STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT dated as of September 2, 1998 (this "Agreement"),
by and between Unidigital Inc., a Delaware corporation (the "Company") and Xxxx
Xxxxx (the "Stockholder").
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, the Company and the Stockholder are parties to that certain
Agreement of Purchase and Sale (the "Purchase Agreement") dated as of August 3,
1998, and as amended by that certain letter agreement dated August 28, 1998, by
and among the Company, Mega Art Corp., a New York corporation ("Mega Art"), and
the Stockholder, Xxxx Xxxxxx and Xxxxxxx X. Xxxxxxx, as record owner, and
Xxxxxxxx, Xxxxxxx & Xxxxxxx, as beneficial owner, the holders of all of the
issued and outstanding capital stock of Mega Art, pursuant to which the
Stockholder has been issued 663,650 shares of the Common Stock (the "Aloni
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 the Stockholder (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 4 hereof, it is understood and agreed that the Stockholder
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 his own
benefit or 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. 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-
1
law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.
SECTION 2. Right of First Refusal.
----------------------
(a) Whenever and as often as the Stockholder shall desire to sell
any of the Restricted Shares pursuant to a bona fide offer for the purchase
thereof in a private transaction, the 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 Stockholder shall cause any such offer
to be reduced to writing) and specifying the number of shares of the
Stockholder's Restricted Shares which the Stockholder desires to sell (the
"Shares"), the name of the person or persons to whom the 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 for which the fair
market value is undetermined, subject to Section 2(h) hereof, the dollar value
of such noncash consideration shall be determined in good faith by the Company's
Board of Directors, provided that if the Stockholder is a member of the Board of
Directors, he shall not participate in such determination), exercisable for a
period of ten (10) calendar days from the date of receipt of the Notice. Failure
of the Company to respond to the Notice within the ten (10) calendar day period
shall be deemed to constitute a notification to the 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 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) calendar 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
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) If the Shares are not purchased by the Company in accordance
with this Section 2, the Stockholder may, during the ninety (90) day period
commencing on the expiration of the right and option provided for in Section
2(a), sell all, or subject to Section 2(d) hereof, less than all, of the Shares
to the transferee named in the Notice for consideration, the dollar value of
which is equal to or greater than the dollar value of the consideration
specified in the Notice, free of the restrictions contained in Section 2 of this
Agreement.
(d) In the event that the Stockholder desires to sell less than all
of the Shares set forth in the Notice (after the Company has exercised its right
and option under Section 2(a)), the Stockholder shall give another notice (the
"Second Notice") to the Company, by which the Stockholder shall then offer to
the Company the right and option to purchase all, but not less than
2
all, of the number of Shares set forth in the Second Notice 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 Company shall have the right and option
to purchase all but not less than all of the number of Shares set forth in the
Second Notice, for cash at a purchase price equal to the dollar value of such
consideration (in the event such consideration includes noncash consideration
for which the fair market value is undetermined, subject to Section 2(h) hereof,
the dollar value of such noncash consideration shall be determined in good faith
by the Company's Board of Directors, provided that if the Stockholder is a
member of the Board of Directors, he shall not participate in such
determination), exercisable for a period of ten (10) calendar days from the date
of receipt of the Second Notice. Failure of the Company to respond to the Second
Notice within the ten (10) calendar day period shall be deemed to constitute a
notification to the Stockholder of the Company's decision not to exercise the
right and option to purchase the Shares under this Section 2(d).
(e) The Company may exercise the rights and options provided in
Section 2(d) by giving written notice to the 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) calendar days from the date of expiration of the
notice upon which the Company is acting) upon which payment of the purchase
price for the Shares shall be made. The 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
being purchased by the Company, properly endorsed for transfer, against payment
of the purchase price therefor by the Company in immediately available funds.
(f) If the Shares set forth in the Second Notice are not purchased
by the Company in accordance with this Section 2, the Stockholder may, during
the ninety (90) day period commencing on the expiration of the rights and
options provided for in Section 2(d), sell all, but not less than all, of the
Shares set forth in the Second Notice to the transferee named in the Second
Notice for consideration, the dollar value of which is equal to or greater than
the dollar value of the consideration specified in the Second Notice, free of
the restrictions contained in Section 2 of this Agreement.
(g) Notwithstanding the foregoing, any of the Restricted Shares
distributed to the Company in satisfaction of an indemnification claim made by
the Company under the Purchase Agreement shall be free of the restrictions
contained in Section 2 of this Agreement. In addition, in the event the
Stockholder desires to sell any of the Restricted Shares pursuant to Rule 144
promulgated under the Securities Act of 1933, as amended (the "1933 Act"), such
sale shall be free of the restrictions contained in Section 2 of this Agreement,
provided such sale does not result in such Stockholder selling in excess of
10,000 shares of Common Stock in the immediately preceding three-month period.
After the third anniversary of the date of this Agreement, for each successive
one-year term, the Stockholder shall be permitted to sell an additional 5,000
shares of Common Stock pursuant to this Section 2(g).
3
(h) In the event the Stockholder disputes the Board of Directors'
determination of the dollar value of noncash consideration to be paid for the
Shares, the Stockholder shall notify the Company in writing within five (5)
calendar days after such determination by the Board of Directors setting forth
the amount, nature and basis of the dispute.
Within the following five (5) calendar 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 "Big Five" public accounting
firm located in the City of New York, State of New York mutually acceptable to
the Company and the Stockholder. 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 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) calendar 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, as described above, 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. The non-prevailing party
shall be solely responsible for the fees and expenses of the arbitrator.
SECTION 3. Standstill Agreement. The Stockholder hereby agrees that,
--------------------
without the prior written consent of the Company, 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 4. 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 the Stockholder or any Permitted Transferee, shall be bound by the
rights and restrictions of this Agreement relating
4
to the 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.
SECTION 5. Legend on Stock Certificates. During the term of this
-----------------------------
Agreement, each certificate issued after the date hereof representing Restricted
Shares held by the 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 SEPTEMBER 2, 1998, BETWEEN UNIDIGITAL INC.
(THE "COMPANY"), AND XXXX XXXXX. 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 6. Duration of Agreement. This Agreement shall terminate on
---------------------
the third anniversary of the date of this Agreement, unless earlier terminated
by the parties hereto; provided, however, that this Agreement shall
--------- -------
automatically be renewed for successive one (1) year terms in the event that
each of the Stockholder and Xxxxxxx X. Xxx are employed by the Company (or any
of its affiliates) at the end of each such term. Additionally, this Agreement
shall terminate immediately upon (i) the transfer of all the Restricted Shares
(or any portion thereof pursuant to a transfer made under Rule 144 or a
registration statement under the 0000 Xxx) owned by the Stockholder, (ii) a
Change of Control (as such term is defined under the Stockholder's Employment
Agreement with Mega Art); or (iii) the Company's (A) admission in writing of its
inability to pay its debts generally as they become due, (B) filing of a
petition in bankruptcy or a petition to take advantage of any insolvency act, on
either a voluntary or involuntary basis, or (C) being adjudicated bankrupt on a
petition in bankruptcy filed against it.
SECTION 7. Representations and Warranties.
------------------------------
(a) Each of the Company and the Stockholder (in the case of clause
(ii) below) represents and warrants, severally and not jointly, to the other
party 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
5
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 the Stockholder, as the case may be, and constitutes the legal,
valid and binding obligation of the Company or the Stockholder,
enforceable against the Company or the 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.
(b) The Stockholder represents and warrants to the other parties
hereto that the Aloni Shares constitute the entire ownership interest of the
Stockholder in the Common Stock of the Company as of the date hereof.
(c) The Company hereby acknowledges that the Stockholder, subject to
underwriter approval and the limitations set forth in the Purchase Agreement,
may be entitled to participate in a public offering of the Company's equity
securities.
SECTION 8. Governing Law. This Agreement shall be governed by, and
--------------
construed in accordance with, the laws of the State of New York without
giving regard to conflicts of law principles.
SECTION 9. 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 10. 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, 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx, 00000-0000, Attention: Chief Executive Officer, with a copy to Xxxxxxxx
Xxxxxxxxx Professional Corporation, 000 Xxxxxxx Xxxx Xxxx, Xxxxxxxxx, Xxx
Xxxxxx, 00000, Attention: Xxxxx X. Xxxxx, Esq.;
(ii) if to the Stockholder, c/o Mega Art Corporation, Xxxx 00, 0xx
Xxxxx, Xxxxxxxx Highway and West Houston Street, New York, New York 10014,
Attention: President, with a copy to Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxx Xxxxxxxxxxx, Esq.
SECTION 11. Modification. Except as otherwise provided herein,
------------
neither this Agreement nor any provision hereof may be modified, changed,
discharged or terminated except
6
by an instrument in writing signed by the party against whom the enforcement of
any modification, change, discharge or termination is sought.
SECTION 12. 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 13. 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 14. 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.
SECTION 15. 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 16. 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 17. 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/ Xxxxxxx X. Xxx
-------------------------------
Name: Xxxxxxx X. Xxx
Title: Chief Executive Officer
STOCKHOLDER
/s/ Xxxx Xxxxx
-----------------------------
Xxxx Xxxxx
