-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hp4/XqT51x6fexx/MsbYtFyqnRDre+mlNbmYpUUn1JcyHvjohEA4uOu8KUTHEhyw qORlnHkFEZGm7UaG0v/bCg== 0001015357-98-000035.txt : 19980409 0001015357-98-000035.hdr.sgml : 19980409 ACCESSION NUMBER: 0001015357-98-000035 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 23 CONFORMED PERIOD OF REPORT: 19980324 ITEM INFORMATION: FILED AS OF DATE: 19980408 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIDIGITAL INC CENTRAL INDEX KEY: 0001003934 STANDARD INDUSTRIAL CLASSIFICATION: SERVICE INDUSTRIES FOR THE PRINTING TRADE [2790] IRS NUMBER: 133856672 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-27664 FILM NUMBER: 98589466 BUSINESS ADDRESS: STREET 1: 20 WEST 20TH ST CITY: NEW YORK STATE: NY ZIP: 10011 BUSINESS PHONE: 2123370330 MAIL ADDRESS: STREET 1: 20 WEST 20TH ST CITY: NEW YORK STATE: NY ZIP: 10011 8-K 1 UNIDIGITAL INC. FORM 8-K CONFORMED COPY SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported) March 24, 1998 -------------- Unidigital Inc. (Exact Name of Registrant as Specified in Charter) Delaware 0-27664 13-3856672 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission File Number) (IRS Employer of Incorporation) Identification No.) 545 West 45th Street, New York, New York 10036 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (zip code) (212) 337-0330 ---------------------------------------------- (Registrant's telephone number, including area code) ------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ITEM 2. ACQUISITION OF ASSETS. On March 25, 1998, Unidigital Inc. (the "Company"), through its wholly-owned subsidiary, Unison (NY), Inc., consummated the acquisition of substantially all of the assets of Kwik International Color, Ltd. (the "Seller") located in New York City (the "Kwik Acquisition"). The Seller provided general printing, color separation and large format printing services. The Company intends to continue such line of business. The assets purchased included the Seller's entire customer list, inventory, equipment, cash, accounts receivable and trade name. The purchase price included cash payments of $20,590,349, issuance of a 5.7% subordinated promissory note in the principal amount of $750,000 (payable in 36 monthly installments commencing April 15, 1998), issuance of 649,841 shares of restricted Common Stock of the Company and the assumption of certain trade obligations of the Seller. The purchase price is subject to adjustment in the event the Seller does not achieve a certain net asset value as of the date of the acquisition. Such determination shall be made within sixty (60) days of the date of closing. Of the purchase price, $1,000,000 in cash and $1,000,000 of restricted Common Stock of the Company (190,589 shares) is being held in escrow for a period of two years to satisfy any purchase price adjustments or indemnification claims. In determining the purchase price, the Company considered, among other factors, (i) the composition of the Seller's assets, in particular, its cash position and the strength of the Seller's balance sheet; (ii) the business, operations and prospects of the Seller; (iii) the financial statements and other relevant financial and operating data of the Seller; (iv) the historical and projected financial information prepared by the management of the Seller; and (v) the past and projected revenues generated from the customers of the Seller. The Company funded the cash portion of the purchase price from proceeds of a $25,000,000 term loan and a $10,000,000 revolving credit loan from Canadian Imperial Bank of Commerce ("CIBC"). See "Item 5. Other Events." below. Richard J. Sirota, the sole shareholder of the Seller ("Sirota"), and the Company entered into a three-year Employment Agreement pursuant to which Sirota shall serve as the Senior Vice President and Chief Operating Officer of the Company at an initial annual salary of $250,000. Sirota also was appointed to the Company's Board of Directors. Effective upon consummation of the Kwik Acquisition, Peter Saad, formerly the Senior Vice President and Chief Operating Officer of the Company, was named President of the Company. In addition, on March 25, 1998, Sirota and William E. Dye, Chairman of the Board and Chief Executive Officer of the Company ("Dye"), executed a Stockholders' Agreement pursuant to which (i) Sirota and Dye granted the Company and each other the right of first refusal with respect to their respective sales of the Company's Common Stock, (ii) Sirota and Dye agreed to vote for each other in the election of Directors of the Company and (iii) Sirota agreed not to acquire more than 1,000,000 shares of the Company's Common Stock without the prior written consent of Dye. - 2 - ITEM 5. OTHER EVENTS. On March 24, 1998, the Company terminated its financing facilities with The Chase Manhattan Bank and entered into borrowing arrangements with CIBC in the aggregate amount of $40,000,000, which consist of a: (i) $25,000,000 term loan; (ii) $10,000,000 revolving line of credit facility which is available for working capital purposes; and (iii) $5,000,000 credit facility which is available for corporate acquisition purposes. Such credit facilities are guaranteed by the Company's United States subsidiaries. In addition, the Company pledged all of its equity interests in its United States subsidiaries and two-thirds of its equity interests in its wholly-owned United Kingdom subsidiary as collateral for such credit facilities. Interest under such credit facilities is, at the Company's option, at the Base Rate or at the Eurodollar Rate, as defined, plus an Applicable Margin, as defined, ranging from 0.75% to 3% depending on the Company's consolidated debt to earnings ratio and the type of loan. As of March 31, 1998, the Company had an outstanding balance of $8,350,000 under the revolving credit facility and $25,000,000 under the term loan. A portion of the proceeds of such loans was used to repay in full promissory notes previously issued by the Company in 1997 in the aggregate principal amount of $4,000,000. The credit facilities contain covenants which require the Company to maintain certain earnings and debt to earnings ratio requirements based on the combined operations of the Company and its subsidiaries. The credit facilities are secured by a first priority lien on all of the assets of the Company and its subsidiaries, a mortgage on the Company's facilities located at 545 West 45th Street, New York, New York and a leasehold mortgage on the Company's facilities acquired as part of the Kwik Acquisition located at 229 West 28th Street, New York, New York. The Company, CIBC and Sirota entered into an intercreditor subordination agreement with respect to CIBC's and Sirota's relative interests in the Company. The Company's agreement with CIBC restricts the Company's ability to pay certain dividends without CIBC's prior written consent. - 3 - ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Financial Information of Business Acquired. To be filed by amendment. The Company believes that it is impracticable to provide such financial information as of the date hereof. Such information shall be filed with the Commission no later than June 7, 1998. (b) Pro Forma Financial Information (unaudited). To be filed by amendment. The Company believes that it is impracticable to provide such financial information as of the date hereof. Such information shall be filed with the Commission no later than June 7, 1998. (c) Exhibits. Exhibit No. Description of Exhibit ----------- ---------------------- 4.1 Stockholders' Agreement dated as of March 25, 1998 by and among Unidigital Inc., William E. Dye and Richard J. Sirota. 10.1 Asset Purchase Agreement dated as of March 25, 1998 by and among Unidigital Inc., Unison (NY), Inc., Kwik International Color, Ltd. and Richard J. Sirota. 10.2 Subordinated Promissory Note dated March 25, 1998 of Unidigital Inc. payable to Kwik International Color, Ltd. in the principal amount of $750,000. 10.3 Employment Agreement dated as of March 25, 1998 by and between Unidigital Inc.and Richard J. Sirota. 10.4 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the fourth floor, known as Room 401-405. 10.5 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the seventh - 4 - floor, known as Room 706-714 and 707- 713. 10.6 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the eighth floor. 10.7 Loft Lease dated March 1, 1997 between S.N.Y., Inc. and Kwik International Color, Ltd. for the property located at 229 W. 28th Street, New York, New York, on the ninth floor. 10.8 Credit Agreement dated as of March 24, 1998 by and among Unidigital Inc., the lenders from time to time parties thereto and Canadian Imperial Bank of Commerce. 10.9 Term Note dated March 24, 1998 of Unidigital Inc. payable to Canadian Imperial Bank of Commerce in the principal amount of $25,000,000. 10.10 Acquisition Note dated March 24, 1998 of Unidigital Inc. payable to Canadian Imperial Bank of Commerce in the principal amount of $5,000,000. 10.11 Revolving Credit Note dated March 24, 1998 of Unidigital Inc. payable to Canadian Imperial Bank of Commerce in the principal amount of $10,000,000. 10.12 Stock Pledge Agreement (U.S.) dated as of March 24, 1998 made by Unidigital Inc. in favor of Canadian Imperial Bank of Commerce. 10.13 Mortgage dated as of March 24, 1998 made by Unidigital Inc. in favor of Canadian Imperial Bank of Commerce. 10.14 Security Agreement dated as of March 24, 1998 made by Unidigital Inc. in favor of Canadian Imperial Bank ofCommerce. - 5 - 10.15 Subsidiaries Guarantee dated as of March 24, 1998 made by each of Unidigital Elements (NY), Inc., Unidigital Elements (SF), Inc., Unison (NY), Inc. and Unison (MA), Inc., in favor of Canadian Imperial Bank of Commerce. 10.16 Intercreditor and Subordination Agreement dated as of March 25, 1998 by and among Kwik International Color, Ltd., Unidigital Inc. and Canadian Imperial Bank of Commerce. 10.17 Mortgage, Assignment of Leases and Rents and Security Agreement dated as of March 24, 1998 between Unidigital Inc. and Canadian Imperial Bank of Commerce. - 6 - SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. Unidigital Inc. By: /s/William E. Dye --------------------------------- William E. Dye, Chairman of the Board and Chief Executive Officer (Principal Executive, Financial and Accounting Officer) Date: April 8, 1998 EX-4.1 2 STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT STOCKHOLDERS' AGREEMENT dated as of March 25, 1998 (this "Agreement"), by and among Unidigital Inc., a Delaware corporation (the "Company"), William E. Dye ("Dye"), and Richard J. Sirota ("Sirota" and, collectively with Dye, the "Stockholders"). W I T N E S S E T H : WHEREAS, the Company is authorized to issue 10,000,000 shares of common stock, $0.01 par value (the "Common Stock"); and WHEREAS, Dye, on the date hereof, has voting control over 1,051,421 shares of the Common Stock; and WHEREAS, the Company and Sirota are parties to that certain Asset Purchase Agreement (the "Asset Purchase Agreement") dated March 25, 1998 by and among the Company, Unison (NY), Inc., a Delaware corporation and wholly-owned subsidiary of the Company ("Unison"), Kwik International Color, Ltd., a New York corporation ("Kwik"), and Sirota, pursuant to which Sirota has been issued 649,841 shares of the Common Stock (the "Sirota Shares"); and WHEREAS, the parties deem it in the best interests of each of the parties to restrict the transfer of the Restricted Shares (as defined below) as herein provided. NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, the Parties hereto hereby agree as follows: SECTION 1. General Restrictions on Transfer of the Restricted Shares. (a) During the term of this Agreement, none of the shares of Common Stock owned on the date hereof or thereafter acquired by any Stockholder (collectively, the "Restricted Shares") may be transferred, assigned, pledged, encumbered or otherwise hypothecated except in accordance with the provisions of this Agreement. (b) Any attempted transfer of the Restricted Shares other than in accordance with this Agreement (other than an involuntary transfer by operation of law) shall be null and void and the Company shall refuse to recognize any such transfer and shall not reflect on its records any change in record ownership of the Restricted Shares pursuant to any such transfer. (c) Notwithstanding anything contained herein to the contrary, but subject to Section 5 hereof, it is understood and agreed that (i) each of the Stockholders may transfer any or all of the Restricted Shares beneficially owned by him to his immediate family (as defined below), or to trusts established for the benefit of such immediate family, provided that in connection with such transfer, the transferee grants to such transferor an irrevocable proxy coupled with an interest to vote all of the Restricted Shares so transferred, and (ii) in the case of Sirota, the Sirota Shares may be transferred to Sirota's former business partner, Walter Berkower. Such transferees shall be referred to herein as "Permitted Transferees." For purposes of this Section 1(c), "immediate family" shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include adoptive relationships. SECTION 2. Right of First Refusal. (a) Subject to Section 2(f) hereof, whenever and as often as any of the Stockholders shall desire to sell any of the Restricted Shares pursuant to a bona fide offer for the purchase thereof in a private transaction, such selling Stockholder (the "Selling Stockholder") shall give notice (the "Notice") to the Company in writing to such effect, enclosing a copy of such bona fide offer (it being agreed that the Selling Stockholder shall cause any such offer to be reduced to writing) and specifying the number of shares of the Selling Stockholder's Restricted Shares which such Selling Stockholder desires to sell (the "Shares"), the name of the person or persons to whom such Selling Stockholder desires to make such sale and the dollar value of the consideration which has been offered in connection therewith. Upon receipt of the Notice, the Company shall have the first right and option to purchase all but not less than all of the Shares, for cash at a purchase price equal to the dollar value of such consideration (in the event such consideration includes noncash consideration, subject to Section 2(g) hereof, the dollar value of such noncash consideration shall be determined by the Company's Board of Directors, provided that if such Selling Stockholder is a member of the Board of Directors, he shall not participate in such determination), exercisable for a period of ten (10) days from the date of receipt of the Notice. Failure of the Company to respond to the Notice within the ten (10) day period shall be deemed to constitute a notification to the Selling Stockholder of the Company's decision not to exercise the first right and option to purchase the Shares under this Section 2(a). (b) The Company may exercise the right and option provided in Section 2(a) above by giving written notice to the Selling Stockholder not later than the close of business on the date of expiration of such right and option (or if such date is not a business day, then on or before the close of business on the next succeeding business day), advising of the election to exercise the same and the date (not later than ten (10) days from the date of expiration of such first right and option to purchase the Shares under Section 2(a)) upon which payment of the purchase price for the Shares shall be made. The Selling Stockholder shall cause to be delivered to the Company at the Company's principal office, on the payment date specified in such written notice, the certificate or certificates representing the Shares, properly endorsed for transfer, against payment of the purchase price therefor by the Company in immediately available funds. (c) In the event that the Shares are not purchased by the Company hereunder, the Selling Stockholder shall next give notice (the "Second Notice", and together with the Notice, the "Notices") to the other Stockholder, by which the Selling Stockholder shall then offer to the other Stockholder (the "Offeree") the right and option to purchase all but not less than all of the Shares for cash at the same purchase price and on the same terms as offered to the Company as set forth in the Notice. Pursuant to such offer, the Offeree shall have the right and option to purchase all but not less than all of the Shares, for cash at a purchase price equal to the dollar value of such consideration (in the event such consideration includes noncash consideration, subject to Section 2(g) hereof, the dollar value of such noncash consideration shall be determined - 2 - by the Company's Board of Directors, provided that if the Selling Stockholder or the Offeree is a member of the Board of Directors, he shall not participate in such determination), exercisable for a period of ten (10) days from the date of receipt of the Second Notice. Failure of the Offeree to respond to the Second Notice within the ten (10) day period shall be deemed to constitute a notification to the Selling Stockholder of the Offeree's decision not to exercise the right and option to purchase the Shares under this Section 2(c). (d) The Offeree may exercise the rights and options provided in Section 2(c) by giving written notice to the Selling Stockholder not later than the close of business on the date of expiration of such right and option (or if such date is not a business day, then on or before the close of business on the next succeeding business day), advising of the election to exercise the same and the date (not later than ten (10) days from the date of expiration of the notice upon which the Offeree is acting) upon which payment of the purchase price for the Shares shall be made. The Selling Stockholder shall cause to be delivered to the Offeree at the Company's principal office, on the payment date specified in such written notice, the certificate or certificates representing the Shares being purchased by the Offeree, properly endorsed for transfer, against payment of the purchase price therefor. (e) If the Shares are not purchased by the Company or the Offeree in accordance with this Section 2, the Selling Stockholder may, during the ninety (90) day period commencing on the expiration of the rights and options provided for in Sections 2(a) and 2(c), sell all, but not less than all, of the Shares to the transferee named in the Notices for consideration, the dollar value of which is equal to or greater than the dollar value of the consideration specified in the Notices, free of the restrictions contained in Section 2 of this Agreement. (f) Notwithstanding the foregoing, any of the Sirota Shares distributed to the Company in satisfaction of an indemnification claim made by the Company or Unison under the Asset Purchase Agreement shall be free of the restrictions contained in Section 2 of this Agreement. In addition, in the event a Selling Stockholder desires to sell any of the Restricted Shares pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, such sale shall be free of the restrictions contained in Section 2 of this Agreement, provided such sale does not result in such Selling Stockholder selling in excess of 10,000 shares of Common Stock in the immediately preceding three-month period. (g) In the event the Selling Stockholder disputes the Board of Directors' determination of the dollar value of noncash consideration to be paid for the Shares, such Selling Stockholder shall notify the Company in writing within three (3) calendar days after such determination setting forth the amount, nature and basis of the dispute. Within the following five (5) days, the parties shall use their best efforts to resolve such dispute. Upon their failure to do so, the dispute shall be submitted for arbitration as follows: (i) The arbitrator shall be a public accounting firm located in the City of New York, State of New York. In the event the selected arbitrator declines or is unable to serve for any reason, the parties shall select another arbitrator. Upon their failure to agree on - 3 - another arbitrator, the jurisdiction of the Supreme Court of the State of New York shall be invoked to make such selection. (ii) The arbitrator shall follow the Commercial Arbitration Rules of the American Arbitration Association, except as otherwise provided herein. The arbitrator shall substantially comply with the rules of evidence; shall grant essential but limited discovery; shall provide for the exchange of witness lists and exhibit copies; shall conduct a pretrial and consider dispositive motions. Each party shall have the right to request the arbitrator to make findings of specific factual issues. The arbitrator shall complete its proceedings and render its decision within forty (40) days after submission of the dispute to it, unless both parties agree to an extension. Each party shall cooperate with the arbitrator to comply with the procedural time requirements and the failure of either to do so shall entitle the arbitrator to extend the arbitration proceedings accordingly and to impose sanctions on the party responsible for the delay, payable to the other party. In the event the arbitrator does not fulfill its responsibilities on a timely basis, either party shall have the right to require a replacement and the appointment of a new arbitrator. (iii) The decision of the arbitrator shall be final and binding upon the parties and accordingly a judgment by a court of competent jurisdiction may be entered in accordance therewith. SECTION 3. Election of Directors. At any time at which stockholders of the Company will have the right to vote or will vote all shares of Common Stock of the Company in matters relating to the election of directors, each Stockholder shall vote all shares of Common Stock presently owned or hereafter acquired by him to cause and maintain the election to the Board of Directors of the Company of the other Stockholder; provided, however, that neither Stockholder shall have any such obligation under this Section 3 in the event the other Stockholder no longer owns at least ten percent (10%) of the Company's then issued and outstanding shares of Common Stock. SECTION 4. Standstill Agreement. Sirota hereby agrees that, without the prior written consent of Dye, he shall not take any action to cause him to be the beneficial owner of more than 1,000,000 shares of the Company's Common Stock. SECTION 5. Purchasers or Transferees of Restricted Shares. Except as otherwise specifically provided herein, any person who shall acquire (either voluntarily or involuntarily, by operation of law or otherwise) any Restricted Shares from a Stockholder or any Permitted Transferee, shall be bound by the provisions of this Agreement relating to the voting, transfer and sale of such Restricted Shares to the same extent as the parties hereto and, prior to the registration of the transfer of any such Restricted Shares on the books of the Company, any purchaser or other transferee shall execute a counterpart to this Agreement agreeing to be bound by such provisions. - 4 - SECTION 6. Legend on Stock Certificates. During the term of this Agreement, each certificate issued after the date hereof representing Restricted Shares held by a Stockholder shall conspicuously bear the following legend until such time as the shares represented thereby are no longer subject to the provisions hereof: "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS' AGREEMENT, DATED AS OF MARCH 25, 1998, AMONG UNIDIGITAL INC. (THE "COMPANY"), WILLIAM E. DYE AND RICHARD J. SIROTA. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF THIS CERTIFICATE TO THE COMPANY." The Company covenants that it shall keep a copy of this Agreement on file at its principal executive offices for the purpose of furnishing copies to the holders of record of the Restricted Shares. SECTION 7. Duration of Agreement. This Agreement shall terminate on the tenth anniversary of the date of this Agreement, unless earlier terminated by the parties hereto. Additionally, this Agreement shall terminate as to a Stockholder upon the transfer of all the Restricted Shares owned by such Stockholder. SECTION 8. Representations and Warranties. (a) Each of the Company and the Stockholders (in the case of clause (ii) below) represents and warrants, severally and not jointly, to the Company and each of the other parties hereto as follows: (i) The execution, delivery and performance of this Agreement by the Company will not violate any provision of law, any order of any court or other agency of government, or any provision of any material indenture, agreement or other instrument to which the Company or any of its properties or assets is bound, or conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any such indenture, agreement or other instrument, or result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the properties or assets of the Company (other than those arising hereunder). (ii) This Agreement has been duly executed and delivered by the Company or such Stockholder, as the case may be, and constitutes the legal, valid and binding obligation of the Company or such Stockholder, enforceable against the Company or such Stockholder in accordance with its terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application affecting the enforcement of creditors' rights, and except that the availability of the equitable remedies of specific performance and injunctive relief may be subject to the discretion of the court before which any proceeding may be brought. - 5 - (b) Sirota represents and warrants to the Company and Dye that the Sirota Shares constitute the entire ownership interest of Sirota in the Common Stock of the Company as of the date hereof. SECTION 9. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 10. Benefits of Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, legal representatives and heirs. SECTION 11. Notices. Any notice, demand or request required or permitted to be given under the provisions of this Agreement (a) shall be in writing; (b) shall be delivered personally, including by means of telecopy or courier, or mailed by registered or certified mail, postage prepaid and return receipt requested; (c) shall be deemed given on the date of personal delivery or on the date set forth on the return receipt; and (d) shall be delivered or mailed as follows or to such other address as any party may from time to time direct: (i) if to the Company or Dye, c/o Unidigital Inc., 545 West 45th Street, New York, New York, 10036, Attention: President, with a copy to Buchanan Ingersoll, 500 College Road East, Princeton, New Jersey, 08540, Attention: David J. Sorin, Esq.; or (ii) if to Sirota, c/o Kwik International Color, Ltd., 229 West 28th Street, New York, New York, 10001-5996, Attention: Mr. Richard J. Sirota, with a copy to Kantor Davidoff Wolfe Mandelker & Kass, 51 East 42nd Street, New York, New York, 10017, Attention: Herbert C. Kantor, Esq. SECTION 12. Modification. Except as otherwise provided herein, neither this Agreement nor any provision hereof may be modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom the enforcement of any modification, change, discharge or termination is sought. SECTION 13. Severability. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein shall, for any reason, be held to be invalid, illegal or unenforceable, such illegality, invalidity or unenforceability shall not affect any other provisions of this Agreement. SECTION 14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument. SECTION 15. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all previous agreements. In the event of any conflict between this Agreement and any other agreement or instrument with respect to the subject matter hereof, the provisions of this Agreement shall control. - 6 - SECTION 16. Reorganization, Etc. The provisions of this Agreement shall apply mutatis mutandis to any shares or other securities resulting from any stock split or reverse split, stock dividend, reclassification, subdivision, consolidation or reorganization of any shares or other securities of the Company and to any shares or other securities of the Company or of any successor company which may be received by each Stockholder by virtue of his ownership of the Restricted Shares. SECTION 17. Survival of Representations. Each representation, warranty, covenant and agreement of the parties hereto herein contained shall survive the date hereof, notwithstanding any investigation at any time made by or on behalf of any of the parties. SECTION 18. Headings. The headings of this Agreement are for convenience of reference only and are not part of the substance of this Agreement. * * * * * * * * - 7 - IN WITNESS WHEREOF, the parties hereto have executed this Stockholders' Agreement as of the day and year first above written. UNIDIGITAL INC. By:/s/ William E. Dye -------------------------------- Name: William E. Dye Title: President and Chief Executive Officer STOCKHOLDERS /s/ William E. Dye ----------------------------------- William E. Dye /s/ Richard J. Sirota ----------------------------------- Richard J. Sirota EX-10.1 3 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT Agreement made as of the 25th day of March, 1998 by and among Unidigital Inc., a Delaware corporation with its principal office at 545 West 45th Street, New York, New York 10036 ("Unidigital"), its wholly-owned subsidiary, Unison (NY), Inc., a Delaware corporation with its principal office at c/o Unidigital Inc., 545 West 45th Street, New York, New York 10036 (the "Buyer"), Kwik International Color, Ltd., a New York corporation with its principal office at 229 West 28th Street, New York, New York 10001-5996 (the "Seller") and Richard J. Sirota, the sole shareholder of the Seller (the "Shareholder"). The Seller and the Shareholder are sometimes collectively referred to herein as the "Selling Parties." Preliminary Statement --------------------- The Seller is engaged principally in the business of general printing, color separation services and large format printing services (the "Business"). The Buyer desires to purchase, and the Seller desires to sell, all of the assets and the Business of the Seller (except for the Excluded Assets (as defined below)), for the consideration set forth below and the assumption of certain of the Seller's liabilities set forth below, subject to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereby agree as follows: 1. Sale and Delivery of the Assets ------------------------------- 1.1 Delivery of the Assets. ---------------------- (a) Subject to and upon the terms and conditions of this Agreement, except as specifically provided in Section 1.1(b) hereof, at the closing of the transactions contemplated by this Agreement (the "Closing"), the Seller shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer shall purchase from the Seller, free and clear of all liens, liabilities, security interests, leasehold interests and encumbrances of any nature whatsoever (except as otherwise expressly provided herein), all of the properties, assets and other claims, rights and interests of the Seller or which are used in the Business of whatever kind, character or description, whether real, personal or mixed, tangible or intangible, wherever situated, including without limitation: (i) all inventories of raw materials, work in process, goods in transit (i.e., inventories purchased by, but not delivered to, the Seller), finished goods, office supplies, maintenance supplies, packaging materials, spare parts and similar items (collectively, the "Inventory"); (ii) all accounts receivable and notes receivable (including any security held by the Seller for the payment thereof) (collectively, the "Accounts Receivable"); (iii)those prepaid expenses set forth in Schedule 1.1(a)(iii); (iv) all rights under the contracts, agreements, leases, licenses, purchase orders, customer sales agreements and other instruments set forth on Schedule 2.9(b) and Schedule 2.13(b) attached hereto (collectively, the "Contract Rights"); (v) except as set forth in Section 1.1(b)(iv), all books; payment records; accounts; customer lists; environmental reports or studies; correspondence; production records; technical, accounting, manufacturing and procedural manuals; engineering data; development and design data; plans, blueprints, specifications and drawings; employment and personnel records; and other useful business records, including electronic media, and any confidential or other information which has been reduced to writing, utilized in the conduct of or relating to the Business or the Assets (as hereinafter defined), subject to the Seller's right to retain copies thereof which the Seller reasonably requires for its ongoing operation, winding-up or dissolution; (vi) all rights of the Seller under express or implied warranties from the suppliers of the Assets to the extent transferable (but excluding such rights insofar as the same pertain to liabilities retained by the Seller hereunder); (vii)the motor vehicles and other rolling stock listed on Schedule 1.1(a)(vii); (viii)all of the machinery, equipment, tools, dies, tooling, production fixtures, maintenance machinery and equipment, computers, telecommunication systems, fittings and other office equipment, furniture, leasehold improvements and construction in progress on the date hereof whether or not reflected as capital assets in the accounting records of the Seller which are owned by the Seller and used or useful in the Business including but not limited to all of the foregoing located at the locations set forth on Schedule 1.1(a)(viii) (collectively, the "Fixed Assets"); (ix) all right, title and interest of the Seller in and to all intangible property rights relating to the Business, including but not limited to inventions, discoveries, trade secrets, processes, formulas, know-how, United States and foreign patents, patent applications, trade names, including but not limited to the name "Kwik International Color, Ltd.", or any derivation thereof and those names listed on Schedule 2.20 attached hereto, trademarks, trademark registrations, applications for trademark registrations, copyrights, copyright registrations, certification marks, industrial designs, technical expertise, research data and other similar property and the registrations and applications for registration thereof owned by the Seller or, where not owned, used by the Seller in the Business and all goodwill associated thereto and all licenses and other agreements to which the Seller is a party (as licensor or licensee) or by which the Seller is bound relating to any of the foregoing kinds of property or rights to any "know-how" or disclosure or use of ideas (collectively, the "Intangible Property"); (x) all transferable approvals, authorizations, certifications, consents, variances, permissions, licenses and permits to or from, or filings, notices or recordings to or - 2 - with, federal, state, foreign, and local governmental authorities as held or effected by the Seller in connection with the Assets; (xi) all of the Seller's goodwill and the exclusive right to use the names of the Seller as all or part of a corporate name; (xii)except as specifically provided in Section 1.1(b) hereof, all other assets, properties, claims, rights and interests of the Seller which relate to the Business and exist on the date hereof, of every kind and nature and description, whether tangible or intangible, real, personal or mixed; and (xiii)cash or cash equivalents ("Cash"). (b) Notwithstanding the provisions of Section 1.1(a) above, the assets to be transferred to the Buyer under this Agreement shall not include (i) any of Seller's rights or consideration under this Agreement, or (ii) any refunds of federal, state, foreign or local income or other tax paid by the Seller, or (iii) any insurance policies currently held by the Seller and related premium agreements for general liability, product liability and workers compensation insurance for periods prior to the date hereof, or (iv) the financial books and records of the Seller (it being understood that the Seller shall make such financial books and records available at the reasonable request of the Buyer), or (v) those assets listed on Schedule 1.1(b) attached hereto (collectively, the "Excluded Assets"). (c) The Inventory, Accounts Receivable, Contract Rights, Fixed Assets, Intangible Property, Cash and other properties, assets and business of the Seller described in Section 1.1(a) above, other than the Excluded Assets, shall be referred to collectively as the "Assets." 1.2 Further Assurances. ------------------ (a) At the Closing, the Seller shall execute and deliver a Bill of Sale (the "Bill of Sale") substantially in the form attached hereto as Exhibit A, and the assignments described in Sections 7.14(b) and (c) hereof. At any time and from time to time after the Closing, at the Buyer's request and without further consideration, the Selling Parties (or their successors) promptly shall execute and deliver such assignments of leases and other instruments of sale, transfer, conveyance, assignment and confirmation, and take such other action, as the Buyer may reasonably request to more effectively transfer, convey and assign to the Buyer, and to confirm the Buyer's title to, all of the Assets and the Business, to put the Buyer in actual possession and operating control thereof, to assist Buyer in exercising all rights with respect thereto and to carry out the purpose and intent of this Agreement. (b) The Selling Parties and the Buyer each will use its best efforts to obtain as promptly as possible written consents to the transfer, assignment or sublicense to the Buyer of all - 3 - agreements, commitments, purchase orders, contracts, licenses, leases, rights and other contract documents being transferred pursuant to Section 1.1(a) hereof where the approval or other consent of any other person is required. If any such approval or consent cannot be obtained, or if the parties hereafter agree in writing that it is not in their respective best interests to obtain any such approval or other consent, the Selling Parties will cooperate with the Buyer in any reasonable arrangement designed to provide the Buyer with substantially the same economic benefits as if such approval or other consent had been obtained and the transfer effected on or before the date hereof. 1.3 Assumption of Liabilities. ------------------------- (a) At the Closing, the Buyer shall execute and deliver an Instrument of Assumption of Liabilities (the "Assumption Agreement") substantially in the form attached hereto as Exhibit B, pursuant to which it shall assume and agree to (i) perform, pay and discharge, in accordance with their respective terms, all those liabilities and obligations set forth on Schedule 1.3(a) attached hereto which were incurred in the ordinary course of business of the Business and are outstanding on the date hereof (the obligations set forth in (i) are collectively, the "Assumed Current Liabilities"); (ii) perform in accordance with their terms those obligations outstanding on the date hereof under the Contract Rights; and (iii) perform in accordance with their terms those liabilities arising after the date hereof from any agreement, contract, commitment or other contract documents which the Buyer has requested be transferred to it pursuant to Section 1.1(a) but which has not been so transferred due to the failure of the Seller to obtain the consent or approval required for such transfer, provided that the Buyer has received substantially the same economic benefit of such contract as if such consent or approval had been obtained (the obligations set forth in (i), (ii) and (iii) are, collectively, the "Assumed Liabilities"). (b) Except as otherwise provided herein, the Buyer shall not assume any of the liabilities of the Selling Parties and shall purchase the Assets free and clear of all liens, mortgages, security interests, encumbrances and claims and the Selling Parties each represent, warrant and agree that the Buyer shall not be or become liable for any claims, demands, liabilities or obligations not expressly assumed in this Agreement of any kind whatsoever arising out of or relating to the conduct of the Business by Seller or the Assets or Assumed Liabilities prior to the date hereof. Without limiting the foregoing, the Buyer shall not at the Closing assume or agree to perform, pay or discharge, and the Selling Parties shall remain unconditionally liable for, all obligations, liabilities and commitments, fixed or contingent, of the Selling Parties other than the Assumed Liabilities, including but not limited to: (i) severance, termination or other payments or benefits (including but not limited to post-retirement benefits) including but not limited to those owing under the Seller's severance policy or any employment agreement to any employees (union or non-union), sales agents or independent contractors employed by the Seller prior to the Closing (collectively, "Seller's Employees"), liabilities arising under any federal, state, local or foreign "plant closing law", liabilities accruing under the Seller's employee benefit plans, vacation pay plans or - 4 - programs, retirement plans, and liabilities for any Employee Plan (as defined in Section 2.21 except those liabilities to Seller's Employees who become employees of the Buyer after the Closing relating solely to and arising solely out of their term of employment with the Buyer); (ii) worker's compensation claims arising from events prior to the Closing; (iii)stock option or other stock-based awards made to Seller's Employees; (iv) liabilities for any federal, state, local or foreign income taxes (including interest, penalties and additions to such taxes) or any deferred income taxes of the Selling Parties; (v) liabilities for any payroll taxes (including interest, penalties and additions to such taxes), except those liabilities to Seller's Employees who become employees of the Buyer after the Closing relating solely to and arising solely out of their term of employment with the Buyer; (vi) liabilities incurred for violations of occupational safety, wage, health, welfare, employee benefit or environmental laws or regulations prior to the date hereof; (vii)liabilities to the extent related solely to the Excluded Assets; (viii)except as provided in Section 11 hereof, any tax (including but not limited to any federal, state, local or foreign income, franchise, single business, value added, excise, customs, intangible, sales, transfer, recording, documentary or other tax) imposed upon, or incurred by, the Selling Parties, if any, in connection with or related to this Agreement or the transactions contemplated hereby (including interest, penalties and additions to such taxes); (ix) liabilities for any commercial rent taxes to the extent accrued but not paid prior to the date hereof; (x) other than the Assumed Liabilities, any liabilities of the Seller to third parties arising out of the failure of the Seller to obtain any necessary consents to the assignment to the Buyer of contracts or leases to which the Seller is a party (including damages asserted by third parties for breach of such contracts or leases due to the failure to obtain such consents); (xi) liabilities, contingent or otherwise, which are not disclosed on Schedule 1.3(a); (xii)liabilities for borrowed money or liabilities, other than the Assumed Liabilities, to creditors of the Selling Parties; - 5 - (xiii)liabilities of the Seller for any state franchise taxes or annual license or other fees relating to qualification as a foreign corporation or authorization to do business in such states (including interest, penalties and additions to such taxes and fees); and (xiv)any other liabilities of any kind or nature whether now in existence or arising hereafter not expressly assumed by the Buyer under Section 1.3(a) hereof. 1.4 Purchase Price. -------------- (a) In consideration of the transfer of the Business and Assets of the Seller to the Buyer hereunder, the Buyer will assume the Assumed Liabilities and will pay an aggregate purchase price (the "Purchase Price"), subject to the provisions of Sections 1.4(b) and (c), Section 1.5 and Section 1.7, equal to (i) $18,000,000 in cash payable to the Seller (such aggregate amount of consideration to be paid in cash in accordance with the provisions of this Section 1.4(a)(i) hereof being referred to herein as the "Cash Consideration"), (ii) $750,000 payable to the Seller, such amount to be paid by the issuance of a 5.7% subordinated promissory note (the "Note") in the form attached hereto as Exhibit C, and (iii) $6,000,000 payable to the Shareholder, such amount to be paid by the issuance of such number of shares of restricted Unidigital common stock (the "Unidigital Stock"), which when multiplied by the average closing prices of Unidigital's common stock for the twenty (20) trading days immediately prior to the ten (10) trading days immediately prior to the Closing (the "Stock Price"), shall have a market value of $6,000,000; provided, however, that in no event shall the Stock Price be (A) less than $4.00 per share, or (B) greater than $10.00 per share and provided, further, however, that Unidigital, in its sole discretion, shall have the right to limit the number of shares of Unidigital Stock delivered pursuant to this Section 1.4 to such number of shares of Unidigital Stock equal to twenty percent (20%) of the then outstanding number of shares of common stock of Unidigital minus one share (such aggregate amount of consideration paid in stock in accordance with the provisions of this Section 1.4(a)(iii) hereof being referred to herein as the "Stock Consideration"). (b) In the event that the value of the Stock Consideration paid to the Shareholder is less than $6,000,000 (determined by multiplying the Stock Price by the number of shares of Unidigital Stock actually delivered by Unidigital pursuant to Section 1.4(a)(iii) hereof), the Buyer shall pay additional cash consideration (the "Additional Cash Consideration") to the Shareholder, such that the sum of the value of the Stock Consideration and the Additional Cash Consideration is equal to $6,000,000. (c) As promptly as possible following the Closing, but in no event later than sixty (60) days following the Closing, the Buyer and the Seller shall cooperate in the preparation of Schedule 1.4(c) setting forth Minimum Net Asset Value (as defined below) as of the date hereof. In the event that such Minimum Net Asset Value is less than $3,500,000, the Purchase Price payable to the Selling Parties shall be reduced by the amount of such deficiency. Such deficiency shall be paid to the Buyer pursuant to the terms of the Escrow Agreement (as defined below) to the extent available. - 6 - (d) In the event the Seller disputes Schedule 1.4(c), the Seller shall notify the Buyer in writing within twenty (20) calendar days after delivery of Schedule 1.4(c) setting forth the amount, nature and basis of the dispute. Within the following thirty (30) days, the parties shall use their best efforts to resolve such dispute. Upon their failure to do so, the dispute shall be submitted for arbitration as follows: (i) The arbitrator shall be a public accounting firm located in the City of New York, State of New York. In the event the selected arbitrator declines or is unable to serve for any reason, the parties shall select another arbitrator. Upon their failure to agree on another arbitrator, the Commercial Arbitration Rules of the American Arbitration Association shall be invoked to make such selection. (ii) The arbitrator shall follow the Commercial Arbitration Rules of the American Arbitration Association, except as otherwise provided herein. The arbitrator shall substantially comply with the rules of evidence; shall grant essential but limited discovery; shall provide for the exchange of witness lists and exhibit copies; shall conduct a pretrial and consider dispositive motions. Each party shall have the right to request the arbitrator to make findings of specific factual issues. The arbitrator shall complete its proceedings and render its decision within forty (40) days after submission of the dispute to it, unless both parties agree to an extension. Each party shall cooperate with the arbitrator to comply with procedural time requirements and the failure of either to do so shall entitle the arbitrator to extend the arbitration proceedings accordingly and to impose sanctions on the party responsible for the delay, payable to the other party. In the event the arbitrator does not fulfill its responsibilities on a timely basis, either party shall have the right to require a replacement and the appointment of a new arbitrator. (iii)The decision of the arbitrator shall be final and binding upon the parties and accordingly a judgment by a court of competent jurisdiction may be entered in accordance therewith. (e) For purposes of this Agreement, "Minimum Net Asset Value" shall mean the aggregate value of the Assets acquired hereunder less (i) the Assumed Current Liabilities and (ii) the capital lease obligations (net of current portion included in Assumed Current Liabilities) assumed hereunder. - 7 - 1.5 The Closing. ----------- (a) The Closing shall take place at the offices of Kantor Davidoff Wolfe Mandelker & Kass, counsel to the Seller, on the date hereof. The transfer of the Assets by the Seller to the Buyer shall be deemed to occur on the date hereof. (b) Subject to Section 1.5(c) and Section 1.7, at the Closing, the Buyer shall pay the Purchase Price in the following manner: (i) by the assumption of the Assumed Liabilities; (ii) payment of the Cash Consideration; (iii) delivery of the Note; (iv) payment of the Additional Cash Consideration, if any; and (v) delivery of the Stock Consideration. (c) At the Closing, the Buyer shall deliver a portion of the Cash Consideration equal to $1,000,000 and such number of shares of Unidigital Stock which have a market value of $1,000,000 (determined in accordance with the provisions set forth in Section 1.4(a)) (collectively, the "Escrow Amount") to a third-party escrow agent, reasonably acceptable to the Seller and the Buyer (the "Escrow Agent"), pursuant to an Escrow Agreement (the "Escrow Agreement") substantially in the form attached hereto as Exhibit D. The disbursement of the Escrow Amount held by the Escrow Agent shall be done in accordance with the terms of the Escrow Agreement. (d) Subject to Section 1.7, the Cash Consideration shall be paid to the Seller by wire transfer to an account to be specified by the Seller. 1.6 Allocation of Purchase Price. The aggregate amount of the Purchase Price shall, for tax purposes only, be allocated among the Assets and Assumed Liabilities substantially in accordance with the amounts set forth on Schedule 1.6. The Seller and the Buyer agree that they will not take any position which is materially inconsistent with the allocations provided for in this Agreement in preparing income, capital or franchise tax returns. 1.7 Use of Proceeds. At the Closing, the Buyer shall direct that a portion of the Cash Consideration be paid as set forth on Schedule 1.7 attached hereto. 2. Representations of the Selling Parties -------------------------------------- The representations and warranties made by the Selling Parties herein or in any instrument or document furnished in connection herewith shall survive the Closing until (and including) the second anniversary of the date hereof, except for any representations or warranties - 8 - relating to any tax matters which shall survive through the appropriate statute of limitations. The representations and warranties in this Section 2 or in any document delivered to the Buyer pursuant to this Agreement are deemed to be material and the Buyer is entering into this Agreement relying on such representations and warranties. The Selling Parties, jointly and severally, represent and warrant to the Buyer as follows (it being understood that all references in this Section 2 to the Seller shall be deemed to include any of Seller's subsidiaries, unless the context otherwise requires): 2.1 Organization. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and has all requisite power and authority (corporate and other) to own its properties, to carry on its business as now being conducted, to execute and deliver this Agreement and the agreements contemplated herein, and to consummate the transactions contemplated hereby. Schedule 2.1 sets forth the authorized and outstanding capital stock of the Seller as well as the record and beneficial owners thereof. Except as set forth on Schedule 2.1, the Seller does not own or control, directly or indirectly, any corporation, partnership, association or business entity. The Seller is duly qualified to do business and in good standing in all jurisdictions in which its ownership of property or the character of its business requires such qualification. Schedule 2.1 contains a true, correct and complete list of all of the jurisdictions in which the ownership of the property used in the Business or the nature of the Business requires qualification. 2.2 Authorization. The execution and delivery of this Agreement (and all other agreements provided for herein) by the Seller, and the consummation by the Seller of all transactions contemplated hereby, has been duly authorized by all requisite corporate and shareholder action. This Agreement and all such other agreements and obligations entered into and undertaken in connection with the transactions contemplated hereby to which the Seller is a party constitutes the valid and legally binding obligations of the Seller, enforceable against it, in accordance with their respective terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally. The execution, delivery and performance by the Seller of this Agreement and the agreements provided for herein, and the consummation by the Buyer of the transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to the Seller; (b) violate the provisions of the Certificate of Incorporation or Bylaws of the Seller; (c) violate any judgment, decree, order or award of any court, governmental body or arbitrator; or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of the Seller pursuant to, any indenture, mortgage, deed of trust or other instrument or agreement to which any of them is a party or by which any of them or any of their properties is or may be bound, other than with respect to obligations of Seller which will be discharged at or prior to Closing. Schedule 2.2 attached hereto sets forth a true, correct and complete list of all consents, approvals, permissions, licenses, authorizations and other requirements prescribed by law, rule, regulation or by contract in connection with the - 9 - consummation by the Seller of the transactions contemplated by this Agreement. Except as indicated on Schedule 2.2, all such items have been obtained and satisfied. 2.3 Ownership of the Assets. Schedule 2.3 attached hereto sets forth a true, correct and complete list of all claims, liabilities, liens, pledges, charges, encumbrances and equities of any kind affecting their respective Assets (collectively, the "Encumbrances"). The Seller is the true and lawful owner of the Assets, and has the right to sell and transfer to the Buyer good and marketable title to all Assets, which are free and clear of all Encumbrances. The delivery to the Buyer of the instruments of transfer of ownership contemplated by this Agreement will vest good and marketable title to all Assets in the Buyer, free and clear of all liens, mortgages, pledges, security interests, restrictions, prior assignments, encumbrances and claims of any kind or nature whatsoever. The Assets to be conveyed to the Buyer hereunder constitute all properties, assets, rights and claims which are necessary to the conduct of the Business as currently conducted by the Seller. 2.4 Financial Statements. -------------------- (a) The Seller has previously delivered to the Buyer its audited balance sheets as of December 31, 1996 and 1997, and the related statements of operations, shareholders' equity and changes in financial position of the Seller for the fiscal years then ended (collectively, the "Audited Financial Statements"). As promptly as possible following the Closing, but in no event later than sixty (60) days following the Closing, the Seller shall deliver to the Buyer an unaudited balance sheet as of February 28, 1998, and the related statements of operations, shareholders' equity and changes in financial position of the Seller for each of the months ended January 31, 1998 and February 28, 1998, respectively (collectively, the "Unaudited Financial Statements" and, together with the Audited Financial Statements, the "Financial Statements"). The Financial Statements have been prepared in accordance with generally accepted accounting principles applied consistently with past practice. (b) The Financial Statements are accurate and complete, and fairly present, as of their respective dates, the financial condition, retained earnings (deficit), assets and liabilities of the Seller and the results of operations of the Seller's business for the periods indicated. Nothing has come to the attention of the Seller since the date of the Financial Statements which would lead it to believe that the reserves and accruals shown thereon are inadequate for all reasonably anticipated losses, costs and expenses and the Seller reasonably believes that such reserves and accruals are adequate for all of such losses, costs and expenses. (c) Schedule 2.4(c) attached hereto sets forth Adjusted EBITDA (as defined below) for the twelve-month period ended December 31, 1997. (d) For purposes of this Agreement, "Adjusted EBITDA" shall mean the Seller's audited earnings before interest, taxes, depreciation and amortization, plus annual remuneration in excess of $500,000 paid by the Seller to the Shareholder (provided such remuneration is paid to the Shareholder as compensation in the normal course of performance of - 10 - his duties as an employee, officer and director of the Seller), plus certain non-recurring, non-operating expenses as shall have been approved by the Buyer. 2.5 Litigation. Except as set forth on Schedule 2.5, the Seller is not a party to, or to the Selling Parties' best knowledge threatened with, and none of the Assets are subject to, any litigation, suit, action, investigation (to the best of the Selling Parties' knowledge), grievance, arbitration, proceeding, or controversy or claim before any court, administrative agency or other governmental authority relating to or affecting the Assets or the business, properties, condition (financial or otherwise) or prospects of the Business. The Seller is not in violation of or in default with respect to any judgment, order, award, writ, injunction, decree or rule of any court, governmental department, commission, agency, instrumentality, arbitrator, administrative agency or governmental authority or any regulation of any administrative agency or governmental authority, where such violation or default would have a material adverse effect upon the Assets, the business, properties, condition (financial or otherwise) or prospects of the Business or the consummation of the transactions contemplated hereby. The Seller has not received notice of any product liability claim, warranty claim or other claim whatsoever which, if decided adversely, would have a material adverse effect on the Assets or the business, condition (financial or otherwise), properties or prospects of the Business. 2.6 Insurance. Schedule 2.6 sets forth a true, correct and complete list of all fire, theft, casualty, general liability, workers compensation, business interruption, environmental impairment, product liability, automobile and other insurance policies insuring the Assets or business of the Business and of all life insurance policies maintained for any employees of the Business, specifying the type of coverage, the amount of coverage, the premium, the insurer and the expiration date of each such policy (collectively, the "Insurance Policies") and all claims made under such Insurance Policies since January 1, 1993. True, correct and complete copies of all of the Insurance Policies have been previously delivered by the Seller to the Buyer. The Insurance Policies are in full force and effect and are in amounts and of a nature which are adequate and customary for the business of the Business. All premiums due on the Insurance Policies or renewals thereof have been paid and there is no default under any of the Insurance Policies. Except as set forth on Schedule 2.6, the Seller has not received any notice or other communication from any issuer of the Insurance Policies canceling or materially amending any of the Insurance Policies, materially increasing any deductibles or retained amounts thereunder, or materially increasing the annual or other premiums payable thereunder, and, to the best knowledge of the Selling Parties, no such cancellation, amendment or increase of deductibles, retainers or premiums is threatened. 2.7 Inventory. Schedule 2.7 sets forth a true, correct and complete list of the Inventory as of the date hereof, including a description and valuation thereof. At the Closing, the Inventory will consist of items of a quality and quantity which are usable or saleable, without discount and at values at least equal to the values indicated on the latest balance sheet included in the Financial Statements, in the ordinary course of business, except as otherwise reserved or provided for in accordance with the procedures set forth on Schedule 2.7, conducted by and - 11 - within the normal operating cycle of the Business. At the Closing, the value of all items of obsolete materials, excess quantities of materials and of materials of below standard quantity will be reserved for in accordance with the procedures set forth in Schedule 2.7, and to the extent not inconsistent, with generally accepted accounting principles. 2.8 Fixed Assets. Schedule 2.8 sets forth a true, correct and complete list of all Fixed Assets as of the date hereof, including a description and the cost and accumulated depreciation on an aggregate basis with respect to all Fixed Assets. Except as set forth in Schedule 2.8, as of the date hereof, the Fixed Assets are in good condition and repair and are sufficiently operational (apart from ordinary wear and tear) to enable the Buyer to conduct the business in essentially the same manner in which it has heretofore been conducted by the Seller. 2.9 Leases. Schedule 2.9(a) attached hereto sets forth a true, correct and complete list as of the date hereof of all leases of real estate, identifying separately each ground lease, to which the Seller is a party as lessee or tenant or which the Seller uses in the operations of the Business. Schedule 2.9(b) attached hereto sets forth a list of all leases of real estate which the Buyer will assume pursuant to this Agreement (the "Leases"). True, correct and complete copies of the Leases, and all amendments, modifications and supplemental agreements thereto, have previously been delivered by the Seller to the Buyer. The Leases are in full force and effect, are binding and enforceable against each of the parties thereto in accordance with their respective terms and, except as set forth on Schedule 2.9(b) attached hereto, have not been modified or amended since the date of delivery to the Buyer. No party to any Lease has sent written notice to the other claiming that such party is in default thereunder, which default remains uncured. Except as set forth on Schedule 2.9(b) attached hereto, there has not occurred any event which would constitute a breach of or default in the performance of any material covenant, agreement or condition contained in any Lease by either party thereto, nor has there occurred any event which with the passage of time or the giving of notice or both would constitute such a breach or material default. The Seller is not obligated to pay any leasing or brokerage commission relating to any Lease and will not have any enforceable obligation to pay any leasing or brokerage commission upon the renewal or extension of any Lease. No material construction, alteration or other leasehold improvement work with respect to any of the Leases remains to be paid for or to be performed by any party under any Lease. Seller has fulfilled all material obligations required pursuant to the Leases to have been performed by Seller. None of the Leases imposes any restrictions that would materially interfere with the continued operation of the business as currently conducted on any of the properties that are the subject of the Leases. There is no pending or, to the best of the Selling Parties' knowledge, threatened eminent domain taking or condemnation that will or may affect any of the properties that are the subject of the Leases. 2.10 Change in Financial Condition and Assets. Since December 31, 1996, there has been no change which materially and adversely affects the Assets or the business, properties, condition (financial or otherwise) or prospects of the Business. The Selling Parties have no knowledge of any existing or threatened occurrence, event or development related to the Assets or the business, properties, condition (financial or otherwise) or prospects of the Business which - 12 - could have a material adverse effect on the Assets or the business, properties, condition (financial or otherwise) or prospects of the Business. 2.11 Accounts Receivable. Schedule 2.11 sets forth a true, correct and complete list of all Accounts Receivable, including an aging thereof as of the date hereof. All Accounts Receivable arose out of the sales of inventory or services in the ordinary course of business and are collectible in the values set forth on Schedule 2.11 net of the respective reserves shown on the latest balance sheet included in the Audited Financial Statements (which reserves are adequate and calculated consistent with past practice). Except as set forth on Schedule 2.11, there is no contest, claim, or right of set-off, other than returns in the ordinary course of business, under any contract or agreement with any account debtor of an Account Receivable relating to the amount or validity of such Account Receivable. 2.12 Books and Records. The general ledgers, minute books and books of account of the Seller with respect to the Business, all federal, state, local and foreign income, franchise, property and other tax returns filed by the Seller, with respect to the Assets, and all other books and records of the Seller with respect to the Business, all of which have been made available to the Buyer, are in all material respects complete and correct and have been maintained in accordance with good business practice and in accordance with all applicable procedures required by laws and regulations other than any digression from such practice and procedures which has no material and adverse effect on the Assets or the Business, or the valuations thereof for the purposes of this Agreement, as conducted as of and prior to the date hereof. 2.13 Contracts and Commitments. ------------------------- (a) Schedule 2.13(a) attached hereto contains a true, complete and correct list and description of the following contracts and agreements, whether written or oral, which relate to the Business: (i) all loan agreements, indentures, mortgages and guaranties to which the Seller is a party or by which the Seller or its property is bound; (ii) all pledges, conditional sale or title retention agreements, security agreements, equipment obligations, personal property leases and lease purchase agreements relating to any of the Assets to which the Seller is a party or by which the Seller or any of its property is bound; (iii)all contracts, agreements, commitments, purchase orders (other than merchandise deliveries to customers in the normal course of business upon standard terms) or other understandings or arrangements to which the Seller is a party or by which any of their respective property is bound which (A) involve payments or receipts by any of them of more than $10,000 in the case of any single contract, agreement, commitment, understanding or arrangement under which full performance (including payment) has not been rendered by all - 13 - parties thereto or (B) may materially adversely affect the condition (financial or otherwise) or the properties, Assets, business or prospects of the Business; (iv) all collective bargaining agreements, employment and consulting agreements, non-competition agreements, trust agreements, executive compensation plans, bonus, 401(k), or profit-sharing plans, deferred compensation agreements, pension plans, retirement plans, employee stock option or stock purchase plans and group life, health and accident insurance and other employee benefit plans, agreements, memoranda of understanding, arrangements or commitments to which the Seller is a party or by which the Seller or any of its property is bound; (v) all agency, distributor, sales representative and similar agreements to which the Seller is a party; (vi) all contracts, agreements or other understandings or arrangements, whether written or oral, between the Seller and any shareholder, employee, officer or director of the Seller which may affect the Business as conducted as of and prior to the date hereof or the Assets; (vii)all leases, whether operating, capital or otherwise, under which the Seller is lessor or lessee, including, without limitation, all equipment leases; (viii)all contracts, agreements and other documents or information relating to past disposal of waste (whether or not hazardous) which are available; (ix) all return policies and product warranties relating to products or goods manufactured or distributed by the Business as the same are currently in effect or may have been in effect from time to time since December 31, 1996, as well as any exception to such policies, all cooperative advertising arrangements and all rebate, discount or allowance arrangements; (x) all contracts related to operation, maintenance or management of the leased facilities under any Leases (the "Leased Premises") other than immaterial contracts which do not constitute a part of Assumed Liabilities; and (xi) any licensing agreements, franchise agreements and other material agreement or contract entered into by the Seller. (b) Schedule 2.13(b) attached hereto sets forth a true, correct and complete list of the contracts and agreements, whether written or oral, which are to be assigned from the Seller to the Buyer at the Closing (collectively, the "Contracts"). - 14 - (c) Except as set forth on Schedule 2.13(c), the continuation, validity and effectiveness of each Contract would not be affected by the transfer thereof to the Buyer under this Agreement and all such Contracts are assignable to the Buyer without a consent and: (i) each Contract is a valid and binding agreement of the Seller, enforceable against the Seller in accordance with its terms, and the Selling Parties have no knowledge that any Contract is not a valid and binding agreement of the other parties thereto: (ii) the Seller has fulfilled all material obligations required pursuant to the Contracts to have been performed by it prior to the date hereof; (iii)the Seller is not in breach of or default under any Contract, and no event has occurred which with the passage of time or giving of notice or both would constitute such a default, result in a loss of rights or result in the creation of any lien, charge or encumbrance, thereunder or pursuant thereto (an "Inchoate Default"); and (iv) to the best knowledge of the Selling Parties, there is no existing breach or default by any other party to any Contract, and no Inchoate Default. (d) True, correct and complete copies of all of the foregoing contracts and agreements (other than all unfilled purchase orders and all unfilled customer orders), including but not limited to the Contracts, and a list of all unfilled purchase orders and all unfilled customer orders, have been delivered by the Seller to the Buyer prior to the date hereof. 2.14 Compliance with Laws. The Seller has all requisite licenses, permits and certificates, including health and safety permits, from federal, state, local and foreign authorities necessary to conduct the Business and own and operate the Assets (collectively, the "Permits"). Schedule 2.14 sets forth a true, correct and complete list of all such Permits, copies of which previously have been delivered by the Seller to the Buyer. The Seller has not engaged in any activity which would cause or, to the knowledge of the Selling Parties, permit revocation or suspension of any such Permit and no action or proceeding looking to or contemplating the revocation or suspension of any such Permit is pending or threatened. There are no existing defaults or Inchoate Defaults by the Seller under any Permit. The Selling Parties have no knowledge of any default or claimed or purported or alleged default or Inchoate Defaults on the part of any party in the performance of any obligation to be performed or paid by any party under any Permit. Except as set forth in Schedule 2.14, the consummation of the transactions contemplated by this Agreement will in no way affect the continuation, validity or effectiveness of the Permits or require the consent of any third party under any such Permit. The Seller is not in violation of any law, regulation or ordinance (including but not limited to laws, regulations or ordinances relating to building, zoning, land use or similar matters) relating to its properties, the violation of which could have a material adverse effect on the Assets or the business, properties, condition (financial or otherwise) or prospects of the Seller. The business of the Seller does not violate, in any material respect, and the Seller is not in violation of, any federal, state, local or foreign laws, regulations or orders, the violation or enforcement of which would have a material - 15 - and adverse effect on the Assets, business, properties, condition (financial or otherwise) or prospects of the Seller. Except as set forth on Schedule 2.14, the Seller has not received any notice or communication from any federal, state, foreign, or local governmental or regulatory authority or otherwise of any such violation or noncompliance and has not received any notice prior to such time of any violation that has not been cured. 2.15 Employee Relations. ------------------ (a) The Seller is in compliance with all material federal, state, local and foreign laws respecting employment and employment practices, terms and conditions of employment, and wages and hours, and is not engaged in any unfair labor practice, and there are no arrears in the payment of wages or taxes or workers compensation assessments or penalties. (b) Except as set forth on Schedule 2.15: (i) none of Seller's Employees are represented by any labor union; (ii) there is no unfair labor practice complaint against the Seller pending before the National Labor Relations Board or any state, foreign, or local agency affecting the Seller; (iii)there is no pending labor strike or other material labor trouble affecting the Seller (including but not limited to any organizational campaign); (iv) there is no material labor grievance pending against or affecting the Seller; (v) there is no pending organizing activities respecting the Seller's Employees; (vi) there are no pending arbitration proceedings arising out of or under any collective bargaining agreement to which the Seller is a party, or to the best knowledge of the Selling Parties, any basis for which a claim may be made under any collective bargaining agreement to which the Seller is a party affecting the Seller's Employees; and (vii)there is no pending litigation, or other proceeding or basis for an unasserted claim against the Seller by any employee or group of employees or independent contractor or group of independent contractors which is based on claims arising out of any employee's or group of employees' employment relationship with the Seller or any independent contractor's or group of independent contractors' independent consulting relationship with the Seller (insofar as such relationship pertains to the Business of the Seller), including but not limited to claims for contract, tort, discrimination, employee benefits, commissions, wrongful termination, age discrimination, sexual harassment, sexual discrimination and any and all common law or statutory claims. - 16 - (c) The Seller has not violated the Worker Adjustment and Retraining Notification Act, 29 U.S.C. Sections 2101-09 (the "WARN Act") or any similar state or local law. Except as set forth on Schedule 2.15, since July 1, 1997, the Seller has not terminated any employees. 2.16 Absence of Certain Changes or Events. Except as set forth on Schedule 2.16, since December 31, 1996, the Seller has not entered into any transaction which is not in the usual and ordinary course of business, and, without limiting the generality of the foregoing, the Seller has not: (a) Mortgaged, pledged or subjected to lien, charge or other encumbrance any of the Assets; (b) Sold or purchased, assigned or transferred any of its Assets (except for Inventory sold in the ordinary course of business); (c) Made any material amendment to or termination of any Contract or done any act or omitted to do any act which would cause the breach of any Contract; (d) Suffered any casualty losses, whether insured or uninsured, and whether or not in the control of the Seller, in excess of $25,000 in the aggregate, or waived any rights of any value unless such loss or waiver is reflected in the Financial Statements; (e) Authorized or issued recall notices for any of its products relating to the Business or initiated any safety investigations relating to the Business; or (f) Received notice of any litigation, warranty claim or products liability claims relating to the Business. 2.17 Customers. The Seller has heretofore provided to the Buyer a true, correct and complete list of the names and addresses of all customers of the Seller. None of the 30 customers which accounted for the largest dollar volume of purchases from the Seller for the twelve month periods ended December 31, 1996 and December 31, 1997, respectively, has notified the Seller that it intends to discontinue its relationship with the Seller nor, to the best of the Selling Parties' knowledge, does there exist any actual or threatened termination, cancellation or limitation of, or any modification or change in, the business relationship of the Seller with any such customer nor does there exist a present condition or state of facts or circumstances known to the Seller involving such customers which would materially adversely affect the Business or prevent the Buyer from conducting the Business after the consummation of the transactions contemplated by this Agreement in essentially the same manner in which it has heretofore been conducted by the Seller. The Seller has no consignment sales in effect as of the date hereof and no customer has any return rights except as set forth on Schedule 2.13(a). - 17 - 2.18 Suppliers. Schedule 2.18 sets forth a true, correct and complete list of the names and addresses of the ten suppliers of the Seller which accounted for the largest dollar volume of purchases by the Seller for the twelve month periods ended December 31, 1996 and December 31, 1997, respectively. The Seller is not a party to any requirements contract relating to the purchase of inventory, finished goods or other property used in the conduct of the Business. None of the Seller's suppliers has notified the Seller that it intends to discontinue its relationship with the Seller, nor raise its prices so as to materially adversely affect the Business nor, to the best of the Selling Parties' knowledge, does there exist any actual or threatened termination, cancellation or limitation of, or any modification or change in, the business relationship of the Seller with any such supplier, nor does there exist a present condition or state of facts or circumstances known to the Selling Parties involving such suppliers which would materially adversely affect the Business or prevent the Buyer from conducting the Business after the consummation of the transactions contemplated by this Agreement in essentially the same manner in which it has heretofore been conducted by the Seller. 2.19 Prepayments and Deposits. Except as set forth on Schedule 2.19, the Seller has no prepayments or deposits from customers for products to be shipped, or services to be performed, by the Seller after the date hereof. 2.20 Trade Names and Other Intangible Property. ----------------------------------------- (a) Schedule 2.20 attached hereto sets forth a true, correct and complete list and a description of all Intangible Property. True, correct and complete copies of all licenses and other agreements relating to the Intangible Property have been previously delivered by the Seller to the Buyer. The Selling Parties have no knowledge of any default or claimed or purported or alleged default or state of facts which with notice or lapse of time or both would constitute a default on the part of any party in the performance of any obligation to be performed or paid by any party under any such license or agreement. During the past five years the only name by which the Seller has been known or which the Seller has used is its corporate name set forth in the preamble of this Agreement. (b) Except as otherwise disclosed in Schedule 2.20 attached hereto, the Seller is the sole and exclusive owner, free and clear of all liens, claims and restrictions, of all Intangible Property and all designs, permits, labels and packages used on or in connection therewith. The Intangible Property owned by the Seller is sufficient to conduct the Business, as presently conducted. The Seller has received no notice of, and has no knowledge of any basis for, a claim against it that any of its operations, activities, products or publications infringes on any patent, trademark, trade name, copyright or other property right of a third party, or that it is illegally or otherwise using the trade secrets, formulae or any property rights of others. Except as otherwise disclosed in Schedule 2.20, the Seller (i) has no disputes with or claims against any third party for infringement by such third party of any trade name or other Intangible Property of the Seller, and (ii) is not obligated or under any liability whatsoever to make any payments by way of royalties, fees or otherwise to any owner or licensee of, or other claimant to, any patent, - 18 - trademark, trade name, copyright or other property right, with respect to the use thereof or in connection with the conduct of the Business or otherwise. The Seller has taken all steps reasonably necessary to protect its right, title and interest in and to the Intangible Property. Except as set forth in Schedule 2.20, the consummation of the transactions contemplated by this Agreement (including any required financing) will in no way affect the continuation, validity or effectiveness of the Intangible Property or require the consent of any third party in respect of the Intangible Property. 2.21 Employee Benefit Plans. ---------------------- (a) ERISA. Except as set forth on Schedule 2.21(a), neither the Seller nor any person, firm, corporation or entity which is (or within the past five years has been) a member with the Seller of a "controlled or affiliated group", within the meaning of Section 414(b), (c), (m), (n) or (o) of the Internal Revenue Code of 1986, as amended (the "Code"), has maintained, sponsored or contributed to any "pension plan" within the meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any "welfare plan" within the meaning of Section 3(1) of ERISA, or any other employee benefit plan, program, practice or arrangement, whether or not subject to ERISA (a "non-ERISA plan") (such pension plans, welfare plans and non-ERISA plans of the Seller being herein referred to as the "Employee Plans"). Except as set forth on Schedule 2.21(a), the Seller has provided the Buyer with a true, correct and complete copy of each pension plan, each welfare plan and each non-ERISA plan listed on such Schedule, together with a copy of the most recent summary plan description and annual report (if applicable) with respect to each such plan. Except as set forth on Schedule 2.21(a), each pension plan listed on such Schedule is a "qualified plan" within the meaning of Section 401 of the Code. Except as set forth on Schedule 2.21(a), each pension plan, each welfare plan and each non-ERISA plan listed on such Schedule has been administered in accordance with its terms, and each pension plan and welfare plan has been operated and administered in accordance with all applicable requirements of ERISA and the Code. Without limiting the generality of the foregoing, no trustee, administrator, sponsor, or other party-in-interest or disqualified person, has engaged or participated in any "prohibited transaction", as that term is defined in Section 4975(c)(1) of the Code, with respect to any pension plan or welfare plan listed on Schedule 2.21(a). Without limiting the generality of the foregoing, in connection with all welfare or non-ERISA plans which are subject to continuation coverage under Section 4980B of the Code, all notices and elections with respect to such coverage have been made in compliance with the requirements of Section 4980B. With respect to each "defined benefit pension plan", as defined in Section 3(35) of ERISA, identified on Schedule 2.21(a): (i) the fair market value of the assets thereof as of the date hereof is as set forth on such Schedule; (ii) the present value of all accrued benefits thereunder, determined as if such pension plan terminated on the date hereof, is as set forth on Schedule 2.21(a); (iii) if any such plan is a "multiemployer plan", as defined in Section 3(37) of ERISA, the present value of the contingent liability of the Seller both in the event of the termination of such plan and in the event that the Seller withdraws therefrom is as set forth on Schedule 2.21(a); (iv) no such plan has incurred an "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, and (v) no such pension - 19 - plan has terminated, nor has any "reportable event", within the meaning of Section 4043 of ERISA, occurred with respect to such plan. All contributions for all periods ending prior to the date hereof (including periods from the first day of the current plan year to the date hereof) will be made prior to the date hereof by the Seller in accordance with past practice with respect to pension plans, welfare plans and non-ERISA plans. All insurance premiums (including premiums to the Pension Benefit Guaranty Corporation) have been paid in full, subject only to normal retrospective adjustments in the ordinary course of business, with regard to applicable plans for policy years or other applicable policy periods ending on or before the date hereof. Except as set forth on Schedule 2.21(a), the Seller has no obligations or liabilities with respect to any unfunded post-retirement medical benefits as of the date hereof. (b) Claims and Litigation. Except as set forth on Schedule 2.21(b), to the best of the Selling Parties' knowledge, there are no threatened or pending claims, suits or other proceedings by present or former employees of Seller, plan participants, beneficiaries or spouses of any of the above, the Internal Revenue Service, the Pension Benefit Guaranty Corporation, or any other pension or entity involving any Employee Plan, including claims against the assets of any trust, involving any Employee Plan, or any rights or benefits thereunder, other than ordinary and usual claims for benefits to participants or beneficiaries, including claims pursuant to domestic relations orders and there is no basis for any legal action, proceeding or investigation with respect to such plans. 2.22 Leased Premises. --------------- (a) Schedule 2.22 contains a true, correct and complete list of address and legal description of all Leased Premises. (b) Except as set forth on Schedule 2.22, no work has been performed on or materials supplied to the Leased Premises within any applicable statutory period which could give rise to mechanics or materialmen's liens; all bills and claims for labor performed and materials furnished to or for the benefit of the Leased Premises for all periods prior to the Closing shall be paid in full, and the Selling Parties have no knowledge of any mechanic's or materialmen's liens, whether or not perfected, on or affecting any portion of the Leased Premises. (c) There is no pending or threatened condemnation or eminent domain proceeding with respect to the Leased Premises. (d) Except as set forth on Schedule 2.22, there are no taxes or betterment or special assessments other than ordinary real estate taxes pending or payable against the Leased Premises and there are no contingencies existing under which any assessment for real estate taxes may be retroactively filed against the Leased Premises; the Selling Parties have no knowledge of any proposed special assessment that may affect the Leased Premises or any part thereof; there are no penalties due with respect to real estate taxes and/or impositions, and all real estate taxes and/or impositions (excepting those for the current year that are not yet due and payable) with - 20 - respect to the Leased Premises have been paid in full; there are no taxes or levies, permit fees or connection fees which must be paid respecting existing curb cuts, sewer hookups, water-main hookups or services of a like nature. (e) The Leased Premises comply with the requirements of all building, zoning, subdivision, health, safety, environmental, pollution control, waste products, sewage control and all other applicable statutes, laws, codes, ordinances, rules, orders, regulations and decrees (collectively, the "Government Regulations") of any and all government agencies. To the extent set forth in Schedule 2.14, the Seller has obtained and provided to the Buyer all consents, permits, licenses and approvals required by such Government Regulations, such consents, permits, licenses and approvals are in full force and effect, have been properly and validly issued, and on or prior to the date hereof will be assigned to the Buyer by the Seller to the extent the same are assignable. Except as set forth in Schedule 2.14, there is no uncured breach of any condition or requirement imposed by, or pursuant to, any permit or license issued with respect to the Leased Premises. There is no action pending or, to the best of the Selling Parties' knowledge, threatened by any government agencies claiming that the Leased Premises violates such Government Regulations or threatening to shut down the Business or the use of the Assets or to prevent the Assets from being used as presently used. (f) Except as set forth on Schedule 2.22, there are no actions, suits, petitions, notices or proceedings pending, given or, to the best of the Seller's knowledge, threatened by any persons or government agencies before any court, government agencies or instrumentalities, administrative or otherwise, which if given, commenced or concluded would have a material adverse effect on the value, occupancy, use or operation of the Leased Premises. (g) The structural components of all of the buildings located on the Leased Premises are in good condition and repair, normal wear and tear excepted. (h) The Selling Parties (i) have not received notice and (ii) have no knowledge of the existence of any outstanding notice: (A) from any federal, state, county, municipal or foreign authority alleging any health, safety, pollution, environmental, zoning or other violation of law with respect to the Leased Premises or any part thereof that has not been entirely corrected; or (B) from any insurance company or bonding company with respect to any defects or inadequacies in the Leased Premises or any part thereof that would adversely affect the insurability of same or cause the imposition of extraordinary premiums or charges therefor or any termination or threatened termination of any policy of insurance or bond relating thereto. 2.23 Bank Accounts; Securities. Set forth in Schedule 2.23 is a list of all bank accounts, safe deposit boxes, money market funds, certificates of deposit, stocks, bonds, notes - 21 - and other securities in the names of or owned or controlled by the Seller, all of which are included in the Assets. 2.24 Disclosure. No representation or warranty by the Selling Parties in this Agreement or in any Exhibit hereto, or in any list, statement, document or information set forth in or attached to any Schedule delivered or to be delivered pursuant to this Agreement, contains or will contain any untrue statement of a material fact or omits or will omit any material fact necessary in order to make the statements contained therein not misleading. The Selling Parties have disclosed to the Buyer all material facts pertaining to the transactions contemplated by this Agreement. 2.25 Brokers. Except for the fees owed by the Seller to Swarthmore Associates, all negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by the Seller without the intervention of any other person in such manner as to give rise to any valid claim for a finder's fee, brokerage commission or other like payment. 2.26 Preservation of Assets. Except as set forth on Schedule 2.26, the Seller has not sold, assigned or transferred any of the Assets, other than in the ordinary course of business, or declared or paid any dividend or other distribution in respect of shares of capital stock or made any purchase, redemption or other acquisition, directly or indirectly, of any outstanding shares of its capital stock, since January 1, 1996. 2.27 Environmental Compliance. ------------------------ (a) The Seller has obtained all permits, licenses and other authorizations required under Federal, state and local laws, relating to protection of the Environment (as defined below), including laws relating to any Release (as defined below) of or presence of pollutants, contaminants, or hazardous or toxic materials or wastes into or in soil, surface waters, groundwaters, land, stream sediments, surface or subsurface strata, ambient air, and/or any environmental medium (the "Environment") or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants or hazardous or toxic materials or waste. Schedule 2.27 hereto sets forth a complete and accurate list of all such permits, licenses and other authorizations obtained by the Seller, copies of which have been delivered to the Buyer. The Seller is in full compliance with all terms and conditions of such permits, licenses and other authorizations. To the best of the Selling Parties' knowledge, except as set forth on Schedule 2.27, there are no proposed or pending changes in the federal, state, county or local laws, regulations, standards, or in the Seller's permits, licenses or authorizations relating to pollution or protection of the Environment that would increase the present costs of compliance with such laws or change any methods of operation. (b) Except as indicated on Schedule 2.27 neither the Seller has, and, to the best of the Selling Parties' knowledge, after due inquiry, none of the Seller's employees, agents, contractors or subcontractors have, used, generated, processed, stored, transported, recycled, Released or otherwise handled any Hazardous Materials (as defined below) except as permitted - 22 - by law on or about any real property related to the Seller's business or the Seller's contractual relations with any such agents, contractors or subcontractors, including, but not limited to, real property formerly owned by the Seller (collectively, the "Seller Real Property") and the facilities now or formerly leased or operated by the Seller (collectively, the "Seller Facilities"). Additionally, except as indicated on Schedule 2.27, neither the Seller Facilities nor the Seller Real Property is being used or has ever previously been used for the generation, use, processing, storage, transportation, recycling, Release or handling of any Hazardous Materials, except as such use may have been permitted by law. In addition, except as indicated on Schedule 2.27, neither the Seller Facilities nor the Seller Real Property has ever been affected by any Hazardous Materials Contamination or Environmental Condition. The Seller, in the conduct of its business, is and has been in compliance with all Environmental Laws. Notwithstanding any statement or representation to the contrary in any affidavit or other document, the Seller affirmatively represents that as of the date hereof, the Seller has made all filings required by RCRA and that there have been no failures by the Seller to timely report under CERCLA ss. 103 or RCRA ss. 304. The Seller has not received any written notice from any governmental authority or any other person respecting or related to any actual, threatened or potential Release or presence of any Hazardous Materials or any non-compliance with any Environmental Laws as to which any such claimed noncompliance presently exists. Notwithstanding the preceding sentence, the Seller has not received any notice from any governmental authority respecting noncompliance with RCRA. No investigation, administrative proceeding, consent order or agreement, limitation or settlement with respect to Hazardous Materials, Hazardous Materials Contamination or Environmental Condition is, to the best of the Selling Parties' knowledge, proposed, threatened, anticipated or in force with respect to its business, nor has such property ever been on any Federal or state "Superfund" or "Super Lien" list. As used in this Section 2.27, "due inquiry" shall mean that Selling Parties have made inquiry of all of Seller's executives, corporate officers and directors and any employee or agent of Seller with responsibility for environmental matters. As used herein "Hazardous Materials" include any (i) "Hazardous Waste" as defined by The Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), as amended from time to time ("RCRA"), and regulations promulgated thereunder; and "Hazardous Substance" as defined by The Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.), as amended from time to time ("CERCLA"), and regulations promulgated thereunder; (ii) asbestos; (iii) polychlorinated biphenyls; (iv) any substance, the presence of which on the premises of the Seller's business, is prohibited by applicable law; (v) oil, petroleum or any petroleum products or by-products; (vi) any other substance which, according to applicable law, requires special handling or notification of any Federal, state or local governmental entity in its collection, processing, handling, storage, transport, treatment or disposal or exposure thereto; (vii) any substance, which if not properly disposed of, may pollute, contaminate, harm or have any detrimental effect on the Environment; (viii) underground storage tanks, whether empty, filled or partially filled with any substance; and (ix) any other pollutant, toxic substance, hazardous substance, hazardous waste, hazardous - 23 - material or hazardous substance as regulated by or defined in or pursuant to any Environmental law or any other Federal, state, or local environmental law, regulation, ordinance, rule, or by-law, whether existing on or prior to the date hereof. As used herein, "Hazardous Materials Contamination" shall mean, with respect to any premises, building or facilities or, the Environment, contamination by a Release or the presence of Hazardous Materials. As used herein, "Environmental Condition" shall mean any condition with respect to the Environment on or off the Seller Real Property and Seller Facilities, whether or not yet discovered, which could or does result in any damage, loss, cost, expense, claim, demand, order, or liability to or against the parties hereto by any third party (including, without limitation, any government entity), including, without limitation, any condition resulting from the operation of Seller's business and/or the operation of the business of any other property owner or operator in the vicinity of the Seller Real Property and Seller Facilities and/or any activity or operation formerly conducted by any person or entity on or off the Seller Real Property and Seller Facilities. As used herein, "Release" shall mean any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing. As used herein, "Environmental Laws" shall mean any environmental or health and/or safety-related law, regulation, rule, ordinance, or by-law at the Federal, state, or local level, whether existing as of the date hereof, previously enforced, or subsequently enacted, including but not limited to: (i) Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USCA 601 et seq.; (ii) Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 USCA 6901 et seq.; (iii) Federal Water Pollution Control Act of 1972 as amended by the Clean Water Act of 1977, as amended, 33 USCA 1251 et seq.; (iv) Toxic Substances Control Act of 1976, as amended, 15 USCA 2601 et seq.; (v) Emergency Planning and Community Right-to-Know Act of 1986, 42 USCA 11001 et seq.; (vi) Clean Air Act of 1966, as amended by the Clean Air Act of 1986, as amended by the Clean Air Act Amendments of l990, 42 USCA 7401 et seq.; (vii) National Environmental Policy Act of 1970, as amended, 42 USCA 4321 et seq.; (viii) Rivers and Harbors Act of 1970, as amended, 33 USCA 401 et seq.; (ix) Endangered Species Act of 1973, as amended, 16 USCA 1531, et seq; (x) Occupational Safety and Health Act of 1970, as amended, 29 USCA 651 et seq.; (xi) Safe Drinking Water Act of 1974, as amended, 42 USCA 300 et seq., and any other federal, state, or local law, regulation, rule, ordinance or order currently in existence which governs: (i) the existence, cleanup and/or remediation of toxic or Hazardous Materials; - 24 - (ii) the Release, emission, discharge or presence of Hazardous Materials into or in the Environment; (iii)the control of Hazardous Materials; or (iv) the use, generation, transport, treatment, storage, disposal, removal or recovery of Hazardous Materials. 2.28 Purchase for Investment. The Shareholder represents that he is an "accredited investor", within the meaning of Regulation D under the Securities Act of 1933, as amended (the "1933 Act"), and is acquiring the Unidigital Stock and the Note (collectively, the "Securities") for his own account, for investment purposes only, and not with a view to the resale or distribution of all or any part thereof. The Shareholder has not offered or sold any portion of the Securities and has no present plan or intention of dividing such Securities with others or reselling or otherwise disposing of any portion of the Securities, either currently or after the passage of a fixed or determinable period of time, or upon the occurrence or nonoccurrence of any predetermined event or circumstance. The Shareholder agrees not to distribute or to transfer any of the Securities in the United States except in compliance with all applicable United States federal and state securities laws. The Shareholder further recognizes that the Securities will not be registered under the 1933 Act or the securities laws of any state, and the transfer of the same will be restricted under such laws, and the Securities cannot be sold except pursuant to an effective registration statement under such laws or an available exemption from such registration, and the certificates or instruments representing the Securities will bear a legend to such effect. The Shareholder acknowledges and understands that Unidigital is under no obligation to register the Securities; provided, however, that, subject to the approval of the lead managing underwriter, the Company agrees to use its reasonable and commercial efforts to register a portion of the Shareholder's Unidigital Stock on a pro-rata basis (based on the total number of shares of Common Stock to be sold by the Shareholder and any other selling shareholders compared to the total number of shares of Common Stock owned by such selling shareholders) in any underwritten public offering which includes other selling shareholders of the Company. Except as otherwise provided herein, the Shareholder agrees not to distribute or to transfer any of the Unidigital Stock within two years after the date hereof. The Shareholder is aware of Unidigital's business affairs and financial condition, has had the opportunity to ask questions of Unidigital's management with respect to its business affairs and financial condition and has acquired sufficient information (including, but not limited to, Unidigital's Form 10-KSB for the fiscal year ended August 31, 1997, Unidigital's 1997 annual report, Unidigital's 1997 proxy statement and Unidigital's Form 10-QSB for the quarter ended November 30, 1997) about Unidigital to reach an informed and knowledgeable decision to acquire the Securities. The Shareholder acknowledges that, upon consummation of the transactions contemplated hereby, he will be deemed an "affiliate" of Unidigital as such term is defined under the 1933 Act and, as an affiliate of Unidigital, he will be subject to the reporting and legal requirements under Sections 13 and 16 of the Securities Exchange Agreement of 1934, as amended (the "1934 Act"). - 25 - 2.29 Solvency. The Seller is not now insolvent, and will not be rendered insolvent by any of the transactions contemplated by this Agreement. In addition, immediately after giving effect to the consummation of the transactions contemplated by this Agreement, (i) the Seller will be able to pay its debts as they become due, (ii) the property of the Seller does not and will not constitute unreasonably small assets, and the Seller will not have unreasonably small assets and will not have insufficient assets with which to conduct its present or proposed business, and (iii) taking into account all pending and threatened litigation, final judgments against the Seller in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, the Seller will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered) as well as all other obligations of the Seller. The cash available to the Seller, after taking into account all other anticipated uses of the cash of the Seller, will be sufficient to pay all such judgments promptly in accordance with their terms. As used in this Section 2.29, (x) "insolvent" means that the sum of the present fair saleable value of the Seller's assets does not and will not exceed the Seller's debts and other probable liabilities, and (ii) the term "debts" includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent, disputed or undisputed or secured or unsecured. 3. Representations of the Buyer and Unidigital Representations and warranties made by the Buyer and Unidigital herein or in any instrument or document furnished in connection herewith shall survive the Closing until (and including) the second anniversary of the date hereof. The Buyer and Unidigital represent and warrant to the Seller as follows: 3.1 Organization and Authority. Each of the Buyer and Unidigital is duly organized and validly existing and in good standing under the laws of the state of Delaware, and has requisite power and authority to own its properties and to carry on its business as now being conducted. Each of the Buyer and Unidigital has full power to execute and deliver this Agreement, and the Assumption Agreement and to consummate the transactions contemplated hereby and thereby. 3.2 Authorization. The execution and delivery of this Agreement by the Buyer and Unidigital and the agreements provided for herein to which each is a party, and the consummation by the Buyer and Unidigital of all transactions contemplated hereby, have been duly authorized by all requisite corporate action. This Agreement and all such other agreements and written obligations entered into and undertaken in connection with the transactions contemplated hereby constitute the respective valid and legally binding obligations of the Buyer and Unidigital, enforceable against them in accordance with their respective terms except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors rights generally. The execution, delivery and performance of this Agreement and the agreements provided for herein, and the consummation by the Buyer and Unidigital of the - 26 - transactions contemplated hereby and thereby, will not, with or without the giving of notice or the passage of time or both, (a) violate the provisions of any law, rule or regulation applicable to the Buyer or Unidigital; (b) violate the provisions of the organizational documents of the Buyer or Unidigital; (c) violate any judgment, decree, order or award of any court, governmental body or arbitrator applicable to the Buyer or Unidigital; or (d) conflict with or result in the breach or termination of any term or provision of, or constitute a default under, or cause any acceleration under, or cause the creation of any lien, charge or encumbrance upon the properties or assets of the Buyer or Unidigital pursuant to, any indenture, mortgage, deed of trust or other agreement or instrument to which it or its properties is a party or by which the Buyer or Unidigital is or may be bound. Schedule 3.2 attached hereto sets forth a true, correct and complete list of all consents and approvals of third parties that are required of the Buyer and Unidigital in connection with the consummation by the Buyer and Unidigital of the transactions contemplated by this Agreement. 3.3 Regulatory Approvals. All consents, approvals, authorizations and other requirements prescribed by any law, rule or regulation which must be obtained or satisfied by the Buyer and Unidigital and which are necessary for its consummation by the Buyer and Unidigital of the transactions contemplated by this Agreement have been obtained and satisfied. 3.4 Brokers. Except for the fees owed by Unidigital to CIBC Oppenheimer Corp., all negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by the Buyer and Unidigital without the intervention of any other person in such manner as to give rise to any valid claim for a finder's fee, brokerage commission or other like payment. 4. Access to Information; Public Announcements ------------------------------------------- 4.1 Confidentiality. All information not previously disclosed to the public or not generally known to persons engaged in the business of the Seller or the Buyer which shall have been furnished by the Buyer or the Seller to the other party in connection with the transactions contemplated hereby shall not be disclosed by such receiving party to any person other than their respective employees, directors, attorneys, accountants or financial advisors or other than as contemplated herein. In the event that the transactions contemplated by this Agreement shall not be consummated, all such information which shall be in writing shall be returned to the party furnishing the same, including, to the extent reasonably practicable, all copies or reproductions thereof which may have been prepared, and neither party shall at any time thereafter disclose to third parties, or use, directly or indirectly, for its own benefit, any such information, written or oral, about the business of the other party hereto. 4.2 Public Announcements. Except as otherwise required by law or government regulation, any public announcement, press release or similar publicity with respect to this Agreement or the transactions contemplated hereby shall be issued, if at all, at such time and in such manner as the Buyer and the Seller mutually determine. Unless consented to by the Buyer in advance or required by applicable law, the Selling Parties shall keep this Agreement strictly - 27 - confidential and may not make any disclosure related to this Agreement to any person. The Selling Parties and the Buyer shall consult with each other concerning the means by which the Seller's Employees, customers, suppliers and others having a business relationship with the Selling Parties will be informed of the transactions contemplated hereby, and the Buyer shall have the right to be present for any such communication. The Seller hereby acknowledges that this Agreement may be filed by Unidigital as an exhibit to certain registration statements and/or reports filed by it pursuant to the 1933 Act or the 1934 Act. 5. Employee Matters 5.1 Seller's Employees. The Seller has furnished to the Buyer a list containing the names of Seller's Employees, including each such employee's status, social security number and current compensation. 5.2 Future Changes. Nothing in this Section 5 shall require the Buyer to retain any of Seller's Employees for any period of time after the date hereof. Subject to requirements of applicable law, the Buyer reserves the right at any time after the date hereof to terminate such employment and amend, modify or terminate any term or condition of employment, including without limitation, any employee benefit plan, program, policy, practice or arrangement. 5.3 Plant Closing. None of the Selling Parties has, directly or indirectly, taken or omitted to take any action which may result in the Seller's or the Buyer's liability to any person or entity under the WARN Act. The term "any action" does not include the sale and acquisition contemplated by this Agreement. The liability under the WARN Act, if any, which results from the Seller's termination of employees in connection with such sale and acquisition is the sole responsibility of the Seller. 5.4 Reporting of Data. The Buyer and the Seller shall compile and furnish to each other such actuarial and employee data as shall be required from time to time for each party to perform and fulfill its obligations under this Section 5. 5.5 Pending Litigation. With respect to any litigation pending, or to the knowledge of the Selling Parties threatened, as set forth in Schedule 2.15 hereto, which claim alleges violation of any nondiscrimination laws, collective bargaining agreements, employment contract and termination thereof or wage and hour laws, the Seller shall fully defend such claim. The Seller shall be responsible for any monetary damages awarded in connection therewith. It is understood by the parties that if the Seller chooses to settle any matter relating to any of the foregoing, including the terms and conditions thereof of any back pay claims, such settlement shall be at the sole discretion of the Seller and the Seller shall be solely responsible for the payment or performance of any such settlement terms. - 28 - 6. Best Efforts to Obtain Satisfaction of Conditions ------------------------------------------------- The Selling Parties and the Buyer covenant and agree to use their best efforts to obtain the satisfaction of the conditions specified in this Agreement. 7. Conditions to Obligations of the Buyer -------------------------------------- The obligations of the Buyer under this Agreement are subject to the fulfillment, at the Closing, of the following conditions precedent, each of which may be waived in writing in the sole discretion of the Buyer: 7.1 Continued Truth of Representations and Warranties of the Selling Parties: Compliance with Covenants and Obligations. The representations and warranties of the Selling Parties shall be true in all material respects on and as of the date hereof. The Seller shall have performed and complied in all material respects with all covenants required by this Agreement to be performed or complied with by it prior to or at the date hereof. 7.2 Corporate and Shareholder Proceedings. All corporate and other proceedings required to be taken on the part of the Seller to authorize or carry out this Agreement and to convey, assign, transfer and deliver the Assets shall have been taken. 7.3 Other Governmental Approvals. All courts of law, governmental agencies, departments, bureaus, commissions and similar bodies, the consent, authorization or approval of which is necessary under any applicable law, rule, order or regulation for the consummation by the Seller of the transactions contemplated by this Agreement and the operation of the Seller's business by the Buyer, shall have consented to, authorized, permitted or approved such transactions including but not limited to, all clearance certificates required pursuant to any applicable retail sales tax legislation required in connection with the completion of the transactions contemplated herein. 7.4 Consents of Lenders, Lessors and Other Third Parties. The Seller shall have received the consents and approvals of all lenders, lessors and other third parties whose consent or approval is required in order for the Seller to consummate the transactions contemplated by this Agreement. 7.5 Adverse Proceedings. No action or proceeding by or before any court or other governmental body shall have been instituted by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might affect the right of the Buyer to own or use the Assets after the Closing. - 29 - 7.6 Opinion of Counsel. The Buyer shall have received an opinion of Kantor Davidoff Wolfe Mandelker & Kass, counsel to the Seller, dated as of the date hereof, substantially in the form attached hereto as Exhibit E (the "Opinion of Seller's Counsel"). 7.7 Board of Directors and Shareholder Approval. The directors and shareholders of the Seller shall have duly authorized the transactions contemplated by this Agreement. 7.8 Title to Assets. At the Closing, the Buyer shall receive good and marketable title to all Assets, free and clear of all liens, mortgages, pledges, security interests, restrictions, prior assignments, encumbrances and claims of any kind or nature whatsoever. 7.9 Environmental Reports; Compliance with Laws. The Buyer shall not have received unsatisfactory environmental reports from its environmental consultants and at any time prior to the Closing shall not have discovered that any Leased Premises fails to comply in any material respect with all applicable federal, foreign, state or local environmental, zoning, land use, and wetlands laws, rules and regulations. 7.10 Fire, Casualty or Eminent Domain. If any of the Assets are, prior to the Closing, either damaged by fire or other casualty insured against or taken, in whole or in part, by eminent domain proceedings, then the Buyer shall have the right to accept said Assets in their damaged or diminished condition together with an assignment to Buyer of all insurance and/or condemnation proceeds payable with respect to such fire, casualty or loss or terminate this Agreement. 7.11 Due Diligence Review. The Buyer shall have completed a due diligence review of the Business, the results of which review are satisfactory to the Buyer. 7.12 Employment Agreement. The Shareholder shall have entered into the Employment Agreement with Unidigital substantially in the form attached hereto as Exhibit F (the "Employment Agreement"), which shall include, without limitation, confidentiality, invention assignment, non-solicitation and non-competition provisions. 7.13 Stockholders Agreement. The Shareholder and Unidigital shall have entered into the Stockholders Agreement substantially in the form attached hereto as Exhibit G (the "Stockholders Agreement"). 7.14 Closing Deliveries. The Buyer shall have received at or prior to the Closing each of the following documents: (a) the Bill of Sale, executed by the Seller; (b) such instruments of conveyance, assignment and transfer, and motor vehicle transfers and safety inspection certificates, if any, in form and substance satisfactory to the Buyer, as shall be appropriate to convey, transfer and assign to, and to vest in, the Buyer, good and marketable title to the Assets other than the Intangible Property; - 30 - (c) such instruments of conveyance, assignment and transfer in form and substance satisfactory to the Buyer and in a form appropriate to file, if required, with the United States Office of Patents and Trademarks, sufficient to convey, transfer and assign to, and to vest in, the Buyer, good and marketable title to the Intangible Property; (d) all technical data, formulations, product literature and other documentation relating to the Seller's business, all in form and substance satisfactory to the Buyer; (e) such contracts, files and other data and documents pertaining to the Assets or the Business as the Buyer may reasonably request; (f) copies of the general ledgers and books of account of the Seller related to the Business, and all federal, state, local and foreign income, franchise, capital, property and other tax returns filed by the Seller with respect to the Assets since January 1, 1996. (g) such certificates of the Seller's officers and such other documents evidencing satisfaction of the conditions specified in this Section 7 as the Buyer shall reasonably request; certificate of the Secretary or Assistant Secretary of the Seller attesting to the incumbency of the Seller's officers, and the authenticity of the resolutions authorizing the transactions contemplated by the Agreement and the organizational documents of the Seller; (h) estoppel certificates from each lessor under the Leases set forth in Schedule 2.9(b) attached hereto (i) consenting to the assignment of such Lease to the Buyer; (ii) representing that there are no outstanding claims against the Seller under any such Lease, and no outstanding defaults or events which, with the passage of time, may become defaults; (iii) specifying the commencement and termination dates under the Lease; and (iv) providing that any purchase right, purchase option, right of first refusal, renewal right or other similar provision is enforceable by the Buyer and specifying the rental rates under the Lease and any other matters that Buyer may reasonably require; (i) the originals, if in the Seller's possession, of all building permits, certificates of occupancy, and other governmental licenses, permits and approvals, and all plans and specifications relating to the Leased Premises not previously delivered to the Buyer; (j) the Employment Agreement, executed by the Shareholder; (k) the Stockholders Agreement, executed by the Shareholder; (l) the Opinion of Seller's Counsel; (m) the Amendment of the Certificate of Incorporation of the Seller to discontinue the use of the name "Kwik International Color, Ltd." and to file any instruments as - 31 - may be necessary with any governmental authority to change their corporate names and foreign qualifications; and (o) such other documents, instruments or certificates as the Buyer may reasonably request in order to evidence the accuracy of the Selling Parties' representations or compliance by Seller with its covenants hereunder. 8. Conditions to Obligations of the Seller --------------------------------------- The obligations of the Seller under this Agreement are subject to the fulfillment, at the Closing, of the following conditions precedent, each of which may be waived in writing at the sole discretion of the Seller: 8.1 Continued Truth of Representations and Warranties of the Buyer and Unidigital; Compliance with Covenants and Obligations. The representations and warranties of the Buyer and Unidigital in this Agreement shall be true on and as of the date hereof. The Buyer and Unidigital shall have performed and complied in all material respects with all covenants required by this Agreement to be performed or complied with by each of them prior to or at the date hereof. 8.2 Corporate Proceedings. All corporate, legal and other proceedings required to be taken on the part of the Buyer and Unidigital to authorize or carry out this Agreement shall have been taken. 8.3 Approvals. All other governmental agencies, departments, bureaus, commissions and similar bodies, the consent, authorization or approval of which is necessary under any applicable law, rule, order or regulation for the consummation by the Buyer and Unidigital of the transactions contemplated by this Agreement shall have consented to, authorized, permitted or approved such transactions. 8.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer and Unidigital shall have received all requisite and material consents and approvals of all lenders, lessors and other third parties whose consent or approval is required in order for the Buyer and Unidigital to consummate the transactions contemplated by this Agreement, including but not limited to those set forth on Schedule 3.2 attached hereto. 8.5 Adverse Proceedings. No action or proceeding by or before any court or other governmental body shall have been instituted by any governmental body or person whatsoever which shall seek to restrain, prohibit or invalidate the transactions contemplated by this Agreement or which might affect the right of the Seller to transfer the Assets or would affect the right of the Buyer to acquire the Assets. - 32 - 8.6 Opinion of Counsel. The Seller shall have received an opinion of Buchanan Ingersoll, counsel to the Buyer and Unidigital, dated as of the date hereof, substantially in the form attached hereto as Exhibit H (the "Opinion of Buyer's Counsel"). 8.7 Material Adverse Change. Neither the Buyer nor Unidigital have suffered a material adverse change (financial or otherwise) since the date of Unidigital's last quarterly report filed with the Securities and Exchange Commission pursuant to the 1934 Act. 8.8 Closing Deliveries. The Seller shall have received at or prior to the Closing each of the following documents: (a) such certificates of the Buyer's officers and such other documents evidencing satisfaction of the conditions specified in this Section 8 as the Seller shall reasonably request; (b) a certificate of the Secretary or Assistant Secretary of the Buyer attesting to the incumbency of the Buyer's officers, and the authenticity of the resolutions authorizing the transactions contemplated by this Agreement and the organizational documents of the Buyer; (c) such certificates of Unidigital's officers and such other documents evidencing satisfaction of the conditions specified in this Section 8 as the Seller may reasonably request; (d) a certificate of the Secretary of Unidigital attesting to the incumbency of Unidigital's officers, and the authenticity of the resolutions authorizing the transactions contemplated by this Agreement and the organizational documents of Unidigital; (e) the Assumption Agreement, executed by the Buyer and accepted by the Seller; (f) payment of the portion of Purchase Price due at the Closing, including the Cash Consideration, the Note, the Stock Consideration and the Additional Cash Consideration, if any; (g) the Employment Agreement, executed by Unidigital; (h) the Stockholders Agreement, executed by Unidigital and William E. Dye; (i) the Opinion of Buyer's Counsel; and (j) such other documents, instruments or certificates as the Seller may reasonably request. - 33 - 9. Post-Closing Agreements ----------------------- 9.1 Proprietary Information. ----------------------- (a) The Seller shall hold in confidence, and use its best efforts to have all officers, shareholders, directors and personnel hold in confidence, all knowledge and information of a secret or confidential nature with respect to the Business, and shall not disclose, publish or make use of the same without the consent of the Buyer, except to the extent that such information shall have become public knowledge other than by breach of this Agreement by the Seller or by any other persons who have agreed not to disclose, publish or make use of such information. (b) The Seller agrees that the remedy at law for any breach of this Section 9.1 would be inadequate and that the Buyer and/or Unidigital shall be entitled to injunctive relief in addition to any other remedy it may have upon breach of any provision of this Section 9.1. (c) The foregoing to the contrary notwithstanding, no information, written or oral, shall be construed or considered confidential information and thereby subject to the restrictions of this Section 9.1 if such information was (i) generally available to the public other than as a result of a disclosure by the Seller or anyone to whom the Seller transmits the information in violation hereof, (ii) in the possession of the Seller or known to the Seller on a non-confidential basis prior to its disclosure to the Seller, (iii) available to the Seller on a non-confidential basis from a source other than the Buyer or Unidigital who is not bound by a confidentiality agreement with the Buyer or Unidigital, as the case may be, or (iv) available in trade publications, reference books or other resources and which may be compiled by any person's decisions of preparing a report or memorandum containing such information. 9.2 Solicitation or Hiring of Former Employees. Except as provided by law or with the written consent of the Buyer, for a period of three years after the date hereof, the Seller and any persons or entities that are not natural persons, that directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with, the Seller (the "Corporate Affiliates"), shall not solicit any person who was a Seller's Employee on the date hereof, and has been employed, and not terminated without cause, by the Buyer, to terminate his employment with the Buyer or to become an employee of the Seller or its Corporate Affiliates or hire any person who was such an employee on the date hereof. 9.3 Non-Competition Agreement. ------------------------- (a) For a period of five (5) years after the date hereof, neither the Seller nor any Corporate Affiliate (except for the Shareholder) thereof shall directly or indirectly (i) manufacture, market or sell any product or service which has the same or substantially the same function and primary application as any existing or proposed product or service manufactured, marketed or sold by the Seller on or prior to the date hereof or (ii) engage in, manage, operate, be connected with or acquire any interest in, as an employee, consultant, advisor, agent, owner, partner, co-venturer, principal, director, shareholder, lender or otherwise, any business - 34 - competitive with the business of the Seller, Unidigital or the Buyer as conducted on the date hereof (a "Competitive Business"), in any country in the world, except that the Seller and its Corporate Affiliates may own, in the aggregate, not more than 1% of the outstanding shares of any publicly held corporation which is a Competitive Business which has shares listed for trading on a securities exchange registered with the Securities and Exchange Commission or through the automatic quotation system of a registered securities association. (b) The parties hereto agree that the duration and geographic scope of the non-competition provision set forth in this Section 9.3 are reasonable. In the event that any court determines that the duration or the geographic scope, or both, are unreasonable and that such provision is to that extent unenforceable, the parties hereto agree that the provision shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable. The parties intend that this non-competition provision shall be deemed to be a series of separate covenants, one for each and every county of each and every state of the United States of America and each and every political subdivision of each and every country outside the United States of America where this provision is intended to be effective. The Seller agrees that damages are an inadequate remedy for any breach of this provision and that the Buyer shall, whether or not it is pursuing any potential remedies at law, be entitled to equitable relief in the form of preliminary and permanent injunctions without bond or other security upon any actual or threatened breach of this non-competition provision. If the Seller or any Corporate Affiliate shall violate this Section 9.3, the duration of this Section 9.3 automatically shall be extended as against such violating party for a period equal to the period during which such party shall have been in violation of this Section 9.3. The covenants contained in this Section 9.3 are deemed to be material and the Buyer is entering into this Agreement relying on such covenants. 9.4 Sharing of Data. The Seller shall have the right for a period of seven years following the date hereof to have reasonable access to such books, records and accounts, including financial and tax information, correspondence, production records, employment records and other similar information as are transferred to the Buyer pursuant to the terms of this Agreement for the limited purposes of concluding its involvement in the business of the Seller prior to the date hereof and for complying with its obligations under applicable securities, tax, environmental, employment or other laws and regulations. The Buyer and/or Unidigital shall have the right for a period of seven years following the date hereof to have reasonable access to those books, records and accounts, including financial and tax information, correspondence, production records, employment records and other records which are retained by the Seller pursuant to the terms of this Agreement to the extent that any of the foregoing relates to the Business transferred to the Buyer hereunder or is otherwise needed by the Buyer and/or Unidigital in order to comply with its obligations under applicable securities, tax, environmental, employment or other laws and regulations. 9.5 Cooperation in Litigation. Each party hereto will fully cooperate with the other in the defense or prosecution of any litigation or proceeding already instituted or which may be instituted hereafter against or by such party relating to or arising out of the conduct of the - 35 - Business prior to or after the date hereof (other than litigation arising out of the transactions contemplated by this Agreement and except as otherwise expressly provided herein). The party requesting such cooperation shall pay the out-of-pocket expenses (including legal fees and disbursements) of the party providing such cooperation and of its officers, directors, employees and agents reasonably incurred in connection with providing such cooperation, but shall not be responsible to reimburse the party providing such cooperation for such party's time spent in such cooperation or the salaries or costs of fringe benefits or similar expenses paid by the party providing such cooperation to its officers, directors, employees and agents while assisting in the defense or prosecution of any such litigation or proceeding. 9.6 Guaranty. In the event that the Buyer fails to duly and properly perform and satisfy its obligations under this Agreement in accordance with the terms and conditions hereof, Unidigital will, upon written demand of the Selling Parties setting forth the specific failure of the Buyer, perform and satisfy those obligations of the Buyer set forth in such written demand in accordance with the terms and conditions of this Agreement. 9.7 Customer and Other Business Relationships. The Selling Parties will cooperate with the Buyer in its efforts to continue and maintain, with lessors, licensors, customers, suppliers and other business associates of any of the Selling Parties, the same business relationships with the Buyer after the Closing as maintained with such Selling Party before the Closing, with respect to the business to be carried on by the Buyer utilizing the Assets. The Selling Parties will refer to the Buyer all inquiries relating to the Business from customers and all such other persons. The Selling Parties will not take any action designed or intended to have the effect of discouraging any customer or such other person from continuing or maintaining the same such business with the Buyer after the Closing. The Selling Parties shall use their best efforts to satisfy any liability or obligation not assumed by the Buyer hereunder in a manner which is not detrimental to the Buyer's relationships with suppliers and vendors. 9.8 Subrogation. If the Buyer or Unidigital becomes liable for or suffers any damage with respect to any matter that was covered by insurance maintained by the Selling Parties at or before the Closing, the Buyer and Unidigital, as the case may be, shall be and hereby are subrogated to any rights of the Selling Parties under such insurance coverage. The Selling Parties shall promptly remit to the Buyer or Unidigital, as the case may be, any insurance proceeds any of them may receive on account of any such liability or damage. 10. Indemnification and Reimbursement --------------------------------- 10.1 Indemnification. --------------- (a) The Selling Parties shall indemnify, defend and hold harmless the Buyer and any parent, subsidiary or affiliate thereof and all directors, officers, employees, agents and consultants of each of the foregoing (collectively, the "Buyer Group") from and against all demands, claims, actions or causes of action, assessments, losses, damages, liabilities (whether - 36 - absolute, accrued, contingent or otherwise), costs and expenses, including but not limited to, interest, penalties and attorneys' fees and expenses (collectively, "Damages"), asserted against, imposed upon or incurred by the Buyer Group or any member thereof, directly or indirectly, by reason of or resulting from or relating to any of the following (but in any event excluding the Assumed Liabilities) at such time as the Damages (except for Damages incurred pursuant to clause (vi) of this Section 10.1(a)), whether actual or alleged, exceed $100,000, and only to the excess thereof: (i) liability and obligation of the Selling Parties; (ii) misrepresentation or breach of warranty or covenant or agreement by the Selling Parties made or contained in this Agreement or in any certificate, document, writing or instrument furnished or to be furnished to the Buyer under this Agreement; (iii)failure to comply with any bulk sales or similar laws applicable to the transactions contemplated hereby; (iv) litigation or other claim arising from acts, failures to act or events which occurred prior to the date hereof including, without limitation, the remediation of environmental conditions attributable to the conduct of the Business at the manufacturing facility in New York, New York prior to the date hereof and claims for product failure or defect (including but not limited to claims for personal injury, property damages and breach of warranty) which relate to any product manufactured or sold prior to the date hereof; (v) litigation or other claim arising out of the transfer of shares of the Seller's common stock pursuant to that certain Redemption Agreement dated as of January 15, 1998 between the Seller and Walter Berkower; (vi) failure to comply with any provisions set forth in any collective bargaining agreement between the Seller and any of the Seller's Employees (it being understood that the Selling Parties' indemnification obligation under this clause (vi) shall be limited to one-half of any Damages in excess of $500,000 arising hereunder); and (vii)in addition to the foregoing, the Seller shall also indemnify the Buyer for the face value of all Accounts Receivable which existed as of the Closing, but are not collected within one hundred twenty (120) days after Closing, upon the Buyer's request therefor, provided that the Buyer has used commercially reasonable efforts to collect such receivables. If the Buyer shall thereafter collect any Account Receivable for which it has received an indemnification payment from the Seller pursuant to the immediately preceding sentence, the Buyer shall promptly remit the amount so collected to the Seller. (b) The Buyer and Unidigital shall indemnify, defend and hold harmless the Seller and any parent, subsidiary or affiliate thereof and all directors, officers, employees, agents and consultants of the foregoing (collectively, the "Seller Group") from and against all Damages - 37 - asserted against, imposed upon or incurred by the Seller Group or any member thereof, directly or indirectly, by reason of or resulting from or relating to the Assumed Liabilities. 10.2 CERCLA. Nothing contained in this Agreement shall be deemed a waiver of the right of the Buyer to maintain a private party cost recovery action under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. 10.3 Notice and Defense of Claims. The parties' obligations and liabilities hereunder with respect to claims resulting from the assertion of liability by the Buyer Group, the Seller Group or third parties shall be subject to the following terms and conditions: (a) Notice. The party seeking indemnification hereunder (each, an "Indemnified Party") shall give prompt written notice to the party from whom indemnification is being sought (each, an "Indemnifying Party") of any claim or event known to it which does or may give rise to a claim by the Indemnified Party against the Indemnifying Party for which the Indemnified Party believes it is entitled to indemnification pursuant to this Section 10 of this Agreement, stating the nature and basis of said claims or events and the amounts thereof, to the extent known, and in the case of any claim, action, suit or proceeding brought by any third party, a copy of any claim, process or legal pleadings with respect thereto promptly after any such documents are received by the Indemnified Party. Such notice shall be given in accordance with Section 12 hereof. (b) Third Party Claims or Actions. ----------------------------- (i) In the event any claim, action, suit or proceeding is made or brought by any third party against the Indemnified Party, with respect to which the Indemnifying Party may have liability for Damages under this Section 10 of this Agreement, the Indemnifying Party shall, at its own expense, be entitled to participate in and, to the extent that it shall wish, jointly and with any other Indemnifying Party, to assume the defense, with independent counsel reasonably satisfactory to the Indemnified Party, provided that in assuming the defense of any such third party claim, action, suit or proceeding, the Indemnifying Party acknowledges in writing to the Indemnified Party that the Indemnifying Party shall thereafter be liable for any Damage with respect to such claim, action, suit or proceeding. (ii) If the Indemnifying Party elects to assume control of such defense or settlement, it shall conduct such defense or settlement in a manner reasonably satisfactory and effective to protect the Indemnified Party fully; such company and its counsel will keep the Indemnified Party fully advised as to its conduct of such defense or settlement, and no compromise or settlement shall be agreed or made without the written consent of the Indemnified Party. In any case, the Indemnified Party shall have the right to employ its own counsel and such counsel may participate in such action, but the reasonable fees and expenses of such counsel shall be at the expense of the Indemnified Party, when and as incurred, unless (A) the employment of counsel by the Indemnified Party has been authorized in writing by the Indemnifying Party, (B) the Indemnified Party shall have reasonably concluded that there may be - 38 - a conflict of interest between the Indemnifying Party and the Indemnified Party in the conduct of the defense of such action, (C) the Indemnifying Party shall not in fact have employed independent counsel reasonably satisfactory to the Indemnified Party to assume the defense of such action and shall have been so notified by the Indemnified Party, (D) the Indemnified Party shall have reasonably concluded and specifically notified the Indemnifying Party either that there may be specific defenses available to it which are different from or additional to those available to it or that such claim, action, suit or proceeding involves or could have a material adverse effect upon it beyond the financial resources of the Indemnifying Party or the scope of this Agreement, or (E) the Indemnifying Party fails to conduct such defense or settlement in a manner reasonably satisfactory to protect the Indemnified Party fully. If clause (B), (C), (D) or (E) of the preceding sentence shall be applicable, then counsel for the Indemnified Party shall have the right to direct the defense of such claim, action, suit or proceeding on behalf of the Indemnified Party and the reasonable fees and disbursements of such counsel shall constitute Damages hereunder. (iii)If the Indemnifying Party does not elect to assume the defense of any such claim, or if they fail to conduct said defense or settlement in a manner reasonably satisfactory to protect the Indemnified Party fully, the Indemnified Party may engage independent counsel selected by the Indemnified Party to assume the defense and may contest, pay, settle or compromise any such claim on such terms and conditions as the indemnified party may determine. The reasonable fees and disbursements of such counsel shall constitute Damages hereunder. (iv) The Buyer and the Selling Parties, as the case may be, shall be kept fully informed of such claim, action, suit or proceeding at all stages thereof whether or not such party is represented by its own counsel. 10.4 Cooperation. The parties hereto agree to render to each other such assistance as they may reasonably require of each other and to cooperate in good faith with each other in order to ensure the proper and adequate defense of any claim, action, suit or proceeding brought by any third party. Where counsel has been selected by the Selling Parties or by the Buyer pursuant to Section 10.4, the Selling Parties or the Buyer, as the case may be, shall be entitled to rely upon the advice of such counsel in the conduct of the defense. 10.5 Confidentiality. The parties agree to cooperate in such a manner as to preserve in full the confidentiality of all confidential business records and the attorney-client and work-product privileges. In connection therewith, each party agrees that (a) it will use its best efforts, in any action, suit or proceeding in which it has assumed or participated in the defense, to avoid production of confidential business records and (b) all communications between any party hereto and counsel responsible for or participating in the defense of any action, suit or proceeding shall, to the extent possible, be made so as to preserve any applicable attorney-client or work-product privilege. - 39 - 10.6 Escrow; Right of Offset. The Buyer may offset any and all Damages owed by the Selling Parties to the Buyer Group pursuant to this Section 10 against any funds held in escrow pursuant to the Escrow Agreement. Neither the exercise of nor the failure to exercise such right or to give notice of a claim under the Escrow Agreement shall constitute an election of remedies or limit the Buyer in any manner in the enforcement of any other legal or equitable remedies that may be available to the Buyer. 11. Transfer and Sales Tax ---------------------- The Buyer shall be responsible for and pay all filing and recording taxes and fees, and all sales, use and transfer taxes and fees, if any, upon the sale and transfer of the Assets hereunder. 12. Notices ------- Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing (including telecommunications) and delivered personally or sent by telex, telecopy or other wire transmission (with request for assurance in a manner typical with respect to communications of that type), federal express or other overnight air courier (postage prepaid), registered or certified mail (postage prepaid with return receipt requested), addressed as follows or to such other address of which the parties may have given notice: To the Seller: Kwik International Color, Ltd. 229 West 28th Street New York, New York 10001-5996 Attn: Richard J. Sirota, President Tel. No.: (212) 643-0200 Fax No.: (212) 643-0201 With a copy to: Kantor Davidoff Wolfe Mandelker & Kass 51 East 42nd Street New York, New York 10017 Attn: Herbert C. Kantor, Esq. Tel. No.: (212) 682-8383 Fax No.: (212) 949-5206 To the Buyer: Unidigital Inc. 545 West 45th Street New York, New York 10036 Attn: Mr. William Dye, President Tel. No.: (212) 397-0800 Fax No.: (212) 262-1568 - 40 - With a copy to: Buchanan Ingersoll 500 College Road East Princeton, New Jersey 08540 Attn: David J. Sorin, Esq. Tel. No.: (609) 987-6800 Fax No.: (609) 520-0360 Unless otherwise specified herein, such notices or other communications shall be deemed received (a) on the date delivered, if delivered personally or by wire transmission; (b) on the next business day after mailing or deposit with an overnight air courier; or (c) five business days after being sent, if sent by registered or certified mail. 13. Successors and Assigns ---------------------- This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Neither the Seller nor the Buyer may assign all or a portion of its rights and obligations hereunder without the prior written consent of the other party, except that the Buyer may assign all or a portion of its rights and obligations hereunder to an Affiliate of the Buyer, provided that the Buyer shall remain liable for the performance of the Buyer's obligations under this Agreement. Any assignment in contravention of this provision shall be void. 14. Entire Agreement; Amendments; Attachments ----------------------------------------- (a) This Agreement, all Schedules and Exhibits hereto, and all agreements and instruments to be delivered by the parties pursuant hereto represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersede all prior oral and written and all contemporaneous oral negotiations, commitments and understandings between such parties except as expressly provided herein. The Buyer and the Seller, by the consent of their respective Boards of Directors, or officers authorized by such Boards, may amend or modify this Agreement, in such manner as may be agreed upon, by a written instrument executed by the Buyer and the Seller. (b) If the provisions of any Schedule or Exhibit to this Agreement are inconsistent with the provisions of this Agreement, the provisions of the Agreement shall prevail. The Exhibits and Schedules attached hereto or to be attached hereafter are hereby incorporated as integral parts of this Agreement. 15. Expenses -------- Except as otherwise expressly provided herein, the Buyer and the Seller shall each pay their own expenses in connection with this Agreement and the transactions contemplated hereby. - 41 - 16. Governing Law ------------- This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without reference to conflicts of laws rules or principles. 17. Section Headings ---------------- The section headings are for the convenience of the parties and in no way alter, modify, amend, limit, or restrict the contractual obligations of the parties. 18. Severability ------------ The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. 19. Counterparts ------------ This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall be one and the same document. 20. Currency -------- Unless otherwise indicated, all dollar amounts referred to in this Agreement are in United States funds. 21. Waiver ------ The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party, (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given, and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. - 42 - 22. Ambiguity in Drafting --------------------- Each party shall have been deemed to have participated equally in the drafting of this Agreement and the agreements contemplated hereby and any ambiguity in any such contracts shall not be construed against any purported author thereof. [Signature page follows] - 43 - IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto as of and on the date first above written. (Corporate Seal) SELLER: ATTEST: KWIK INTERNATIONAL COLOR, LTD. /s/ Herbert C. Kantor By:/s/ Richard J. Sirota - ----------------------------- ----------------------------- Assistant Secretary Name: Richard J. Sirota Title: President SHAREHOLDER: /s/ Richard J. Sirota -------------------------------- Richard J. Sirota (Corporate Seal) BUYER: ATTEST: UNISON (NY), INC. /s/ Peter Saad By:/s/ William E. Dye - ----------------------------- ----------------------------- Secretary Name: William E. Dye Title: Chairman of the Board (Corporate Seal) ATTEST: UNIDIGITAL INC. /s/ Peter Saad By:/s/ William E. Dye - ----------------------------- ----------------------------- Assistant Secretary Name: William E. Dye Title: President EX-10.2 4 SUBORDINATED PROMISSORY NOTE (KWIK) THIS NOTE HAS BEEN ISSUED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH SUCH REQUIREMENTS OR A WRITTEN OPINION OF COUNSEL ACCEPTABLE TO THE OBLIGOR THAT SUCH TRANSFER WILL NOT RESULT IN ANY VIOLATION OF SUCH LAWS OR AFFECT THE LEGALITY OF ITS ISSUANCE. ALL INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE INTERCREDITOR AND SUBORDINATION AGREEMENT, DATED MARCH 25, 1998 (THE "SUBORDINATION AGREEMENT"), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG UNIDIGITAL INC., AS BORROWER, CANADIAN IMPERIAL BANK OF COMMERCE, AS ADMINISTRATIVE AGENT FOR THE LENDERS PARTIES TO THE SENIOR CREDIT AGREEMENT REFERRED TO IN THE SUBORDINATION AGREEMENT, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE SUBORDINATED NOTE REFERRED TO IN THE SUBORDINATION AGREEMENT, INCLUDING, WITHOUT LIMITATION, THIS NOTE. SUBORDINATED PROMISSORY NOTE $750,000 March 25, 1998 FOR VALUE RECEIVED, the undersigned, Unidigital Inc., a Delaware corporation (the "Obligor"), hereby promises to pay to the order of Kwik International Color, Ltd., a New York corporation (the "Holder"), the principal sum of Seven Hundred Fifty Thousand Dollars ($750,000) payable as set forth below. The Obligor also promises to pay to the order of the Holder interest on the principal amount hereof at a rate per annum equal to five and seven-tenths percent (5.7%) compounded annually, which interest shall be payable at such time as the principal is due hereunder. Interest shall be calculated on the basis of a year of 365 days and for the number of days actually elapsed. Any amounts of interest and principal not paid when due shall bear interest at the maximum rate of interest allowed by applicable law. The payments of principal and interest hereunder shall be made in coin or currency of the United States of America which at the time of payment shall be legal tender therein for the payment of public and private debts. This Note shall be subject to the following additional terms and conditions: 1. Payments. Principal shall be payable in thirty-five (35) equal installments of $20,833.33 and one (1) installment of $20,833.45. Each such payment shall be made by the Obligor to the Holder on the fifteenth (15th) day of each month, commencing on April 15, 1998. In the event that any payment to be made hereunder shall be or become due on a Saturday, Sunday or any other day which is a legal bank holiday under the laws of the State of New York, such payment shall be or become due on the immediately preceding business day. 2. Restrictions on Transferability. This Note may not be transferred in any manner other than by will or by the laws of descent or distribution; provided, however, that the Holder shall be permitted to transfer this Note, in whole or in part, to Richard J. Sirota, the sole shareholder of the Holder, Mr. Sirota's wife, Mr. Sirota's daughter or Walter Berkower (each, a "Permitted Transferee"). Prior to transferring this Note pursuant to this Section 2, the Holder shall cause the Permitted Transferee to agree to be bound by the terms and provisions of this Note. 3. No Waiver. No failure or delay by the Holder in exercising any right, power or privilege under this Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. No course of dealing between the Obligor and the Holder shall operate as a waiver of any rights by the Holder. 4. Waiver of Presentment and Notice of Dishonor. The Obligor and all endorsers, guarantors and other parties that may be liable under this Note hereby waive presentment, notice of dishonor, protest and all other demands and notices in connection with the delivery, acceptance, performance or enforcement of this Note. 5. Place of Payment. All payments of principal of this Note and the interest due thereon shall be made at the office of the Holder, 229 West 28th Street, New York, New York 10001-5996 or at such other place as the Holder may from time to time designate in writing. 6. Events of Default. The entire unpaid principal amount of this Note and the interest due thereon shall, at the option of the Holder exercised by written notice to the Obligor, forthwith become and be due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, if any one or more of the following events (herein called "Events of Default") shall have occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and be continuing at the time of such notice, that is to say: a) if default shall be made in the due and punctual payment of the principal of this Note and the interest due thereon when and as the same shall become due and payable, whether at maturity, or by acceleration or otherwise, and such default shall have continued for a period of five days; - 2 - b) if the Obligor shall: (i) admit in writing its inability to pay its debts generally as they become due; (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act; (iii)make an assignment for the benefit of creditors; (iv) consent to the appointment of a receiver of the whole or any substantial part of his property; (v) on a petition in bankruptcy filed against him, be adjudicated a bankrupt; or (vi) file a petition or answer seeking reorganization or arrangement under the Federal bankruptcy laws or any other applicable law or statute of the United States of America or any State, district or territory thereof; c) if a court of competent jurisdiction shall enter an order, judgment, or decree appointing, without the consent of the Obligor, a receiver of the whole or any substantial part of Obligor's property, and such order, judgment or decree shall not be vacated or set aside or stayed within 90 days from the date of entry thereof; and d) if, under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction shall assume custody or control of the whole or any substantial part of Obligor's property and such custody or control shall not be terminated or stayed within 90 days from the date of assumption of such custody or control. 7. Remedies. In case any one or more of the Events of Default specified in Section 6 hereof shall have occurred and be continuing, the Holder may proceed to protect and enforce his rights either by suit in equity and/or by action at law, whether for the specific performance of any covenant or agreement contained in this Note or in aid of the exercise of any power granted in this Note, or the Holder may proceed to enforce the payment of all sums due upon this Note or to enforce any other legal or equitable right of the Holder. 8. Severability. In the event that one or more of the provisions of this Note shall for any reason be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. - 3 - 9. Governing Law. This Note and the rights and obligations of the Obligor and the Holder shall be governed by and construed in accordance with the laws of the State of New York. 10. Unsecured Obligations. The Holder hereby acknowledges that the obligations of the Obligor hereunder are unsecured. * * * * * * * IN WITNESS WHEREOF, the undersigned has caused this Note to be executed and delivered on the date first written above. UNIDIGITAL INC. By:/s/ William E. Dye --------------------------- William E. Dye, President EX-10.3 5 RICHARD J. SIROTA EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT THIS AGREEMENT (the "Agreement") is dated as of this 25th day of March, 1998, by and between Unidigital Inc., a Delaware corporation, with an office for purposes of this Agreement at 545 West 45th Street, New York, NY 10036 (hereinafter the "Company" or "Employer"), and Richard Sirota with an address at 1 Pallisar Road, Irvington, New York 10533 (hereinafter the "Employee"). WITNESSETH: WHEREAS: (a) Company wishes to engage the services of Employee to render services for and on its behalf in accordance with the following terms, conditions and provisions; and (b) Employee wishes to perform such services for and on behalf of the Company, in accordance with the following terms, conditions and provisions. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained the parties hereto intending to be legally bound hereby agree as follows: 1. EMPLOYMENT. Company hereby employs Employee and Employee accepts such employment and shall perform his duties and the responsibilities provided for herein in accordance with the terms and conditions of this Agreement principally in New York City, New York. 2. EMPLOYMENT STATUS. Employee shall at all times be Company's employee subject to the terms and conditions of this Agreement. 3. TERM. The term of this Agreement (the "Term") shall commence on March 25, 1998, and shall terminate on March 25, 2001 (the "Termination Date"), for a total term of three (3) years, unless earlier terminated pursuant to the terms and provisions of this Agreement. 4. During Employee's employment hereunder, Employee shall serve as Senior Vice President and Chief Operating Officer of the Company. In such positions, Employee shall have the customary powers, responsibilities and authorities of officers in such position of corporations of the size, type and nature of the Company. Employee shall perform such duties and exercise such powers commensurate with his positions and responsibilities as shall be determined from time to time by the Company's Board of Directors (the "Board"), William E. Dye or such other executive officer designated by the Board or Mr. Dye and shall report directly to William E. Dye and to no other person, entity or committee other than the Board or a duly appointed designee of the Board or Mr. Dye. Employee shall be provided with an office, staff and other working facilities consistent with his positions and as required for the performance of his duties. In addition, Company agrees to cause Employee to be nominated to serve as a director of the Company and to use its best efforts to cause Employee to be elected to the Board and be retained as a director of the Company during Employee's employment during the Term, as it may be extended. - 2 - 5. COMPENSATION. (a) For the performance of all Employee's services to be rendered pursuant to the terms of this Agreement, Company will pay and Employee will accept the following compensation: Base Salary. During the Term, Company shall pay the Employee an initial base annual salary of $250,000 (the "Base Salary") payable in regular installments in accordance with the Company's usual payment practices (which currently is in equal bi-monthly installments). Employee shall be entitled to such further increases, if any, in his Base Salary as may be determined from time to time in the sole discretion of the Board; but, in any event, Employee shall be entitled to receive an annual increase equal to the increase in the CPI for the New York Metropolitan Area on annual basis. Employee's Base Salary, as in effect from time to time, is hereinafter referred to as the "Employee's Base Salary". Bonus. During the Term, Employee shall be eligible for and may receive bonuses. The amount of such bonuses, if any, shall be solely within the discretion of the Board or the Compensation Committee thereof. (b) Company shall deduct and withhold from Employee's compensation all necessary or required taxes, including but not limited to Social Security, withholding and otherwise, and any other applicable amounts required by law or any taxing authority. - 3 - 6. EMPLOYEE BENEFITS. (a) During the Term hereof and so long as Employee is not terminated, Employee shall receive and be provided health and insurance benefits, and during Employee's employment hereunder, Employee shall receive and be provided employee benefits (including without limitation, fringe benefits, vacation, automobile, retirement plan participation and life, health, accident and disability insurance etc., (collectively, "Employee Benefits") on the same basis as those benefits are generally made available to the most senior executives of the Company. Employee shall be entitled to receive not less than four weeks vacation per year and if such vacation time is not taken by Employee, in the then current year, Employee at his option may accrue vacation or receive compensation at the then current level. (b) At his discretion and at the Company's sole expense, Employee may travel business class, portal to portal, when traveling on business for the Company. 7. BUSINESS EXPENSES AND PERQUISITES. (a) Reasonable travel, entertainment and other business expenses incurred by Employee in the performance of his duties hereunder shall be reimbursed by the Company in accordance with Company policies then in effect. (b) Company shall provide Employee a new automobile, every three years, including all related maintenance, repairs, insurance parking and other costs. The base annual automobile rental expense shall not exceed $18,000 per annum. - 4 - 8. TERMINATION. (a) For Cause by the Company. (i) Employee's employment hereunder may be terminated by the Company for cause. For purposes of this Agreement, "cause" shall mean (A) Employee's unjustified failure to perform his duties hereunder or to follow reasonable directions of the Board, William E. Dye or a duly appointed designee of the Board or Mr. Dye, (B) willful misconduct by Employee in connection with his employment, (C) Employee's conviction of, or plea of nolo contendere to, any crime constituting a felony under the laws of the United States or any State thereof, or any crime constituting a misdemeanor under any such law involving moral turpitude, or (D) Employee's material breach of any of the provisions of this Agreement. (ii) If Employee is terminated for cause, he shall entitled to receive Employee's Base Salary from Company through the date of termination and Employee shall be entitled to no other payments of Employee's Base Salary under this Agreement. All other benefits, if any, due Employee following Employee's termination of employment pursuant to this Section 8(a) shall be determined in accordance with the plans, policies and practices of the Company for most senior executives. (b) Disability or Death. (i) Employee's employment hereunder shall terminate upon his death or if Employee becomes physically or mentally incapacitated and is therefore unable (or will as a result thereof, be unable) for a period of six (6) consecutive months or for an aggregate of twelve (12) months in any twenty-four (24) consecutive month - 5 - period to perform his duties (such incapacity is hereinafter referred to as "Disability"). Any question as to the existence of the Disability of Employee as to which Employee and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Employee and the Company. If Employee and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and Employee shall be final and conclusive for all purposes of the Agreement. (ii) Upon termination of Employee's employment hereunder during the Term for Disability, Employee shall receive from the Company 50% of Employee's Base Salary through the end of the Term and the amount equivalent to 50% of the last bonus, if any, received by the Employee under the terms of this Agreement times the number of years remaining in the Term. Employee shall be entitled to no further payments of Employee's Base Salary under this Agreement, provided that any payment under this Section 8(b)(ii) shall be reduced by the amount of any disability benefits paid to Employee under any other disability plan, program or arrangement maintained and paid for by the Company or its affiliates. (iii)Upon termination of Employee's employment hereunder during the Term as a result of death, the Employee's estate or named beneficiary(ies) shall receive from the Company (A) Employee's Base Salary at the rate in effect at the time of Employee's death through the end of the month in which his death occurs and pro rata bonus paid to Employee during then immediately preceding year of the Term, and (B) the proceeds of any - 6 - life insurance policy maintained for his benefit by the Company pursuant to Section 6(a) under this Agreement. (iv) All other benefits, if any, due Employee following Employee's termination of employment pursuant to this Section 8(b) shall be determined in accordance with the plans, policies and practices of the Company and shall be at least equal to those received by most senior executives of the Company. (c) Without Cause by the Company. If Employee's employment is terminated by the Company without cause (other than by reason of Disability or death), then Employee shall be entitled to receive the Employee's Base Salary from the Company for the balance of the Term, to be paid to Employee during immediately succeeding next bi-weekly intervals. All other benefits, if any, due Employee following Employee's termination of employment pursuant to this Section 8(c) shall be determined in accordance with the plans, policies and practices of the Company then in effect. (d) Termination by Employee. If Employee wishes to terminate his employment with the Company for any reason, Employee must afford the Company with at least six full month's written notice of termination. Such termination shall not be deemed a breach of this Agreement. (e) Change of Control. For purposes of this Agreement, "Change of Control" shall mean (i) any transaction or series of transactions (including, without limitation, a tender offer, merger or consolidation) the result of which is that any "person" or "group" - 7 - (within the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), becomes the "beneficial" owner (as defined in Rule 13(d)(3) under the Exchange Act) of more than 50 percent (50%) of the total aggregate voting power of all classes of the voting stock of the Company and/or warrants or options to acquire such voting stock, calculated on a fully diluted basis, or (ii) a sale of assets constituting all or substantially all of the assets of the Company (determined on a consolidated basis). In the event of such a Change of Control, the new entity shall be obligated to perform the Company's obligations under the terms of this Agreement. Notwithstanding the foregoing, such Change in Control shall not release the Company from its liability for the full and faithful performance of all the terms and conditions of this Agreement. 9. NON-DISCLOSURE OF INFORMATION. Employee acknowledges that by virtue of his position he will be privy to the Company's trade secrets including, but not limited to, Company's customers list and private processes, as they may exist or as Company may determine from time to time, and that such secrets are valuable, special, and unique assets of Company's business and constitute confidential information and trade secrets of Company (hereafter collectively "Confidential Information"). Employee shall not, during the Term and for a period of two (2) years thereafter, intentionally disclose all or any part of the Confidential Information to any person, firm, corporation, association or any other entity for any reason or purpose whatsoever, nor shall Employee and any other person by, through or with Employee, during the Term and for a period of two (2) years thereafter, intentionally make use of any of the Confidential Information for any purpose or for the benefit of any - 8 - other person or entity, other than Company, under any circumstances. Company and Employee agree that a violation of the foregoing covenants will cause irreparable injury to the Company, and that in the event of a breach or threatened breach by the Employee of the provisions of this Section 9, Company shall be entitled to an injunction. The foregoing to the contrary notwithstanding, no information, written or oral, shall be construed or considered "Confidential Information" and thereby subject to the restrictions of this Section 9 if such information was (i) generally available to the public other than as a result of a disclosure by the Employee or anyone to whom the Employee transmits the information in violation hereof, (ii) in the possession of the Employee or known to him on a non-confidential basis prior to its disclosure to him, (iii) available to the Employee on a non-confidential basis from a source other than Unidigital who is not bound by a confidentiality agreement with Unidigital, or (iv) available in trade publications, reference books or other resources and which may be compiled by any person desirous of preparing a report or memorandum containing such information. 10. RESTRICTIVE COVENANT. Without the prior written approval of the Board first obtained: (a) For a period of two (2) years after the termination of this Agreement, Employee covenants and agrees that, within a radius of twenty-five (25) miles from each of the then present place(s) of Company's business or any other area in which Company is engaged in business, he shall not own, manage, operate, control, be employed by, participate - 9 - in, or be connected in any manner with the ownership, management, operation, or control, whether directly or indirectly, as an individual on his own account, or as a partner, member, joint venture, officer, director or shareholder of a corporation or other entity (this excludes ownership of less than five (5%) percent of any public company), of any business similar to or competitive with the type of business conducted by Company at the time of the termination or expiration of this Agreement. Employee further covenants and agrees he shall not, directly or indirectly, in any manner whatsoever interfere with, solicit or disrupt or attempt to interfere with, solicit or disrupt the relationship, contractual or otherwise, between Company and any customer, supplier, lessee or employee of Company, its parent or subsidiaries during such period. (b) For the period set forth in the immediately preceding subsection (a) Employee covenants and agrees that within a radius of twenty-five (25) miles from each of the then present place(s) of Company's business or any other area in which Company is engaged in business, he shall not render any services to any person, firm, corporation, association or other entity to whom any Confidential Information in whole or in part, has been disclosed or is threatened to be disclosed in violation of this Agreement. (c) Company and Employee agree that a violation of either of the foregoing covenants will cause irreparable injury to the Company, and that in the event of a breach or threatened breach by Employee of the provisions of this Section 10, Company shall be entitled to an injunction. - 10 - (d) Employee acknowledges that the restrictions contained in this Section 10 are reasonable. In that regard, it is the intention of the parties to this Agreement that the provisions of this Section 10 shall be enforced to the fullest extent permissible under the law and public policy applied in each jurisdiction in which enforcement is sought. Accordingly, if any portion of this Section 10 shall be adjudicated or deemed to be invalid or unenforceable, the remaining portions shall remain in full force and effect, and such invalid or unenforceable portion shall be limited to the particular jurisdiction in which such adjudication is made. 11. BREACH OR THREATENED BREACH OF COVENANTS. In the event of Employee's actual or threatened breach of his obligations under either Section 9 or 10, or both, of this Agreement, in addition to any other remedies Company may have, Company shall be entitled to obtain a temporary restraining order and a preliminary and/or permanent injunction restraining the other from violating these provisions. Nothing in this Agreement shall be construed to prohibit Company from pursuing and obtaining any other available remedies which Company may have for such breach or threatened breach, whether at law or in equity, including the recovery of damages from the other. 12. REPRESENTATIONS AND WARRANTIES BY EMPLOYEE. Employee hereby warrants and represents that he is not subject to or a party to any restrictive covenants or other agreements that in any way preclude, restrict, restrain or limit him (a) from being an Employee of Company, (b) from engaging in the business of Company in any capacity, directly or indirectly, and (c) from competing with any other persons, companies, businesses or entities engaged in the business of Company. - 11 - 13. ARBITRATION. Any controversy or claim arising out of or relating to this Agreement, the performance thereof of its breach or threatened breach shall be settled by arbitration in the State of New York, County of New York in accordance with the then governing rules of the American Arbitration Association. The findings of the arbitration panel or arbitrator shall be final and binding upon the parties. Judgment upon any arbitration award rendered may be entered and enforced in any court of competent jurisdiction. In no event may the arbitration determination change Employee's compensation, title, duties or responsibilities, the entity to whom Employee reports or the principal place where Employee is to render his services. 14. NOTICES. Any notice required, permitted or desired to be given under this Agreement shall be sufficient if it is in writing and (a) personally delivered to Employee or an authorized member of Company, (b) sent by overnight delivery, or (c) sent by registered or certified mail, return receipt requested, to Employer's or Employee's address as provided in this Agreement or to a different address designated in writing by either party. In all instances of notices to be given to Company, a copy by like means shall be delivered to Company's counsel care of Buchanan Ingersoll, 500 College Road East, Princeton, NJ 08540, Attn: David Sorin, Esq. In all instances of notices to be given to Employee, a copy by like means shall be delivered to Employee's counsel care of Kantor Davidoff Wolfe Mandelbaum & Kass, 51 East 42nd Street, New York, NY 10017, Attn: Herbert C. Kantor, Esq. Notice is deemed given on the day it is delivered personally or by overnight delivery, or five (5) business days after it is mailed, if transmitted by the United States Post Office. - 12 - 15. ASSIGNMENT. Employee acknowledges that his services are unique and personal. Accordingly, Employee may not assign his rights or delegate his duties or obligations under this Agreement. Company's rights and obligations under this Agreement shall inure to the benefit of and shall be binding upon the Company's successors and assigns. Company has the absolute right to assign its rights and benefits under the terms of this Agreement. 16. WAIVER OF BREACH. Any waiver of a breach of provision of this Agreement, or any delay of failure to exercise a right under a provision of this Agreement, by either party, shall not operate or be construed as a waiver of that or any other subsequent breach or right. 17. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties. It may not be changed orally but only by an agreement in writing which is signed by the parties. The parties hereto agree that any existing employment agreement between them shall be terminated as of the date of this Agreement. 18. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the internal laws of the State of New York. 19. SEVERABILITY. The invalidity or non-enforceability of any provision of this Agreement or application thereof shall not affect the remaining valid and enforceable provisions of this Agreement or application thereof. - 13 - 20. CAPTIONS. Captions in this Agreement are inserted only as a matter of convenience and reference and shall not be used to interpret or construe any provisions of this Agreement. 21. GRAMMATICAL USAGE. In construing or interpreting this Agreement, masculine usage shall be substituted for those feminine in form and vice versa, and plural usage shall be substituted or singular and vice versa, in any place in which the context so requires. 22. CAPACITY. Employee has read and is familiar with all the terms and conditions of this Agreement and has the capacity to understand such terms and conditions hereof. By executing this Agreement, Employee agrees to be bound by this Agreement and the terms and conditions hereof. 23. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same Agreement. - 14 - IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the date first hereinabove written. UNIDIGITAL INC. /s/ William E. Dye -------------------------- William E. Dye Chief Executive Officer /s/ Richard J. Sirota -------------------------- Richard J. Sirota EX-10.4 6 FOURTH FLOOR LEASE 2/94 STANDARD FORM OF LOFT LEASE The Real Estate Board of New York, Inc. AGREEMENT OF LEASE, made as of this 1ST day of MARCH 1997, between S.N.Y., INC., a New York corporation having an office at 229 W. 28th St, NY, party of the first part, hereinafter referred to as OWNER, and KWIK INTERNATIONAL COLOR, LTD., a New York corporation, having an office at 229 W. 28th St., NY, NY 10001 party of the second part, hereinafter referred to as TENANT, WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner a portion of the Fourth Floor, known as Room 401-405), with square footage of approximately 2,875 square feet in the building known as 229 West 28th Street in the Borough of Manhattan, City of New York, for the term of Twelve (12) years (or until such term shall sooner cease and expire as hereinafter provided) to commence on the 1st day of March nineteen hundred and ninety-seven, and to end on the 28th day of February, Two Thousand Nine both dates inclusive, at an annual rental rate of Forty Six Thousand ($46,000) Dollars from March 1, 1997 to February 28, 2003; Forty Eight Thousand Eight Hundred Seventy Five ($48,875) Dollars from March 1, 2003 to February 28, 2009. which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof (unless this lease be a renewal). In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner's predecessor in interest, Owner may at Owner's option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent. The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows: RENT: 1. Tenant shall pay the rent as above and as hereinafter provided. OCCUPANCY: 2. Tenant shall use and occupy demised premises for printing and graphic services provided such use is in accordance with the certificate of occupancy for the building, if any, and for no other purpose. ALTERATIONS: 3. Tenant shall make no changes in or to the demised premises of any nature without Owner's prior written consent. Subject to the prior written consent of Owner, and to the provisions of this article, tenant, at Tenant's expense, may make alterations, installations, additions or improvements which are nonstructural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises using contractors or mechanics first approved in each instance by Owner. Tenant shall, at its expense, before making any alterations, additions, installations or improvements obtain all permits, approval and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner. Tenant agrees to carry and will cause Tenant's contractors and sub-contractors to carry such workman's compensation, general liability, personal and property damage insurance as Owner may require. If any mechanic's lien is filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant's expense, by payment or filing the bond required by law or otherwise. All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty days prior to the date fixed as the termination of this lease, elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the demised premises by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant's removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner's property or removed from the premises by Owner, at Tenant's expense. REPAIRS: 4. Owner shall maintain and repair the exterior of and the public portions of the building. Tenant shall, throughout the term of this lease, take good care of the demised premises including the bathrooms and lavatory facilities (if the demised premises encompass the entire floor of the building) and the windows and window frames and, the fixtures and appurtenances therein and at Tenant's sole cost and expense promptly make all repairs thereto and to the building, whether structural or non-structural in nature, caused by or resulting from the carelessness, omission, neglect or improper conduct of Tenant, Tenant's servants, employees, invitees, or licensees, and whether or not arising from such Tenant conduct or omission, when required by other provisions of this lease, including Article 6. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant's fixtures, furniture or equipment. All the aforesaid repairs shall be of quality or class equal to the original work or construction. If Tenant fails, after ten days notice, to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by the Owner at the expense of Tenant, and the expenses thereof incurred by Owner shall be collectible, as additional rent, after rendition of a bill or statement therefor. If the demised premises be or become infested with vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant shall give Owner prompt notice of any defective condition in any plumbing, heating system or electrical lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence, but at the expense of Tenant, if repairs are necessitated by damage or injury attributable to Tenant, Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to the Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner, Tenant or others making or failing to make any repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any set off or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of any action for damages for breach of contract. The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply. WINDOW: 5. Tenant will not clean nor require, permit, suffer or allow any window in the demised premises to be cleaned from the outside in violation of Section 202 of the New York State Labor Law or any other applicable law or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction. REQUIREMENTS OF LAW, FIRE INSURANCE: 6. Prior to the commencement of the lease term, if Tenant is then in possession, and at all times thereafter Tenant shall, at Tenant's sole cost and expense, promptly comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, or the Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant's use or manner of use thereof, or, with respect to the building, if arising out of Tenant's use or manner of use of the demised premises of the building (including the use permitted under the lease). Except as provided in Article 30 hereof, nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization and other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. If by reason of failure to comply with the foregoing the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up" or rate for the building or demised premises issued by a body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and prevent vibration, noise and annoyance. SUBORDINATION: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may request. TENANT'S LIABILITY INSURANCE PROPERTY LOSS, DAMAGE INDEMNITY: 8. Owner or its agents shall not be liable for any damage to property of Tenant or of others entrusted to employees of the building, nor for loss of or damage to any property of Tenant by theft or otherwise, nor for any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees; Owner or its agents shall not be liable for any damage caused by other tenants or persons in, upon or about said building or caused by operations in connection of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Owner's own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorney's fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant's agents, contractors, employees, invitees or licensees. Tenant's liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld. DESTRUCTION, FIRE AND OTHER CASUALTY: 9. (a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth. (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner occupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Owner's right to elect not to restore the same as hereinafter provided. (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given within 90 days after such fire or casualty, or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Owner's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control. After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and movable equipment, furniture, and other property. Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner's obligation to restore under paragraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefitting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's furniture and or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. EMINENT DOMAIN: 10. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant's moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term and provided further such claim does not reduce Owner's award. ASSIGNMENT, MORTGAGE, ETC.: 11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority partnership interest of a partnership Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting. ELECTRIC CURRENT: 12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain. ACCESS TO PREMISES: 13. Owner or Owner's agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to any portion of the building or which Owner may elect to perform in the premises after Tenant's failure to make repairs or perform any work which Tenant is obligated to perform under this lease, or for the purpose of complying with laws, regulations and other directions of governmental authorities. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided, wherever possible, they are within walls or otherwise concealed. Owner may, during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants and may, during said six months period, place upon the demised premises the usual notices "To Let" and "For Sale" which notices Tenant shall permit to remain thereon without molestation. If Tenant is not present to open and permit an entry into the demised premises, Owner or Owner's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom. Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant's obligation hereunder. VAULT, VAULT SPACE, AREA: 14. No Vaults, vault space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility, Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant, if used by Tenant, whether or not specifically leased hereunder. OCCUPANCY: 15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business, Tenant shall be responsible for and shall procure and maintain such license or permit. BANKRUPTCY: 16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this lease may be cancelled by Owner by sending of a written notice to Tenant within a reasonable time after the happening of any one or more of the following events: (1) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; or (2) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the premises demised but shall forthwith quit and surrender the premises. If this lease shall be assigned in accordance with its terms, the provisions of this Article 16 shall be applicable only to the party then owning Tenant's interests in this lease. (b) It is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rental reserved hereunder the for unexpired portion of the term demised and the fair and reasonable rental value of the demised premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof be relet by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above. DEFAULT: 17. (1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises becomes vacant or deserted "or if this lease be rejected under ss. 235 of Title 11 of the U.S. Code (bankruptcy code);" or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if Tenant shall make default with respect to any other lease between Owner and Tenant; or if Tenant shall have failed, after five (5) days written notice, to redeposit with Owner any portion of the security deposited hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder or failed to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease, of which fact Owner shall be the sole judge; then in any one or more of such events, upon Owner serving a written fifteen (15) days notice upon Tenant specifying the nature of said default and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced during such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written five (5) days' notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided. (2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required; then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice. REMEDIES OF OWNER AND WAIVER OF REDEMPTION: 18. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or other wise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner may re-let the premises or any part or parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner's option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease, (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant's covenants herein contained, any deficiency between the rent hereby reserved and or covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the premises or any part or parts thereof shall not release or affect Tenant's liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner's option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner's sole judgment, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws. FEES AND EXPENSES: 19. If Tenant shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and without notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorney's fees, in instituting, prosecuting or defending any action or proceedings, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages. BUILDING ALTERATIONS AND MANAGEMENT: 20. Owner shall have the right at any time without the same constituting an eviction and without incurring liability to Tenant therefor to change the arrangement and or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenant making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner's imposition of any controls of the manner of access to the building by Tenant's social or business visitors as the Owner may deem necessary for the security of the building and its occupants. NO REPRESENTATIONS BY OWNER: 21. Neither Owner nor Owner's agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the demised premises or the building except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same "as is" on the date possession is tendered and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. END OF TERM: 22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property from the demised premises. Tenant's obligations to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day. QUIET ENJOYMENT: 23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 34 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned. FAILURE TO GIVE POSSESSION: 24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or if Owner has not completed any work required to be performed by Owner, or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession or complete any work required) until after Owner shall have given Tenant notice that Owner is able to deliver possession in the condition required by this lease. If permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such possession and/or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except the obligation to pay the fixed annual rent set forth in page one of this lease. The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law. NO WAIVER: 25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. All checks tendered to Owner as and for the rent of the demised premises shall be deemed payments for the account of Tenant. Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the payor of such rent or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or as a modification of the provisions of this lease. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises. WAIVER OF TRIAL BY JURY: 26. It is mutually agreed by and between Owner and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action [first several words of first line of column 2 are cut off photocopy] brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceeding or action for possession including a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims. INABILITY TO PERFORM: 27. This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment, fixtures or other materials if Owner is prevented or delayed from doing so by reason of strike or labor troubles or any cause whatsoever beyond Owner's sole control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions which have been or are affected, either directly or indirectly, by war or other emergency. BILLS AND NOTICES: 28. Except as otherwise in this lease provided, a bill statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice. WATER CHARGES: 29. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge) Owner may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of the installation, thereof and throughout the duration of Tenant's occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense in default of which Owner may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water consumed, as shown on said meter as and when bills are rendered, and on default in making such payment Owner may pay such charges and collect the same from Tenant, as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or a lien upon the demised premises or the realty of which they are part pursuant to law, order or regulation made or issued in connection with the use, consumption, maintenance or supply of water, water system or sewage or sewage connection or system. If the building or the demised premises or any part thereof is supplied with water through a meter through which water is also supplied to other premises Tenant shall pay to Owner, as additional rent, on the first day of each month, % ($22.50) of the total meter charges as Tenant's portion. Independently of and in addition to any of the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and collect any monies to be paid by Tenant or paid by Owner for any of the reasons or purposes hereinabove set forth. SPRINKLERS: 30. Anything elsewhere in this lease to the contrary notwithstanding, if the New York Board of Fire Underwriters or the New York Fire Insurance Exchange or any bureau, department or official of the federal, state or city government recommend or require the installation of a sprinkler system or that any changes, modifications, alterations, or additional sprinkler heads or other equipment be made or supplied in an existing sprinkler system by reason of Tenant's business, or the location of partitions, trade fixtures, or other contents of the demised premises, or for any other reason, or if any such sprinkler system installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rate set by any said Exchange or by any fire insurance company, Tenant shall, at Tenant's expense, promptly make such sprinkler system installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required whether the work involved shall be structural or non-structural in nature. Tenant shall pay to Owner as additional rent the sum of $7.50, on the first day of each month during the term of this lease, as Tenant's portion of the contract price for sprinkler supervisory service. ELEVATORS, HEAT, CLEANING: 31. As long as Tenant is not in default under any the covenants of this lease beyond the applicable grace period provided in this lease for the curing of such defaults, Owner shall: (a) provide necessary passenger elevator facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided, same shall be provided only on regular business days Monday through Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied by Owner to the demised premises, when and as required by law, on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public portions of the building which are used in common by all tenants. Tenant shall, at Tenant's expense, keep the demised premises, including the windows, clean and in order, to the reasonable satisfaction of Owner, and for that purpose shall employ the person or persons, or corporation approved by Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse and rubbish from the building. Bills for the same shall be rendered by Owner to Tenant at such time as Owner may elect and shall be due and payable hereunder, and the amount of such bills shall be deemed to be, and be paid as, additional rent. Tenant shall, however, have the option of independently contracting for the removal of such rubbish and refuse in the event that Tenant does not wish to have same done by employees of Owner. Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations as, in the judgment of Owner, are necessary for the proper operation of the building. Owner reserves the right to stop service of the heating, elevator, plumbing and electric systems, when necessary, by reason of accident, or emergency, or for repairs, alterations, replacements or improvements, in the judgment of Owner desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. If the building of which the demised premises are a part supplies manually operated elevator service, Owner may proceed diligently with alterations necessary to substitute automatic control elevator service without in any way affecting the obligations of Tenant hereunder. SECURITY: 32. Tenant has deposited with Owner the sum of $ as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the reletting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or lessee and Owner shall thereupon be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. CAPTIONS: 33. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provision thereof. DEFINITIONS: 34. The term "Owner" as used in this lease means only the owner of the fee or of the leasehold of the building, or the mortgagee in possession, for the time being of the land and building (or the owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in this lease are not restricted to their technical legal meaning. The term "rent" includes the annual rental rate whether so expressed or expressed in monthly installments, and "additional rent." "Additional rent" means all sums which shall be due to Owner from Tenant under this lease, in addition to the annual rental rate. The term "business days" as used in this lease, shall exclude Saturdays, Sundays and all days observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. Wherever it is expressly provided in this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed. ADJACENT EXCAVATION-SHORING: 35. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purposes of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent. RULES AND REGULATIONS: 36. Tenant and Tenant's servants, employees, agents, visitors, and licensees shall observe faithfully, and comply strictly with, the Rules and Regulations annexed hereto and such other and further reasonable Rules and Regulations as Owner or Owner's agents may from time to time adopt. Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner's agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within fifteen (15) days after the giving of notice thereof. Nothing in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees. GLASS: 37. Owner shall replace, at the expense of the Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the demised premises. Owner may insure, and keep insured, at Tenant's expense, all plate and other glass in the demised premises for and in the name of Owner. Bills for the premiums therefor shall be rendered by Owner to Tenant at such times as Owner may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid, as additional rent. ESTOPPEL CERTIFICATE: 38. Tenant, at any time, and from time to time, upon at least 10 days' prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this Lease is unmodified in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under this Lease, and, if so, specifying each such default. 39. DIRECTORY BOARD LISTING: If, at the request of and as accommodation to Tenant, Owner shall place upon the directory board in the lobby of the building, one or more names of persons other than Tenant, such directory board listing shall not be construed as the consent by Owner to an assignment or subletting by Tenant to such person or persons. SUCCESSORS AND ASSIGNS: 40. The covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise provided in this lease, their assigns. Tenant shall look only to Owner's estate and interest in the land and building for the satisfaction of Tenant's remedies for the collection of a judgement (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner (or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this lease, the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of the demised premises. IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written. Witness for Owner: S.N.Y., INC. ------------------------- - ------------------------------- /s/ Richard J. Sirota -------------------------[L.S.] Witness for Tenant: KWIK INTERNATIONAL COLOR , LTD. ------------------------- - ------------------------------- /s/ Walter Berkower -------------------------[L.S.] ACKNOWLEDGMENTS CORPORATE TENANT STATE OF NEW YORK, ss.: County of New York On this 1st day of March, 1997, before me personally came Walter Berkower to me known, who being by me duly sworn, did depose and say that he resides in that he is the Secretary/Treasurer of Kwik International Color Ltd. the corporation described in and which executed the foregoing instrument, as TENANT; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/Cheryl Ann C. Meredith ------------------------------ Notary Public, State of New York INDIVIDUAL TENANT STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to be known and known to me to be the individual described in and who, as TENANT, executed the foregoing instrument and acknowledged to me that he executed the same. IMPORTANT - PLEASE READ RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36. 1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any Tenant or used for any purpose other than for ingress or egress from the demised premises and for delivery of merchandise and equipment in a prompt and efficient manner using elevators and passageways designated for such delivery by Owner. There shall not be used in any space, or in the public hall of the building, either by any Tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and sideguards. If said premises are situated on the ground floor of the building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in front of said premises clean and free from ice, snow, dirt and rubbish. 2. The water and wash cloths and plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed and no sweepings, rubbish, rags, acids or other substances shall be deposited therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose clerks, agents, employees or visitors, shall have caused it. 3. No carpet, rug or other article shall be hung or shaken out of any window of the building; and no Tenant shall sweep or throw or permit to be swept or thrown from the demised premises any dirt or other substances into any of the corridors of halls, elevators, or out of the doors or windows or stairways of the building and Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the demised premises, or permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to Owner or other occupants of the buildings by reason of noise, odors, and or vibrations, or interfere in any way, with other Tenants or those having business therein, nor shall any bicycles, vehicles, animals, fish, or birds be kept in or about the building. Smoking or carrying lighted cigars or cigarettes in the elevators of the building is prohibited. 4. No awnings or other projections shall be attached to the outside walls of the building without the prior written consent of Owner. 5. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside of the demised premises or the building or on the inside of the demised premises if the same is visible from the outside of the premises without the prior written consent of Owner, except that the name of Tenant may appear on the entrance door of the premises. In the event of the violation of the foregoing by any Tenant, Owner may remove same without any liability and may charge the expense incurred by such removal to Tenant or Tenants violating this rule. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for each Tenant by Owner at the expense of such Tenant, and shall be of a size, color and style acceptable to Owner. 6. No Tenant shall mark, paint, drill into, or in any way deface any part of the demised premises or the building of which they form a part. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised premises, and, if linoleum or other similar floor covering is desired to be used an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 7. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or mechanism thereof. Each Tenant must, upon the termination of his Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such Tenant, and in the event of the loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof. 8. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only on the freight elevators and through the service entrances and corridors, and only during hours and in a manner approved by Owner. Owner reserves the right to inspect all freight to be brought into the building and to exclude from the building all freight which violates any of these Rules and Regulations of the lease of which these Rules and Regulations are a part. 9. No Tenant shall obtain for use upon the demised premises ice, drinking water, towel and other similar services, or accept barbering or bootblacking services in the demised premises, except from persons authorized by Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting and peddling in the building is prohibited and each Tenant shall cooperate to prevent the same. 10. Owner reserves the right to exclude from the building all persons who do not present a pass to the building signed by Owner. Owner will furnish passes to persons for whom any Tenant requests same in writing. Each Tenant shall be responsible for all persons for whom he requests such pass and shall be liable to Owner for all acts of such persons. Notwithstanding the foregoing, Owner shall not be required to allow Tenant or any person to enter or remain in the building, except on business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against Owner by reason of Owner excluding from the building any person who does not present such pass. 11. Owner shall have the right to prohibit any advertising by any Tenant which in Owner's opinion, tends to impair the reputation of the building or its desirability as a loft building, and upon written notice from Owner, Tenant shall refrain from or discontinue such advertising. 12. Tenant shall not bring or permit to be brought or kept in or on the demised premises, any inflammable, combustible, or explosive, or hazardous fluid, material, chemical or substance, or cause or permit any odors of cooking or other processes, or any unusual or other objectionable odors to permeate in or emanate from the demised premises. 13. Tenant shall not use the demised premises in a manner which disturbs or interferes with other Tenants in the beneficial use of their premises. Address Premises TO STANDARD FORM OF LOFT LEASE THE REAL ESTATE BOARD OF NEW YORK, INC. (C)Copyright 1994. All rights Reserved. Reproduction in whole or in part prohibited. Dated 19 --- Rent Per Year Rent Per Month Term From To Drawn by -------------------------------- Checked by ------------------------------ Entered by ------------------------------ Approved by ----------------------------- EX-10.5 7 SEVENTH FLOOR LEASE 2/94 STANDARD FORM OF LOFT LEASE The Real Estate Board of New York, Inc. AGREEMENT OF LEASE, made as of this 1ST day of MARCH 1997, between S.N.Y., INC., a New York corporation having an office at 229 W. 28th St, NY, party of the first part, hereinafter referred to as OWNER, and KWIK INTERNATIONAL COLOR, LTD., a New York corporation, having an office at 229 W. 28th St., NY, NY 10001 party of the second part, hereinafter referred to as TENANT, WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner a portion of the Seventh Floor, known as Room 706-714 and 707-713 with square footage of approximately 6,900 square feet. in the building known as 229 West 28th Street in the Borough of Manhattan, City of New York, for the term of Twelve (12) years (or until such term shall sooner cease and expire as hereinafter provided) to commence on the 1st day of March nineteen hundred and ninety-seven, and to end on the 28th day of February, Two Thousand Nine both dates inclusive, at an annual rental rate of One Hundred Ten Thousand Four Hundred ($110,400) Dollars from March 1, 1997 to February 28, 2003; One Hundred Seventeen Thousand Three Hundred ($117,300) Dollars from March 1, 2003 to February 28, 2009. which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof (unless this lease be a renewal). In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner's predecessor in interest, Owner may at Owner's option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent. The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows: RENT: 1. Tenant shall pay the rent as above and as hereinafter provided. OCCUPANCY: 2. Tenant shall use and occupy demised premises for printing and graphic services provided such use is in accordance with the certificate of occupancy for the building, if any, and for no other purpose. ALTERATIONS: 3. Tenant shall make no changes in or to the demised premises of any nature without Owner's prior written consent. Subject to the prior written consent of Owner, and to the provisions of this article, tenant, at Tenant's expense, may make alterations, installations, additions or improvements which are nonstructural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises using contractors or mechanics first approved in each instance by Owner. Tenant shall, at its expense, before making any alterations, additions, installations or improvements obtain all permits, approval and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner. Tenant agrees to carry and will cause Tenant's contractors and sub-contractors to carry such workman's compensation, general liability, personal and property damage insurance as Owner may require. If any mechanic's lien is filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant's expense, by payment or filing the bond required by law or otherwise. All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty days prior to the date fixed as the termination of this lease, elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the demised premises by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant's removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner's property or removed from the premises by Owner, at Tenant's expense. REPAIRS: 4. Owner shall maintain and repair the exterior of and the public portions of the building. Tenant shall, throughout the term of this lease, take good care of the demised premises including the bathrooms and lavatory facilities (if the demised premises encompass the entire floor of the building) and the windows and window frames and, the fixtures and appurtenances therein and at Tenant's sole cost and expense promptly make all repairs thereto and to the building, whether structural or non-structural in nature, caused by or resulting from the carelessness, omission, neglect or improper conduct of Tenant, Tenant's servants, employees, invitees, or licensees, and whether or not arising from such Tenant conduct or omission, when required by other provisions of this lease, including Article 6. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant's fixtures, furniture or equipment. All the aforesaid repairs shall be of quality or class equal to the original work or construction. If Tenant fails, after ten days notice, to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by the Owner at the expense of Tenant, and the expenses thereof incurred by Owner shall be collectible, as additional rent, after rendition of a bill or statement therefor. If the demised premises be or become infested with vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant shall give Owner prompt notice of any defective condition in any plumbing, heating system or electrical lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence, but at the expense of Tenant, if repairs are necessitated by damage or injury attributable to Tenant, Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to the Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner, Tenant or others making or failing to make any repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any set off or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of any action for damages for breach of contract. The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply. WINDOW: 5. Tenant will not clean nor require, permit, suffer or allow any window in the demised premises to be cleaned from the outside in violation of Section 202 of the New York State Labor Law or any other applicable law or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction. REQUIREMENTS OF LAW, FIRE INSURANCE: 6. Prior to the commencement of the lease term, if Tenant is then in possession, and at all times thereafter Tenant shall, at Tenant's sole cost and expense, promptly comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, or the Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant's use or manner of use thereof, or, with respect to the building, if arising out of Tenant's use or manner of use of the demised premises of the building (including the use permitted under the lease). Except as provided in Article 30 hereof, nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization and other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. If by reason of failure to comply with the foregoing the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up" or rate for the building or demised premises issued by a body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and prevent vibration, noise and annoyance. SUBORDINATION: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may request. TENANT'S LIABILITY INSURANCE PROPERTY LOSS, DAMAGE INDEMNITY: 8. Owner or its agents shall not be liable for any damage to property of Tenant or of others entrusted to employees of the building, nor for loss of or damage to any property of Tenant by theft or otherwise, nor for any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees; Owner or its agents shall not be liable for any damage caused by other tenants or persons in, upon or about said building or caused by operations in connection of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Owner's own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorney's fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant's agents, contractors, employees, invitees or licensees. Tenant's liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld. DESTRUCTION, FIRE AND OTHER CASUALTY: 9. (a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth. (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner occupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Owner's right to elect not to restore the same as hereinafter provided. (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given within 90 days after such fire or casualty, or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Owner's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control. After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and movable equipment, furniture, and other property. Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner's obligation to restore under paragraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefitting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's furniture and or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. EMINENT DOMAIN: 10. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant's moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term and provided further such claim does not reduce Owner's award. ASSIGNMENT, MORTGAGE, ETC.: 11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority partnership interest of a partnership Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting. ELECTRIC CURRENT: 12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain. ACCESS TO PREMISES: 13. Owner or Owner's agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to any portion of the building or which Owner may elect to perform in the premises after Tenant's failure to make repairs or perform any work which Tenant is obligated to perform under this lease, or for the purpose of complying with laws, regulations and other directions of governmental authorities. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided, wherever possible, they are within walls or otherwise concealed. Owner may, during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants and may, during said six months period, place upon the demised premises the usual notices "To Let" and "For Sale" which notices Tenant shall permit to remain thereon without molestation. If Tenant is not present to open and permit an entry into the demised premises, Owner or Owner's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom. Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant's obligation hereunder. VAULT, VAULT SPACE, AREA: 14. No Vaults, vault space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility, Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant, if used by Tenant, whether or not specifically leased hereunder. OCCUPANCY: 15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business, Tenant shall be responsible for and shall procure and maintain such license or permit. BANKRUPTCY: 16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this lease may be cancelled by Owner by sending of a written notice to Tenant within a reasonable time after the happening of any one or more of the following events: (1) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; or (2) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the premises demised but shall forthwith quit and surrender the premises. If this lease shall be assigned in accordance with its terms, the provisions of this Article 16 shall be applicable only to the party then owning Tenant's interests in this lease. (b) It is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rental reserved hereunder the for unexpired portion of the term demised and the fair and reasonable rental value of the demised premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof be relet by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above. DEFAULT: 17. (1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises becomes vacant or deserted "or if this lease be rejected under ss. 235 of Title 11 of the U.S. Code (bankruptcy code);" or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if Tenant shall make default with respect to any other lease between Owner and Tenant; or if Tenant shall have failed, after five (5) days written notice, to redeposit with Owner any portion of the security deposited hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder or failed to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease, of which fact Owner shall be the sole judge; then in any one or more of such events, upon Owner serving a written fifteen (15) days notice upon Tenant specifying the nature of said default and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced during such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written five (5) days' notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided. (2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required; then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice. REMEDIES OF OWNER AND WAIVER OF REDEMPTION: 18. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or other wise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner may re-let the premises or any part or parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner's option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease, (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant's covenants herein contained, any deficiency between the rent hereby reserved and or covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the premises or any part or parts thereof shall not release or affect Tenant's liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner's option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner's sole judgment, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws. FEES AND EXPENSES: 19. If Tenant shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and without notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorney's fees, in instituting, prosecuting or defending any action or proceedings, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages. BUILDING ALTERATIONS AND MANAGEMENT: 20. Owner shall have the right at any time without the same constituting an eviction and without incurring liability to Tenant therefor to change the arrangement and or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenant making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner's imposition of any controls of the manner of access to the building by Tenant's social or business visitors as the Owner may deem necessary for the security of the building and its occupants. NO REPRESENTATIONS BY OWNER: 21. Neither Owner nor Owner's agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the demised premises or the building except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same "as is" on the date possession is tendered and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. END OF TERM: 22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property from the demised premises. Tenant's obligations to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day. QUIET ENJOYMENT: 23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 34 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned. FAILURE TO GIVE POSSESSION: 24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or if Owner has not completed any work required to be performed by Owner, or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession or complete any work required) until after Owner shall have given Tenant notice that Owner is able to deliver possession in the condition required by this lease. If permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such possession and/or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except the obligation to pay the fixed annual rent set forth in page one of this lease. The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law. NO WAIVER: 25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. All checks tendered to Owner as and for the rent of the demised premises shall be deemed payments for the account of Tenant. Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the payor of such rent or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or as a modification of the provisions of this lease. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises. WAIVER OF TRIAL BY JURY: 26. It is mutually agreed by and between Owner and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action [first several words of first line of column 2 are cut off photocopy] brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceeding or action for possession including a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims. INABILITY TO PERFORM: 27. This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment, fixtures or other materials if Owner is prevented or delayed from doing so by reason of strike or labor troubles or any cause whatsoever beyond Owner's sole control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions which have been or are affected, either directly or indirectly, by war or other emergency. BILLS AND NOTICES: 28. Except as otherwise in this lease provided, a bill statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice. WATER CHARGES: 29. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge) Owner may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of the installation, thereof and throughout the duration of Tenant's occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense in default of which Owner may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water consumed, as shown on said meter as and when bills are rendered, and on default in making such payment Owner may pay such charges and collect the same from Tenant, as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or a lien upon the demised premises or the realty of which they are part pursuant to law, order or regulation made or issued in connection with the use, consumption, maintenance or supply of water, water system or sewage or sewage connection or system. If the building or the demised premises or any part thereof is supplied with water through a meter through which water is also supplied to other premises Tenant shall pay to Owner, as additional rent, on the first day of each month, % ($35.93) of the total meter charges as Tenant's portion. Independently of and in addition to any of the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and collect any monies to be paid by Tenant or paid by Owner for any of the reasons or purposes hereinabove set forth. SPRINKLERS: 30. Anything elsewhere in this lease to the contrary notwithstanding, if the New York Board of Fire Underwriters or the New York Fire Insurance Exchange or any bureau, department or official of the federal, state or city government recommend or require the installation of a sprinkler system or that any changes, modifications, alterations, or additional sprinkler heads or other equipment be made or supplied in an existing sprinkler system by reason of Tenant's business, or the location of partitions, trade fixtures, or other contents of the demised premises, or for any other reason, or if any such sprinkler system installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rate set by any said Exchange or by any fire insurance company, Tenant shall, at Tenant's expense, promptly make such sprinkler system installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required whether the work involved shall be structural or non-structural in nature. Tenant shall pay to Owner as additional rent the sum of $18.00, on the first day of each month during the term of this lease, as Tenant's portion of the contract price for sprinkler supervisory service. ELEVATORS, HEAT, CLEANING: 31. As long as Tenant is not in default under any the covenants of this lease beyond the applicable grace period provided in this lease for the curing of such defaults, Owner shall: (a) provide necessary passenger elevator facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided, same shall be provided only on regular business days Monday through Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied by Owner to the demised premises, when and as required by law, on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public portions of the building which are used in common by all tenants. Tenant shall, at Tenant's expense, keep the demised premises, including the windows, clean and in order, to the reasonable satisfaction of Owner, and for that purpose shall employ the person or persons, or corporation approved by Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse and rubbish from the building. Bills for the same shall be rendered by Owner to Tenant at such time as Owner may elect and shall be due and payable hereunder, and the amount of such bills shall be deemed to be, and be paid as, additional rent. Tenant shall, however, have the option of independently contracting for the removal of such rubbish and refuse in the event that Tenant does not wish to have same done by employees of Owner. Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations as, in the judgment of Owner, are necessary for the proper operation of the building. Owner reserves the right to stop service of the heating, elevator, plumbing and electric systems, when necessary, by reason of accident, or emergency, or for repairs, alterations, replacements or improvements, in the judgment of Owner desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. If the building of which the demised premises are a part supplies manually operated elevator service, Owner may proceed diligently with alterations necessary to substitute automatic control elevator service without in any way affecting the obligations of Tenant hereunder. SECURITY: 32. Tenant has deposited with Owner the sum of $ as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the reletting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or lessee and Owner shall thereupon be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. CAPTIONS: 33. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provision thereof. DEFINITIONS: 34. The term "Owner" as used in this lease means only the owner of the fee or of the leasehold of the building, or the mortgagee in possession, for the time being of the land and building (or the owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in this lease are not restricted to their technical legal meaning. The term "rent" includes the annual rental rate whether so expressed or expressed in monthly installments, and "additional rent." "Additional rent" means all sums which shall be due to Owner from Tenant under this lease, in addition to the annual rental rate. The term "business days" as used in this lease, shall exclude Saturdays, Sundays and all days observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. Wherever it is expressly provided in this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed. ADJACENT EXCAVATION-SHORING: 35. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purposes of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent. RULES AND REGULATIONS: 36. Tenant and Tenant's servants, employees, agents, visitors, and licensees shall observe faithfully, and comply strictly with, the Rules and Regulations annexed hereto and such other and further reasonable Rules and Regulations as Owner or Owner's agents may from time to time adopt. Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner's agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within fifteen (15) days after the giving of notice thereof. Nothing in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees. GLASS: 37. Owner shall replace, at the expense of the Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the demised premises. Owner may insure, and keep insured, at Tenant's expense, all plate and other glass in the demised premises for and in the name of Owner. Bills for the premiums therefor shall be rendered by Owner to Tenant at such times as Owner may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid, as additional rent. ESTOPPEL CERTIFICATE: 38. Tenant, at any time, and from time to time, upon at least 10 days' prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this Lease is unmodified in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under this Lease, and, if so, specifying each such default. 39. DIRECTORY BOARD LISTING: If, at the request of and as accommodation to Tenant, Owner shall place upon the directory board in the lobby of the building, one or more names of persons other than Tenant, such directory board listing shall not be construed as the consent by Owner to an assignment or subletting by Tenant to such person or persons. SUCCESSORS AND ASSIGNS: 40. The covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise provided in this lease, their assigns. Tenant shall look only to Owner's estate and interest in the land and building for the satisfaction of Tenant's remedies for the collection of a judgement (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner (or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this lease, the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of the demised premises. IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written. Witness for Owner: S.N.Y., INC. ------------------------- - ------------------------------- /s/ Richard J. Sirota -------------------------[L.S.] Witness for Tenant: KWIK INTERNATIONAL COLOR , LTD. ------------------------- - ------------------------------- /s/ Walter Berkower -------------------------[L.S.] ACKNOWLEDGMENTS CORPORATE TENANT STATE OF NEW YORK, ss.: County of New York On this 1st day of March, 1997, before me personally came Walter Berkower to me known, who being by me duly sworn, did depose and say that he resides in that he is the Secretary/Treasurer of Kwik International Color Ltd. the corporation described in and which executed the foregoing instrument, as TENANT; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/Cheryl Ann C. Meredith ------------------------------ Notary Public, State of New York INDIVIDUAL TENANT STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to be known and known to me to be the individual described in and who, as TENANT, executed the foregoing instrument and acknowledged to me that he executed the same. IMPORTANT - PLEASE READ RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36. 1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any Tenant or used for any purpose other than for ingress or egress from the demised premises and for delivery of merchandise and equipment in a prompt and efficient manner using elevators and passageways designated for such delivery by Owner. There shall not be used in any space, or in the public hall of the building, either by any Tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and sideguards. If said premises are situated on the ground floor of the building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in front of said premises clean and free from ice, snow, dirt and rubbish. 2. The water and wash cloths and plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed and no sweepings, rubbish, rags, acids or other substances shall be deposited therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose clerks, agents, employees or visitors, shall have caused it. 3. No carpet, rug or other article shall be hung or shaken out of any window of the building; and no Tenant shall sweep or throw or permit to be swept or thrown from the demised premises any dirt or other substances into any of the corridors of halls, elevators, or out of the doors or windows or stairways of the building and Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the demised premises, or permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to Owner or other occupants of the buildings by reason of noise, odors, and or vibrations, or interfere in any way, with other Tenants or those having business therein, nor shall any bicycles, vehicles, animals, fish, or birds be kept in or about the building. Smoking or carrying lighted cigars or cigarettes in the elevators of the building is prohibited. 4. No awnings or other projections shall be attached to the outside walls of the building without the prior written consent of Owner. 5. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside of the demised premises or the building or on the inside of the demised premises if the same is visible from the outside of the premises without the prior written consent of Owner, except that the name of Tenant may appear on the entrance door of the premises. In the event of the violation of the foregoing by any Tenant, Owner may remove same without any liability and may charge the expense incurred by such removal to Tenant or Tenants violating this rule. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for each Tenant by Owner at the expense of such Tenant, and shall be of a size, color and style acceptable to Owner. 6. No Tenant shall mark, paint, drill into, or in any way deface any part of the demised premises or the building of which they form a part. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised premises, and, if linoleum or other similar floor covering is desired to be used an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 7. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or mechanism thereof. Each Tenant must, upon the termination of his Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such Tenant, and in the event of the loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof. 8. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only on the freight elevators and through the service entrances and corridors, and only during hours and in a manner approved by Owner. Owner reserves the right to inspect all freight to be brought into the building and to exclude from the building all freight which violates any of these Rules and Regulations of the lease of which these Rules and Regulations are a part. 9. No Tenant shall obtain for use upon the demised premises ice, drinking water, towel and other similar services, or accept barbering or bootblacking services in the demised premises, except from persons authorized by Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting and peddling in the building is prohibited and each Tenant shall cooperate to prevent the same. 10. Owner reserves the right to exclude from the building all persons who do not present a pass to the building signed by Owner. Owner will furnish passes to persons for whom any Tenant requests same in writing. Each Tenant shall be responsible for all persons for whom he requests such pass and shall be liable to Owner for all acts of such persons. Notwithstanding the foregoing, Owner shall not be required to allow Tenant or any person to enter or remain in the building, except on business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against Owner by reason of Owner excluding from the building any person who does not present such pass. 11. Owner shall have the right to prohibit any advertising by any Tenant which in Owner's opinion, tends to impair the reputation of the building or its desirability as a loft building, and upon written notice from Owner, Tenant shall refrain from or discontinue such advertising. 12. Tenant shall not bring or permit to be brought or kept in or on the demised premises, any inflammable, combustible, or explosive, or hazardous fluid, material, chemical or substance, or cause or permit any odors of cooking or other processes, or any unusual or other objectionable odors to permeate in or emanate from the demised premises. 13. Tenant shall not use the demised premises in a manner which disturbs or interferes with other Tenants in the beneficial use of their premises. Address Premises TO STANDARD FORM OF LOFT LEASE THE REAL ESTATE BOARD OF NEW YORK, INC. (C)Copyright 1994. All rights Reserved. Reproduction in whole or in part prohibited. Dated 19 --- Rent Per Year Rent Per Month Term From To Drawn by -------------------------------- Checked by ------------------------------ Entered by ------------------------------ Approved by ----------------------------- EX-10.6 8 EIGHTH FLOOR LEASE 2/94 STANDARD FORM OF LOFT LEASE The Real Estate Board of New York, Inc. AGREEMENT OF LEASE, made as of this 1ST day of MARCH 1997, between S.N.Y., INC., a New York corporation having an office at 229 W. 28th St, NY, party of the first part, hereinafter referred to as OWNER, and KWIK INTERNATIONAL COLOR, LTD., a New York corporation, having an office at 229 W. 28th St., NY, NY 10001 party of the second part, hereinafter referred to as TENANT, WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner the entire eighth floor in the building known as 229 West 28th Street in the Borough of Manhattan, City of New York, for the term of Twelve (12) years (or until such term shall sooner cease and expire as hereinafter provided) to commence on the 1st day of March nineteen hundred and ninety-seven, and to end on the 28th day of February, Two Thousand Nine both dates inclusive, at an annual rental rate of One Hundred Eighty Four Thousand ($184,000) Dollars from March 1, 1997 to February 28, 2003; One Hundred Ninety Five Thousand Five Hundred ($195,500) Dollars from March 1, 2003 to February 28, 2009. which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof (unless this lease be a renewal). In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner's predecessor in interest, Owner may at Owner's option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent. The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows: RENT: 1. Tenant shall pay the rent as above and as hereinafter provided. OCCUPANCY: 2. Tenant shall use and occupy demised premises for printing and graphic services provided such use is in accordance with the certificate of occupancy for the building, if any, and for no other purpose. ALTERATIONS: 3. Tenant shall make no changes in or to the demised premises of any nature without Owner's prior written consent. Subject to the prior written consent of Owner, and to the provisions of this article, tenant, at Tenant's expense, may make alterations, installations, additions or improvements which are nonstructural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises using contractors or mechanics first approved in each instance by Owner. Tenant shall, at its expense, before making any alterations, additions, installations or improvements obtain all permits, approval and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner. Tenant agrees to carry and will cause Tenant's contractors and sub-contractors to carry such workman's compensation, general liability, personal and property damage insurance as Owner may require. If any mechanic's lien is filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant's expense, by payment or filing the bond required by law or otherwise. All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty days prior to the date fixed as the termination of this lease, elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the demised premises by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant's removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner's property or removed from the premises by Owner, at Tenant's expense. REPAIRS: 4. Owner shall maintain and repair the exterior of and the public portions of the building. Tenant shall, throughout the term of this lease, take good care of the demised premises including the bathrooms and lavatory facilities (if the demised premises encompass the entire floor of the building) and the windows and window frames and, the fixtures and appurtenances therein and at Tenant's sole cost and expense promptly make all repairs thereto and to the building, whether structural or non-structural in nature, caused by or resulting from the carelessness, omission, neglect or improper conduct of Tenant, Tenant's servants, employees, invitees, or licensees, and whether or not arising from such Tenant conduct or omission, when required by other provisions of this lease, including Article 6. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant's fixtures, furniture or equipment. All the aforesaid repairs shall be of quality or class equal to the original work or construction. If Tenant fails, after ten days notice, to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by the Owner at the expense of Tenant, and the expenses thereof incurred by Owner shall be collectible, as additional rent, after rendition of a bill or statement therefor. If the demised premises be or become infested with vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant shall give Owner prompt notice of any defective condition in any plumbing, heating system or electrical lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence, but at the expense of Tenant, if repairs are necessitated by damage or injury attributable to Tenant, Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to the Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner, Tenant or others making or failing to make any repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any set off or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of any action for damages for breach of contract. The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply. WINDOW: 5. Tenant will not clean nor require, permit, suffer or allow any window in the demised premises to be cleaned from the outside in violation of Section 202 of the New York State Labor Law or any other applicable law or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction. REQUIREMENTS OF LAW, FIRE INSURANCE: 6. Prior to the commencement of the lease term, if Tenant is then in possession, and at all times thereafter Tenant shall, at Tenant's sole cost and expense, promptly comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, or the Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant's use or manner of use thereof, or, with respect to the building, if arising out of Tenant's use or manner of use of the demised premises of the building (including the use permitted under the lease). Except as provided in Article 30 hereof, nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization and other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. If by reason of failure to comply with the foregoing the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up" or rate for the building or demised premises issued by a body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and prevent vibration, noise and annoyance. SUBORDINATION: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may request. TENANT'S LIABILITY INSURANCE PROPERTY LOSS, DAMAGE INDEMNITY: 8. Owner or its agents shall not be liable for any damage to property of Tenant or of others entrusted to employees of the building, nor for loss of or damage to any property of Tenant by theft or otherwise, nor for any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees; Owner or its agents shall not be liable for any damage caused by other tenants or persons in, upon or about said building or caused by operations in connection of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Owner's own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorney's fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant's agents, contractors, employees, invitees or licensees. Tenant's liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld. DESTRUCTION, FIRE AND OTHER CASUALTY: 9. (a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth. (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner occupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Owner's right to elect not to restore the same as hereinafter provided. (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given within 90 days after such fire or casualty, or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Owner's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control. After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and movable equipment, furniture, and other property. Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner's obligation to restore under paragraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefitting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's furniture and or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. EMINENT DOMAIN: 10. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant's moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term and provided further such claim does not reduce Owner's award. ASSIGNMENT, MORTGAGE, ETC.: 11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority partnership interest of a partnership Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting. ELECTRIC CURRENT: 12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain. ACCESS TO PREMISES: 13. Owner or Owner's agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to any portion of the building or which Owner may elect to perform in the premises after Tenant's failure to make repairs or perform any work which Tenant is obligated to perform under this lease, or for the purpose of complying with laws, regulations and other directions of governmental authorities. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided, wherever possible, they are within walls or otherwise concealed. Owner may, during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants and may, during said six months period, place upon the demised premises the usual notices "To Let" and "For Sale" which notices Tenant shall permit to remain thereon without molestation. If Tenant is not present to open and permit an entry into the demised premises, Owner or Owner's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom. Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant's obligation hereunder. VAULT, VAULT SPACE, AREA: 14. No Vaults, vault space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility, Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant, if used by Tenant, whether or not specifically leased hereunder. OCCUPANCY: 15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business, Tenant shall be responsible for and shall procure and maintain such license or permit. BANKRUPTCY: 16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this lease may be cancelled by Owner by sending of a written notice to Tenant within a reasonable time after the happening of any one or more of the following events: (1) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; or (2) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the premises demised but shall forthwith quit and surrender the premises. If this lease shall be assigned in accordance with its terms, the provisions of this Article 16 shall be applicable only to the party then owning Tenant's interests in this lease. (b) It is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rental reserved hereunder the for unexpired portion of the term demised and the fair and reasonable rental value of the demised premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof be relet by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above. DEFAULT: 17. (1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises becomes vacant or deserted "or if this lease be rejected under ss. 235 of Title 11 of the U.S. Code (bankruptcy code);" or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if Tenant shall make default with respect to any other lease between Owner and Tenant; or if Tenant shall have failed, after five (5) days written notice, to redeposit with Owner any portion of the security deposited hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder or failed to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease, of which fact Owner shall be the sole judge; then in any one or more of such events, upon Owner serving a written fifteen (15) days notice upon Tenant specifying the nature of said default and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced during such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written five (5) days' notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided. (2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required; then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice. REMEDIES OF OWNER AND WAIVER OF REDEMPTION: 18. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or other wise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner may re-let the premises or any part or parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner's option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease, (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant's covenants herein contained, any deficiency between the rent hereby reserved and or covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the premises or any part or parts thereof shall not release or affect Tenant's liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner's option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner's sole judgment, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws. FEES AND EXPENSES: 19. If Tenant shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and without notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorney's fees, in instituting, prosecuting or defending any action or proceedings, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages. BUILDING ALTERATIONS AND MANAGEMENT: 20. Owner shall have the right at any time without the same constituting an eviction and without incurring liability to Tenant therefor to change the arrangement and or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenant making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner's imposition of any controls of the manner of access to the building by Tenant's social or business visitors as the Owner may deem necessary for the security of the building and its occupants. NO REPRESENTATIONS BY OWNER: 21. Neither Owner nor Owner's agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the demised premises or the building except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same "as is" on the date possession is tendered and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. END OF TERM: 22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property from the demised premises. Tenant's obligations to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day. QUIET ENJOYMENT: 23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 34 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned. FAILURE TO GIVE POSSESSION: 24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or if Owner has not completed any work required to be performed by Owner, or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession or complete any work required) until after Owner shall have given Tenant notice that Owner is able to deliver possession in the condition required by this lease. If permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such possession and/or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except the obligation to pay the fixed annual rent set forth in page one of this lease. The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law. NO WAIVER: 25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. All checks tendered to Owner as and for the rent of the demised premises shall be deemed payments for the account of Tenant. Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the payor of such rent or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or as a modification of the provisions of this lease. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises. WAIVER OF TRIAL BY JURY: 26. It is mutually agreed by and between Owner and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action [first several words of first line of column 2 are cut off photocopy] brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceeding or action for possession including a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims. INABILITY TO PERFORM: 27. This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment, fixtures or other materials if Owner is prevented or delayed from doing so by reason of strike or labor troubles or any cause whatsoever beyond Owner's sole control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions which have been or are affected, either directly or indirectly, by war or other emergency. BILLS AND NOTICES: 28. Except as otherwise in this lease provided, a bill statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice. WATER CHARGES: 29. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge) Owner may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of the installation, thereof and throughout the duration of Tenant's occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense in default of which Owner may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water consumed, as shown on said meter as and when bills are rendered, and on default in making such payment Owner may pay such charges and collect the same from Tenant, as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or a lien upon the demised premises or the realty of which they are part pursuant to law, order or regulation made or issued in connection with the use, consumption, maintenance or supply of water, water system or sewage or sewage connection or system. If the building or the demised premises or any part thereof is supplied with water through a meter through which water is also supplied to other premises Tenant shall pay to Owner, as additional rent, on the first day of each month, % ($42.49) of the total meter charges as Tenant's portion. Independently of and in addition to any of the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and collect any monies to be paid by Tenant or paid by Owner for any of the reasons or purposes hereinabove set forth. SPRINKLERS: 30. Anything elsewhere in this lease to the contrary notwithstanding, if the New York Board of Fire Underwriters or the New York Fire Insurance Exchange or any bureau, department or official of the federal, state or city government recommend or require the installation of a sprinkler system or that any changes, modifications, alterations, or additional sprinkler heads or other equipment be made or supplied in an existing sprinkler system by reason of Tenant's business, or the location of partitions, trade fixtures, or other contents of the demised premises, or for any other reason, or if any such sprinkler system installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rate set by any said Exchange or by any fire insurance company, Tenant shall, at Tenant's expense, promptly make such sprinkler system installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required whether the work involved shall be structural or non-structural in nature. Tenant shall pay to Owner as additional rent the sum of $30.00, on the first day of each month during the term of this lease, as Tenant's portion of the contract price for sprinkler supervisory service. ELEVATORS, HEAT, CLEANING: 31. As long as Tenant is not in default under any the covenants of this lease beyond the applicable grace period provided in this lease for the curing of such defaults, Owner shall: (a) provide necessary passenger elevator facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided, same shall be provided only on regular business days Monday through Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied by Owner to the demised premises, when and as required by law, on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public portions of the building which are used in common by all tenants. Tenant shall, at Tenant's expense, keep the demised premises, including the windows, clean and in order, to the reasonable satisfaction of Owner, and for that purpose shall employ the person or persons, or corporation approved by Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse and rubbish from the building. Bills for the same shall be rendered by Owner to Tenant at such time as Owner may elect and shall be due and payable hereunder, and the amount of such bills shall be deemed to be, and be paid as, additional rent. Tenant shall, however, have the option of independently contracting for the removal of such rubbish and refuse in the event that Tenant does not wish to have same done by employees of Owner. Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations as, in the judgment of Owner, are necessary for the proper operation of the building. Owner reserves the right to stop service of the heating, elevator, plumbing and electric systems, when necessary, by reason of accident, or emergency, or for repairs, alterations, replacements or improvements, in the judgment of Owner desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. If the building of which the demised premises are a part supplies manually operated elevator service, Owner may proceed diligently with alterations necessary to substitute automatic control elevator service without in any way affecting the obligations of Tenant hereunder. SECURITY: 32. Tenant has deposited with Owner the sum of $ as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the reletting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or lessee and Owner shall thereupon be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. CAPTIONS: 33. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provision thereof. DEFINITIONS: 34. The term "Owner" as used in this lease means only the owner of the fee or of the leasehold of the building, or the mortgagee in possession, for the time being of the land and building (or the owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in this lease are not restricted to their technical legal meaning. The term "rent" includes the annual rental rate whether so expressed or expressed in monthly installments, and "additional rent." "Additional rent" means all sums which shall be due to Owner from Tenant under this lease, in addition to the annual rental rate. The term "business days" as used in this lease, shall exclude Saturdays, Sundays and all days observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. Wherever it is expressly provided in this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed. ADJACENT EXCAVATION-SHORING: 35. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purposes of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent. RULES AND REGULATIONS: 36. Tenant and Tenant's servants, employees, agents, visitors, and licensees shall observe faithfully, and comply strictly with, the Rules and Regulations annexed hereto and such other and further reasonable Rules and Regulations as Owner or Owner's agents may from time to time adopt. Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner's agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within fifteen (15) days after the giving of notice thereof. Nothing in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees. GLASS: 37. Owner shall replace, at the expense of the Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the demised premises. Owner may insure, and keep insured, at Tenant's expense, all plate and other glass in the demised premises for and in the name of Owner. Bills for the premiums therefor shall be rendered by Owner to Tenant at such times as Owner may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid, as additional rent. ESTOPPEL CERTIFICATE: 38. Tenant, at any time, and from time to time, upon at least 10 days' prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this Lease is unmodified in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under this Lease, and, if so, specifying each such default. 39. DIRECTORY BOARD LISTING: If, at the request of and as accommodation to Tenant, Owner shall place upon the directory board in the lobby of the building, one or more names of persons other than Tenant, such directory board listing shall not be construed as the consent by Owner to an assignment or subletting by Tenant to such person or persons. SUCCESSORS AND ASSIGNS: 40. The covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise provided in this lease, their assigns. Tenant shall look only to Owner's estate and interest in the land and building for the satisfaction of Tenant's remedies for the collection of a judgement (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner (or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this lease, the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of the demised premises. IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written. Witness for Owner: S.N.Y., INC. ------------------------- - ------------------------------- /s/ Richard J. Sirota -------------------------[L.S.] Witness for Tenant: KWIK INTERNATIONAL COLOR , LTD. ------------------------- - ------------------------------- /s/ Walter Berkower -------------------------[L.S.] ACKNOWLEDGMENTS CORPORATE TENANT STATE OF NEW YORK, ss.: County of New York On this 1st day of March, 1997, before me personally came Walter Berkower to me known, who being by me duly sworn, did depose and say that he resides in that he is the Secretary/Treasurer of Kwik International Color Ltd. the corporation described in and which executed the foregoing instrument, as TENANT; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/Cheryl Ann C. Meredith ------------------------------ Notary Public, State of New York INDIVIDUAL TENANT STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to be known and known to me to be the individual described in and who, as TENANT, executed the foregoing instrument and acknowledged to me that he executed the same. IMPORTANT - PLEASE READ RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36. 1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any Tenant or used for any purpose other than for ingress or egress from the demised premises and for delivery of merchandise and equipment in a prompt and efficient manner using elevators and passageways designated for such delivery by Owner. There shall not be used in any space, or in the public hall of the building, either by any Tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and sideguards. If said premises are situated on the ground floor of the building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in front of said premises clean and free from ice, snow, dirt and rubbish. 2. The water and wash cloths and plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed and no sweepings, rubbish, rags, acids or other substances shall be deposited therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose clerks, agents, employees or visitors, shall have caused it. 3. No carpet, rug or other article shall be hung or shaken out of any window of the building; and no Tenant shall sweep or throw or permit to be swept or thrown from the demised premises any dirt or other substances into any of the corridors of halls, elevators, or out of the doors or windows or stairways of the building and Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the demised premises, or permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to Owner or other occupants of the buildings by reason of noise, odors, and or vibrations, or interfere in any way, with other Tenants or those having business therein, nor shall any bicycles, vehicles, animals, fish, or birds be kept in or about the building. Smoking or carrying lighted cigars or cigarettes in the elevators of the building is prohibited. 4. No awnings or other projections shall be attached to the outside walls of the building without the prior written consent of Owner. 5. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside of the demised premises or the building or on the inside of the demised premises if the same is visible from the outside of the premises without the prior written consent of Owner, except that the name of Tenant may appear on the entrance door of the premises. In the event of the violation of the foregoing by any Tenant, Owner may remove same without any liability and may charge the expense incurred by such removal to Tenant or Tenants violating this rule. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for each Tenant by Owner at the expense of such Tenant, and shall be of a size, color and style acceptable to Owner. 6. No Tenant shall mark, paint, drill into, or in any way deface any part of the demised premises or the building of which they form a part. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised premises, and, if linoleum or other similar floor covering is desired to be used an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 7. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or mechanism thereof. Each Tenant must, upon the termination of his Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such Tenant, and in the event of the loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof. 8. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only on the freight elevators and through the service entrances and corridors, and only during hours and in a manner approved by Owner. Owner reserves the right to inspect all freight to be brought into the building and to exclude from the building all freight which violates any of these Rules and Regulations of the lease of which these Rules and Regulations are a part. 9. No Tenant shall obtain for use upon the demised premises ice, drinking water, towel and other similar services, or accept barbering or bootblacking services in the demised premises, except from persons authorized by Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting and peddling in the building is prohibited and each Tenant shall cooperate to prevent the same. 10. Owner reserves the right to exclude from the building all persons who do not present a pass to the building signed by Owner. Owner will furnish passes to persons for whom any Tenant requests same in writing. Each Tenant shall be responsible for all persons for whom he requests such pass and shall be liable to Owner for all acts of such persons. Notwithstanding the foregoing, Owner shall not be required to allow Tenant or any person to enter or remain in the building, except on business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against Owner by reason of Owner excluding from the building any person who does not present such pass. 11. Owner shall have the right to prohibit any advertising by any Tenant which in Owner's opinion, tends to impair the reputation of the building or its desirability as a loft building, and upon written notice from Owner, Tenant shall refrain from or discontinue such advertising. 12. Tenant shall not bring or permit to be brought or kept in or on the demised premises, any inflammable, combustible, or explosive, or hazardous fluid, material, chemical or substance, or cause or permit any odors of cooking or other processes, or any unusual or other objectionable odors to permeate in or emanate from the demised premises. 13. Tenant shall not use the demised premises in a manner which disturbs or interferes with other Tenants in the beneficial use of their premises. Address Premises TO STANDARD FORM OF LOFT LEASE THE REAL ESTATE BOARD OF NEW YORK, INC. (C)Copyright 1994. All rights Reserved. Reproduction in whole or in part prohibited. Dated 19 --- Rent Per Year Rent Per Month Term From To Drawn by -------------------------------- Checked by ------------------------------ Entered by ------------------------------ Approved by ----------------------------- EX-10.7 9 NINTH FLOOR LEASE 2/94 STANDARD FORM OF LOFT LEASE The Real Estate Board of New York, Inc. AGREEMENT OF LEASE, made as of this 1ST day of MARCH 1997, between S.N.Y., INC., a New York corporation having an office at 229 W. 28th St, NY, party of the first part, hereinafter referred to as OWNER, and KWIK INTERNATIONAL COLOR, LTD., a New York corporation, having an office at 229 W. 28th St., NY, NY 10001 party of the second part, hereinafter referred to as TENANT, WITNESSETH: Owner hereby leases to Tenant and Tenant hereby hires from Owner the entire Ninth Floor in the building known as 229 West 28th Street in the Borough of Manhattan, City of New York, for the term of Twelve (12) years (or until such term shall sooner cease and expire as hereinafter provided) to commence on the 1st day of March nineteen hundred and ninety-seven, and to end on the 28th day of February, Two Thusand Nine both dates inclusive, at an annual rental rate of One Hundred Eighty-Four Thousand ($184,000) Dollars from March 1, 1997 to February 28, 2003; One Hundred Ninety-Five Thousand Five Hundred ($195,500) Dollars from March 1, 2003 to February 28, 2009. which Tenant agrees to pay in lawful money of the United States which shall be legal tender in payment of all debts and dues, public and private, at the time of payment, in equal monthly installments in advance on the first day of each month during said term, at the office of Owner or such other place as Owner may designate, without any set off or deduction whatsoever, except that Tenant shall pay the first monthly installment(s) on the execution hereof (unless this lease be a renewal). In the event that, at the commencement of the term of this lease, or thereafter, Tenant shall be in default in the payment of rent to Owner pursuant to the terms of another lease with Owner or with Owner's predecessor in interest, Owner may at Owner's option and without notice to Tenant add the amount of such arrears to any monthly installment of rent payable hereunder and the same shall be payable to Owner as additional rent. The parties hereto, for themselves, their heirs, distributees, executors, administrators, legal representatives, successors and assigns, hereby covenant as follows: RENT: 1. Tenant shall pay the rent as above and as hereinafter provided. OCCUPANCY: 2. Tenant shall use and occupy demised premises for printing and graphic services provided such use is in accordance with the certificate of occupancy for the building, if any, and for no other purpose. ALTERATIONS: 3. Tenant shall make no changes in or to the demised premises of any nature without Owner's prior written consent. Subject to the prior written consent of Owner, and to the provisions of this article, tenant, at Tenant's expense, may make alterations, installations, additions or improvements which are nonstructural and which do not affect utility services or plumbing and electrical lines, in or to the interior of the demised premises using contractors or mechanics first approved in each instance by Owner. Tenant shall, at its expense, before making any alterations, additions, installations or improvements obtain all permits, approval and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Owner. Tenant agrees to carry and will cause Tenant's contractors and sub-contractors to carry such workman's compensation, general liability, personal and property damage insurance as Owner may require. If any mechanic's lien is filed against the demised premises, or the building of which the same forms a part, for work claimed to have been done for, or materials furnished to, Tenant, whether or not done pursuant to this article, the same shall be discharged by Tenant within thirty days thereafter, at Tenant's expense, by payment or filing the bond required by law or otherwise. All fixtures and all paneling, partitions, railings and like installations, installed in the premises at any time, either by Tenant or by Owner on Tenant's behalf, shall, upon installation, become the property of Owner and shall remain upon and be surrendered with the demised premises unless Owner, by notice to Tenant no later than twenty days prior to the date fixed as the termination of this lease, elects to relinquish Owner's right thereto and to have them removed by Tenant, in which event the same shall be removed from the demised premises by Tenant prior to the expiration of the lease, at Tenant's expense. Nothing in this Article shall be construed to give Owner title to or to prevent Tenant's removal of trade fixtures, moveable office furniture and equipment, but upon removal of any such from the premises or upon removal of other installations as may be required by Owner, Tenant shall immediately and at its expense, repair and restore the premises to the condition existing prior to installation and repair any damage to the demised premises or the building due to such removal. All property permitted or required to be removed by Tenant at the end of the term remaining in the premises after Tenant's removal shall be deemed abandoned and may, at the election of Owner, either be retained as Owner's property or removed from the premises by Owner, at Tenant's expense. REPAIRS: 4. Owner shall maintain and repair the exterior of and the public portions of the building. Tenant shall, throughout the term of this lease, take good care of the demised premises including the bathrooms and lavatory facilities (if the demised premises encompass the entire floor of the building) and the windows and window frames and, the fixtures and appurtenances therein and at Tenant's sole cost and expense promptly make all repairs thereto and to the building, whether structural or non-structural in nature, caused by or resulting from the carelessness, omission, neglect or improper conduct of Tenant, Tenant's servants, employees, invitees, or licensees, and whether or not arising from such Tenant conduct or omission, when required by other provisions of this lease, including Article 6. Tenant shall also repair all damage to the building and the demised premises caused by the moving of Tenant's fixtures, furniture or equipment. All the aforesaid repairs shall be of quality or class equal to the original work or construction. If Tenant fails, after ten days notice, to proceed with due diligence to make repairs required to be made by Tenant, the same may be made by the Owner at the expense of Tenant, and the expenses thereof incurred by Owner shall be collectible, as additional rent, after rendition of a bill or statement therefor. If the demised premises be or become infested with vermin, Tenant shall, at its expense, cause the same to be exterminated. Tenant shall give Owner prompt notice of any defective condition in any plumbing, heating system or electrical lines located in the demised premises and following such notice, Owner shall remedy the condition with due diligence, but at the expense of Tenant, if repairs are necessitated by damage or injury attributable to Tenant, Tenant's servants, agents, employees, invitees or licensees as aforesaid. Except as specifically provided in Article 9 or elsewhere in this lease, there shall be no allowance to the Tenant for a diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner, Tenant or others making or failing to make any repairs, alterations, additions or improvements in or to any portion of the building or the demised premises or in and to the fixtures, appurtenances or equipment thereof. It is specifically agreed that Tenant shall not be entitled to any set off or reduction of rent by reason of any failure of Owner to comply with the covenants of this or any other article of this lease. Tenant agrees that Tenant's sole remedy at law in such instance will be by way of any action for damages for breach of contract. The provisions of this Article 4 with respect to the making of repairs shall not apply in the case of fire or other casualty with regard to which Article 9 hereof shall apply. WINDOW: 5. Tenant will not clean nor require, permit, suffer or allow any window in the demised premises to be cleaned from the outside in violation of Section 202 of the New York State Labor Law or any other applicable law or of the Rules of the Board of Standards and Appeals, or of any other Board or body having or asserting jurisdiction. REQUIREMENTS OF LAW, FIRE INSURANCE: 6. Prior to the commencement of the lease term, if Tenant is then in possession, and at all times thereafter Tenant shall, at Tenant's sole cost and expense, promptly comply with all present and future laws, orders and regulations of all state, federal, municipal and local governments, departments, commissions and boards and any direction of any public officer pursuant to law, and all orders, rules and regulations of the New York Board of Fire Underwriters, or the Insurance Services Office, or any similar body which shall impose any violation, order or duty upon Owner or Tenant with respect to the demised premises, whether or not arising out of Tenant's use or manner of use thereof, or, with respect to the building, if arising out of Tenant's use or manner of use of the demised premises of the building (including the use permitted under the lease). Except as provided in Article 30 hereof, nothing herein shall require Tenant to make structural repairs or alterations unless Tenant has, by its manner of use of the demised premises or method of operation therein, violated any such laws, ordinances, orders, rules, regulations or requirements with respect thereto. Tenant shall not do or permit any act or thing to be done in or to the demised premises which is contrary to law, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Owner. Tenant shall not keep anything in the demised premises except as now or hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire Insurance Rating Organization and other authority having jurisdiction, and then only in such manner and such quantity so as not to increase the rate for fire insurance applicable to the building, nor use the premises in a manner which will increase the insurance rate for the building or any property located therein over that in effect prior to the commencement of Tenant's occupancy. If by reason of failure to comply with the foregoing the fire insurance rate shall, at the beginning of this lease or at any time thereafter, be higher than it otherwise would be, then Tenant shall reimburse Owner, as additional rent hereunder, for that portion of all fire insurance premiums thereafter paid by Owner which shall have been charged because of such failure by Tenant. In any action or proceeding wherein Owner and Tenant are parties, a schedule or "make-up" or rate for the building or demised premises issued by a body making fire insurance rates applicable to said premises shall be conclusive evidence of the facts therein stated and of the several items and charges in the fire insurance rates then applicable to said premises. Tenant shall not place a load upon any floor of the demised premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Owner reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Tenant, at Tenant's expense, in settings sufficient, in Owner's judgement, to absorb and prevent vibration, noise and annoyance. SUBORDINATION: 7. This lease is subject and subordinate to all ground or underlying leases and to all mortgages which may now or hereafter affect such leases or the real property of which demised premises are a part and to all renewals, modifications, consolidations, replacements and extensions of any such underlying leases and mortgages. This clause shall be self-operative and no further instrument or subordination shall be required by any ground or underlying lessor or by any mortgagee, affecting any lease or the real property of which the demised premises are a part. In confirmation of such subordination, Tenant shall from time to time execute promptly any certificate that Owner may request. TENANT'S LIABILITY INSURANCE PROPERTY LOSS, DAMAGE INDEMNITY: 8. Owner or its agents shall not be liable for any damage to property of Tenant or of others entrusted to employees of the building, nor for loss of or damage to any property of Tenant by theft or otherwise, nor for any injury or damage to persons or property resulting from any cause of whatsoever nature, unless caused by or due to the negligence of Owner, its agents, servants or employees; Owner or its agents shall not be liable for any damage caused by other tenants or persons in, upon or about said building or caused by operations in connection of any private, public or quasi public work. If at any time any windows of the demised premises are temporarily closed, darkened or bricked up (or permanently closed, darkened or bricked up, if required by law) for any reason whatsoever including, but not limited to Owner's own acts, Owner shall not be liable for any damage Tenant may sustain thereby and Tenant shall not be entitled to any compensation therefor nor abatement or diminution of rent nor shall the same release Tenant from its obligations hereunder nor constitute an eviction. Tenant shall indemnify and save harmless Owner against and from all liabilities, obligations, damages, penalties, claims, costs and expenses for which Owner shall not be reimbursed by insurance, including reasonable attorney's fees, paid, suffered or incurred as a result of any breach by Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any covenant or condition of this lease, or the carelessness, negligence or improper conduct of the Tenant, Tenant's agents, contractors, employees, invitees or licensees. Tenant's liability under this lease extends to the acts and omissions of any sub-tenant, and any agent, contractor, employee, invitee or licensee of any sub-tenant. In case any action or proceeding is brought against Owner by reason of any such claim, Tenant, upon written notice from Owner, will, at Tenant's expense, resist or defend such action or proceeding by counsel approved by Owner in writing, such approval not to be unreasonably withheld. DESTRUCTION, FIRE AND OTHER CASUALTY: 9. (a) If the demised premises or any part thereof shall be damaged by fire or other casualty, Tenant shall give immediate notice thereof to Owner and this lease shall continue in full force and effect except as hereinafter set forth. (b) If the demised premises are partially damaged or rendered partially unusable by fire or other casualty, the damages thereto shall be repaired by and at the expense of Owner and the rent and other items of additional rent, until such repair shall be substantially completed, shall be apportioned from the day following the casualty according to the part of the premises which is usable. (c) If the demised premises are totally damaged or rendered wholly unusable by fire or other casualty, then the rent and other items of additional rent as hereinafter expressly provided shall be proportionately paid up to the time of the casualty and thenceforth shall cease until the date when the premises shall have been repaired and restored by Owner (or sooner occupied in part by Tenant then rent shall be apportioned as provided in subsection (b) above), subject to Owner's right to elect not to restore the same as hereinafter provided. (d) If the demised premises are rendered wholly unusable or (whether or not the demised premises are damaged in whole or in part) if the building shall be so damaged that Owner shall decide to demolish it or to rebuild it, then, in any of such events, Owner may elect to terminate this lease by written notice to Tenant, given within 90 days after such fire or casualty, or 30 days after adjustment of the insurance claim for such fire or casualty, whichever is sooner, specifying a date for the expiration of the lease, which date shall not be more than 60 days after the giving of such notice, and upon the date specified in such notice the term of this lease shall expire as fully and completely as if such date were the date set forth above for the termination of this lease and Tenant shall forthwith quit, surrender and vacate the premises without prejudice however, to Owner's rights and remedies against Tenant under the lease provisions in effect prior to such termination, and any rent owing shall be paid up to such date and any payments of rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant. Unless Owner shall serve a termination notice as provided for herein, Owner shall make the repairs and restorations under the conditions of (b) and (c) hereof, with all reasonable expedition, subject to delays due to adjustment of insurance claims, labor troubles and causes beyond Owner's control. After any such casualty, Tenant shall cooperate with Owner's restoration by removing from the premises as promptly as reasonably possible, all of Tenant's salvageable inventory and movable equipment, furniture, and other property. Tenant's liability for rent shall resume five (5) days after written notice from Owner that the premises are substantially ready for Tenant's occupancy. (e) Nothing contained hereinabove shall relieve Tenant from liability that may exist as a result of damage from fire or other casualty. Notwithstanding the foregoing, including Owner's obligation to restore under paragraph (b) above, each party shall look first to any insurance in its favor before making any claim against the other party for recovery for loss or damage resulting from fire or other casualty, and to the extent that such insurance is in force and collectible and to the extent permitted by law, Owner and Tenant each hereby releases and waives all right of recovery with respect to subparagraphs (b), (d) and (e) above, against the other or any one claiming through or under each of them by way of subrogation or otherwise. The release and waiver herein referred to shall be deemed to include any loss or damage to the demised premises and/or to any personal property, equipment, trade fixtures, goods and merchandise located therein. The foregoing release and waiver shall be in force only if both releasors' insurance policies contain a clause providing that such a release or waiver shall not invalidate the insurance. If, and to the extent, that such waiver can be obtained only by the payment of additional premiums, then the party benefitting from the waiver shall pay such premium within ten days after written demand or shall be deemed to have agreed that the party obtaining insurance coverage shall be free of any further obligation under the provisions hereof with respect to waiver of subrogation. Tenant acknowledges that Owner will not carry insurance on Tenant's furniture and or furnishings or any fixtures or equipment, improvements, or appurtenances removable by Tenant and agrees that Owner will not be obligated to repair any damage thereto or replace the same. (f) Tenant hereby waives the provisions of Section 227 of the Real Property Law and agrees that the provisions of this article shall govern and control in lieu thereof. EMINENT DOMAIN: 10. If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant's moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term and provided further such claim does not reduce Owner's award. ASSIGNMENT, MORTGAGE, ETC.: 11. Tenant, for itself, its heirs, distributees, executors, administrators, legal representatives, successors and assigns, expressly covenants that it shall not assign, mortgage or encumber this agreement, nor underlet, or suffer or permit the demised premises or any part thereof to be used by others, without the prior written consent of Owner in each instance. Transfer of the majority of the stock of a corporate Tenant or the majority partnership interest of a partnership Tenant shall be deemed an assignment. If this lease be assigned, or if the demised premises or any part thereof be underlet or occupied by anybody other than Tenant, Owner may, after default by Tenant, collect rent from the assignee, under-tenant or occupant, and apply the net amount collected to the rent herein reserved, but no such assignment, underletting, occupancy or collection shall be deemed a waiver of this covenant, or the acceptance of the assignee, under-tenant or occupant as tenant, or a release of Tenant from the further performance by Tenant of covenants on the part of Tenant herein contained. The consent by Owner to an assignment or underletting shall not in any wise be construed to relieve Tenant from obtaining the express consent in writing of Owner to any further assignment or underletting. ELECTRIC CURRENT: 12. Rates and conditions in respect to submetering or rent inclusion, as the case may be, to be added in RIDER attached hereto. Tenant covenants and agrees that at all times its use of electric current shall not exceed the capacity of existing feeders to the building or the risers or wiring installation and Tenant may not use any electrical equipment which, in Owner's opinion, reasonably exercised, will overload such installations or interfere with the use thereof by other tenants of the building. The change at any time of the character of electric service shall in no wise make Owner liable or responsible to Tenant, for any loss, damages or expenses which Tenant may sustain. ACCESS TO PREMISES: 13. Owner or Owner's agents shall have the right (but shall not be obligated) to enter the demised premises in any emergency at any time, and, at other reasonable times, to examine the same and to make such repairs, replacements and improvements as Owner may deem necessary and reasonably desirable to any portion of the building or which Owner may elect to perform in the premises after Tenant's failure to make repairs or perform any work which Tenant is obligated to perform under this lease, or for the purpose of complying with laws, regulations and other directions of governmental authorities. Tenant shall permit Owner to use and maintain and replace pipes and conduits in and through the demised premises and to erect new pipes and conduits therein provided, wherever possible, they are within walls or otherwise concealed. Owner may, during the progress of any work in the demised premises, take all necessary materials and equipment into said premises without the same constituting an eviction nor shall the Tenant be entitled to any abatement of rent while such work is in progress nor to any damages by reason of loss or interruption of business or otherwise. Throughout the term hereof Owner shall have the right to enter the demised premises at reasonable hours for the purpose of showing the same to prospective purchasers or mortgagees of the building, and during the last six months of the term for the purpose of showing the same to prospective tenants and may, during said six months period, place upon the demised premises the usual notices "To Let" and "For Sale" which notices Tenant shall permit to remain thereon without molestation. If Tenant is not present to open and permit an entry into the demised premises, Owner or Owner's agents may enter the same whenever such entry may be necessary or permissible by master key or forcibly and provided reasonable care is exercised to safeguard Tenant's property, such entry shall not render Owner or its agents liable therefor, nor in any event shall the obligations of Tenant hereunder be affected. If during the last month of the term Tenant shall have removed all or substantially all of Tenant's property therefrom. Owner may immediately enter, alter, renovate or redecorate the demised premises without limitation or abatement of rent, or incurring liability to Tenant for any compensation and such act shall have no effect on this lease or Tenant's obligation hereunder. VAULT, VAULT SPACE, AREA: 14. No Vaults, vault space or area, whether or not enclosed or covered, not within the property line of the building is leased hereunder anything contained in or indicated on any sketch, blue print or plan, or anything contained elsewhere in this lease to the contrary notwithstanding. Owner makes no representation as to the location of the property line of the building. All vaults and vault space and all such areas not within the property line of the building, which Tenant may be permitted to use and/or occupy, is to be used and/or occupied under a revocable license, and if any such license be revoked, or if the amount of such space or area be diminished or required by any federal, state or municipal authority or public utility, Owner shall not be subject to any liability nor shall Tenant be entitled to any compensation or diminution or abatement of rent, nor shall such revocation, diminution or requisition be deemed constructive or actual eviction. Any tax, fee or charge of municipal authorities for such vault or area shall be paid by Tenant, if used by Tenant, whether or not specifically leased hereunder. OCCUPANCY: 15. Tenant will not at any time use or occupy the demised premises in violation of the certificate of occupancy issued for the building of which the demised premises are a part. Tenant has inspected the premises and accepts them as is, subject to the riders annexed hereto with respect to Owner's work, if any. In any event, Owner makes no representation as to the condition of the premises and Tenant agrees to accept the same subject to violations, whether or not of record. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business, Tenant shall be responsible for and shall procure and maintain such license or permit. BANKRUPTCY: 16. (a) Anything elsewhere in this lease to the contrary notwithstanding, this lease may be cancelled by Owner by sending of a written notice to Tenant within a reasonable time after the happening of any one or more of the following events: (1) the commencement of a case in bankruptcy or under the laws of any state naming Tenant as the debtor; or (2) the making by Tenant of an assignment or any other arrangement for the benefit of creditors under any state statute. Neither Tenant nor any person claiming through or under Tenant, or by reason of any statute or order of court, shall thereafter be entitled to possession of the premises demised but shall forthwith quit and surrender the premises. If this lease shall be assigned in accordance with its terms, the provisions of this Article 16 shall be applicable only to the party then owning Tenant's interests in this lease. (b) It is stipulated and agreed that in the event of the termination of this lease pursuant to (a) hereof, Owner shall forthwith, notwithstanding any other provisions of this lease to the contrary, be entitled to recover from Tenant as and for liquidated damages an amount equal to the difference between the rental reserved hereunder the for unexpired portion of the term demised and the fair and reasonable rental value of the demised premises for the same period. In the computation of such damages the difference between any installment of rent becoming due hereunder after the date of termination and the fair and reasonable rental value of the demised premises for the period for which such installment was payable shall be discounted to the date of termination at the rate of four percent (4%) per annum. If such premises or any part thereof be relet by the Owner for the unexpired term of said lease, or any part thereof, before presentation of proof of such liquidated damages to any court, commission or tribunal, the amount of rent reserved upon such reletting shall be deemed to be the fair and reasonable rental value for the part or the whole of the premises so re-let during the term of the re-letting. Nothing herein contained shall limit or prejudice the right of the Owner to prove for and obtain as liquidated damages by reason of such termination, an amount equal to the maximum allowed by any statute or rule of law in effect at the time when, and governing the proceedings in which, such damages are to be proved, whether or not such amount be greater, equal to, or less than the amount of the difference referred to above. DEFAULT: 17. (1) If Tenant defaults in fulfilling any of the covenants of this lease other than the covenants for the payment of rent or additional rent; or if the demised premises becomes vacant or deserted "or if this lease be rejected under ss. 235 of Title 11 of the U.S. Code (bankruptcy code);" or if any execution or attachment shall be issued against Tenant or any of Tenant's property whereupon the demised premises shall be taken or occupied by someone other than Tenant; or if Tenant shall make default with respect to any other lease between Owner and Tenant; or if Tenant shall have failed, after five (5) days written notice, to redeposit with Owner any portion of the security deposited hereunder which Owner has applied to the payment of any rent and additional rent due and payable hereunder or failed to move into or take possession of the premises within thirty (30) days after the commencement of the term of this lease, of which fact Owner shall be the sole judge; then in any one or more of such events, upon Owner serving a written fifteen (15) days notice upon Tenant specifying the nature of said default and upon the expiration of said fifteen (15) days, if Tenant shall have failed to comply with or remedy such default, or if the said default or omission complained of shall be of a nature that the same cannot be completely cured or remedied within said fifteen (15) day period, and if Tenant shall not have diligently commenced during such default within such fifteen (15) day period, and shall not thereafter with reasonable diligence and in good faith, proceed to remedy or cure such default, then Owner may serve a written five (5) days' notice of cancellation of this lease upon Tenant, and upon the expiration of said five (5) days this lease and the term thereunder shall end and expire as fully and completely as if the expiration of such five (5) day period were the day herein definitely fixed for the end and expiration of this lease and the term thereof and Tenant shall then quit and surrender the demised premises to Owner but Tenant shall remain liable as hereinafter provided. (2) If the notice provided for in (1) hereof shall have been given, and the term shall expire as aforesaid; or if Tenant shall make default in the payment of the rent reserved herein or any item of additional rent herein mentioned or any part of either or in making any other payment herein required; then and in any of such events Owner may without notice, re-enter the demised premises either by force or otherwise, and dispossess Tenant by summary proceedings or otherwise, and the legal representative of Tenant or other occupant of demised premises and remove their effects and hold the premises as if this lease had not been made, and Tenant hereby waives the service of notice of intention to re-enter or to institute legal proceedings to that end. If Tenant shall make default hereunder prior to the date fixed as the commencement of any renewal or extension of this lease, Owner may cancel and terminate such renewal or extension agreement by written notice. REMEDIES OF OWNER AND WAIVER OF REDEMPTION: 18. In case of any such default, re-entry, expiration and/or dispossess by summary proceedings or other wise, (a) the rent, and additional rent, shall become due thereupon and be paid up to the time of such re-entry, dispossess and/or expiration, (b) Owner may re-let the premises or any part or parts thereof, either in the name of Owner or otherwise, for a term or terms, which may at Owner's option be less than or exceed the period which would otherwise have constituted the balance of the term of this lease and may grant concessions or free rent or charge a higher rental than that in this lease, (c) Tenant or the legal representatives of Tenant shall also pay Owner as liquidated damages for the failure of Tenant to observe and perform said Tenant's covenants herein contained, any deficiency between the rent hereby reserved and or covenanted to be paid and the net amount, if any, of the rents collected on account of the subsequent lease or leases of the demised premises for each month of the period which would otherwise have constituted the balance of the term of this lease. The failure of Owner to re-let the premises or any part or parts thereof shall not release or affect Tenant's liability for damages. In computing such liquidated damages there shall be added to the said deficiency such expenses as Owner may incur in connection with re-letting, such as legal expenses, reasonable attorneys' fees, brokerage, advertising and for keeping the demised premises in good order or for preparing the same for re-letting. Any such liquidated damages shall be paid in monthly installments by Tenant on the rent day specified in this lease and any suit brought to collect the amount of the deficiency for any month shall not prejudice in any way the rights of Owner to collect the deficiency for any subsequent month by a similar proceeding. Owner, in putting the demised premises in good order or preparing the same for re-rental may, at Owner's option, make such alterations, repairs, replacements, and/or decorations in the demised premises as Owner, in Owner's sole judgment, considers advisable and necessary for the purpose of re-letting the demised premises, and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. Owner shall in no event be liable in any way whatsoever for failure to re-let the demised premises, or in the event that the demised premises are re-let, for failure to collect the rent thereof under such re-letting, and in no event shall Tenant be entitled to receive any excess, if any, of such net rents collected over the sums payable by Tenant to Owner hereunder. In the event of a breach or threatened breach by Tenant of any of the covenants or provisions hereof, Owner shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not herein provided for. Mention in this lease of any particular remedy, shall not preclude Owner from any other remedy, in law or in equity. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future laws. FEES AND EXPENSES: 19. If Tenant shall default in the observance or performance of any term or covenant on Tenant's part to be observed or performed under or by virtue of any of the terms or provisions in any article of this lease, after notice if required and upon expiration of any applicable grace period if any, (except in an emergency), then, unless otherwise provided elsewhere in this lease, Owner may immediately or at any time thereafter and without notice perform the obligation of Tenant thereunder. If Owner, in connection with the foregoing or in connection with any default by Tenant in the covenant to pay rent hereunder, makes any expenditures or incurs any obligations for the payment of money, including but not limited to reasonable attorney's fees, in instituting, prosecuting or defending any action or proceedings, and prevails in any such action or proceeding, then Tenant will reimburse Owner for such sums so paid or obligations incurred with interest and costs. The foregoing expenses incurred by reason of Tenant's default shall be deemed to be additional rent hereunder and shall be paid by Tenant to Owner within ten (10) days of rendition of any bill or statement to Tenant therefor. If Tenant's lease term shall have expired at the time of making of such expenditures or incurring of such obligations, such sums shall be recoverable by Owner as damages. BUILDING ALTERATIONS AND MANAGEMENT: 20. Owner shall have the right at any time without the same constituting an eviction and without incurring liability to Tenant therefor to change the arrangement and or location of public entrances, passageways, doors, doorways, corridors, elevators, stairs, toilets or other public parts of the building and to change the name, number or designation by which the building may be known. There shall be no allowance to Tenant for diminution of rental value and no liability on the part of Owner by reason of inconvenience, annoyance or injury to business arising from Owner or other Tenant making any repairs in the building or any such alterations, additions and improvements. Furthermore, Tenant shall not have any claim against Owner by reason of Owner's imposition of any controls of the manner of access to the building by Tenant's social or business visitors as the Owner may deem necessary for the security of the building and its occupants. NO REPRESENTATIONS BY OWNER: 21. Neither Owner nor Owner's agents have made any representations or promises with respect to the physical condition of the building, the land upon which it is erected or the demised premises, the rents, leases, expenses of operation or any other matter or thing affecting or related to the demised premises or the building except as herein expressly set forth and no rights, easements or licenses are acquired by Tenant by implication or otherwise except as expressly set forth in the provisions of this lease. Tenant has inspected the building and the demised premises and is thoroughly acquainted with their condition and agrees to take the same "as is" on the date possession is tendered and acknowledges that the taking of possession of the demised premises by Tenant shall be conclusive evidence that the said premises and the building of which the same form a part were in good and satisfactory condition at the time such possession was so taken, except as to latent defects. All understandings and agreements heretofore made between the parties hereto are merged in this contract, which alone fully and completely expresses the agreement between Owner and Tenant and any executory agreement hereafter made shall be ineffective to change, modify, discharge or effect an abandonment of it in whole or in part, unless such executory agreement is in writing and signed by the party against whom enforcement of the change, modification, discharge or abandonment is sought. END OF TERM: 22. Upon the expiration or other termination of the term of this lease, Tenant shall quit and surrender to Owner the demised premises, broom clean, in good order and condition, ordinary wear and damages which Tenant is not required to repair as provided elsewhere in this lease excepted, and Tenant shall remove all its property from the demised premises. Tenant's obligations to observe or perform this covenant shall survive the expiration or other termination of this lease. If the last day of the term of this Lease or any renewal thereof, falls on Sunday, this lease shall expire at noon on the preceding Saturday unless it be a legal holiday in which case it shall expire at noon on the preceding business day. QUIET ENJOYMENT: 23. Owner covenants and agrees with Tenant that upon Tenant paying the rent and additional rent and observing and performing all the terms, covenants and conditions, on Tenant's part to be observed and performed, Tenant may peaceably and quietly enjoy the premises hereby demised, subject, nevertheless, to the terms and conditions of this lease including, but not limited to, Article 34 hereof and to the ground leases, underlying leases and mortgages hereinbefore mentioned. FAILURE TO GIVE POSSESSION: 24. If Owner is unable to give possession of the demised premises on the date of the commencement of the term hereof, because of the holding-over or retention of possession of any tenant, undertenant or occupants or if the demised premises are located in a building being constructed, because such building has not been sufficiently completed to make the premises ready for occupancy or because of the fact that a certificate of occupancy has not been procured or if Owner has not completed any work required to be performed by Owner, or for any other reason, Owner shall not be subject to any liability for failure to give possession on said date and the validity of the lease shall not be impaired under such circumstances, nor shall the same be construed in any wise to extend the term of this lease, but the rent payable hereunder shall be abated (provided Tenant is not responsible for Owner's inability to obtain possession or complete any work required) until after Owner shall have given Tenant notice that Owner is able to deliver possession in the condition required by this lease. If permission is given to Tenant to enter into the possession of the demised premises or to occupy premises other than the demised premises prior to the date specified as the commencement of the term of this lease, Tenant covenants and agrees that such possession and/or occupancy shall be deemed to be under all the terms, covenants, conditions and provisions of this lease, except the obligation to pay the fixed annual rent set forth in page one of this lease. The provisions of this article are intended to constitute "an express provision to the contrary" within the meaning of Section 223-a of the New York Real Property Law. NO WAIVER: 25. The failure of Owner to seek redress for violation of, or to insist upon the strict performance of any covenant or condition of this lease or of any of the Rules or Regulations, set forth or hereafter adopted by Owner, shall not prevent a subsequent act which would have originally constituted a violation from having all the force and effect of an original violation. The receipt by Owner of rent with knowledge of the breach of any covenant of this lease shall not be deemed a waiver of such breach and no provision of this lease shall be deemed to have been waived by Owner unless such waiver be in writing signed by Owner. No payment by Tenant or receipt by Owner of a lesser amount than the monthly rent herein stipulated shall be deemed to be other than on account of the earliest stipulated rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Owner may accept such check or payment without prejudice to Owner's right to recover the balance of such rent or pursue any other remedy in this lease provided. All checks tendered to Owner as and for the rent of the demised premises shall be deemed payments for the account of Tenant. Acceptance by Owner of rent from anyone other than Tenant shall not be deemed to operate as an attornment to Owner by the payor of such rent or as a consent by Owner to an assignment or subletting by Tenant of the demised premises to such payor, or as a modification of the provisions of this lease. No act or thing done by Owner or Owner's agents during the term hereby demised shall be deemed an acceptance of a surrender of said premises and no agreement to accept such surrender shall be valid unless in writing signed by Owner. No employee of Owner or Owner's agent shall have any power to accept the keys of said premises prior to the termination of the lease and the delivery of keys to any such agent or employee shall not operate as a termination of the lease or a surrender of the premises. WAIVER OF TRIAL BY JURY: 26. It is mutually agreed by and between Owner and Tenant that the respective parties hereto shall and they hereby do waive trial by jury in any action [first several words of first line of column 2 are cut off photocopy] brought by either of the parties hereto against the other (except for personal injury or property damage) on any matters whatsoever arising out of or in any way connected with this lease, the relationship of Owner and Tenant, Tenant's use of or occupancy of said premises, and any emergency statutory or any other statutory remedy. It is further mutually agreed that in the event Owner commences any proceeding or action for possession including a summary proceeding for possession of the premises, Tenant will not interpose any counterclaim of whatever nature or description in any such proceeding including a counterclaim under Article 4 except for statutory mandatory counterclaims. INABILITY TO PERFORM: 27. This Lease and the obligation of Tenant to pay rent hereunder and perform all of the other covenants and agreements hereunder on part of Tenant to be performed shall in no wise be affected, impaired or excused because Owner is unable to fulfill any of its obligations under this lease or to supply or is delayed in supplying any service expressly or impliedly to be supplied or is unable to make, or is delayed in making any repair, additions, alterations or decorations or is unable to supply or is delayed in supplying any equipment, fixtures or other materials if Owner is prevented or delayed from doing so by reason of strike or labor troubles or any cause whatsoever beyond Owner's sole control including, but not limited to, government preemption or restrictions or by reason of any rule, order or regulation of any department or subdivision thereof of any government agency or by reason of the conditions which have been or are affected, either directly or indirectly, by war or other emergency. BILLS AND NOTICES: 28. Except as otherwise in this lease provided, a bill statement, notice or communication which Owner may desire or be required to give to Tenant, shall be deemed sufficiently given or rendered if, in writing, delivered to Tenant personally or sent by registered or certified mail addressed to Tenant at the building of which the demised premises form a part or at the last known residence address or business address of Tenant or left at any of the aforesaid premises addressed to Tenant, and the time of the rendition of such bill or statement and of the giving of such notice or communication shall be deemed to be the time when the same is delivered to Tenant, mailed, or left at the premises as herein provided. Any notice by Tenant to Owner must be served by registered or certified mail addressed to Owner at the address first hereinabove given or at such other address as Owner shall designate by written notice. WATER CHARGES: 29. If Tenant requires, uses or consumes water for any purpose in addition to ordinary lavatory purposes (of which fact Tenant constitutes Owner to be the sole judge) Owner may install a water meter and thereby measure Tenant's water consumption for all purposes. Tenant shall pay Owner for the cost of the meter and the cost of the installation, thereof and throughout the duration of Tenant's occupancy Tenant shall keep said meter and installation equipment in good working order and repair at Tenant's own cost and expense in default of which Owner may cause such meter and equipment to be replaced or repaired and collect the cost thereof from Tenant, as additional rent. Tenant agrees to pay for water consumed, as shown on said meter as and when bills are rendered, and on default in making such payment Owner may pay such charges and collect the same from Tenant, as additional rent. Tenant covenants and agrees to pay, as additional rent, the sewer rent, charge or any other tax, rent, levy or charge which now or hereafter is assessed, imposed or a lien upon the demised premises or the realty of which they are part pursuant to law, order or regulation made or issued in connection with the use, consumption, maintenance or supply of water, water system or sewage or sewage connection or system. If the building or the demised premises or any part thereof is supplied with water through a meter through which water is also supplied to other premises Tenant shall pay to Owner, as additional rent, on the first day of each month, % ($59.80) of the total meter charges as Tenant's portion. Independently of and in addition to any of the remedies reserved to Owner hereinabove or elsewhere in this lease, Owner may sue for and collect any monies to be paid by Tenant or paid by Owner for any of the reasons or purposes hereinabove set forth. SPRINKLERS: 30. Anything elsewhere in this lease to the contrary notwithstanding, if the New York Board of Fire Underwriters or the New York Fire Insurance Exchange or any bureau, department or official of the federal, state or city government recommend or require the installation of a sprinkler system or that any changes, modifications, alterations, or additional sprinkler heads or other equipment be made or supplied in an existing sprinkler system by reason of Tenant's business, or the location of partitions, trade fixtures, or other contents of the demised premises, or for any other reason, or if any such sprinkler system installations, modifications, alterations, additional sprinkler heads or other such equipment, become necessary to prevent the imposition of a penalty or charge against the full allowance for a sprinkler system in the fire insurance rate set by any said Exchange or by any fire insurance company, Tenant shall, at Tenant's expense, promptly make such sprinkler system installations, changes, modifications, alterations, and supply additional sprinkler heads or other equipment as required whether the work involved shall be structural or non-structural in nature. Tenant shall pay to Owner as additional rent the sum of $30.00, on the first day of each month during the term of this lease, as Tenant's portion of the contract price for sprinkler supervisory service. ELEVATORS, HEAT, CLEANING: 31. As long as Tenant is not in default under any the covenants of this lease beyond the applicable grace period provided in this lease for the curing of such defaults, Owner shall: (a) provide necessary passenger elevator facilities on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (b) if freight elevator service is provided, same shall be provided only on regular business days Monday through Friday inclusive, and on those days only between the hours of 9 a.m. and 12 noon and between 1 p.m. and 5 p.m.; (c) furnish heat, water and other services supplied by Owner to the demised premises, when and as required by law, on business days from 8 a.m. to 6 p.m. and on Saturdays from 8 a.m. to 1 p.m.; (d) clean the public halls and public portions of the building which are used in common by all tenants. Tenant shall, at Tenant's expense, keep the demised premises, including the windows, clean and in order, to the reasonable satisfaction of Owner, and for that purpose shall employ the person or persons, or corporation approved by Owner. Tenant shall pay to Owner the cost of removal of any of Tenant's refuse and rubbish from the building. Bills for the same shall be rendered by Owner to Tenant at such time as Owner may elect and shall be due and payable hereunder, and the amount of such bills shall be deemed to be, and be paid as, additional rent. Tenant shall, however, have the option of independently contracting for the removal of such rubbish and refuse in the event that Tenant does not wish to have same done by employees of Owner. Under such circumstances, however, the removal of such refuse and rubbish by others shall be subject to such rules and regulations as, in the judgment of Owner, are necessary for the proper operation of the building. Owner reserves the right to stop service of the heating, elevator, plumbing and electric systems, when necessary, by reason of accident, or emergency, or for repairs, alterations, replacements or improvements, in the judgment of Owner desirable or necessary to be made, until said repairs, alterations, replacements or improvements shall have been completed. If the building of which the demised premises are a part supplies manually operated elevator service, Owner may proceed diligently with alterations necessary to substitute automatic control elevator service without in any way affecting the obligations of Tenant hereunder. SECURITY: 32. Tenant has deposited with Owner the sum of $ as security for the faithful performance and observance by Tenant of the terms, provisions and conditions of this lease; it is agreed that in the event Tenant defaults in respect of any of the terms, provisions and conditions of this lease, including, but not limited to, the payment of rent and additional rent, Owner may use, apply or retain the whole or any part of the security so deposited to the extent required for the payment of any rent and additional rent or any other sum as to which Tenant is in default or for any sum which Owner may expend or may be required to expend by reason of Tenant's default in respect of any of the terms, covenants and conditions of this lease, including but not limited to, any damages or deficiency in the reletting of the premises, whether such damages or deficiency accrued before or after summary proceedings or other re-entry by Owner. In the event that Tenant shall fully and faithfully comply with all of the terms, provisions, covenants and conditions of this lease, the security shall be returned to Tenant after the date fixed as the end of the Lease and after delivery of entire possession of the demised premises to Owner. In the event of a sale of the land and building or leasing of the building, of which the demised premises form a part, Owner shall have the right to transfer the security to the vendee or lessee and Owner shall thereupon be released by Tenant from all liability for the return of such security; and Tenant agrees to look to the new Owner solely for the return of said security, and it is agreed that the provisions hereof shall apply to every transfer or assignment made of the security to a new Owner. Tenant further covenants that it will not assign or encumber or attempt to assign or encumber the monies deposited herein as security and that neither Owner nor its successors or assigns shall be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance. CAPTIONS: 33. The Captions are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this lease nor the intent of any provision thereof. DEFINITIONS: 34. The term "Owner" as used in this lease means only the owner of the fee or of the leasehold of the building, or the mortgagee in possession, for the time being of the land and building (or the owner of a lease of the building or of the land and building) of which the demised premises form a part, so that in the event of any sale or sales of said land and building or of said lease, or in the event of a lease of said building, or of the land and building, the said Owner shall be and hereby is entirely freed and relieved of all covenants and obligations of Owner hereunder, and it shall be deemed and construed without further agreement between the parties or their successors in interest, or between the parties and the purchaser, at any such sale, or the said lessee of the building, or of the land and building, that the purchaser or the lessee of the building has assumed and agreed to carry out any and all covenants and obligations of Owner hereunder. The words "re-enter" and "re-entry" as used in this lease are not restricted to their technical legal meaning. The term "rent" includes the annual rental rate whether so expressed or expressed in monthly installments, and "additional rent." "Additional rent" means all sums which shall be due to Owner from Tenant under this lease, in addition to the annual rental rate. The term "business days" as used in this lease, shall exclude Saturdays, Sundays and all days observed by the State or Federal Government as legal holidays and those designated as holidays by the applicable building service union employees service contract or by the applicable Operating Engineers contract with respect to HVAC service. Wherever it is expressly provided in this lease that consent shall not be unreasonably withheld, such consent shall not be unreasonably delayed. ADJACENT EXCAVATION-SHORING: 35. If an excavation shall be made upon land adjacent to the demised premises, or shall be authorized to be made, Tenant shall afford to the person causing or authorized to cause such excavation, license to enter upon the demised premises for the purposes of doing such work as said person shall deem necessary to preserve the wall or the building of which demised premises form a part from injury or damage and to support the same by proper foundations without any claim for damages or indemnity against Owner, or diminution or abatement of rent. RULES AND REGULATIONS: 36. Tenant and Tenant's servants, employees, agents, visitors, and licensees shall observe faithfully, and comply strictly with, the Rules and Regulations annexed hereto and such other and further reasonable Rules and Regulations as Owner or Owner's agents may from time to time adopt. Notice of any additional rules or regulations shall be given in such manner as Owner may elect. In case Tenant disputes the reasonableness of any additional Rule or Regulation hereafter made or adopted by Owner or Owner's agents, the parties hereto agree to submit the question of the reasonableness of such Rule or Regulation for decision to the New York office of the American Arbitration Association, whose determination shall be final and conclusive upon the parties hereto. The right to dispute the reasonableness of any additional Rule or Regulation upon Tenant's part shall be deemed waived unless the same shall be asserted by service of a notice, in writing upon Owner within fifteen (15) days after the giving of notice thereof. Nothing in this lease contained shall be construed to impose upon Owner any duty or obligation to enforce the Rules and Regulations or terms, covenants or conditions in any other lease, as against any other tenant and Owner shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees. GLASS: 37. Owner shall replace, at the expense of the Tenant, any and all plate and other glass damaged or broken from any cause whatsoever in and about the demised premises. Owner may insure, and keep insured, at Tenant's expense, all plate and other glass in the demised premises for and in the name of Owner. Bills for the premiums therefor shall be rendered by Owner to Tenant at such times as Owner may elect, and shall be due from, and payable by, Tenant when rendered, and the amount thereof shall be deemed to be, and be paid, as additional rent. ESTOPPEL CERTIFICATE: 38. Tenant, at any time, and from time to time, upon at least 10 days' prior notice by Owner, shall execute, acknowledge and deliver to Owner, and/or to any other person, firm or corporation specified by Owner, a statement certifying that this Lease is unmodified in full force and effect (or, if there have been modifications, that the same is in full force and effect as modified and stating the modifications), stating the dates to which the rent and additional rent have been paid, and stating whether or not there exists any default by Owner under this Lease, and, if so, specifying each such default. 39. DIRECTORY BOARD LISTING: If, at the request of and as accommodation to Tenant, Owner shall place upon the directory board in the lobby of the building, one or more names of persons other than Tenant, such directory board listing shall not be construed as the consent by Owner to an assignment or subletting by Tenant to such person or persons. SUCCESSORS AND ASSIGNS: 40. The covenants, conditions and agreements contained in this lease shall bind and inure to the benefit of Owner and Tenant and their respective heirs, distributees, executors, administrators, successors, and except as otherwise provided in this lease, their assigns. Tenant shall look only to Owner's estate and interest in the land and building for the satisfaction of Tenant's remedies for the collection of a judgement (or other judicial process) against Owner in the event of any default by Owner hereunder, and no other property or assets of such Owner (or any partner, member, officer or director thereof, disclosed or undisclosed), shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies under or with respect to this lease, the relationship of Owner and Tenant hereunder, or Tenant's use and occupancy of the demised premises. IN WITNESS WHEREOF, Owner and Tenant have respectively signed and sealed this lease as of the day and year first above written. Witness for Owner: S.N.Y., INC. ------------------------- - ------------------------------- /s/ Richard J. Sirota -------------------------[L.S.] Witness for Tenant: KWIK INTERNATIONAL COLOR , LTD. ------------------------- - ------------------------------- /s/ Walter Berkower -------------------------[L.S.] ACKNOWLEDGMENTS CORPORATE TENANT STATE OF NEW YORK, ss.: County of New York On this 1st day of March, 1997, before me personally came Walter Berkower to me known, who being by me duly sworn, did depose and say that he resides in that he is the Secretary/Treasurer of Kwik International Color Ltd. the corporation described in and which executed the foregoing instrument, as TENANT; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order. /s/Cheryl Ann C. Meredith ------------------------------ Notary Public, State of New York INDIVIDUAL TENANT STATE OF NEW YORK, ss.: County of On this day of , 19 , before me personally came to be known and known to me to be the individual described in and who, as TENANT, executed the foregoing instrument and acknowledged to me that he executed the same. IMPORTANT - PLEASE READ RULES AND REGULATIONS ATTACHED TO AND MADE A PART OF THIS LEASE IN ACCORDANCE WITH ARTICLE 36. 1. The sidewalks, entrances, driveways, passages, courts, elevators, vestibules, stairways, corridors or halls shall not be obstructed or encumbered by any Tenant or used for any purpose other than for ingress or egress from the demised premises and for delivery of merchandise and equipment in a prompt and efficient manner using elevators and passageways designated for such delivery by Owner. There shall not be used in any space, or in the public hall of the building, either by any Tenant or by jobbers or others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and sideguards. If said premises are situated on the ground floor of the building, Tenant thereof shall further, at Tenant's expense, keep the sidewalk and curb in front of said premises clean and free from ice, snow, dirt and rubbish. 2. The water and wash cloths and plumbing fixtures shall not be used for any purposes other than those for which they were designed or constructed and no sweepings, rubbish, rags, acids or other substances shall be deposited therein, and the expense of any breakage, stoppage, or damage resulting from the violation of this rule shall be borne by the Tenant who, or whose clerks, agents, employees or visitors, shall have caused it. 3. No carpet, rug or other article shall be hung or shaken out of any window of the building; and no Tenant shall sweep or throw or permit to be swept or thrown from the demised premises any dirt or other substances into any of the corridors of halls, elevators, or out of the doors or windows or stairways of the building and Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in the demised premises, or permit or suffer the demised premises to be occupied or used in a manner offensive or objectionable to Owner or other occupants of the buildings by reason of noise, odors, and or vibrations, or interfere in any way, with other Tenants or those having business therein, nor shall any bicycles, vehicles, animals, fish, or birds be kept in or about the building. Smoking or carrying lighted cigars or cigarettes in the elevators of the building is prohibited. 4. No awnings or other projections shall be attached to the outside walls of the building without the prior written consent of Owner. 5. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside of the demised premises or the building or on the inside of the demised premises if the same is visible from the outside of the premises without the prior written consent of Owner, except that the name of Tenant may appear on the entrance door of the premises. In the event of the violation of the foregoing by any Tenant, Owner may remove same without any liability and may charge the expense incurred by such removal to Tenant or Tenants violating this rule. Interior signs on doors and directory tablet shall be inscribed, painted or affixed for each Tenant by Owner at the expense of such Tenant, and shall be of a size, color and style acceptable to Owner. 6. No Tenant shall mark, paint, drill into, or in any way deface any part of the demised premises or the building of which they form a part. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Owner, and as Owner may direct. No Tenant shall lay linoleum, or other similar floor covering, so that the same shall come in direct contact with the floor of the demised premises, and, if linoleum or other similar floor covering is desired to be used an interlining of builder's deadening felt shall be first affixed to the floor, by a paste or other material, soluble in water, the use of cement or other similar adhesive material being expressly prohibited. 7. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or mechanism thereof. Each Tenant must, upon the termination of his Tenancy, restore to Owner all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, such Tenant, and in the event of the loss of any keys, so furnished, such Tenant shall pay to Owner the cost thereof. 8. Freight, furniture, business equipment, merchandise and bulky matter of any description shall be delivered to and removed from the premises only on the freight elevators and through the service entrances and corridors, and only during hours and in a manner approved by Owner. Owner reserves the right to inspect all freight to be brought into the building and to exclude from the building all freight which violates any of these Rules and Regulations of the lease of which these Rules and Regulations are a part. 9. No Tenant shall obtain for use upon the demised premises ice, drinking water, towel and other similar services, or accept barbering or bootblacking services in the demised premises, except from persons authorized by Owner, and at hours and under regulations fixed by Owner. Canvassing, soliciting and peddling in the building is prohibited and each Tenant shall cooperate to prevent the same. 10. Owner reserves the right to exclude from the building all persons who do not present a pass to the building signed by Owner. Owner will furnish passes to persons for whom any Tenant requests same in writing. Each Tenant shall be responsible for all persons for whom he requests such pass and shall be liable to Owner for all acts of such persons. Notwithstanding the foregoing, Owner shall not be required to allow Tenant or any person to enter or remain in the building, except on business days from 8:00 a.m. to 6:00 p.m. and on Saturdays from 8:00 a.m. to 1:00 p.m. Tenant shall not have a claim against Owner by reason of Owner excluding from the building any person who does not present such pass. 11. Owner shall have the right to prohibit any advertising by any Tenant which in Owner's opinion, tends to impair the reputation of the building or its desirability as a loft building, and upon written notice from Owner, Tenant shall refrain from or discontinue such advertising. 12. Tenant shall not bring or permit to be brought or kept in or on the demised premises, any inflammable, combustible, or explosive, or hazardous fluid, material, chemical or substance, or cause or permit any odors of cooking or other processes, or any unusual or other objectionable odors to permeate in or emanate from the demised premises. 13. Tenant shall not use the demised premises in a manner which disturbs or interferes with other Tenants in the beneficial use of their premises. Address Premises TO STANDARD FORM OF LOFT LEASE THE REAL ESTATE BOARD OF NEW YORK, INC. (C)Copyright 1994. All rights Reserved. Reproduction in whole or in part prohibited. Dated 19 --- Rent Per Year Rent Per Month Term From To Drawn by -------------------------------- Checked by ------------------------------ Entered by ------------------------------ Approved by ----------------------------- EX-10.8 10 CREDIT AGREEMENT ================================================================================ CREDIT AGREEMENT among UNIDIGITAL INC., Borrower, The Several Lenders from Time to Time Parties Hereto, and CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent Dated as of March 24, 1998 ================================================================================ TABLE OF CONTENTS ----------------- Page ---- SECTION 1. DEFINITIONS................................................... 1 1.1 Defined Terms.............................................. 1 1.2 Other Definitional Provisions..............................20 SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS.....................21 2.1 Term Loan Commitments......................................21 2.2 Term Notes.................................................21 2.3 Procedure for Term Loan Borrowing..........................21 SECTION 3. AMOUNT AND TERMS OF ACQUISITION LOAN COMMITMENTS..............22 3.1 Acquisition Loan Commitments...............................22 3.2 Acquisition Notes..........................................22 3.3 Procedure for Acquisition Loan Borrowing...................22 3.4 Commitment Fee.............................................23 3.5 Termination or Reduction of Acquisition Loan Commitments...23 SECTION 4. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS..............24 4.1 Revolving Credit Commitments...............................24 4.2 Revolving Credit Notes.....................................24 4.3 Procedure for Revolving Credit Borrowing...................25 4.4 Commitment Fee.............................................25 4.5 Termination or Reduction of Revolving Credit Commitments..............................................26 SECTION 5. LETTERS OF CREDIT.............................................26 5.1 L/C Commitment.............................................26 5.2 Procedure for Issuance of Letters of Credit................27 5.3 Fees, Commissions and Other Charges........................27 5.4 L/C Participations.........................................27 5.5 Reimbursement Obligations of the Borrower..................28 5.6 Obligations Absolute.......................................29 5.7 Letter of Credit Payments..................................29 5.8 Application................................................29 SECTION 6. GENERAL PROVISIONS APPLICABLE TO LOANS........................30 6.1 Interest Rates and Payment Dates...........................30 -i- 6.2 Conversion and Continuation Options........................30 6.3 Maximum Number of Tranches.................................31 6.4 Optional Prepayments.......................................31 6.5 Mandatory Prepayments......................................31 6.6 Computation of Interest and Fees...........................33 6.7 Inability to Determine Interest Rate.......................33 6.8 Pro Rata Treatment and Payments............................33 6.9 Illegality.................................................34 6.10 Requirements of Law.......................................35 6.11 Taxes.....................................................36 6.12 Indemnity.................................................37 6.13 Lending Offices; Change of Lending Office.................38 SECTION 7. REPRESENTATIONS AND WARRANTIES................................38 7.1 Financial Condition........................................38 7.2 No Change..................................................39 7.3 Existence; Compliance with Law.............................39 7.4 Power; Authorization; Enforceable Obligations..............40 7.5 No Legal Bar...............................................40 7.6 No Material Litigation.....................................40 7.7 No Default.................................................40 7.8 Ownership of Property; Liens...............................41 7.9 Intellectual Property......................................41 7.10 No Burdensome Restrictions................................41 7.11 Taxes.....................................................41 7.12 Federal Regulations.......................................41 7.13 ERISA.....................................................43 7.14 Investment Company Act; Other Regulations.................42 7.15 Subsidiaries..............................................42 7.16 Security Documents........................................42 7.17 Accuracy and Completeness of Information..................43 7.18 Labor Relations...........................................43 7.19 Insurance.................................................43 -ii- 7.20 Solvency..................................................43 7.21 Purpose of Loans..........................................44 7.22 Environmental Matters.....................................44 7.23 Regulation H..............................................45 7.24 Existing Indebtedness.....................................45 7.25 No Warehouse Inventory....................................45 7.26 Collateral Certificate....................................45 SECTION 8. CONDITIONS PRECEDENT..........................................45 8.1 Conditions to Initial Loans................................45 8.2 Conditions to Acquisition Loans............................50 8.3 Conditions to Each Loan....................................54 SECTION 9. AFFIRMATIVE COVENANTS.........................................55 9.1 Financial Statements.......................................55 9.2 Certificates; Other Information............................56 9.3 Payment of Obligations.....................................57 9.4 Conduct of Business and Maintenance of Existence...........57 9.5 Maintenance of Property; Insurance.........................57 9.6 Inspection of Property; Books and Records; Discussions.....57 9.7 Notices....................................................57 9.8 Environmental Laws.........................................58 9.9 Additional Collateral; Additional Guarantors...............59 9.10 Audit.....................................................59 9.11 Filing of Mortgage........................................59 9.12 Filing of Leasehold Mortgage..............................60 9.13 Execution of Leasehold Mortgages..........................61 SECTION 10. NEGATIVE COVENANTS...........................................61 10.1 Financial Condition Covenants.............................61 10.2 Limitation on Indebtedness................................64 10.3 Limitation on Liens.......................................65 10.4 Limitation on Guarantee Obligations.......................66 10.5 Limitation on Fundamental Changes.........................66 10.6 Limitation on Sale of Assets..............................67 -iii- 10.7 Limitation on Leases......................................67 10.8 Limitation on Dividends...................................67 10.9 Limitation on Capital Expenditures........................68 10.10 Limitation on Investments, Loans and Advances............68 10.11 Limitation on Optional Payments and Modifications of Debt Instruments....................................69 10.12 Limitation on Transactions with Affiliates...............69 10.13 Limitation on Sales and Leasebacks.......................69 10.14 Limitation on Changes in Fiscal Year.....................69 10.15 Limitation on Negative Pledge Clauses....................69 10.16 Limitation on Lines of Business..........................70 10.17 Governing Documents......................................70 10.18 Limitation on Subsidiary Formation.......................70 10.19 Limitation on Securities Issuances.......................70 10.20 Inventory................................................70 SECTION 11. EVENTS OF DEFAULT............................................70 SECTION 12. THE ADMINISTRATIVE AGENT.....................................74 12.1 Appointment...............................................74 12.2 Delegation of Duties......................................74 12.3 Exculpatory Provisions....................................74 12.4 Reliance by Administrative Agent..........................74 12.5 Notice of Default.........................................75 12.6 Non-Reliance on Administrative Agent and Other Lenders....75 12.7 Indemnification...........................................76 12.8 Administrative Agent in Its Individual Capacity...........76 12.9 Successor Administrative Agent............................76 SECTION 13. MISCELLANEOUS................................................77 13.1 Amendments and Waivers....................................77 13.2 Notices...................................................77 13.3 No Waiver; Cumulative Remedies............................78 13.4 Survival of Representations and Warranties................78 13.5 Payment of Expenses and Taxes.............................78 13.6 Successors and Assigns; Participations and Assignments....79 -iv- 13.7 Adjustments; Set-off......................................81 13.8 Counterparts..............................................82 13.9 Severability..............................................82 13.10 Integration..............................................82 13.11 GOVERNING LAW............................................82 13.12 Submission To Jurisdiction; Waivers......................82 13.13 Acknowledgments..........................................83 13.14 WAIVERS OF JURY TRIAL....................................83 13.15 Confidentiality..........................................83 SCHEDULES Schedule I Lenders, Commitments, and Lending Offices Schedule 1.1. Pro Forma Consolidated EBITDA for the Kwik Acquisition Schedule 2.1 Scheduled Term Loan Repayments Schedule 3.2 Scheduled Acquisition Loan Repayments Schedule 7.2 Dividends and Distributions Schedule 7.4 Consents, Authorizations, Notices and Filings Schedule 7.6 Material Litigation Schedule 7.16 Filing Jurisdictions Schedule 7.22 Environmental Matters Schedule 8.1 Mortgaged Properties Schedule 10.2 Indebtedness EXHIBITS Exhibit A-1 Form of Term Note Exhibit A-2 Form of Acquisition Note Exhibit A-3 Form of Revolving Credit Note Exhibit B Form of Landlord Agreement -v- Exhibit C Form of Pledge Agreement (U.S.) Exhibit D Form of Pledge Agreement (U.K.) Exhibit E Form of Security Agreement Exhibit F Form of Borrowing Notice Exhibit G Form of Leasehold Mortgage Exhibit H Form of Mortgage Exhibit I Form of Subsidiaries Guarantee Exhibit J Form of Non-Bank Status Certificate Exhibit K-1 Form of Opinion of Counsel to the Borrower Exhibit K-2 Form of Opinion of Special Counsel to the Borrower for the U.K. Exhibit L Form of Assignment and Acceptance Exhibit M-1 Form of Secretary's Certificate (Borrower) Exhibit M-2 Form of Secretary's Certificate (Officer) Exhibit N Form of Responsible Officer's Certificate -vi- CREDIT AGREEMENT, dated as of March 24, 1998, among UNIDIGITAL INC., a Delaware corporation (the "Borrower"), the lenders from time to time parties to this Agreement (the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE ("CIBC"), as administrative agent for the Lenders hereunder (in such capacity, the "Administrative Agent"). RECITALS The Borrower intends to acquire all or substantially all of the assets of, and assume certain liabilities of, Kwik International Color, Ltd., a New York corporation ("Kwik"), pursuant to the Kwik Acquisition Agreement (as hereinafter defined; such acquisition of assets and assumption of liabilities, the "Kwik Acquisition"). The Borrower further intends to refinance certain existing indebtedness of the Borrower and its subsidiaries, and to seek additional financing for its working capital needs and for additional potential acquisitions. The Borrower has requested (a) that the Lenders make a term loan to the Borrower, in the principal amount of $25,000,000, the proceeds of which term loans would be used to finance a portion of the purchase price of the Kwik Acquisition and fees and expenses incurred in connection therewith, to refinance existing indebtedness of the Borrower and its subsidiaries and to pay fees and expenses incurred in connection herewith, (b) that the Lenders make available an acquisition credit facility in the principal amount of $5,000,000 the proceeds of which would be used to finance acquisitions (other than the Kwik Acquisition) and fees and expenses incurred in connection therewith and (c) that the Lenders make available to the Borrower revolving credit loans and letters of credit in an aggregate principal and/or face amount at any one time outstanding not to exceed $10,000,000, the proceeds of which would be used to finance a portion of the purchase price of the Kwik Acquisition and fees and expenses incurred in connection therewith, to refinance existing indebtedness of the Borrower and its subsidiaries, to finance the working capital requirements of the Borrower and its subsidiaries in the ordinary course of business and to pay fees and expenses incurred in connection herewith. The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Acquired Business": with respect to any Permitted Acquisition, the Person the common stock or other ownership interest which is acquired in such Permitted Acquisition, or the business unit, division or subdivision the assets of which are acquired in such Permitted Acquisition, as the case may be. "Acquisition Closing Date": in respect of any Acquisition Loan, the date on which all of the conditions described on Section 8.2 shall have been satisfied for the Permitted Acquisition to be financed thereby. "Acquisition Documents": with respect to any Permitted Acquisition, the stock purchase agreement, asset purchase agreement, agreement and plan of merger, or similar agreement regarding such Permitted Acquisition, and all other agreements, instruments and documents delivered in connection with the consummation thereof (including, without limitation, any equity financing documents related thereto). "Acquisition Loan": as defined in Section 3.1. "Acquisition Loan Commitment": as to any Lender, its obligation to make Acquisition Loans to the Borrower pursuant to Section 3.1 in the amount set forth opposite such Lender's name on Schedule I under the caption "Acquisition Loans" or in an Assignment and Acceptance, as such amount may be reduced from time to time in accordance with the provisions of this Agreement. "Acquisition Loan Commitment Percentage": as to any Lender, the percentage equal to the quotient of such Lender's Acquisition Loan Commitment divided by the aggregate Acquisition Loan Commitments. "Acquisition Loan Commitment Period": the period from and including the date hereof to but excluding the Acquisition Loan Commitment Termination Date, or such earlier date as the Acquisition Loan Commitments terminate as provided herein. "Acquisition Loan Commitment Termination Date": March 24, 2000. "Acquisition Note": as defined in Section 3.2. "Adjusted EBITDA": for any period, the Consolidated EBITDA of the Borrower for such period plus, for each Permitted Acquisition consummated (or proposed to be consummated during such period), the Consolidated EBITDA of the Acquired Business in respect of such Permitted Acquisition for such period, calculated on a pro forma basis without duplication, as if such Permitted Acquisition had occurred on the first day of such period (and for purposes of this definition, "Consolidated EBITDA of the Acquired Business" shall mean the sum of (i) Consolidated Net Income for such period (substituting such Acquired Business for the Borrower), (ii) the sum of provisions for such period for income taxes, interest expense, and depreciation and amortization expense used in determining such Consolidated Net Income, (iii) other amounts deducted in such period in respect of non-cash expenses in accordance with GAAP, (iv) non-capitalized transaction costs deducted in such period in connection with such Permitted Acquisition, (v) the amount of any aggregate net loss (or minus the amount of any gain) during such periods arising from the sale, exchange or other disposition of capital assets, (vi) non-cash expenses deducted in such period in connection with any earn-out agreements, stock appreciation rights, "phantom" stock plans, employment agreements, non-competition agreements, subscription and stockholders agreements and other incentive and bonus plans and similar arrangements made in connection with acquisitions of Persons or businesses by such Acquired Business or the retention of executives, officers or employees by such Acquired -2- Business and (vii) other non-recurring, non-operating expenses as shall have been approved by the Administrative Agent as exclusions from the determination of Adjusted EBITDA; provided that Adjusted EBITDA shall in any event exclude the amount of any non-cash income recognized during any period for which Consolidated EBITDA is determined; provided further that for purposes of computing Consolidated EBITDA of the Acquired Business, there shall be added thereto the amount by which the compensation (whether in the form of salary, bonus, dividend or other distribution) paid to the principal owner(s) and/or manager(s) of the Acquired Business prior to such Permitted Acquisition will be reduced, following such Permitted Acquisition, as set forth in a certificate of the Borrower reasonably acceptable to the Administrative Agent; and provided further; in the case of the period prior to the Closing Date Adjusted EBITDA shall be calculated by taking into account the amounts and periods set forth on Schedule 1.1. "Administrative Agent": CIBC, together with its affiliates, as the arranger of the Commitments and as the administrative agent for the Lenders under this Agreement and the other Loan Documents. "Affiliate": as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person (including, with its correlative meanings, "controlled by" and "under common control with") means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agreement": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Aggregate Outstanding RC Extensions of Credit": as to any Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Credit Loans made by such Lender then outstanding and (b) such Lender's Revolving Credit Commitment Percentage of the L/C Obligations then outstanding. "Applicable Lending Office": for each Lender and for each Type of Loan, the lending office of such Lender designated for such Type of Loan on Schedule I hereto (or any other lending office from time to time notified to the Administrative Agent by such Lender ) as the office at which its Loans of such Type are to be made and maintained. "Applicable Margin": prior to the date on which financial statements for the second full fiscal quarter following the Closing Date are required to be delivered pursuant to Section 9.1(a) or (b), 3.00% with respect to Eurodollar Loans and 1.75% with respect to Base Rate Loans, and thereafter with respect to each Type of Loans shall be the margin set forth opposite the applicable ratio of Consolidated Funded Debt -3- to Adjusted EBITDA for the period of four consecutive fiscal quarters most recently ended, as follows: ------------------------------------------------- Consolidated Funded Debt/ Base Rate Eurodollar Adjusted EBITDA Loans Loans ------------------------------------------------- Greater than or 1.75% 3.00% equal to 3.00 ------------------------------------------------- Less than 3.00 1.50% 2.75% but greater than or equal to 2.50 ------------------------------------------------- Less than 2.50 1.25% 2.50% but greater than or equal to 2.00 ------------------------------------------------- Less than 2.00 1.00% 2.25% but greater than or equal to 1.50 ------------------------------------------------- Less than 1.50 0.75% 2.00% ------------------------------------------------- The Applicable Margin shall be adjusted on and as of the date on which the consolidated financial statements are delivered pursuant to Section 9.1(a) or (b) provided, however, that if such financial statements are not delivered when required pursuant to such Section, then until such financial statements are so delivered for purposes of calculating the Applicable Margin the ratio of Consolidated Funded Debt to Adjusted EBITDA shall be deemed to be greater than 3.00 to 1. "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit. "Assignee": as defined in Section 13.6(c). "Assignment and Acceptance": as defined in Section 13.6(c). "Available RC Commitment": as to any Lender at any time, an amount equal to the excess, if any, of (a) the amount of such Lender's Revolving Credit Commitment at such time over (b) the Aggregate Outstanding RC Extensions of Credit by such Lender at such time. "Base Rate": for any day, the rate per annum (rounded upward, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced by CIBC in New York, New York from time to time as its base rate (the base rate not being intended to be the lowest rate of interest charged by CIBC in connection with extensions of credit to debtors). -4- "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate. "Borrower": as defined in the heading to this Agreement. "Borrower Security Documents": the collective reference to the Mortgage executed and delivered by the Borrower, the Pledge Agreements, and the Security Agreement. "Borrowing Date": any Business Day specified in a notice pursuant to Section 2.3, 3.3 or 4.3 as a date on which the Borrower requests the Lenders to make Loans hereunder. "Business": as defined in Section 7.22(b). "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, and, if such day relates to a borrowing of, a payment or prepayment of principal of or interest on, or a Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect to any such borrowing, payment, prepayment, Conversion or Interest Period, which is also a day on which dealings in Dollar deposits are carried out in the London interbank market. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all similar ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of six months or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by Standard and Poor's Ratings Group ("S&P") or P-1 or the equivalent thereof by Moody's Investors Service, Inc. ("Moody's") and in either case maturing within six months after the day of acquisition, (e) securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of six months or less -5- from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition. "Closing Date": the date on which the conditions precedent set forth in Section 8.1 shall be satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Collateral": all property and interests in property of the Loan Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "Commitments": the collective reference to the Revolving Credit Commitments, the Acquisition Loan Commitments and the Term Loan Commitments. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Borrower and which is treated as a single employer under Section 414 of the Code. "Consolidated Current Assets": at a particular date, all amounts which would, in conformity with GAAP, be included under current assets on a consolidated balance sheet of the Borrower and its Subsidiaries as at such date; provided, however, that such amounts shall not include (a) any amounts for any Indebtedness owing by an Affiliate of the Borrower, unless such Indebtedness arose in connection with the sale of goods or other property in the ordinary course of business and would otherwise constitute current assets in conformity with GAAP, (b) any shares of stock issued by an Affiliate of the Borrower, or (c) the cash surrender value of any life insurance policy. "Consolidated Current Liabilities": at a particular date, all amounts which would, in conformity with GAAP, be included under current liabilities on a consolidated balance sheet of the Borrower and its Subsidiaries as at such date (excluding the current portion of any Loans). "Consolidated EBITDA": for any period, the sum, for the Borrower and its Subsidiaries (determined on a consolidated basis without duplication in accordance with GAAP), for such period of (a) Consolidated Net Income for such period, (b) the sum of provisions for such period for income taxes, interest expense, and depreciation and amortization expense used in determining such Consolidated Net Income, (c) amounts deducted in such period in respect of non-cash expenses in accordance with GAAP, (d) non-capitalized transaction costs deducted in such period in connection with the Kwik Acquisition and any Permitted Acquisitions and the financings relating thereto, (e) the amount of any aggregate net loss (or minus the amount of any gain) during such period arising from the sale, exchange or other disposition of capital assets, -6- (f) non-cash expenses deducted in such period in connection with any earn-out agreements, stock appreciation rights, "phantom" stock plans, employment agreements, non-competition agreements, subscription and stockholders agreements and other incentive and bonus plans and similar arrangements made in connection with acquisitions of Persons or businesses by the Borrower or its Subsidiaries or the retention of executives, officers or employees by the Borrower or its Subsidiaries, including (but without duplication) any Person that has become a Subsidiary during such specified period, on a pro forma basis as if such acquisition had occurred on the first day of such period plus other non-recurring, non-operating expenses as shall have been approved by the Administrative Agent as exclusions from the determination of Consolidated EBITDA; provided, that Consolidated EBITDA shall in any event exclude, from and after the Closing Date, (x) the effect of any write-up of the assets of Kwik or any of its Subsidiaries or any other assets acquired in any Permitted Acquisitions and (y) the amount of any non-cash income recognized during any period for which Consolidated EBITDA is determined. "Consolidated Fixed Charges": for any period, the sum of (i) the amounts deducted for the cash portion of Consolidated Interest Expense in determining Consolidated Net Income for such period, (ii) the amount of scheduled payments of principal of Indebtedness during such period, (iii) all amounts of capital expenditures made during such period (other than capital expenditures in respect of Financing Leases to the extent the same are included in clauses (i) or (ii) of this definition), and (iv) the amount of cash income taxes paid during such period. "Consolidated Funded Debt": as of any date, the sum of all aggregate indebtedness of the Borrower and its Subsidiaries of the types set forth in clauses (a), (b), (c), (d), (e) and (g) of Indebtedness, determined on a consolidated basis in accordance with GAAP, including, in any event, the Term Loans, the Acquisition Loans, Revolving Credit Loans and any purchase money Indebtedness. "Consolidated Indebtedness": at any time, the aggregate Indebtedness of the Borrower and its consolidated Subsidiaries at such time determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Expense": for any period, the amount which, in conformity with GAAP, would be set forth opposite the caption "interest expense" or any like caption (including without limitation, imputed interest included in payments under Financing Leases) on a consolidated income statement of the Borrower and the Subsidiaries for such period excluding the amortization of any original issue discount. "Consolidated Lease Expense": for any period, the aggregate amount of fixed or contingent rentals payable by the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period with respect to leases of real and personal property. -7- "Consolidated Net Income": for any period, the consolidated net income (or deficit) of the Borrower and the Subsidiaries for such period (taken as a cumulative whole), determined in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary, (b) the income (or deficit) of any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has an ownership interest, except to the extent that any such income has been actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions, (c) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation or Requirement of Law applicable to such Subsidiary, (d) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of income accrued during such period, (e) any aggregate net gain (but not any aggregate net loss) during such period arising from the sale, exchange or other disposition of capital assets (such term to include all fixed assets, whether tangible or intangible, all inventory sold in conjunction with the disposition of fixed assets and all securities), (f) any write-up of any asset, (g) any net gain from the collection of the proceeds of life insurance policies, (h) any gain arising from the acquisition of any securities, or the extinguishment, under GAAP, of any Indebtedness, of the Borrower or any Subsidiary, (i) in the case of a successor to the Borrower by consolidation or merger or as a transferee of its assets, any earnings of the successor corporation prior to such consolidation, merger or transfer of assets, and (j) any deferred credit representing the excess of equity in any Subsidiary at the date of acquisition over the cost of the investment in such Subsidiary. "Continue", "Continuation" and "Continued" shall refer to the continuation of a Eurodollar Loan from one Interest Period to the next Interest Period. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Convert", "Conversion" and "Converted" shall refer to a conversion of Base Rate Loans into Eurodollar Loans or of Eurodollar Loans into Base Rate Loans, which may be accompanied by the transfer by a Lender (at its sole discretion) of a Loan from one Applicable Lending Office to another. "Credit Exposure": as to any Lender at any time, the sum of (a) its Revolving Credit Commitment (or, if the Revolving Credit Commitments shall have expired or been terminated, the aggregate unpaid principal amount of its Revolving Credit Loans), (b) the sum (without duplication) of the aggregate unpaid principal amount of the Acquisition Loans made by such Lender and its Acquisition Loan Commitment (or, if the Acquisition Loan Commitments shall have expired or been terminated, the -8- aggregate unpaid principal amount of its Acquisition Loans) and (c) the unpaid principal amount of its Term Loan. "Credit Exposure Percentage": as to any Lender at any time, the fraction (expressed as a percentage), the numerator of which is the Credit Exposure of such Lender at such time and the denominator of which is the aggregate Credit Exposures of all of the Lenders at such time. "Default": any of the events specified in Section 11, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Person": any individual resident of the United States or any other Person organized under the laws of a jurisdiction in the United States of America, any State thereof or the District of Columbia. "Domestic Subsidiary": any Subsidiary of the Borrower other than a Foreign Subsidiary. "Elements UK": Elements (UK) Limited, a United Kingdom corporation. "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the corresponding rate appearing at page 3750 of the Dow Jones Telerate Service at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period, -9- or if such rate no longer so appears, the rate per annum at which CIBC is offered Dollar deposits at or about 10:00 a.m., local time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate ---------------------------------------- 1.00 - Eurocurrency Reserve Requirements "Event of Default": any of the events specified in Section 11; provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": as to the Borrower for any applicable fiscal year: (a) Consolidated EBITDA for such fiscal year; plus (b) the decrease (if any) in the amount of the excess of Consolidated Current Assets (excluding cash and Cash Equivalents) over Consolidated Current Liabilities at the end of such fiscal year compared to the amount of the excess of Consolidated Current Assets (excluding cash and Cash Equivalents) over Consolidated Current Liabilities at the end of the immediately preceding fiscal year of the Borrower; minus (c) the sum of (i) the amount of (A) all regularly scheduled payments of principal of the Term Loans and Acquisition Loans actually made during such fiscal year, (B) any voluntary prepayment of principal of the Term Loans and Acquisition Loans made during such fiscal year, (C) any permanent reduction in the Revolving Credit Commitments made during such fiscal year to the extent that, before giving effect to such reduction, the average outstanding principal balance of the Revolving Credit Loans for the thirty (30) days prior to such reduction exceeds the aggregate Revolving Credit Commitments after giving effect to such reduction and (D) any voluntary prepayment of other permitted Indebtedness to the extent not subject to reborrowing, made during such fiscal year, (ii) the amount of all interest payments actually made in cash during such fiscal year by the Borrower and its consolidated Subsidiaries, (iii) the amount of capital expenditures (other than capital expenditures in respect of Financing Leases) actually made during such fiscal year to the extent permitted by Section 10.9, (iv) cash income taxes paid during such fiscal year and -10- (v) the increase (if any) in the amount of the excess of Consolidated Current Assets (excluding cash and Cash Equivalents) over Consolidated Current Liabilities at the end of such fiscal year compared to the amount of the excess of Consolidated Current Assets (excluding cash and Cash Equivalents) over Consolidated Current Liabilities at the end of the immediately preceding fiscal year of the Borrower. "Existing Creditor": any creditor under an Existing Financing Document. "Existing Financing Documents": all credit agreements, indentures, notes, guarantees and other financing documents, in each case as amended to the extent permitted hereunder, evidencing or governing the Indebtedness listed on Schedule 10.2. "Existing Indebtedness": all Indebtedness of the Borrower, Kwik and their respective Subsidiaries outstanding immediately prior to the Closing Date pursuant to the Existing Financing Documents. "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Fee Letter": that certain Fee Letter, dated March 5, 1998, between CIBC and the Borrower, as amended, supplemented or otherwise modified from time to time. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Foreign Subsidiary": any Subsidiary of the Borrower organized under the laws of a jurisdiction other than the United States of America, any State thereof or the District of Columbia. "GAAP": generally accepted accounting principles in the United States of America. "Governing Documents": as to any Person, its articles or certificate of incorporation and by-laws, its partnership agreement, its certificate of formation and operating agreement, and/or the other organizational or governing documents of such Person. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. -11- "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a correlative meaning. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money (whether by loan or the issuance and sale of debt securities) or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of letters of credit, acceptances or similar instruments issued or created for the account of such Person, (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof, (f) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined and (g) all Guarantee Obligations of such Person in respect of any of the foregoing. -12- "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Interest Payment Date": (a) as to any Base Rate Loan, the last day of each March, June, September and December, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any Eurodollar having an Interest Period longer than three months, (i) each day which is three months, or a whole multiple thereof, after the first day of such Interest Period, and (ii) the last day of such Interest Period. "Interest Period": (a) with respect to any Eurodollar Loan: (i) initially, the period commencing on the borrowing or Conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of Conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period pertaining to a Eurodollar Loan would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period in respect of Revolving Credit Loans, Acquisition Loans or Term Loans, as the case may be, that would otherwise extend beyond the Revolving Credit Termination Date or beyond the date final payment is due on the Acquisition Loans or the Term Loans shall end on the Revolving Credit Termination Date or such date of final payment, as the case may be; (3) any Interest Period pertaining to a Eurodollar Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of -13- such Interest Period) shall end on the last Business Day of a calendar month; and (4) the Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "Intercreditor and Subordination Agreement": the Intercreditor and Subordination Agreement to be entered into by the Borrower, the Administrative Agent and Kwik International Color, Ltd., as the same may be amended, supplemented or otherwise modified from time to time. "Inventory": as defined in the Uniform Commercial Code in effect in the State of New York. "Issuing Lender": CIBC, in its capacity as issuer of any Letter of Credit. "Kwik Acquisition": as defined in the recitals hereto. "Kwik Acquisition Agreement": the Asset Purchase Agreement, dated as of March 19, 1998, among the Borrower, Unison (NY), Inc., a Delaware corporation and wholly-owned Subsidiary of the Borrower, Kwik and Richard J. Sirota, the sole shareholder of Kwik, as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "Kwik Acquisition Documents": the Kwik Acquisition Agreement and all other agreements, instruments and documents delivered in connection with the consummation thereof (including, without limitation, any equity financing documents related thereto). "Landlord Agreement": each landlord agreement executed and delivered by the lessor of premises leased by the Borrower or any other Loan Party, substantially in the form of Exhibit B or such other form as the Administrative Agent may approve, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof. "L/C Commitment": $1,000,000. "L/C Fee Payment Date": the last Business Day of each March, June, September and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed. "L/C Participants": the collective reference to all the Lenders other than the Issuing Lender. -14- "Leasehold Mortgage": each Leasehold Mortgage to be executed and delivered by any Loan Party, substantially in the form of Exhibit G, as the same may be amended, supplemented or otherwise modified from time to time. "Letters of Credit": as defined in Section 5.1(a). "Leverage Ratio": at any time, the ratio of Consolidated Funded Debt to Adjusted EBITDA for the immediately preceding period of four consecutive fiscal quarters; provided that, in calculating the Leverage Ratio for any period during which a Permitted Acquisition was consummated, Adjusted EBITDA shall be substituted for Consolidated EBITDA. "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing), and the filing of any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction in respect of any of the foregoing. "Loan": any loan made by any Lender pursuant to this Agreement. "Loan Documents": this Agreement, the Notes, the Applications, the Subsidiaries Guarantee and the Security Documents. "Loan Parties": the Borrower and each Subsidiary of the Borrower which is or becomes a party to a Loan Document. "Material Adverse Effect": a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this or any of the other Loan Documents or the rights or remedies of the Administrative Agent or the Lenders hereunder or thereunder. "Material Environmental Amount": an amount payable by the Borrower and/or its Subsidiaries in excess of $100,000 for remedial costs, compliance costs, compensatory damages, punitive damages, fines, penalties or any combination thereof. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. -15- "Mortgage": each Mortgage to be executed and delivered by any Loan Party, substantially in the form of Exhibit H, as the same may be amended, supplemented or otherwise modified from time to time. "Mortgages": collectively, the reference to the Mortgages executed by the Borrower or any Subsidiary and any fee or leasehold mortgage or deed of trust, in form and substance satisfactory to the Administrative Agent, that may be required by the Required Lenders in connection with a Permitted Acquisition. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA with respect to which the Borrower or any Commonly Controlled Entity is, or ever has been, obligated to contribute. "Net Proceeds": (i) the aggregate cash consideration received by the Borrower or a Subsidiary in connection with any transaction referred to in Section 6.5(b) less (ii) the expenses (including out-of-pocket expenses) incurred by the Borrower or such Subsidiary in connection with such transaction (including, in the case of any issuance of debt or equity securities, underwriters' commissions and fees) and the amount of any federal and state taxes incurred in connection with such transaction, in each case as certified by a Responsible Officer to the Administrative Agent at the time of such transaction. "Non-Bank Status Certificate": as defined in Section 6.11(b)(i)(B). "Non-Excluded Taxes": as defined in Section 6.11. "Notes": the collective reference to the Revolving Credit Notes, the Acquisition Credit Notes and the Term Notes. "Obligations": the unpaid principal amount of, and interest (including, without limitation, interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) on the Loans, and all other obligations and liabilities of the Loan Parties to the Administrative Agent and the Lenders, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, or out of or in connection with this Agreement, the Notes, the Guarantees, the Security Documents and any other Loan Documents and any other document made, delivered or given in connection therewith or herewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by a Loan Party pursuant to the terms of the Loan Documents) or otherwise. "Participant": as defined in Section 13.6(b). -16- "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Acquisition": an acquisition of (a) 100% of the common stock or other ownership interests of a Domestic Person or (b) the assets of a Domestic Person, or of a business unit, division or subdivision of a Domestic Person, in each case engaged in or relating to a line of business substantially similar to the line of business engaged in by the Borrower on the Closing Date; provided that (i) the Ratio for the most recent period of four consecutive fiscal quarters preceding such Permitted Acquisition (calculated on a pro-forma basis as if such Permitted Acquisition had been consummated as of the first day of such four quarter period) of Consolidated Funded Debt as of the last day of such period to Adjusted EBITDA for such period is not greater than the required Leverage Ratio less 0.25 set forth in Section 10.1(a) for such period, (ii) no later than five Business Days prior to the consummation of such acquisition, the Administrative Agent shall have received a certificate of a Responsible Officer with detailed calculations establishing to the reasonable satisfaction of the Administrative Agent that the foregoing requirement has been satisfied and (iii) each Loan Party shall have granted a security interest in favor of the Administrative Agent to assets acquired in accordance with Section 9.9. "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pledge Agreement (U.S.)": the Pledge Agreement to be executed and delivered by the Borrower, substantially in the form of Exhibit C-1, as the same may be amended, supplemented or otherwise modified from time to time. "Pledge Agreement (U.K.)": the Mortgage to be executed and delivered by the Borrower with respect to the shares of Elements U.K. substantially in the form of Exhibit D, as the same may be amended, supplemented or otherwise modified from time to time. "Pledge Agreements": the collective reference to the Pledge Agreement (U.S.) and the Pledge Agreement (U.K.). "Post-Closing Agreement": the Post-Closing Agreement to be executed and delivered by the Borrower, as the same may be amended, supplemented or otherwise modified from time to time. "Properties": as defined in Section 7.22. -17- "Refinancing": the refinancing of all of the Existing Indebtedness (other than Existing Indebtedness listed in Part B of Schedule 10.2) with the proceeds of the Loans to be made on the Closing Date. "Register": as defined in Section 13.6(d). "Regulation G": Regulation G of the Board of Governors of the Federal Reserve System as in effect from time to time. "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Obligation": the obligation of the Borrower to reimburse the Issuing Bank pursuant to Section 5.5(a) for amounts drawn under a Letter of Credit. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under Sections .13, .14, .16, .18, .19 or .20 of PBGC Reg. ss. 4043. "Required Lenders": at any time, Lenders the Credit Exposure Percentage of which aggregate 51% or more. "Requirement of Law": as to any Person, the certificate of incorporation and by-laws or other organizational or Governing Documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": as to any Person, the chief executive officer and the president of such Person or, with respect to financial matters, the chief financial officer of such Person. Unless otherwise specified, "Responsible Officer" refers to a Responsible Officer of the Borrower. "Revolving Credit Commitment": as to any Lender, the obligation of such Lender to make Revolving Credit Loans to the Borrower pursuant to Section 4.1 and/or to issue or participate in Letters of Credit issued on behalf of the Borrower hereunder in an aggregate principal and/or face amount at any one time outstanding not to exceed the amount set forth opposite such Lender's name on Schedule I under the caption "Revolving Credit Loan" or in an Assignment and Acceptance, as such amount may be reduced from time to time in accordance with the provisions of this Agreement. The original aggregate principal amount of the Revolving Credit Commitment is $10,000,000. -18- "Revolving Credit Commitment Percentage": as to any Lender at any time, the percentage which such Lender's Revolving Credit Commitment then constitutes of the aggregate Revolving Credit Commitments (or, at any time after the Revolving Credit Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Revolving Credit Loans then outstanding constitutes of the aggregate principal amount of the Revolving Credit Loans then outstanding). "Revolving Credit Commitment Period": the period from and including the date hereof to but not including the Revolving Credit Termination Date or such earlier date on which the Revolving Credit Commitments shall terminate as provided herein. "Revolving Credit Loans": as defined in Section 4.1. "Revolving Credit Note": as defined in Section 4.2. "Revolving Credit Termination Date": March 24, 2003. "Security Agreement": the Security Agreement to be executed and delivered by the Borrower and each domestic Subsidiary of the Borrower, substantially in the form of Exhibit E, as the same may be amended, supplemented or otherwise modified from time to time. "Security Documents": the collective reference to the Leasehold Mortgages, the Mortgage, the Pledge Agreements, the Security Agreement, and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure any of the Obligations or to secure any guarantee of any such Obligations. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "Subsidiaries Guarantee": the Guarantee to be executed and delivered by each Domestic Subsidiary of the Borrower, substantially in the form of Exhibit I, as the same may be amended, supplemented or otherwise modified from time to time. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. -19- "Subsidiary Guarantor": any Subsidiary party to the Subsidiaries Guarantee as a guarantor. "Term Loan": as defined in Section 2.1. "Term Loan Commitment": as to any Lender, its obligation to make a Term Loan to the Borrower pursuant to Section 2.1 in the amount set forth opposite such Lender's name on Schedule I under the caption "Term Loan". "Term Loan Commitment Percentage": as to any Lender, the percentage equal to the quotient of such Lender's Term Loan Commitment divided by the aggregate Term Loan Commitments. "Term Note": as defined in Section 2.2. "Tranche": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Transferee": as defined in Section 13.6(f). "Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar Loan. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. -20- SECTION 2. AMOUNT AND TERMS OF TERM LOAN COMMITMENTS 2.1 Term Loan Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make a term loan (a "Term Loan") to the Borrower on the Closing Date in an amount not to exceed the amount of the Term Loan Commitment of such Lender then in effect; provided, that the Term Loan Commitments shall terminate at 3:00 p.m., New York City time, on March 31, 1998, if the Term Loans have not been made prior to that time. The Term Loans may from time to time be (a) Eurodollar Loans, (b) Base Rate Loans or (c) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.3 and 6.2. 2.2 Term Notes. The Term Loan of each Lender shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A-1 with appropriate insertions as to payee, date and principal amount (a "Term Note"), payable to the order of such Lender and representing the obligation of the Borrower to pay the amount of the Term Loan made by such Lender. Each Lender is hereby authorized to record the date, Type and amount of its Term Loan and the date and amount of each payment or prepayment of principal thereof and each Conversion of all or a portion thereof to another Type and, and in the case of Eurodollar Loans, the Interest Period with respect thereto, on the schedule annexed to and constituting a part of its Term Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; provided, that the failure of such Lender to make any such recordation shall not impair or otherwise affect the validity or enforceability of its Term Note. Each Term Note shall (a) be dated the Closing Date, (b) be stated to mature in installments in amounts equal to such Lender's Term Loan Commitment Percentage of the amounts, and payable on the dates, set forth on Schedule 2.2, and (c) bear interest for the period from the date thereof on the unpaid principal amount thereof at the applicable interest rates per annum specified in Section 6.1. Interest on the Term Notes shall be payable on the dates specified in Section 6.1(d). 2.3 Procedure for Term Loan Borrowing. The Borrower shall give the Administrative Agent irrevocable written notice substantially in the form of Exhibit A-4 (which notice must be received by the Administrative Agent prior to 10:00 a.m., New York City time, (a) three Business Days prior to the Closing Date, if all or any part of the Term Loans are to be initially Eurodollar Loans or (b) one Business Day prior to the Closing Date, otherwise) requesting that the Lenders make the Term Loans on the Closing Date and specifying (i) the Closing Date, (ii) the amount to be borrowed, (iii) whether the Term Loans are to be initially Eurodollar Loans, Base Rate Loans or a combination thereof, and (iv) if the Term Loans are to be entirely or partly Eurodollar Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor. Upon receipt of such notice the Administrative Agent shall promptly notify each Lender thereof. Not later than 11:00 a.m. on the Closing Date each Lender shall make available to the Administrative Agent at its office specified in Section 13.2 the amount of such Lender's pro rata share of such borrowing in immediately available funds. The Administrative Agent shall on such date credit the account of the Borrower on the books of such office of the Administrative Agent with the aggregate of -21- the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. SECTION 3. AMOUNT AND TERMS OF ACQUISITION LOAN COMMITMENTS 3.1 Acquisition Loan Commitments. Subject to the terms and conditions hereof, each Lender severally agrees to make term loans (each, an "Acquisition Loan") to the Borrower from time to time during the Acquisition Loan Commitment Period in an amount not to exceed, together with the aggregate amount of all other Acquisition Loans theretofore made by such Lender, the amount of the Acquisition Loan Commitment of such Lender then in effect; provided, that the Acquisition Loan Commitments shall terminate at 3:00 p.m., New York City time, on March 31, 1998, if the Term Loans have not been made prior to that time. The Acquisition Loans may from time to time be (a) Eurodollar Loans, (b) Base Rate Loans or (c) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 3.3 and 6.2. 3.2 Acquisition Notes. The Acquisition Loans of each Lender shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A-2 with appropriate insertions as to payee, date and principal amount (an "Acquisition Note"), payable to the order of such Lender and representing the obligation of the Borrower to pay the amount of the Acquisition Loan made by such Lender. Each Lender is hereby authorized to record the date, Type and amount of its Acquisition Loan and the date and amount of each payment or prepayment of principal thereof and each Conversion of all or a portion thereof to another Type and, in the case of Eurodollar Loans, the Interest Period with respect thereto, on the schedule annexed to and constituting a part of its Acquisition Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; provided, that the failure of such Lender to make any such recordation shall not impair or otherwise affect the validity or enforceability of its Acquisition Note. Each Acquisition Note shall (a) be dated the Closing Date, (b) be stated to mature in installments in amounts equal to such Lender's Acquisition Loan Commitment Percentage of the amounts, and payable on the dates, calculated as set forth on Schedule 3.2, and (c) bear interest for the period from the date thereof on the unpaid principal amount thereof at the applicable interest rates per annum specified in Section 6.1. Interest on the Acquisition Notes shall be payable on the dates specified in Section 6.1(d). 3.3 Procedure for Acquisition Loan Borrowing. The Borrower may borrow under the Acquisition Loan Commitments during the Acquisition Loan Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice substantially in the form of Exhibit A-4 (which notice must be received by the Administrative Agent prior to 10:00 a.m., New York City time, in the case of Base Rate Loans and 11:00 a.m., New York City time, in the case of Eurodollar Loans, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Acquisition Loans are to be initially Eurodollar Loans or (b) one Business Day prior to the requested Borrowing Date, otherwise) requesting that the Lenders make such Acquisition Loans on the proposed -22- Acquisition Closing Date and specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) the Permitted Acquisition to be financed with the proceeds of such Acquisition Loans, (iv) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof, and (v) if the borrowing is to be entirely or partly of Eurodollar Loans, the amounts of each such Type of Loan and the respective lengths of the initial Interest Periods therefor. Each borrowing under the Acquisition Loan Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $500,000 or a whole multiple of $100,000 in excess thereof (or, if the then remaining unused Acquisition Loan Commitments are less than $500,000 such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing of Acquisition Loans available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 13.2 prior to 11:00 a.m., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 3.4 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee for the period from and including the first day of the Acquisition Loan Commitment Period to but not including the Acquisition Loan Commitment Termination Date, computed at the rate of 1/2 of 1% per annum on the average daily amount of the unutilized Acquisition Loan Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last Business Day of each March, June, September and December and on the Acquisition Loan Commitment Termination Date or such earlier date as the Acquisition Loan Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. The rate per annum at which such commitment fee shall be calculated for each day during any period of computation shall be equal to (a) 3/8 of 1% per annum, if the ratio of Consolidated Funded Debt as of the last day in the period of four consecutive fiscal quarters of the Borrower most recently ended prior to such day for which financial statements have been delivered pursuant to Section 9.1(a) or (b) to Adjusted EBITDA for such period was less than 2.00 to 1, and (b) 1/2 of 1% per annum, if otherwise. The rate at which such commitment fee is calculated shall be adjusted on and as of the date on which the consolidated financial statements for each period of four consecutive fiscal quarters of the Borrower and its Subsidiaries are delivered pursuant to Section 9.1(a) or (b), provided, however, that if such financial statements are not delivered when - -------- required pursuant to such Section, then until such financial statements are so delivered for purposes of calculating the rate at which such commitment fee is calculated the ratio of Consolidated Funded Debt to Adjusted EBITDA for such period shall be deemed to be greater than 2.00 to 1. 3.5 Termination or Reduction of Acquisition Loan Commitments. The Borrower shall have the right, upon not less than three Business Days' notice to the -23- Administrative Agent, to terminate the Acquisition Loan Commitments or, from time to time, to reduce the amount of the Acquisition Loan Commitments. Any such reduction shall be in an amount equal to $1,000,000 or a whole multiple thereof and shall reduce permanently the Acquisition Loan Commitments then in effect. SECTION 4. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS 4.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Lender severally agrees to make revolving credit loans ("Revolving Credit Loans") to the Borrower from time to time during the Revolving Credit Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving Credit Commitment Percentage of the outstanding L/C Obligations, does not exceed the amount of such Lender's Revolving Credit Commitment then in effect; provided, that the Revolving Credit Commitments shall terminate at 3:00 p.m., New York City time, on March 31, 1998, if the Term Loans have not been made prior to that time. During the Revolving Credit Commitment Period the Borrower may use the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) Base Rate Loans or (iii) a combination thereof, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 4.3 and 6.2, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Revolving Credit Termination Date. 4.2 Revolving Credit Notes. The Revolving Credit Loans made by each Lender shall be evidenced by a promissory note of the Borrower, substantially in the form of Exhibit A-3 with appropriate insertions as to payee, date and principal amount (a "Revolving Credit Note"), payable to the order of such Lender and evidencing the obligation of the Borrower to pay a principal amount equal to the lesser of (a) the amount of the Revolving Credit Commitment of such Lender and (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by such Lender. Each Lender is hereby authorized to record the date, Type and amount of each Revolving Credit Loan made or Converted by such Lender, the date and amount of each payment or prepayment of principal thereof, and, in the case of Eurodollar Loans, the Interest Period with respect thereto, on the schedule annexed to and constituting a part of its Revolving Credit Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded. Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the Revolving Credit Termination Date and (z) bear interest on the unpaid principal amount thereof from time to time outstanding at the applicable interest rate per annum determined as provided in Section 6.1. Interest on each Revolving Credit Note shall be payable on the dates specified in Section 6.1(d). -24- 4.3 Procedure for Revolving Credit Borrowing. The Borrower may borrow under the Revolving Credit Commitments during the Revolving Credit Commitment Period on any Business Day in an aggregate principal amount not exceeding the aggregate Available RC Commitments then in effect, provided that the Borrower shall give the Administrative Agent irrevocable written notice, substantially in the form of Exhibit A-4 (which notice must be received by the Administrative Agent prior to 10:00 a.m., New York City time in the case of Base Loan Rates and 11:00 a.m., New York City time, in the case of Eurodollar Loans), (a) three Business Days prior to the requested Borrowing Date, as to any part of the requested Revolving Credit Loans that are to be initially Eurodollar Loans or (b) one Business Day prior to the requested Borrowing Date, otherwise) specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, Base Rate Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurodollar Loans, the amounts of such Type of Loan and the respective lengths of the initial Interest Periods therefor. Each borrowing under the Revolving Credit Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $500,000 or a whole multiple thereof (or, if the then Available RC Commitments are less than $500,000, such lesser amount) and (y) in the case of Eurodollar Loans, $1,000,000 or a whole multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Lender thereof. Each Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Borrower at the office of the Administrative Agent specified in Section 13.2 prior to 11:00 a.m., New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Lenders and in like funds as received by the Administrative Agent. 4.4 Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee for the period from and including the first day of the Revolving Credit Commitment Period to the Revolving Credit Termination Date, computed at the rate per annum calculated as provided in the next succeeding sentence on the average daily amount of the Available RC Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Revolving Credit Termination Date or such earlier date as the Revolving Credit Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof. The rate per annum at which such commitment fee shall be calculated for each day during any period of computation shall be equal to (a) 3/8 of 1% per annum, if the ratio of Consolidated Funded Debt as of the last day in the period of four consecutive fiscal quarters of the Borrower most recently ended prior to such day for which financial statements have been delivered pursuant to Section 9.1(a) or (b) to Adjusted EBITDA for such period was less than 2.00 to 1, and (b) 1/2 of 1% per annum, if otherwise. The rate at which such commitment fee is calculated shall be adjusted on and as of the date on which the consolidated financial statements for each period of four consecutive fiscal quarters of the Borrower and its Subsidiaries are delivered pursuant to Section 9.1(a) or (b), provided, however, that if such financial statements are not delivered when required -25- pursuant to such Section, then until such financial statements are so delivered for purposes of calculating the rate at which such commitment fee is calculated the ratio of Consolidated Funded Debt to Adjusted EBITDA for such period shall be deemed to be greater than 2.00 to 1. 4.5 Termination or Reduction of Revolving Credit Commitments. The Borrower shall have the right, upon not less than five Business Days' notice to the Administrative Agent, to terminate the Revolving Credit Commitments or, from time to time, to reduce the amount of the Revolving Credit Commitments; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans made on the effective date thereof, the Aggregate Outstanding RC Extensions of Credit would exceed the Revolving Credit Commitments then in effect. Any such reduction shall be in an amount equal to $1,000,000 or a whole multiple thereof and shall reduce permanently the Revolving Credit Commitments then in effect. SECTION 5. LETTERS OF CREDIT 5.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Lender, in reliance on the agreements of the other Lenders set forth in Section 5.4(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Credit Commitment Period in such form as may be approved from time to time by the Issuing Lender; provided that the Issuing Lender shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (1) the L/C Obligations would exceed the L/C Commitment or (2) the aggregate Available RC Commitments would be less than zero. (b) Each Letter of Credit shall: (1) be denominated in Dollars and shall be a standby letter of credit issued to support obligations of the Borrower and/or the Subsidiaries, contingent or otherwise, in respect of insurance obligations, to workman's compensation board or similar Governmental Authority for workman's compensation liabilities of the Borrower and/or the Subsidiaries, and for such other purposes as may be approved by the Issuing Lender and the Administrative Agent (such consent not to be unreasonably withheld), and (2) expire no later than the earlier of (i) the Revolving Credit Termination Date and (ii) 364 days from the date of issuance (subject to renewal). (c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (d) The Issuing Lender shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. -26- 5.2 Procedure for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Lender issue a Letter of Credit by delivering to the Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of the Issuing Lender, and such other certificates, documents and other papers and information as the Issuing Lender may request. Upon receipt of any Application, the Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. 5.3 Fees, Commissions and Other Charges. (a) The Borrower shall pay to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, a letter of credit commission with respect to each Letter of Credit, computed for the period from the date of such payment to the date upon which the next such payment is due hereunder at a rate equal to the sum of the Applicable Margin for Eurodollar Loans then in effect and 0.25% per annum, calculated on the basis of the actual days elapsed over a 360 day year, of the aggregate amount available to be drawn under such Letter of Credit on the date on which such fee is calculated. One-quarter of one percent (.25%) of such fee shall be payable to the Issuing Lender, and the remainder of such fee shall be payable to the L/C Participants and the Issuing Lender to be shared ratably among them in accordance with their respective Revolving Credit Commitment Percentages. Such commissions shall be payable in arrears on each L/C Fee Payment Date to occur after the issuance of each Letter of Credit and shall be nonrefundable. (b) In addition to the foregoing fees and commissions, the Borrower shall pay or reimburse the Issuing Lender for such normal and customary costs and expenses as are incurred or charged by the Issuing Lender in issuing, effecting payment under, amending or otherwise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Lender and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 5.4 L/C Participations. (a) The Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Lender, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk, an undivided interest equal to such L/C Participant's Revolving Credit Commitment Percentage in the Issuing Lender's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with -27- the Issuing Lender that, if a draft is paid under any Letter of Credit for which the Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Lender upon demand at the Issuing Lender's address for notices specified herein an amount equal to such L/C Participant's Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) If any amount required to be paid by any L/C Participant to the Issuing Lender pursuant to Section 5.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Lender under any Letter of Credit is paid to the Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Lender on demand an amount equal to the product of (1) such amount, times (2) the daily average Federal funds rate, as quoted by the Issuing Lender, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Lender, times (3) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 5.4(a) is not in fact made available to the Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, the Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 5.4(a), the Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of collateral applied thereto by the Issuing Lender), or any payment of interest on account thereof, the Issuing Lender will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Lender shall be required to be returned by the Issuing Lender, such L/C Participant shall return to the Issuing Lender the portion thereof previously distributed by the Issuing Lender to it. 5.5 Reimbursement Obligations of the Borrower. (a) The Borrower agrees to reimburse the Issuing Lender on each date on which the Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Lender or, if later, on each date on which such draft is paid by the Issuing Lender for the amount of (1) such draft so paid and (2) any taxes and any reasonable fees, charges or other costs or expenses incurred by the Issuing Lender in connection with such payment at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by the Borrower under this Section from the date such amounts become payable (whether at stated -28- maturity, by acceleration or otherwise) until payment in full at the rate which would be payable on any outstanding Base Rate Loans which were then overdue. (c) Each drawing under any Letter of Credit shall constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 4.3 of Base Rate Loans in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing. 5.6 Obligations Absolute. (a) The Borrower's obligations under this Section 5 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Borrower may have or have had against the Issuing Lender or any beneficiary of a Letter of Credit. (b) The Borrower also agrees with the Issuing Lender that the Issuing Lender shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 5.5(a) shall not be affected by, among other things, (1) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (2) any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (3) any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. (c) The Issuing Lender shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Lender's gross negligence or willful misconduct. (d) The Borrower agrees that any action taken or omitted by the Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Issuing Lender to the Borrower. 5.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. 5.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 5, the provisions of this Section 5 shall apply. -29- SECTION 6. GENERAL PROVISIONS APPLICABLE TO LOANS 6.1 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), the principal of the Loans and any such overdue interest, commitment fee or other amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this Section plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand. 6.2 Conversion and Continuation Options. (a) The Borrower may elect from time to time to Convert Eurodollar Loans to Base Rate Loans, by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such Conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to Convert Base Rate Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of Conversion to Eurodollar Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurodollar Loans and Base Rate Loans may be Converted as provided herein, provided that (i) no Loan may be Converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined that such a Conversion is not appropriate, (ii) any such Conversion may only be made if, after giving effect thereto, Section 6.3 shall not have been contravened, and (iii) no Loan may be Converted into a Eurodollar Loan after the date that is one month prior to the Revolving Credit Termination Date (in the case of Conversions of Revolving Credit Loans) or the date of the final installment of principal (in the case of Conversions of Term Loans and Acquisition Loans). (b) Any Eurodollar Loan may be Continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest -30- Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan may be Continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Required Lenders have determined that such a Continuation is not appropriate, (ii) if, after giving effect thereto, Section 6.3 would be contravened or (iii) after the date that is one month prior to the Revolving Credit Termination Date (in the case of Continuations of Revolving Credit Loans) or the date of the final installment of principal (in the case of Continuations of Term Loans and Acquisition Loans) and provided, further, that if the Borrower shall fail to give such notice or if such Continuation is not permitted pursuant to this Section 6.2, such Loans shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period. 6.3 Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, in no event shall there be more than eight Tranches outstanding at any time. 6.4 Optional Prepayments. The Borrower may on the last day of any Interest Period with respect thereto, in the case of Eurodollar Loans or at any time and from time to time, in the case of Base Rate Loans, prepay the Loans, in whole or in part, without premium or penalty, upon at least three Business Days' irrevocable written notice to the Administrative Agent, specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, Base Rate Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of any such notice the Administrative Agent shall promptly notify each Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to Section 6.12 and, in the case of prepayments of the Term Loans and Acquisition Loans only, accrued interest to such date on the amount prepaid. Partial prepayments of the Term Loans and Acquisition Loans pursuant to this Section shall be applied to the installments of principal thereof in the inverse order of their scheduled maturities. Amounts prepaid on account of the Term Loans and Acquisition Loans may not be reborrowed. Partial prepayments pursuant to this Section shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. 6.5 Mandatory Prepayments. (a) Subject to Section 6.12, if on any date the Aggregate Outstanding RC Extensions of Credit exceeds the Revolving Credit Commitments, the Borrower shall immediately prepay the Revolving Credit Loans and cash collateralize or replace Letters of Credit in an amount equal to the amount of such excess. (b) Unless the Required Lenders otherwise agree, the Borrower shall prepay the Loans and reduce the Commitments in an amount equal to (i) 100% of the Net Proceeds of any sale or issuance of debt securities, and 75% of the Net Proceeds of any sale or issuance of any equity securities, in either case by the Borrower or any Subsidiary, whether in a public offering, a private placement or otherwise and (ii) 100% of the Net Proceeds of any sale, lease, assignment, exchange or other disposition for cash of any asset or group of assets not -31- made in the ordinary course of business (including, without limitation, but subject to clause (d) of this Section 6.5, insurance proceeds paid as a result of any destruction, casualty or taking of any property of the Borrower or any Subsidiary and the proceeds of key person life insurance required by the terms hereof), by the Borrower or any Subsidiary of the Borrower, in any such case no later than three Business Days following receipt by the Borrower or such Subsidiary of such proceeds, together with accrued interest to such date on the amount prepaid; provided that no such prepayment shall be required pursuant to subclause (ii) of this Section 6.5(b) unless the aggregate amount of such Net Proceeds received by the Borrower and its Subsidiaries and not previously applied to prepayment of the Loans and the reduction of the Commitments pursuant to Section 6.5(b)(ii) is at least $100,000 for any single disposition or $500,000 in the aggregate for all dispositions in any year. Amounts prepaid pursuant to this Section 6.5(b) shall be applied first to the Term Loans and the Acquisition Loans (or, if no Acquisition Loans are then outstanding, to the reduction of the Acquisition Credit Commitments), pro rata, until paid in full, and second to the reduction of the Revolving Credit Commitments and the prepayment of the Revolving Credit Loans and/or cash collateralization of the Letters of Credit. Prepayments of installments of Term Loans and Acquisition Loans shall be applied in the inverse order of maturity and such amounts so prepaid may not be reborrowed. Nothing in this Section 6.5(b) shall be construed to derogate any restriction or limitation contained in any Loan Document imposed on any transaction of the types described in this Section 6.5(b), including without limitation the restrictions set forth in Sections 10.2, 10.5 and 10.6 hereof. (c) On or before the earlier of the date on which the financial statements referred to in Section 9.1(a) are required to be delivered in respect of a fiscal year of the Borrower, beginning with the fiscal year ending August 31, 2000, and the date on which such financial statements are actually delivered, the Borrower shall prepay the Term Loans and Acquisition Loans and permanently reduce the Commitments in the amount of 50% of Excess Cash Flow for the fiscal year covered by such financial statements, together with accrued interest to such date on the amount prepaid. Amounts prepaid pursuant to this Section 6.5(c) shall be applied first to the Term Loans and the Acquisition Loans (or, if no Acquisition Loans are then outstanding, to the reduction of the Acquisition Credit Commitments), pro rata, until paid in full, and second to the reduction of the Revolving Credit Commitments and the prepayment of the Revolving Credit Loans and/or cash collateralization of the Letters of Credit. Prepayments of installments of Term Loans and Acquisition Loans shall be applied in the inverse order of maturity and such amounts so prepaid may not be reborrowed. (d) Net Proceeds received by the Borrower or any Subsidiary as proceeds of insurance upon any destruction, casualty or taking with respect to any property of the Borrower or any Subsidiary need not be applied as set forth in Section 6.5(b) to the extent that such Net Proceeds are applied to the repair, rebuilding or replacement of the property which was the subject of such destruction, casualty or taking within 60 days after the receipt of such Net Proceeds. If required by the Administrative Agent, such Net Proceeds shall be held in a special collateral account, subject to the sole dominion and control of the Administrative Agent and in a manner reasonably satisfactory to the Administrative Agent, as additional Collateral for the Obligations and the Subsidiaries Guarantee, until such time as it is to be applied to such repair, rebuilding or replacement. -32- 6.6 Computation of Interest and Fees. (a) Commitment fees and, whenever it is calculated on the basis of the Prime Rate, interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 6.1(a) or (c). 6.7 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the Borrower and the Lenders as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans Loan requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (y) any Loans that were to have been Converted on the first day of such Interest Period to Eurodollar Loans shall be Converted to or Continued as Base Rate Loans and (z) any outstanding Eurodollar Loans shall be Converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or Continued as such, nor shall the Borrower have the right to Convert Loans to Eurodollar Loans. 6.8 Pro Rata Treatment and Payments. (a) Each borrowing by the Borrower from the Lenders hereunder, each payment by the Borrower on account of any commitment fee hereunder and any reduction of the Term Loan Commitments, the Acquisition Loan Commitments or the Revolving Credit Commitments of the Lenders shall be made pro rata according to the respective Term Loan Commitment Percentages, Acquisition Loan -33- Commitment Percentages or Revolving Credit Commitment Percentages, as applicable, of the Lenders. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans, Acquisition Loans or the Revolving Credit Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans, Acquisition Loans or the Revolving Credit Loans, as applicable, then held by the Lenders. All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set-off or counterclaim and shall be made prior to 12:00 noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Administrative Agent's office specified in Section 13.2, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders promptly upon receipt in like funds as received. If any payment hereunder (other than payments on Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Lender prior to a borrowing that such Lender will not make the amount that would constitute its Term Loan Commitment Percentage, Acquisition Loan Commitment Percentage or Revolving Credit Commitment Percentage, as applicable, of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error. If such Lender's Term Loan Commitment Percentage, Acquisition Loan Commitment Percentage or Revolving Credit Commitment Percentage, as applicable, of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans hereunder, on demand, from the Borrower. 6.9 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurodollar Loans, Continue Eurodollar Loans as such and Convert Base Rate Loans to Eurodollar Loans shall forthwith be -34- canceled and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be Converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such Conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 6.12. 6.10 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Note or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 6.11 and changes in the rate of tax on the overall net income of such Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Lender any other condition; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, Converting into, Continuing or maintaining Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduced amount receivable. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, the Borrower shall promptly pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. -35- (c) If any Lender becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section submitted by such Lender to the Borrower (with a copy to the Administrative Agent) shall be conclusive in the absence of manifest error. The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 6.11 Taxes. (a) All payments made by the Borrower under this Agreement and any Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Administrative Agent or any Lender as a result of a present or former connection between the Administrative Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any Note). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Administrative Agent or any Lender hereunder or under any Note, the amounts so payable to the Administrative Agent or such Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of clause (b) of this Section. Whenever any Non-Excluded Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Lender as a result of any such failure. The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. (b) Each Lender that is not incorporated under the laws of the United States of America or a state thereof shall: (i) (A) if such Lender is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, deliver to the Borrower and the Administrative Agent (x) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224, or successor -36- applicable form, as the case may be, and (y) an Internal Revenue Service Form W-8 or W-9, or successor applicable form, as the case may be, or (B) if such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224, deliver (x) a certificate substantially in the form of Exhibit J (a "Non-Bank Status Certificate") and (y) two completed and signed copies of Internal Revenue Service Form W-8 or successor applicable form; (ii) deliver to the Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Administrative Agent; unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, (ii) in the case of a Non-Bank Status Certificate, that it is not a "bank" as such term is defined in Section 881(c)(3)(A) of the Code, and (iii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. Each Person that shall become a Lender or a Participant pursuant to Section 13.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this Section, provided that in the case of a Participant such Participant shall furnish all such required forms and statements to the Lender from which the related participation shall have been purchased. 6.12 Indemnity. The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, Conversion into or Continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, Converted or Continued, for the period from the date of such prepayment or of such failure to borrow, Convert or Continue to the last day of such Interest Period (or, in the case of a failure to borrow, Convert or Continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable -37- rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Bank on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurodollar market. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 6.13 Lending Offices; Change of Lending Office. (a) Loans of each Type made by any Lender shall be made and maintained at such Lender's Applicable Lending Office for Loans of such Type. (b) Each Lender agrees that if it makes any demand for payment under Section 6.10 or 6.11(a), or if any adoption or change of the type described in Section 6.9 shall occur with respect to it, it will use reasonable efforts (consistent with its internal policy and legal and regulatory restrictions and so long as such efforts would not be disadvantageous to it, as determined in its sole discretion) to designate a different lending office if the making of such a designation would reduce or obviate the need for the Borrower to make payments under Section 6.10 or 6.11(a), or would eliminate or reduce the effect of any adoption or change described in Section 6.9. SECTION 7. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent and the Lenders to enter into this Agreement and to make the Loans, the Borrower hereby represents and warrants to the Administrative Agent and each Lender that: 7.1 Financial Condition. (a) The consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at November 30, 1997 and the related consolidated statements of income and of cash flows for the fiscal year ended on such date, reported on by Ernst and Young, LLP, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at February 28, 1998 and the related unaudited consolidated statements of income and of cash flows for the three-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Borrower nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent -38- liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other financial derivative, which is not reflected in the foregoing statements or in the notes thereto. During the period from August 31, 1997 to and including the date hereof there has been no sale, transfer or other disposition by the Borrower or any of its consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person) material in relation to the consolidated financial condition of the Borrower and its consolidated Subsidiaries at August 31, 1997. (b) The pro forma consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at November 30, 1997, certified by a Responsible Officer of the Borrower (the "Pro Forma Balance Sheet"), a copy of which has been provided to the Administrative Agent and each Lender, is the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries adjusted to give effect (as if such events had occurred on such date) to (i) the Kwik Acquisition, (ii) the Refinancing, (iii) the making of the Term Loans, (iv) the making of the Revolving Credit Loans to be made on the Closing Date, (v) the application of the proceeds of the foregoing in accordance with the terms of the Loan Documents and (vi) the payment of all fees and expenses related to the foregoing transactions, as estimated in good faith as of the date of the Pro Forma Balance Sheet. The Pro Forma Balance Sheet, together with the notes thereto, presents fairly, on a pro forma basis, the consolidated financial position of the Borrower and its Subsidiaries as at November 30, 1997, assuming that the events specified in the preceding sentence had actually occurred on such date. (c) The operating forecast and cash flow projections of the Borrower and its consolidated Subsidiaries, copies of which have heretofore been furnished to the Lenders, have been prepared in good faith under the direction of a Responsible Officer of the Borrower, and in accordance with GAAP. The Borrower has no reason to believe that as of the date of delivery thereof such operating forecast and cash flow projections are materially incorrect or misleading in any material respect, or omit to state any material fact which would render them misleading in any material respect. 7.2 No Change. (a) Since August 31, 1997 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect, and (b) except as set forth on Schedule 7.2, during the period from August 31, 1997 to and including the date hereof no dividends or other distributions have been declared, paid or made upon the Capital Stock of the Borrower nor has any of the Capital Stock of the Borrower been redeemed, retired, purchased or otherwise acquired for value by the Borrower or any of its Subsidiaries. 7.3 Existence; Compliance with Law. Each of the Borrower and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the -39- business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, have a Material Adverse Effect. 7.4 Power; Authorization; Enforceable Obligations. The Borrower has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement and any Notes and to authorize the execution, delivery and performance of the Loan Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Loan Documents to which the Borrower is a party other than those consents, authorizations, notices and filings which have been obtained, are in full force and effect and are set forth on Schedule 7.4. This Agreement has been, and each other Loan Document to which it is a party will be, duly executed and delivered on behalf of the Borrower. This Agreement constitutes, and each other Loan Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 7.5 No Legal Bar. The execution, delivery and performance of the Loan Documents to which the Borrower is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Borrower or of any of its Subsidiaries and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation (other than Liens created by the Security Documents in favor of the Administrative Agent). 7.6 No Material Litigation. Except as set forth on Schedule 7.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) which could reasonably be expected to have a Material Adverse Effect. 7.7 No Default. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. -40- 7.8 Ownership of Property; Liens. Each of the Borrower and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 10.3. 7.9 Intellectual Property. The Borrower and each of its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business as currently conducted except for those the failure to own or license which could not have a Material Adverse Effect (the "Intellectual Property"). No claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any valid basis for any such claim. The use of such Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, do not have a Material Adverse Effect. 7.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries has a Material Adverse Effect. 7.11 Taxes. Each of the Borrower and its Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 7.12 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation G or Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect, or for any purpose which violates, or which would be inconsistent with, the provisions of the regulations of such Board of Governors. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in said Regulation G or Regulation U, as the case may be. 7.13 ERISA. Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five- -41- year period. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any Commonly Controlled Entity would become subject to any liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. 7.14 Investment Company Act; Other Regulations. The Borrower is not an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. The Borrower is not subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 7.15 Subsidiaries. Schedule 7.15 sets forth the name of each direct or indirect Subsidiary of the Borrower, its form of organization, its jurisdiction of organization, the total number of issued and outstanding shares or other interests of Capital Stock thereof, the classes and number of issued and outstanding shares or other interests of Capital Stock of each such class, the name of each holder of Capital Stock thereof and the number of shares or other interests of such Capital Stock held by each such holder and the percentage of all outstanding shares or other interests of such class of Capital Stock held by such holders. 7.16 Security Documents. (a) The provisions of each Security Document are effective to create in favor of the Administrative Agent for the ratable benefit of the Lenders a legal, valid and enforceable security interest in all right, title and interest of the Loan Party thereto in the "Collateral" described therein. (b) (i) When financing statements have been filed in the offices in the jurisdictions listed in Schedule 7.16, the Security Agreements shall each constitute a fully perfected first Lien on, and security interest in, all right, title and interest of each of the Borrower and its Subsidiaries in the "Collateral" described therein, which can be perfected by such filing. (ii) When certificates representing the Pledged Stock (as defined in the Pledge Agreements) are delivered to the Administrative Agent, together with stock powers endorsed in blank by a duly authorized officer of the pledgors thereof, the Pledge Agreements shall constitute a fully perfected first Lien on, and security interest in, all right, title and interest of the pledgors parties thereto in the "Collateral" described therein. (c) Neither the Borrower nor any Subsidiary owns any property, or has any interest in any property, that is not subject to a fully perfected first priority Lien on, or security interest in, such property in favor of the Administrative Agent, other than any such property having an aggregate fair market value at any one time not exceeding $250,000. -42- 7.17 Accuracy and Completeness of Information. (a) All factual information, reports and other papers and data with respect to the Loan Parties (other than projections) furnished, and all factual statements and representations made, to the Administrative Agent or the Lenders by a Loan Party, or on behalf of a Loan Party, were, at the time the same were so furnished or made, when taken together with all such other factual information, reports and other papers and data previously so furnished and all such other factual statements and representations previously so made, complete and correct in all material respects, to the extent necessary to give the Administrative Agent and the Lenders true and accurate knowledge of the subject matter thereof in all material respects, and did not, as of the date so furnished or made, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements contained therein not misleading in light of the circumstances in which the same were made. (b) All projections with respect to the Loan Parties furnished by or on behalf of a Loan Party to the Administrative Agent or the Lenders were prepared and presented in good faith by or on behalf of such Loan Party. No fact is known to a Loan Party which materially and adversely affects or in the future is reasonably likely (so far as such Loan Party can reasonably foresee) to have a Material Adverse Effect which has not been set forth in the financial statements referred to in Section 7.1 or in such information, reports, papers and data or otherwise disclosed in writing to the Administrative Agent or the Lenders prior to the Closing Date. 7.18 Labor Relations. No Loan Party is engaged in any unfair labor practice which could reasonably be expected to have a Material Adverse Effect. There is (a) no unfair labor practice compliant pending or, to the best knowledge of each Loan Party and each of the Subsidiaries, threatened against a Loan Party before the National Labor Relations Board which could reasonably be expected to have a Material Adverse Effect and no grievance or arbitration proceeding arising out of or under a collective bargaining agreement is so pending or threatened; (b) no strike, labor dispute, slowdown or stoppage pending or, to the best knowledge of each Loan Party, threatened against a Loan Party; and (c) no union representation question existing with respect to the employees of a Loan Party and no union organizing activities are taking place with respect to any thereof. 7.19 Insurance. Each Loan Party has, with respect to its properties and business, insurance covering the risks, in the amounts, with the deductible or other retention amounts, and with the carriers, listed on Schedule 7.19, which insurance meets the requirements of Section 9.5 hereof and Section 5(m) of the Security Agreements and Section 5 of the Mortgages as of the date hereof and the Closing Date. 7.20 Solvency. On the Closing Date, after giving effect to the consummation of the Kwik Acquisition and the Refinancing and to the incurrence of all indebtedness and obligations being incurred on or prior to such date in connection herewith and therewith, (i) the amount of the "present fair saleable value" of the assets of the Borrower and of the Borrower and its Subsidiaries, taken as a whole, will, as of such date, exceed the amount of all "liabilities of the Borrower and of the Borrower and its Subsidiaries, taken as a whole, -43- contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (ii) the present fair saleable value of the assets of the Borrower and of the Borrower and its Subsidiaries, taken as a whole, will, as of such date, be greater than the amount that will be required to pay the liabilities of the Borrower and of the Borrower and its Subsidiaries, taken as a whole, on their respective debts as such debts become absolute and matured, (iii) neither the Borrower nor the Borrower and its Subsidiaries, taken as a whole, will have, as of such date, an unreasonably small amount of capital with which to conduct their respective businesses, and (iv) each of the Borrower and the Borrower and its Subsidiaries, taken as a whole, will be able to pay their respective debts as they mature. For purposes of this Section 7.20, "debt" means "liability on a claim", "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, and (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. 7.21 Purpose of Loans. The proceeds of the Term Loans shall be used by the Borrower to finance in part the Kwik Acquisition and the Refinancing, and to pay fees and expenses incurred in connection therewith. The proceeds of the Revolving Credit Loans shall be used to finance in part the Refinancing, for the working capital requirements of the Borrower in the ordinary course of business and to pay fees and expenses incurred in connection herewith. The proceeds of the Acquisition Loans shall be used to finance in part the purchase price of Permitted Acquisitions, and to pay fees and expenses incurred in connection therewith. 7.22 Environmental Matters. Except as set forth on Schedule 7.22: (a) The facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could give rise to liability under, any Environmental Law except in either case insofar as such violation or liability, or any aggregation thereof, is not reasonably likely to result in the payment of a Material Environmental Amount. (b) The Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business") which could interfere with the continued operation of the Properties or impair the fair saleable value thereof. (c) Neither the Borrower nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the -44- Properties or the Business, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (d) Materials of Environmental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (f) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could [reasonably] give rise to liability under Environmental Laws. 7.23 Regulation H. No Mortgage or Leasehold Mortgage encumbers improved real property which is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968. 7.24 Existing Indebtedness. Schedule 10.2 is a true and complete list of all Indebtedness of the Borrower and its Subsidiaries as of the date hereof. Immediately after giving effect to the Refinancing, the only Indebtedness of the Borrower and its Subsidiaries will be that listed under Part B of Schedule 10.2, "Indebtedness to Remain Outstanding". 7.25 No Warehouse Inventory. No Inventory of any Loan Party is held in a warehouse operated by any Person. 7.26 Collateral Certificate. As of the Closing Date, the information in the Collateral Certificate provided by or on behalf of the Loan Parties is true and correct in all material respects. SECTION 8. CONDITIONS PRECEDENT 8.1 Conditions to Initial Loans. The agreement of each Lender to make the initial Loan requested to be made by it is subject to the satisfaction, immediately prior to or -45- concurrently with the making of such Loan on the Closing Date, of the following conditions precedent: (a) Loan Documents. The Administrative Agent shall have received: (i) this Agreement, executed and delivered by a duly authorized officer of the Borrower, with a counterpart for each Lender, (ii) for the account of each Lender having a Term Loan Commitment, a Term Note of the Borrower conforming to the requirements hereof and executed by a duly authorized officer of the Borrower, (iii) for the account of each Lender having an Acquisition Loan Commitment, an Acquisition Note of the Borrower conforming to the requirements hereof and executed by a duly authorized officer of the Borrower, (iv) for the account of each Lender having a Revolving Credit Commitment, a Revolving Credit Note of the Borrower conforming to the requirements hereof and executed by a duly authorized officer of the Borrower, (v) each of the Pledge Agreements, each executed and delivered by a duly authorized officer of the party thereto, with a counterpart or a conformed copy for each Lender, (vi) the Subsidiaries Guarantee, executed and delivered by a duly authorized officer of the parties thereto, with a counterpart or a conformed copy for each Lender, (vii) the Security Agreement, executed and delivered by a duly authorized officer of the party thereto, with a counterpart or a conformed copy for each Lender, (viii) the Mortgage, with respect to the property listed on Schedule 8.1, executed and delivered by a duly authorized officer of the party thereto, with a counterpart or a conformed copy for each Lender, (ix) a Blocked Account Agreement (as defined in the Security Agreement), executed and delivered by a duly authorized officer of the parties thereto, with respect to each Bank Account (as defined in the Security Agreement) of each Loan Party, (x) a certificate of insurance naming the Administrative Agent additional insured and loss payee with respect to the key person life insurance policy for William E. Dye and with respect to each other policy of insurance maintained by the Loan Parties, -46- (xi) the Intercreditor and Subordination Agreement executed and delivered by a duly authorized officer of each party thereto, with a counterpart or a conformed copy for each Lender, and (xii) the Post-Closing Agreement, executed and delivered by a duly authorized officer of the party thereto, with a counterpart or a conformed copy for each Lender. (b) Related Agreements. The Administrative Agent shall have received, with a copy for each Lender, true and correct copies, certified as to authenticity by the Borrower, of the Kwik Acquisition Documents and such other documents or instruments as may be reasonably requested by the Administrative Agent, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Borrower or its Subsidiaries may be a party. (c) Concurrent Transactions. (i) The Kwik Acquisition shall have been, or shall be concurrently with the making of the initial Loans, consummated for a total consideration, including fees and expenses thereof, not to exceed $27,000,000 pursuant to satisfactory documentation, without any amendment, modification or waiver thereof except with the consent of the Required Lenders, and the Administrative Agent shall have received evidence satisfactory to it to that effect. (ii) All amounts owing to the Existing Creditors under the Existing Financing Documents listed on Part A of Schedule 10.2, "Indebtedness to be Repaid" shall have been, or shall be concurrently with the making of the initial Loans, repaid in full, and any Liens created pursuant to such Existing Financing Documents shall have been or shall be, concurrently with the making of the initial Loans, released, and such Existing Financing Documents shall terminate and be of no further force and effect upon such repayment; in each case pursuant to such payout letters, Lien releases, termination statements, mortgage satisfactions and other documents as the Administrative Agent may require, each of which shall be in form and substance satisfactory to the Administrative Agent. (d) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, (ii) the borrowings contemplated hereunder and (iii) the granting by it of the Liens created pursuant to the Borrower Security Documents, certified by the Secretary or an Assistant Secretary of the Borrower as of the Closing Date, which certificate shall be in substantially in the form of Exhibit M-1 and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (e) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated the -47- Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document, which certificate shall be substantially in the form of Exhibit M-1, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. (f) Corporate Proceedings of Subsidiaries. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Subsidiary of the Borrower which is a party to a Loan Document authorizing (i) the execution, delivery and performance of the Loan Documents to which it is a party and (ii) the granting by it of the Liens created pursuant to the Security Documents to which it is a party, certified by the Secretary or an Assistant Secretary of each such Subsidiary as of the Closing Date, which certificate shall be substantially in the form of Exhibit M-2 and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (g) Subsidiary Incumbency Certificates. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Subsidiary of the Borrower which is a Loan Party, dated the Closing Date, as to the incumbency and signature of the officers of such Subsidiaries executing any Loan Document, satisfactory, which certificate shall be substantially in the form of Exhibit M-2, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Subsidiary. (h) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Loan Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party. (i) Good Standing Certificates. The Administrative Agent shall have received, with a copy for each Lender, certificates dated as of a recent date from the Secretary of State or other appropriate authority, evidencing the good standing of each Loan Party (i) in the jurisdiction of its organization and (ii) in each other jurisdiction where its ownership, lease or operation of property or the conduct of its business requires it to qualify as a foreign Person except, as to this subclause (ii), where the failure to so qualify could not have a Material Adverse Effect. (j) Consents, Licenses and Approvals. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of a Responsible Officer of the Borrower, substantially in the form of Exhibit O, (i) attaching copies of all consents, authorizations and filings referred to in Section 7.4, and (ii) stating that such consents, licenses and filings are in full force and effect, and each such consent, authorization and filing shall be in form and substance satisfactory to the Administrative Agent. -48- (k) Fees. The Administrative Agent shall have received the fees and other compensation, and reimbursement of expenses, to be received on the Closing Date referred to in the Fee Letter. (l) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender, the following executed legal opinions: (i) the executed legal opinion of Buchanan Ingersoll, special counsel to the Borrower and the other Loan Parties, substantially in the form of Exhibit K - 1; (ii) the executed legal opinion of Wilde Sapte, special United Kingdom counsel to Elements UK, substantially in the form of Exhibit K-2; and (iii) the executed legal opinion of Kantor, Davidoff, Wolfe, Mandelker & Kass, P.C., counsel to Kwik and its Subsidiaries in connection with the Kwik Acquisition, in form and substance satisfactory to the Administrative Agent, accompanied by a letter from such counsel authorizing the Lenders and the Administrative Agent to rely on such opinion as if it were addressed to the Lenders and the Administrative Agent as of the Closing Date. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (m) Pledged Stock; Stock Powers. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to each of the Pledge Agreements (limited to 2/3 of the shares of Elements UK), together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. Each Issuer referred to in each Pledge Agreement shall have delivered an acknowledgment of and consent to such Pledge Agreement, executed by a duly authorized officer of such Issuer, in substantially the form appended to such Pledge Agreement. All necessary action shall have been taken under English law to provide the Administrative Agent with a fixed charge over the shares of Elements UK to be pledged to the Administrative Agent. (n) Actions to Perfect Liens. The Administrative Agent shall have received evidence in form and substance satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on form UCC-1, necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Security Documents shall have been completed or will be completed promptly following the making of the initial Loans hereunder. (o) Lien Searches. The Administrative Agent shall have received the results of a recent search by a Person satisfactory to the Administrative Agent, of the Uniform Commercial Code, judgment and tax lien filings which may have been filed with -49- respect to personal property of the Borrower, and the results of such search shall be satisfactory to the Administrative Agent. (p) Insurance. The Administrative Agent shall have received evidence in form and substance satisfactory to it that all of the requirements of Section 9.5 hereof and Section 5(m) of the Security Agreements and Section 5 of the Mortgages shall have been satisfied; provided, however, that such evidence regarding the life insurance policy of William E. Dye shall be delivered pursuant to the terms set forth in the Post-Closing Agreement. (q) Historical Financial Information. The Lenders shall have received copies of the audited annual financial statements and quarterly financial statements for the Borrower and its Subsidiaries for (i) the fiscal years ended August 31, 1996 and 1997, and (ii) each fiscal quarter ended subsequent to August 31, 1997 for which financial statements are available and for Kwik and its Subsidiaries for (i) the fiscal year ended December 31, 1996 and 1997, and (ii) each fiscal quarter subsequent to December 31, 1997 for which financial statements are available. (r) Pro Forma Financial Information. The Lenders shall have received the Pro Forma Balance Sheet referenced in Section 7.1(b) above. (s) Maximum Expenses. The Administrative Agent shall have received evidence reasonably satisfactory to it that the aggregate fees and expenses incurred by the Borrower in connection with the Kwik Acquisition, the Refinancing and the financing thereof shall not exceed $2,000,000. (t) Landlord Agreements. The Administrative Agent shall have received a Landlord Agreement with respect to each of the Properties leased by any Loan Party as of the date set forth on the Post-Closing Agreement, duly executed and delivered on behalf of the lessor of such real property. (u) Senior Managers. The Lenders shall be satisfied that senior managers acceptable to them shall be available to manage the Borrower and its Subsidiaries and that all management incentive plans relating to the Borrower and its Subsidiaries are satisfactory to the Lenders. 8.2 Conditions to Acquisition Loans. The agreement of each Lender having an Acquisition Loan Commitment to make any Acquisition Loan requested to be made by it is subject to the satisfaction, immediately prior to or concurrently with the making of such Acquisition Loan, of the following conditions precedent: (a) Acquisition Documents. (i) The Administrative Agent shall have received, not later than five (5) Business Days prior to the proposed Borrowing Date for such Permitted Acquisition, drafts of each of the Acquisition Documents substantially in the form as will be executed at the closing of the Permitted Acquisition to be financed with such requested Acquisition Loans (and thereafter copies of -50- subsequent drafts marked to show changes) and on the Borrowing Date the Administrative Agent shall have received copies of the executed material Acquisition Documents certified as to authenticity by the Borrower on the date of borrowing, and such other documents or instruments as may be reasonably requested by the Administrative Agent, including, without limitation, a copy of any debt instrument, security agreement or other material contract to which the Borrower or any Subsidiary of the Borrower may be a party, and if requested by the Administrative Agent, Borrower shall use its best efforts to obtain reliance letters from counsel rendering opinions pursuant to such Acquisition Documents. (ii) The Administrative Agent shall have received a certificate from a duly authorized officer of each of the Loan Parties party to such Acquisition Documents and each of the Persons which are sellers in such Permitted Acquisition, addressed to the Administrative Agent and the Lenders, to the effect that none of the Acquisition Documents as delivered to the Administrative Agent has been amended, supplemented or otherwise modified except as approved by the Administrative Agent, that each of the representations and warranties set forth in such Acquisition Documents continue to be true, complete and correct in all material respects as of the Acquisition Closing Date as if made on and as of the Acquisition Closing Date, that the Administrative Agent and the Lenders may rely on such representations and warranties as if such representations and warranties were made to the Administrative Agent and Lenders directly, and that no default, breach or violation of any of the Acquisition Documents has occurred and is continuing. (b) Pro Forma Financial Condition. The Administrative Agent shall have received, with a copy for each Lender, not later than five Business Days prior to the proposed Borrowing Date of such Acquisition Loan, the certificate of a Responsible Officer of the Borrower, in form and substance satisfactory to the Lenders, referenced in clause (ii) of the proviso to the definition of "Permitted Acquisition". (c) Supplements to Loan Documents; Additional Loan Documents. The Administrative Agent shall have received: (i) if there shall be any new Subsidiary acquired or formed in connection with the proposed Permitted Acquisition to be financed with such Acquisition Loans, Supplements to the Borrower Pledge Agreement and/or Subsidiaries Pledge Agreement, substantially in the form of Exhibit A thereto, executed and delivered by a duly authorized officer of the party thereto, with a counterpart or a conformed copy for each Lender, (ii) if there shall be any new Subsidiary acquired or formed in connection with the proposed Permitted Acquisition to be financed with such Acquisition Loans, Supplements to the Subsidiaries Guarantee, substantially in the form of Exhibit A thereto, executed and delivered by a duly authorized officer of the party thereto, with a counterpart or a conformed copy for each Lender, -51- (iii) if there shall be any new Subsidiary acquired or formed in connection with the proposed Permitted Acquisition to be financed with such Acquisition Loans, Supplements to the Security Agreement, substantially in the form of Annex A thereto, executed and delivered by a duly authorized officer of the party thereto, with a counterpart or a conformed copy for each Lender, (iv) if the proposed Permitted Acquisition included the acquisition of any leasehold, fee, or other interests in real property and if requested by the Required Lenders, one or more Mortgages or Leasehold Mortgages on such real property, together with such title insurance, surveys, flood insurance, and legal opinions as the Required Lenders may request, and (d) Consummation of Acquisition. The Permitted Acquisition shall have been, or shall be concurrently with the making of such Acquisition Loans, consummated in accordance with the terms of the Acquisition Documents therefor, without any material amendment thereto or modification or waiver thereof, except with the consent of the Required Lenders and with notice of all amendments thereto and modifications and waivers thereof, and the Administrative Agent shall have received evidence satisfactory to it to that effect. (e) Corporate Proceedings of the Borrower. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of the Borrower authorizing (i) the execution, delivery and performance of the Acquisition Documents and the Loan Documents and supplements thereto to which it is a party being executed and delivered in connection with the Acquisition Loans requested in connection with such Permitted Acquisition and (ii) the granting by it of the Liens created pursuant to the Security Documents and supplements thereto being executed and delivered in connection with the Acquisition Loans requested in connection with such Permitted Acquisition, certified by the Secretary or an Assistant Secretary of the Borrower as of the Acquisition Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (f) Borrower Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of the Borrower, dated such Acquisition Closing Date, as to the incumbency and signature of the officers of the Borrower executing any Loan Document being executed and delivered in connection with the Acquisition Loans requested in connection with such Permitted Acquisition, satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Borrower. -52- (g) Corporate Proceedings of Subsidiaries. The Administrative Agent shall have received, with a counterpart for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors of each Subsidiary of the Borrower which is a party to an Acquisition Document authorizing (i) the execution, delivery and performance of the Acquisition Documents and the Loan Documents and supplements thereto to which it is a party being executed and delivered in connection with the Acquisition Loans requested in connection with such Permitted Acquisition and (ii) the granting by it of the Liens created pursuant to the Security Documents and supplements thereto being executed and delivered in connection with the Acquisition Loans requested in connection with such Permitted Acquisition, certified by the Secretary or an Assistant Secretary of such Subsidiary as of the Acquisition Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (h) Subsidiary Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Lender, a certificate of each Subsidiary of the Borrower, dated such Acquisition Closing Date, as to the incumbency and signature of the officers of such Subsidiary executing any Loan Document being executed and delivered in connection with the Acquisition Loans requested in connection with such Permitted Acquisition, satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of such Subsidiary. (i) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Lender, true and complete copies of the certificate of incorporation and by-laws of each Loan Party as to which such corporate documents were not theretofore delivered, certified as of the Acquisition Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of such Loan Party. (j) Good Standing Certificates. The Administrative Agent shall have received, with a copy for each Lender, certificates dated as of a recent date from the Secretary of State or other appropriate authority, evidencing the good standing of each Person becoming a Loan Party as of such Acquisition Closing Date (i) in the jurisdiction of its organization and (ii) in each other jurisdiction where its ownership, lease or operation of property or the conduct of its business requires it to qualify as a foreign Person except, as to this subclause (ii), where the failure to so qualify could not have a Material Adverse Effect. (k) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Lender, copies of such executed legal opinions with respect to, and to the extent delivered in connection with, such Permitted Acquisition, and the Borrower shall use its best efforts to obtain letters from counsel delivering such opinions permitting the Administrative Agent and the Lenders to rely thereon. -53- (l) Pledged Stock; Stock Powers; Pledged Interests. The Administrative Agent shall have received the certificates representing the shares or other equity interests of each Subsidiary formed or acquired in connection with such Permitted Acquisition or which otherwise shall not theretofore have been delivered to the Administrative Agent, which are to be pledged pursuant to the Pledge Agreements, together with an undated stock or transfer power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. Each such Subsidiary shall have delivered an acknowledgment of and consent to such respective Pledge Agreement, executed by a duly authorized officer of such Subsidiary, in substantially the form appended to such Pledge Agreement. (n) Actions to Perfect Liens. The Administrative Agent shall have received all financing statements on form UCC-1, and all other actions shall have been taken, in each case which are necessary or, in the opinion of the Administrative Agent, desirable to perfect the Liens created by the Security Documents as supplemented in connection with such Acquisition Loans shall have been completed or will be completed promptly following the making of the initial Loans hereunder. (o) Lien Searches. The Administrative Agent shall have received the results of a recent search by a Person satisfactory to the Administrative Agent, of the Uniform Commercial Code, judgment and tax lien filings which may have been filed with respect to personal property of each Subsidiary formed or acquired in connection with such Permitted Acquisition, the Borrower, to the extent that such Permitted Acquisition results in the Borrower owning property or conducting operations in new jurisdictions, and if requested by the Administrative Agent the seller of the property to be acquired in such Permitted Acquisition, and the results of such search shall be satisfactory to the Administrative Agent. (p) Chief Financial Officer. The Borrower shall have retained a Chief Financial Officer reasonably acceptable to the Administrative Agent. 8.3 Conditions to Each Loan. The agreement of each Lender to make any Loan requested to be made by it on any date (including, without limitation, its initial Loan) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by the Borrower and the other Loan Parties in or pursuant to the Loan Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date. (c) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions -54- contemplated by this Agreement, the other Loan Documents, the Kwik Acquisition Documents and any other Acquisition Documents shall be satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received such other documents and legal opinions in respect of any aspect or consequence of the transactions contemplated hereby or thereby as it shall reasonably request. Each borrowing by the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date thereof that the conditions contained in paragraphs (a) and (b) of this Section 8.3 have been satisfied. SECTION 9. AFFIRMATIVE COVENANTS The Borrower hereby agrees that, so long as any of the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 9.1 Financial Statements. Furnish to each Lender: (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Ernst & Young, LLP or other independent certified public accountants of nationally recognized standing; and (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Borrower and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) within 20 days after the end of each calendar month, (i) an accounts receivable aging schedule for the Borrower and its Subsidiaries on a consolidated basis and (ii) a schedule of each Domestic Subsidiary's billings for the immediately preceding calendar month (without giving effect to any intercompany adjustments); -55- all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 9.2 Certificates; Other Information. Furnish to each Lender: (a) concurrently with the delivery of the financial statements referred to in Section 9.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in Sections 9.1(a), (b) and (c), a certificate of a Responsible Officer (i) stating that, to the best of such Officer's knowledge, the Borrower during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to be observed, performed or satisfied by it, and that such Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) showing in detail the calculations supporting such Officer's certification of the Borrower's compliance with the requirements of Section 10.1(a) through 10.1(c); (c) not later than thirty days prior to the end of each fiscal year of the Borrower, a copy of the projections by the Borrower of the operating budget and cash flow budget of the Borrower and its Subsidiaries for the succeeding fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such projections have been prepared on the basis of sound financial planning practice and that such Officer has no reason to believe they are incorrect or misleading in any material respect; (d) within five days after the same are sent, copies of all financial statements and reports which the Borrower sends to its stockholders, and within five days after the same are filed, copies of all financial statements and reports which the Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; (e) during the month of March in each calendar year, a report of a reputable insurance broker with respect to the insurance maintained by the Borrower and its Subsidiaries in accordance with Section 9.5 of this Agreement and Section 5(m) of the Security Agreement and Section 5 of each Mortgage, and such supplemental reports with respect to insurance maintained by the Borrower and its Subsidiaries as the Administrative Agent may from time to time reasonably request; and (f) promptly, such additional financial and other information as any Lender may from time to time reasonably request. -56- 9.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 9.4 Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to Section 10.5; comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, have a Material Adverse Effect. 9.5 Maintenance of Property; Insurance. (a) Keep all property useful and necessary in its business in good working order and condition; maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business, and maintain key person life insurance for William E. Dye at not less than level of coverage maintained on the Closing Date, which insurance shall name the Administrative Agent as lender loss payee, in the case of property or casualty insurance, and as an additional insured, in the case of liability insurance; and furnish to each Lender, upon written request, full information as to the insurance carried. (b) on or before April 24, 1998, the Administrative Agent shall have received evidence of being named as loss payee on the life insurance policy of William E. Dye. 9.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants. 9.7 Notices. Promptly give notice to the Administrative Agent and each ------- Lender of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Borrower or any of its Subsidiaries and any -57- Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, would have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries in which the amount involved is $500,000 or more and not covered by insurance or in which injunctive or similar relief is sought; (d) the acquisition by any Loan Party of any property or interest in property (including, without limitation, real property), that is not subject to a perfected Lien in favor of the Administrative Agent pursuant to the Security Documents; (e) the occurrence of any transaction or occurrence referred to in Section 6.5(b), and the receipt of any Net Proceeds or any insurance proceeds as a result thereof (whether or not such Net Proceeds or proceeds are then required to be applied to the repayment of Loans and reduction of Revolving Credit Commitments as specified in Section 6.5(b)); (f) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan; and (g) any material adverse change in the business, operations, property, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower proposes to take with respect thereto. 9.8 Environmental Laws. (a) Comply with, and ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws. -58- 9.9 Additional Collateral; Additional Guarantors. (a) In the event that the Borrower or any Subsidiary acquires any property or interest in property (including, without limitation, real property) other than property made subject to a Lien permitted under Section 10.3(g), that is not subject to a perfected Lien in favor of the Administrative Agent pursuant to the Security Documents, the Borrower shall, and shall cause any such Subsidiary to, take such action (including, without limitation, the preparation and filing of mortgages or deeds of trust in form and substance satisfactory to the Administrative Agent) as the Administrative Agent shall request in order to create and/or perfect a Lien in favor of the Administrative Agent on such property. (b) In the event that the Borrower is permitted to acquire or form any additional Subsidiary in accordance with the terms of this Agreement and the other Loan Documents, such Subsidiary shall execute a guarantee and a security agreement, or supplements to the Subsidiaries Guarantee and the Subsidiaries Security Agreement, and the Borrower and/or any Subsidiary which is a holder of any Capital Stock of such Subsidiary shall execute such pledge agreements or supplements to the Pledge Agreements, each in form and substance satisfactory to the Administrative Agent, and shall take such other action as shall be necessary or advisable (including, without limitation, the execution of financing statements on form UCC-1) in order to perfect the Liens granted by such Subsidiary in favor of the Administrative Agent for the benefit of the Lenders and to effect and perfect the pledge of all of the Capital Stock of such Subsidiary in favor of the Administrative Agent for the benefit of the Lenders. Such Subsidiary shall thereupon become a Guarantor for all purposes under the Loan Documents, including, without limitation, Section 9.9(a) of this Agreement. The Administrative Agent shall be entitled to receive legal opinions of one or more counsel to the Borrower and such Subsidiary addressing such matters as the Administrative Agent or its counsel may reasonably request, including, without limitation, the enforceability of the guaranty and the security agreement to which such Subsidiary becomes a party and the pledge of the Capital Stock of such Subsidiary, and the creation, validity and perfection of the Liens so granted by such Subsidiary and the Borrower and/or other Subsidiaries to the Administrative Agent for the benefit of the Lenders. 9.10 Audit. Upon the request of the Administrative Agent, a field audit shall be conducted by CIBC or a Person satisfactory to the Administrative Agent, of the accounts receivable, inventory of the Borrower, Kwik and their respective Subsidiaries, which audit shall be in form and substance satisfactory to the Administrative Agent, and the results of such audit shall be delivered to the Administrative Agent; provided, that unless an Event of Default has occurred, the Administrative Agent may request no more than one such audit each calendar year. 9.11 Filing of Mortgage. In the event that the Borrower or any of its Subsidiaries is the beneficial owner of the real property located at 545 West 45th Street, New York, New York as of the date which is six months after the Closing Date, the Mortgage which has been executed and delivered to the Administrative Agent pursuant to Section 8.1(a)(viii) of this Credit Agreement shall be filed in the appropriate recording office, the Borrower shall cause to be provided title insurance of the type called for by Section 9.12 -59- hereof and a legal opinion with respect to the Mortgage acceptable to the Administrative Agent, and the Borrower shall pay all applicable recording taxes and other fees and expenses in connection therewith. 9.12 Filing of Leasehold Mortgage. In the event that the Borrower or any of its Subsidiaries enters into a lease of real property with a term greater than or equal to five years, the Borrower shall: (a) cause a Leasehold Mortgage, satisfactory to the Administrative Agent, to be executed by the parties to such lease for the benefit of the Administrative Agent and filed in the appropriate recording office; (b) provide to the Administrative Agent and the title insurance company issuing the policies referred to in 9.12(c) (the "Title Insurance Company") maps or plats of an as-built survey of the sites of the property covered by such Leasehold Mortgage certified to the Administrative Agent and the Title Insurance Company in a manner satisfactory to them, dated a date satisfactory to the Administrative Agent and the Title Insurance Company by an independent professional licensed land surveyor satisfactory to the Administrative Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1962, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (i) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (ii) the lines of streets abutting the sites and width thereof; (iii) all access and other easements appurtenant to the sites or necessary or desirable to use the sites; (iv) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (v) any encroachments on any adjoining property by the building structures and improvements on the sites; and (vi) if the site is described as being on a filed map, a legend relating the survey to said map; (c) provide to the Administrative Agent in respect of each parcel covered by each Leasehold Mortgage a mortgagee's title policy (or policies) or marked up unconditional binder for such insurance dated the Closing Date. Each such policy shall (i) be in an amount satisfactory to the Administrative Agent; (ii) be issued at ordinary rates; (iii) insure that the Leasehold Mortgages insured thereby creates a valid first Lien on such parcel (or such leasehold interest) free and clear of all defects and encumbrances, except such as may be approved by the Administrative Agent; (iv) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (v) be in the form of ALTA Loan Policy - - 1970 (Amended 10/17/70); (vi) contain such endorsements and affirmative coverage as the Administrative Agent may request and (vii) be issued by title companies satisfactory to the Administrative Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Administrative Agent). The Administrative Agent shall have received -60- evidence satisfactory to it that all premiums in respect of each such policy, and all charges for mortgage recording tax, if any, have been paid; (d) if requested by the Administrative Agent, provide (i) a policy of flood insurance which (A) covers any parcel of improved real property which is encumbered by any Leasehold Mortgage, (B) is written in an amount not less than the outstanding principal amount of the indebtedness secured by such Leasehold Mortgage which is reasonably allocable to such real property or the maximum limit of coverage made available with respect to the particular type of property under the Act, whichever is less, and (C) has a term ending not later than the maturity of the indebtedness secured by such Leasehold Mortgage and (ii) confirmation that the Company has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board of Governors of the Federal Reserve System; (e) provide a copy of all recorded documents referred to, or listed as exceptions to title in, the title policy or policies referred to in Section 9.12(c) and a copy, certified by such parties as the Administrative Agent may deem appropriate, of all other documents affecting the property covered by each Leasehold Mortgage; (f) pay all applicable recording taxes and other fees and expenses in connection therewith; and (g) deliver to the Administrative Agent a Landlord Agreement with respect to the real property encumbered by any such Leasehold Mortgage. 9.13 Execution of Leasehold Mortgages. On or before April 30, 1998 and in accordance with Section 9.12, the Borrower shall cause Leasehold Mortgages, substantially in the form of Exhibit G to be executed for each of the four leases of real property at 28th Street, New York, New York, as more fully described on Schedule 9.13. SECTION 10. NEGATIVE COVENANTS The Borrower hereby agrees that, so long as any of the Commitments remain in effect or any amount is owing to any Lender or the Administrative Agent hereunder or under any other Loan Document, the Borrower shall not, and (except with respect to Section 10.1) shall not permit any of its Subsidiaries to, directly or indirectly: 10.1 Financial Condition Covenants. (a) Maximum Leverage Ratio. Permit the ratio of Consolidated Funded Debt of the Borrower and its Subsidiaries as of the last day of any fiscal quarter of the Borrower ending during any test period set forth on the table below, to Adjusted EBITDA for the period of four consecutive fiscal quarters ending on the same day, to be greater than the ratio set forth opposite such test period below: -61- Four Fiscal Quarters Ending Ratio ------------------------------------ ----------------- 5/31/98 3.45 8/31/98 3.35 11/30/98 3.25 2/28/99 3.25 5/31/99 3.25 8/31/99 3.25 11/30/99 2.75 2/28/00 2.75 5/31/00 2.75 8/31/00 2.75 11/30/00 2.25 2/28/01 2.25 5/31/01 2.25 8/31/01 2.25 11/30/01 and thereafter 2.00 -62- (b) Minimum EBITDA. Permit the amount of Consolidated EBITDA for any period of four consecutive fiscal quarters of the Borrower ending during any test period set forth on the table below to be less than the amount set forth opposite such test period below: Four Fiscal Quarters Ending Amount ---------------------------------- --------------- 5/31/98 $11,000,000 8/31/98 11,000,000 11/30/98 11,500,000 2/28/99 11,500,000 5/31/99 11,500,000 8/31/99 11,500,000 11/30/99 12,500,000 2/28/00 12,500,000 5/31/00 12,500,000 8/31/00 12,500,000 11/30/00 14,000,000 2/28/01 14,000,000 5/31/01 14,000,000 8/31/01 14,000,000 11/30/01 15,000,000 2/28/02 15,000,000 5/31/02 15,000,000 8/31/02 15,000,000 11/30/02 16,500,000 2/28/03 16,500,000 -63- (c) Minimum Fixed Charge Coverage. Permit the ratio of Consolidated EBITDA of the Borrower and its Subsidiaries to Consolidated Fixed Charges for any test period of the Borrower set forth on the table below to be less than the ratio set forth opposite such test period below: Test Period Ratio ---------------------------- -------------- 3/1/98 - 5/31/98 1.50 3/1/98 - 8/31/98 1.30 3/1/98 - 11/30/98 1.20 3/1/98 - 2/28/99 1.20 (and for each period of four quarters thereafter) 10.2 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness of the Borrower under this Agreement; (b) Indebtedness of the Borrower to any Subsidiary Guarantor and of any Subsidiary Guarantor to the Borrower or any other Subsidiary Guarantor; (c) Indebtedness of the Borrower and any of its Subsidiaries incurred to finance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) in an aggregate principal amount not exceeding as to the Borrower and its Subsidiaries $7,500,000 at any time outstanding; (d) long-term Indebtedness for borrowed money of any Foreign Subsidiary, together with similar such Indebtedness listed on Schedule 10.2, not to exceed $3,000,000 at any one time outstanding; (e) short-term Indebtedness of Foreign Subsidiaries incurred for working capital purposes, together with similar such Indebtedness listed on Schedule 10.2, not to exceed $5,000,000 at any one time outstanding; (f) Indebtedness outstanding on the date hereof and listed on Part B of Schedule 10.2, and prior to the Closing Date only, Indebtedness outstanding on the date hereof and listed on Part A of Schedule 10.2; (g) Indebtedness of a corporation which becomes a Subsidiary after the date hereof, provided that (i) such Indebtedness existed at the time such corporation became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such corporation by the Borrower no Default or Event of Default shall have occurred and be continuing; -64- (h) additional Indebtedness not exceeding $500,000 in aggregate principal amount at any one time outstanding; (i) Indebtedness in an amount and having terms approved by the Required Lenders which is subordinated on terms approved by the Required Lenders in each case in their sole discretion; and (j) all Guarantee Obligations permitted under Section 10.4. 10.3 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of incorporation); (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or such Subsidiary; (f) Liens in existence on the date hereof listed on Schedule 10.3, securing Indebtedness permitted by Section 10.2(f), provided that no such Lien is spread to cover any additional property after the Closing Date and that the amount of Indebtedness secured thereby is not increased; (g) Liens securing Indebtedness of the Borrower and its Subsidiaries permitted by Section 10.2(c) incurred to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with -65- the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased and (iv) the principal amount of Indebtedness secured by any such Lien shall at no time exceed 90% of the original purchase price of such property of such property at the time it was acquired; (h) Liens on assets of any Foreign Subsidiary securing Indebtedness of such Foreign Subsidiary permitted by Sections 10.2(d) and (e); (i) Liens on the property or assets of a corporation which becomes a Subsidiary after the date hereof securing Indebtedness permitted by Section 10.2(g), provided that (i) such Liens existed at the time such corporation became a Subsidiary and were not created in anticipation thereof, (ii) any such Lien is not spread to cover any property or assets of such corporation after the time such corporation becomes a Subsidiary, and (iii) the amount of Indebtedness secured thereby is not increased; (j) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Borrower and all Subsidiaries) $100,000 in aggregate amount at any time outstanding; and (k) Liens created pursuant to the Security Documents. 10.4 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 10.4; (b) Guarantee Obligations incurred after the date hereof in an aggregate amount not to exceed (i) $100,000 at any one time outstanding for the Borrower and its Domestic Subsidiaries and (ii) $100,000 at any one time outstanding for the Borrower's Foreign Subsidiaries; and (c) the Guarantees. 10.5 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or make any material change in its present method of conducting business, except: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Domestic Subsidiaries of the Borrower (provided that the wholly owned Domestic Subsidiary or Domestic Subsidiaries shall be the continuing or surviving corporation); and -66- (b) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Domestic Subsidiary of the Borrower. 10.6 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), except as set forth on Schedule 10.6, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Borrower or any wholly owned Subsidiary except: (a) the sale or other disposition of obsolete or worn out property in the ordinary course of business; provided that the Net Proceeds of each such transaction are applied to the prepayment of the Loans as provided in Section 6.5(b); (b) the sale or other disposition of any property in the ordinary course of business, provided that (other than inventory) the aggregate book value of all assets so sold or disposed of in any period of twelve consecutive months shall not exceed 2 1/2% of consolidated total assets of the Borrower and its Subsidiaries as at the beginning of such twelve-month period; (c) the sale of inventory in the ordinary course of business; (d) the sale or discount without recourse of accounts receivable arising in the ordinary course of business in connection with the compromise or collection thereof; (e) as permitted by Section 10.5(b); and (f) the sale or disposition of any other property (not including Accounts) not in the ordinary course of business provided that all such sales shall not exceed, in the aggregate $100,000 and that the proceeds of such sales shall be subject to the mandatory prepayment requirements of Section 6.5 of this Agreement. 10.7 Limitation on Leases. Permit Consolidated Lease Expense (other than Capital Leases) for any fiscal year of the Borrower to exceed $1,500,000. 10.8 Limitation on Dividends. Declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Borrower or any warrants or options to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary [(such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "Restricted Payments"), except that: any -67- wholly-owned Subsidiary may declare and pay dividends to the Borrower or, in the case of any Subsidiary that is wholly-owned by any other Subsidiary, to such Subsidiary. 10.9 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure in respect of the purchase or other acquisition of fixed or capital assets (excluding any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations) except for expenditures in the ordinary course of business not exceeding, in the aggregate for the Borrower and its Subsidiaries during any of the fiscal years of the Borrower set forth below, the amount set forth opposite such fiscal year below: Fiscal Year Amount/Category of Expenditures Total Amount - ------------------ ------------------------------------- ------------------ 1998 Financing Leases - $2,250,000 $3,000,000 Other - 750,000 1999 Financing Leases - $2,250,000 $3,000,000 Other - 750,000 2000 Financing Leases - $2,625,000 $3,500,000 Other - 875,000 2001 Financing Leases - $3,000,000 $4,000,000 Other $1,000,000 2002 Financing Leases - $3,000,000 $4,000,000 Other - $1,000,000 provided, that up to 50% of any such amount if not so expended in the fiscal year for which it is permitted above, may be carried over for expenditure in the next following fiscal year (but not subsequent years). 10.10 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment in, any Person, except : (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) Permitted Acquisitions; (d) Capital Stock of any Subsidiary; -68- (e) loans and advances by the Borrower to its wholly-owned Subsidiaries and by such Subsidiaries to the Borrower not to exceed $200,000 in the aggregate at any one time outstanding; (f) investments by the Borrower in Subsidiary Guarantors and investments by such Subsidiary Guarantors in the Borrower and in other Subsidiary Guarantors; (g) loans and advances to employees of the Borrower or its Subsidiaries in the ordinary course of business, in an aggregate amount not to exceed $250,000 in the aggregate at any one time outstanding; and (h) intercompany loans listed on Schedule 10.2 Part B hereto. 10.11 Limitation on Optional Payments and Modifications of Debt Instruments. (a) Make any optional payment or prepayment on or redemption or purchase of any Indebtedness (other than the Loans), (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any such Indebtedness or any Acquisition Documents (other than any such amendment, modification or change which would extend the maturity or reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon), or (c) amend, modify or change the terms of, consent or otherwise agree to any amendment, modification or change to the terms of, or waive or otherwise relinquish any rights or causes of action under or arising out of, any Kwik Acquisition Document, or any Landlord Agreement. 10.12 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of the Borrower's or such Subsidiary's business and (c) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not an Affiliate. 10.13 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. 10.14 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Borrower to end on a day other than August 31. 10.15 Limitation on Negative Pledge Clauses. Enter into with any Person any agreement, other than (a) this Agreement and (b) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby), which -69- prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 10.16 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or which are directly related thereto. 10.17 Governing Documents. Amend its certificate of incorporation (except to increase the number of authorized shares of common stock), partnership agreement or other Governing Documents, without the prior written consent of the Required Lenders, which shall not be unreasonably withheld or delayed. 10.18 Limitation on Subsidiary Formation. Form any Subsidiaries unless, immediately upon the formation of such Subsidiary, all requirements of Section 9.9 shall have been satisfied. 10.19 Limitation on Securities Issuances. (A) Permit any Subsidiary to issue any shares of Capital Stock that are not "certificated securities" (as defined in ss. 8-102 of the Uniform Commercial Code as in effect in the State of New York on the date hereof) and are not pledged to the Administrative Agent pursuant to a Pledge Agreement or (B) issue, or permit any Subsidiary to issue, any shares of preferred stock. 10.20 Inventory. No inventory of any Loan Party shall be held in a warehouse unless a warehouse bailment agreement form satisfactory to the Administrative Agent has been entered into by the Loan Party intending to place such inventory in a warehouse, the Person operating such warehouse and the Administrative Agent. SECTION 11. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Borrower shall fail to pay any principal of any Loan when due in accordance with the terms thereof or hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under the other Loan Documents or the Fee Letter, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by the Borrower or any other Loan Party herein or in any other Loan Document or which is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or -70- (c) The Borrower or any other Loan Party shall default in the observance or performance of any agreement contained in Section 10, Section 5 of the Pledge Agreement (U.S.), or Sections 5(h), 5(i), 5(j), 5(k), 5(p), 5(s) or 5(t) of the Security Agreement]; or (d) The Borrower or any other Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days; or (e) The Borrower or any of its Subsidiaries shall (i) default in any payment of principal of or interest of any Indebtedness (other than the Loans) or in the payment of any Guarantee Obligation, beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created, if the aggregate amount of the Indebtedness and/or Guarantee Obligations in respect of which such default or defaults shall have occurred is at least $500,000; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or (f) (i) The Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any action in -71- furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, involve an aggregate amount in excess of $100,000; or (h) One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $100,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (i) (i) Any of the Security Documents shall cease, for any reason, to be in full force and effect, or the Borrower or any other Loan Party which is a party to any of the Security Documents shall so assert or (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) Any Guarantee shall cease, for any reason, to be in full force and effect or any Guarantor shall so assert; or (k) William E. Dye shall cease to maintain beneficial ownership of 10% or more of the outstanding class of Capital Stock having ordinary voting power in the election of directors of the Borrower, unless such cessation is the result of a testamentary disposition upon his death; or (l) (i) Any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) other than William E. Dye or Richard J. Sirota (A) shall have acquired beneficial ownership of 20% or more of any -72- outstanding class of Capital Stock having ordinary voting power in the election of directors of the Borrower or (B) shall obtain the power (whether or not exercised) to elect a majority of the Borrower's directors or (ii) the Board of Directors of the Borrower shall not consist of a majority of Continuing Directors; "Continuing Directors" shall mean the directors of the Borrower on the Closing Date and each other director, if such other director's nomination for election to the Board of Directors of the Borrower is recommended by a majority of the then Continuing Directors, provided that notwithstanding anything in this Section 11 to the contrary, the transfer of Capital Stock owned by either William E. Dye or Richard J. Sirota upon their death shall not be deemed an Event of Default hereunder; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) of this Section with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to the preceding paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Lender and the L/C Participants, a security interest in such cash collateral to secure all obligations of the Borrower under this Agreement and the other Loan Documents. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the Notes. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the Notes shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower. The Borrower shall execute and deliver to the Administrative Agent, for the account of the Issuing Lender and the L/C Participants, such further documents and instruments as the Administrative Agent may request to evidence the creation and perfection of the within security interest in such cash collateral account. -73- Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 12. THE ADMINISTRATIVE AGENT 12.1 Appointment. Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. 12.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 12.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of the Borrower to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower. 12.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon -74- advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any other Loan Party), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. 12.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 12.6 Non-Reliance on Administrative Agent and Other Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower or any other Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly required to be furnished -75- to the Lenders by the Administrative Agent hereunder or under the other Loan Documents, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Borrower or any other Loan Party which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 12.7 Indemnification. The Lenders agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Credit Exposure Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder. 12.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and the other Loan Parties as though the Administrative Agent were not the Administrative Agent hereunder and under the other Loan Documents. With respect to the Loans made by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms "Lender" and "Lenders" shall include the Administrative Agent in its individual capacity. 12.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Lenders. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be approved by the Borrower, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions -76- of this Section 12 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. SECTION 13. MISCELLANEOUS 13.1 Amendments and Waivers. Neither this Agreement nor any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 13.1. The Required Lenders may, or, with the written consent of the Required Lenders, the Administrative Agent may, from time to time, (a) enter into with the Borrower written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (i) reduce the amount or extend the scheduled date of maturity of any Loan or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the aggregate amount or extend the expiration date of any Lender's Commitments, in each case without the consent of each Lender affected thereby, or (ii) amend, modify or waive any provision of this Section 13.1 or reduce the percentage specified in the definition of Required Lenders, or consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents or release all or substantially all of the Collateral or release all or substantially all of the Guarantors from their obligations under the Guarantees, in each case without the written consent of each of the Lenders, or (iii) amend, modify or waive any provision of Section 12 without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Borrower, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, the Borrower, the Lenders and the Administrative Agent shall be restored to their former positions and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 13.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered, (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid, or (c) in the case of delivery by facsimile transmission, when sent and receipt has been electronically confirmed, addressed as follows in the case of the Borrower and the Administrative Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto: -77- The Borrower: Unidigital Inc. 545 West 45th Street New York, New York 10036 Attention: William Dye Fax: (212) 262-1830 The Administrative Agent: Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, New York 10017 Attention: William Koslo Fax: 212/856-3991 Telephone: 212/856-3545 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to Section 2.3, 3.3, 3.5, 4.3, 4.5, 6.2, 6.4 or 6.8(b) shall not be effective until received. 13.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 13.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 13.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay or reimburse the Administrative Agent for all its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Lender and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be -78- payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold each Lender and the Administrative Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents, the Kwik Acquisition Documents, the Kwik Acquisition, any Acquisition Documents, any Permitted Acquisition, or the use of the proceeds of the Loans in connection with the Kwik Acquisition or any Permitted Acquisition and any such other documents, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), provided, that the Borrower shall have no obligation hereunder to the Administrative Agent or any Lender with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of the Administrative Agent or any such Lender or (ii) legal proceedings commenced against the Administrative Agent or any such Lender by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such. The agreements in this Section shall survive repayment of the Loans and all other amounts payable hereunder. 13.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lenders, the Administrative Agent and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender. (b) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Loan Documents. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Loan Documents. The Borrower agrees that if amounts outstanding under this Agreement are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement, provided that, in purchasing such participating interest, -79- such Participant shall be deemed to have agreed to share with the Lenders the proceeds thereof as provided in Section 13.7(a) as fully as if it were a Lender hereunder. The Borrower also agrees that each Participant shall be entitled to the benefits of Sections 6.10, 6.11, and 6.12 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Lender; provided that, in the case of Section 6.11, such Participant shall have complied with the requirements of said Section and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such Section than the transferor Lender would have been entitled to receive in respect of the amount of the participation transferred by such transferor Lender to such Participant had no such transfer occurred. (c) Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to any Lender or any affiliate thereof or, with the consent of the Administrative Agent and the Issuing Lender (which in each case shall not be unreasonably withheld), to an additional bank or financial institution ("an Assignee") all or any part of its rights and obligations under this Agreement and the other Loan Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit L, with appropriate completions (an "Assignment and Acceptance"), executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Administrative Agent and the Issuing Lender) and delivered to the Administrative Agent for its acceptance and recording in the Register, provided that, in the case of any such assignment to an additional bank or financial institution, the sum of the aggregate principal amount of the Loans, the aggregate amount of the L/C Obligations and the aggregate amount of the unused Revolving Credit Commitment being assigned are not less than $5,000,000 (or such lesser amount as may be agreed to by the Borrower and the Administrative Agent). Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with Commitments as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding any provision of this paragraph (c) and paragraph (e) of this Section, the consent of the Borrower shall not be required, and, unless requested by the Assignee and/or the assigning Lender, new Notes shall not be required to be executed and delivered by the Borrower, for any assignment which occurs at any time when any of the events described in Section 11(f) shall have occurred and be continuing. (d) The Administrative Agent, on behalf of the Borrower, shall maintain at the address of the Administrative Agent referred to in Section 13.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders -80- may (and, in the case of any Loan or other obligation hereunder not evidenced by a Note, shall) treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Loan Documents. Any assignment of any Loan or other obligation hereunder not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Administrative Agent and the Issuing Lender) together with payment to the Administrative Agent of a registration and processing fee of $3,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Borrower. (f) The Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of Section 13.15, any and all financial information in such Lender's possession concerning the Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Borrower in connection with such Lender's credit evaluation of the Borrower and its Affiliates prior to becoming a party to this Agreement. (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this Section concerning assignments of Loans and Notes relate only to absolute assignments and that such provisions do not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law. 13.7 Adjustments; Set-off. (a) If any Lender (a "benefited Lender") shall at any time receive any payment of all or part of its Loans, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 11(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of such other Lender's Loans, or interest thereon, such benefited Lender shall purchase for cash from the other Lenders a participating interest in such portion of each such other Lender's Loan, or shall provide such other Lenders with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefited Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefited Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Borrower agrees that each Lender so purchasing a portion of another Lender's Loan may exercise all rights of payment -81- (including, without limitation, rights of set-off) with respect to such portion as fully as if such Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set-off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 13.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission of signature pages hereto), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent. 13.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 13.10 Integration. This Agreement and the other Loan Documents represent the agreement of the Borrower, the Administrative Agent and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Lender relative to the subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. 13.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 13.12 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the -82- United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 13.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 13.13 Acknowledgments. The Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Borrower and the other Loan Parties, on one hand, and Administrative Agent and Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders. 13.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 13.15 Confidentiality. Each Lender agrees to keep confidential all non-public information provided to it by the Borrower pursuant to this Agreement that is designated by the -83- Borrower in writing as confidential; provided that nothing herein shall prevent any Lender from disclosing any such information (i) to the Administrative Agent or any other Lender, (ii) to any Transferee which receives such information having been made aware of the confidential nature thereof, (iii) to its employees, directors, agents, attorneys, accountants and other professional advisors, (iv) upon the request or demand of any examiner or other Governmental Authority having jurisdiction over such Lender, (v) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (vi) which has been publicly disclosed other than in breach of this Agreement, or (vii) in connection with the exercise of any remedy hereunder. [Signature Pages Follow] -84- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. UNIDIGITAL INC. By:/s/ William E. Dye ------------------------------------- Title: Chief Executive Officer CANADIAN IMPERIAL BANK OF COMMERCE, as Administrative Agent and as a Lender By:/s/ William Koslo ------------------------------------- Title: Executive Director Credit Agreement: Signature Page EX-10.9 11 TERM NOTE TERM NOTE $25,000,000 New York, New York March 24, 1998 FOR VALUE RECEIVED, the undersigned UNIDIGITAL INC., a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of CANADIAN IMPERIAL BANK OF COMMERCE (the "Lender"), at the office of Canadian Imperial Bank of Commerce located at 425 Lexington Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of TWENTY-FIVE MILLION DOLLARS ($25,000,000). The principal amount of this Term Note shall be payable in installments in amounts equal to the Lender's Term Loan Commitment Percentage of the amounts set forth on Schedule 2.2 to the Credit Agreement. Such installments shall be payable on the dates set forth on Schedule 2.2 to the Credit Agreement. The undersigned further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time from the date hereof at the rates per annum and on the dates as provided in Section 6.1 of the Credit Agreement referred to below, until paid in full (both before and after judgment). The holder of this Term Note is authorized to, and so long as it holds this Term Note shall, record the date, Type and amount of each Term Loan made by the Lender pursuant to Section 2.1 of the Credit Agreement, each Continuation thereof and each Conversion of all or a portion thereof to another Type pursuant to Section 6.2 of the Credit Agreement, the date and amount of each payment or prepayment of principal thereof and, in the case of Eurodollar Loans, the length of each Interest Period and the Eurodollar Rate with respect thereto, on the schedules annexed hereto and constituting a part hereof, or on a continuation thereof which shall be annexed hereto and constitute a part hereof, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided that failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of the Borrower under this Term Note or under the Credit Agreement. This Term Note is one of the Term Notes referred to in the Credit Agreement, dated as of March 24, 1998 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time parties thereto (the "Lenders") and Canadian Imperial Bank of Commerce, as Administrative Agent for the Lenders thereunder, is entitled to the benefits thereof, is secured as provided therein and is subject to optional and mandatory prepayment in whole or in part as provided therein. Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. The Borrower expressly waives diligence, presentment, protest, demand and other notices of any kind. This Term Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. UNIDIGITAL INC. By /s/ William E. Dye --------------------------------- Name: William E. Dye Title: Chief Executive Officer
SCHEDULE A to Term Note --------- LOANS, CONVERSIONS AND PAYMENTS OF BASE RATE LOANS Amount of Amount of Base Rate Eurodollar Loans Unpaid Amount Loans Converted Principal of Base Converted into Amount of Balance of Rate into Base Eurodollar Principal Base Rate Notation Date Loan Rate Loans Loans Repaid Loans Made by - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- ------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- ------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- --------
SCHEDULE B to Term Note --------- LOANS, CONVERSIONS AND PAYMENTS OF EURODOLLAR LOANS Amount of Euro- Amount of dollar Amount of Interest Eurodollar Loan Base Rate Period and Loans Unpaid (and Loans Eurodollar Converted Amount Principal Contin- Converted Rate with into Base of Prin- Balance of uations into Euro- Respect Rate cipal Eurodollar Notation Date Thereof) dollar Loans Thereto Loans Repaid Loans Made by - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- --------
EX-10.10 12 ACQUISITION NOTE ACQUISITION NOTE $5,000,000 New York, New York March 24, 1998 FOR VALUE RECEIVED, the undersigned UNIDIGITAL INC., a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of CANADIAN IMPERIAL BANK OF COMMERCE (the "Lender"), at the office of Canadian Imperial Bank of Commerce located at 425 Lexington Avenue, New York, New York 10017 in lawful money of the United States of America and in immediately available funds, the principal amount of the lesser of (a) FIVE MILLION DOLLARS ($5,000,000) and (b) the aggregate unpaid principal amount of all Acquisition Loans made by the Lender to the undersigned pursuant to Section 3.1 of the Credit Agreement referred to below. Such installments shall be payable on the dates and in the amounts set forth on Schedule 3.2 to the Credit Agreement. The undersigned further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time from the date hereof at the rates per annum and on the dates as provided in Section 6.1 of the Credit Agreement referred to below, until paid in full (both before and after judgment). The holder of this Acquisition Note is authorized to, and so long as it holds this Note shall, record the date, Type and amount of each Acquisition Loan made by the Lender pursuant to Section 3.1 of the Credit Agreement, each Continuation thereof and each Conversion of all or a portion thereof to another Type pursuant to Section 6.2 of the Credit Agreement, the date and amount of each payment or prepayment of principal thereof and, in the case of Eurodollar Loans, the length of each Interest Period and the Eurodollar Rate with respect thereto, on the schedules annexed hereto and constituting a part hereof, or on a continuation thereof which shall be annexed hereto and constitute a part hereof, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided that failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of the Borrower under this Acquisition Note or under the Credit Agreement. This Acquisition Note is one of the Acquisition Notes referred to in the Credit Agreement, dated as of March 24, 1998 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time parties thereto (the "Lenders") and Canadian Imperial Bank of Commerce, as Administrative Agent for the Lenders thereunder, is entitled to the benefits thereof, is secured as provided therein and is subject to optional and mandatory prepayment in whole or in part as provided therein. Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. The Borrower expressly waives diligence, presentment, protest, demand and other notices of any kind. This Acquisition Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. UNIDIGITAL INC. By/s/ William E. Dye --------------------------------- Name: William E. Dye Title: Chief Executive Officer SCHEDULE A to Acquisition Note ---------------- LOANS, CONVERSIONS AND PAYMENTS OF BASE RATE LOANS
Amount of Amount of Base Rate Eurodollar Loans Unpaid Amount Loans Converted Principal of Base Converted into Amount of Balance of Rate into Base Eurodollar Principal Base Rate Notation Date Loan Rate Loans Loans Repaid Loans Made by - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- ------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- ------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- --------
SCHEDULE B to Acquisition Note ---------------- LOANS, CONVERSIONS AND PAYMENTS OF EURODOLLAR LOANS
Amount of Euro- Amount of dollar Amount of Interest Eurodollar Loan Base Rate Period and Loans Unpaid (and Loans Eurodollar Converted Amount Principal Contin- Converted Rate with into Base of Prin- Balance of uations into Euro- Respect Rate cipal Eurodollar Notation Date Thereof) dollar Loans Thereto Loans Repaid Loans Made by - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- --------
EX-10.11 13 REVOLVING CREDIT NOTE REVOLVING CREDIT NOTE $10,000,000 New York, New York March 24, 1998 FOR VALUE RECEIVED, the undersigned UNIDIGITAL INC., a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay on the Revolving Credit Termination Date to the order of CANADIAN IMPERIAL BANK OF COMMERCE (the "Lender"), at the office of Canadian Imperial Bank of Commerce located at 425 Lexington Avenue, New York, New York 10017, in lawful money of the United States of America and in immediately available funds, the principal amount of the lesser of (a) TEN MILLION DOLLARS ($10,000,000) and (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by the Lender to the undersigned pursuant to Section 4.1 of the Credit Agreement referred to below. The undersigned further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time from the date hereof at the rates per annum and on the dates as provided in Section 4.1 of the Credit Agreement referred to below, until paid in full (both before and after judgment). The holder of this Revolving Credit Note is authorized to, and so long as it holds this Note shall, record the date, Type and amount of each Revolving Credit Loan made by the Lender pursuant to Section 4.1 of the Credit Agreement, each Continuation thereof and each Conversion of all or a portion thereof to another Type pursuant to Section 6.2 of the Credit Agreement, the date and amount of each payment or prepayment of principal thereof and, in the case of Eurodollar Loans, the length of each Interest Period and the Eurodollar Rate with respect thereto, on the schedules annexed hereto and constituting a part hereof, or on a continuation thereof which shall be annexed hereto and constitute a part hereof, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided that failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of the Borrower under this Revolving Credit Note or under the Credit Agreement. This Revolving Credit Note is one of the Revolving Credit Notes referred to in the Credit Agreement, dated as of March 24, 1998 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the lenders from time to time parties thereto (the "Lenders") and Canadian Imperial Bank of Commerce, as Administrative Agent for the Lenders thereunder, is entitled to the benefits thereof, is secured as provided therein and is subject to optional and mandatory prepayment in whole or in part as provided therein. Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires. Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided therein. The Borrower expressly waives diligence, presentment, protest, demand and other notices of any kind. This Revolving Credit Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. UNIDIGITAL INC. By /s/ William E. Dye --------------------------------- Name: William E. Dye Title: Chief Executive Officer SCHEDULE A to Revolving Credit Note --------------------- LOANS, CONVERSIONS AND PAYMENTS OF BASE RATE LOANS
Amount of Amount of Base Rate Eurodollar Loans Unpaid Amount Loans Converted Principal of Base Converted into Amount of Balance of Rate into Base Eurodollar Principal Base Rate Notation Date Loan Rate Loans Loans Repaid Loans Made by - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- ------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- ------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- -------- - ---- ------- ---------- ---------- --------- ---------- --------
SCHEDULE B to Revolving Credit Note --------------------- LOANS, CONVERSIONS AND PAYMENTS OF EURODOLLAR LOANS
Amount of Euro- Amount of dollar Amount of Interest Eurodollar Loan Base Rate Period and Loans Unpaid (and Loans Eurodollar Converted Amount Principal Contin- Converted Rate with into Base of Prin- Balance of uations into Euro- Respect Rate cipal Eurodollar Notation Date Thereof) dollar Loans Thereto Loans Repaid Loans Made by - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- -------- - ---- -------- ------------ --------- --------- ------- ----------- --------
EX-10.12 14 STOCK PLEDGE AGREEMENT (U.S.) STOCK PLEDGE AGREEMENT (U.S.) STOCK PLEDGE AGREEMENT, dated as of March 24, 1998, made by UNIDIGITAL INC., a Delaware corporation (the "Borrower"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE, as administrative agent (in such capacity, the "Administrative Agent") for the lenders (the "Lenders") parties to the Credit Agreement referred to below. RECITALS Pursuant to the Credit Agreement, dated as of March 24, 1998 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders, the Issuing Lender and the Administrative Agent, the Lenders have severally agreed to make loans to and the Issuing Lender has agreed to issue letters of credit for the account of the Borrower upon the terms and subject to the conditions set forth therein, such loans to be evidenced by the Notes issued by the Borrower thereunder. It is a condition precedent to the obligation of the Lenders to make their respective loans to the Borrower, and of the Issuing Lender to issue its letters of credit, under the Credit Agreement that the Borrower shall have executed and delivered this Pledge Agreement to the Administrative Agent for the ratable benefit of the Lenders and the Issuing Lender. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective loans to the Borrower, and the Issuing Lender to issue its letters of credit, under the Credit Agreement, the Borrower hereby agrees with the Administrative Agent, for the ratable benefit of the Lenders, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms which are defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (b) The following terms shall have the following meanings: "Additional Pledged Stock" shall have the meaning provided in any supplement to this Pledge Agreement delivered pursuant to Section 5(e) hereof. "Code" means the Uniform Commercial Code from time to time in effect in the State of New York. "Collateral" means the Pledged Stock and all Proceeds. "Collateral Account" means any account established to hold money Proceeds, maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Lenders only as provided in Section 8 of this Pledge Agreement. "Hedge Agreement": as to any Person, any swap, cap, collar or similar arrangement entered into by such Person providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Issuer" means each of the corporations identified on Schedule I as an issuer of Pledged Stock. "Pledge Agreement" means this Stock Pledge Agreement, as amended, supplemented or otherwise modified from time to time. "Pledged Stock" means the shares of capital stock listed on Schedule I hereto, together with all stock certificates, options or rights of any nature whatsoever which may be issued or granted by any of the Issuers to the Borrower in respect of the Pledged Stock while this Pledge Agreement is in effect, together with any Additional Pledged Stock at any time pledged pursuant to Section 5(e). "Proceeds" means all "proceeds" as such term is defined in Section 9-306(1) of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, shall include, without limitation, all dividends or other income from the Pledged Stock, collections thereon or distributions with respect thereto. "Secured Obligations" is the collective reference to (a) the Obligations, and (b) all obligations and liabilities of the Borrower to the Administrative Agent and the Lenders, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with any Hedge Agreement entered into by the Borrower with any Lender and any other document made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of such Hedge Agreement or other documents) or otherwise. "Securities Act" means the Securities Act of 1933, as amended. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not to any particular provision of this Pledge Agreement, and Section, Schedule. Annex, and Exhibit references are to this Pledge Agreement unless otherwise specified. The meanings - 2 - given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Pledge; Grant of Security Interest. The Borrower hereby delivers to the Administrative Agent all the Pledged Stock and hereby grants to the Administrative Agent, for the ratable benefit of the Lenders, a first security interest in the Collateral, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations. 3. Stock Powers. Concurrently with the delivery to the Administrative Agent of each certificate representing one or more shares of the Pledged Stock, the Borrower shall deliver an undated stock power covering such certificate, duly executed in blank with, if the Administrative Agent so requests, signature guaranteed. 4. Representations and Warranties. The Borrower represents and warrants that: (a) the shares of Pledged Stock listed on Schedule I constitute all the issued and outstanding shares of all classes of the Capital Stock of the Issuers which are not Foreign Subsidiaries and 66 2/3% of the Capital Stock of the Issuers which are Foreign Subsidiaries and are represented by the certificates listed thereon; (b) all the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable; (c) the Borrower is the record and beneficial owner of, and has title to, the Pledged Stock, free of any and all Liens or options in favor of, or claims of, any other Person, except the Lien created by this Pledge Agreement; and (d) upon delivery to the Administrative Agent of the stock certificates evidencing the Pledged Stock (and assuming the continuing possession by Administrative Agent of such stock certificate in accordance with the requirements of applicable law), the Lien granted pursuant to this Pledge Agreement will constitute a valid, perfected first priority Lien on the Collateral in favor of the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender, enforceable as such against all creditors of the Borrower and any Persons purporting to purchase any Collateral from the Borrower. 5. Covenants. The Borrower covenants and agrees with the Administrative Agent that, from and after the date of this Pledge Agreement until the Secured Obligations are paid in full and the Commitments have been terminated: (a) If the Borrower shall, as a result of its ownership of the Pledged Stock, become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in - 3 - connection with any reorganization), option or rights, whether in addition to, in substitution for, as a conversion of, or in exchange for any shares of the Pledged Stock, or otherwise in respect thereof, the Borrower shall accept the same as the Administrative Agent's and the Lenders' Administrative Agent, hold the same in trust for the Administrative Agent and the Lenders and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Borrower to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank and with, if the Administrative Agent so requests, signature guaranteed, to be held by the Administrative Agent, for the ratable benefit of the Lenders, subject to the terms hereof as additional collateral security for the Secured Obligations. Any sums paid upon or in respect of the Pledged Stock upon the liquidation or dissolution of any of the Issuers shall be paid over to the Administrative Agent to be held by it hereunder for the ratable benefit of the Lenders as additional collateral security for the Secured Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Stock or any property shall be distributed upon or with respect to the Pledged Stock pursuant to the recapitalization or reclassification of the capital of any of the Issuers or pursuant to the reorganization thereof, the property so distributed shall be delivered to the Administrative Agent to be held by it for the ratable benefit of the Lenders and the Issuer, subject to the terms hereof, as additional collateral security for the Secured Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Stock shall be received by the Borrower, the Borrower shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent and the Lenders segregated from other funds of the Borrower, as additional collateral security for the Secured Obligations. (b) Without the prior written consent of the Administrative Agent, the Borrower will not (i) vote to enable, or take any other action to permit, any of the Issuers to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any of the Issuers, or (ii) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Collateral, or (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Collateral, or any interest therein, except for the Lien provided for by this Pledge Agreement, or (iv) enter into any agreement or undertaking restricting the right or ability of the Borrower or the Administrative Agent to sell, assign or transfer any of the Collateral. (c) The Borrower shall maintain the security interest created by this Pledge Agreement as a first, perfected security interest and shall defend such security interest against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Borrower, the Borrower will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purposes of obtaining or preserving the full benefits of - 4 - this Pledge Agreement and of the rights and powers herein granted. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any promissory note, other instrument or chattel paper, such note, instrument or chattel paper shall be immediately delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Pledge Agreement. (d) The Borrower agrees to pay, and to save the Administrative Agent, the Lenders and the Issuing Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Pledge Agreement. (e) Pursuant to Section 9.9 of the Credit Agreement, if the Borrower shall at any time acquire any shares of Capital Stock of any Subsidiary which is not an Issuer hereunder, the Borrower shall (i) immediately deliver such shares of Capital Stock, and all stock certificates evidencing the same, to the Administrative Agent to be held as additional collateral security for the Secured Obligations hereunder, (ii) promptly deliver to the Administrative Agent a supplement to this Pledge Agreement, substantially in the form of Exhibit A to this Pledge Agreement, duly completed, adding such shares of Capital Stock to Schedule I hereto, and (iii) promptly cause such Subsidiary to execute and deliver an acknowledgment and consent substantially in the form appended as Annex I to Exhibit A to this Pledge Agreement. 6. Cash Dividends; Voting Rights. Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the Borrower of the Administrative Agent's intent to exercise its corresponding rights pursuant to Section 7 below, the Borrower shall be permitted to receive all cash dividends paid in the normal course of business of the Issuers and consistent with past practice, to the extent permitted in the Credit Agreement, in respect of the Pledged Stock and to exercise all voting and corporate rights with respect to the Pledged Stock; provided, however, that no vote shall be cast or corporate right exercised or other action taken which would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, the Notes, this Pledge Agreement or the other Loan Documents. 7. Rights of the Administrative Agent. (a) All money Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent for the benefit of the Lenders and the Issuing Lender in a Collateral Account. All Proceeds while held by the Administrative Agent in a Collateral Account (or by the Borrower in trust for the Administrative Agent and the Lenders and the Issuing Lender) shall continue to be held as collateral security for all the Secured Obligations and shall not constitute payment thereof until applied as provided in Section 8(a). (b) If an Event of Default shall occur and be continuing and the Administrative Agent shall give notice of its intent to exercise such rights to the Borrower: (i) the - 5 - Administrative Agent shall have the right to receive any and all cash dividends paid in respect of the Pledged Stock and make application thereof to the Secured Obligations in such order as it may determine, and (ii) at the request of the Administrative Agent, all shares of the Pledged Stock shall be registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or its nominee may thereafter exercise (A) all voting, corporate and other rights pertaining to such shares of the Pledged Stock at any meeting of shareholders of any of the Issuers or otherwise and (B) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such shares of the Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any of the Issuers, or upon the exercise by the Borrower or the Administrative Agent of any right, privilege or option pertaining to such shares of the Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depository, transfer Administrative Agent, registrar or other designated agency upon such terms and conditions as it may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing. (c) The rights of the Administrative Agent hereunder shall not be conditioned or contingent upon the pursuit by the Administrative Agent of any right or remedy against any of the Issuers or against any other Person which may be or become liable in respect of all or any part of the Obligations or against any other collateral security therefor, guarantee thereof or right of offset with respect thereto. The Administrative Agent shall not be liable for any failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so, nor shall it be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 8. Remedies. (a) If an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent's election, the Administrative Agent may apply all or any part of the Proceeds held in any Collateral Account in payment of the Secured Obligations in such order as the Administrative Agent may elect. (b) If an Event of Default shall occur and be continuing, the Administrative Agent may exercise, in addition to all other rights and remedies granted in this Pledge Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Borrower, the Issuers or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, assign, give option or options to purchase or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the - 6 - foregoing), in one or more parcels at public or private sale or sales, in the over-the-counter market, at any exchange, broker's board or office of the Administrative Agent or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent, any Lender or the Issuing Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Borrower, which right or equity is hereby waived or released. The Administrative Agent shall apply any Proceeds from time to time held by it and the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the Administrative Agent account for the surplus, if any, to the Borrower. To the extent permitted by applicable law, the Borrower waives all claims, damages and demands it may acquire against the Administrative Agent, any Lender or the Issuing Lender arising out of the exercise by the Administrative Agent of any of its rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. The Borrower shall remain liable for any deficiency if the proceeds of any sale or other disposition of Collateral are insufficient to pay the Secured Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent, any Lender or the Issuing Lender to collect such deficiency. 9. Registration Rights; Private Sales. (a) The Borrower recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. The Borrower acknowledges and agrees that any such private sale may result in prices and other terms less favorable to the Administrative Agent than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuers to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if the Issuers would agree to do so. - 7 - (b) The Borrower further agrees to use its reasonable efforts to do or cause to be done all such other acts as may be necessary to make any sale or sales of all or any portion of the Pledged Stock pursuant to this Pledge Agreement valid and binding and in compliance with any and all other applicable Requirements of Law. The Borrower further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Administrative Agent, the Lenders and the Issuing Lender, that the Administrative Agent, the Lenders and the Issuing Lender have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Borrower, and the Borrower hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement. 10. Irrevocable Authorization and Instruction to Issuers. The Borrower hereby authorizes and instructs each Issuer to comply with any instruction received by it from the Administrative Agent in writing that (a) states that an Event of Default has occurred and (b) is otherwise in accordance with the terms of this Pledge Agreement, without any other or further instructions from the Borrower, and the Borrower agrees that each Issuer shall be fully protected in so complying. 11. Administrative Agent's Appointment as Attorney-in-Fact. (a) The Borrower hereby irrevocably constitutes and appoints the Administrative Agent and any officer of the Administrative Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower and in the name of the Borrower or in the Administrative Agent's own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Pledge Agreement, including, without limitation, any financing statements, endorsements, assignments or other instruments of transfer. (b) The Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done pursuant to the power of attorney granted in Section 11(a). All powers, authorizations and agencies contained in this Pledge Agreement are coupled with an interest and are irrevocable until this Pledge Agreement is terminated and the security interest created hereby are released. 12. Limitation on Duties Regarding Collateral. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar securities and property for its own account, except that the Administrative Agent shall have no obligation to invest funds held in any Collateral Account and may hold the same as demand deposits. None of the Administrative Agent, any Lender, the Issuing Lender or any of their respective directors, officers, employees or Administrative Agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation - 8 - to sell or otherwise dispose of any Collateral upon the request of the Borrower or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 13. Execution of Financing Statements. Pursuant to Section 9-402 of the Code, the Borrower hereby authorizes the Administrative Agent to file financing statements with respect to the Collateral without the signature of the Borrower in such form and in such filing offices as the Administrative Agent reasonably determines appropriate to perfect the security interests of the Administrative Agent under this Pledge Agreement. A carbon, photographic or other reproduction of this Pledge Agreement shall be sufficient as a financing statement for filing in any jurisdiction. 14. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 15. Notices. Notices, requests and demands to or upon the Administrative Agent or the Borrower hereunder shall be effected in the manner set forth in Section 13.2 of the Credit Agreement. 16. Authority of Administrative Agent. The Borrower acknowledges that the rights and responsibilities of the Administrative Agent under this Pledge Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Pledge Agreement shall, as between the Administrative Agent and the Lenders and the Issuing Lender, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Borrower, the Administrative Agent shall be conclusively presumed to be acting as Administrative Agent for the Lenders and the Issuing Lender with full and valid authority so to act or refrain from acting, and neither the Borrower nor any Issuer shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 17. Severability. Any provision of this Pledge Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 18. Paragraph Headings. The paragraph headings used in this Pledge Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 19. No Waiver; Cumulative Remedies. The Administrative Agent, any Lender or the Issuing Lender shall not by any act (except by a written instrument pursuant to Section 20 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in - 9 - exercising, on the part of the Administrative Agent, any Lender or the Issuing Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent, any Lender or the Issuing Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent, any Lender or the Issuing Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 20. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Pledge Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Borrower, and the Administrative Agent, provided that any provision of this Pledge Agreement may be waived by the Administrative Agent in a letter or agreement executed by the Administrative Agent or by telex or facsimile transmission from the Administrative Agent. This Pledge Agreement shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of the Administrative Agent, the Lenders and the Issuing Lender and their respective successors and assigns. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. [SIGNATURE PAGE FOLLOWS] - 10 - Borrower Pledge Agreement IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be duly executed and delivered as of the date first above written. UNIDIGITAL INC. By:/s/ William E. Dye ------------------------------- Name:William E. Dye Title:Chief Executive Officer Borrower Pledge Agreement ACKNOWLEDGMENT AND CONSENT The undersigned, the Issuers referred to in the foregoing Pledge Agreement, hereby acknowledge receipt of a copy thereof and agree to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to it. The undersigned agree to notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5(a) of the Pledge Agreement. The undersigned further agree that the terms of Section 9(c) of the Pledge Agreement shall apply to them, mutatis mutandis, with respect to all actions that may be required of them under or pursuant to or arising out of Section 9 of the Pledge Agreement. UNIDIGITAL INC. By:/s/ William E. Dye ------------------------------- Name:William E. Dye Title:Chief Executive Officer UNIDIGITAL ELEMENTS (SF), INC. By:/s/ William E. Dye ------------------------------- Name:William E. Dye Title:Chief Executive Officer UNISON (NY), INC. By:/s/ William E. Dye ------------------------------- Name:William E. Dye Title:Chief Executive Officer UNISON (MA), INC. By:/s/ William E. Dye ------------------------------- Name:William E. Dye Title:Chief Executive Officer Borrower Pledge Agreement SCHEDULE I to Pledge Agreement DESCRIPTION OF PLEDGED STOCK Stock Name of Class of Certificate No. of Issuer Stock No. Shares - ------ -------- ----------- ------ Unidigital Elements (NY), Inc. Common 1 20 Unidigital Elements (SF), Inc. Common 1 3 Unison (NY), Inc. Common 1 100 Unison (MA), Inc. Common 1 100 Borrower Pledge Agreement EXHIBIT A to Stock Pledge Agreement STOCK PLEDGE AGREEMENT SUPPLEMENT STOCK PLEDGE AGREEMENT SUPPLEMENT, dated as of March 24 1998 (this "Supplement"), made by UNIDIGITAL INC., a Delaware corporation (the "Borrower"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE, as administrative agent (in such capacity, the "Administrative Agent") under the Credit Agreement (as defined in the Pledge Agreement referred to below) for the benefit of the Lenders (as so defined). 1. Reference is hereby made to that certain Stock Pledge Agreement, dated as of March 24, 1998, made by the Borrower in favor of the Administrative Agent (as amended, supplemented or otherwise modified as of the date hereof, the "Pledge Agreement"). Terms defined in the Pledge Agreement are used herein as therein defined. 2. The Borrower hereby confirms and reaffirms the security interest in the Collateral granted to the Administrative Agent for the benefit of the Lenders and the Issuing Lender under the Pledge Agreement, and, as additional collateral security for the prompt and complete payment when due (whether at stated maturity, by acceleration or otherwise) of the Secured Obligations and in order to induce the Lenders to make their Loans and the Issuing Lender to issue Letters of Credit under the Credit Agreement and the other Loan Documents, the Borrower hereby delivers to the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender, all of the shares of Capital Stock of [INSERT NAME OF NEW ISSUER], a corporation (the "New Issuer") listed in Schedule I hereto, together with all stock certificates, options, or rights of any nature whatsoever which may be issued or granted by the New Issuer in respect of such Capital Stock while the Pledge Agreement, as supplemented hereby, is in force (the "Additional Pledged Stock") and hereby grants to the Administrative Agent, for the ratable benefit of the Lenders [and the Issuing Lender] a first security interest in the Additional Pledged Stock and all Proceeds thereof. From and after the date of this Supplement, as used in the Pledge Agreement as supplemented by this Supplement and for all purposes of the Pledge Agreement as so supplemented, "Pledged Stock" shall be deemed to include the Additional Pledged Stock and "Issuers" shall be deemed to include the New Issuer. 3. The Borrower hereby represents and warrants that the representations and warranties contained in Section 4 of the Pledge Agreement are true and correct on the date of this Supplement with references therein to the "Pledged Stock" to include the Additional Pledged Stock, with references to the "Issuers" therein to include the New Issuer, and with references to the Pledge Agreement to mean the Pledge Agreement as supplemented hereby. 4. This Supplement is supplemental to the Pledge Agreement, forms a part thereof and is subject to the terms thereof. From and after the date of this Supplement, Borrower Pledge Agreement Schedule I to the Pledge Agreement shall be deemed to include each item listed on Schedule I to this Supplement. This Supplement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed and delivered as of the date first above written. UNIDIGITAL INC. By: ------------------------------- Name: Title: Borrower Pledge Agreement SCHEDULE I to Supplement DESCRIPTION OF ADDITIONAL PLEDGED STOCK Stock Name of Class of Certificate No. of Issuer Stock No. Shares - ------ -------- ----------- ------ Borrower Pledge Agreement ANNEX I to Supplement ACKNOWLEDGMENT AND CONSENT The undersigned, the New Issuer referred to in the foregoing Supplement to Stock Pledge Agreement, hereby acknowledges receipt of a copy thereof and of the Pledge Agreement referred to therein and agrees to be bound thereby and to comply with the terms thereof insofar as such terms are applicable to it. The undersigned agrees to notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5(a) of the Pledge Agreement. The undersigned further agrees that the terms of Section 9(c) of the Pledge Agreement shall apply to it, mutatis mutandis, with respect to all actions that may be required of it under or pursuant to or arising out of Section 9 of the Pledge Agreement. [NAME OF NEW ISSUER] By: -------------------------- Name: Title: EX-10.13 15 EXHIBIT D - MORTGAGE A MORTGAGE made on March 24, 1998 BETWEEN UNIDIGITAL INC. (the "Mortgagor"), a company incorporated under the laws of the State of Delaware (registered number ) and whose registered office is at 545 West 45th Street, New York, New York 10036 and CANADIAN IMPERIAL BANK OF COMMERCE (the "Administrative Agent" pursuant to the Credit Agreement, dated as of March 24, 1998 among Unidigital Inc., the several lenders from time to time party thereto, and the Administrative Agent (the "Credit Agreement")) of 425 Lexington Avenue, New York, New York 10017. IT IS AGREED as follows INTERPRETATION 1.1 In this Mortgage: "Original Securities" means: the securities listed in Schedule 1, which are all registered in the name of the Mortgagor; "Sale Event" means any of the events mentioned in clause 8.1; "Secured Amounts" means the moneys and liabilities which the Mortgagor covenants in clause 2 to pay or discharge; and references to the Secured Amounts include (save in clauses 4.3 and 10.1) references to any part of them; "Security Shares" means the Original Securities and all and any other shares, securities, rights, moneys and property for the time being mortgaged or charged to the Administrative Agent pursuant to clause 3; "Security Interest" means any mortgage, charge, pledge, lien, right of set off or any security interest, howsoever created or arising; references to the Original Securities or to the Security Shares include references to any of them; and "mortgage" includes a transfer or assignment by way of mortgage. 1.2 Clause headings are for ease of reference only and shall not affect the interpretation of this Mortgage. 1.3 References in this Mortgage to any statute or other legislative provision shall include any statutory or legislative modification or re-enactment thereof, or any substitution therefor. 1.4 References to the Mortgagor or the Administrative Agent include references to any person for the time being deriving title under each of them respectively. 1.5 References to this Mortgage are references to the same as from time to time varied, supplemented or amended in any manner or respect whatsoever, and in particular by variations which increase or otherwise affect the liability of the Mortgagor. COVENANT TO PAY SECURED AMOUNTS 2.1 The Mortgagor covenants with the Administrative Agent that it will on demand pay to the Administrative Agent and discharge all moneys and liabilities whatsoever which now are or at any time hereafter (whether on or after any such demand) may become due, owning or payable, in any currency, to the Administrative Agent by the Mortgagor, actually or contingently, solely or jointly and/or severally with another or others, as principal or surety, on any current or other account, with reference to any bill, note or other security, in connection with any advance, loan, credit, instrument, guarantee or indemnity made or issued to, for or at the request of the Mortgagor or in any other manner whatsoever, including all amounts which may become payable or for which the Mortgagor may become liable under this Mortgage and all commission, discount and all banking, legal and other costs, charges and expenses whatsoever (on a full indemnity basis) and also all losses and damages that may be sustained, suffered or incurred by the Administrative Agent arising out of or in connection with any act, matter or thing done or to be done by the Mortgagor under this Mortgage or any document, arrangement or agreement between the Mortgagor and the Administrative Agent or any disclaimer of any of its contracts, agreements or arrangements or any of its liabilities or obligations to the Administrative Agent, and interest on the foregoing from the date of demand for payment being made until the date of actual payment or discharge. 2.2 Interest under clause 2.1 shall be payable at such rate or rates and upon such terms as may from time to time be agreed, and interest shall be computed and compounded according to the usual practice fro the time being of the Administrative Agent and shall be payable as well after as before any demand made, judgment obtained or liquidation or administration of the Mortgagor. MORTGAGE 3.1 The Mortgagor, with full title guarantee, hereby assigns and transfers absolutely by way of the first fixed mortgage and agrees to mortgage and charges and agrees to charge to the Administrative Agent as a continuing security for the payment and discharge of the Secured Amounts: (a) the Original Securities; and - 2 - (b) all other securities and all rights, moneys (including, without limitation, dividends) and property whatsoever which may from time to time at any time be derived from, accrue on or be offered in respect of the Original Securities whether by way of redemption, exchange, conversion, rights, bonus, capital reorganisation or otherwise howsoever, but in each case so that the covenants implied by the Law of Property (Miscellaneous Provisions) Act 1994 (the "LP (MP) Act") in the mortgages and charges contained in or created pursuant to this Mortgage, are construed with the omission of: (A) the words "other than any charges, encumbrances or rights which that person does not and could not reasonably be expected to know about" in section 3(1) LP MP Act; and (B) section 6 (2) LP (MP) Act. 3.2 The Mortgagor shall procure that as soon as is practicable all the Original Securities and as soon as is practicable all and any other registered or registrable Security Shares shall be transferred to and registered in the name of the Administrative Agent (or such nominee as the Administrative Agent may direct) to be held on trust for the Administrative Agent. CONTINUING AND PRIMARY SECURITY 4.1 This Mortgage shall be a continuing security, and shall be in addition to and shall not affect any continuing liens or other Security Interests to which the Administrative Agent is or will be entitled on such of the certificates or other documents of title to the Security Shares as may have been or may be deposited with or to the order of the Administrative Agent, which liens and other Security Interests shall remain in force independently of this Mortgage. 4.2 The Security Shares are hereby deposited and mortgaged to the Administrative Agent as primary and not as collateral security. Although, as between the Mortgagor and a third party, the Mortgagor may be only a surety for the third party in respect of the Secured Amounts and the Security Shares may be only a secondary or collateral security, nevertheless, as between the Mortgagor and the Administrative Agent, the Mortgagor shall be deemed to be a principal debtor, and the Security Shares shall be deemed to be a principal security for the Secured Amounts. 4.3 The liabilities and obligations of the Mortgagor under this Mortgage and the security constituted by this Mortgage shall remain in force notwithstanding any act, omission, neglect, event or matter whatsoever, except the proper and valid payment and discharge of all the Secured Amounts and, subject to clause 4.4 below, an absolute discharge or release of the Mortgagor signed by the Administrative Agent; and without prejudice to its generality, the foregoing shall apply in relation to anything which would have discharged the Mortgagor (wholly or in part) or which would have afforded the Mortgagor any legal or equitable defence, and in relation to any winding up or dissolution of, or any change in constitution or corporate identity or loss or of corporate identity by, the Mortgagor, or any - 3 - other person; and, in addition, the Mortgagor further covenants with the Administrative Agent that if, by reason of any moneys or liabilities expressed or intended to be guaranteed to the Administrative Agent by the Mortgagor not being legally recoverable from such third party or for any other reason whatsoever, such moneys or liabilities (or any part of them) would not be recoverable from the Mortgagor as a surety then (notwithstanding that it was known to the Administrative Agent) they shall be fully recoverable from the Mortgagor as sole, original and independent obligor and the Mortgagor will pay or discharge them to the Administrative Agent upon demand. 4.4 Any such discharge or release referred to in clauses 4.3 or 10.1 and any composition or arrangement which the Mortgagor may effect with the Administrative Agent, shall be deemed to be made subject to the condition that it will be void, if any payment or security which the Administrative Agent may previously have received or may thereafter receive from any person in respect of the Secured Amounts is set aside under any applicable law or proves to have become or been for any reason invalid. 4.5 Without prejudice to the generality of clause 4.3, none of the liabilities or obligations of the Mortgagor under this Mortgage shall be impaired, and the security constituted by this Mortgage shall not be impaired, by the Administrative Agent: (a) releasing or granting any time or any indulgence whatsoever to the Mortgagor or any other person and, in particular, entering into any transaction or arrangements whatsoever with or in relation to the Mortgagor and/or any third party; (b) taking, accepting, varying, dealing with, enforcing, abstaining from enforcing, surrendering or releasing any security for the Secured Amounts in such manner as it thinks fit, or claiming, proving for, accepting or transferring any payment in respect of the Secured Amounts in any composition by, or winding up of, the Mortgagor, and/or any third party or abstaining from so claiming, proving, accepting or transferring. 4.6 Rights may be exercised and demands may be under this Mortgage from time to time, and the liabilities and obligations of the Mortgagor and the rights and security contained in this Mortgage under this Mortgage may be exercised and enforced, irrespective of: (a) whether any demands, steps or proceedings are being or have been taken against the Mortgagor and/or any third party; or (b) whether or in what order any security to which the Administrative Agent may be entitled in respect of the Secured Amounts is enforced. - 4 - WARRANTIES AND UNDERTAKINGS 5.1 The Mortgagor represents and warrants that: (a) it is the sole legal and beneficial owner of all the Original Securities free of all Security Interests, encumbrances, trusts, equities and claims whatsoever (save under this Mortgage) and that all the Original Securities are fully paid up; (b) it is or will be at such later time at which the relevant Security Shares (other than the Original Securities) become the subject of this Mortgage the sole legal and beneficial owner of all the Security Shares (other than the Original Securities) free from all Security Interests, encumbrances, trusts, equities and claims whatsoever (save under this Mortgage) and that all the Security Shares are or will at such date be fully paid-up; (c) the Original Securities are all currently registered in the name of the Mortgagor; and 5.2 The Mortgagor undertakes that, for so long as any Secured Amounts remain outstanding, it shall: (a) pay to the Administrative Agent, upon demand, the amount of all expenses which it may incur in, about or with a view to perfecting or enforcing this security or otherwise in connection with this security, together with interest on the amount of any payments made by the Administrative Agent in respect of such expenses in accordance with clause 2.2 from the date of payment until the date of repayment and as well after as before judgment and so that any amount payable hereunder may be debited to any account of the Mortgagor with the Administrative Agent; (b) promptly pay all calls, instalments and other payments which may be made or become due in respect of the Security Shares and so that, in the event of default by the Mortgagor, the Administrative Agent may do so on behalf of the Mortgagor and clause 5.2(a) shall apply accordingly; (c) forthwith sign, seal, deliver and complete all transfers, renunciations, proxies, mandates, assignments, deeds and documents and do all acts and things which the Administrative Agent may, in its absolute discretion, at any time and from time to time specify: (i) for enabling or assisting the Administrative Agent to perfect or improve its title to and security over the Security Shares; (ii) to vest the Security Shares in the Administrative Agent or its nominee or nominees; (iii) to exercise (or enable its nominee or nominees to exercise) any rights or powers attaching to the Security Shares; - 5 - (iv) (after the occurrence of a Sale Event) to sell or dispose of the Security Shares; or (v) otherwise to enforce any of the rights of the Administrative Agent under or in connection with this Mortgage; (d) not (without the written consent of the Administrative Agent): (i) create or permit to exist over all or part of the Security Shares (or any interest therein) any Security Interest (other than this Mortgage) whether ranking prior to, pari passu with or behind the security contained in this Mortgage; (ii) sell, transfer or otherwise dispose of the Security Shares or any interest therein or attempt or agree to so dispose; or (iii) permit any person other than the Mortgagor to be registered as or become the holder of the Security Shares; (e) forward to the Administrative Agent all notices, reports, accounts, circulars and other documents relating to the Security Shares or which are sent to the holders of the Security Shares as soon as they are received; (f) take such action as the Administrative Agent may in its absolute discretion direct, in respect of any proposed compromise, arrangement, capital reorganisation, conversion, exchange, repayment or take-over offer affecting or in respect of the Security Shares or any of them or any proposal made for varying or abrogating any rights attaching to the Security Shares or any of them; (g) indemnify the Administrative Agent (and any of its nominees) on demand from and against all losses, actions, claims and liabilities which any of them may incur as holders of the Security Shares or any interest in the Security Shares; and (h) ensure that other registered Security Shares which are not registered in the name of the Mortgagor or the Administrative Agent (or its nominee) are at all times registered in the names of persons who have executed declarations of trust in favour of the Mortgagor and the Administrative Agent in such forms as the Administrative Agent may specify, being (if at any time the Administrative Agent so requires) persons nominated by the Administrative Agent. DIVIDENDS AND VOTING 6.1 Until a Sale Event shall have occurred, then: (a) all and any cash dividends paid in respect of the Security Shares or any of them received by the Agent (or its nominee) shall, on request by the Mortgagor, be released to the Mortgagor; and - 6 - (b) subject to clause 5.2(f), the Administrative Agent will exercise all voting and other rights and powers attached to the Security Shares as the Mortgagor may from time to time in writing reasonably direct, and the Administrative Agent shall instruct any nominee for the time being registered as holder for the Security Shares accordingly. 6.2 Subject to clause 6.1: (a) all and any dividends and other distributions accruing on or deriving from the Security Shares (notwithstanding that they may have accrued in respect of an earlier period) shall: (i) if received by the Mortgagor (or any nominee of the Mortgagor) be held on trust and forthwith paid and transferred to the Administrative Agent; and (ii) when and if received by the Administrative Agent (or its nominee) shall form part of the Security Shares and be held by the Administrative Agent on the terms of this Mortgage as additional security (and, if cash, be paid into a cash collateral deposit account and may be applied by the Administrative Agent at any time and from time to time thereafter in or towards the discharge of the Secured Amounts as the Administrative Agent thinks fit); (b) the Administrative Agent may from time to time exercise (and may from time to time direct the exercise of) all voting and other rights and powers (by statute or otherwise) attached to or conferred on the Security Shares in such manner as the Administrative Agent (in its absolute discretion) thinks fit and the Mortgagor shall, and shall procure that any nominee of the Mortgagor shall, comply with any such directions of the Administrative Agent; and (c) the Mortgagor shall (and shall procure that any nominee of the Mortgagor shall) forthwith agree to accept short notice for and to attend all or any meetings or class meetings of the holders of the Security Shares, to appoint proxies and exercise all voting and other rights and powers which may at any time be exercisable by the holders of the Security Shares as the Administrative Agent may from time to time direct. 6.3 The rights and powers attached to the Security Shares shall, for the purposes of clause 6.2(b), include (without limitation) all powers given to trustees by sections 10(3) and 10(4) of the Trustee Act 1925 (as amended) in respect of securities subject to a trust and shall be exercisable without any need for any further consent of authority of the Mortgagor. POWER OF ATTORNEY 7. The Mortgagor hereby irrevocably and by way of security for the payment by it of the Secured Amounts and the performance of its obligations under this Mortgage appoints the Administrative Agent as its true and lawful attorney (with full power to appoint substitutes and to sub-delegate) on behalf of the Mortgagor and in the Mortgagor's - 7 - own name or otherwise, at any time and from time to time, to sign, seal, deliver and complete all transfers, renunciations, proxies, mandates, assignments, deeds and documents and do all acts and things which the Administrative Agent may, in its sole and absolute discretion, consider to be necessary or advisable to perfect or improve its security over the Security Shares or to give proper effect to the intent and purposes of this Mortgage or to enable or assist in any way in the exercise of any power of sale of the Security Shares (whether arising under this Mortgage or implied by statute or otherwise). SALE 8.1 The following shall constitute Sale Events under this Mortgage: (a) if the Mortgagor fails to pay on demand any of the Secured Amounts or any sum due to the Administrative Agent, under this Mortgage or otherwise; (b) if the Mortgagor otherwise fails to comply with any of its obligations under this Mortgage; or (c) if an Event of Default under the Credit Agreement has occurred and is continuing. 8.2 On the occurrence of a Sale Event, the Secured Amounts shall become due and on or any time after the occurrence of a Sale Event and without prior notice to the Mortgagor, the Administrative Agent exercise all the powers and rights of a mortgagee conferred by statute or otherwise and (without prejudice to the generality of the foregoing) may sell or otherwise dispose (and instruct any nominee of the Administrative Agent or the Mortgagor to sell or otherwise dispose) of all the title to and interest in the Security Shares or (as the Administrative Agent may elect and without prejudice to any later exercise of this power) the whole or part of the equitable interest divested of the legal title for such consideration (which may comprise or include shares or debentures), upon such terms and generally in such manner as the Administrative Agent may, in its sole and absolute discretion, think fit. 8.3 The provisions of the Law of Property Act 1925 (or any statutory re-enactment, variation or modification thereof or any law of similar effect in any jurisdiction) relating to the power of sale conferred by that Act are hereby varied so that section 103 shall not apply, and such provisions are hereby extended as set out in clause 8.2. 8.4 The Administrative Agent shall not be liable for any loss or damage occasioned by any sale or disposal of the Security Shares (or interest therein) or arising out of the exercise of or failure to exercise any of its powers under this Mortgage or for any neglect or default to pay any instalment or accept any offer or notify the Mortgagor of any such matter or for any other loss of any nature whatsoever in connection with the Security Shares. 8.5 The Administrative Agent shall be entitled to apply moneys arising from the exercise of its powers under this Mortgage or in respect of the Secured Amounts towards - 8 - the discharge of the Secured Amounts in such manner and order as the Administrative Agent may in its sole and absolute discretion think fit, with (subject to any rights of set off, combination or retention) any surplus being paid to the Mortgagor or any other person who may be entitled to it. 8.6 All moneys from time to time received by the Administrative Agent from the Mortgagor or any person or persons in respect of the Secured Amounts or otherwise on the realisation or enforcement of the security contained in this Mortgage may be applied by the Administrative Agent either as a whole or in such proportion as the Administrative Agent shall think fit to any account or item of account or any transaction and, without limitation, the Administrative Agent may in its absolute discretion at all times pending the payment to the Administrative Agent of all the Secured Amounts place and keep to the credit of a separate or suspense account any money received by the Administrative Agent from the Mortgagor or such other persons for so long and in such manner as the Administrative Agent may determine without any obligation to apply the same or any part thereof in or towards the discharge of any of the Secured Amounts. OTHER SECURITY ETC. 9.1 Section 93 of the Law of Property Act 1925 (restricting rights of consolidation of mortgages) (or any statutory re-enactment, variation or modification thereof or any law of similar effect in any jurisdiction) shall not apply in relation to this Mortgage. 9.2 This security is in addition to and shall not affect or be merged in any bills, notes, guarantees, indemnities, undertakings, Security Interests, or other security whatsoever which Administrative Agent may hold now or hereafter in connection with the Secured Amounts or the obligations of any other person liable for any of the Secured Amounts and the Administrative Agent shall be under no obligation to take any steps to call in or to enforce any security for the Secured Amounts or the obligations of any other person liable for any of the Secured Amounts and shall not be liable to the Mortgagor or any other person for any loss arising from any omission on the part of the Administrative Agent to take any such steps or for the manner in which the Administrative Agent shall enforce or refrain from enforcing any such security. 9.3 Without prejudice to clause 5.2(d) (restriction on Security Interests), if the Administrative Agent receives notice of any Security Interest or any other interest affecting the Security Shares: (a) the Administrative Agent may open a new account with the Mortgagor and, if it does not, it shall nevertheless be deemed to have done so at the time it received such notice; and (b) all payments received by the Administrative Agent from the Mortgagor or, in respect of the Secured Amounts, from any other person after the Administrative Agent receives such notice shall be credited or deemed to have been credited to the new account, and - 9 - in no circumstances whatsoever shall operate to reduce the Secured Amounts as at the time the Administrative Agent received such notice. 9.4 If there are any Security Interests having priority to the security contained in this Mortgage in respect of all or any part of the Security Shares then: (a) if any proceedings or steps are being taken to exercise or enforce any powers or remedies conferred by such prior Security Interest against the Security Shares, the Administrative Agent may (but without prejudice to any rights the Administrative Agent may have under statute or otherwise) redeemed such prior Security Interest or procure the transfer thereof to itself and may settle and pass the accounts of the prior charges and any accounts so settled and passed shall be conclusive and binding on the Mortgagor and the principal, interest, costs, charges and expenses of and incidental to such redemption or transfer shall be paid to the Administrative Agent on demand with interest in accordance with clause 2.2 and, until payment, the Security Shares shall stand as a security for the amount to be paid; and (b) all the powers, authorities and discretions conferred by a prior Security Interest upon the chargee or any receiver thereunder shall be exercisable by the Administrative Agent in like manner as if the same were expressly included herein and the Administrative Agent shall be entitled to exercise all the powers, authorities and discretions of an administrative receiver, receiver, manager or receiver and manager appointed thereunder. 9.5 If the Mortgagor has more than one account with the Administrative Agent, the Administrative Agent may, at any time and without prior notice to the Mortgagor, transfer all or part of any credit balance on any such account to any other account which may then be in debit or otherwise apply the credit balance in or towards satisfying the Secured Amounts, whether or not the credit balance and the account in debit or the Secured Amounts are expressed in the same currency, and the Administrative Agent is hereby authorised to effect any necessary conversions at its prevailing rates of exchange. REASSIGNMENT 10.1 At such time as the Mortgagor has no further obligations, (actual or contingent, present or future, joint or several) to the Administrative Agent and none of the Secured Amounts remains outstanding, the Administrative Agent shall at the request and cost of the Mortgagor execute such documents and procure that its nominees execute such documents as the Mortgagor may reasonably request and which may be required to reassign (subject to the provisions of clause 4.4) all its then right, title and interest in and to such of the Security Shares then held by the Administrative Agent (or its nominee) to the person entitled to the Security Shares. 10.2 If the Administrative Agent or its nominee or nominees shall be required to transfer the Security Shares pursuant to clause 10.1 or otherwise, the Administrative Agent may require the transferee to accept delivery, transfer or registration of other securities of the - 10 - same type, class and denomination in lieu of the Security Shares and ensure that its nominees (if any) do likewise. EXPENSES AND INDEMNITY 11.1 The Mortgagor further covenants with the Administrative Agent to reimburse or pay to the Administrative Agent (on the basis of a full indemnity) the amount of all costs (including legal costs), charges and expenses incurred by the Administrative Agent in connection with: (a) the preparation, registration or perfecting of this Mortgage (or the security therein contained), or any other document entered into between the Mortgagor and the Administrative Agent; (b) the exercise, or the attempted or purported exercise, or the consideration of the exercise, by or on behalf of the Administrative Agent of any of the powers of the Administrative Agent, and the enforcement, preservation or attempted preservation of this Mortgage or the Security Shares of any other action taken by or on behalf of the Administrative Agent with a view to or in connection with the recovery by the Administrative Agent of the Secured Amounts from the Mortgagor or any other person; and (c) the carrying out or consideration of any other act or matter which the Administrative Agent may consider to be for the preservation, improvement or benefit of the Security Shares. 11.2 The Mortgagor hereby agrees to indemnify the Administrative Agent against all losses, claims, costs (including legal costs) expenses, demands and liabilities whether in contract, tort, or otherwise now or hereafter sustained or incurred by the Administrative Agent or by any person for whose liability, act or omission the Administrative Agent may be answerable for or in connection with anything done or omitted under this Mortgage or any other document, agreement or arrangement entered into between the Mortgagor and the Administrative Agent or in the exercise or purported exercise of the powers herein contained or occasioned by any breach by the Mortgagor or any of its covenants or other obligations to the Administrative Agent or in consequence of any payment in respect of the Secured Amounts (whether made by the Mortgagor or a third person) being declared void or impeached for any reason whatsoever. 11.3 Any amounts for which the Company shall be liable under sub-clauses 11.1 or 11.2 shall be payable on demand and shall bear interest in accordance with clause 2.2 from the dates or dates on which they were paid, incurred or charged by the Administrative Agent and such amounts and interest may be debited by the Administrative Agent to any account of the Mortgagor, but shall, in any event, form part of the Secured Amounts and accordingly be secured on the Security Shares under the Security contained in this Mortgage. - 11 - 11.4 All sums of whatsoever nature which are payable by the Mortgagor under this Mortgage and which are now or at any time hereafter become subject to Value Added Tax or any similar tax shall be deemed to be exclusive of Value Added Tax or any similar tax and the Mortgagor in addition to such sums will indemnify the Administrative Agent from and against all claims and liabilities whatsoever in respect thereof. FURTHER PROVISIONS 12.1 The Administrative Agent may at any time and from time to time without notice and notwithstanding any settlement of account or other matter whatsoever combine or consolidate all or any of its existing accounts including accounts in the name of the Administrative Agent or of the Mortgagor jointly with others and may set off or transfer any credit balance or any sum standing to the credit of any account (whether or not the same is due to the Mortgagor by the Administrative Agent and whether or not the credit balance and the account in debit or the Secured Amounts are expressed in the same currency) in or toward satisfaction of any of the Secured Amounts and may in its absolute discretion estimate the amount of any liability of the Mortgagor which is contingent or unascertained and thereafter set off such estimated amount and no amount shall be payable by the Administrative Agent to the Mortgagor unless and until all Secured Amounts have been ascertained and fully repaid or discharged. 12.2 If any amount is received or recovered by the Administrative Agent in respect of the Secured Amounts (whether pursuant to a judgment or otherwise) in a currency (the "other currency") other than the currency in which the Secured Amounts are payable (the "original currency"), then the Administrative Agent may convert the other currency into the original currency and the Administrative Agent shall calculate the amount of the original currency it would have received if the other currency was used to purchase the original currency on the date of receipt or recovery and if such amount is less than the amount payable by the Mortgagor in the original currency, the Mortgagor, as a separate and independent obligation shall indemnify the Administrative Agent against any loss sustained by the Administrative Agent as a result (including any premium, commission, transfer or other costs incurred or charged by the Administrative Agent). 12.3 If the Mortgagor fails to pay or discharge any part of the Secured Amounts when due, the Administrative Agent from time to time may purchase an amount of the currency in which such sum is due with any other currency or currencies and the Mortgagor's obligation thereafter shall be to pay to the Administrative Agent the amount of the other currency or currencies so purchased. 12.4 Any document required to be executed under the seal of the Administrative Agent under or in connection with this Mortgage shall be validly executed if executed under the seal of a duly authorised attorney of the Administrative Agent. 12.5 Any notice or demand under this Mortgage to or upon the Mortgagor shall be in writing and shall be deemed to have been properly served upon the Mortgagor if - 12 - delivered personally or if sent by telex, rapifax or prepaid first-class letter post to its registered office for the time being or to any one of its principal places of business for the time being. Any such notice or demand: (a) which is sent by telex or rapifax, shall be deemed to have been properly served upon the Mortgagor two hours after the time of dispatch; (b) which is sent by first-class prepaid letter post and is posted before the last collection of letters from the letter box in which it was posted has been made on any day, shall be deemed to have been properly served upon the Mortgagor at 10:00 a.m. on the next succeeding day upon which a delivery of letters is made. 12.6 In any action, proceedings or claim relating to this Mortgage or the security contained in this Mortgage, a statement as to any amount due to the Administrative Agent or of the Secured Amounts or any part thereof which is certified as being correct by an officer of the Administrative Agent shall, save in the case of manifest error, be conclusive evidence that such amount is in fact due and payable. 12.7 The rights of the Administrative Agent are cumulative, may be exercised as often as it considers appropriate and are in addition to its rights under general law; and the rights of the Administrative Agent (whether arising under this Mortgage or under general law) shall not be capable of being waived or varied otherwise than by express waiver or variation in writing; and, in particular, any failure to exercise or any delay in exercising any such rights shall not operate as a variation or waiver of that or any other such right; any defective or partial exercise of such rights shall not preclude any other or further exercise of that or any other such right; and no act or course of conduct or negotiation on its part or on its behalf shall in any way preclude it from exercising any such right or constitute a suspension or variation of any such right. 12.8 If any provisions of this Mortgage become invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired but shall remain in full force and effect. 12.9 The Administrative Agent may assign all or any of its rights under this Mortgage and any successor to or assignee of the Administrative Agent shall be entitled to the full benefits of this Mortgage and this Mortgage shall remain valid and enforceable notwithstanding any change in the name, composition or constitution of the Administrative Agent nor any amalgamation or consolidation with any other company. 12.10 This Mortgage is governed by, and shall be construed in accordance with, the law of England. - 13 - 12.11 The Mortgagor and the Administrative Agent agree that the courts of England are to have non-exclusive jurisdiction over any matter which may be in dispute under this Mortgage, and the Mortgagor irrevocably submits to the jurisdiction of such court. - 14 - DULY DELIVERED AS A DEED by UNIDIGITAL INC. on the date inserted above. EXECUTED as a DEED under the ) COMMON SEAL of UNIDIGITAL INC. ) in the presence of: ) Director:/s/ William E. Dye --------------------------------------- Assistant Secretary:/s/ Peter Saad -------------------------------------- OR EXECUTED as a DEED by ) UNIDIGITAL INC. acting by two ) Directors/Director and the Secretary ) Director: --------------------------------------- Secretary: -------------------------------------- /s/ William J. Koslo - ----------------------------------------------------- for and on behalf of CANADIAN IMPERIAL BANK OF COMMERCE - 15 - SCHEDULE 1 AMOUNT OR NUMBER OF SECURITY DESCRIPTION OF REGISTERED SECURITY 668 SHARES @(pounds)0.01 Certificate No. 10 EX-10.14 16 SECURITY AGREEMENT SECURITY AGREEMENT SECURITY AGREEMENT, dated as of March 24, 1998, made by UNIDIGITAL Inc., a Delaware corporation (the "Borrower") and each subsidiary of the Borrower which is a signatory hereto (together with the Borrower, collectively, the "Loan Parties") in favor of CANADIAN IMPERIAL BANK OF COMMERCE, as administrative agent (in such capacity, the "Administrative Agent") for the lenders (the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE (in such capacity, the "Issuing Lender") parties to the Credit Agreement referred to below. RECITALS Pursuant to the Credit Agreement, dated as of March 24, 1998 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the various lenders from time to time a party thereto (the "Lenders"), the Issuing Lender and the Administrative Agent, the Lenders have severally agreed to make loans to and the Issuing Lender has agreed to issue letters of credit for the account of the Borrower upon the terms and subject to the conditions set forth therein, such loans to be evidenced by the Notes issued by the Borrower thereunder. It is a condition precedent to the obligation of the Lenders to make their respective loans to the Borrower, and of the Issuing Lender to issue its letters of credit, under the Credit Agreement that the Loan Parties shall have executed and delivered this Security Agreement to the Administrative Agent for the ratable benefit of the Lenders and the Issuing Lender. NOW, THEREFORE, in consideration of the premises and to induce the Lenders, the Issuing Lender and the Administrative Agent to enter into the Credit Agreement and to induce the Lenders to make their respective loans to the Borrower, and the Issuing Lender to issue its letters of credit, under the Credit Agreement, each Loan Party hereby agrees with the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, capitalized terms which are defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement; the following terms which are defined in the Uniform Commercial Code in effect in the State of New York on the date hereof are used herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products, General Intangibles, Instruments, Inventory and Proceeds; and the following terms shall have the following meanings: "Bank Account": a deposit, custody, or other account (whether, in any case, time or demand or interest or non-interest bearing) maintained by a Loan Party with any bank or other financial institution, all of which are set forth on Schedule I. "Bank Account Deposits": all cash and securities from time to time standing to the credit of each Bank Account, and all interest, principal and other distributions payable on or with respect to, such Bank Account. "Blocked Account Agreement": an agreement, substantially in the form attached hereto as Annex A, among a Loan Party, the Administrative Agent and the bank at which such Loan Party maintains a Designated Bank Account. "Code": the Uniform Commercial Code as from time to time in effect in the State of New York. "Collateral": as defined in Section 2 of this Security Agreement. "Collateral Account": any collateral account established by the Administrative Agent as provided in Section 3(d) or 8. "Contracts": the contracts and agreements listed on Schedule II hereto, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (a) all rights of any Loan Party to receive moneys due and to become due to it thereunder or in connection therewith, (b) all rights of any Loan Party to damages arising out of, or for, breach or default in respect thereof and (c) all rights of any Loan Party to perform and to exercise all remedies thereunder. "Designated Bank Account": a deposit, custody, money-market or other account of any Loan Party for which a Blocked Account Agreement has been executed by the Borrower, the bank at which such Designated Bank Account has been established and the Administrative Agent. "Hedge Agreement": as to any Person, any swap, cap, collar or similar arrangement entered into by such Person providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Secured Obligations": with respect to any Loan Party, the collective reference to (a) the Obligations, and (b) all obligations and liabilities of such Loan Party to the Administrative Agent and the Lenders, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of or in connection with any Hedge Agreement entered into by any Loan Party with any Lender and any other document made, delivered or given in connection therewith, whether on account of - 2 - principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by such Loan Party pursuant to the terms of such Hedge Agreement or other documents) or otherwise. "Security Agreement": this Security Agreement, as amended, supplemented or otherwise modified from time to time. "Trademarks": (a) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, all prints or labels on which any of the foregoing appear, and all designs and general intangibles of a like nature, and the goodwill associated therewith or symbolized thereby, and all other assets, rights and interests that uniquely embody such goodwill, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof, or otherwise and (b) all extensions or renewals thereof. "Trademark License": any agreement, written or oral, providing for the grant by or to the Borrower of any right to use any Trademark. "Vehicles": all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any State and, in any event, including, without limitation, the vehicles listed on Schedule III hereto and all tires and other appurtenances to any of the foregoing. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Security Agreement shall refer to this Security Agreement as a whole and not to any particular provision of this Security Agreement, and Section, Schedule. Annex, and Exhibit references are to this Security Agreement unless otherwise specified. The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Grant of Security Interest. As collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Secured Obligations, each Loan Party hereby grants to the Administrative Agent for the ratable benefit of the Lenders and the Issuing Lender a security interest in all of the following property now owned or at any time hereafter acquired by any Loan Party or in which any Loan Party now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"): (i) all Accounts; (ii) all Bank Accounts; (iii) all Bank Account Deposits; (iv) all Chattel Paper; - 3 - (v) all Contracts; (vi) all Documents; (vii) all Equipment; (viii) all General Intangibles; (ix) all Instruments; (x) all Inventory; (xi) all Trademarks; (xii) all Trademark Licenses; (xiii) all Vehicles; (xiv) all books and records pertaining to the Collateral; and (xv) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing. 3. Rights of Administrative Agent and Lenders; Limitations on Administrative Agent's and Lenders' Obligations. (a) Each Loan Party Remains Liable under Accounts and Contracts. Anything herein to the contrary notwithstanding, each Loan Party shall remain liable under each of the Accounts and Contracts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to each such Account and in accordance with and pursuant to the terms and provisions of each such Contract. None of the Administrative Agent, any Lender nor the Issuing Lender shall have any obligation or liability under any Account (or any agreement giving rise thereto) or under any Contract by reason of or arising out of this Security Agreement or the receipt by the Administrative Agent any such Lender or the Issuing Lender of any payment relating to such Account or Contract pursuant hereto, nor shall the Administrative Agent nor any Lender nor the Issuing Lender be obligated in any manner to perform any of the obligations of any Loan Party under or pursuant to any Account (or any agreement giving rise thereto) or under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto) or under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times. (b) Notice to Account Debtors and Contracting Parties. Upon the request of the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any Loan Party so instructed shall notify account debtors on the Accounts and parties to the Contracts that the Accounts and the Contracts have been assigned to the Administrative Agent for the ratable benefit of the Lenders and the Issuing Lender and that payments in respect thereof shall be made directly to the Administrative Agent. (c) Analysis of Accounts and Contracts. The Administrative Agent shall have the right to make test verifications of the Accounts in any manner and through any medium that it reasonably considers advisable, and each Loan Party shall furnish all such - 4 - assistance and information as the Administrative Agent may require in connection therewith. At any time and from time to time, upon the Administrative Agent's request and at the expense of the Loan Parties, each Loan Party so instructed shall cause independent public accountants or others satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts. The Administrative Agent may in its own name or in the name of others communicate with account debtors on the Accounts and parties to the Contracts to verify with them to its satisfaction the existence, amount and terms of any Accounts or Contracts. (d) Collections on Accounts. The Administrative Agent hereby authorizes each Loan Party to collect the Accounts, subject to the Administrative Agent's direction and control, and the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Administrative Agent at any time when an Event of Default shall have occurred and be continuing, any payments of Accounts, when collected by each Loan Party, shall be forthwith (and, in any event, within two Business Days) deposited by the Borrower in the exact form received, duly endorsed by such Loan Party to the Administrative Agent if required, in a special collateral account maintained by the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Lenders and the Issuing Lender only, as hereinafter provided, and, until so turned over, shall be held by such Loan Party in trust for the Administrative Agent, the Lenders and the Issuing Lender, in an account segregated from other funds of such Loan Party (the "Collateral Account"). Each deposit of any such Proceeds shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit. All Proceeds constituting collections of Accounts while held by the Administrative Agent (or by the Loan Parties in trust for the Administrative Agent, the Lenders and the Issuing Lender) shall continue to be collateral security for all of the Secured Obligations and shall not constitute payment thereof until applied as hereinafter provided. At such intervals as may be agreed upon by the Loan Parties and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent's election, the Administrative Agent shall apply all or any part of the funds on deposit in said Collateral Account on account of the Secured Obligations in such order as the Administrative Agent may elect, and any part of such funds which the Administrative Agent elects not so to apply and deems not required as collateral security for the Secured Obligations shall be paid over from time to time by the Administrative Agent to the Loan Party or to whomsoever may be lawfully entitled to receive the same. At the Administrative Agent's request, the Loan Parties shall deliver to the Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Accounts, including, without limitation, all original orders, invoices and shipping receipts. (C) Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may notify the Loan Parties in writing that such Event of Default has occurred and is continuing, and that, pursuant to the Blocked Account Agreement, the Administrative Agent shall have access to any or all Designated Bank Accounts; provided that no such notice need be given by the Administrative Agent to the Loan Parties if such Event of Default is an Event of Default specified in either Section 11(f)(i) or (ii) of the Credit Agreement. Upon the giving of such notice, or upon the occurrence of an Event of Default specified in either Section 11(f)(i) or (ii) of the Credit - 5 - Agreement, the Administrative Agent shall be entitled, at the Administrative Agent's sole discretion, to withdraw all or any portion of funds deposited in Designated Bank Accounts and apply such funds to the payment of the Secured Obligations in such order as the Administrative Agent may elect. 4. Representations and Warranties. Each Loan Party hereby represents and warrants that: (a) Title; No Other Liens. Except for the Liens granted to the Administrative Agent for the ratable benefit of the Lenders and the Issuing Lender pursuant to this Security Agreement, and the other Liens permitted to exist on the Collateral pursuant to the Credit Agreement, each Loan Party owns each item of the Collateral free and clear of any and all Liens or claims of others. No security agreement, financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as may have been filed in favor of the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender, pursuant to this Security Agreement or as may be permitted pursuant to the Credit Agreement. (b) Perfected First Priority Liens. When financing statements have been filed in the offices in the jurisdictions listed in Schedule 7.16 to the Credit Agreement, the Liens granted pursuant to this Security Agreement will constitute perfected Liens in favor of the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender, in the Collateral, which can be perfected by such filing, as collateral security for the Secured Obligations, which Liens are prior to all other Liens on the Collateral created by the Loan Parties and in existence on the date hereof and which are enforceable as such against all creditors of and purchasers from the Loan Parties and against any owner or purchaser of the real property where any of the Equipment or Inventory is located and any present or future creditor obtaining a Lien on such real property. (c) Accounts. The amount represented by each Loan Party to the Administrative Agent from time to time as owing by each account debtor or by all account debtors in respect of the Accounts will at such time be the correct amount actually owing by such account debtor or debtors thereunder. No amount payable to any Loan Party under or in connection with any Account is evidenced by any Instrument or Chattel Paper which has not been delivered to the Administrative Agent. The place where each Loan Party keeps its records concerning the Accounts is set forth on Schedule IV. (d) Contracts. No consent of any party (other than the Loan Party which is a party to such Contract) to any Contract is required, or purports to be required, in connection with the execution, delivery and performance of this Security Agreement. Each Contract is in full force and effect and constitutes a valid and legally enforceable - 6 - obligation of the parties thereto, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar laws affecting the enforcement of creditor's rights generally and general equitable principles (whether considered in a proceeding in equity or at law). No consent or authorization of, filing with or other act by or in respect of any Governmental Authority is required in connection with the execution, delivery, performance, validity or enforceability of any of the Contracts by any party thereto other than those which have been duly obtained, made or performed, are in full force and effect and do not subject the scope of any such Contract to any material adverse limitation, either specific or general in nature. Neither the Loan Party which is a party to any Contract nor (to the best of such Loan Party's knowledge) any other party to any Contract is in default or is likely to become in default in the performance or observance or any of the terms thereof. Each Loan Party has fully performed all its obligations under each Contract. The right title and interest of each Loan Party in, to and under each Contract are not subject to any defense, offset, counterclaim or claim which could reasonably be expected to have a Material Adverse Effect, nor have any of the foregoing been asserted or alleged against any Loan Party as to any Contract. Each Loan Party has delivered to the Administrative Agent a complete and correct copy of each Contract, including all amendments, supplements and other modifications thereto. No amount payable to any Loan Party under or in connection with any Contract is evidenced by any Instrument or Chattel Paper which has not been delivered to the Administrative Agent. (e) Inventory and Equipment. The Inventory and the Equipment are kept at the locations listed on Schedule V hereto. (f) Chief Executive Office. The chief executive office and chief place of business of each Loan Party is set forth on Schedule VI hereto. (g) Farm Products. None of the Collateral constitutes, or is the Proceeds of, Farm Products. (h) Insurance Policies. None of the Collateral constitutes an interest or claim in or under any policy of insurance or contract for annuity, except to the extent the same constitutes Proceeds. (i) Vehicles. Schedule III is a complete and correct list of all Vehicles owned by each Loan Party. (j) Governmental Obligors. None of the obligors on any Accounts, and none of the parties to any Contracts, is a Governmental Authority. (k) Blocked Account Agreements. For each deposit, custody, money-market or other accounts (whether, in any case, time or demand or interest or non-interest bearing) maintained by each Loan Party with any bank or any other financial institution, a Blocked Account Agreement among such bank, such Loan Party and the Administrative Agent shall have been executed. - 7 - (l) Patents and Trademarks. No Credit Party has any patents or registered trademarks. 5. Covenants. Each Loan Party covenants and agrees with the Administrative Agent, the Lenders and the Issuing Lender that, from and after the date of this Security Agreement until the Secured Obligations are paid in full and the Commitments have expired or been terminated: (a) Maintenance of Perfected Security Interests; Further Documentation; Pledge of Instruments and Chattel Paper. Each Loan Party shall maintain the security interest created by this Security Agreement as a perfected security interest having at least the priority described in Section 4(b) hereof and shall defend such security interest against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of the Loan Parties, the Loan Parties so instructed will promptly and duly execute and deliver such further instruments and documents and take such further action as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Security Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Liens created hereby. Each Loan Party also hereby authorizes the Administrative Agent to file any such financing or continuation statement without the signature of any Loan Party to the extent permitted by applicable law. A carbon, photographic or other reproduction of this Security Agreement shall be sufficient as a financing statement for filing in any jurisdiction. If any amount payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Instrument or Chattel Paper shall be immediately delivered to the Administrative Agent, duly endorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Security Agreement. (b) Indemnification. Each Loan Party agrees to pay, and to save the Administrative Agent, the Lenders and the Issuing Lender harmless from, any and all liabilities, costs and expenses (including, without limitation, legal fees and expenses) (i) with respect to, or resulting from, any delay in paying, any and all excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral, (ii) with respect to, or resulting from, any delay in complying with any Requirement of Law applicable to any of the Collateral or (iii) in connection with any of the transactions contemplated by this Security Agreement. In any suit, proceeding or action brought by the Administrative Agent, any Lender or the Issuing Lender under any Account or Contract for any sum owing thereunder, or to enforce any provisions of any Account or Contract, each Loan Party will save, indemnify and keep the Administrative Agent, such Lender and the Issuing Lender harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by any Loan Party of any obligation thereunder or - 8 - arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from such Loan Party. (c) Maintenance of Records. Each Loan Party will keep and maintain at its own cost and expense satisfactory and complete records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Accounts. Each Loan Party will mark its books and records pertaining to the Collateral to evidence this Security Agreement and the security interests granted hereby. Upon the occurrence and during the continuance of an Event of Default, the Loan Parties shall turn over any books and records pertaining to the Collateral to the Administrative Agent or to its representatives during normal business hours at the request of the Administrative Agent. (d) Right of Inspection. The Administrative Agent, the Lenders and the Issuing Lender shall at all times have full and free access during normal business hours to all the books, correspondence and records of the Loan Parties, and the Administrative Agent, the Lenders and the Issuing Lender or their respective representatives may examine the same, take extracts therefrom and make photocopies thereof, and the Loan Parties agree to render to the Administrative Agent, the Lenders and the Issuing Lender, at the Borrower's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. The Administrative Agent, the Lenders and the Issuing Lender and their respective representatives shall at all times also have the right to enter into and upon any premises where any of the Inventory or Equipment is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein. (e) Compliance with Laws, etc. Each Loan Party will comply in all material respects with all Requirements of Law applicable to the Collateral or any part thereof or to the operation of any Loan Party's business; provided, however, that any Loan Party may contest any Requirement of Law in any reasonable manner which shall not, in the sole opinion of the Administrative Agent, adversely affect the Administrative Agent's, the Lenders' or the Issuing Lender's rights or the priority of its Liens on the Collateral. (f) Compliance with Terms of Contracts, etc. Each Loan Party will perform and comply in all material respects with all its obligations under the Contracts and all its other Contractual Obligations relating to the Collateral. (g) Payment of Obligations. Each Loan Party will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of its income or profits therefrom, as well as all claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if (i) the validity thereof is being contested in good faith by appropriate proceedings, (ii) such proceedings do not involve any material danger of the sale, forfeiture or loss of any of - 9 - the Collateral or any interest therein and (iii) such charge is adequately reserved against on the Borrower's books in accordance with GAAP. (h) Limitation on Liens on Collateral. No Loan Party will create, incur or permit to exist, will defend the Collateral against, and will take such other action as is necessary to remove, any Lien or claim on or to the Collateral, other than the liens created hereby and other than as permitted pursuant to the Credit Agreement, and will defend the right, title and interest of the Administrative Agent, the Lenders and the Issuing Lender in and to any of the Collateral against the claims and demands of all Persons whomsoever. (i) Limitations on Dispositions of Collateral. No Loan Party will sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so except for (x) sales of Inventory in the ordinary course of its business and (y) so long as no Default or Event of Default has occurred and is continuing, sales, transfers and other dispositions of Collateral permitted under Section 10 of the Credit Agreement. (j) Limitations on Modifications of Contracts and Agreements Giving Rise to Accounts; Exercise of Rights; Notices. No Loan Party will (i) amend, modify, terminate or waive any provision of any Contract or any agreement giving rise to an Account in any manner which could reasonably be expected to materially adversely affect the value of such Contract or such Account as Collateral, (ii) other than in the ordinary course of business as generally conducted by any such Loan Party over a period of time, fail to exercise promptly and diligently each and every material right which it may have under each Contract and each agreement giving rise to an Account (other than any right of termination) or (iii) fail to deliver to the Administrative Agent a copy of each material demand, notice or document received by it relating in any way to any Contract or any agreement giving rise to an Account that questions the validity or enforceability of such Contract or Accounts constituting more than 5% of the aggregate amount of the Accounts. (k) Limitations on Discounts, Compromises, Extensions of Accounts. Other than in the ordinary course of business consistent with its past practice, no Loan Party will (i) grant any extension of the time of payment of any Account, (ii) compromise, compound or settle any Account for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Account, or (iv) allow any credit or discount whatsoever on any Account. (l) Maintenance of Equipment. Each Loan Party will maintain each item of Equipment in good operating condition, ordinary wear and tear and immaterial impairments of value and damage by the elements excepted, and will provide all maintenance, service and repairs necessary for such purpose, except that the Loan Parties' obligations pursuant to this Section 5(l) shall not extend to obsolete Equipment. - 10 - (m) Maintenance of Insurance. Each Loan Party will maintain, with financially sound and reputable companies, insurance policies (i) insuring the Inventory, Equipment and Vehicles against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the Administrative Agent in amounts comparable to amounts of insurance coverage obtained by similar businesses of similar size acting prudently and (ii) insuring each Loan Party, the Administrative Agent, the Lenders and the Issuing Lender against liability for personal injury and property damage relating to such Inventory, Equipment and Vehicles, such policies to be in such form and amounts and having such coverage as shall be comparable to forms, amounts and coverage, respectively, obtained by similar businesses of similar size acting prudently, with losses payable to the respective Loan Party, the Administrative Agent, the Lenders and the Issuing Lenders as their respective interests may appear or, in the case of liability insurance, showing the Administrative Agent, the Lenders and the Issuing Lender as additional insured parties. All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Administrative Agent of written notice thereof, (ii) name the Administrative Agent, the Lenders and the Issuing Lender as insured parties and loss payees, (iii) include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to the Administrative Agent. Each Loan Party shall deliver to the Administrative Agent a report of a reputable insurance broker with respect to such insurance during the month of March in each calendar year and such supplemental reports with respect thereto as the Administrative Agent may from time to time reasonably request. (n) Further Identification of Collateral. Each Loan Party will furnish to the Administrative Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail. (o) Notices. Each Loan Party will advise the Administrative Agent and the Lenders promptly, in reasonable detail, at their respective addresses set forth in the Credit Agreement, (i) of any Lien (other than Liens created hereby or permitted under the Credit Agreement) on, or claim asserted against, any of the Collateral and (ii) of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the Liens created hereunder. (p) Changes in Locations, Name, etc. No Loan Party will (i) change the location of its chief executive office/chief place of business from that specified in Section 4(f) or remove its books and records concerning the Accounts from the location specified in Section 4(c), (ii) permit any of the Inventory or Equipment to be kept at a location other than those listed on Schedule V hereto or (iii) change its name, identity or corporate structure to such an extent that any financing statement filed by the Administrative Agent in connection with this Security Agreement would become seriously misleading. - 11 - (q) Trademarks. (i) Each Loan Party (either itself or through licensees) will, except with respect to any Trademark that the Borrower shall reasonably determine is of negligible economic value to it, (A) continue to use each Trademark on each and every trademark class of goods applicable to its current line as reflected in its current catalogs, brochures and price lists in order to maintain such Trademark in full force free from any claim of abandonment for non-use, (B) maintain as in the past the quality of products and services offered under such Trademark, (C) employ such Trademark with the appropriate notice of registration, (D) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender, shall obtain a perfected security interest in such mark pursuant to this Security Agreement, and (E) not (and not permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated. (ii) Each Loan Party shall from time to time execute and deliver any and all agreements, instruments, documents, and papers as the Administrative Agent may request to evidence the Administrative Agent's security interest for the ratable benefit of the Lenders and the Issuing Lender in any Trademark and the goodwill and general intangibles of each Loan Party relating thereto or represented thereby, and each Loan Party hereby constitutes the Administrative Agent its attorney-in-fact to execute and file all such writings for the foregoing purposes, all acts of such attorney being hereby ratified and confirmed, such power being coupled with an interest is irrevocable until the Secured Obligations are paid in full and the Commitments are terminated. (r) Vehicles. Each Loan Party will maintain each Vehicle in good operating condition, ordinary wear and tear and immaterial impairments of value and damage by the elements excepted, and will provide all maintenance, service and repairs necessary for such purpose. Each Loan Party will notify the Administrative Agent of each acquisition or sale of a Vehicle, promptly following the acquisition or sale thereof. If an Event of Default shall occur and be continuing, at the request of the Administrative Agent the Borrower shall, within five Business Days after such request, file applications for certificates of title indicating the Administrative Agent's first priority Lien for the ratable benefit of the Lenders and the Issuing Lender on the Vehicles covered by such certificates, together with any other necessary documentation, in each office in each jurisdiction which the Administrative Agent shall deem advisable to perfect its Liens on the Vehicles. (s) Inventory. None of the Inventory of the Borrower shall be evidenced by a warehouse receipt. - 12 - (t) Bank Accounts. Each Credit Party will maintain all of its Bank Accounts, as set forth on Schedule I, as Designated Bank Accounts. 6. Administrative Agent's Appointment as Attorney-in- Fact. (a) Powers. The Borrower hereby irrevocably constitutes and appoints the Administrative Agent and any officer or Administrative Agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the Borrower and in the name of the Borrower or in its own name, from time to time in the Administrative Agent's discretion, for the purpose of carrying out the terms of this Security Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Security Agreement, and, without limiting the generality of the foregoing, the Borrower hereby gives the Administrative Agent the power and right, on behalf of the Borrower, without notice to or assent by the Borrower, to do the following: (i) in the name of the Borrower or its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Account, Instrument, General Intangible or Contract or with respect to any other Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Account, Instrument, General Intangible or Contract or with respect to any other Collateral whenever payable; (ii) to pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, to effect any repairs or any insurance called for by the terms of this Security Agreement and to pay all or any part of the premiums therefor and the costs thereof; (iii) in the case of any Trademark, to execute and deliver any and all agreements, instruments, documents and papers as the Administrative Agent may request to evidence the Administrative Agent's and the Lenders' security interest in such Trademark and the goodwill and general intangibles of the Borrower relating thereto or represented thereby; (iv) to execute, in connection with any sale provided for in Section 9 hereof, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and (v) (A) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (B) to ask or demand for, collect, receive payment of and receipt - 13 - for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (C) to sign and endorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any thereof and to enforce any other right in respect of any Collateral; (E) to defend any suit, action or proceeding brought against the Borrower with respect to any Collateral; (F) to settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; (G) to assign any Trademark (along with the goodwill of the business to which any such Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; and (H) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and to do, at the Administrative Agent's option and the Borrower's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's, Liens thereon for the ratable benefit of the Lenders and the Issuing Lender and to effect the intent of this Security Agreement, all as fully and effectively as the Borrower might do. Anything in this Section 6(a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section unless an Event of Default has occurred and is continuing. The Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and are irrevocable. (b) No Duty on Administrative Agent's, Lenders' or Issuing Lender's Part. The powers conferred on the Administrative Agent, the Lenders and the Issuing Lender hereunder are solely to protect the Administrative Agent's, the Lenders' and the Issuing Lender's interests in the Collateral and shall not impose any duty upon the Administrative Agent, any Lender or Issuing Lender to exercise any such powers. Each of the Administrative Agent, the Lenders and the Issuing Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or Administrative Agents shall be responsible to the Borrower for any act or failure to act hereunder, except for its own gross negligence or willful misconduct. 7. Performance by Administrative Agent of Borrower's Obligations. If the Borrower fails to perform or comply with any of its agreements contained herein, the - 14 - Administrative Agent, at its option, but without any obligation to do so, may itself perform or comply, or otherwise cause performance or compliance, with such agreement. The expenses of the Administrative Agent incurred in connection with such performance or compliance, together with interest thereon at a rate per annum 2.0% above the Base Rate, shall be payable by the Borrower to the Administrative Agent on demand and shall constitute Secured Obligations secured hereby. 8. Proceeds. In addition to the rights of the Administrative Agent, the Lenders and the Issuing Lender specified in Section 3(d) with respect to payments of Accounts, it is agreed that (a) all Proceeds received by the Borrower consisting of cash, checks and other near-cash items shall be held by the Borrower in trust for the Administrative Agent, the Lenders and the Issuing Lender, segregated from other funds of the Borrower, and shall, forthwith upon receipt by the Borrower, be turned over to the Administrative Agent in the exact form received by the Borrower (duly endorsed by the Borrower to the Administrative Agent, if required), and held by the Administrative Agent in a Collateral Account maintained under the sole dominion and control of the Administrative Agent. Any and all such Proceeds held by the Administrative Agent in a Collateral Account (or by the Borrower in trust for the Administrative Agent and the Lenders and the Issuing Lender) shall continue to be held as collateral security for the Secured Obligations and shall not constitute payment thereof until applied as provided in this Section. At such intervals as may be agreed upon between the Administrative Agent and the Borrower or, if an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent's election, the Administrative Agent may apply all or any part of the Proceeds held in any Collateral Account or otherwise received by the Administrative Agent against the Secured Obligations (whether matured or unmatured), such application to be in such order as the Administrative Agent shall elect. Any balance of such Proceeds remaining after the Secured Obligations shall have been paid in full and the Commitments shall have expired or been terminated shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same. 9. Remedies. If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Lenders and the Issuing Lender, may exercise, in addition to all other rights and remedies granted to it in this Security Agreement and in any other instrument or agreement securing, evidencing or relating to the Secured Obligations, all rights and remedies of a secured party under the Code. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon the Borrower or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Administrative Agent, any Lender or the Issuing Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The - 15 - Administrative Agent, any Lender or the Issuing Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in the Borrower, which right or equity is hereby waived or released. The Borrower further agrees, at the Administrative Agent's request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at the Borrower's premises or elsewhere. The Administrative Agent shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable costs and expenses of every kind incurred therein or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent, the Lenders and the Issuing Lender arising out of the exercise by the Administrative Agent hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Secured Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the Administrative Agent account for the surplus, if any, to the Borrower. To the extent permitted by applicable law, the Borrower waives all claims, damages and demands it may acquire against the Administrative Agent, any Lender or the Issuing Lender arising out of the exercise by the Administrative Agent, any Lender or the Issuing Lender of any of its rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. The Borrower shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay the Secured Obligations and the fees and disbursements of any attorneys employed by the Administrative Agent, any Lender or the Issuing Lender to collect such deficiency. 10. Grant of License to Use Trademark Collateral. For the purpose of enabling the Administrative Agent to exercise rights and remedies under Section 9 hereof at such time as the Administrative Agent shall be lawfully entitled to exercise such rights and remedies, the Borrower hereby grants to the Administrative Agent an irrevocable, non-exclusive license (exercisable without payment of royalty or other compensation to the Borrower) to use, license or sublicense any of the Trademarks, now owned or hereafter acquired by the Borrower, and wherever the same may be located, and including in such license reasonable access to all media in which any of the licensed items may be recorded or stored. The use of such license by the Administrative Agent shall be exercised, at the option of the Administrative Agent for any purpose appropriate in connection with the exercise of remedies hereunder, only upon the occurrence and during the continuance of an Event of Default, provided that any license, sublicense or other transaction entered into by the Administrative Agent in accordance herewith shall be binding upon the Borrower notwithstanding any subsequent cure of an Event of Default. The Administrative Agent agrees to apply the net proceeds received from any license as provided in Section 8 hereof. 11. Limitation on Duties Regarding Presentation of Collateral. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical - 16 - preservation of the Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. None of the Administrative Agent, Lender, nor the Issuing Lender nor any of their respective directors, officers, employees or Administrative Agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. The powers conferred on the Administrative Agent, the Lenders and the Issuing Lender hereunder are solely to protect the Administrative Agent's, the Lenders' and the Issuing Lender's interests in the Collateral and shall not impose any duty upon the Administrative Agent, any Lender or the Issuing Lender to exercise any such powers. The Administrative Agent, the Lenders and the Issuing Lender shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or Administrative Agents shall be responsible to the Borrower for any act or failure to act hereunder, except for their own gross negligence or willful misconduct. 12. Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Collateral are irrevocable and powers coupled with an interest. 13. Notices. Notices, requests and demands to or upon the Administrative Agent or the Borrower hereunder shall be effected in the manner set forth in Section 13.2 of the Credit Agreement. 14. Authority of Administrative Agent. The Borrower acknowledges that the rights and responsibilities of the Administrative Agent under this Security Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Security Agreement shall, as between the Administrative Agent, the Lenders and the Issuing Lender, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Borrower, the Administrative Agent shall be conclusively presumed to be acting as Administrative Agent for the Lenders and the Issuing Lender with full and valid authority so to act or refrain from acting, and the Borrower shall be under no obligation, or entitlement, to make any inquiry respecting such authority. 15. Severability. Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. - 17 - 16. Paragraph Headings. The paragraph headings used in this Security Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 17. No Waiver; Cumulative Remedies. None of the Administrative Agent, any Lender nor the Issuing Lender shall by any act (except by a written instrument pursuant to Section 18 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any Lender or the Issuing Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent, any Lender or the Issuing Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent, such Lender or the Issuing Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any rights or remedies provided by law. 18. Waivers and Amendments; Successors and Assigns; Governing Law. None of the terms or provisions of this Security Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Borrower and the Administrative Agent, provided that any provision of this Security Agreement may be waived by the Administrative Agent in a written instrument executed by the Administrative Agent. This Security Agreement shall be binding upon the successors and assigns of the Borrower and shall inure to the benefit of the Administrative Agent, the Lenders and the Issuing Lender and their respective successors and assigns. This Security Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. 19. Additional Grantors. Each Subsidiary of the Borrower is required pursuant to Section 9.9 of the Credit Agreement to become party to this Security Agreement and shall become a Grantor for all purposes of this Security Agreement upon execution and delivery by such Subsidiary of a Supplement in the form of Annex B hereto. [SIGNATURE PAGE FOLLOWS] - 18 - IN WITNESS WHEREOF, the Borrower has caused this Security Agreement to be duly executed and delivered as of the date first above written. V-1 UNIDIGITAL INC. By /s/ William E. Dye ---------------------------- Name: William E. Dye Title: Chief Executive Officer UNIDIGITAL ELEMENTS (NY), INC. By /s/ William E. Dye ---------------------------- Name: William E. Dye Title: Chief Executive Officer UNIDIGITAL ELEMENTS (SF), INC. By /s/ William E. Dye ---------------------------- Name: William E. Dye Title: Chief Executive Officer UNISON (NY), INC. By /s/ William E. Dye ---------------------------- Name: William E. Dye Title: Chief Executive Officer UNISON (MA), INC. By /s/ William E. Dye ---------------------------- Name: William E. Dye Title: Chief Executive Officer V-2 EX-10 17 ANNEX A ANNEX A ------- FORM OF BLOCKED ACCOUNT AGREEMENT March , 1998 [Name of Bank] [Address] Re: Blocked Account Agreement Ladies and Gentlemen: 1. We hereby notify you that we have granted a security interest in our demand deposit account number maintained with you (the "Bank Account") to Canadian Imperial Bank of Commerce, as Agent, 425 Lexington Avenue, New York, New York 10021 (the "Agent"). 2. We hereby irrevocably instruct you, and by your acceptance of this Blocked Account Agreement you hereby agree, to make all transfers of funds to be made by you after the delivery of this Blocked Account Agreement out of or in connection with the Bank Account in accordance with the instructions of the Agent, subject to paragraph . If the Agent shall at any time instruct you to make transfers of funds from the Bank Account directly to the Agent, such transfers shall be made to such account as the Agent shall specify maintained at Canadian Imperial Bank of Commerce, New York, New York 10021, or otherwise in accordance with the instructions of the Agent. 3. We also hereby notify you and agree that the Agent shall be irrevocably entitled (until the Agent shall notify you to the contrary) to exercise any and all rights (without notice to us or further consent by us) in respect of or in connection with the Bank Account including, without limitation, the right to specify when transfers of funds are to be made out of or in connection with the Bank Account and the withdrawal of funds therefrom. 4. We also hereby notify you, and by your acceptance of this Blocked Account Agreement you hereby agree, that all fees, expenses and other charges arising out of or in connection with the Bank Account shall remain our obligation and shall not be an obligation of the Agent; provided that the Agent shall be notified by you of any default in our payment of any such obligation and the Agent shall be entitled (but shall have no obligation) to cure any such default within a reasonable period of time after its receipt of such notice. 5. We also hereby notify you that in the event that any provision of any instrument, certificate or other document delivered by or on behalf of us in connection with the Account shall be inconsistent with any provision of this notice, the provisions of this notice shall govern. 6. Subject to paragraph 7, you hereby waive any right that you may now or hereafter have to security interests, bank's or other possessory liens, rights to offset or other claims against the funds in the Bank Account. You agree to hold the funds in the Bank Account as the bailee and custodian for the benefit of the Agent, to indicate on your records the assignment of the funds in the Bank Account in favor of the Agent and to provide the Agent, at the request of the Agent, with information concerning the amounts on deposit in the Bank Account. Subject to paragraph 8, you agree not to pay to us all or any part of the funds in the Bank Account or any income, distributions, profits or proceeds of the funds in the Bank Account without the prior written consent of the Agent. 7. Notwithstanding anything contained herein to the contrary, we agree and the Agent agrees that you shall be entitled to be reimbursed from funds in the Bank Account for your fees related to your services in connection with the Bank Account and for amounts in respect of returned and otherwise uncollected items previously credited to the Bank Account. 8. By its acknowledgment and acceptance of this Agreement, the Agent hereby instructs you, until such instruction is rescinded by the Agent or superseded by a different instruction from the Agent (which instruction shall be rescinded by the Agent only so long as an Event of Default under the Credit Agreement to which we are a party has occurred and is continuing), to permit us to withdraw funds standing to the credit of the Bank Account. - 2 - Please acknowledge your agreement to the foregoing by signing in the space provided below on two copies hereof sent herewith, and returning a one such signed copy to the undersigned and another such signed copy to the Agent Very truly yours, [NAME OF CREDIT PARTY] By --------------------------- Name: Title: AGREED TO AND ACCEPTED: [NAME OF BANK] By --------------------------- Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE, as Agent By --------------------------- Name: Title: - 3 - EX-10 18 ANNEX B ANNEX B to Security Agreement SUPPLEMENT TO SECURITY AGREEMENT SUPPLEMENT, dated as of (this "Supplement"), made by , a corporation (the "Additional Grantor"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE as administrative agent (in such capacity, the "Administrative Agent") for the Lenders (the "Lenders") and Canadian Imperial Bank of Commerce as issuer of the Letters of Credit (as defined in the Credit Agreement referenced below) (in such capacity, the "Issuing Lender") parties to the Credit Agreement referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in the Credit Agreement. RECITALS WHEREAS, reference is hereby made to that certain Credit Agreement, dated as of March , 1998, among Unidigital Inc. (the "Borrower"), the Administrative Agent, the Lenders and the Issuing Lender (as amended, supplemented or otherwise modified as of the date hereof, the "Credit Agreement"); WHEREAS, in connection with the Credit Agreement, the Subsidiaries of the Borrower (other then the Additional Grantor) (collectively the "Grantors" and each a "Grantor") have entered into the Security Agreement, dated as of March , 1998, in favor of the Administrative Agent for the ratable benefit of Lenders and the Issuing Lender (as amended, supplemented or otherwise modified as of the date hereof, the "Subsidiaries Security Agreement"); WHEREAS, Section 9.9 of the Credit Agreement requires that should the Borrower at any time acquire or form any Subsidiary, such Subsidiary shall become party to the Subsidiaries Guarantee and the Security Agreement; WHEREAS, the Additional Grantor has agreed to execute and deliver this Supplement in order to become a party to the Security Agreement. NOW, THEREFORE, IT IS AGREED: 1. Security Agreement. By executing and delivering this Supplement, the Additional Grantor, as provided in Section 19 of the Security Agreement, hereby becomes a party to the Security Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder. The Additional Grantor hereby represents and warrants the each of the representations and warranties contained in Section 4 of the Security Agreement is true and correct on and as of the date hereof (after giving effect to this Supplement) as if made on and as of such date. 2. Supplement to the Security Agreement. This Supplement is supplemental to the Security Agreement, forms a part thereof and is subject to the terms thereof. From and after the date of this Supplement, Schedules I, II, III, IV, V, and VI, to the Security Agreement shall be deemed to include each item listed on Annex D-1 to this Supplement. 3. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed and delivered as of the date first above written. [NAME OF ADDITIONAL GRANTOR], a corporation By --------------------------- Name: Title: The place where Additional Grantor keeps its records concerning the Accounts is: ---------------------------------------------------------------------------. The Additional Grantor's chief executive office and chief place of business is located at: ---------------------------------------------------------------------------. - 5 - EX-10 19 ANNEX B ANNEX D-1 to Supplement I. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT BANK ACCOUNTS ------------- II. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT CONTRACTS --------- III. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT VEHICLES -------- IV. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT LOCATION OF RECORDS ------------------- V. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT INVENTORY AND EQUIPMENT ----------------------- VI. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT CHIEF EXECUTIVE OFFICE ---------------------- VII. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT GOVERNMENTAL OBLIGORS --------------------- VIII. SUPPLEMENTS TO SCHEDULE I TO THE SUBSIDIARIES SECURITY AGREEMENT INSURANCE OBLIGORS ------------------ - 7 - EX-10.15 20 SUBSIDIARIES GUARANTEE SUBSIDIARIES GUARANTEE GUARANTEE, dated as of March 24, 1998, made by each of the entities that are signatories hereto (the "Guarantors"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE, as administrative agent (in such capacity, the "Administrative Agent") for the lenders (the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE (the "Issuing Lender") parties to the Credit Agreement referred to below. RECITALS Pursuant to the Credit Agreement, dated as of March 24, 1998 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders, the Issuing Lender and the Administrative Agent, the Lenders have severally agreed to make loans to and the Issuing Lender has agreed to issue letters of credit for the account of the Borrower upon the terms and subject to the conditions set forth therein, such loans to be evidenced by the Notes issued by the Borrower thereunder. The Borrower owns directly or indirectly all of the issued and outstanding stock of each Guarantor. The proceeds of the loans and extensions of credit will be used in part to enable the Borrower to make valuable transfers (as determined as provided herein) to some of the Guarantors in connection with the operation of their respective businesses. The Borrower and the Guarantors are engaged in related businesses, and each Guarantor will derive substantial direct and indirect benefit from the making of the loans and extensions of credit. It is a condition precedent to the obligation of the Lenders to make their respective loans to the Borrower, and of the Issuing Lender to issue its letters of credit, under the Credit Agreement that the Guarantors shall have executed and delivered this Guarantee to the Administrative Agent for the ratable benefit of the Lenders and the Issuing Lender. NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective loans to the Borrower, and the Issuing Lender to issue its letters of credit under the Credit Agreement, the Guarantors hereby agree with the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Guarantee shall refer to this Guarantee as a whole and not to any particular provision of this Guarantee, and section and paragraph references are to this Guarantee unless otherwise specified. (c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Guarantee. (a) Subject to the provisions of Section 2(b), each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Lenders and the Issuing Lender and their respective successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations. (b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors. (c) Each Guarantor further agrees to pay any and all expenses (including, without limitation, all fees and disbursements of counsel) which may be paid or incurred by the Administrative Agent or any Lender in enforcing, or obtaining advice of counsel in respect of, any rights with respect to, or collecting, any or all of the Obligations and/or enforcing any rights with respect to, or collecting against, such Guarantor under this Guarantee. This Guarantee shall remain in full force and effect until the Obligations are paid in full and the Commitments are terminated, notwithstanding that from time to time prior thereto the Borrower may be free from any Obligations. (d) Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing this Guarantee or affecting the rights and remedies of the Administrative Agent or any Lender or the Issuing Lender hereunder. (e) No payment or payments made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment or payments other than payments made by such Guarantor in respect of the Obligations or payments received or collected from such Guarantor in respect of the Obligations, remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full and the Commitments are terminated. (f) Each Guarantor agrees that whenever, at any time, or from time to time, it shall make any payment to the Administrative Agent or any Lender or the Issuing Lender on - 2 - account of its liability hereunder, it will notify the Administrative Agent in writing that such payment is made under this Guarantee for such purpose. 3. Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder who has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 5 hereof. The provisions of this Section shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the Lenders and the Issuing Lender, and each Guarantor shall remain liable to the Administrative Agent and the Lenders and the Issuing Lender for the full amount guaranteed by such Guarantor hereunder. 4. Right of Set-off. Upon the occurrence of any Event of Default, each Guarantor hereby irrevocably authorizes each Lender and the Issuing Lender at any time and from time to time without notice to such Guarantor or any other Guarantor, any such notice being expressly waived by each Guarantor, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or the Issuing Lender to or for the credit or the account of such Guarantor, or any part thereof in such amounts as such Lender or the Issuing Lender may elect, against and on account of the obligations and liabilities of such Guarantor to such Lender or the Issuing Lender hereunder and claims of every nature and description of such Lender or the Issuing Lender against such Guarantor, in any currency, whether arising hereunder, under the Credit Agreement, any Note, any Loan Documents or otherwise, as such Lender or the Issuing Lender may elect, whether or not the Administrative Agent, any Lender or the Issuing Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. The Administrative Agent, each Lender and the Issuing Lender shall notify such Guarantor promptly of any such set-off and the application made by the Administrative Agent, such Lender or the Issuing Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent, each Lender and the Issuing Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent, such Lender or the Issuing Lender may have. 5. No Subrogation. Notwithstanding any payment or payments made by any of the Guarantors hereunder or any set-off or application of funds of any of the Guarantors by any Lender or the Issuing Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent, any Lender or the Issuing Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by any Lender or the Issuing Lender for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent, the Lenders and the Issuing Lender by the Borrower on account - 3 - of the Obligations are paid in full and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Administrative Agent, the Lenders and the Issuing Lender, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. 6. Amendments, etc. with respect to the Obligations; Waiver of Rights. Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Administrative Agent, any Lender or the Issuing Lender may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent, any Lender or the Issuing Lender, and the Credit Agreement, the Notes and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent, any Lender or the Issuing Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. None of the Administrative Agent nor any Lender nor the Issuing Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Guarantee or any property subject thereto. When making any demand hereunder against any of the Guarantors, the Administrative Agent, any Lender or the Issuing Lender may, but shall be under no obligation to, make a similar demand on the Borrower or any other Guarantor or guarantor, and any failure by the Administrative Agent, any Lender or the Issuing Lender to make any such demand or to collect any payments from the Borrower or any such other Guarantor or guarantor or any release of the Borrower or such other Guarantor or guarantor shall not relieve any of the Guarantors in respect of which a demand or collection is not made or any of the Guarantors not so released of their several obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent, any Lender or the Issuing Lender against any of the Guarantors. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 7. Guarantee Absolute and Unconditional. Each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent, any Lender or the Issuing Lender upon this Guarantee or acceptance of this Guarantee, the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee; and all dealings between the Borrower - 4 - and any of the Guarantors, on the one hand, and the Administrative Agent, the Lenders and the Issuing Lender, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Guarantee. Each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Obligations. Each Guarantor understands and agrees that this Guarantee shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity, regularity or enforceability of the Credit Agreement, any Note or any other Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent, any Lender or the Issuing Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower against the Administrative Agent, any Lender or the Issuing Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of such Guarantor under this Guarantee, in bankruptcy or in any other instance. When pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent, any Lender and the Issuing Lender may, but shall be under no obligation to, pursue such rights and remedies as it may have against the Borrower or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent, any Lender or the Issuing Lender to pursue such other rights or remedies or to collect any payments from the Borrower or any such other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower or any such other Person or any such collateral security, guarantee or right of offset, shall not relieve such Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent, the Lenders and the Issuing Lender against such Guarantor. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon each Guarantor and the successors and assigns thereof, and shall inure to the benefit of the Administrative Agent, the Lenders and the Issuing Lender, and their respective successors, indorsees, transferees and assigns, until all the Obligations and the obligations of each Guarantor under this Guarantee shall have been satisfied by payment in full and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Obligations. 8. Reinstatement. This Guarantee shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent, any Lender or the Issuing Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. - 5 - 9. Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in U.S. Dollars at the office of the Administrative Agent specified in Section 11.2 of the Credit Agreement. 10. Representations and Warranties. Each Guarantor hereby represents and warrants that: (a) it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has the corporate power and authority and the legal right to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged; (b) it has the corporate power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guarantee and the other Loan Documents to which is a party, and has taken all necessary corporate action to authorize its execution, delivery and performance of this Guarantee and the other Loan Documents to which is a party; (c) this Guarantee and each of the other Loan Documents to which such Guarantor is a party has been duly executed and delivered on behalf of such Guarantor, and constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered on a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (d) the execution, delivery and performance of this Guarantee and the other Loan Documents to which such Guarantor is a party will not violate any provision of any Requirement of Law or Contractual Obligation of such Guarantor and will not result in or require the creation or imposition of any Lien on any of the properties or revenues of such Guarantor pursuant to any Requirement of Law or Contractual Obligation of the Guarantor (other than Liens created by the Security Documents in favor of the Administrative Agent); (e) no consent or authorization of, filing with, notice to, or other act by or in respect of, any Governmental Authority or any other Person (including, without limitation, any stockholder or creditor of such Guarantor) is required in connection with the execution, delivery, performance, validity or enforceability of this Guarantee or the other Loan Documents to which such Guarantor is a party; (f) no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or against any of its properties or revenues (i) with respect to this Guarantee or any other Loan Document to which such Guarantor is a party or any of the transactions contemplated hereby or thereby, or (ii) which could have a material adverse effect on the business, operations, property or financial or other condition of such Guarantor; - 6 - (g) it has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien of any nature whatsoever except such as are disclosed in the balance sheet referred to in Section 10(i) hereof and as are permitted by Section 10.3 of the Credit Agreement; (h) it has filed or caused to be filed on its behalf all tax returns which, to its knowledge, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of such Guarantor); no tax Lien has been filed, and, to the knowledge of such Guarantor, no claim is being asserted, with respect to any such tax, fee or other charge; (i) The unaudited balance sheet of such Guarantor as at August 31, 1997 and the related unaudited statement of income and of cash flows for the twelve-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender and the Issuing Lender, are complete and correct and present fairly the financial condition of such Guarantor as at such date, and the results of its operations and its cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). At the date of the most recent balance sheet referred to above, such Guarantor had no material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other financial derivative, which is not reflected in the foregoing statements or in the notes thereto. During the period from August 31, 1997, to and including the date hereof there has been no sale, transfer or other disposition by such Guarantor of any material part of its business or property and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person) material in relation to the financial condition of such Guarantor at August 31, 1997. Each Guarantor agrees that the foregoing representations and warranties shall be deemed to have been made by such Guarantor on the date of each borrowing by the Borrower, and the date of each issuance of a Letter of Credit, under the Credit Agreement on and as of such date of borrowing as though made hereunder on and as of such date. 11. Limitation of Liability. Notwithstanding the provisions of Section 2, no Guarantor shall have any personal liability for payment of the Obligations, and in any action or suit to collect the Obligations the Administrative Agent, the Lenders and the Issuing Lender shall not seek any in personam judgment against any Guarantor or any judgment for a deficiency but shall look solely to the security interests created under and the collateral - 7 - described in the documents set forth in Schedule 1 attached hereto (the "Guarantor Security Documents") to which such Guarantor is a party for payment of the Obligations. Nothing contained in this Section shall be construed to impair the validity of the Obligations or affect or impair in any way the right of the Administrative Agent, the Lenders and the Issuing Lender to exercise their rights and remedies under the Credit Agreement, the Notes and any other Loan Documents in accordance with their respective terms. 12. Authority of Administrative Agent. Each Guarantor acknowledges that the rights and responsibilities of the Administrative Agent under this Guarantee with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Guarantee shall, as between the Administrative Agent and the Lenders and the Issuing Lender, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and such Guarantor, the Administrative Agent shall be conclusively presumed to be acting as Administrative Agent for the Lenders and the Issuing Lender with full and valid authority so to act or refrain from acting, and no Guarantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 13. Notices. All notices, requests and demands to or upon the Administrative Agent, any Lender, the Issuing Lender or any Guarantor to be effective shall be in writing (or by telex, fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (1) when delivered by hand or (2) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (3) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows: (a) if to the Administrative Agent, any Lender or the Issuing Lender, at its address or transmission number for notices provided in Section 13.2 of the Credit Agreement; and (b) if to any Guarantor, at its address or transmission number for notices set forth under its signature below. The Administrative Agent, each Lender, the Issuing Lender and each Guarantor may change its address and transmission numbers for notices by notice in the manner provided in this Section. 14. Counterparts. This Guarantee may be executed by one or more of the Guarantors on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the counterparts of this Guarantee signed by all the Guarantors shall be lodged with the Administrative Agent. 15. Severability. Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and - 8 - any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 16. Integration. This Guarantee represents the agreement of each Guarantor with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent, any Lender or the Issuing Lender relative to the subject matter hereof not reflected herein. 17. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the terms or provisions of this Guarantee may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each Guarantor and the Administrative Agent, provided that any provision of this Guarantee may be waived by the Administrative Agent, the Lenders and the Issuing Lender in a letter or agreement executed by the Administrative Agent or by telex or facsimile transmission from the Administrative Agent. (b) None of the Administrative Agent nor any Lender nor the Issuing Lender shall by any act (except by a written instrument pursuant to Section 19(a) hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent, any Lender or the Issuing Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent, any Lender or the Issuing Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent, such Lender or the Issuing Lender would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 18. Section Headings. The section headings used in this Guarantee are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 19. Successors and Assigns. This Guarantee shall be binding upon the successors and assigns of each Guarantor and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and assigns. 20. GOVERNING LAW. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 21. Submission To Jurisdiction; Waivers. Each of the Guarantors hereby irrevocably and unconditionally: - 9 - (a) submits for itself and its property in any legal action or proceeding relating to this Guarantee and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Guarantor at its address set forth under its signature below or at such other address of which the Administrative Agent shall have been notified pursuant hereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 22. Acknowledgments. Each Guarantor hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Guarantee and the other Loan Documents to which it is a party; (b) none of the Administrative Agent nor any Lender nor the Issuing Lender has any fiduciary relationship with or duty to such Guarantor arising out of or in connection with this Guarantee or any of the other Loan Documents to which it is a party, and the relationship between such Guarantor, the Borrower and the other Loan Parties, on one hand, and Administrative Agent and Lenders and the Issuing Lender, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders and the Issuing Lender or among such Guarantor, the Borrower, any of the other Loan Parties and the Lenders and the Issuing Lender. 23. WAIVERS OF JURY TRIAL. EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. - 10 - 24. Additional Guarantors. Each Subsidiary of the Borrower is required pursuant to Section 9.9 of the Credit Agreement to become party to this Subsidiaries Guarantee and shall become a Guarantor for all purposes of this Subsidiaries Guarantee upon execution and delivery by such Subsidiary of a Supplement in the form of Annex A hereto - 11 - IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee to be duly executed and delivered by its duly authorized officer as of the day and year first above written. UNIDIGITAL ELEMENTS (NY), INC. By:/s/ William E. Dye ------------------------------------- Title: Chief Executive Officer ---------------------------------- Addresss for Notices: Telex: ---------------------------------- Fax: ------------------------------------ UNIDIGITAL ELEMENTS (SF), INC. By:/s/ William E. Dye ------------------------------------- Title: Chief Executive Officer ---------------------------------- Addresss for Notices: Telex: ---------------------------------- Fax: ------------------------------------ UNISON (NY), INC. By:/s/ William E. Dye ------------------------------------- Title: Chief Executive Officer ---------------------------------- Addresss for Notices: Telex: ---------------------------------- Fax: ------------------------------------ UNISON (MA), INC. By:/s/ William E. Dye ------------------------------------- Title: Chief Executive Officer ---------------------------------- Addresss for Notices: Telex: ---------------------------------- Fax: ------------------------------------ - 12 - EX-10 21 SUBSIDIARIES GUARANTEE ANNEX A ------- to Subsidiaries Guaranty SUPPLEMENT TO SUBSIDIARIES GUARANTEE SUPPLEMENT, dated as of (this "Supplement"), made by , a corporation (the "Additional Guarantor"), in favor of CANADIAN IMPERIAL BANK OF COMMERCE as administrative agent (in such capacity, the "Administrative Agent") for the Lenders (the "Lenders") and Canadian Imperial Bank Of Commerce as issuer of the Letters of Credit (as defined in the Credit Agreement referenced below) (in such capacity, the "Issuing Lender") parties to the Credit Agreement referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in the Credit Agreement. RECITALS WHEREAS, reference is hereby made to that certain Credit Agreement, dated as of March , 1998, among Unidigital Inc. (the "Borrower"), the Administrative Agent, the Lenders and the Issuing Lender (as amended, supplemented or otherwise modified as of the date hereof, the "Credit Agreement"); WHEREAS, in connection with the Credit Agreement, the Subsidiaries of the Borrower (other then the Additional Guarantor) (collectively the "Guarantors" and each a "Guarantor") have entered into the Subsidiaries Guarantee, dated as of March , 1998, in favor of the Administrative Agent for the ratable benefit of Lenders and the Issuing Lender (as amended, supplemented or otherwise modified as of the date hereof, the "Subsidiaries Guarantee"); WHEREAS, Section 9.9 of the Credit Agreement requires that should the Borrower at any time acquire or form any Subsidiary, such Subsidiary shall become party to the Subsidiaries Guarantee and the Subsidiaries Security Agreement; WHEREAS, the Additional Guarantor has agreed to execute and deliver this Supplement in order to become a party to the Subsidiaries Guarantee. NOW, THEREFORE, IT IS AGREED: 1. Subsidiaries Guarantee. By executing and delivering this Supplement, the Additional Guarantor, as provided in Section 26 of the Subsidiaries Guarantee, hereby becomes a party to the Subsidiaries Guarantee as a Guarantor thereunder with the same force and effect as if originally named therein as a Guarantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Guarantor thereunder. The Additional Guarantor hereby represents and warrants the each of the representations and warranties contained in Section of the Subsidiaries Guarantee is true and - 13 - correct on and as of the date hereof (after giving effect to this Supplement) as if made on and as of such date. 2. Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the undersigned has caused this Supplement to be duly executed and delivered as of the date first above written. [NAME OF ADDITIONAL GUARANTOR], a corporation -------------------- By: ------------------------------------- Name: Title: EX-10.16 22 INTERCREDITOR AND SUBORDINATION AGREEMENT INTERCREDITOR AND SUBORDINATION AGREEMENT INTERCREDITOR AND SUBORDINATION AGREEMENT, dated as of March 25, 1998, by and among the KWIK INTERNATIONAL COLOR, LTD., a New York corporation (together with its successors and assigns, the "Subordinated Lender"), UNIDIGITAL INC., a Delaware corporation (together with its successors and assigns, the "Borrower"), and CANADIAN IMPERIAL BANK OF COMMERCE, a New York banking corporation, as Administrative Agent (together with its successors and assigns in such capacity, the "Administrative Agent") for the Lenders parties to the Senior Credit Agreement (as hereinafter defined). The parties hereto hereby agree as follows: 1. Definitions. (a) Unless otherwise defined herein, terms defined in the Senior Credit Agreement and used herein shall have the meanings given to them in the Senior Credit Agreement. (b) The following terms shall have the following meanings: "Agreement": this Intercreditor and Subordination Agreement, as the same may be amended, modified or otherwise supplemented from time to time. "Event of Default": as defined in the Senior Credit Agreement. "Insolvency Event": (1) the Borrower or any of its Subsidiaries commencing any case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries making a general assignment for the benefit of its creditors; or (2) there being commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (1) above which (i) results in the entry of an order for relief or any such adjudication or appointment or (ii) remains undismissed, undischarged or unbonded for a period of 60 days; or (3) there being commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (4) the Borrower or any of its Subsidiaries taking any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (1), (2) or (3) above; or (5) the Borrower or any of its Subsidiaries generally not paying, or being unable to pay, or admitting in writing its inability to pay, its debts as they become due. "Senior Credit Agreement": the Credit Agreement dated as of March 24, 1998, among the Borrower, the Administrative Agent and the Lenders parties thereto from time to time, as such Credit Agreement may be amended, modified or supplemented from time to time, including, without limitation, amendments, modifications, supplements and restatements thereof giving effect to increases, renewals, extensions, refundings, deferrals, restructurings, replacements or refinancings of, or additions to, the arrangements provided in such Credit Agreement (whether provided by the original Administrative Agent and Lenders under such Credit Agreement or a successor Administrative Agent or other Lenders). "Senior Lenders": the holders from time to time of Senior Obligations. "Senior Loan Documents": the collective reference to the Senior Credit Agreement, the Senior Notes, the Senior Security Documents and all other documents that from time to time evidence the Senior Obligations or secure or support payment or performance thereof. "Senior Loans": the loans made by the Senior Lenders to the Borrower pursuant to the Senior Credit Agreement. "Senior Notes": the promissory notes of the Borrower outstanding from time to time under the Senior Credit Agreement. "Senior Obligations": the collective reference to the unpaid principal of and interest on the Senior Notes and all other obligations and liabilities of the Borrower to the Administrative Agent and the Senior Lenders (including, without limitation, interest accruing at the then applicable rate provided in the Senior Credit Agreement after the maturity of the Senior Loans and interest accruing at the then applicable rate provided in the Senior Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Senior Credit Agreement, the Senior Notes, this Agreement, the other Senior Loan Documents or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower pursuant to the terms of the Senior Credit Agreement or this Agreement or any other Senior Loan Document). "Senior Security Documents": the collective reference to all documents and instruments, now existing or hereafter arising, which create or purport to create a security interest in property to secure payment or performance of the Senior Obligations, including, without limitation, the documents listed on Schedule 1 attached hereto. - 2 - "Subordinated Lender": as defined in the recitals hereof. "Subordinated Loan Documents": the collective reference to the Subordinated Note and any other documents or instruments that from time to time evidence the Subordinated Obligations or secure or support payment or performance thereof. "Subordinated Loan": the loan made by the Subordinated Lender pursuant to the Subordinated Note. "Subordinated Note": the promissory note of the Borrower, dated March 24, 1998, in the original principal amount of $750,000 and payable to the order of the Subordinated Lender. "Subordinated Obligations": the collective reference to the unpaid principal of and interest on the Subordinated Note and all other obligations and liabilities of the Borrower to the Subordinated Lender (including, without limitation, interest accruing at the then applicable rate provided in the Subordinated Note after the maturity of the Subordinated Loan and interest accruing at the then applicable rate provided in the Subordinated Note after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Subordinated Note, this Agreement, or any other Subordinated Loan Document, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Subordinated Lender that are required to be paid by the Borrower pursuant to the terms of the Subordinated Note or this Agreement or any other Subordinated Loan Document). "Subordination Event": either of the following events: (A) occurrence of any Insolvency Event; or (B) the Senior Obligations becoming due and payable in full, whether upon maturity, acceleration or otherwise. (c) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section and paragraph references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2. Subordination. (a) The Subordinated Lender agrees, for itself and each future holder of the Subordinated Obligations, that the Subordinated Obligations are expressly - 3 - "subordinate and junior in right of payment" (as that phrase is defined in paragraph 2(b)) to all Senior Obligations. (b) "Subordinate and junior in right of payment": means that: (1) no part of the Subordinated Obligations shall have any claim to the assets of the Borrower on a parity with or prior to the claim of the Senior Obligations; (2) unless and until the Senior Notes have been paid in full and the Commitments have been terminated, without the express prior written consent of the Administrative Agent, (A) no Subordinated Lender will take, demand or receive from the Borrower, and the Borrower will not make, give or permit, directly or indirectly, by set-off, redemption, purchase or in any other manner, any payment of or security for the whole or any part of the Subordinated Obligations, and (B) no Subordinated Lender will accelerate for any reason the scheduled maturities of any amount owing under the Subordinated Note; provided, however, that at any time except when an Event of Default has occurred and is continuing, the Borrower may make, and the Subordinated Lender may receive, scheduled payments on account of principal of and interest on the Subordinated Note in accordance with the terms thereof. (c) If any Event of Default has been cured or waived or shall have ceased to exist, the Subordinated Lender' right to receive payments as provided in clause 2(b)(2)(B)(i) shall be reinstated, and the Borrower may resume making such payments to the Subordinated Lender, including any missed payments. (d) The expressions "prior payment in full," "payment in full," "paid in full" and any other similar terms or phrases when used herein with respect to the Senior Obligations shall mean the payment in full, in immediately available funds, of all of the Senior Obligations. 3. Additional Provisions concerning Subordination. (a) The Subordinated Lender and the Borrower agree that upon the occurrence of any Subordination Event: (1) all Senior Obligations shall be paid in full before any payment or distribution is made with respect to the Subordinated Obligations; and (2) any payment or distribution of assets of the Borrower, whether in cash, property or securities, to which the Subordinated Lender would be entitled except for the provisions hereof, shall be paid or delivered by the Borrower, or any receiver, trustee in bankruptcy, liquidating trustee, disbursing Administrative Agent or other Person making such payment or distribution, directly to the Administrative Agent, for the account of the Senior Lenders, to the extent necessary to pay in full all Senior Obligations, before any payment or distribution shall be made to the Subordinated Lender. - 4 - (b) Upon the occurrence of any Insolvency Event: (1) the Subordinated Lender irrevocably authorizes and empowers the Administrative Agent (A) to demand, sue for, collect and receive every payment or distribution on account of the Subordinated Obligations payable or deliverable in connection with such event or proceeding and give acquittance therefor, and (B) to file claims and proofs of claim in any statutory or non-statutory proceeding and take such other actions, in its own name as Administrative Agent, or in the name of the Subordinated Lender or otherwise, as the Administrative Agent may deem necessary or advisable for the enforcement of the provisions of this Agreement; provided, however, that the foregoing authorization and empowerment imposes no obligation on the Administrative Agent to take any such action; (2) the Subordinated Lender shall take such action, duly and promptly, as the Administrative Agent may request from time to time (A) to collect the Subordinated Obligations for the account of the Senior Lenders and (B) to file appropriate proofs of claim in respect of the Subordinated Obligations; and (3) the Subordinated Lender shall execute and deliver such powers of attorney, assignments or proofs of claim or other instruments as the Administrative Agent may request to enable the Administrative Agent to enforce any and all claims in respect of the Subordinated Obligations and to collect and receive any and all payments and distributions which may be payable or deliverable at any time upon or in respect of the Subordinated Obligations. (c) If any payment or distribution, whether consisting of money, property or securities, be collected or received by the Subordinated Lender in respect of the Subordinated Obligations, except payments permitted to be made at the time of payment as provided in paragraph 2(b), the Subordinated Lender forthwith shall deliver the same to the Administrative Agent for the account of the Senior Lenders, in the form received, duly indorsed to the Administrative Agent, if required, to be applied to the payment or prepayment of the Senior Obligations until the Senior Obligations are paid in full. Until so delivered, such payment or distribution shall be held in trust by the Subordinated Lender as the property of the Senior Lenders, segregated from other funds and property held by the Subordinated Lender. 4. Subrogation. Subject to the payment in full of the Senior Obligations, the Subordinated Lender shall be subrogated to the rights of the Senior Lenders to receive payments or distributions of assets of the Borrower in respect of the Senior Obligations until the Senior Obligations shall be paid in full. For the purposes of such subrogation, payments or distributions to the Administrative Agent, for the account of the Senior Lenders, of any money, property or securities to which the Subordinated Lender would be entitled except for the provisions of this Agreement shall be deemed, as between the Borrower and its creditors other than the Senior Lenders and the Subordinated Lender, to be a payment by the Borrower to or on account of Subordinated Obligations, it being understood that the provisions of this Agreement are, and are intended solely, for the purpose of defining the relative rights of the Subordinated Lender, on the one hand, and the Senior Lenders, on the other hand. - 5 - 5. Consent of Subordinated Lender. (a) The Subordinated Lender consents that, without the necessity of any reservation of rights against the Subordinated Lender, and without notice to or further assent by the Subordinated Lender: (1) any demand for payment of any Senior Obligations made by the Administrative Agent or any Senior Lender may be rescinded in whole or in part by the Administrative Agent or any such Senior Lender, and any Senior Obligation may be continued, and the Senior Obligations, or the liability of the Borrower or any guarantor or any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, or any obligation or liability of the Borrower or any other party under the Senior Credit Agreement or any other agreement, may, from time to time, in whole or in part, be renewed, extended, modified, accelerated, compromised, waived, surrendered, or released by the Administrative Agent or any Senior Lender; and (2) the Senior Credit Agreement, the Senior Notes and any other Senior Loan Document may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent or any Senior Lender may deem advisable from time to time, and any collateral security at any time held by the Administrative Agent or any Senior Lender for the payment of any of the Senior Obligations may be sold, exchanged, waived, surrendered or released, in each case all without notice to or further assent by the Subordinated Lender, which will remain bound under this Agreement, and all without impairing, abridging, releasing or affecting the subordination provided for herein. (b) The Subordinated Lender waives any and all notice of the creation, renewal, extension or accrual of any of the Senior Obligations and notice of or proof of reliance by the Senior Lenders upon this Agreement. The Senior Obligations, and any of them, shall be deemed conclusively to have been created, contracted or incurred in reliance upon this Agreement, and all dealings between the Borrower and the Senior Lenders shall be deemed to have been consummated in reliance upon this Agreement. The Subordinated Lender acknowledges and agrees that the Senior Lenders have relied upon the subordination provided for herein in entering into the Senior Credit Agreement and in making funds available to the Borrower thereunder. The Subordinated Lender waives notice of or proof of reliance on this Agreement and protest, demand for payment and notice of default. 6. Negative Covenants of the Subordinated Lender. So long as any of the Senior Obligations shall remain outstanding, no Subordinated Lender shall, without the prior written consent of the Administrative Agent: (a) sell, assign, or otherwise transfer, in whole or in part, the Subordinated Obligations or any interest therein to any other Person (a "Transferee") or create, incur or suffer to exist any security interest, lien, charge or other encumbrance whatsoever upon the Subordinated Obligations in favor of any Transferee unless (1) such action is made expressly subject to this Agreement and (2) the Transferee expressly acknowledges to the Administrative Agent, by a - 6 - writing in form and substance satisfactory to the Administrative Agent, the subordination provided for herein and agrees to be bound by all of the terms hereof; (b) permit any of the Subordinated Loan Documents to be amended, modified or otherwise supplemented; or (d) commence, or join with any creditors other than the Senior Lenders in commencing any proceeding referred to in clause (2) of the definition of "Insolvency Event". 7. Senior Obligations Unconditional. All rights and interests of the Senior Lenders hereunder, and all agreements and obligations of the Subordinated Lender and the Borrower hereunder, shall remain in full force and effect irrespective of: (a) any lack of validity or enforceability of any Senior Security Documents or any other Senior Loan Documents; (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Senior Obligations, or any amendment or waiver or other modification, whether by course of conduct or otherwise, of the terms of the Senior Credit Agreement or any other Senior Security Document; (c) any exchange, release or nonperfection of any security interest in any Collateral, or any release, amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the Senior Obligations or any guarantee thereof; or (d) any other circumstances which otherwise might constitute a defense available to, or a discharge of, the Borrower in respect of the Senior Obligations, or of either the Subordinated Lender or the Borrower in respect of this Agreement. 8. Representations and Warranties. The Subordinated Lender represents and warrants to the Administrative Agent and the Senior Lenders that: (a) its Subordinated Note (1) has been issued to it for good and valuable consideration, (2) is owned by the Subordinated Lender free and clear of any security interests, liens, charges or encumbrances whatsoever arising from, through or under the Subordinated Lender, other than the interest of the Senior Lenders under this Agreement, (3) are payable solely and exclusively to the Subordinated Lender and to no other Person and are payable without deduction for any defense, offset or counterclaim, and (4) constitute the only evidence of the obligations evidenced thereby. (b) The Subordinated Lender has the corporate power and authority and the legal right to execute and deliver and to perform its obligations under this Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of this Agreement. - 7 - (c) This Agreement constitutes a legal, valid and binding obligation of the Subordinated Lender. (d) The execution, delivery and performance of this Agreement will not violate any provision of any Requirement of Law or Contractual Obligation of the Subordinated Lender and will not result in the creation or imposition of any Lien on any of the properties or revenues of the Subordinated Lender pursuant to any Requirement of Law affecting or any Contractual Obligation of the Subordinated Lender, except the interest of the Senior Lenders under this Agreement. (e) No consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental Authority and no consent of any other Person (including, without limitation, any stockholder or creditor of the Subordinated Lender), is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. 9. No Representation by Administrative Agent. Neither the Administrative Agent nor any Senior Lender has made, and none of them hereby or otherwise makes to the Subordinated Lender, any representations or warranties, express, or implied, nor does the Administrative Agent or any Senior Lender assume any liability to the Subordinated Lender with respect to: (a) the financial or other condition of obligors under any instruments of guarantee with respect to the Senior Obligations, (b) the enforceability, validity, value or collectibility of the Senior Obligations or the Subordinated Obligations, any collateral therefor, or any guarantee or security which may have been granted in connection with any of the Senior Obligations or the Subordinated Obligations or (c) the Borrower's title or right to transfer any collateral or security. 10. Waiver of Claims. To the maximum extent permitted by law, the Subordinated Lender waives any claim it might have against the Senior Lenders with respect to, or arising out of, any action or failure to act or any error of judgment, negligence, or mistake or oversight whatsoever on the part of the Administrative Agent, the Senior Lenders or their respective directors, officers, employees or Administrative Agents with respect to any exercise of rights or remedies under the Senior Loan Documents or any transaction relating to the Collateral. Neither the Administrative Agent, any Senior Lender nor any of their respective directors, officers, employees or Administrative Agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or the Subordinated Lender or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 11. Provisions Applicable After Bankruptcy; No Turnover. (a) The provisions of this Agreement shall continue in full force and effect notwithstanding the occurrence of any event contemplated under the definition of "Insolvency Event." (b) To the extent that the Subordinated Lender has or acquires any rights under Section 363 or Section 364 of the Bankruptcy Code with respect to the Collateral, the Subordinated - 8 - Lender hereby agrees not to assert such rights without the prior written consent of the Administrative Agent, on behalf of the Senior Lenders; provided that, if requested by the Administrative Agent, the Subordinated Lender shall seek to exercise such rights in the manner requested by the Administrative Agent, including the rights in payments in respect of such rights. 12. Further Assurances. The Subordinated Lender and the Borrower, at their own expense and at any time from time to time, upon the written request of the Administrative Agent will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent reasonably may request for the purposes of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted. 13. Expenses. (a) The Borrower will pay or reimburse the Administrative Agent and each Senior Lender, upon demand, for all its costs and expenses in connection with the enforcement or preservation of any rights under this Agreement, including, without limitation, fees and disbursements of counsel to the Administrative Agent and the Senior Lenders. (b) The Borrower will pay, indemnify, and hold each Senior Lender and the Administrative Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions (whether sounding in contract, tort or on any other ground), judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of, or in any other way arising out of or relating to this Agreement or any action taken or omitted to be taken by any Senior Lender or the Administrative Agent with respect to any of the foregoing. 14. Provisions Define Relative Rights. This Agreement is intended solely for the purpose of defining the relative rights of the Administrative Agent and the Senior Lenders on the one hand and the Subordinated Lender on the other, and no other Person shall have any right, benefit or other interest under this Agreement. 15. Legend. The Subordinated Lender and the Borrower will cause the Subordinated Note to bear upon its face the following legend: ALL INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE INTERCREDITOR AND SUBORDINATION AGREEMENT, DATED MARCH 25, 1998 (THE "SUBORDINATION AGREEMENT"), AS THE SAME MAY BE AMENDED, MODIFIED OR OTHERWISE SUPPLEMENTED FROM TIME TO TIME, BY AND AMONG UNIDIGITAL INC., AS BORROWER, CANADIAN IMPERIAL BANK OF COMMERCE, AS ADMINISTRATIVE AGENT FOR THE LENDERS PARTIES TO THE SENIOR CREDIT AGREEMENT REFERRED TO IN THE SUBORDINATION AGREEMENT, AND THE HOLDERS FROM TIME TO TIME OF THE OBLIGATIONS ARISING UNDER THE - 9 - SUBORDINATED NOTE REFERRED TO IN THE SUBORDINATION AGREEMENT, INCLUDING, WITHOUT LIMITATION, THIS NOTE. 16. Powers Coupled With An Interest. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until the Senior Obligations are paid in full and the Commitments are terminated. 17. Authority of Administrative Agent. The Borrower and the Subordinated Lender acknowledge that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Administrative Agent and the Senior Lenders, be governed by the Senior Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent, on the one hand, and the Borrower and the Subordinated Lender, on the other hand, the Administrative Agent shall be conclusively presumed to be acting as Administrative Agent for the Senior Lenders with full and valid authority so to act or refrain from acting, and neither the Borrower nor the Subordinated Lender shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 18. Notices. All notices, requests and demands to or upon the Administrative Agent or the Borrower or the Subordinated Lender to be effective shall be in writing (or by telex, fax or similar electronic transfer confirmed in writing) and shall be deemed to have been duly given or made (1) when delivered by hand or (2) if given by mail, when deposited in the mails by certified mail, return receipt requested, or (3) if by telex, fax or similar electronic transfer, when sent and receipt has been confirmed, addressed as follows: If to the Administrative Agent: Canadian Imperial Bank of Commerce 425 Lexington Avenue, 3rd Floor New York, New York 10017 Attention: William Koslo Fax: 212-856-3991 If to the Borrower: Unidigital Inc. 545 West 45th Street New York, New York 10036 Attention: William Dye Fax: 212-212-262-1830 - 10 - If to the Subordinated Lender: Kwik International Color, Ltd 229 West 28th Street New York, New York 1001-5996 Attention: Richard J. Sirrota Fax: 212-643-0201 The Administrative Agent, the Borrower and the Subordinated Lender may change their addresses and transmission numbers for notices by notice in the manner provided in this Section. 19. Counterparts. This Agreement may be executed by one or more of the parties on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the counterparts of this Agreement signed by all the parties shall be lodged with the Administrative Agent. 20. Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 21. Integration. This Agreement represents the agreement of the Administrative Agent and the Senior Lenders and the Subordinated Lender with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent or any Senior Lender or the Subordinated Lender relative to the subject matter hereof not reflected herein. 22. Amendments in Writing; No Waiver: Cumulative Remedies. (a) None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Administrative Agent, the Borrower and the Subordinated Lender; provided that any provision of this Agreement may be waived by the Administrative Agent and the Senior Lenders in a letter or agreement executed by the Administrative Agent or by telex or facsimile transmission from the Administrative Agent. (b) No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any Senior Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. - 11 - 23. Section Headings. The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 24. Successors and Assigns. (a) This Agreement shall be binding upon the successors and assigns of the Borrower and the Subordinated Lender and shall inure to the benefit of the Administrative Agent and the Senior Lenders and their successors and assigns. (b) Upon a successor Administrative Agent becoming the Administrative Agent under the Senior Credit Agreement, such successor Administrative Agent automatically shall become the Administrative Agent hereunder with all the rights and powers of the Administrative Agent hereunder without the need for any further action on the part of any party hereto. 25. Governing Law. This Agreement shall be governed by, and construed and interpreted in accordance with, the law of the State of New York. [Signature Pages Follow] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. CANADIAN IMPERIAL BANK UNIDIGITAL INC. OF COMMERCE as Borrower as Administrative Agent By:/s/ William Koslo By:/s/ William E. Dye -------------------------------- --------------------------------- Title: Executive Director Title:Chief Executive Officer ------------------------- --------------------------- KWIK INTERNATIONAL COLOR, LTD as Subordinated Lender By:/s/ Richard J. Sirota -------------------------------- Title: President -------------------------- EX-10.17 23 MORTGAGE, ASSIGNMENT OF LEASES MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT between UNIDIGITAL INC., Borrower AND CANADIAN IMPERIAL BANK OF COMMERCE, Lender Property Address: Unison (NY), Inc. 545 West 45th Street New York, New York 10036 THIS DOCUMENT WAS PREPARED BY AND AFTER RECORDING SHOULD BE MAILED TO: Steven N. Cohen, Esq. Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Table of Contents ----------------- PRELIMINARY STATEMENT..........................................................1 1. Payment of Indebtedness; Performance of Obligations........................3 2. Taxes and Other Obligations................................................4 3. Reserves for Taxes.........................................................4 4. Use of Property............................................................4 5. Insurance and Condemnation.................................................4 6. Preservation and Maintenance of Property...................................6 7. Protection of Lender's Security............................................6 8. Inspection.................................................................7 9. Books and Records..........................................................7 10. Financial Statements......................................................7 11. Environmental Matters.....................................................7 12. Covenants.................................................................9 13. Lease....................................................................10 14. Estoppel Certificate.....................................................10 15. Transfers of the Property or Beneficial Interest in Borrower; Assumption.10 16. No Additional Liens, Encumbrances or Indebtedness.......................11 17. Borrower and Lien Not Released...........................................11 18. Uniform Commercial Code Security Agreement...............................11 19. Events of Default; Acceleration of Indebtedness..........................12 20. Entry; Foreclosure.......................................................13 21. Expenditures and Expenses................................................13 22. Application of Proceeds of Foreclosure Sale..............................14 23. Appointment of Receiver or Mortgagee in Possession.......................14 24. After-Acquired Property..................................................14 25. Future Advances..........................................................14 26. Forbearance by Lender Not a Waiver.......................................14 27. Waiver of Statute of Limitations.........................................15 28. Waiver of Homestead, Redemption an Prejudgment Remedy....................15 29. Jury Trial Waiver........................................................15 30. Venue....................................................................15 31. Governing Law; Severability..............................................16 32. Notice...................................................................16 33. Successors and Assigns Bound; Joint and Several Liability; Agents; Captions.................................................................17 34. Release..................................................................17 35. Terms....................................................................18 36. Exculpation..............................................................18 37. State Specific Provisions................................................18 -i- THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS AND SECURITY AGREEMENT (this "Mortgage") is made as of this 24th day of March, 1998, between UNIDIGITAL INC., a Delaware corporation ("Borrower"), whose address is 545 West 45th Street, New York, New York 10036, and CANADIAN IMPERIAL BANK OF COMMERCE ("Lender") whose address is 425 Lexington Avenue, 3rd Floor, New York, New York 10017 PRELIMINARY STATEMENT WHEREAS, Lender has agreed, subject to the terms and conditions of that certain Credit Agreement, dated as of the date hereof, executed by and among Borrower, Lender and various other lenders from time to time (the "Credit Agreement"), to make loans (the "Loan") to Borrower. The Loan is evidenced by three notes of even date herewith and the sum of the original principal amounts of the three notes is Forty Million and no/100 Dollars ($40,000,000.00) (which notes, together with all notes issued in substitution or exchange therefor and all amendments thereto, is hereinafter collectively referred to as the "Note"), providing for monthly payments as set forth in the Note, with the balance thereof, due and payable as set forth therein or such later date to which maturity may be extended in accordance with the terms and conditions of the Note (said date, or any earlier date on which the entire unpaid principal amount shall be paid or required to be paid in full, whether by prepayment, acceleration or otherwise, is hereinafter called the "Maturity Date"). The terms and provisions of the Credit Agreement and Note are hereby incorporated by reference in this Mortgage. All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed thereto in the "Loan Documents" (as hereinafter defined). WHEREAS, Lender wishes to secure (i) the prompt payment of the Note, together with all interest, premiums and other amounts, if any, due in accordance with the terms of the Note, as well as the prompt payment of any additional indebtedness accruing to Lender on account of any future payments, advances or expenditures made by Lender pursuant to the Note, the Credit Agreement, this Mortgage, any of the other Mortgages, Assignments of Leases and Rents and Security Agreements now or hereafter made by Borrower or any affiliate of Borrower in favor of Lender and encumbering the Property (hereinafter defined) and other properties similar to the Property owned by Borrower or any affiliate of Borrower (collectively, the "Other Mortgages") or any other agreement, document, or instrument securing the payment of the indebtedness evidenced by the Note (such documents together with any modifications, renewals, extensions or replacements thereof are hereinafter collectively referred to as the "Loan Documents") and (ii) the prompt performance of each and every covenant, condition, and agreement contained in the Loan Documents of Lender and Borrower. All payment obligations of Lender and Borrower to Lender are hereinafter sometimes collectively referred to as the "Indebtedness," and all other obligations of Lender and Borrower to Lender are hereinafter sometimes collectively referred to as the "Obligations". NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, to secure so much of the Indebtedness as may be outstanding at any time (subject to the limitations set forth in Section 37(f) hereof) and the performance of the Obligations, Borrower has executed this Mortgage and does hereby mortgage, convey, assign, warrant, transfer, pledge and grant to Lender a security interest in the following described property and all proceeds thereof (which property is hereinafter sometimes collectively referred to as the "Property"): A. The real estate described on Exhibit A hereto (the "Land") ; B. All of the following (collectively, the "Improvements"): all buildings, improvements and fixtures of every kind or nature situated on the Land; to the extent not owned by tenants of the Property, all machinery, appliances, equipment, furniture and all other personal property of every kind or nature located in or on, or attached to, or used or to be used in connection with the Land, buildings, structures, improvements or fixtures; all building materials and goods procured for use or in connection with the foregoing; and all additions, substitutions and replacements to any of the foregoing; C. To the extent assignable, all plans, specifications, architectural renderings, drawings, soil test reports, other reports of examination or analysis of the Land or the Improvements; D. All easements, rights-of-way, water courses, water rights and appurtenances in any way belonging, relating or appertaining to any of the Land or Improvements, or which hereafter shall in any way belong, relate or be appurtenant thereto ("Appurtenances"); E. All agreements affecting the use, enjoyment or occupancy of the Land and/or Improvements now or hereafter entered into (the "Leases") and all rents, royalties, profits, issues and revenues from the Land and/or Improvements from time to time accruing under the Leases (the "Rents"), reserving to Borrower, however, so long as no "Event of Default" (hereinafter defined) has occurred hereunder and is continuing, a revocable license to receive and apply the Rents in accordance with the terms and conditions of Section 13 of this Mortgage; F. All claims, demands, judgments, insurance proceeds, rights of action, awards of damages, compensation, and settlements hereafter made resulting from the taking of the Land and/or the Improvements or any part thereof under the power of eminent domain, or for any damage (whether caused by such taking, by casualty or otherwise) to the Land, Improvements or Appurtenances or any part thereof; G. To the extent assignable, all management contracts, permits, certificates, licenses, approvals, contracts, entitlements and authorizations, however characterized, issued or in any way furnished for the acquisition, construction, development, operation and use of the Land, Improvements and/or Leases, including building permits, environmental certificates, licenses, certificates of operation, warranties and guaranties; H. All accounts, contract rights, general intangibles, chattel paper, documents, instruments, inventory, equipment and all books and records relating to the foregoing; -2- I. Any monies on deposit with or for the benefit of Lender, including deposits for the payment of real estate taxes; J. All proceeds, products, replacements, additions, substitutions, renewals and accessions of and to the Land, Improvements or Appurtenances; and K. Any and all after-acquired right, title or interest of Borrower in and to any property of the types described in the preceding granting clauses. TO HAVE AND TO HOLD the Property and all parts thereof unto Lender to its own proper use, benefit, and advantage forever, subject, however, to the terms, covenants, and conditions herein. The Note is secured by, inter alia, this Mortgage and the Other Mortgages. It is understood and agreed that all of the properties of all kinds conveyed by this Mortgage and the Other Mortgages are security for the Indebtedness without allocation of any one or more of the parcels or portions thereof to any portion of the Indebtedness. It is specifically covenanted and agreed that Lender may proceed, at the same or different times, to foreclose this Mortgage and the Other Mortgages or any of them, in accordance with the provisions hereof and thereof by any proceedings appropriate in the State of New York or elsewhere, and that no event of enforcement taking place in any state, including, without limiting the generality of the foregoing, any pending foreclosure, judgment or decree of foreclosure, foreclosure sale, rents received, possession taken, deficiency judgment or decrees, or judgment taken on the Note, shall in any way stay, preclude or bar enforcement of this Mortgage and the Other Mortgages or any of them (whether in the State of New York or elsewhere), and that Lender may pursue any or all of its remedies to the maximum extent permitted by law and as provided hereunder and thereunder until all of the Indebtedness now or hereafter secured by any or all of this Mortgage and the Other Mortgages has been paid or discharged in full. No release of any portion of the property now or hereafter subject to the lien of any of this Mortgage and the Other Mortgages shall have any effect whatsoever by way of impairment or disturbance of the lien or priority of this Mortgage and the Other Mortgages on the unreleased property encumbered thereby. Any foreclosure or other appropriate remedy brought in any state may be brought and prosecuted as to any part of the mortgaged security, wherever located, without regard to the fact that foreclosure proceedings or other appropriate remedies have or have not been instituted elsewhere on any other land subject to the lien of this Mortgage and the Other Mortgages or any of them. Borrower covenants and agrees with Lender as follows: 1. Payment of Indebtedness; Performance of Obligations. Borrower shall promptly pay when due the Indebtedness and shall promptly perform all Obligations. -3- 2. Taxes and Other Obligations. Borrower will pay, or cause to be paid, all taxes, assessments, and other similar charges which are assessed, levied, confirmed, imposed, or which become a lien upon or against the Property or any portion thereof or which become payable with respect thereto or with respect to the occupancy, use or possession of the Property before the same become delinquent, and, if requested by Lender, will promptly deliver to Lender receipts therefor. Should Borrower fail to make any of such payments, Lender may, at its option and at the expense of Borrower, pay the amounts due for the account of Borrower. Upon the request of Lender, Borrower shall immediately furnish to Lender all notices of amounts due and receipts evidencing payment. Borrower shall promptly notify Lender of any lien on all or any part of the Property and shall promptly discharge any unpermitted lien or encumbrance. 3. Reserves for Taxes. Upon demand by Lender following the occurrence of an Event of Default that has not been cured within any applicable cure period therefor and thereafter, at the time of and in addition to the monthly installments of principal and interest due under the Note, Borrower shall pay to Lender a sum equal to one-twelfth (1/12) of the amount estimated by Lender to be sufficient to pay at least thirty (30) days before they become due and payable, all taxes, assessments and other similar charges levied against the Property (collectively, the "Taxes"). So long as no Event of Default exists hereunder, Lender shall apply the sums to pay the Taxes. These sums may be commingled with the general funds of Lender, and no interest shall be payable thereon nor shall these sums be deemed to be held in trust for the benefit of Borrower. If Lender at any time determines that such amount on deposit is insufficient to fully pay such taxes, Borrower shall, within ten (10) days following notice from Lender, deposit such additional sum as may be required by Lender. On the Maturity Date, the moneys then remaining on deposit with Lender or its agent shall, at Lender's option, be applied against the Indebtedness. The obligation of Borrower to pay the Taxes is not affected or modified by the provisions of this paragraph. 4. Use of Property. Unless required by applicable law, Borrower shall not permit changes in the use of any part of the Property from the use existing at the time this Mortgage was executed. Borrower shall not initiate or acquiesce in a change in the zoning classification of the Property without Lender's prior written consent. 5. Insurance and Condemnation. (a) Insurance. --------- Borrower shall keep the Property insured with such coverage as Lender shall now and hereafter require, including, without limitation, policies (i) insuring the Improvements against -4- fire, lightning, windstorm, civil commotion, vandalism, malicious mischief and other risks insured against by so-called "all causes of loss" forms of policy in amounts equal to one hundred percent (100%) of the replacement costs of the Improvements (without deduction for depreciation) containing satisfactory replacement costs and mortgagee interest endorsements with co-insurance penalties waived, and Lender shall have the right, but not the duty, to determine from time to time the replacement costs of the Improvements, (ii) covering public liability, (iii) affording such other or additional coverage as from time to time may be requested by Lender. Borrower shall pay, or cause to be paid, all premiums on such policies. The companies issuing such policies, and the amounts, forms, expiration dates and substance of such policy shall be acceptable to Lender and shall contain, in favor of Lender, a standard non-contributory mortgagee clause, or its equivalent, and a mortgagee loss payable endorsement, in form satisfactory to Lender. Borrower will assign and deliver to Lender the original or a certificate satisfactory to Lender together with a photocopy of each policy of insurance required to be maintained pursuant to this section, and all renewals and replacements thereof. Each such policy shall provide that all proceeds shall be payable to Lender, that the same may not be canceled or materially modified except upon thirty (30) days prior written notice to Lender and that no act or thing done by Borrower shall invalidate the policy as against Lender. At all times until the payment in full of the Loan, Lender shall have and hold said policies as further collateral for the payment in full of the Loan and interest thereon and all other amounts evidenced by the Note and performance of the other Obligations. Subject to the terms and provisions of any lease of the Property or portion thereof (which lease was in existence on the date hereof), which provisions shall govern, Lender is authorized and empowered: (a) to make or file proofs of loss or damage and to settle and adjust any claim under insurance policies which insure against such risks; or (b) to direct Borrower, in writing, to agree with the insurance company or companies on the amount to be paid in regard to such loss. In either case, Lender is authorized to collect any such insurance proceeds. Subject to the leases of the Property or portion thereof (which lease was in existence on the date hereof), such insurance proceeds (after deduction of Lender's reasonable costs and expenses, if any, in collecting the same) shall be disbursed and applied in accordance with the terms and provisions of the Credit Agreement. (b) Condemnation. ------------ Borrower hereby assigns, transfers and sets over unto Lender the entire interest of Borrower in the proceeds of any award and any claim for damages for any of the Property (including the Improvements) taken or damaged under the power of eminent domain or by condemnation. Subject to any leases of the Property or portion thereof (which lease was in existence on the date hereof), Lender is authorized to collect any such proceeds, and may, in its sole discretion, elect: (a) to apply the proceeds or the award or claims upon or in reduction of the Loan, whether due or not; or (b) to make those proceeds available to Borrower for repair, restoration, or rebuilding of the Improvements, in the manner and under the conditions that the Lender may require. Lender shall not be held responsible for any failure to collect any condemnation proceeds regardless of the cause of such failure or for any use by Borrower of such proceeds as Lender may pay over to Borrower. -5- 6. Preservation and Maintenance of Property. Borrower shall keep and maintain the Property, including the Improvements, to be kept and maintained, in good order, condition, and repair. Borrower will not intentionally or materially waste the Property, including the Improvements. Borrower will not cause or permit any excavation, construction, earth work, site work or any other mechanic's lienable work to or for the benefit of any of the Property or the construction of any buildings, structures, or improvements on the Property without the prior written consent of Lender to the proposed construction as well as to the plans and specifications relating thereto, except for tenant improvements and normal repair and maintenance in the ordinary course of business. Without limitation of the foregoing, Borrower will not cause or consent to any instrument or document affecting the Property of which Borrower has knowledge to be recorded without Lender's prior written consent thereto. Borrower shall: (a) duly and punctually perform, observe and comply with, or cause the punctual performance, observance and compliance of, all (i) building, zoning, fire, health, disabled persons, environmental, and use laws, codes, ordinances, rules, and regulations, (ii) covenants and restrictions of record, and (iii) easements, which are in any way applicable to the Property or any part thereof or to the construction of any Improvements thereon and the use or enjoyment thereof; (b) not abandon the Property; (c) provide for management of the Property by a property manager reasonably satisfactory to Lender pursuant to a contract in form and substance reasonably satisfactory to Lender; and (d) give notice in writing to Lender of and, unless otherwise directed in writing by Lender, appear in and defend any action or proceeding purporting to affect the Property, the security granted by the Loan Documents or the rights or powers of Lender. Neither Borrower nor any tenant or other person shall remove, demolish or alter any Improvement on the Land except when incident to the replacement of fixtures, equipment, machinery and appliances with items of like kind. 7. Protection of Lender's Security. If (a) Borrower fails to pay the Indebtedness or to perform the Obligations, (b) any action or proceeding is commenced which affects or could affect the Property or Lender's interest therein, including any loss, damage, cost, expense or liability incurred by Lender with respect to (i) any environmental matters relating to the Property or (ii) the preparation of the commencement or defense of any action or proceeding or any threatened action or proceeding affecting the Loan Documents or the Property, then Lender, at Lender's option, may make such appearances, disburse such sums and take such action as Lender deems necessary, in its sole discretion, to protect the Property or Lender's interest therein, including entry upon the Property to take such actions Lender determines appropriate to preserve, protect or restore the Property. Any amounts disbursed by Lender pursuant to this Section 7 (including attorneys' fees, costs and expenses), together with interest thereon at the Default Rate from the date of disbursement, shall become additional Indebtedness of Borrower secured by the lien of this Mortgage and the other Loan Documents and shall be due and payable on demand. Nothing contained in this Section 7 shall require Lender to incur any expense or take any action hereunder. -6- 8. Inspection. Lender shall have the continuous right to conduct on-site inspections of the Property. Lender shall not, during Lender's inspections, unreasonably interfere with any of the tenants and/or the Property. Borrower shall reimburse Lender for all costs and expenses incurred by Lender in connection with such inspections. However, so long as no Event of Default has occurred, Lender shall not conduct any such inspections more than one time per year and Borrower will not be required to reimburse Lender for costs and expenses incurred in connection with more than one annual inspection. 9. Books and Records. Borrower shall keep and maintain (or cause to be kept and maintained) books and records of account in which full, true and correct entries shall be made of all dealings and transactions relative to the Property, including, without limitation, profit and loss statements and rent rolls. Such books and records of account shall be kept and maintained in accordance with generally accepted accounting principles consistently applied except as otherwise disclosed to Lender. Borrower shall maintain correspondence files as part of said books and records and shall deliver to Lender copies of all such correspondence to Lender upon request. Lender, its accountants, and other duly authorized representatives shall have the continuous right, during normal business hours and upon reasonable notice to Borrower, at Borrower's sole cost and expense, to audit, inspect and copy the books and records of Borrower pertaining to the Property and such books and records shall be maintained at a central location. However, so long as no Event of Default has occurred, Lender shall not conduct any such audits more than one time per year, and Borrower will not be required to reimburse Lender for costs and expenses incurred in connection with more than one annual audit of the books and records for the Property. In the event of a foreclosure of this Mortgage, all of Borrower's books, records, contracts, correspondence, Leases and other documents maintained in connection with the Property shall be made available to the successful bidder at the foreclosure sale for inspection and copying for a period of not less than three (3) years following said sale. 10. Financial Statements. Borrower shall furnish to Lender financial statements and other certificates in accordance with and in the time periods set forth in Section 9 of the Credit Agreement. 11. Environmental Matters. (a) Borrower represents and warrants that, to the best of its knowledge, except as previously disclosed to Lender in writing or as contained in the written due diligence reports delivered to Lender by Borrower, there are no, and covenants that there will not be, for so long as any of Borrower's Indebtedness remains outstanding, any "Hazardous Materials" (as hereinafter defined) generated, released, stored, buried or deposited over, beneath, in or upon the Property or on or beneath the surface of adjacent property, except as such Hazardous Materials may be used, stored or transported in connection with the permitted uses of the -7- Property and then only to the extent permitted by law after obtaining all necessary permits and licenses therefor. For purposes of this Mortgage, "Hazardous Materials" means and includes, without limitation: (i) "hazardous substances," or "toxic substances" as those terms are defined by the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.9601 et seq.; or the Hazardous Materials Transportation Act, 49 U.S.C. ss.1802, all as amended and hereafter amended; (ii) "hazardous wastes," as that term is defined by the Resource Conservation and Recovery Act, 42 U.S.C. ss.6902 et seq., as amended and hereafter amended; (iii) any pollutant or contaminant or hazardous, dangerous or toxic chemicals, materials, or substances within the meaning of any other applicable federal, state, or local law, regulation, ordinance, or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste substance or material, all as amended or hereafter amended; (iv) petroleum products, including, but not limited to, crude oil or any fraction thereof which is liquid at standard conditions of temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute) and substances containing hydrocarbons (other than petroleum products which are normally contained in motor vehicles, to the extent that said petroleum products are not released from said motor vehicles) (v) any radioactive material, including any source, special nuclear or by-product material as defined at 42 U.S.C. ss.2011 et seq., as amended or hereafter amended; (vi) asbestos in any form or condition; and (vii) polychlorinated biphenyls or substances or compounds containing PCBs. Such laws, ordinances and regulations are hereinafter collectively referred to as the "Hazardous Materials Laws". (b) Borrower shall, and Borrower shall cause all employees, agents, tenants, contractors and subcontractors of Borrower and any other persons from time to time present on or occupying the Property to, keep and maintain the Property in compliance with, and not cause or knowingly permit the Property to be in violation of, any applicable Hazardous Materials Laws. Neither Borrower nor any employees, agents, tenants, contractors or subcontractors of Borrower or any other persons occupying or present on the Property shall use, generate, manufacture, store or dispose of on, under or about the Property or transport to or from the Property any Hazardous Materials, except as such Hazardous Materials may be used, stored or transported in connection with the permitted uses of the Property and then only to the extent permitted by law after obtaining all necessary permits and licenses therefor. (c) Borrower shall immediately advise Lender in writing of: (i) any notices received by Borrower (whether such notices are from the Environmental Protection Agency, or any other federal, state or local governmental agency or regional office thereof) of the violation or potential violation of any applicable Hazardous Materials Laws occurring on or about the Property; (ii) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened pursuant to any Hazardous Materials Laws; (iii) all claims made or threatened by any third party against Borrower or the Property relating to damage, contribution, cost recovery compensation, loss or injury resulting from any Hazardous Materials (the matters set forth in clauses (i), (ii) and (iii) above are hereinafter referred to as "Hazardous Materials Claims"); and (iv) Borrower's discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to be subject to any Hazardous Materials Claims. -8- Lender shall have the right but not the obligation to join and participate in, as a party if it so elects, any legal proceedings or actions initiated in connection with any Hazardous Materials Claims and Borrower shall pay to Lender, upon demand, all attorneys' and consultants' fees incurred by Lender in connection therewith. (d) Borrower shall be solely responsible for, and shall indemnify and hold harmless Lender, its directors, officers, employees, agents, successors and assigns from and against, any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, disposal or presence (whether prior to or during the term of the Loan or otherwise and, subject to the terms of this Section 11, regardless of by whom caused, whether by Borrower or any predecessor in title or any owner of land adjacent to the Property or any other third party, or any employee, agent, tenant, contractor or subcontractor of Borrower or any predecessor in title or any such adjacent land owner or any third person) of Hazardous Materials on, under or about the Property, which use, generation, storage, release, threatened release, discharge, disposal or presence results from the acts or omissions of Borrower, without limitation: (i) claims of third parties (including governmental agencies) for damages, penalties, losses, costs, fees, expenses, injunctive or other relief; (ii) response costs, clean-up costs, costs and expenses of removal and restoration, including fees of attorneys and experts, and costs of determining the existence of Hazardous Materials and reporting same to any governmental agency; and (iii) any and all expenses or obligations, including attorneys' fees, costs, and other expenses. (e) Borrower hereby represents, warrants and certifies that to the best of its knowledge, except as previously disclosed to Lender in writing or as contained in the written due diligence reports delivered to Lender by Borrower, there are no underground storage tanks located on, under or about the Property that are subject to the notification requirements under Section 9002 of the Solid Waste Disposal Act, as now or hereafter amended (42 U.S.C. ss.6991). (f) Lender may, in its sole discretion, require Borrower, at its sole cost and expense, from time to time to perform or cause to be performed, such studies or assessments of the Property, as Lender may deem necessary or appropriate or desirable, to determine the status of environmental conditions on and about the Property, which such studies and assessments shall be for the benefit of Lender and be prepared in accordance with the specifications established by Lender. 12. Covenants. Borrower covenants with Lender: (a) to warrant and defend title to the Property against all claims and demands, subject to easements and restrictions set forth in the pro-forma title commitment issued in connection with the Loan and this Mortgage; -9- (b) to provide Lender with notice of any litigation, arbitration, or other proceeding or governmental investigation pending or, to Borrower's knowledge, threatened against or relating to Borrower or the Property; and (c) to use the proceeds evidenced by the Note solely and exclusively for proper business purposes and not for the purchase or carrying of registered equity securities within the purview and operation of any regulation issued by the Board of Governors of the Federal Reserve System or for the purpose of releasing or retiring any indebtedness which was originally incurred for any such purpose. 13. Lease. Borrower shall not, without Lender's prior written consent, execute, modify, amend, surrender or terminate any Lease other than in the ordinary course of business. Such Leases shall be on the form of lease previously approved by Lender with tenants and for a use acceptable to Lender. All Leases executed or renewed after the date hereof must be approved by Lender prior to the execution thereof by Borrower. Borrower shall not be authorized to enter into any ground lease of the Property without Lender's prior written approval. If Lender consents to any new lease or the renewal of any existing lease, at Lender's request, Borrower shall cause the tenant thereunder to execute a subordination and attornment agreement in form and substance satisfactory to Lender. Borrower shall comply with and observe Borrower's obligations as landlord under all Leases. Borrower shall furnish Lender with executed copies of all Leases. So long as there shall not have occurred an Event of Default, Borrower shall have the right to collect all Rents, and shall hold the same, in trust, to be applied, in accordance with the terms and provisions of the Note. 14. Estoppel Certificate. Borrower shall within ten (10) days after Lender's request, furnish Lender with a written statement, duly acknowledged, setting forth the sums, according to Borrower's books and records, secured by the Loan Documents and any right of set-off, counterclaim or other defense which exists against such sums and the Obligations. 15. Transfers of the Property or Beneficial Interest in Borrower; Assumption. Borrower agrees that Borrower may not, sell, lease (except leases executed in the ordinary course of business and pursuant to the requirements contained herein and in the other Loan Documents), transfer, or in any other way encumber or dispose of all or any of the Property (or any portion thereof or any legal, equitable or other interest therein, including interests pursuant to an installment contract) except as otherwise set forth in the Credit Agreement or otherwise approved by Lender in writing. Except for the interest of Borrower and encumbrances permitted by Lender, there shall be no interests, claims or liens with respect to the Property whether subordinate or superior to the lien of this Mortgage and the other Loan -10- Documents, except as otherwise approved in the Credit Agreement or by Lender. Ownership interests in Borrower (such as stock, shares and general and limited partnership interests), shall not be permitted to be transferred, sold, assigned or in any other way encumbered or disposed of, and no new ownership interests in Borrower shall be created. 16. No Additional Liens, Encumbrances or Indebtedness. Borrower covenants not to execute any mortgage, security agreement, assignment of leases and rents or other agreement granting a lien against or encumbrance on the Property or take or fail to take any other action which would result in a lien against the Property (except the liens granted to Lender by the Loan Documents) or the interest of Borrower in the Property without the prior written consent of Lender and Borrower further covenants to keep the Property, free and clear of all liens and encumbrances (except the liens granted to Lender by the Loan Documents or unless the same are bonded or insured over in a manner satisfactory to Lender within thirty (30) days of such filing) of every nature or description (whether for taxes or assessments, or charges for labor, materials, supplies or services or any other thing). Except as otherwise permitted in the Credit Agreement, Borrower shall not, without Lender's prior written consent, incur additional indebtedness, except that Borrower may incur unsecured trade payables outstanding at any one time in the ordinary course of business. 17. Borrower and Lien Not Released. From time to time, Lender may, at Lender's option, without giving notice to or obtaining the consent of Borrower, its successors or assigns or of any junior lienholder or guarantors, without liability on Lender's part and without regard to Borrower's breach of any covenant or agreement in any Loan Document: (i) extend or otherwise modify the terms or the time for payment of the Indebtedness or any part thereof, including the interest rate, amortization period, or payment amount; (ii) release anyone liable on any of said Indebtedness; (iii) accept replacement note or notes therefor; (iv) release from the lien of any Loan Document any part of the Property or take or release other security; (v) consent to any map or plan of the Property; (vi) consent to the granting of any easement; (vii) join in any extension or subordination agreement; and/or (viii) waive or modify any of the Obligations. Any actions taken by Lender pursuant to the terms of this Section 17 shall not affect the obligation of Borrower or Borrower's successors or assigns to pay the Indebtedness and to perform the Obligations, shall not affect the guaranty of any person, corporation, partnership or other entity for payment of the Indebtedness and shall not affect the lien or priority of this Mortgage. 18. Uniform Commercial Code Security Agreement. (a) This Mortgage shall constitute a security agreement pursuant to the Uniform Commercial Code for any portion of the Property which, under applicable law, may be subject to a security interest pursuant to the Uniform Commercial Code, and Borrower hereby grants Lender a security interest in said Property. Any reproduction of this Mortgage or of any other security agreement or financing statement shall be sufficient as a financing statement. In -11- addition, Borrower agrees to execute and deliver to Lender any financing statements, as well as extensions, renewals and amendments thereof, and reproductions of this Mortgage in such form as Lender may require to perfect a security interest with respect to said items. Borrower hereby authorizes and empowers Lender and irrevocably appoints Lender its agent and attorney-in-fact to execute and file, on Borrower's behalf, all financing statements and refilings and continuations thereof as Lender deems necessary or advisable to create, preserve and protect such lien. Borrower shall pay all costs of filing such financing statements and any extensions, renewals, amendments and releases thereof, and shall pay all reasonable costs and expenses of any record searches for financing statements Lender may reasonably require. Without limitation of the foregoing, if an Event of Default occurs, Lender shall be entitled immediately to exercise all remedies available to it under the Uniform Commercial Code. (b) Any party to any contract subject to the security interest granted herein shall be entitled to rely on the rights of Lender without the necessity of any further notice or action by Borrower. Lender shall not by reason of this Mortgage or the exercise of any right granted hereby be obligated to perform any obligation of Borrower with respect to any portion of the personal property nor shall Lender be responsible for any act committed by Borrower, or any breach or failure to perform by Borrower with respect to any portion of the personal property. 19. Events of Default; Acceleration of Indebtedness. The occurrence of any one or more of the following events shall constitute an "Event of Default" under this Mortgage: (a) failure of Borrower to pay any of the Indebtedness in accordance with the terms and provisions of the Note or the Credit Agreement; or (b) failure of Borrower to strictly comply with Sections 5(a), 11, 15 and 16 of this Mortgage; or (c) the occurrence of an "Event of Default" under and as defined in any other Loan Document; or (d) any statement, report or certificate made or delivered to Lender by Borrower is not materially true and complete at any time; or (e) failure of Borrower, within thirty (30) days after notice and demand, to satisfy each and every Obligation not set forth in the subsections above. Upon the occurrence of an Event of Default at the option of Lender, the Indebtedness shall become immediately due and payable without notice to Borrower and Lender shall be entitled to all of the rights and remedies provided in the Loan Documents or at law or in equity. Each remedy provided in the Loan Documents is distinct and cumulative to all other rights or remedies under the Loan Documents or afforded by law or equity, and may be exercised concurrently, independently, or successively, in any order whatsoever. -12- 20. Entry; Foreclosure. Upon the occurrence of an Event of Default, Borrower, upon demand of Lender, shall forthwith surrender to Lender the actual possession of the Property, or to the extent permitted by law, Lender itself, or by such officers or agents as it may appoint, may enter and take possession of all or any part of the Property, and may exclude Borrower and its agents and employees wholly therefrom, and may have joint access with Borrower to the books, papers and accounts of Borrower. If Borrower shall for any reason fail to surrender or deliver the Property or any part thereof after such demand by Lender, Lender may obtain a judgment or decree conferring on Lender the right to immediate possession or requiring the delivery to Lender of the Property, and Borrower specifically consents to the entry of such judgment or decree. Upon every such entering upon or taking of possession, Lender may hold, store, use, operate, manage and control the Property and conduct the business thereof. Lender shall have no liability for any loss, damage, injury, cost or expense resulting from any action or omission by it or its representatives which was taken or omitted in good faith. When the Indebtedness or any part thereof shall become due, whether by acceleration or otherwise, Lender may, either with or without entry or taking possession as herein provided or otherwise, proceed by suit or suits at law or in equity or by any other appropriate proceeding or remedy to: (a) enforce payment of the Note or the performance of any term, covenant, condition or agreement of Borrower under any of the Loan Documents; (b) foreclose the lien hereof for the Indebtedness or part thereof and sell the Property as an entirety or otherwise, as Lender may determine; and/or (c) pursue any other right or remedy available to it under or by the law and decisions of the State in which the Land is located. Notwithstanding any statute or rule of law to the contrary, the failure to join any tenant or tenants of the Property as party defendant or defendants in any foreclosure action or the failure of any such order or judgment to foreclose their rights shall not be asserted by Borrower as a defense in any civil action instituted to collect (a) the Indebtedness, or any part thereof or (b) any deficiency remaining unpaid after foreclosure and sale of the Property. Upon any foreclosure sale, Lender may bid for and purchase the Property and shall be entitled to apply all or any part of the Indebtedness as a credit to the purchase price. 21. Expenditures and Expenses. In any action to foreclose the lien hereof or otherwise enforce Lender's rights and remedies hereunder, there shall be allowed and included as additional Indebtedness all expenditures and expenses which may be paid or incurred by or on behalf of Lender including repair costs, payments to remove or protect against liens, attorneys' fees, costs and expenses, receivers' fees, costs and expenses, appraisers' fees, engineers' fees, accountants' fees, outlays for documentary and expert evidence, stenographers' charges, stamp taxes, publication costs, and costs (which may be estimates as to items to be expended after entry of an order or judgment) for procuring all such abstracts of title, title searches and examination, title insurance policies and similar data and assurances with respect to title as Lender may deem reasonably necessary either to prosecute any action or to evidence to bidders at any sale -13- which may be had pursuant to an order or judgment the true condition of the title to, or the value of, the Property. 22. Application of Proceeds of Foreclosure Sale. The proceeds of any foreclosure sale of the Property shall be distributed and applied in the order of priority set forth in the Note with the excess, if any, being applied, to any party entitled thereto as their rights may appear. 23. Appointment of Receiver or Mortgagee in Possession. If an Event of Default is continuing or if Lender shall have accelerated the Indebtedness, Lender, upon application to a court of competent jurisdiction, shall be entitled as a matter of strict right, without notice, and without regard to the occupancy or value of any security for the Indebtedness or the insolvency of any party bound for its payment, to the appointment, at its option, of itself as mortgagee in possession, or of a receiver to take possession of and to operate the Property, and to collect and apply the Rents. 24. After-Acquired Property. To the extent permitted by, and subject to, applicable law, the lien of this Mortgage, including without limitation the security interest created under the granting clauses of this Mortgage and Section 18, shall automatically attach, without further act, to all property hereafter acquired by Borrower located in or on, or attached to, or used or intended to be used in connection with, or with the operation of, the Property or any part thereof. 25. Future Advances. This Mortgage is given to secure not only the existing Indebtedness, but also future advances (whether such advances are obligatory or are made at the option of Lender, or otherwise) made by Lender under the Note or this Mortgage, to the same extent as if such future advances were made on the date of the execution of this Mortgage. The total amount of indebtedness that may be so secured may decrease or increase from time to time, but all Indebtedness secured hereby shall in no event exceed five (5) times the aggregate face amount of the Note. Such future advances shall be evidenced by the Note, may be made pursuant to the terms and conditions hereof or of any of the other Loan Documents. The extension of such future advances by Lender to or for the benefit of Borrower shall not extend the Maturity Date and shall be due and payable on demand therefor by Lender or, if no demand is sooner made therefor, on the Maturity Date. 26. Forbearance by Lender Not a Waiver. Any forbearance by Lender in exercising any right or remedy under any of the Loan Documents, or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of any right or remedy. Lender's acceptance of payment of any sum secured by any -14- of the Loan Documents after the due date of such payment shall not be a waiver of Lender's right to either require prompt payment when due of all other sums so secured or to declare a default for failure to make prompt payment. The procurement of insurance or the payment of taxes or other liens or charges by Lender shall not be a waiver of Lender's right to accelerate the maturity of the Indebtedness, nor shall Lender's receipt of any awards, proceeds or damages under Section 5 hereof operate to cure or waive Borrower's default in payment or sums secured by any of the Loan Documents. With respect to all Loan Documents, only waivers made in writing by Lender shall be effective against Lender. 27. Waiver of Statute of Limitations. Borrower hereby waives the right to assert any statute of limitations as a bar to the enforcement of the lien created by any of the Loan Documents or to any action brought to enforce the Note or any other obligation secured by any of the Loan Documents. 28. Waiver of Homestead, Redemption an Prejudgment Remedy. Borrower hereby waives all right of homestead exemption in the Property. Borrower hereby waives all right of redemption on behalf of Borrower and on behalf of all other persons acquiring any interest or title in the Property subsequent to the date of this Mortgage, except decree or judgment creditors of Borrower. 29. Jury Trial Waiver. BORROWER AND LENDER HEREBY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THE LOAN DOCUMENTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY BORROWER, AND BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY PERSON ACTING ON BEHALF OF LENDER HAS MADE ANY REPRESENTATIONS OF FACT TO THE OTHER TO INDUCE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTION THAT MAY IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THE LOAN DOCUMENTS AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL. BORROWER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION. 30. Venue. BORROWER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY, INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT SHALL BE LITIGATED, AT LENDER'S SOLE DISCRETION AND ELECTION, ONLY IN COURTS HAVING A SITUS WITHIN -15- THE COUNTY OF NEW YORK, STATE OF NEW YORK. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE. BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES CORPORATION SERVICE COMPANY, WHOSE ADDRESS IS UNIDIGITAL INC., C/O CORPORATION SERVICE COMPANY, 1013 CENTER ROAD, NEW CASTLE, DELAWARE 19805, AS ITS DULY AUTHORIZED AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON BORROWER. IN THE EVENT SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN CHICAGO, ILLINOIS, BORROWER SHALL, WITHIN TEN (10) DAYS AFTER LENDER'S REQUEST, APPOINT A SUBSTITUTE AGENT ON ITS BEHALF AND WITHIN SUCH PERIOD NOTIFY LENDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT TIMELY APPOINTED, LENDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO BORROWER. BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST IT BY LENDER ON THE LOAN DOCUMENTS IN ACCORDANCE WITH THIS PARAGRAPH. 31. Governing Law; Severability. This Mortgage shall be governed by and construed in accordance with the laws of the State of New York. The invalidity, illegality or unenforceability of any provision of this Mortgage shall not affect or impair the validity, legality or enforceability of the remainder of this Mortgage, and to this end, the provisions of this Mortgage are declared to be severable. 32. Notice. Any notice or other communication required or permitted to be given shall be in writing addressed to the respective party as set forth below and may be personally served, telecopied or sent by overnight courier or U.S. Mail and shall be deemed given: (a) if served in person, when served; (b) if telecopied, on the date of transmission if before 4:00 p.m. (New York time); provided that a hard copy of such notice is also sent pursuant to clause (c) or (d) below; (c) if by overnight courier, on the first "business day" (as hereinafter defined) after delivery to the courier; or (d) if by U.S. Mail, on the fourth (4th) day after deposit in the mail, postage prepaid, if addressed to the party to whom such notice is intended as set forth below: Notices to Borrower: Unidigital, Inc. 545 West 45th Street New York, New York 10036 Attention: William E. Dye Telecopy: (212) 262-1830 -16- with a copy to: Buchanan Ingersoll 500 College Road East Princeton, New Jersey 08540 Attention: David J. Sorin, Esq. Telecopy: (609) 520-0360 Notices to Lender: Canadian Imperial Bank of Commerce 425 Lexington Avenue, 3rd Floor New York, New York 10017 Attention: William Koslo, Jr. Telecopy: (212) 856-3991 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Steven N. Cohen, Esq. Telecopy: (212) 504-6666 or to either party at such other addresses as such party may designate in a written notice to the other party given in the manner specified herein. 33. Successors and Assigns Bound; Joint and Several Liability; Agents; Captions. The covenants and agreements contained in the Loan Documents shall bind, and the rights thereunder shall inure to, the respective successors and assigns of Lender and Borrower, subject to the provisions of Section 15 hereof. All covenants and agreements of Borrower shall be joint and several. In exercising any rights under the Loan Documents or taking any actions provided for therein, Lender may act through its employees, agents or independent contractors as authorized by Lender. The captions and headings of the paragraphs of this Mortgage are for convenience only and are not to be used to interpret or define the provisions hereof. 34. Release. Upon payment of all amounts due and payable under the Note, this Mortgage, the Credit Agreement and the other Loan Documents or upon the sale or transfer of the Property in accordance with the terms of the Credit Agreement, Lender shall release this Mortgage. Borrower shall pay Lender's reasonable costs incurred in releasing this Mortgage and any financing statements related thereto. -17- 35. Terms. As used in the Loan Documents, (i) "business day" means a day when banks are not required to be open or are authorized to be closed in New York, New York; and (ii) the phrase "including" shall mean "including but not limited to" unless specifically set forth to the contrary. 36. Exculpation. This Mortgage and all of Borrower's obligations hereunder are subject to the provisions of the Note entitled Exculpation, which are incorporated herein by this reference. 37. State Specific Provisions. (a) Conflicts. In the event of any inconsistencies between the terms and conditions of Section 37 of this Mortgage and the terms and provisions of the rest of this Mortgage, the terms and provisions of Section 37 of this Mortgage shall control and be binding. (b) Commercial Property. Mortgagor represents that this Mortgage does not encumber real property principally improved or to be improved by one or more structures containing in the aggregate not more than six residential dwelling units, each having its own separate cooking facilities. (c) Insurance Proceeds. In the event of any conflict, inconsistency or ambiguity between the provisions of Section 5(a) of this Mortgage and the provisions of subsection 4 of Section 254 of the Real Property Law of New York covering the insurance of buildings against loss by fire, the provisions of Section 5(a) hereof shall govern and control. (d) Trust Fund. Pursuant to Section 13 of the lien law of New York, Borrower shall receive the advances secured hereby and shall hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of any improvement and shall apply such advances first to the payment of the cost of any such improvement of the Property before using any part of the total of the same for any other purpose. (e) Section 291-f Agreement. This Mortgage is intended to be, and shall operate as, the agreement described Section 291-f of the Real Property Law of the State of New York and shall be entitled to the benefits afforded thereby. Mortgagor shall (unless such notice is contained in such tenant's Lease) deliver notice of this Mortgage in form and substance acceptable to Lender, to all present and future holders of any interest in any Lease, by assignment or otherwise, and shall take such other action as may now or hereafter be reasonably required to afford Lender the full protections and benefits of Section 291-f. Borrower shall request the recipient of any such notice to acknowledge the receipt thereof. (f) Maximum Principal Indebtedness. The maximum amount of principal indebtedness secured by this Mortgage at execution or which under any contingency may be secured hereby at any time hereafter is $3,000,000.00 plus all amounts expended by -18- Mortgagee following a default hereunder in respect of insurance premiums and real estate taxes, and all legal costs or expenses required to protect and preserve the lien of this Mortgage. -19- IN WITNESS WHEREOF, Borrower has executed this Mortgage or has caused the same to be executed by its representatives thereunto duly authorized. BORROWER: UNIDIGITAL INC., a Delaware corporation By:/s/ William E. Dye ------------------------------------- Name: William E. Dye Title: Chief Executive Officer STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On the 24th day of March, 1998, before me personally came William E. Dye, to me known, who, being by me duly sworn, did depose and say that he has an address at c/o Unidigital Inc., 545 West 45th Street, New York, New York 10036; that he is the Chief Executive Officer of Unidigital Inc., which corporation executed the foregoing instrument; and that he signed his name thereto by authority of the board of directors of said corporation on behalf of said corporation. /s/ Man Wai Lau ---------------------------------------- Notary Public, State of New York -----END PRIVACY-ENHANCED MESSAGE-----