Exchange Agreement - Master Graphics Inc. and GECFS Inc.
EXCHANGE AGREEMENT
------------------
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
EXCHANGE OF THE SECURITIES......................................... 1
1.1 Exchange................................................ 1
1.2 Closing................................................. 1
ARTICLE II
CONDITIONS TO CLOSING.............................................. 1
2.1 Conditions to GECFS's Obligations....................... 1
2.2 Conditions to the Company's Obligations................. 3
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................... 4
3.1 Authorization of the Transaction........................ 4
3.2 Due Execution and Delivery.............................. 4
3.3 Capitalization.......................................... 4
3.4 Absence of Conflicts.................................... 5
3.5 Absence of Certain Developments......................... 5
3.6 Disclosure.............................................. 6
3.7 Exemption from Registration; Restrictions on Offer and
Sale of Same or Similar Securities...................... 6
3.8 Organization and Good Standing.......................... 6
3.9 Subsidiaries............................................ 6
3.10 Absence of Undisclosed Liabilities...................... 7
3.11 Absence of Adverse Changes or Increased Liabilities..... 7
3.12 Title to Properties and Assets.......................... 7
i
<PAGE>
3.13 Taxes................................................... 8
3.14 Litigation; Warranties.................................. 8
3.15 Permits, Licenses....................................... 8
3.16 Brokerage............................................... 9
3.17 Insurance............................................... 9
3.18 Other Instruments....................................... 9
3.19 Certain Transactions.................................... 9
3.20 Employee Benefit Plans.................................. 10
3.21 Relationship with Customers............................. 11
3.22 Closing Date............................................ 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GECFS............................ 11
4.1 Organization and Power.................................. 11
4.2 Authorization........................................... 11
4.3 Absence of Conflicts.................................... 11
4.4 Closing Date............................................ 12
ARTICLE V
COVENANTS OF THE COMPANY........................................... 12
5.1 Fulfillment of Obligations.............................. 12
5.2 Accounts and Reports.................................... 12
5.3 Conduct of Business and Corporate Existence............. 12
5.4 Payment of Taxes, Compliance with Laws.................. 12
5.5 Transactions with Related Parties....................... 13
5.6 Subsequent Registration Rights.......................... 13
5.7 Board of Directors Meetings............................. 13
5.8 Notice of Adverse Changes............................... 13
5.9 Negative Covenants of the Company....................... 13
ARTICLE VI
TERMINATION........................................................ 13
6.1 Termination............................................. 13
6.2 Effect of Termination................................... 14
ARTICLE VII
ADDITIONAL AGREEMENTS.............................................. 14
7.1 Survival................................................ 14
7.2 Indemnification......................................... 14
ii
<PAGE>
7.3 Press Releases and Announcements........................ 15
7.4 Further Transfers....................................... 15
7.5 Specific Performance.................................... 15
7.6 Investigation........................................... 16
7.7 Exclusivity............................................. 16
7.8 Transfer of Securities.................................. 16
7.9 GECFS Representations................................... 17
7.10 Restrictions on Certain Activities...................... 18
ARTICLE VIII
DEFINITIONS........................................................ 18
ARTICLE IX
MISCELLANEOUS...................................................... 20
9.1 Amendment and Waiver.................................... 20
9.2 Notices................................................. 21
9.3 Binding Agreement; Assignment........................... 22
9.4 Severability............................................ 22
9.5 No Strict Construction.................................. 22
9.6 Headings; Interpretation................................ 22
9.7 Entire Agreement........................................ 22
9.8 Counterparts............................................ 23
9.9 Governing Law........................................... 23
9.10 Parties in Interest..................................... 23
9.11 Termination............................................. 23
iii
<PAGE>
EXCHANGE AGREEMENT
------------------
EXCHANGE AGREEMENT (this "Agreement") is made as of March 30, 1998 by and
between MASTER GRAPHICS, INC., a Tennessee corporation (the "Company"), and
GECFS, INC., a Nevada corporation ("GECFS"). Except as otherwise indicated
herein, capitalized terms used herein are defined in Article VIII hereof.
Subject to the terms and conditions set forth herein, GECFS desires to acquire
from the Company, and the Company desires to issue to GECFS, shares of Series A
Cumulative Convertible Preferred Stock, par value $0.01 per share (the
"Preferred Stock"), in exchange for 222,220 shares of the Company's common
stock, par value $0.01 per share (the "Common Stock"), under the circumstances
described herein. The Preferred Stock and the Underlying Common Stock are
sometimes collectively referred to herein as the "Securities." In consideration
of the mutual promises, representations, warranties, covenants and conditions
set forth in this Agreement, the parties hereto agree as follows:
ARTICLE I
EXCHANGE OF THE SECURITIES
I.1 Exchange. On the terms and subject to the conditions of this
--------
Agreement, at the Closing:
(a) GECFS shall surrender to the Company certificates evidencing
222,220 shares of Common Stock, duly endorsed to the Company or delivered
with duly executed stock powers.
(b) The Company shall issue to GECFS certificates evidencing 222,220
shares of Preferred Stock, duly registered in the name of GECFS, which
shares shall have the rights and preferences set forth in Exhibit A
attached hereto.
I.2 Closing. The closing of the transaction contemplated by this
-------
Agreement (the "Closing") will take place at the offices of Black, Bobango &
Morgan on March 30, 1998 (the "Closing Date") (so long as all conditions to the
obligations of the parties to consummate the transaction contemplated hereby
have been satisfied or waived), or at such other time and location as is
mutually agreed upon by the Company and GECFS, but in no event later than March
30, 1998.
ARTICLE II
CONDITIONS TO CLOSING
---------------------
II.1 Conditions to GECFS's Obligations. The obligation of GECFS to
---------------------------------
consummate the transaction contemplated by this Agreement is subject to the
satisfaction of the following conditions precedent on or before the Closing
Date:
<PAGE>
(a) the representations and warranties set forth in Article III herein
will be true and correct in all material respects at and as of the Closing
Date as though then made and as though references to the Closing Date were
substituted for references to the date of this Agreement throughout such
representations and warranties;
(b) prior to the Closing, the Company will have performed and complied
in all material respects with each of the covenants and agreements required
to be performed by it under this Agreement and the agreements and documents
attached hereto as Exhibits;
(c) the Company shall have duly adopted, executed and filed with the
Secretary of State of the State of Tennessee (i) the Company's Charter, in
substantially the form attached hereto as Exhibit B, and (ii) Articles of
Amendment to the Charter of Master Graphics, Inc. Designating and Fixing
the Rights and Preferences of a Series of Shares of Preferred Stock (the
"Designating Amendment"), in substantially the form attached hereto as
Exhibit A, and the Company shall not have adopted or filed any other
document designating terms, rights or preferences of its preferred stock;
(d) the Designating Amendment and the Charter shall be in full force
and effect as of the Closing under the laws of Tennessee and shall not have
been amended or modified;
(e) the Company and GECFS shall have entered into a Registration
Rights Agreement (the "Registration Rights Agreement"), in the form set
forth in Exhibit C attached hereto;
(f) [Intentionally Omitted];
(g) GECFS shall have received an opinion, dated the Closing Date, of
counsel to the Company, Black, Bobango & Morgan, in the form attached
hereto as Exhibit D and otherwise in form and substance reasonably
satisfactory to GECFS and its counsel;
(h) the Company shall have delivered to GECFS a list, after giving
effect to the transaction contemplated by this Agreement, of (x) the name
of each of the Company's directors, (y) the name and title of each of the
Company's officers and (z) the name of each of the Company's stockholders
setting forth the number and class of shares held;
(i) all proceedings to be taken by the Company in connection with the
consummation of the transaction contemplated hereby and all certificates,
opinions, instruments and other documents, including customary
representations, warranties, covenants, conditions and remedies for breach,
required to be delivered by the Company to effect the transaction
contemplated hereby will be reasonably satisfactory in form and substance
to GECFS;
-2-
<PAGE>
(j) all consents and waivers by third parties that are required for
the consummation of the transaction contemplated hereby including, without
limitation, any consents required pursuant to any leases or subleases or
that are required in order that the transaction contemplated hereby does
not constitute a material breach of or a material default under or a
termination or material modification of any material agreement to which the
Company or any of its Subsidiaries is a party or to which any material
property of the Company or any of its Subsidiaries is subject, will have
been obtained on terms reasonably satisfactory to GECFS; and
(k) all governmental filings, authorizations and approvals that are
required for the consummation of the transaction contemplated hereby, if
any, will have been duly made and obtained other than those filings,
authorizations or approvals the absence of which would not, individually or
in the aggregate, have a Material Adverse Effect. Any condition to the
obligations of GECFS specified in this Section 2.1 may be waived by GECFS
in its sole discretion.
II.2 Conditions to the Company's Obligations. The obligation of the
---------------------------------------
Company to consummate the transaction contemplated by this Agreement is subject
to the satisfaction of the following conditions precedent on or before the
Closing Date:
(a) the representations and warranties set forth in Article IV hereof
and in any writing delivered by GECFS pursuant hereto will be true and
correct in all material respects at and as of the Closing Date as though
then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties;
(b) GECFS will have performed and complied in all material respects
with all of the covenants and agreements required to be performed by it
under this Agreement prior to the Closing;
(c) all consents and waivers by third parties that are required for
the consummation of the transaction contemplated hereby including, without
limitation, any consents that are required in order that the transaction
contemplated hereby does not constitute a breach of or a default under or a
termination or material modification of any material agreement to which
GECFS is a party or to which any material property of GECFS is subject,
will have been obtained on terms reasonably satisfactory to the Company;
and
(d) all governmental filings, authorizations and approvals that are
required for the consummation of the transaction contemplated hereby, if
any, will have been duly made and obtained other than those filings,
authorizations or approvals the absence of which would not, individually or
in the aggregate, have a Material Adverse Effect. The
-3-
<PAGE>
conditions specified in this Section 2.2 may be waived by the Company, in
its sole discretion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
As a material inducement to GECFS to enter into this Agreement, the Company
hereby represents and warrants to GECFS that:
III.1 Authorization of the Transaction. The Company has full corporate
--------------------------------
power and authority, and has obtained all approvals and consents required to
enter into, execute and deliver this Agreement, and the agreements and the
documents attached hereto as Exhibits, and upon the filing of the Designating
Amendment with the Tennessee Secretary of State, to perform fully its
obligations under this Agreement and such other agreements. The Board of
Directors of the Company has duly approved this Agreement and have duly
authorized the execution, delivery and performance of this Agreement, the
agreements and documents attached hereto as Exhibits and the consummation of the
transaction contemplated hereby, including without limitation, the issuance of
the Preferred Stock and the shares of Underlying Common Stock issuable upon
conversion of the Preferred Stock. No other corporate proceedings on the part
of the Company are necessary to approve and authorize the execution and delivery
of this Agreement, the agreements and documents attached hereto as Exhibits and
the consummation of the transaction contemplated hereby with the exception of
the filing of the Designating Amendment with the Tennessee Secretary of State.
III.2 Due Execution and Delivery. This Agreement and the agreements and
--------------------------
documents attached hereto as Exhibits have been duly executed and delivered by
the Company and constitute valid and binding agreements of the Company,
enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer and similar laws affecting
creditors' rights and remedies generally and to general principles of equity.
III.3 Capitalization. (a) The authorized, issued and outstanding capital
--------------
stock of the Company is as set forth on Schedule 3.3. All of the issued and
------------
outstanding shares of capital stock of the Company have been duly authorized,
are validly issued, fully paid and nonassessable, are not subject to, nor were
they issued in violation of, any preemptive rights. Except as set forth on
Schedule 3.3, there are no outstanding or authorized securities with profit
------------
participating features or profit interests, or options, warrants, rights or
other agreements or commitments to which the Company is a party or which are
binding upon the Company providing for the issuance, disposition or acquisition
of any of its capital stock or any such securities or interests (collectively
"Options")(other than this Agreement). Except as set forth on Schedule 3.3,
-------- ------------
there are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company. Except as set forth on Schedule 3.3
------------
or as contemplated herein, there are no voting trusts, proxies or any other
agreements or understandings with respect to the voting of the capital stock of
the Company. Except as set forth on Schedule 3.3 or as contemplated herein, the
------------
-4-
<PAGE>
Company is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock or any Options.
(b) Upon the issuance and delivery of the Preferred Stock in accordance
with this Agreement, (i) the Preferred Stock will be duly authorized, validly
issued, fully paid and nonassessable; and (ii) GECFS will acquire, subject to
the restrictions of this Agreement and the federal and state securities laws,
good, valid and marketable title to the Preferred Stock, free and clear of all
liens, claims, preemptive rights, options, warrants, rights, commitments,
charges, encumbrances, equities, proxies or voting or other agreements
whatsoever.
(c) The Underlying Common Stock has been duly and validly reserved and,
upon the issuance and delivery of the Underlying Common Stock upon conversion of
the Preferred Stock, (i) the Underlying Common Stock will be duly authorized,
validly issued, fully paid and nonassessable; and (ii) GECFS will acquire,
subject to the restrictions of the federal and state securities laws, good,
valid and marketable title to the Underlying Common Stock, free and clear of all
liens, claims, preemptive rights, options, warrants, rights, commitments,
charges, encumbrances, equities, proxies or voting or other agreements
whatsoever except for those created by GECFS.
III.4 Absence of Conflicts. Except as set forth on Schedule 3.4, the
-------------------- ------------
execution, delivery and performance of this Agreement and the consummation of
the transaction contemplated hereby do not and will not (a) conflict with or
result in a breach of any of the provisions of, (b) constitute a default under,
(c) result in a violation of, (d) give any third party the right to terminate or
to accelerate any obligation under, (e) result in the creation of any lien,
security interest, charge or encumbrance upon the Common Stock under, or (f)
require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body under, the provisions of the
charter or bylaws of the Company or any of the Subsidiaries or any indenture,
mortgage, lease, license, loan agreement or other agreement or instrument to
which the Company or any of the Subsidiaries is bound or by which the Company or
any of the Subsidiaries is affected, or any law, statute, rule or regulation or
any judgment, order or decree to which the Company or any of the Subsidiaries is
subject;
III.5 Absence of Certain Developments. Since December 16, 1997, except as
-------------------------------
set forth on Schedule 3.5 or as specifically contemplated by this Agreement and
------------
the Designating Amendment, neither the Company nor any of the Subsidiaries has:
(a) issued, sold or transferred any notes, bonds or other debt
securities or any equity securities, securities convertible, exchangeable
or exercisable into equity securities, or warrants, options or other rights
to acquire equity securities, of the Company or any of the Subsidiaries;
(b) except for the authorization of the Designating Amendment,
changed or authorized any change in its certificate of incorporation or
bylaws.
-5-
<PAGE>
III.6 Disclosure. To the knowledge of the chief executive officer of the
----------
Company, after due inquiry, neither this Agreement nor any of the schedules,
attachments, exhibits, written statements or certificates supplied to GECFS by
or on behalf of the Company with respect to the transaction contemplated hereby
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading. There is no fact which
has not been disclosed to GECFS in writing and of which any of the Company's
stockholders, executive officers and directors is aware or any of the executive
officers and directors of any of its Subsidiaries is aware, and which has had or
would reasonably be anticipated to have a Material Adverse Effect.
III.7 Exemption from Registration; Restrictions on Offer and Sale of Same
-------------------------------------------------------------------
or Similar Securities. Assuming GECFS's representations in Section 7.10 are
--------------------- ------------
true, the offer and sale of the Securities made pursuant to this Agreement will
be exempt from the registration requirements of the Securities Act. Neither the
Company nor any Person acting on its behalf has, in connection with the offering
of the Securities, engaged in (a) any form of general solicitation or general
advertising (as those terms are used within the meaning of Rule 502(c) under the
Securities Act), (b) any action involving a public offering within the meaning
of Section 4(2) of the Securities Act, or (c) any action that would require the
registration under the Securities Act of the offering and sale of the Securities
pursuant to this Agreement or that would violate applicable state securities or
"blue sky" laws. The Company has not made and will not prior to the Closing
make, directly or indirectly, any offer or sale of the Securities or of
securities of the same or a similar class as the Securities if, as a result, the
offer and sale of the Securities contemplated hereby could fail to be entitled
to exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(c)
of the Securities Act.
III.8 Organization and Good Standing. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Tennessee. The Company has all requisite corporate power and authority to own
and operate its properties and assets, and to carry on its business as now
conducted and as proposed to be conducted, and is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which the
location or nature of its property or the character of its business makes such
qualification necessary. The Company has furnished to counsel for GECFS true
and correct copies of its Charter, as amended, and Bylaws, as presently in
effect, and all minutes and consents of the stockholders and Board of Directors
of the Company. Such minutes and consents reflect all transactions referred to
in such minutes and consents accurately in all material respects.
III.9 Subsidiaries. Except for Premier Graphics, Inc. ("Premier") and
------------ -------
Phillips Litho Co., Inc. ("Phillips") the Company has no subsidiaries and has no
--------
investments in and does not control, directly or indirectly, any other
corporation, trust, partnership, limited liability company or other entity.
Neither Premier nor Phillips have any subsidiaries or have any investments in or
control,
-6-
<PAGE>
directly or indirectly, any other corporation, trust, partnership, limited
liability company or other entity.
III.10 Absence of Undisclosed Liabilities. The Company has no indebtedness
----------------------------------
for borrowed money or any other material liability of any nature, accrued or
contingent, arising out of any transaction or circumstance existing on or before
the date hereof, that is not reflected in the December 31, 1997 audited balance
sheet (the "Balance Sheet"), other than liabilities arising in the ordinary
-------------
course of business (including acquisitions) since the preparation thereof, and
the reserves established by the company and set forth on the Balance Sheet are
in the opinion of the Company adequate in all material respects.
III.11 Absence of Adverse Changes or Increased Liabilities. Except as
---------------------------------------------------
described in Schedule 3.11, since the date of the Balance Sheet there has been
(a) no material adverse change in the condition, financial or otherwise, of the
Company or in the assets, liabilities, properties, business or prospects of the
Company; (b) no declaration, setting aside or payment of any dividend or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any of the capital stock of the Company; (c) no waiver or any
valuable right of the Company or the cancellation of any debt or claim held by
the Company; (d) no loan by the Company to any officer, director, employee or
stockholder of the Company, or any agreement or commitment therefor; (e) no
material increase, direct or indirect, in the compensation paid or payable to
any officer, director, employee or agent of the Company; (f) no material loss,
destruction or damage to any property of the Company, whether or not insured;
(g) no resignation or termination of employment of any officer or key employee
of the Company, and the Company does not know of the impending resignation or
termination of employment of any such officer or key employee; (h) no labor
dispute involving the Company or its employees and none is pending or, to the
Company's knowledge, threatened; (i) no change, except in the ordinary course of
business (including acquisitions), in the contingent obligations of the Company,
by way of guaranty, endorsement, indemnity, warranty or otherwise; (j) no sales,
transfers, leases or other dispositions by the Company of any material amount of
its assets or any acquisition of any material amount of assets (or any contract
or arrangement therefor), except in the usual and ordinary course of business
(including acquisitions); and (k) no material transaction by the Company other
than for fair market value.
III.12 Title to Properties and Assets. Except as set forth in Schedule
------------------------------ --------
3.12 hereto, the Company has sole and exclusive possession of, and has good and
----
marketable title to all of its properties and assets (real and personal,
tangible and intangible) reflected on the Balance Sheet, in each case free and
clear of all liens, restrictions or encumbrances. All equipment included in
such properties which is necessary to the business of the Company is in good
condition and repair (ordinary wear and tear excepted) and all leases of real or
personal property to which the Company is a party are fully effective and afford
the Company peaceful and undisturbed possession of the subject matter of the
lease. All buildings, fixtures, equipment and other property and assets that
are material to the Company's business are either owned by the Company or are
held under leases or sub-leases by the Company that to the knowledge of the
Company are
-7-
<PAGE>
valid instruments enforceable in accordance with their respective terms, subject
to bankruptcy, moratorium and other laws affecting creditors rights and general
principles of equity. The Company is not in violation of any zoning, building or
safety ordinance, regulation or requirement or other law or regulation
applicable to the operation of its owned or leased properties, nor has it
received any notice of such violation. The Company owns no real property nor has
any interests in real property except as set forth in Schedule 3.12 hereto.
-------------
III.13 Taxes. The Company has filed all federal, state and county local
-----
and foreign tax returns required to be filed by it and has paid all appropriate
federal, state, county, local and foreign income, franchise and other taxes
required to be paid by it through the date hereof. There is no pending or
asserted dispute with any taxing authority relating to any of such returns that,
if determined adversely to the Company, would result in the assertion by any
taxing authority of any material tax deficiency, and the Company has no
knowledge of a proposed liability or threatened assertion of any claim for any
tax to be imposed upon the Company's properties or assets for which there is not
an adequate reserve reflected in the Balance Sheet. No federal income tax
returns of the Company (since the organization of the Company) have been
audited. There is no waiver of any applicable statute of limitations in effect
with respect to tax liabilities or tax returns of the Company (since the
organization of the Company) for any year.
III.14 Litigation; Warranties.
----------------------
(a) Except as set forth on Schedule 3.14 hereto, there is no litigation,
-------------
action, suit or governmental or administrative proceeding or investigation
pending or, to the best knowledge of the Company, threatened against the Company
or affecting any of its properties or assets, or against any manager, officer,
member or key employee of the Company with respect to any matter related to the
Company, nor, to the best knowledge of the Company, has there occurred any event
nor does there exist any condition on the basis of which any such claims may be
asserted.
(b) Except as set forth on Schedule 3.14 hereto, (i) no claim has been
-------------
asserted against the Company for renegotiation or price redetermination of any
material business transaction, and to the knowledge of the Company there are no
facts upon which any such claim could be based, (ii) there have been no warranty
or similar claims asserted by customers with respect to products sold by the
Company, and there are no facts on which any such claim could be based, (iii)
there are no claims against the Company to return products by reason of alleged
overshipments, defective products or otherwise, and to the knowledge of the
Company there are no facts upon which any such claim could be based, and (iv)
there are no claims against the Company relating to any product alleged to have
been manufactured for or sold by the Company and alleged to have been inherently
dangerous, defective or improperly designed or manufactured, and to the
knowledge of the Company there are no facts upon which any such claim could be
based.
III.15 Permits, Licenses. The Company has all material franchises,
-----------------
authorizations, approvals, orders, consents, licenses, certificates, permits,
registrations, qualifications or other rights and privileges (collectively
"Permits") necessary to permit it to own its property and to conduct its
--------
business as its is presently conducted or proposed to be conducted, and all such
-8-
<PAGE>
Permits are valid and in full force and effect. No Permit is subject to
termination as a result of the execution of the Agreement or consummation of the
transactions contemplated hereby. The Company is now and has heretofore been in
compliance with all applicable statutes, ordinances, orders, rules and
regulations promulgated by any federal, state, municipal or other governmental
authority which apply to the conduct of its business. The Company has never
entered into or been subject to any judgment, consent decree, compliance order
or administrative order with respect to any environmental or health and safety
law or received any request for information, notice, demand letter,
administrative inquiry or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any such
law.
III.16 Brokerage. No broker, finder, agent or similar intermediary has
---------
acted on the Company's behalf in connection with the transactions contemplated
by this Agreement and there are no brokerage commission, finder's fees or
similar items of compensation payable in connection therewith based on any
arrangement or agreement made by or on behalf of the Company.
III.17 Insurance. The Company has in full force and effect the insurance
---------
policies listed in Schedule 3.17 hereto. The Company is presently insured, and
-------------
since the inception of operations by the Company has been insured, against such
risks as companies engaged in the same or substantially similar business would,
in accordance with good business practice, customarily be insured. The Company
has given in a timely manner to its insurers all notices required to be given
under such insurance policies with respect to all claims and actions covered by
insurance, and no insurer has denied coverage of any such claims or actions or
reserved its rights in respect of or rejected any of such claims. The Company
has not received any notice or other communication from any such insurer
canceling or materially amending any of such insurance policies, and no such
cancellation is pending or threatened. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not cause such
insurance policies to lapse, terminate or be canceled and will not result in any
party thereto having the right to terminate or cancel such insurance policies.
III.18 Other Instruments. The Company is not in violation of any of the
-----------------
terms of its Charter or By-Laws as amended and in effect on and as of the
Closing, nor any mortgage, indenture, contract, agreement, or instrument to
which it is a party or by which any of its properties or assets is bound, and
except for the terms and conditions of those agreements disclosed in this
Agreement, the Exhibits and Schedules hereto there is no term of any of the
foregoing that adversely affects or which the Company can now reasonably foresee
may adversely affect the business, prospects, condition (financial or
otherwise), affairs or operations of the Company or any of its properties or
assets.
III.19 Certain Transactions. Except as set forth on Schedule 3.19, the
-------------------- -------------
Company is not indebted directly or indirectly to any of its officers, directors
or stockholders or to their respective spouses or children in any amount
whatsoever; none of such officers, directors or stockholders, or any members of
their immediate families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or business entity that is affiliated
with or with which the
-9-
<PAGE>
Company has a business relationship, or any firm or corporation that competes
with the Company; no officer, director or stockholder, or any member of his
immediate family, has a direct or indirect financial interest in any material
contract with the Company; the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation (excluding guaranties
arising from endorsement of items for deposit or collection in the ordinary
course of business). Nothing contained in this Section 3.19 shall be construed,
------------
however, to prevent any officer, director or stockholder, or any member of his
family, from owning up to five percent of the capital stock of any publicly-held
company that operates in the printing or graphics industry.
III.20 Employee Benefit Plans.
----------------------
(a) Employee Benefit Plan Compliance. For purposes of this Section
-------------------------------- -------
3.23, the term "Company" shall mean the Company and each corporation, trade,
----
business or entity under common control with the Company, within the meaning of
Section 414(b), (c), (m) or (o) of the Internal Revenue Code, as amended, or
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
-----
(b) Copies of Plans. True, correct and complete copies of each of the
---------------
Company's employee and director benefit and compensation plans and related
trusts (the "Plans"), if applicable, including all amendments thereto, have been
-----
furnished to Purchaser. None of the Plans is an "employee pension benefit
plan," within the meaning of Section 3(2) of ERISA, and the Company does not
contribute to or have an obligation to contribute to, and has not at any time
since its inception contributed to or had an obligation to contribute to, a plan
subject to Title IV of ERISA or a "multiemployer plan," within the meaning of
Section 3(37) of ERISA. The Company has substantially performed all
obligations, whether arising by operation of law or by contract, required to be
performed by it in connection with the Plans. Each Plan has been administered
and operated in compliance with its governing documents and applicable law.
There are no actions, suits or claims pending (other than routine claims for
benefits) or threatened against, or with respect to, any of the Plans or their
assets. Each Plan may be unilaterally amended or terminated in its entirety
without liability except as to benefits accrued thereunder prior to such
amendment or termination.
(c) No Additional Severance. The execution and delivery of this
-----------------------
Agreement and the consummation of the transactions contemplated hereby will not
(i) require the Company to make a larger contribution to, or pay greater
benefits under, any Plan than it otherwise would or (ii) create or give rise to
any additional vested rights or service credits under any Plan. The Company is
not a party to any agreement, nor has it established any policy or practice,
requiring it to make a payment or provide any other form of compensation or
benefit to any person performing services for the Company upon termination of
such services which would not be payable or provided in the absence of the
consummation of the transactions contemplated by this Agreement. In connection
with the consummation of the transactions contemplated by this Agreement, no
payments have or will be made under the Plans that, in the aggregate, would
result
-10-
<PAGE>
in imposition of the sanctions imposed under Sections 280G and 4999 of the
Internal Revenue Code, as amended.
III.21 Relationship with Customers. The relationships of the Company with
---------------------------
its customers are good commercial working relationships. No customer that
accounted for more than 10% of the revenues of the Company for its most recent
fiscal year or which is otherwise significant to the Company has canceled or
otherwise terminated or threatened to cancel or otherwise terminate its
relationship with the Company. No such customer has, to the knowledge of the
Company, any plan or intention to terminate, to cancel or otherwise materially
and adversely modify its relationship with the Company.
III.22 Closing Date. All of the representations and warranties contained
------------
in this Article III and made by or on behalf of the Company elsewhere in this
Agreement and all information delivered in any schedule, attachment or exhibit
hereto are true and correct in all material respects on the date of this
Agreement and will be true and correct in all material respects on the Closing
Date, unless waived by GECFS.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GECFS
---------------------------------------
As a material inducement to the Company to enter into this Agreement, GECFS
hereby represents and warrants to the Company that:
IV.1 Organization and Power. GECFS is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the state of its
jurisdiction of incorporation, with full corporate power and authority to enter
into this Agreement and perform its obligations hereunder. GECFS is a 100%
Affiliate of General Electric Capital Corporation, a New York corporation.
IV.2 Authorization. The execution, delivery and performance of this
-------------
Agreement by GECFS and the consummation of the transaction contemplated hereby
have been duly and validly authorized by all requisite corporate action on the
part of GECFS, and no other corporate proceedings on its part are necessary to
authorize the execution, delivery or performance of this Agreement. This
Agreement constitutes a valid and binding obligation of GECFS, enforceable
against GECFS in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer and similar laws affecting creditors' rights and remedies
generally and to general principles of equity.
IV.3 Absence of Conflicts. The execution, delivery and performance of this
--------------------
Agreement and the consummation of the transaction contemplated hereby do not and
will not (a) conflict with or result in a breach of any of the provisions of,
(b) constitute a default under, (c) result in a violation of, or (d) require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body under, the provisions of the certificate of
incorporation or bylaws of GECFS or any agreement or instrument to which GECFS
is bound or
-11-
<PAGE>
by which GECFS is affected, or any applicable law, statute, rule or regulation
or any judgment, order or decree to which GECFS is subject.
IV.4 Closing Date. The representations and warranties contained in this
------------
Article IV and made by GECFS elsewhere in this Agreement are true and correct in
all material respects on the date of this Agreement and will be true and correct
in all material respects on the Closing Date, unless waived by the Company.
ARTICLE V
COVENANTS OF THE COMPANY
------------------------
The Company further covenants and agrees as follows:
V.1 Fulfillment of Obligations. The Company will observe and comply fully
--------------------------
with all of the terms, conditions and covenants of this Agreement, the
Designating Amendment and any other agreements and instruments to be entered
into by the Company pursuant to this Agreement.
V.2 Acounts and Reports. The Company will continue to maintain a standard
-------------------
system of accounts in accordance with generally accepted accounting principles
consistently applied.
V.3 Conduct of Business and Corporate Existence. The Company shall
-------------------------------------------
continue to engage principally in the business now conducted by the Company or a
business or businesses similar thereto or reasonably compatible therewith,
including such research and development activities as the Board of Directors may
from time to time approve. The Company shall keep in full force and effect its
existence as a corporation and all material intellectual property rights useful
in its business.
V.4 Payment of Taxes, Compliance with Laws. The Company will pay and
--------------------------------------
discharge all lawful taxes, assessments and governmental charges or levied
imposed upon it or upon its income or property before the same shall become in
default, as well as all lawful claims for labor, materials and supplies that, if
not paid when due, might result in the imposition of a lien or charge upon any
of its properties; provided, however, that the Company shall not be required to
pay and discharge any such tax, assessment, charge, levy or claim so long as the
validity thereof is being contested by the Company in good faith by appropriate
proceedings and an adequate reserve therefore has been established on its books.
The Company shall comply with all material applicable laws and regulations in
the conduct of business, including without limitation, all applicable federal
and state securities laws, if applicable, in connection with the issuance of any
shares of its capital stock or other ownership interests.
V.5 Transactions with Related Parties. All transactions by and between
---------------------------------
the Company on the one hand and stockholders, officers and employees of the
Company or corporations or other business organizations controlled by or
affiliated with such stockholders, officers and employees on the other hand,
shall be conducted on an arms-length basis and shall be on terms
-12-
<PAGE>
and conditions no less favorable to the Company than could be obtained from non-
related persons.
V.6 Subsequent Registration Rights. From and after the Closing Date,
------------------------------
other than as permitted under the Registration Rights Agreement, the Company
shall not enter into any agreement granting any holder or prospective holder of
any securities of the Company registration rights with respect to such
securities unless such rights are subordinate to the registration rights of
GECFS.
V.7 Board of Directors Meetings. The Company shall ensure that meetings
---------------------------
of its Board of Directors are held at least four times each year and at
intervals of not more than three months.
V.8 Notice of Adverse Changes. The Company shall provide notice of GECFS
-------------------------
promptly after the occurrence thereof and in any event within five (5) business
days after each occurrence, notice of any material adverse change in the
operations or financial condition of the Company.
V.9 Negative Covenants of the Company. Without the prior written consent
---------------------------------
of GECFS, which consent shall not be unreasonably withheld, the Company will not
permit to occur any amendment, alteration, or modification of its Certificate of
Incorporation, Bylaws or other charter or organizational documents of the
Company, as constituted on the date of this Agreement, the effect of which, in
the sole judgment of GECFS, would be to alter, impair, or affect adversely,
either the rights and benefits of GECFS or the duties and obligations of Company
under this Agreement or the Preferred Stock, obligate itself or otherwise agree
to take, permit or enter into any of the events described above.
ARTICLE VI
TERMINATION
-----------
VI.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by mutual written consent of GECFS and the Company;
(b) by GECFS or the Company if there has been a material
misrepresentation or breach on the part of the other party or parties in
the representations and warranties set forth in this Agreement if such
breach is not cured within 10 days after the terminating party first
becomes aware of such breach, or if events have occurred which have made it
impossible to satisfy a condition precedent to the terminating party's or
parties' obligations to consummate the transaction contemplated hereby,
unless such terminating party's or parties' willful breach of this
Agreement has caused the condition to be unsatisfied; or
-13-
<PAGE>
(c) by either of GECFS or by the Company if the Closing has not
occurred on or prior to March 30, 1998; and provided that neither GECFS nor
--------
the Company may terminate this Agreement pursuant to this Section 6.1(c) if
--------------
such person's willful breach of this Agreement has prevented the
consummation of the transaction contemplated hereby at or prior to such
time.
VI.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either GECFS or the Company as provided above, this Agreement will forthwith
become void and there will be no liability on the part of any party hereto to
any other party hereto or its shareholders or directors or officers in respect
hereof, except for the obligations of the parties pursuant to Sections 7.2, 7.7
------------ ---
and 7.8 and except that nothing herein will relieve any party from liability
---
resulting from any breach of this Agreement prior to such termination,
including, without limitation, any breach of Section 7.9.
-----------
ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
VII.1 Survival. Notwithstanding any examination made for or on behalf of
--------
GECFS, the knowledge of any of its officers, directors, stockholders, employees
or agents, or the acceptance of any certificate or opinion, all representations,
warranties, covenants and agreements set forth in this Agreement or in any
writing delivered in connection with this Agreement shall survive the Closing
and shall be fully effective and enforceable until the termination of any
statute of limitation applicable to the rights of the parties hereunder.
VII.2 Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless GECFS, including
each of its Affiliates, and the directors, officers, agents, employees,
accountants and attorneys thereof (GECFS and each such other Person, an
"Indemnified Party") from and against any losses, claims, damages, judgements,
-----------------
assessments, costs and other liabilities (collectively "Liabilities"), and will
-----------
reimburse each Indemnified Party for all fees and expenses (including the
reasonable fees and expenses of outside counsel) (collectively, "Expenses") as
--------
they are incurred in investigating, preparing or defending any claim, action,
proceeding or investigation, whether or not in connection with pending or
threatened litigation or arbitration and to which any Indemnified Party is a
party (collectively, "Actions"), arising out of (i) any material breach of any
-------
of the representations or warranties made by the Company in this Agreement or
any of the agreements or certificates, documents or other writings contemplated
hereby or delivered in connection herewith, (ii) any breach or violation of or
failure to perform fully any material covenant, agreement or obligation of the
Company in this Agreement or any of the agreements contemplated hereby, or (iii)
any Action by any third party arising out of or in connection with the
transactions contemplated by this Agreement; provided, however, that the Company
-------- -------
shall not indemnify any Indemnified Party from Liabilities or reimburse Expenses
incurred by such party to the extent they arise out of the willful misconduct,
gross negligence or bad faith (as finally
-14-
<PAGE>
determined by a court of competent jurisdiction) of such party. If multiple
claims are brought against an Indemnified Party (including in an arbitration),
with respect to at least one of which indemnification is permitted under
applicable law and provided for under this Agreement, the Company agrees that
any award shall be conclusively deemed to be based on claims as to which
indemnification is permitted and provided for, except to the extent the award
expressly states that the award, or any portion thereof, is based solely on a
claim as to which indemnification is not available.
(b) The indemnification provisions of this Section 7.2 are in addition
-----------
to, and not in derogation of, any statutory or common law remedy any party may
have for misrepresentation, breach of warranty or breach of covenant.
VII.3 Press Releases and Announcements. Except to the extent otherwise
--------------------------------
agreed by GECFS, except where the Company has been advised by its counsel that
such disclosure is required by law, the Company will not disclose the
transaction contemplated hereby, including by making any press release related
to this Agreement or the transaction contemplated herein, or other announcement
to the employees, customers or suppliers of the Company and the Subsidiaries,
without the prior written approval of GECFS (which shall not be unreasonably
withheld), and the Company will not disclose the name of GECFS or any of its
Affiliates without the prior written consent of GECFS, except where the Company
has been advised by its counsel that such disclosure is required by law, in
which event the Company shall use its best efforts to consult with GECFS prior
to making such disclosure.
VII.4 Further Transfers. The Company (at its own expense) will execute and
-----------------
deliver such further instruments of conveyance and transfer and take such
additional action as GECFS may reasonably request to effect, consummate, confirm
or evidence the issue to GECFS of the Securities. The Company will execute such
documents as may be necessary to assist GECFS in preserving or perfecting its
rights in the Securities and will also complete such actions as are necessary to
perform its representations, warranties and agreements herein, including,
without limitation, after the Closing, making all registrations, filings and
applications, giving all notices and obtaining all governmental, third party or
other consents, transfers, approvals, orders, qualifications and waivers
desirable for the consummation of the transaction contemplated hereby which, for
any reason, have not been made, given or obtained prior to the Closing.
VII.5 Specific Performance. The Company acknowledges that the business of
--------------------
the Company and the Subsidiaries and the Securities are unique and recognize and
affirm that in the event of a breach of this Agreement by the Company, money
damages may be inadequate and GECFS may have no adequate remedy at law.
Accordingly, the Company agrees that GECFS shall have the right, in addition to
any other rights and remedies existing in its favor at law or in equity, to
enforce its rights and the Company's obligations hereunder not only by an action
or actions for damages but also by an action or actions for specific
performance, injunctive and/or other equitable relief (without posting of bond
or other security).
-15-
<PAGE>
VII.6 Investigation. Prior to the Closing Date, GECFS and its
-------------
representatives may make or cause to be made such investigation of the business
and properties of the Company and the Subsidiaries as each deems reasonably
necessary or advisable and the Company shall (and shall cause each of its
Subsidiaries to) furnish and disclose promptly to GECFS all information
concerning its business, properties and personnel as GECFS or its
representatives reasonably request. Upon reasonable notice, the Company agrees
to permit, prior to the Closing Date, GECFS and its authorized representatives
to have access during business hours to the Company's and each of its
Subsidiaries' books, records, facilities, key personnel, officers, directors,
customers (upon prior consultation with the Company), independent accountants,
and legal counsel (without waiver of privilege) in a manner that will not
unreasonably interfere with the normal business of the Company and its
Subsidiaries.
VII.7 Exclusivity. Until the earlier of the consummation of the
-----------
transaction contemplated hereby or the termination of this Agreement in
accordance with Section 6.1, neither the Company, nor any of its
-----------
representatives, officers, employees, directors, or agents, will directly or
indirectly (a) submit, solicit, initiate or encourage any proposal or offer from
any person or enter into any agreement or accept any offer relating to any
issuance or sale of any of its capital stock or of any rights or securities
convertible into or exercisable or exchangeable for any of its capital stock,
except for the issuance of capital stock upon exercise or conversion of
warrants, options and other rights to acquire Common Stock outstanding as
reflected on Schedule 3.3 hereto (or any other transactions between the Company
------------
and GECFS or its Affiliates), in each case in accordance with the terms of such
warrants, options and other rights as previously disclosed to GECFS, and except
for an underwritten initial public offering of the capital stock of the Company
on terms and conditions satisfactory to GECFS, or (b) furnish any information
with respect to, assist or participate in or facilitate in any other manner any
effort or attempt by any person to do or seek to do any of the foregoing. Except
with respect to a contemplated underwritten initial public offering of the
capital stock of the Company, the Company represents and warrants that it is not
engaged in any discussions with third-parties regarding the foregoing and shall
notify GECFS immediately if any person makes any proposal, offer, inquiry or
contact with respect to any of the foregoing.
VII.8 Transfer of Securities.
----------------------
(a) General Provisions. The Securities are transferable only pursuant to
------------------
(i) public offerings registered under the Securities Act, (ii) Rule 144 or Rule
144A of the Securities Act (or any similar rule or rules then in force) if such
rule is available or (iii) subject to the conditions specified in Section 7.9
-----------
below, any other legally available means of transfer such that the Securities
are registered or exempt from registration. In addition to the foregoing, the
Preferred Stock may only be transferred to or among 100% Affiliates of GECFS who
agree to be bound by the conditions contained in this Section and Section 7.9
-----------
(b) Opinion Delivery. In connection with the transfer of any Securities,
----------------
the holder thereof shall deliver written notice to the Company describing in
reasonable detail the transfer or
-16-
<PAGE>
proposed transfer, and, except for in a transfer described in subsection
7.8(a)(i) or (ii) above and other than a transfer to a 100% Affiliate of GECFS,
an opinion of counsel payable solely by the holder of the Securities, in form
and substance reasonably satisfactory to the Company and its counsel, to the
effect that such transfer of Securities may be effected without registration of
such Securities under the Securities Act. In addition, if the holder of the
Securities delivers to the Company an opinion of counsel payable solely by the
holder of the Securities, in form and substance reasonably satisfactory to the
Company and its counsel, that no subsequent transfer of such Securities shall
require registration under the Securities Act, the Company shall promptly upon
such contemplated transfer deliver new certificates for such Securities which do
not bear the Securities Act legend set forth in Section 7.9. If the Company is
-----------
not required to deliver new certificates for such Securities not bearing such
legend, the holder thereof shall not transfer the same until the prospective
transferee has confirmed to the Company in writing its agreement to be bound by
the conditions contained in this Section and Section 7.9
-----------
(c) Rule 144A. Upon the request of GECFS, the Company shall promptly
---------
supply to GECFS or its prospective transferees all information regarding the
Company required to be delivered in connection with a transfer of the Preferred
Stock pursuant to Rule 144A of the Securities Act.
(d) Removal of Legend. If any Securities are eligible for sale pursuant
-----------------
to Rule 144(k), the Company shall, upon the request of the holder of such
Securities, remove the legend set forth in Section 7.9 from the certificates for
-----------
such Securities.
(e) Restriction on Transfer. The Company acknowledges and agrees that
-----------------------
(A) GECFS is not bound by any terms or provisions contained in any existing or
future agreement to which the Company is or may be a party that may expressly or
impliedly restrict, or be construed to restrict, the transfer by GECFS of the
Securities, (B) subject to subsection (a) and (e)(i) above, GECFS has the
unfettered right to transfer or assign the Securities, and (C) GECFS shall not
be liable for any damages or losses incurred by the Company in the event of a
breach or alleged breach of any agreement to which the Company is or may be a
party which arises out of, or is related to, the transfer of the Securities.
VII.9 GECFS Representations. GECFS represents that it is an "Accredited
---------------------
Investor" within the meaning of Regulation D under the Securities Act. GECFS
understands that the Securities constitute "restricted securities" within the
meaning of Rule 144 under the Securities Act. GECFS hereby represents that it
is acquiring the restricted securities purchased hereunder or acquired pursuant
hereto for its own account with the present intention of holding such securities
for purposes of investment, and that it has no intention of selling such
securities in a public distribution in violation of the federal securities laws
or any applicable state securities laws; provided, that nothing contained herein
--------
shall prevent GECFS and subsequent holders of restricted securities from
transferring such securities in compliance with the provisions of Section 7.8.
-----------
GECFS understands that the restricted securities are being offered and sold in
reliance on exemptions from the registration requirements of federal and state
securities laws and that the
-17-
<PAGE>
Company is relying upon the truth and accuracy of GECFS's representations,
warranties, agreements, acknowledgments and understandings set forth herein to
determine its suitability to acquire the restricted securities. Each instrument
or certificate for restricted securities shall be imprinted with a legend in
substantially the following form:"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
WERE ORIGINALLY ISSUED ON MARCH 30, 1998, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR UNDER ANY STATE SECURITIES LAWS. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED UNDER
FEDERAL AND STATE SECURITIES LAWS AND FURTHER IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE EXCHANGE AGREEMENT, DATED AS OF MARCH 30, 1998, BETWEEN THE
ISSUER (THE "COMPANY") AND GECFS, INC., AND THE COMPANY RESERVES THE RIGHT TO
REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED
WITH RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
VII.10 Restrictions on Certain Activities
----------------------------------
(a) Without the prior written consent of GECFS, the Company shall be
prohibited from entering into any voting trusts, proxies or any other agreements
or understandings with respect to the voting of the capital stock of the
Company.
(b) Without the prior written consent of GECFS, the Company shall be
prohibited from entering into any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock or any
Options.
ARTICLE VIII
DEFINITIONS
-----------
"100% Affiliate" means with respect to any Person, (i) each other Person
--------------
that, directly or indirectly, owns or controls one hundred percent (100%) of the
Stock having ordinary voting power in the election of directors of such Person,
(ii) each other Person of which the Stock having ordinary voting power in the
election of its directors is owned or controlled one hundred percent (100%) by
such Person, or (iii) each other Person of which the Stock having ordinary
voting power in the election of its directors is owned or controlled one hundred
percent (100%) by any Person defined in clause (i) above or any of its 100%
Affiliates.
"Affiliate" means, with respect to any Person, (i) each other Person that,
---------
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, ten percent (10%) or more of the Stock having
ordinary voting power in the election of directors of such Person, (ii) each
Person that directly or indirectly controls, is controlled by or is under common
control with such Person or any Affiliate of such Person, (iii) each of such
Person's officers, directors, joint ventures and partners, and, (iv) the spouse,
each sibling and each lineal
-18-
<PAGE>
descendant and ascendant of any such specified Person or any Affiliate of such
specified Person. For the purpose of this definition, "control" of a Person
-------
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of its management or policies, whether through the ownership
of voting securities, by contract or otherwise.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
"Material Adverse Effect" shall mean (i) a material adverse change in (A)
-----------------------
the business, assets, earnings, operations, prospects, or customer, supplier,
employee or sales representative relations, or financial or other condition of
the Company and each Subsidiary of the Company, taken as a whole, or (B) the
Company's or any of its Subsidiaries' ability to pay or perform its obligations
in accordance with the terms thereof, or (ii) the existence of any action or
proceeding by or before any court or government body wherein an unfavorable
judgment, decree, injunction or order would prevent the carrying out of this
Agreement or the transaction contemplated by this Agreement or cause such
transaction to be rescinded, or could reasonably be expected adversely to affect
the right of GECFS to own or control the Preferred Stock or the Underlying
Common Stock.
"Person" means any individual, sole proprietorship, partnership (including
------
a limited partnership), joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, limited
liability company, joint stock company, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof) or other business
entity.
"SEC" means the United States Securities and Exchange Commission and any
---
successor to the functions thereof.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Stock" means all shares, options, warrants, general or limited partnership
-----
interests, participations or other equivalents (regardless of how designated) of
or in a Person, whether voting or nonvoting, including, without limitation,
common stock, preferred stock, or any other "equity security" (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
SEC under the Exchange Act), including, without limitation, any securities with
profit participation features, and any rights, warrants, options or other
securities convertible into or exercisable or exchangeable for any such shares,
equity or profits interests, participations or other equivalents, or such other
securities, directly or indirectly (or any equivalent ownership interests, in
the case of a Person which is not a corporation).
"Subsidiary" shall mean, with respect to any Person, (i) any corporation of
----------
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power for the election of directors, managers or trustees of such
corporation (irrespective of whether, at the
-19-
<PAGE>
time, Stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned legally or beneficially or controlled,
directly or indirectly, by such Person and/or one or more Subsidiaries of such
Person, or any combination thereof, or with respect to which any such Person has
the right to vote or designate the vote of more than 50% of such Stock whether
by proxy, agreement, operation of law or otherwise, (ii) any partnership,
limited liability company, association or other business entity, in which such
Person and/or one or more Subsidiaries of such Person shall have more than 50%
of the partnership or other similar ownership interests thereof (whether in the
form of voting or participation in profits or capital contribution), and (iii)
all other Persons from time to time included in the consolidated financial
statements of such Person. For purposes hereof, a Person or Persons shall be
deemed to have more than 50% ownership interest in a limited liability company,
partnership, association or other business entity if such Person or Persons
shall be allocated more than 50% of limited liability company, partnership,
association or other business entity gains or losses or shall be or control any
managing director or general partner of such limited liability company,
partnership, association or other business entity.
"Transaction Documents" means this Agreement, the Registration Rights
---------------------
Agreement, each of the other agreements or other documents contemplated hereby,
the Company's Charter and the Designating Amendment.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
-----------------------
upon conversion of the Preferred Stock, and (ii) any Common Stock issued or
issuable with respect to the securities referred to above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization.
ARTICLE IX
MISCELLANEOUS
IX.1 Amendment and Waiver. This Agreement may be amended and any provision
--------------------
of this Agreement may be waived, provided that, subject to the last sentence of
Section 2.1 and the last sentence of Section 2.2, any such amendment or waiver
----------- -----------
will be binding upon a party only if such amendment or waiver is set forth in a
writing executed by each of the Company and GECFS. No course of dealing between
or among any persons having any interest in this Agreement will be deemed
effective to modify, amend or discharge any part of this Agreement or any rights
or obligations of any party under or by reason of this Agreement.
IX.2 Notices. All notices, demands and other communications given or
-------
delivered under this Agreement will be in writing and shall be made by hand
delivery, overnight courier, first-class mail, or telecopier and will be deemed
to have been given when personally delivered, four business days after being
mailed by first class mail, return receipt requested, or delivered by express
courier service or telecopied (subject to receipt of written confirmation).
Notices, demands and communications to the Company and GECFS will, unless
another address is specified in writing, be sent to the addresses indicated
below:
-20-
<PAGE>
Notices to the Company: Master Graphics, Inc.
2500 Lamar Avenue
Memphis, Tennessee 38114
Attention: Mr. John P. Miller
Telecopy No.: (901) 744-6012
With copies to: Black, Bobango & Morgan
530 Oak Court Drive, Suite 345
Memphis, TN 38117
Attention: Michael Morgan, Esq.
Telecopy No.: (901) 683-2553
Notices to GECFS: GECFS, Inc.
880 Greir Drive
Las Vegas, Nevada 89119
Attention: President
With copies to: General Electric Capital Corporation
Capital Funding, Inc.
777 Long Ridge Road
Bldg. B, First Floor
Stamford, Connecticut 06927
Attention: Kim Tanner
Telecopy No.: (203) 316-7989
and General Electric Capital Corporation
Capital Funding, Inc.
5400 LBJ Freeway, Suite 1280
Dallas, Texas 75240
Attention: John Hanley
Steve Bellah
Telecopy No.: (972) 419-3289
and Patton Boggs, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attention: Larry A. Makel, Esq.
Telecopy No.: (214) 871-2688
IX.3 Binding Agreement; Assignment.
-----------------------------
-21-