
to the Employee's written designee or, if he has no written
designee, to his spouse or, if he leaves no spouse and has no
written designee, to his estate, (i) accrued but unpaid Base Salary
through the date of death, (ii) Base Salary payable for the
remainder of the Employment Period (without any extension or renewal
for any reason and disregarding for this purpose the early
termination of his employment on account of his death), such amounts
to be paid in the same manner through the remainder of the
Employment Period as if the Employee's employment were not
terminated, (iii) accrued but unpaid Bonus through the date of
death, and (iv) all reasonable expenses actually incurred or paid by
the Employee in the performance of his duties hereunder prior to the
date of death.
7.2 Disability. The Company may terminate the Employee's employment
hereunder if as a result of the Employee's incapacity due to
physical or mental illness, the Employee shall have failed to
perform his duties hereunder on a substantially full- time basis for
an aggregate of 180 consecutive or non-consecutive days in any 12
consecutive-month period. The determination of incapacity or
disability under the preceding sentence shall be made in good faith
by the Company based upon information supplied by a physician
selected by the Company or its insurers and reasonably acceptable to
the Employee or his legal representative. During any period that the
Employee fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness (the "Disability
Period"), the Employee shall continue to receive his full Base
Salary hereunder until his employment is terminated pursuant to this
Section 7.2.; provided that amounts payable to the Employee shall be
reduced by the sum of the amounts, if any, paid to the Employee
during the Disability Period under any disability benefits plans of
the Company.
7.3 Termination by the Company
7.3.1 The Company may terminate the Employee's employment on written
notice given to the Employee at any time following the
occurrence of any of the following events (which shall
constitute "cause"): (a) being convicted of or entering a
guilty plea or plea of nolo contendere to a felony or any
crime involving the Company (other than pursuant to actions
taken at the direction or with the approval of the Board), (b)
being found
108
by reasonable determination of the Company, made in good
faith, to have engaged in (1) willful misconduct, (2) willful
or gross neglect, (3) fraud, (4) misappropriation or (5)
embezzlement in the performance of his duties hereunder or (c)
having breached in any material respect the terms and
provisions of this Agreement and failed to cure such breach
within 15 days following written notice from the Company
specifying such breach.
7.3.2 In the event the Employee's employment is terminated by the
Company under this Subsection 7.3 other than for "cause", the
Employee shall be entitled to continue to receive (i) Base
Salary, (ii) an amount equal to (a) the average Bonus paid to
the Employee during the period immediately prior to
termination by the Company other than for "cause" or (b) if
two years shall not have elapsed prior to such termination the
Bonus paid to the Employee, or which would have been paid to
the Employee pursuant to this Agreement but for such
termination, during the first full fiscal year of the Company
during the Employment Period and (iii) the benefits and
perquisites contemplated by Sections 4.3 and 4.6(i) of this
Agreement, in each case for the remainder of the Employment
Period as if such employment had not been terminated, such
amounts to be paid (and benefits to be provided) in the same
manner through the remainder of the Employment Period as if
such employment were not terminated and without offset for
earnings from subsequent employment or otherwise.
Notwithstanding the foregoing, if the benefit plans with
respect to the benefits described above do not provide
coverage for or with respect to the Employee after Employee's
employment is terminated by the Company other than for
"cause," the Company shall, at its sole cost and expense,
provide the Employee supplemental benefits to the extent
necessary to afford the Employee the same benefit coverage
that would have been available to the Employee for the
remainder of the Employment Period had his employment not been
terminated.
7.4 Termination by the Employee.
7.4.1 Definitions. For purposes of this Section 7.4, the following
terms shall have the respective meanings set forth below.
(a) "Acceleration Payment" means an amount in cash equal to
the value of (i) any Bonus accrued but unpaid prior to
the date of termination, (ii) any vacation accrued but
unused prior to the date of termination, and (iii) any
stock options, restricted stock awards, stock
appreciation rights and any other similar Company
capital-stock based compensation award (whether vested
or not vested) that have been granted or awarded to the
Employee prior to the date of termination.
109
(b) "Change of Control" means (i) a Person acquires,
directly or indirectly, the beneficial ownership of 50%
or more of the issued and outstanding voting stock of
the Company in a single transaction or series of
transactions, (ii) the Company is a party to a merger,
consolidation or similar transaction and following such
transaction 50% or more of the issued and outstanding
voting securities of the Person surviving or emerging
from such transaction is beneficially owned by a Person
other than the Company or an Affiliate, (iii) the
Company sells or transfers all or substantially all of
its assets to another Person, other than an Affiliate of
the Company, (iv) the Company files for dissolution of
the Company, or (v) during any two-year period,
individuals who comprise a majority of the Board of
Directors of the Company (the "Board") at the beginning
of such two-year period do not comprise a majority of
the Board at the end of such two year period.
(c) "Good reason" means (i) the assignment to the Employee
of any duties inconsistent with his status as Chief
Operating Officer of the Company or a material adverse
alteration in the nature or status of his
responsibilities from those provided herein or the
transfer of a significant portion of such
responsibilities to one or more other Persons; (ii) the
failure by the Company to pay or provide to the
Employee, within 45 days of a written demand therefor,
any amount of compensation or any benefit which is due,
owing and payable pursuant to the terms hereof or of any
applicable plan, program, arrangement or policy; (iii)
the breach in any material respect by the Company of any
of its other obligations or agreements set forth herein
and the failure by the Company to cure such breach
within 45 days after written notice thereof from the
Employee; or (iv) the occurrence of a Change of Control.
(d) "Severance" means the sum of (i) the highest Base Salary
that was paid to the Employee at any time prior to
termination by the Employee for good reason, and (ii)
the average Bonus paid to the Employee during the period
immediately prior to termination by the Employee for
good reason, or if two years shall not have elapsed
prior to such termination, the Bonus paid to the
Employee, or which would have been paid to the Employee
pursuant to this Agreement but for such termination,
during the first full fiscal year of the Company during
the Employment Period.
(e) "Severance Benefits" means the benefits contemplated by
Sections 4.3 and 4.6(i) of this Agreement.
(f) "Severance Term" means the longer of (i) the remainder
of the Employment Period as if the Employee's employment
had not been
110
terminated and (ii) the six-month period following the
date of termination of employment hereunder.
7.4.2 At the election of the Employee for "good reason," the
Employee may terminate his employment immediately upon written
notice to the Company. If during the Employment Period the
Employee's employment is terminated by the Employee for good
reason, the Employee shall be entitled to receive from the
Company (i) Severance and Severance Benefits for each year
during the Severance Term and the Acceleration Payment and
(ii) in addition to the amounts described above, cash payments
in an amount sufficient to ensure that the amounts received
under this Section 7.4.2 as a result of a Change of Control
are not subject to net reductions due to the imposition of
excise taxes under Section 4999 of the Internal Revenue Code
of 1986, as amended.
7.4.3 Upon 45 days' prior written notice, the Employee may terminate
his employment with the Company other than for good reason. If
the Employee voluntarily terminates his employment with the
Company other than for good reason, no further payment shall
be due the Employee pursuant to Section 4 above (other than
payments for accrued and unpaid Base Salary and expenses
incurred but not repaid to the Employee, in each case prior to
such termination).
7.5 Effect of Termination on Certain Obligations. No termination of the
employment of the Employee, whether voluntary or involuntary, shall
terminate, affect or impair any of the obligations or rights of the
parties set forth in this Section 7, all of which obligations and
rights shall survive any termination of employment of the Employee
hereunder.
8. Indemnification. To the fullest extent permitted or required by the laws
of the State of New York, the Company shall indemnify and hold harmless
(including the advance payment of expenses) the Employee, in accordance
with the terms of such laws, if the Employee is made a party, or
threatened to be made a party, to any threatened, pending, or contemplated
suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that the Employee is or was an
officer or director of the Company or any subsidiary or Affiliate, against
expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with any such action, suit or proceeding. The Company's
obligations under this paragraph will survive the termination of this
Agreement for any reason whatsoever.
9. D&O Liability Insurance. During the Employment Period, the Company shall
maintain customary directors' and officers' liability insurance.
111
10. Assignment. This Agreement as it relates to the employment of the
Employee, is a personal contract and the rights and interests of the
Employee hereunder may not be sold, transferred, assigned, pledged or
hypothecated, except as otherwise set forth herein. This Agreement shall
inure to the benefit of and be binding upon the Company and its successors
and assigns, including without limitation, any Person into which the
Company is merged or which acquires all of the outstanding shares of the
Company's capital stock, or all or substantially all of the assets of the
Company; provided, however, that the Company shall not be released from
its obligations hereunder without the prior written consent of the
Employee, which consent shall not be unreasonably withheld.
11. Rights to Payments. Employee shall not under any circumstances have any
option or right to require payments hereunder otherwise than in accordance
with the terms hereof. To the extent permitted by law, and except as
otherwise provided herein, the Employee shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder,
and all rights and benefits of the Employee shall be for the sole personal
benefit of the Employee, and no other Person shall acquire right, title or
interest hereunder by reason of any sale, assignment, transfer, claim or
judgment or bankruptcy proceedings against the Employee.
12. Notices. Any notice or communications required or permitted hereunder
shall be in writing and shall be deemed effective (a) upon personal
delivery, if delivered by hand; (b) one day after the date of delivery by
Federal Express or other nationally recognized courier service that
provides a delivery receipt, if delivered by priority overnight delivery
between any two points within the United States; or (c) three (3) days
after deposit in the mails, if mailed by certified or registered mail
(return receipt requested) between any two points within the United States
and in each case of mailing, postage prepaid, addressed as follows: (i) if
to Employee, at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and (ii)
if to the Company at Twenty-One ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attn: President, or at such other address as any such party shall
designate by written notice to the other party.
13. Waiver. The waiver by either party of a breach of any provision of this
Agreement shall be effective only if in writing and shall not operate or
be construed as a waiver of any other breach of such provision or any
other provision of this Agreement.
14. Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and not in any way affect or render invalid or
unenforceable any provisions of this Agreement, and this Agreement shall
be carried out as if such invalid or unenforceable provisions were not
embodied therein.
15. Governing Law. This Agreement shall be governed by the laws of the State
of New York regardless of the laws that might be applicable under
conflicts of law.
16. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall
be an original but all
112
such counterparts together shall constitute one and the same instrument.
Each counterpart may consist of two copies hereof each signed by one of
the parties hereto.
17. Headings. The headings in this Agreement are for reference only and shall
not affect the interpretation of this Agreement.
18. Definition. "Person" includes any natural person, corporation, joint stock
company, limited liability company, partnership, joint venture,
unincorporated association, trust, government or any agency, authority or
instrumentality thereof, or any group of the foregoing acting in concert.
19. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and there are no
representations, warranties or commitments except as set forth herein.
This Agreement supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether written or oral, of
the parties hereto relating to the transactions contemplated by this
Agreement; provided, however, that it is the intention of the parties that
this Agreement shall be interpreted and applied in conjunction with the
terms of any option, warrant or other right now in existence or
hereinafter granted to the Employee to acquire shares of capital stock of
the Company. In the event of any conflict, however, the terms of this
Agreement shall govern and prevail. This Agreement may be amended only in
writing executed by the parties hereto affected by such amendment.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
EMPLOYER:
▇▇▇▇ DIGITAL TECHNOLOGIES, INC.
By:
------------------------------
Name:
Title:
EMPLOYEE:
------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
113
114
SCHEDULE 1
(A) The bonus payable in accordance with Section 4.2 of the Employment
Agreement to which this Schedule is attached (the "Agreement") with respect to
each of the fiscal years of the Company (as defined in the Agreement) during the
term of the Agreement shall equal, if the Company's earnings per share of Common
Stock, as stated on the Company's audited consolidated financial statements (the
"EPS") for such fiscal year equals or exceeds the Target EPS (as hereinafter
defined) for such fiscal year, $50,000 plus the product of (i) $10,000 and (ii)
the amount (in whole cents), if any, by which the EPS for such fiscal year
exceeds the Target EPS for such fiscal year. Any such bonus shall be paid,
subject to amounts required to be withheld under applicable law, in cash within
five (5) days after the completion of the audit of the Company's financial
statements for such fiscal year by the Company's independent auditors.
(B) The "Target EPS" for the Company's fiscal year ending December 31,
1998 is $.42, and shall be determined by the Company in consultation with the
Employee for each subsequent fiscal year during the term of this Agreement,
provided that, in the event of any merger, consolidation, capital
reorganization, stock split, combination of shares, stock dividend or other
recapitalization of the Company, the Target EPS shall be proportionately or
otherwise equitably adjusted.
115
Schedule 1.38
Excluded Assets
(i) All artwork (framed and unframed) on walls of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ location and the 4' x 5' cabinet (and contents thereof)
located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ location.
(ii) All personal objects, files and documents belonging to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and members of his family located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
(iii) The safe located in the Controller's office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
(iv) The Cash Component of the Purchase Price and any interest accrued thereon.
116
Schedule 1.54
Real Property Leases
See Schedule 1.29, Documents 1-13.
117
Schedule 1.65
▇▇▇▇ DIGITAL TECHNOLOGIES, INC.
SUBORDINATED PROMISSORY NOTE
$2,000,000.00 January 1, 1998
▇▇▇▇ DIGITAL TECHNOLOGIES, INC., a Delaware corporation with its principal
place of business at Twenty-One ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("MAKER"),
hereby promises to pay to MOONDANCE, INC., a New York corporation, at ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or its permitted assigns
("HOLDER"), or such other place as the HOLDER may from time to time designate in
writing, the principal amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00),
plus interest calculated on the unpaid principal balance hereof until this Note
is paid in full at a rate of seven percent (7%) per annum, based on a 365-day
year. All payments shall be made in lawful money of the United States of America
by wire transfer of immediately available funds to the account or accounts
designated by HOLDER or by check if such designation is not received one (1)
business day prior to the date a payment is due. Anything to the contrary herein
provided notwithstanding, the interest rate provided for herein shall not in any
event exceed that permitted by applicable law.
REPAYMENT - The principal amount of this Note shall be paid in 36 equal
monthly installments, together with interest accrued on the outstanding
principal amount, in accordance with the payment schedule annexed hereto, on the
1st day of each calendar month, commencing February 1, 1998 until January 1,
2001, when the entire amount due under this Note shall be paid in full.
This Note is being issued and delivered pursuant to an Asset Acquisition
Agreement dated as of January 1, 1998 among MAKER, HOLDER and certain other
parties (the "Agreement") and is subject to the provisions thereof, all of which
are incorporated by this reference herein.
The rights of MAKER under this Note and the payment and enforcement hereof
are subject to the provisions of a Subordination Agreement dated as of January
8, 1998, made by MAKER in favor of The Bank of New York, all of which are
incorporated by this reference herein.
MISCELLANEOUS - In case any payment herein provided for shall not be paid
when due, MAKER promises to pay all costs of collection, including all
reasonable attorneys' fees.
Subject to applicable securities laws, upon surrender of this Note for
transfer or exchange, a new Note or new Notes of the same tenor, dated the date
to which interest has been paid on the surrendered note and in the aggregate
principal amount equal to the unpaid principal amount of the Note so surrendered
will be issued to the transferee or transferees.
118
JURISDICTION - This Note shall be governed by and construed under the laws
of the State of New York. Any action brought to enforce this Note shall be
brought in the State of New York, and MAKER hereby consents to the personal
jurisdiction of the federal and state courts located in the State of New York,
and agrees that unless applicable law requires a different method, service of
process in any such action may be made by first class mail upon MAKER at its
address set forth in the beginning of this Note or at such other address as
MAKER shall advise HOLDER by written notice.
NOTICES - MAKER and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of non-payment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note. All notices required to be made hereunder shall be made and be
effective according to the notice provisions of the Agreement.
IN WITNESS WHEREOF, MAKER, by its duly authorized officer, has executed
and delivered this Note as of the date first set forth above.
▇▇▇▇ DIGITAL TECHNOLOGIES INC.
By:
------------------------------
▇▇▇▇ ▇▇▇▇
Chairman, Chief Executive Officer
119
================================================================================
Balance Before Balance After
Date Principal Interest Total Payment Payment Payment
--------------------------------------------------------------------------------
2/1/98 55,555.56 11,890.41 67,4456.97 2,000,000.00 1,944,444.44
--------------------------------------------------------------------------------
3/1/98 55,555.56 10,441.40 65,996.96 1,944.444.44 1,888,888.88
--------------------------------------------------------------------------------
4/1/98 55,555.56 11,229.83 66,785.39 1,888,888.88 1,833,333.32
--------------------------------------------------------------------------------
5/1/98 55,555.56 10,867.58 66,423.14 1,833,333.32 1,777,777.76
--------------------------------------------------------------------------------
6/1/98 55,555.56 10,899.54 66,455.10 1,777,777.76 1,722,222.20
--------------------------------------------------------------------------------
7/1/98 55,555.56 10,228.31 65,783.87 1,722,222.20 1,666,666.64
--------------------------------------------------------------------------------
8/1/98 55,555.56 10,238.96 65,794.52 1,666,666.64 1,611,111.08
--------------------------------------------------------------------------------
9/1/98 55,555.56 9,908.68 65.464.24 1,611,111.08 1,555,555.52
--------------------------------------------------------------------------------
10/1/98 55,555.56 9,269.41 64,824.97 1,555,555.52 1,499,999.96
--------------------------------------------------------------------------------
11/1/98 55,555.56 9,248.10 65,803.66 1,499,999.96 1,444,444.40
--------------------------------------------------------------------------------
12/1/98 55,555.56 8,630.14 64,185.70 1,444,444.40 1,388,888.84
--------------------------------------------------------------------------------
1/1/99 55,555.56 8,587.52 64,143.08 1,388,888.84 1,333,333.28
--------------------------------------------------------------------------------
2/1/99 55,555.56 8,257.23 63,812.79 1,333,333.28 1,277,777.72
--------------------------------------------------------------------------------
3/1/99 55,555.56 7,159.82 62,715.38 1,277,777.72 1,222,222.16
--------------------------------------------------------------------------------
4/1/99 55,555.56 7,596.65 63,152.21 1,222,222.16 1,166,666.60
--------------------------------------------------------------------------------
5/1/99 55,555.56 7,031.96 62,587.52 1,166,666.60 1,111,111.04
--------------------------------------------------------------------------------
6/1/99 55,555.56 6,936.07 62,491.63 1,111,111.04 1,055,555.48
--------------------------------------------------------------------------------
7/1/99 55,555.56 6,392.69 61,948.25 1,055,555.48 999,999.92
--------------------------------------------------------------------------------
8/1/99 55,555.56 6,275.49 61,831.05 999,999.92 944,444.36
--------------------------------------------------------------------------------
9/1/99 55,555.56 5,945.21 61,500.77 944,444.36 888,888.80
--------------------------------------------------------------------------------
10/1/99 55,555.56 5,433.79 60,989.35 888,888.80 833,333.24
--------------------------------------------------------------------------------
11/1/99 55,555.56 5,284.63 60,840.19 833.333.24 777,777.68
--------------------------------------------------------------------------------
12/1/99 55,555.56 4,794.52 60,350.08 777,777.68 722,222.12
--------------------------------------------------------------------------------
1/1/00 55,555.56 4,624.05 60,179.61 722,222.12 666,666.56
--------------------------------------------------------------------------------
2/1/00 55,555.56 4,293.76 59,849.32 666,666.56 611,111.00
--------------------------------------------------------------------------------
3/1/00 55,555.56 3,579.91 59,135.47 611,111.00 555,555.44
--------------------------------------------------------------------------------
4/1/00 55,555.56 3,633.18 59,188.74 555,555.44 499,999,88
--------------------------------------------------------------------------------
5/1/00 55,555.56 3,196.35 58,751.91 499,999.88 444,444.32
--------------------------------------------------------------------------------
120
================================================================================
Balance Before Balance After
Date Principal Interest Total Payment Payment Payment
--------------------------------------------------------------------------------
6/1/00 55,555.56 2,972.60 58,528.16 444,444.32 388,999.76
--------------------------------------------------------------------------------
7/1/00 55,555.56 2,557.08 58,112.64 388,888.76 333,333.20
--------------------------------------------------------------------------------
8/1/00 55,555.56 2,312.02 57,867.58 333,333.20 277,777.64
--------------------------------------------------------------------------------
9/1/00 55,555.56 1,981.73 57,537.29 277,777.64 222,222.08
--------------------------------------------------------------------------------
10/1/00 55,555.56 1,598.17 57,153.73 222,222.08 166,666.52
--------------------------------------------------------------------------------
11/1/00 55,555.56 1,321.16 56,876.72 166,666.52 111,110.96
--------------------------------------------------------------------------------
12/1/00 55,555.56 958.90 56,514.56 111,110.96 55,555.40
--------------------------------------------------------------------------------
1/1/01 55,555.56 660.58 56,215.98 55,555.40 (0.00)
================================================================================
121
Schedule 1.80
SUBORDINATION AGREEMENT
dated as of January 8, 1998 (this "Agreement")
between Speed Graphics, Inc., a New York corporation
("Creditor"), and The Bank of New York,
a New York banking corporation (the "Bank")
In order to induce the Bank at its discretion, to extend or to continue to
extend financial accommodations from time to time to or on account of, or in
reliance on the guaranty of, ▇▇▇▇ Digital Technologies, Inc., a Delaware
corporation, having offices at ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the
"Borrower"), up to such aggregate principal amount, with such maturity or
maturities, to bear such rate or rates of interest, to be unsecured or secured
by such collateral security, to be direct or indirect, absolute or contingent,
and to contain such other terms and provisions all as may be agreed upon from
time to time between the Bank and the Borrower, including, without limitation,
all obligations of the Borrower to the Bank under that certain Loan Agreement
dated as of January 8, 1998 among the Borrower, certain guarantors and the Bank,
as it may be amended or modified from time to time (the "Loan Agreement") (all
such financial accommodations and extensions of credit and all other
indebtedness, liabilities and obligations of every kind and nature of the
Borrower to the Bank, whether joint, several, or joint and several, direct or
indirect or acquired by assignment or otherwise, absolute or contingent, secured
or unsecured, now or hereafter existing or incurred, due or to become due,
including any indebtedness, liability or obligation arising after payment in
full of any prior indebtedness of the Borrower, together with all extensions,
renewals or modifications thereof, all of which being hereinafter collectively
referred to as the "Superior Indebtedness"), the undersigned, to whom the
Borrower is now indebted (hereinafter called the "Creditor", whether one or more
creditors executes this instrument) under the Note (as defined below), hereby
warrants and represents to and agrees with the Bank, and the Bank hereby agrees
with the Creditor, as follows:
As of the date hereof, the Borrower is indebted to the Creditor in the
principal amount of $2,000,000.00 represented by that certain Subordinated
Promissory Note made by Borrower dated January __, 1998 in the original
principal amount of $2,000,000.00 (the "Note").
The Note is not subject to any counterclaim, defense or offset of any
kind, and no part thereof has previously been assigned, incumbered or disposed
of by the Creditor. Except as disclosed to the Bank, the Note is not in default.
The Creditor hereby subordinates the payment of the principal, interest,
fees and all other amounts owing on the Note (all such principal, interest, fees
and other amounts being hereinafter collectively referred to as the
"Subordinated Indebtedness"), to the prior, final and irrevocable payment in
full of the principal, interest (including interest accruing after the
bankruptcy of Borrower), fees and all other amounts owing on the Superior
Indebtedness. Notwithstanding the subordination of the Subordinated
Indebtedness, the Bank agrees that the Borrower may make, and the Creditor may
accept, the regularly scheduled payments of principal and interest on the
Subordinated Indebtedness, provided (i) the Borrower remains in compliance
(before and after giving effect to the proposed payment on the Subordinated
Indebtedness) with the provisions of Section 5.03(b) (Fixed Charge Coverage
Ratio) of the Loan Agreement and (ii) no Event of Default (as defined in the
Loan Agreement) exists at the time of, or would result from, the proposed
payment on the Subordinated Indebtedness. The Borrower and the Creditor agree
that they will not amend, modify or change the principal amortization schedule
or the interest rate on the Subordinated Indebtedness without the express
written consent of the Bank.
In order to bring about and accomplish the intent and purpose of this
Subordination Agreement (hereinafter referred to as the "Agreement"), the
Creditor hereby agrees that until the Superior Indebtedness has been irrevocably
repaid in full, and until the Commitment (as defined in the Loan Agreement), or
any other commitment on the part of the Bank to lend to the Borrower, has
terminated, the Subordinated Indebtedness, any notes, instruments or other
writings evidencing
122
the Subordinated Indebtedness and any collateral security at any time held
therefor, will indicate by a notation thereon that they are subject to this
Agreement.
In furtherance of the foregoing, the Creditor hereby grants to the Bank
irrevocable authority in the name, place and stead of the Creditor or in the
Bank's name but for its use, at any time or times after an Event of Default
under the Loan Agreement, in the Bank's absolute discretion to demand, collect,
compromise, file proofs of claim with respect to, receive (by way of dividends
or otherwise) and take any and all legal proceedings for the recovery of any and
all moneys due or to become due on account of the Subordinated Indebtedness, and
to vote, give consents and take any other action with respect thereto. Any and
all moneys collected, received and retained by the Bank after first deducting
the expenses hereinafter authorized shall be applied on account of the
principal, interest, fees and any other amounts then outstanding on the Superior
Indebtedness, provided, however, that upon the payment to the Bank of moneys
collected, received and retained on account of Subordinated Indebtedness and on
account of Superior Indebtedness aggregating an amount equivalent to all
Superior Indebtedness, including principal, interest, fees, any other amounts
owing thereon and the expenses hereinafter authorized, the Bank shall pay over
to the Creditor the excess, if any, of all moneys so received, collected and
retained on the Subordinated Indebtedness and on the Superior Indebtedness over
the amounts due on the Superior Indebtedness and release the balance of the
Subordinated Indebtedness and Superior Indebtedness which is still unpaid, and
deliver to the Creditor any and all writings, without any warranties of any
nature or type whatsoever with respect thereto (endorsed to the Creditor without
recourse in the case of negotiable instruments) evidencing such Subordinated
Indebtedness and Superior Indebtedness. If the Bank receives written notice of
any claim or demand, whether reasonable or unreasonable, adverse to the rights
or interests, as hereinabove set forth, of the Creditor in respect of the
Subordinated Indebtedness, or any moneys received and held by the Bank pursuant
to this paragraph, the Bank shall be entitled to retain any and all such moneys,
and writings evidencing such Subordinated Indebtedness and Superior Indebtedness
without incurring any liability or debt to the Creditor, until the adjudication
or final settlement of the rights of such claimant, and the Creditor hereby
agrees to pay to the Bank on demand, all reasonable expenses, including
reasonable counsel fees, which the Bank may incur in enforcing any of its rights
hereunder.
The Creditor further agrees that so long as any Superior Indebtedness
remains unpaid, or as long as the Commitment, or any other commitment on the
part of the Bank to lend to the Borrower, has not terminated, and except as
otherwise expressly permitted by this Agreement, the Creditor will not accept
any payment (whether for principal, interest, fees or otherwise) on account of,
or any collateral security for, any Subordinated Indebtedness whether from the
Borrower or any other person liable with respect to the Subordinated
Indebtedness. After the occurrence of an Event of Default, in the event that the
Borrower or any other person liable with respect to the Subordinated
Indebtedness shall offer any payment on account of, or any collateral security
for, any Subordinated Indebtedness, the Creditor will direct that the same be
made or delivered to the Bank, and if any moneys and/or collateral security
shall come into the hands of the Creditor on account of any Subordinated
Indebtedness from any source whatsoever, the Creditor will receive the same
solely as the Bank's agent and will immediately turn the same, in the form
received, except for the endorsement of the Creditor when appropriate, over to
the Bank for application on account of the Superior Indebtedness, and that until
so delivered, the Creditor will hold the same in trust as the Bank's property.
After the occurrence of an Event of Default, if the Creditor shall fail or
refuse to endorse any writing for the payment of money payable to the Creditor
or to the order of the Creditor, which has been delivered to the Bank, the Bank
is hereby irrevocably constituted and appointed attorney-in-fact for the
Creditor with full power to make such endorsement.
The Creditor shall notify the Bank of any default in the Subordinated
Indebtedness (a "Subordinated Default Notice"). The Bank shall use its best
efforts to notify ("Senior Default Notice") the Creditor of the occurrence of
any Event of Default or any other default in the payment of any of the Superior
Indebtedness. Any failure by the Bank to so notify the Creditor shall not affect
the Bank's rights or the Creditor's obligations under this Agreement. The Bank
agrees to respond to any request made by the Creditor in writing (provided that
such a request is not made more than once during each calendar quarter) as to
whether an Event of Default has occurred under the Loan Agreement or whether any
payment default has occurred under any Superior Indebtedness. If any such Event
of Default or other payment default has occurred, the response of Bank with
regard to same shall be deemed a Senior Default Notice. The Creditor shall have
123
no right to exercise any rights and remedies against the Borrower to enforce or
collect upon the Subordinated Indebtedness, take possession of assets of the
Borrower or foreclose upon any such assets, whether by judicial action or
otherwise, unless and until all of the Senior Indebtedness shall have been fully
and finally paid and satisfied with interest and the Commitment, or any other
commitment on the part of the Bank to lend to the Borrower, terminated;
provided, however, that the Creditor shall be entitled, subject to the right of
the holder of the Senior Indebtedness to receive prior full and final payment in
accordance with the terms of this Subordination Agreement, to accelerate the
Subordinated Indebtedness upon expiration of the earlier of the following
periods (each such period, a "Standstill Period"):
(a) The Standstill Period commencing from and after receipt by the
Creditor of a Senior Default Notice and ending on the earlier of (x) the date on
which the Event of Default described in the Senior Default Notice shall have
been waived in writing by the Bank or (y) two hundred seventy (270) days after
the date the Senior Default Notice is so given.
(b) The Standstill Period commencing from and after receipt by the
Bank of a Subordinated Default Notice and ending on the earlier of (x) the date
on which such default described in the Subordinated Default Notice shall have
been cured or waived in writing by the Creditor or (y) two hundred seventy (270)
days after the date the Subordinated Default Notice is so given.
Notwithstanding anything to the contrary in this Agreement, no new Standstill
Period shall be effective unless and until (i) ninety (90) days have elapsed
since the last Standstill Period and (ii) all scheduled payments of principal
and interest on the Note that have come due have been paid in full in cash. No
default that existed or was continuing on the date of delivery of any Senior
Default Notice or Subordinated Default Notice shall be, or be made, the basis
for a subsequent Standstill Period unless such default shall have been waived
for a period of not less than ninety (90) days.
After all Superior Indebtedness is paid in full and until the Creditor is
paid in full, to the extent that holders of Superior Indebtedness have received
cash, securities or other property in respect of the repayment of Superior
Indebtedness, which cash, securities or other property, but for the operation of
this Agreement would have been paid to the Creditor, such Creditor shall be
subrogated to any rights of holders of Superior Indebtedness in collecting cash,
securities or other property in satisfaction of the obligations of the Borrower
to the Creditor hereunder and under the Notes.
If requested by the Bank, the Creditor shall (a) give the Bank, upon
request from time to time, and during reasonable business hours, full and free
access to the Creditors' books pertaining to the Subordinated Indebtedness, with
the right to make copies thereof, and (b) furnish the Bank, upon request from
time to time, a statement of the account between the Creditor and the Borrower
with respect to the Subordinated Indebtedness.
This Agreement is a continuing agreement and, unless the Bank shall have
specifically consented in writing to its revocation, shall remain in full force
in all respects whether or not the Borrower shall at any time be indebted to the
Bank until the earlier of (i) the repayment in full of the Superior Indebtedness
and the termination of the Commitment, or any other commitment on the part of
the Bank to lend to the Borrower or (ii) the repayment of the Subordinated
Indebtedness. If after the payment of principal, interest, fees and all other
amounts owing on all Superior Indebtedness and any expenses hereinafter
authorized and provided for, the Borrower shall thereafter become liable to the
Bank on account of any new Superior Indebtedness, this Agreement shall thereupon
be applicable in all respects to any such new Superior Indebtedness without the
necessity of any further action, notice, understanding or writing by, between or
among the Bank, the Creditor and/or the Borrower.
If, during the term of this Agreement, the Creditor receives any payment
(other than a payment of regularly scheduled principal or interest) on account
of or any collateral security for any Subordinated Indebtedness at a time when
there is no outstanding Superior Indebtedness, the Creditor shall immediately
notify the Bank in writing of the receipt thereof and such payment or collateral
security shall be subject to the terms of this Agreement. If the Creditor fails
to
124
notify the Bank, and a new Superior Indebtedness is thereafter created, and if
the Borrower defaults with respect to the payment of such new Superior
Indebtedness, in addition to and not in limitation of any other rights or
remedies available to the Bank hereunder, the Bank shall have the right to
receive and the Creditor will immediately pay to the Bank an amount equal to any
such payment or the value of any such security received by the Creditor and not
reported to the Bank.
Except as may otherwise be expressly required by this Agreement, with or
without notice to or further assent from the Creditor, the Bank may at any time
or times, in its absolute discretion, either prior to or after any default on
the part of the Borrower with respect to either the Subordinated Indebtedness or
the Superior Indebtedness: (i) extend, renew or change, refuse to extend, renew
or change any of the Superior Indebtedness, waive any default, modify, rescind
or waive any provision of any related agreement or collateral undertaking,
including, but not by way of limitation, any provision relating to acceleration
of maturity, (ii) fail to set off any deposit balances or any part thereof on
its books in favor of the Borrower and release the same, (iii) release,
exchange, fail to resort to, or realize upon, or apply, any collateral security
or any part thereof held by or available to it for the Superior Indebtedness,
and (iv) generally deal with the Borrower in such manner as the Bank may see
fit, all without impairing or affecting its rights and remedies under this
Agreement. Except as otherwise expressly provided in this Agreement, the
Creditor hereby waives any and all notice of the receipt and acceptance of this
Agreement by the Bank and of the creation, renewal, extension or accrual of any
of the Superior Indebtedness, present or future, in whole or in part, by the
Bank or of the reliance by the Bank on this Agreement at any time or times, and
further waives notice of any default at any time on the part of the Borrower.
The Creditor waives any right to interpose any defense, counterclaim or offset
with respect to the Superior Indebtedness or the Subordinated Indebtedness.
Nothing in this Subordination Agreement shall impair, as between the
Borrower and the Creditor, the obligations of the Borrower in respect of the
Subordinated Indebtedness, which are unconditional and absolute, to pay the
Creditor the principal and interest thereon and any other liabilities
encompassed within the Subordinated Indebtedness, all in accordance with their
respective terms.
This Agreement shall continue in full force and effect notwithstanding the
death or incapacity of the Creditor (if the Creditor is an individual) or the
dissolution of the Creditor (if the Creditor is a partnership or corporation)
and shall be binding on the Creditor and the Creditor's estate and the personal
representatives, heirs, successors and assigns of the Creditor and the Bank may
continue to act in reliance upon this Agreement until the earlier of the
repayment in full of the Superior Indebtedness or the Subordinated Indebtedness.
Notwithstanding anything herein to the contrary, nothing in this Agreement shall
prohibit, limit or restrict the ability of the Creditor or any shareholder or
affiliate of the Creditor to transfer the Note and the rights and obligations
hereunder to any of its shareholders or affiliates or, after any such transfer,
to the Creditor.
The Creditor agrees to pay to the Bank on demand all reasonable expenses,
including reasonable counsel fees, which it may incur in enforcing its rights
hereunder.
If this Agreement is executed by more than one Creditor, the liability and
obligations of the Creditor hereunder shall be joint and several.
All notices, requests and demands to or upon the respective parties hereto
shall be in writing and shall be deemed to have been duly given or made when
delivered by hand, or if sent by certified mail, three days after the day in
which mailed, or, in the case of telecopier, when evidence of receipt is
obtained, or, in the case of overnight courier service, one business day after
delivery to such courier service, addressed as set forth below, or to such other
address as may be hereafter notified by the respective parties hereto.
The Bank: The Bank of New York
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
125
Attention: ▇▇▇▇ Digital Technologies,
Inc. Account Officer
The Creditor Speed Graphics, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: President
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
The Creditor waives trial by jury, and the right to interpose any defense,
counterclaim or offset of any nature or description in any litigation arising
out of or in any way connected with this Agreement, and agrees that the venue of
any such litigation shall be the county in which is located the Bank's office
making the loan or Superior Indebtedness to the Borrower.
No delay on the Bank's part in exercising any right or rights hereunder or
in failing to exercise the same shall operate as a waiver of such right or
rights, and no notice to or demand on the Borrower or the Creditor shall be
deemed a waiver of the Bank's right to take further action without notice or
demand; nor in any event shall any modification, alteration or waiver of any of
the provisions hereof be effective unless in writing and signed for or on behalf
of the Bank and then only in the specific instance for which given.
This Agreement shall be deemed to be a contract made in the State of New
York and entered into under and pursuant to the laws of said State and shall be
governed, construed and enforced and all rights and obligations hereunder shall
be determined in accordance with the laws of said State.
Capitalized terms used but not defined herein shall have the meanings
given such terms in the Loan Agreement.
IN WITNESS WHEREOF, this Agreement has been executed by the Creditor and
the Bank on this 8th day of January, 1998.
SPEED GRAPHICS, INC.
By:
--------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Title: Vice President
▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ ) ss.:
On the 8th day of January, 1998, before me personally came
___________________, to me known, who, being by me duly sworn, did depose and
say that he maintains an office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇; that
he is the _____________ of Speed Graphics, Inc., the corporation described in
and which executed the foregoing instrument; and that he signed his name thereto
by order of the board of directors of said corporation.
--------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF NEW YORK ) ss.:
On the 8th day of January, 1998, before me personally came ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇▇, to me known, who, being by me duly sworn, did depose and say that
he maintains an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇; that he is a
Vice President of The Bank of New York, Inc., the banking corporation described
in and which executed the foregoing instrument; and that he signed his name
thereto by order of the board of directors of said banking corporation.
--------------------------
Notary Public
127
ACKNOWLEDGEMENT OF BORROWER
The undersigned, the Borrower referred to in the Subordination Agreement
and Assignment to which this Acknowledgment is annexed, hereby agrees to do and
perform all acts necessary to enable the Bank and the Creditor to fulfill all of
their obligations under the Agreement, and agrees to refrain from doing all acts
(including, but without limitation, making payments on the Subordinated
Indebtedness) which would cause Creditor or the Bank to violate such
obligations. Borrower further agrees that if any violation of this Agreement
shall occur, all of the obligations (including the Superior Indebtedness) of
Borrower to the Bank shall become immediately due and payable, any term,
covenant or condition contained in any other agreement or in the instrument
evidencing such obligations to the contrary notwithstanding.
Dated: January 8, 1998 ▇▇▇▇ DIGITAL TECHNOLOGIES, INC.
By
-------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: President
128
Schedule 3.2
Purchase Price Allocation
A portion of the Purchase Price, as adjusted pursuant to Section 3.3 of
the Asset Acquisition Agreement, that is equal to the Final Closing Book Value
(or such other fair market vlaue determined by Daily-▇▇▇▇▇▇▇ Appraisal Corp.)
shall be allocated to equipment and other tangible property that constitute the
Acquired Assets. The difference between (i) the Purchase Price, as adjusted
pursuant to Section 3.3 of the Asset Acquisition Agreement, and (ii) the Final
Closing Book Value shall be allocated to goodwill.
129
Schedule 4.2(ii)
[FORM OF OPINION]
January 9, 1998
▇▇▇▇ Digital Technologies, Inc.
▇▇▇▇ N.Y. Acquisition, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
We have acted as counsel to Speed Graphics, Inc., a New York corporation
("SGI"), DDP, Inc., a New York corporation ("DDP"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
("RK"), in connection with the negotiation, execution and delivery of, and the
transactions contemplated by, the (i) Asset Acquisition Agreement dated as of
January 1, 1998 (together with the disclosure schedules thereto, the
"Agreement"), among Speed, DDP, RK, ▇▇▇▇ Digital Technologies, Inc., a Delaware
corporation ("KDTI"), and ▇▇▇▇ N.Y. Acquisition, Inc., a Delaware corporation
("KDTI-NY"); (ii) ▇▇▇▇ of Sale dated as of January 1, ▇▇▇▇ (▇▇▇ "▇▇▇▇ ▇▇ ▇▇▇▇"),
▇▇▇▇ ▇▇▇ and DDP to KDTI-NY; (iii) Assignment and Assumption Agreement dated as
of January 1, 1998 (the "Assignment and Assumption Agreement"), among SGI, DDP,
KDTI and KDTI-NY; (iv) the Employment Agreement dated as of January 9, 1998 (the
"Employment Agreement"), between KDTI and RK; (v) the Assignment and Assumption
of Lease dated as of January 1, 1998 (the "45th Street Assignment"), between SGI
and KDTI-NY, relating to that certain lease dated as of June 22, 1995, between
575 Realties, Inc. and SGI; and (vi) the Assignment and Assumption of Lease
dated as of January 1, 1998 (the "342 Madison Assignment"), between SGI and
KDTI-NY, relating to that certain lease dated as of May 31, 1985, as amended,
between ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Associates Limited Partnership and SGI.
Capitalized terms used but not defined herein shall have the
respective meanings ascribed to such terms in the Agreement. The Agreement, ▇▇▇▇
of Sale, Assignment and Assumption Agreement, the ▇▇▇▇ ▇▇▇▇▇▇ Assignment and the
342 Madison Assignment, each a "Transaction Document," are hereinafter referred
to collectively as the "Transaction Documents." We are rendering this opinion to
you pursuant to Section 4.2(i) of the Agreement.
In rendering this opinion, we have examined executed counterparts of
the Transaction Documents, and we have assumed the due authorization, execution
and delivery thereof by, and the binding effect thereon as to, each party
thereto (other than SGI, DDP and RK) and that each party thereto (other than
SGI, DDP and RK) has performed all of such party's obligations thereunder and
has complied with all the requirements of law applicable to such party and the
Transaction Documents. When relevant facts were not independently established,
we also have examined and relied upon
130
▇▇▇▇ Digital Technologies, Inc.
▇▇▇▇ N.Y. Acquisition, Inc.
January 9, 1998
Page 45
(i) such corporate records and certificates of public officials or officers of
SGI, DDP and RK and other persons, as applicable, (ii) the representations and
warranties as to factual matters made in (or pursuant to) the Transaction
Documents and (iii) such additional documents, and made such further inquiries
and examinations, as we have deemed necessary to enable us to render the
opinions set forth herein. In our examination, we have assumed the genuineness
of all signatures (other than those of SGI, DDP and RK), the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. We also have assumed the
legal capacity and competency of all natural persons executing the documents
submitted to us.
Based upon and subject to the qualifications and assumptions set
forth herein, and having due regard for legal considerations we deem relevant,
we are of the opinion that:
1. Each of SGI and DDP is a corporation validly existing and in good
standing under the laws of the State of New York. Each of Speed and DDP has all
requisite corporate power and authority to (i) carry on its business as now
being conducted and to own, lease and operate its respective properties used in
connection therewith and (ii) to enter into and perform the Transaction
Documents and the transactions contemplated thereby.
2. The execution and delivery by each of SGI and DDP of the Transaction
Documents, the performance by each of SGI and DDP of its obligations thereunder,
and the transactions contemplated thereby, have been duly authorized by all
necessary corporate action on the part of SGI and DDP, respectively. Each of the
Transaction Documents has been duly executed and delivered by SGI and DDP,
respectively, and each constitutes the valid and binding obligation of each of
SGI and DDP, respectively, enforceable against each of SGI and DDP,
respectively, in accordance with its terms, except as such enforcement may be
subject to (i) bankruptcy, liquidation, conservation, dissolution, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) the effects of general
principles of equity (regardless of whether considered in a proceeding at equity
or at law), including, without limitation, (A) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and (B)
concepts of materiality, reasonableness, good faith and fair dealing.
3. RK has duly executed and delivered the Agreement and the Employment
Agreement, each of which constitutes his valid and binding obligation,
enforceable against him in accordance with its terms, except as such enforcement
may be subject to (i) bankruptcy, liquidation, conservation, dissolution,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the effects of general
principles of equity (regardless of whether considered in a proceeding at equity
or at law), including, without limitation, (A) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and (B)
concepts of materiality, reasonableness, good faith and fair dealing.
4. Except as disclosed in the Transaction Documents, the execution,
delivery and performance of the Transaction Documents by each of SGI and DDP
does not, and the consummation of the transactions contemplated thereby will
not, (i) violate, conflict with or result in the breach of any provision of the
certificate of incorporation or by-laws of
131
▇▇▇▇ Digital Technologies, Inc.
▇▇▇▇ N.Y. Acquisition, Inc.
January 9, 1998
Page ▇▇
▇▇▇ and DDP, respectively; (ii) violate, conflict with or result in the breach
or material modification of any of the terms of, or constitute (or with notice
or lapse of time or both constitute) a default under, or otherwise give any
other contracting party the right to accelerate or terminate, any Contract
included on Schedule 1.29 to the Agreement; (iii) violate any Order of any
Governmental Body known to us against, or binding upon, SGI or DDP or upon any
of their respective assets which violation could reasonably be expected to have
a Material Adverse Effect; or (iv) violate any statute, law or regulation of the
United States of America or the State of New York which violation could
reasonably be expected to have a Material Adverse Effect.
5. Except as disclosed in the Transaction Documents, the execution,
delivery and performance of the Agreement and the Employment Agreement by RK
does not, and the consummation of the transactions contemplated thereby will not
(i) violate, conflict with or result in the breach or material modification of
any of the terms of, or constitute (or with notice or lapse of time or both
constitute) a default under, or otherwise give any other contracting party the
right to accelerate or terminate, any Contract included on Schedule 1.29 to the
Agreement; (ii) violate any Order of any Governmental Body known to us against,
or binding upon, RK or upon his assets which violation could reasonably be
expected to have a Material Adverse Effect; or (iii) violate any statute, law or
regulation of the United States of America or the State of New York which
violation could reasonably be expected to have a Material Adverse Effect.
We express no opinion herein as to (i) the applicability to the
obligations of SGI, DDP or RK (or the enforceability thereof) of Section 548 of
the U.S. Bankruptcy Code or any other provision of law relating to fraudulent
transfers, conveyances and obligations, (ii) the securities or "blue sky" laws
of any State, (iii) the bulk sales or transfer laws of any jurisdiction or (iv)
the enforceability of Section 8.12 of the Agreement or Article VI of the
Employment Agreement.
The opinions expressed herein are qualified to the extent that the
validity, binding nature and enforceability against SGI, DDP and RK of the
Transaction Documents may be limited or otherwise affected by the
unenforceability under certain circumstances of provisions indemnifying, or
prospectively releasing, a party against liability for its own wrongful or
negligent acts or where a release or indemnification provision is contrary to
public policy.
We do not express an opinion herein concerning any law other than
the laws of the State of New York and the federal laws of the United States of
America.
References made in this letter to "knowledge" (or words of like
import) mean the actual knowledge, without any duty of inquiry, of those
partners, counsel and associates who have given substantive attention to the
Transaction Documents.
The opinions contained herein are limited to those matters expressly
covered by numbered paragraphs 1 through 5 above; no opinion is to be implied in
respect of any other matter. The opinions set forth in numbered paragraphs 1
through 5 are as of the date hereof and we disclaim any undertaking to update
this letter or otherwise advise
132
▇▇▇▇ Digital Technologies, Inc.
▇▇▇▇ N.Y. Acquisition, Inc.
January 9, 1998
Page 47
you as to any changes of law or fact which may hereafter be brought to our
attention. These opinions may not be relied on by any person or entity other
than you without our prior written consent.
Very truly yours,
▇▇▇▇▇▇ & ▇▇▇▇▇
Prepared by: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Reviewed by: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Signed by : ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
133
Schedule 4.3(iv)
January 9, 1998
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
Speed Graphics, Inc.
DDP, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Gentlemen:
We have acted as counsel to ▇▇▇▇ Digital Technologies, Inc., a Delaware
corporation ("KDTI"), and ▇▇▇▇ N.Y. Acquisition, Inc., a Delaware corporation
("KDTI-NY"), in connection with that certain Asset Acquisition Agreement dated
January 1, 1998, among Speed Graphics, Inc., a New York corporation, DDP, Inc.,
a New York corporation (Speed Graphics, Inc. and DDP, Inc. are collectively
referred to as "Speed"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇"), KDTI, and KDTI-NY,
governing the acquisition of the assets of Speed by KDTI-NY (the "Purchase
Agreement"). Capitalized terms used herein without definition shall have the
meanings set forth in the Purchase Agreement unless otherwise defined herein.
For purposes of rendering this opinion, we have examined and relied upon
originals or copies of the following documents and agreements (hereinafter
collectively referred to, together with all exhibits and schedules thereto, as
the "Transaction Documents"):
1. the Purchase Agreement;
2. the Promissory Note;
3. the Share Certificates;
4. the Employment Agreement dated January 9, 1998 between ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ and KDTI;
5. the Assignment and Assumption Agreement dated as of January 1, 1998,
among Speed and KDTI-NY;
6. the Assignment and Assumption of Lease dated as of January 1, 1998,
between Speed Graphics, Inc. and KDTI-NY, relating to that certain
Lease dated as of June 22, 1995, between 575 Realties, Inc. And
Speed Graphics, Inc.;
134
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
January 9, 1998
Page 49
7. the Assignment and Assumption of Lease dated as of January 1, 1998,
between Speed Graphics, Inc. and KDTI-NY, relating to that certain
Lease dated as of May 31, 1985, as amended, between ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Associates Limited Partnership and Speed Graphics, Inc.
We have also reviewed such other documents and made such other
investigations and examinations as to matters of law and fact as we have deemed
necessary in order to render the opinions expressed herein. As to matters of
fact, we have relied, without independent verification, upon Certificates of the
office of the Secretary of State of Delaware and of officers of KDTI and KDTI-NY
and upon the factual representations made by KDTI and KDTI-NY in the Purchase
Agreement.
This opinion letter is governed by, and shall be interpreted in accordance
with, the Legal Opinion Accord (the "Accord") of the ABA Section of Business Law
(1991). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations, all as
more particularly described in the Accord, and this Opinion Letter should be
read in conjunction therewith. The Law (as defined in the Accord) covered by the
opinions expressed herein is limited to the federal laws of the United States,
the State of New York and the General Corporation Law of Delaware. The opinions
set forth below are subject to the General Qualifications, as defined in the
Accord.
The opinions expressed herein are subject to the following specific
qualifications and assumptions:
(a) The opinions expressed herein are limited by and subject to the
effect of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws of general application from time to time in
effect affecting the enforcement of creditors' rights and remedies, and by
statutes, rules or procedures and applicable case law limiting the
availability of or prescribing procedural requirements for the exercise of
creditors' rights and remedies. We express no opinion as to the
availability of equitable relief, including, without limitation, specific
performance of any agreement or injunctive relief in any situation arising
out of the transactions to which the opinions expressed herein relate.
(b) We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as
copies, whether certified or not, and we have assumed that such documents
are valid and binding on all parties thereto.
(c) We have assumed that each party to any document or instrument
referred to in this opinion, other than KDTI and KDTI-NY, has all
requisite power and authority in the case of a corporation, and capacity,
in the case of an individual, and has taken all necessary action, to
execute and deliver the documents and instruments delivered by such party
and to consummate the transactions contemplated thereby, and that said
documents and instruments are binding on such party.
135
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
January 9, 1998
Page 50
(d) We have assumed that you and your counsel have communicated to
us all factual matters of which you or they have knowledge and which the
person having such knowledge knows, or reasonably should know, would
affect our opinion.
(e) In rendering our opinion in Paragraph 5 below, we have relied
upon the representations, warranties and covenants of Speed and ▇▇▇▇▇▇
contained in the Transaction Documents with respect to the Shares,
Additional Shares and the Promissory Note.
(f) The opinions expressed herein are qualified to the extent that
the validity, binding effect and enforceability against KDTI or KDTI-NY of
the Transaction Documents may be limited or otherwise affected by the
unenforceability under certain circumstances of provisions indemnifying,
or prospectively releasing, a party against liability for its own wrongful
or negligent acts or where a release or indemnification provision is
contrary to public policy.
References made in this letter to "knowledge" (or words of like import)
mean the actual knowledge, without any duty of inquiry, of those partners and
associates who have given substantive attention to the Transaction Documents.
This opinion is limited to the matters stated herein, and no opinion is to
be implied or may be inferred beyond the matters expressly stated.
Based on the foregoing, and subject to the qualifications, assumptions and
limitations stated herein, it is our opinion that:
1. KDTI and KDTI-NY is each a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
2. KDTI and KDTI-NY each has the corporate power and authority to (i)
carry on its business as now being conducted and to own, lease and operate its
respective properties used in connection therewith and (ii) to execute, deliver
and perform the Transaction Documents and the transactions contemplated thereby
and has duly authorized the execution, delivery and performance of the
Transaction Documents. Each of the Transaction Documents has been duly executed
and delivered by KDTI and KDTI-NY, and each of the Transaction Documents
constitutes the legal, valid and binding obligations of each of KDTI and
KDTI-NY, respectively, enforceable against each of KDTI and KDTI-NY in
accordance with its terms.
3. The execution, delivery and performance by KDTI and KDTI-NY of the
Transaction Documents to which each is a party will not: (i) violate, breach or
constitute a default under their respective Certificates of Incorporation or
By-Laws; (ii) violate any statute, law or regulation of the United States of
America, the State of New York or Delaware, (iii) to our knowledge, violate,
breach or constitute (or with notice or lapse of time or both constitute) a
default under or a material modification of any of the terms of any agreement to
which either is a party, which violation, breach or default would have a
material adverse effect on their ability to execute, deliver or perform the
Purchase Agreement and the Transaction Documents to which each
136
is a party; (iv) to our knowledge, violate any order, writ, judgment,
injunction, award or decree of any court, arbitrator or governmental or
regulatory body against, or binding upon KDTI or KDTI-NY or any of their
respective assets.
4. The issuance and delivery of the Shares, the Additional Shares, if any,
and the Promissory Note in accordance with the Purchase Agreement have been duly
authorized by all required corporate action of KDTI; and upon delivery in
accordance with the Purchase Agreement, the Shares and the Additional Shares, if
any, will have been validly issued, and be fully paid and non-assessable and, to
our knowledge, not subject to any liens, charges, restrictions, claims or
encumbrances other than those set forth in the Transaction Documents.
5. The offering, issuance and delivery to Speed Graphics, Inc. by KDTI of
the Promissory Note, the Shares and any Additional Shares are not, and will not
be, required to be registered under the Securities Act or any applicable Blue
Sky Laws.
No person except the addressees named herein may rely on this opinion for
any purpose. This opinion may not be disclosed to any other person or for any
purpose other than in connection with the transactions and documents referred to
herein and is not to be used, circulated, quoted or otherwise referred to
without the prior written consent of this firm. We assume no obligation to
advise the addressees of this opinion of any changes concerning the above,
whether or not deemed material, which may hereafter come or be brought to our
attention.
Very truly yours,
FEDER, KASZOVITZ, ISAACSON, WEBER,
▇▇▇▇▇ & BASS, LLP
By:
-----------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
A Member of the Firm
137
Schedule 6.2
Stockholders and Capitalization of Speed
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ owns 150 shares of common stock of Speed, which
represents all the issued and outstanding capital stock of Speed. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ owns 100 shares of common stock of DDP, Inc., which represents all
the issued and outstanding shares of capital stock of DDP, Inc.
138
Schedule 6.3.2
Absence of Adverse Changes
(i) The following employees were given salary increases since the Balance Sheet
Date:
Annual Salary
Employee Name @ 6/30/97 @ 12/31/97
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ [Omitted to maintain confidentiality and
filed separately with the Commission]
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(ii) Cledic vs. Speed - Speed settled this action for $15,000, pursuant to an
Agreement and Release dated December 8, 1997. $7,500 of the settlement was
paid to ▇▇. ▇▇▇▇▇▇ in December, 1997, and the remaining $7,500 is payable
in January, 1998.
(iii) During the month of November, 1997, and December, 1997, Speed made an
aggregate of $500,000 and $100,000, respectively, in distributions to its
sole shareholder, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
(iv) On behalf of Speed, Williamson, Picket, Gross, Inc. reviewed the leases at
Speed's ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ location to determine if there were any
adjustments or overbillings related to the facility leases. (A copy of
▇▇▇▇▇▇▇▇▇▇, Picket's report is attached to this Schedule 6.3.2 as Annex
A-1). Based upon ▇▇▇▇▇▇▇▇▇▇ Picket's analysis, Speed believes it has made
overpayments related to ▇▇▇▇▇▇'▇ wages and similar items of approximately
$120,000. ▇▇▇▇▇▇▇▇▇▇ Picket reviewed its findings with the landlord, which
agreed that overpayments had in fact occurred. However, the landlord has
not refunded any of the overpayments to Speed. Accordingly, Speed reduced
its December 1997 rental payment by $50,000. A copy of the letter
accompanying that payment is attached to this Schedule 6.3.2 as Annex A-2.
The management agent for the Madison Avenue location has agreed to settle
the dispute described above for $75,000 (as evidenced in the letter
attached as Annex A-3 to this Schedule 6.3.2), $50,000 of which is
comprised of the December 1997 rental payment reduction described above
and $25,000 of which will be applied as a reduction towards future rent
escalations. A letter embodying this settlement arrangement is expected
after the Closing.
(v) Fleet Bank has waived (copy attached as Annex B to this Schedule 6.3.2. )
certain restrictions in the Credit Agreement with respect to distributions
to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ above a certain level.
139
(vi) Speed entered into the following equipment financing arrangements since
the Balance Sheet Date:
TOTAL AMOUNT
OF PAYMENTS MONTHLY FINAL EQUIPMENT
LEASEHOLDER DUE PAYMENT PAYMENT DESCRIPTION
STERLING NATIONAL(1) $87,912.00 $2,442.00 AUG 2000 CLC 1000
WASCO FUNDING CORP $51,300.00 $1,425.00 JUL 2000 COLORPASS 8000
WASCO FUNDING CORP $162,396.00 $4,511.00 JUN 2000 CONTEX RIP N STRIP
WASCO FUNDING CORP $49,572.00 $1,377.00 JUN 2000 ADP 8800
(vii) On November 28, 1997, Speed entered into a one-year employment contract
with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, a MAC Technician. A copy of this Agreement
previously has been provided to Purchaser, but has not yet been signed by
▇▇. ▇▇▇▇▇▇.
(viii) [Omitted to maintain confidentiality and filed seperately with the
Commission.]
(ix) [Omitted to maintain confidentiality and filed seperately with the
Commission.]
(x) Speed had a change in an estimate related to the useful life of its
printing presses. The life was changed from a standard MACRS life to an
10-year straight-line life. Additionally, Speed Graphics, Inc. changed
the method of accounting for one of its Heidelberg Quickmaster leases
from an operating to a capital lease.
(xi) Speed entered into a Letter of Intent dated September 16, 1997 to be
acquired by Purchaser.
(xii) Since the Balance Sheet Date, Speed has repaid an aggregate of $1,400,000
under the Credit Agreement.
----------
(1) This lease was originally between Speed and Gramercy Leasing Services,
Inc., dated as of April 24, 1997, and assigned to Sterling National after
the Balance Sheet Date. See Document 71 on Schedule 1.29.
140
Annex A-1 to Schedule 6.3.2
[▇▇▇▇▇▇▇▇▇▇ PICKET, GROSS, INC. Letterhead]
SPEED GRAPHICS LEASE AUDIT
ITEMS IN DISPUTE REASONING
Fire Safety Director Total amount payable for the entire building
is $500. Assuming 2080 hours worked, cost
would be .24 not .6154. However, this fringe
benefit should not be included at all
because the Fire Safety Director is usually
the Chief Engineer, Handiman or ▇▇▇▇▇▇ but
not "Other" Classification which is basis
for ▇▇▇▇▇▇'▇ Wage Calculation.
Relief Time We are calculating all time based upon
2080 hours. If an individual is relieved
there is not an extra individual "Other"
personnel replacing them.
Mandatory Overtime There is no mention in the union
contract of Mandatory Overtime.
Disability/Workers Compensation Have requested back-up for these
computations and have not received it. We do
not believe their explanation.
Vacation Time Calculations include four weeks instead of
two weeks.
Suite 260 Being charged on a ▇▇▇▇▇ and a half per
▇▇▇▇▇ increase when the formula should be
▇▇▇▇▇ for ▇▇▇▇▇.
Miscellaneous Benefits, including vacation, birthday,
social security, workmen's compensation and
pension are not consistent from lease to
lease for the same escalation year and in
many instances are miscalculated to begin
with.
141
Annex A-2 to Schedule 6.3
[SPEED GRAPHICS Letterhead]
December 2, 1997
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Odin Management, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇▇▇:
As you know, it is our contention that we have been grossly overcharged in our
lease at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇. Over the last two years, we have tried to work
with your managing agent to come up with an equitable solution. This, however,
has proved to be a waste of time. Even when mistakes were admitted new mistaken
interpretations were added to offset the original errors.
Left with no other choice, please be advised that we will be paying December's
rent less $50,000 which is less than one half of the amount which has been
overcharged us. The reason that we have not deducted the entire overpayment or
paid the rent to escrow is to show our good faith and to encourage you to help
us resolve this matter as quickly as possible. If we do not have a resolution of
this matter before year-end, we will pay the next monthly payment to escrow
until such time as this matter can be resolved. In the meantime. I am still open
to trying to settle this matter so we can potentially avoid what will
undoubtedly be an unnecessarily unpleasant experience for everyone.
Please, we ask you to look into this matter immediately.
Thank you for your time and consideration
Very truly yours,
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Executive Vice President
Chief Financial Officer
cc: ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, file
142
Annex A-3 to Schedule 6.3.2
[INSIGNIA/ESG Letterhead]
Friday, January 09, 1998
▇▇. ▇▇▇ ▇▇▇▇
Speed Graphics, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Dear ▇▇▇:
This letter will confirm our understanding in connection with the Porters Wage
Escalations charged to Speed Graphics at the building above referenced.
1. Both parties agree that the Landlord will credit Speed Graphics $75,000
2. This credit will be against monthly escalation charges until the full amount
of the credit is reached.
3. The Porters Wage Escalation will be adjusted as of January, 1998 to reflect
the changes in the formulations of the charges going forward. An outline of
these changes will be forwarded under a separate cover.
4. In exchange for this agreement, Speed Graphics, will release the Landlord
from any past or future claims with respect to the Porters Wage Escalation.
The above agreement will be contingent upon the execution, by both parties, of
an agreement satisfactory in both form and substance to the Landlord.
Sincerely,
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Managing Director
143
Annex B to Schedule 6.3.2
[FLEET Letterhead]
November 26, 1997
Speedgraphics, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ Krivoshiew
Reference is made to a letter dated August 11, 1997 between Speedgraphics, Inc.
(the "Company") and Fleet Bank, NA (the "Bank") in which the Company's line of
credit with the Bank is described (the "Letter Agreement"). The Company has
requested and the Bank hereby agrees to amend the terms of the Letter Agreement
as follows:
Section 7(d) of the Letter Agreement is hereby amended for the 1997 Fiscal Year
end to waive the Company's maximum dividends covenant. On a going forward basis,
all terms and conditions of the referenced Section shall remain in full force
and effect.
All Capitalized terms used herein, unless otherwise defined herein, shall have
the same meanings provided therefor in the Letter Agreement.
Except as expressly amended by this letter, all of the terms and conditions
contained in the Letter Agreement shall continue in full force and affect, and
payment of the obligations thereunder shall continue to be secured by the
collateral referred to herein.
Sincerely,
Fleet Bank, NA
By: /S/
-----------------------------
Name: Judah Zweiter
Title: Assistant Vice President
Agreed and Accepted:
Speedgraphics, Inc.
By: /s/
-----------------------------
Name: ▇▇▇ Krivoshiew
Title: President
By: /s/
-----------------------------
Name: ▇▇▇ Krivoshiew
Guarantor
By: /s/
-----------------------------
Name: ▇▇▇ Krivoshiew
144
Title: President, DDP, Inc.
Corporate Guarantor
145
Schedule 6.4
Location of Books and Records
(i) The minute books of Speed do not contain a complete record of all
stockholder and/or board of directors resolutions for the period prior to
the Closing Date.
(ii) Speed's books and records are located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇.
146
Schedule 6.5.1
Condition of Leased Premises
(i) Structural alterations have been made to the leased premises with the
landlord's consent. However, the landlord may require that such premises
be restored to original condition at the end of the lease. Speed has
already been notified (See Annex A to this Schedule 6.5.1) of this
possibility with respect to the ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ location. $15,000 are
reflected on the Balance Sheet Date Balance Sheet as an accrual for any
costs associated with such restoration. Speed shall indemnify KDTI for any
expenses in excess of $15,000 in accordance with the terms of the AAA.
(ii) See Schedule 6.3.2(iv).
147
Annex A to Schedule 6.5.1
December 2, 1997
Certified Z ▇▇▇-▇▇▇-▇▇▇
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
President
Speed Graphics, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Basement Lease - Speed Graphics, Inc.
Dear ▇▇. ▇▇▇▇▇▇▇▇▇▇:
This letter is to inform you that the lease for the basement space will expire
on December 31, 1997. Our recent inspection indicated that the space still
contains some materials. The lease requires the premises to be left in "broom
clean" condition. We noted that the ▇▇▇▇▇▇▇▇▇ rail is missing from the staircase
leading to the street. This is an important safety item that has to be replaced.
The offices constructed by your company have not been demolished and removed as
required under the lease. We are willing to leave the offices in present
condition at this time subject to a new tenant accepting these offices. We will
notify you as soon as we obtain a new tenant and advise you of the decision to
remove the offices or let them remain "as is." Please notify us whether the
offer is acceptable, otherwise you will be required to remove the offices by the
end of December, 1997.
Please communicate with me should you have any questions.
Very truly yours,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President
148
[SPEED GRAPHICS Letterhead]
December 24, 1997
Via Fax ▇▇▇-▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Executive Vice President
▇▇▇▇▇▇▇ Management Corp.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇▇:
Sorry for any miscommunication related to your letter dated December 2, 1997
regarding the terminating lease for the space at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
(Basement).
As you are aware, we have already replaced the ▇▇▇▇▇▇▇▇▇ rail noted in the
letter.
Additionally, we thank you for your consideration related to leaving the offices
constructed by Scotch Screen and later assumed by Speed Graphics, Inc. in tact
until such time as you have a new tenant for that space. We agree that, if your
next tenant does not accept these offices, we will remove the offices noted in
your letter at our cost.
However, should your new tenant decide not to accept these offices, we must be
allowed to either contract directly or approve of another contractor to perform
the demolition and removal of the offices noted.
Thank you again for your time and consideration.
Very truly yours,
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Executive Vice President
Chief Financial Officer
cc: ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
149
Schedule 6.5.2
Title to Assets; Encumbrances
See Schedule 1.29, Documents 14-90.
150
Schedule 6.5.3
Machinery and Equipment; Encumbrances
(i) There are unpaid late charges under a number of the equipment leases
aggregating approximately $7,000. These amounts have been accrued on the
Balance Sheet Date Balance Sheet.
(ii) A list of equipment which has been moved from ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ to ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ is attached as Annex A to this Schedule.
151
Annex A to Schedule 6.5.3
SPEED GRAPHICS, INC.
List of Assets moved from 342 Madison to ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
===============================================================================================
Description Believed Lessor Speed Lease Number
-----------------------------------------------------------------------------------------------
Select-Set 7000 with Cobra RIP EKCC #154
-----------------------------------------------------------------------------------------------
Stausser Frame Researching
-----------------------------------------------------------------------------------------------
Kodak 700 Processor Researching Believed to be EKCC
-----------------------------------------------------------------------------------------------
Iris 4012, Iris 3024, (2) Iris 3047's GECC and EAB ▇▇▇▇-#▇▇▇ & #▇▇▇,
▇▇▇▇-▇▇▇ #▇▇▇
-----------------------------------------------------------------------------------------------
PS-2 (for Iris's) General Electric Credit Corp. #166
-----------------------------------------------------------------------------------------------
VO Whisper (for Iris) General Electric Credit Corp. #166
-----------------------------------------------------------------------------------------------
(10) MAC 950 Quadra's Misc. Various Leases Primarily attached to
eq. Moved
-----------------------------------------------------------------------------------------------
Photo CD (PCD 225) European American Bank #167
-----------------------------------------------------------------------------------------------
Horizon Flatbed Scanner EKCC #154
-----------------------------------------------------------------------------------------------
Kodak Contact Frame Researching Believed to be EKCC
-----------------------------------------------------------------------------------------------
MAC Workgroup Server 95 Researching
===============================================================================================
152
Schedule 6.6
Contracts
(i) See Schedule 1.29
(ii) See Schedule 6.3.2.(iv) and (v)
(iii) See Schedule 6.5.3.
(iv) All of Speed's employees have been requested to enter into a
confidentiality agreement in the form attached as Annex A to this Schedule
6.6.
(v) See Schedule 6.19.
153
Annex A to Schedule 6.6
CONFIDENTIALITY AGREEMENT
I hereby acknowledge that during the course of my employment I may
be exposed to confidential or proprietary information which is the exclusive
property of SPEED GRAPHICS, INC. (the "Company"). I agree that I will not
disclose such information to third persons without first having obtained written
permission from the Company. This requirement is not limited in time to the
duration of my employment but extends after my employment, irrespective of the
reason for its termination.
Confidential information, as used in this agreement, includes any
technical, economic, financial, marketing or other information which is not
common knowledge among, or readily available to, competitors or other companies
who may like to possess such confidential information or may find it useful.
Some examples of confidential information in our business might be items in
research or development, scientific studies or analyses, details of training
methods, new products or new uses for old products, merchandising and selling
techniques, customer lists, contracts and licenses, purchasing, accounting,
business systems and computer programs, long-range planning, financial plans and
results, etc. This list is merely illustrative and confidential information is
not limited to these illustrations.
I further agree that all proprietary or confidential information
that I develop during or as a result of my employment will become property of
the Company unless a written release is given to me by the Company.
I acknowledge that this agreement is not intended and does not
constitute a contract between me and the Company limiting the right of either of
us to terminate my employment by the Company at any time, for any reason, with
or without cause.
Dated:
---------------------- ---------------------------------------
Signature of Employee
154
Schedule 6.7
Litigation
See Schedule 6.8(ii).
155
Schedule 6.8
Taxes
(i) In the past, some of Speed's Tax Returns have been filed after the
required filing dates.
(ii) There is a regular interval audit pending by the New York State Department
of Labor (See letter attached as Annex A to this Schedule 6.8.)
156
Annex A to Schedule 6.8
[STATE OF NEW YORK, DEPARTMENT OF LABOR Letterhead]
December 5, 1997
Re: ER# 73-08940 7
Speed Graphics, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Controller
Dear Employer:
It is our policy to verify, at regular intervals, the reports submitted to us by
employers. Authorization for such audits is contained in section 575 of the New
York State Unemployment Insurance Law.
Your account has been scheduled for an audit.
To facilitate the audit and assure completion, copies of the following records
for the year ending December 1996 should be made available at the entrance
conference.
1. General description of payroll and vendor transaction files.
2. Quarterly Social Security tax reports (Form 941).
3. Federal Unemployment Insurance tax reports (Form 940).
4. Quarterly NYS Unemployment Insurance tax reports (Form IA 5).
5. General ledger chart of accounts.
6. Return of Tip Income and Allocated Tips (Form 8027), if applicable.
7. Third Party Sick pay reporting with evidence of NYSUI reporting.
8. Annual report to Stockholders and Employee handbook.
9. Any other records pertaining to payments for services.
Due to the size of your organization, the audit will be conducted using the
appropriate software. It is therefore requested that you complete the attached
questionnaire, with the assistance of a member of your EDP staff, indicating the
most convenient date, within the next twenty days for an entrance conference,
and return in the self-addressed envelope. The appointment will be confirmed by
the undersigned.
We suggest that representatives of the controller's office, EDP unit, personnel
department, payroll department and corporate counsel be present at the meeting
to answer any relevant New York State Unemployment Insurance tax issues which
may be raised, and to acquaint us with your operations and hiring practices.
Sincerely,
/s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
U.I. Tax Auditor
157
Attachment A
Computer Questionnaire
Employer Name: Speed Graphics, Inc.
ER#: 73-08940 7
What date is convenient for an entrance conference? [January 15, 1998]
Our examination of your records may include the application of our software,
either on your system or ours.
1. Which of the following records are computer generated?
a. General Ledger [x]
b. Year end vendor master file [x]
c. Federal 1099 file ___
d. Year end payroll master file [from ADP]
e. Federal W-2 file [from ADP]
f. Payroll transaction file [from ADP]
g. Vendor transaction file [x]
2. What payroll system do you use [ADP]
3. What accounts payable system do you use? [SBT Accounting Systems]
4. If you engage the services of an outside computer service to
generate your records, please complete the following:
a. Name of Service Company [ADP]
b. Address of Service Company ___
c. Type of records generated [payroll, w-2, and related information]
Indicate contact person(s) such as Payroll, MIS, or Accounts Payable
Name: [ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ] Title: [Accounting] Phone: [212] ▇▇▇-▇▇▇▇]
Name: [ Krisna Basbew ] Title: [Payroll] Phone: [212] ▇▇▇-▇▇▇▇]
Name: [ ▇▇▇▇▇▇ ▇▇▇▇ ] Title: [CFO] Phone: [212] ▇▇▇-▇▇▇▇]
Place where books and records will be available: [342 Madison Avenue, 4th
Floor, NYC, NY
Remarks: [We have been preparing for an acquisition of Speed Graphics by ▇▇▇▇
Digital Technologies and have not been able to determine a
convenient day because of workload and lack of sufficient staff
personnel to accommodate the required support.]
158
Schedule 6.9
Liabilities
Note Payable - Fleet Bank 500,900
Construction Loan - ▇▇▇▇ ▇▇▇▇▇▇ 298,100
Capital Leases (see itemized list attached as Annex
A to this Schedule 6.9): 2,497,100
Total Future Payments 327,400
---------
Interest included in Future Payments 2,169,700
---------
Total Capital Lease Payable
Total Speed Graphics, Inc. Borrowing 2,968,700
DDP, Inc. - Note in connection with Item 75 on 320,800
Schedule 1.29 ---------
Total Speed and DDP Combined Borrowings 3,289,500
=========
159
Annex A to Schedule 6.9
SPEED GRAPHICS, INC.
Analysis of Capital Lease Balances @ 12/31/97
================================================================================
Ref. Lessor-Name Lease Monthly Balance
No. Term Payment 12/31/97
--------------------------------------------------------------------------------
148 ▇▇▇▇▇▇ Capital Corporation 1/93-10/97 $ 3,569.00 $ 0
--------------------------------------------------------------------------------
153 ▇▇▇▇▇▇▇ Kodak Credit Corp* 6/93-3/98 $ 4,033.08 $ 4,033
--------------------------------------------------------------------------------
154 ▇▇▇▇▇▇▇ Kodak Credit Corp* 11/93-8/98 $ 15,064.00 $ 30,128
--------------------------------------------------------------------------------
162 Canon Financial Services, Inc.** 1/95-12/97 $ 2,351.70 ($ 0)
--------------------------------------------------------------------------------
163 European American Bank 10/94-9/98 $ 6,633.00 $ 59,697
--------------------------------------------------------------------------------
164 Canon Financial Services, Inc.** 2/95-1/98 $ 1,201.20 $ 0
--------------------------------------------------------------------------------
165 Canon Financial Services, Inc.** 3/95-2/98 $ 1,170.00 $ 1,170
--------------------------------------------------------------------------------
167 European American Bank 6/95-5/99 $ 17,230.00 $ 292,910
--------------------------------------------------------------------------------
169 Gramercy Leasing Services 8/95-6/98 $ 2,312.00 $ 13,872
--------------------------------------------------------------------------------
177 The CIT Group 2/96-1/01 $ 7,129.00 $ 263,773
--------------------------------------------------------------------------------
179 Colonial Pacific Leasing** 4/96-3/00 $ 4,484.54 $ 116,598
--------------------------------------------------------------------------------
180 European American Bank 6/96-5/00 $ 6,414.00 $ 186,006
--------------------------------------------------------------------------------
181 Sterling National Bank 6/96-4/99 $ 3,324.00 $ 53,184
--------------------------------------------------------------------------------
184 Phoenixcor Inc.*** 11/96-9/2001 $ 9,130.00 $ 410,850
--------------------------------------------------------------------------------
185 Summit Leasing Corp. 11/96-9/2000 $ 10,325.00 $ 340,725
--------------------------------------------------------------------------------
183 Summit Leasing Corp. 11/96 - 2003 $ 6,108.49 $ 427,595
--------------------------------------------------------------------------------
200 Gramercy/Wasco Lease 8/97 - 7/2000 $ 2,442.00 $ 75,702
--------------------------------------------------------------------------------
210-1 Gramercy/Wasco Lease 8/97 - 7/2000 $ 1,425.00 $ 44,175
--------------------------------------------------------------------------------
210-2 Gramercy/Wasco Lease 7/97 - 6/2000 $ 1,377.00 $ 41,310
--------------------------------------------------------------------------------
210-3 Gramercy/Wasco Lease 7/97 - 6/2000 $ 4,511.00 $ 135,330
--------------------------------------------------------------------------------
XXX TOTAL CAPITAL LEASES $110,234.00 $2,497,058
--------------------------------------------------------------------------------
XXX DEFERRED INTEREST AMOUNT (327,357)
--------------------------------------------------------------------------------
XXX NET CAPITAL LEASES $2,169,701
================================================================================
* Quarterly Payments-5 year term
** Checks cut and mailed one month in advance of due date.
160
Schedule 6.10
Intellectual Property
Speed has been using the service ▇▇▇▇ "Speed Graphics" since July 1, 1978.
Speed has registered the service ▇▇▇▇ "Speed Graphics" in New York State
(Registration No. 511,271).
Speed filed an application to register the service ▇▇▇▇ "Speed Graphics" with
the U.S. Patent and Trademark Office on July 25, 1988 (Serial No. 73-742,220),
but abandoned such application.
161
Schedule 6.13
Insurance
=============================================================================================================================
AMOUNT OR TERM IN POLICY
COVERAGE LIMITS YEARS EXPIRES COMPANY NUMBER PREMIUM
-----------------------------------------------------------------------------------------------------------------------------
5. MASTER PACKAGE* 01 05/01/98 ▇▇▇▇▇▇ INS. TPK03746403 $17,367
Loc #1 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Contents $ 950,000
Business $ 1,340,000*
▇▇▇ #▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
Contents $ 250,000
Business Income $ 660,000
Comprehensive General
Liability 1MM/2MM
Loc #▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ #▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ #▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
6. COMPUTER & All Risk 01 05/12/98 ▇▇▇▇▇▇ INS. 3AT60528902 $19,212
TELEPHONE FLOATER & Per
NEGATIVE FILM Schedule
FLOATER & MASTER
EQUIPMENT FLOATER
7. WORKERS
COMPENSATION Statutory 01 05/31/98 ▇▇▇▇▇▇ INS. 3CE577981 $61,007
Audit 01 [05/31/97] 3CE577981 $ 7,290
8. UMBRELLA POLICY 2MM/2MM 01 05/12/98 ▇▇▇▇▇▇ INS. 3SB01087105 $ 3,607
9. AUTOMOBILE POLICY $1,000,000 01 05/12/98 ▇▇▇▇▇▇ INS. E3H00296203 $11,702
(Scheduled Autos)
Hired & Non-Owned
10. DISABILITY BENEFITS Statutory 01 07/01/97 NATIONAL 1565510 Based on
PAYROLL BENEFITS Payroll
TBD
11. NYS DISABILITY Statutory NATIONAL 0152110
BENEFITS BENEFITS
12. PENSION BOND $ 200,000 03 06/02/99 ▇▇▇▇▇▇ INS. 3F192369 $378
===========================================================================
COVERAGE COMMENTS
---------------------------------------------------------------------------
5. MASTER PACKAGE* Special Forms, Includes Water Damage,
Loc #1 ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and Employee Benefits Liability,
Contents Additional Insureds, Landlords
Business
* Based on last year's Business
Loc #2 ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Income Work
Contents
Business Income
Comprehensive General
Liability
Sales $20M
Loc #▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ #▇ ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ #▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
6. COMPUTER & All Risk Including
TELEPHONE FLOATER & Theft & Flood
NEGATIVE FILM
FLOATER & MASTER
EQUIPMENT FLOATER
7. WORKERS
COMPENSATION Based on 9.2M Payroll
8. UMBRELLA POLICY
9. AUTOMOBILE POLICY
(Scheduled Autos)
Hired & Non- Owned
10. DISABILITY BENEFITS
PAYROLL
11. NYS DISABILITY
BENEFITS
12. PENSION BOND
162
=============================================================================================================================
AMOUNT OR TERM IN POLICY
COVERAGE LIMITS YEARS EXPIRES COMPANY NUMBER PREMIUM
--------------------------------------------------------------------------------------------------------------- -------------
13. Medical Benefit Plan Oxford Freedom SG086 Annually by
Plan schedule
14. Life & AD&D Ins. $15,000-$50,000 Phoenix Home 057-0000D Based on
Life ▇▇▇-▇▇▇▇-▇▇ Payroll
=============================================================================================================================
===========================================================================
COVERAGE COMMENTS
---------------------------------------------------------------------------
13. Medical Benefit Plan Depends on whether the employee
takes single or family coverage
14. Life & AD&D Ins.
===========================================================================
163
Schedule 6.14
Suppliers and Customers
(i) Ten largest suppliers:
[Omitted to maintain confidentiality and filed separately with the Commission]
(ii) Ten largest customers:
[Omitted to maintain confidentiality and filed separately with the Commission]
164
Schedule 6.15
Employment Relations
(i) Since the announcement of the transactions contemplated by the Asset
Acquisition Agreement, the following employees have resigned from Speed:
NAME EFFECTIVE DATE POSITION
---- -------------- --------
[Omitted to maintain confidentiality and filed separately with the Commission]
165
Schedule 6.16
Personnel
(i) See Annex A to this Schedule 6.16 for a list of employees, sales agents,
sales representatives and compensation.
(ii) Speed is required to make the following payments for severance to the
individuals described below:
Nature of
Name Amount Payment
---- ------ -------
[Omitted to maintain confidentiality and filed Severance
separately with the Commission] Severance
(iii) Speed is required to make payments for accrued vacation pay and sick leave
as set forth on Annex A to Schedule 1.3.
(iv) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, a Speed employee, owes $500 to Speed in connection with
an employee loan previously made by Speed to ▇▇. ▇▇▇▇▇▇.
(v) See Items 96-98, 101 and 102 on Schedule 1.29.
----------
(2) The amount to be paid is based upon an oral agreement with the ex-employee
that Speed would pay him severance (not to exceed eight weeks) until he
finds gainful employment.
(3) The amount to be paid is based upon an oral agreement with the ex-employee
that Speed would pay him severance (not to exceed four weeks) until he
finds gainful employment.
166
Schedule 6.17
Changes since the Balance Sheet Date
See Schedule 6.3.2
167
Schedule 6.18
Valid Agreements; Restrictive Documents
See Schedule 6.19.
168
Schedule 6.19
Approvals for Speed
Consent is required to assign to KDTI contracts 2 (Rooms 400 and 436), 15, 17-90
and 99 listed on Schedule 1.29. On December 19, 1997, Speed requested such
consents to assignment. As of January 8, 1998, Speed has received the forms of
consent attached to this Schedule 6.19.
169
Schedule 6.21
Environmental Conditions
(i) SPEED does not own (1) hazardous waste facilities, (2) waste disposal
sites or (3) underground storage tanks. Hazardous materials used in the
course of the SPEED business are disposed of or recycled by Greymart
Environmental Services ("GES") (See the letter attached as Annex A to this
Schedule 6.21, from GES to SPEED, dated December 11, 1997). GES has acted
exclusively in the disposal of hazardous waste materials for SPEED for
over 10 years.
(ii) See the letter attached as Annex A to this Schedule 6.21, from GES to
SPEED, dated December 11, 1997
(iii) None.
170
Annex A to Schedule 6.21
[GREYMART ENVIRONMENTAL SERVICES Letterhead]
December 11, 1997
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇
Speed Graphics
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇▇▇▇▇▇,
This will confirm that Greymart Environmental Services transports your hazardous
waste materials for disposal.
Greymart is a fully licensed New York State Part 364 permitted hazardous waste
transporter. Your waste is transported to Chemical Pollution Control Co. located
in Bay Shore, NY. Chemical Pollution Control is licensed by EPA to operate as a
hazardous waste Transfer, Storage and Disposal Facility (TSDF).
If you any questions or need any additional information please do not hesitate
to contact me at any time.
Wishing you a happy holiday season.
Very truly yours,
/s/
▇▇▇▇▇ ▇▇▇▇▇▇
Executive Vice President
171
Schedule 6.22
Health and Safety Conditions
None.
172
SCHEDULE 7.4
1. Consents to the contracts listed on Schedule 6.6.
2. Approval of the stockholders of KDTI to the amendment of the Option Plan
increasing the number of options grantable thereunder.
173
SCHEDULE 7.6
KATC 1996 Form 10KSB
KATC March 31, 1997 Form 10Q
KATC June 30, 1997 Form 10Q
KATC September 30, 1997 Form 10Q
KATC June 30, 1996 Form 10Q
KATC September 30, 1996 Form 10Q
KATC 1996 Annual Report to Shareholders
KATC 1997 Proxy Statement
Financial statement forecast as distributed to banks on October 9, 1997
Revised financial statement forecast distributed to the Bank of New York on
December 23, 1997
Committal letter from Bank of New York to KATC dated November 17, 1997
List of KATC five top customers
List of KATC employees including department and salaries
KATC employee handbook
KATC Form SB-2 and Exhibits and Amendments
KATC Forms 8-K and 8-KA regarding the acquisition of the assets of The Sarabande
Press
KATC Forms 8-K regarding the acquisition of the assets of Advanced digital
Services, Inc.
174
Schedule 8.8
Employees; Assumed Plans
(i) Agreement dated August 22, 1997, between ▇▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇. and Speed
(ii) Speed Graphics, Inc. 401(k) Profit Sharing Plan effective as of January
1, 1992, as amended by the Amendment dated August 12, 1994 and the Second
Amendment dated as of February 20, 1996.
(iii) Speed terminated ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ and authorized an 8-week severance
package totalling $19,231. $12,109.25 of this severance package will be
reflected as an accrual on the Closing Date Balance Sheet.
(iv) Speed terminated ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and authorized a 4-week severance package
totalling $7,692. $1,923.00 of this severance package will be reflected
as an accrual on the Closing Date Balance Sheet.
(v) Items 3 and 6-10 on Schedule 6.13.
(vi) Oral employment agreement between Speed and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as
memorialized on Annex A-1 to this Schedule 8.8.
(vii) Oral employment agreement between Speed and ▇▇▇▇▇▇ ▇. ▇▇▇▇, as
memorialized on Annex A-2 to this Schedule 8.8.
(viii) Oral employment agreement between Speed and ▇▇▇▇▇▇ ▇▇▇▇▇▇, as reflected
on Annex A-3 to this Schedule 8.8.
175
Annex A-1 to Schedule 8.8
[Omitted to maintain confidentiality and filed separately with the Commission]
176
Annex A-2 to Schedule 8.8
[Omitted to maintain confidentiality and filed separately with the Commission]
177
Annex A-3 to Schedule 8.8
[Omitted to maintain confidentiality and filed separately with the Commission]
178
Schedule 8.10
Options to Purchase KDTI Common Stock
================================================================================
NAME POSITION NUMBER OF SHARES
---- -------- ----------------
--------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ PRESIDENT 45,000
--------------------------------------------------------------------------------
179
Schedule 8.10 (cont.)
================================================================================
NAME POSITION NUMBER OF SHARES
---- -------- ----------------
--------------------------------------------------------------------------------
[Omitted to maintain confidentiality and filed separately with the Commission]
================================================================================
================================================================================
TOTAL 345,000
================================================================================