Exhibit (d)(2)
LOCK-UP AGREEMENT
This LOCK-UP AGREEMENT (this "Agreement") dated as of June 12, 2003
by and among APPLIED GRAPHICS TECHNOLOGIES, INC., KAGT HOLDINGS, INC ("KAGT"), a
newly formed Delaware corporation affiliated with KOHLBERG MANAGEMENT IV, L.L.C.
("Kohlberg"), Fleet National Bank, as Administrative Agent (the "Agent") and the
lenders (the "Lenders") party to the Second Amended and Restated Credit
Agreement dated as of April 15, 2003 (as may be amended from time to time, the
"Credit Agreement"), by and among Applied Graphics Technologies, Inc., as
borrower (the "Borrower"), the Agent and the Lenders. Capitalized terms used but
not defined herein shall have the meanings assigned to such terms in the Credit
Agreement.
WHEREAS, the Lenders have made Advances and extensions of credit to
the Borrower under the Credit Agreement;
WHEREAS, the aggregate principal amount of Term Loans outstanding on
the date hereof is $124,297,140 and the aggregate principal amount of Revolving
Credit Advances on the date hereof is $49,900,000 (collectively, the "Lock-Up
Date Balances");
WHEREAS, the Borrower and Kohlberg have proposed a financial
restructuring of the Borrower as described in the proposal letter attached as
Annex I hereto (the "Restructuring");
WHEREAS, the Borrower and KAGT intend to enter into a merger
agreement (the "Merger Agreement") with respect to the implementation of the
Restructuring;
WHEREAS, Kohlberg or KAGT has obtained debt and equity financing
commitments in the form attached hereto as Annex II (the "Commitment Letters");
WHEREAS, the Restructuring contemplates the cancellation by the
Agent and the Lenders of all obligations owing to them under the Credit
Agreement and the other Loan Documents in exchange for consideration in the form
and in the amounts described on Annex III hereto (the "Consideration") and
otherwise pursuant to the terms of a pay-off letter in form and substance
reasonably satisfactory to the Agent, the Lenders and the Borrower (the "Pay-off
Letter"); and
WHEREAS, the Agent and the Lenders desire to (i) cancel all
obligations owing to them under the Credit Agreement and the other Loan
Documents and (ii) cancel all warrants for common stock of the Borrower issued
to the Lenders by the Borrower (the "Warrants") or the shares issued in respect
thereof, in exchange for the Consideration.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower, KAGT, the Agent and the Lenders agree as follows:
1. Subject to the terms and conditions hereof and subject to the
completion of definitive documentation reasonably satisfactory to the Borrower,
the Agent and each Lender, each Lender agrees to (i) cancel all obligations
owing to them under the Credit Agreement and the other Loan Documents and (ii)
cancel the Warrants or the shares issued in respect thereof, in exchange for the
Consideration; provided that (i) the Borrower shall not have requested the
issuance of any new Letter of Credit, (ii) each Letter of Credit outstanding on
the date hereof shall, at the Borrower's option, have been replaced, cancelled,
back-stopped and/or cash collateralized (at 105% of their face value) and (iii)
the Borrower's obligations under any Hedge Agreement with any Lender shall have
been satisfied in full. On the date hereof, the Lenders shall exercise the
option to purchase 680,067 shares of common stock of the
Borrower (the "Transferred Shares") pursuant to the letter agreement dated July
27, 2001 between the Lender and Applied Printing Technologies, L.P. Upon
exercise of the option, the Lenders agree to enter into a Tender Agreement in
the form attached as Annex IV hereto. It is understood that, with respect to the
Transferred Shares, the Lenders shall be entitled to such investment
opportunities in KAGT, if any, as may be afforded to other holders of common
stock of the Borrower.
2. Subject to the terms and conditions hereof, each Lender agrees
that it shall not, directly or indirectly, seek, solicit, support, participate
in the negotiation of, or enter into any other agreements with any other party
with respect to, the assignment or transfer of its interests in respect of the
Credit Agreement or the other Loan Documents; except that any Lender may sell
such rights to a party that agrees in writing to be subject to the terms and
conditions of this Agreement.
3. This Agreement shall be effective until, and the obligations of
the parties hereunder shall terminate on, July 31, 2003. Notwithstanding the
foregoing, the Agent, at the direction of the Required Lenders, may upon written
notice to the Borrower and Kohlberg, terminate the obligations of the Agent and
the Lenders under this Agreement upon the occurrence of any of the following
events:
(i) any of the Subdebt Undertaking Agreements or the Preference
Shares Undertaking Agreements (each as defined below) shall have been
terminated by any of the parties thereto or shall otherwise no longer be
in full force and effect;
(ii) either of the Commitment Letters shall have been terminated by
any party thereto or shall otherwise no longer be in full force and
effect;
(iii) any of the parties thereto shall have terminated the Merger
Agreement or the Merger Agreement shall otherwise no longer be in full
force and effect;
(iv) (a) KAGT shall have failed to commence a tender offer for the
outstanding common stock of the Borrower on or before June 20, 2003 or (b)
the holders of not less than 51% of the outstanding common stock of the
Borrower shall have failed to tender such shares on or before July 31,
2003;
(v) the failure to post, on or before June 20, 2003, to the holders
of the 8% Cumulative Convertible Redeemable Preference Shares due July 31,
2005 issued by Wace Group Limited (the "Preference Shares") a circular
containing a proposal for the redemption of the Preference Shares at a
discount that is sufficient to consummate the Restructuring;
(vi) the failure to post, on or before June 20, 2003, to the holders
of the 10% Subordinated Notes due October 31, 2005 (the "Subordinated
Notes") a tender offer for the Subordinated Notes at a discount that is
sufficient to consummate the Restructuring;
(vii) (a) the Agent shall have provided notice to the Borrower and
Kohlberg that the aggregate amount of the Lenders' Term Loans and
Revolving Credit Advances exceeded the Lock-Up Date Balances by more than
$3,000,000 as of the close of business on any five consecutive Business
Days and (b) KAGT shall have failed to provide to the Agent within two
Business Days of its receipt of such notice a written commitment, in form
and substance reasonably satisfactory to the Agent, to provide the
Consideration regardless of the then aggregate amount of the Post-Lock-Up
Date Advances (as defined in Annex III); or
(viii) the occurrence and continuance of an Event of Default under
the Credit Agreement (other than in respect of Section 6.01(o) of the
Credit Agreement).
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4. Each of the Borrower and Kohlberg hereby covenants and agrees to
notify the Agent immediately upon its knowledge of the occurrence of a
termination event pursuant to Section 3 of this Agreement.
5. From and after the date hereof, subject to Sections 1 and 3
hereof, each of the parties to this Agreement hereby covenants and agrees to
prepare and execute definitive documentation evidencing the obligations and
transactions contemplated herein, and to execute and deliver all such other
agreements, instruments and documents and to take all such further actions as
the parties may reasonably deem necessary from time to time to carry out the
intent and purpose of this Agreement and of the transactions contemplated
hereby.
6. Each of the parties hereto represents and warrants that (a) it
has all requisite corporate power and authority to enter into this Agreement and
to carry out the transactions contemplated hereby and to perform its obligations
hereunder, (b) it is duly organized, validly existing and in good standing under
the laws of its state of organization and (c) the execution and delivery of this
Agreement and the performance of its obligations hereunder have been duly
authorized by all necessary corporate action on its part.
7. Neither the Agent nor any Lender shall issue any press release or
make any public statements regarding the existence of this Agreement, the
transactions contemplated hereby or the Restructuring, except as may be required
by applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange, in which case, prior
notification of such announcement will be given to Kohlberg. The Agent and each
Lender will, between the date of this Agreement and the date of the first public
announcement by the Borrower or Kohlberg of the Restructuring, maintain
appropriate confidentiality about the possibility, and terms, of this Agreement,
the transactions contemplated hereby and the existence and terms of the
Restructuring. Notwithstanding anything to the contrary set forth herein or in
any other agreement to which the parties hereto are parties or by which they are
bound, the obligations of confidentiality contained herein and therein, as they
relate to the Restructuring, shall not apply to the federal tax structure or
federal tax treatment of the Restructuring, and each party hereto (and any
employee, representative, or agent of any party hereto) may disclose to any and
all persons, without limitation of any kind, the federal tax structure and
federal tax treatment of the Restructuring. The preceding sentence is intended
to cause the Restructuring to be treated as not having been offered under
conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any
successor provision) of the Treasury Regulations promulgated under Section 6011
of the Internal Revenue Code of 1986, as amended, and shall be construed in a
manner consistent with such purpose. In addition, each party hereto acknowledges
that it has no proprietary or exclusive rights to the federal tax structure of
the Restructuring or any federal tax matter or federal tax idea related to the
Restructuring.
8. The Agent and the Lenders acknowledge that in order to induce
Kohlberg to proceed with the Restructuring, the Borrower has agreed to
reimburse Kohlberg and KAGT for their out-of-pocket expenses relating to the
Restructuring in an amount not to exceed $500,000 in the aggregate.
9. This Agreement shall become effective when the Agent shall have
received (i) counterparts hereof duly executed and delivered by KAGT, the Agent
and the Lenders, (ii) a copy of a fully executed Merger Agreement and such
agreement shall be in full force and effect, (iii) a copy of fully executed
undertaking agreements among between the Borrower and the holders of not less
than 51% of the aggregate principal amount of Subordinated Notes (the "Subdebt
Undertaking Agreements") and such agreements shall be in full force and effect,
(iv) a copy of fully executed undertaking agreements among between the Borrower
and the holders of not less than 51% of the outstanding Preference Shares (the
"Preference Shares Undertaking Agreements") and such agreements shall be in full
force and effect, (v) a copy of fully executed Commitment Letters and such
letters shall be in full force and effect and (vi) the Agent, on behalf of the
Lenders, shall have received (i) an extension of the expiration date to August
31, 2003 of those Warrants that currently expire on July 15, 2003 and (ii)
countersigned copy of that certain
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letter dated as of the date hereof pursuant to which the Agent has exercised its
call option with respect to the Transferred Shares.
10. This Agreement together with any annexes attached hereto
embodies the entire agreement between the parties and supersedes all prior
negotiations, and documents reflecting such prior negotiations, between and
among them with respect to the subject matter hereof.
11. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to such state's choice
of law provisions. THE PARTIES HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION, OR PROCEEDING ARISING UNDER OR IN
RESPECT OF THIS AGREEMENT OR IN ANY WAY RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO OR THE TRANSACTIONS CONTEMPLATED HEREBY.
12. This Agreement is intended for the benefit of the parties hereto
and no other person shall have any rights hereunder.
13. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original, and all of which together shall be
deemed to be one and the same document. Execution copies of this Agreement may
be delivered by facsimile, which shall be deemed to be an original for the
purposes of this paragraph.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their respective duly authorized officers, solely
in their respective capacity as officers of the undersigned and not in any other
capacity, as of the date first set forth above.
FLEET NATIONAL BANK, as
Administrative Agent and Lender
/s/ Xxxxx X. Xxxxx
By:________________________________
Title: Senior Vice President
Xxxxx X. Xxxxx
BANK OF AMERICA, N.A., as a Lender
/s/ Xxxxxxx Xxxxxxxx
By:________________________________
Title: Senior Vice President
WACHOVIA BANK, N.A. , as a Lender
/s/ Xxxxxxx Xxxxx
By:________________________________
Title: Vice President
XX XXXXXX XXXXX BANK, as a Lender
/s/ Xxxxxx X. Xxxx
By:________________________________
Title: Managing Director
THE BANK OF NEW YORK, as a Lender
/s/ Xxxxx Xxxxxxxxx
By:________________________________
Title: Vice President
SOVEREIGN BANK, as a Lender
/s/ Xxxxxx XxXxxx
By:________________________________
Title: Vice President
SUNTRUST BANK, N.A. , as a Lender
/s/ Xxxxx Xxxxxxx
By:________________________________
Title: Director
CITIZENS BANK OF MASSACHUSETTS, as
a Lender
/s/ Xxxxxxxx Xxxxxx
By:________________________________
Title: Vice President
THE BANK OF NOVA SCOTIA, as a
Lender
/s/ Xxxx X. Xxxxxxx
By:________________________________
Title: Managing Director
PB CAPITAL CORPORATION, as a Lender
/s/ Xxxxx X. Xxxxxxx
By:________________________________
Title: Vice President
/s/ Xxxxxxxx Xxxxxx
By:________________________________
Title: Assistant Vice President
GE CAPITAL CFE, INC., as a
Lender(1)
By: /s/ Xxxxxxx X. Xxxxxx
________________________________
Title: Duly Authorized Signatory
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(1) This Agreement shall only be binding upon the GE Capital CFE, Inc. business
("CFE") of General Electric Capital Corporation ("GE Capital") and CFE's
successors and assigns, but not upon any other business of GE Capital, any of
its affiliates, or any of their respective successors and assigns, and shall
relate only to the claims of CFE and not to any claims of any other business of
GE Capital or any of its affiliates.
APPLIED GRAPHICS TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxx
________________________________
Title: Executive Vice President
KAGT HOLDINGS, INC.
By: /s/ Xxxxx Xxxxxxxx
________________________________
Title: President
ANNEX I
Proposal Letter
ANNEX II
Debt and Equity Commitments
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ANNEX III
Consideration
Each Lender shall receive the following:
- at each Lender's sole option, either (i) cash in the amount equal to
55% of the aggregate amount of such Lender's Term Loans and
Revolving Credit Advances outstanding on the date hereof (the
"Lock-Up Date") or (ii) (a) cash in the amount equal to 53% of the
aggregate amount of such Lender's Term Loans and Revolving Credit
Advances outstanding on the Lock-Up Date and (b) options to purchase
such Lender's pro rata share (based on aggregate outstandings) of 2%
of the fully diluted common stock of KAGT as of the closing date of
the Restructuring (the "Closing Date") exercisable at a price twice
the price at which Kohlberg purchases the KAGT common stock on the
Closing Date;
- 100% of the amount by which such Lender's Revolving Credit Advances
outstanding on the Closing Date exceed such Lender's Revolving
Credit Advances on the Lock-up Date (the "Post-Lock-Up Date
Advances"); and
- in then event that the Borrower's Consolidated EBITDA (before
restructuring charges and otherwise calculated in accordance with
GAAP) for Fiscal Year 2004 is greater than $48,000,000, then the
Borrower shall pay to each Lender, on or before April 15, 2005, cash
in an amount equal to 2% of the aggregate amount of such Lender's
Term Loans and Revolving Credit Advances outstanding on the Lock-Up
Date.
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ANNEX IV
TENDER AGREEMENT
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