EMPLOYMENT AGREEMENT
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THIS AGREEMENT (the "Agreement") is dated as of this 2nd day of September,
1998, by and between Mega Art Corp., a New York corporation, with an office for
purposes of this Agreement at 229 West 28th Street, New York, NY 10001
(hereinafter the "Company" or "Employer"), Ehud Aloni with an address at Pier
40, 2nd Floor, West Side Highway and West Houston Street, New York, New York
10014 (hereinafter the "Employee"), and for purposes of Section 4 of this
Agreement only, Unidigital Inc., a Delaware corporation and the Company's
parent, with an office for purposes of this Agreement at 229 West 28th Street,
New York, New York 10001 (hereinafter "Unidigital").
WITNESSETH:
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WHEREAS:
(a) Company wishes to engage the services of Employee to render
services for and on its behalf in accordance with the following terms,
conditions and provisions; and
(b) Employee wishes to perform such services for and on behalf of
the Company, in accordance with the following terms, conditions and provisions.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained the parties hereto intending to be legally bound hereby agree
as follows:
1. EMPLOYMENT. Company hereby employs Employee and Employee accepts
such employment and shall perform his duties and the responsibilities provided
for
herein in accordance with the terms and conditions of this Agreement principally
in New York City, New York.
2. EMPLOYMENT STATUS. Employee shall at all times be Company's employee
subject to the terms and conditions of this Agreement.
3. TERM. The term of this Agreement (the "Term") shall commence on
September 2, 1998, and shall terminate on August 31, 2001 (the "Termination
Date"), for a total term of three (3) years, unless earlier terminated pursuant
to the terms and provisions of this Agreement.
4. POSITION. During Employee's employment hereunder, Employee shall serve
as President of the Company. In such position, Employee shall have the full
power and authority to manage and conduct all of the business of Mega Art.
Employee shall report directly to William E. Dye (or his successor) and to no
other person, entity or committee other than William E. Dye (or his successor).
Employee shall devote such time necessary to perform his duties hereunder;
provided, however, that subject to the terms and conditions of this Agreement,
Employee shall be permitted to pursue certain business activities outside of his
employment hereunder, provided that such activities do not materially adversely
interfere with the Employee's ability to perform his duties and obligations to
the Company hereunder. Employee shall be provided with an office, staff and
other working facilities consistent with his positions and as required for the
performance of his duties. In addition, Company and Unidigital agree to cause
Employee to (i) be nominated as a director of the Company and to
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use their best efforts to cause Employee to be elected to the Board of Directors
of the Company (the "Board") and to be retained as a director of the Company,
and (ii) be appointed to serve on the Executive Committee of Senior Management
(or such other similar committee) (the "Executive Committee") of Unidigital and
to cause Employee to be retained as a member of the Executive Committee, during
Employee's employment during the Term, as it may be extended.
5. COMPENSATION.
(a) For the performance of all Employee's services to be rendered
pursuant to the terms of this Agreement, Company will pay and Employee will
accept the following compensation:
Base Salary. During the Term, Company shall pay the Employee
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an initial base annual salary of $200,000 (the "Base Salary") payable in regular
installments in accordance with the Company's usual payment practices (which
currently is in equal bi-monthly installments). Employee shall be entitled to
such further increases, if any, in his Base Salary as may be determined from
time to time in the sole discretion of the Board. Employee's Base Salary, as in
effect from time to time, is hereinafter referred to as the "Employee's Base
Salary".
Bonus. During the Term, Employee shall be eligible for and may
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receive bonuses. The amount of such bonuses, if any, shall be solely within the
discretion of the Board or the Compensation Committee thereof and may be in the
form of cash or stock options. The Board or the Compensation Committee, as the
case may be, will, commensurate with the
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Company's policies and practices, consider certain factors in making its
determination hereunder, including, but not limited to, the performance,
profitability and cash flow of the Mega Art division.
(b) Company shall deduct and withhold from Employee's compensation
all necessary or required taxes, including, but not limited to, Social Security,
withholding and any other applicable amounts required by law or any taxing
authority.
6. EMPLOYEE BENEFITS.
In addition to the Employee's Base Salary, during the Term hereof
and so long as Employee is not terminated, Employee shall receive and be
provided health and insurance benefits at the Company's cost, and during
Employee's employment hereunder, Employee shall receive and be provided employee
benefits (including, without limitation, if offered by the Company, fringe
benefits, vacation, automobile, retirement plan participation and life, health,
accident and disability insurance, etc. (collectively, "Employee Benefits") on
the same basis as those benefits are generally made available to the most senior
executives of the Company or other subsidiaries of Unidigital. Employee shall be
entitled to receive not less than three weeks of paid vacation per year and if
such vacation time is not taken by Employee, in the then current year, Employee
at his option may accrue vacation or receive compensation at the then current
level.
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7. BUSINESS EXPENSES AND PERQUISITES.
(a) Reasonable travel, entertainment and other business expenses
incurred by Employee in the performance of his duties hereunder shall be
reimbursed by the Company in accordance with Company policies then in effect.
(b) Company shall provide Employee a new automobile, every three
years, including all related maintenance, repairs, insurance parking and other
costs. The base annual automobile rental expense shall not exceed $18,000 per
annum.
8. TERMINATION.
(a) For Cause by the Company. (i) Employee's employment hereunder may be
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terminated by the Company for cause. For purposes of this Agreement, "cause"
shall mean (A) Employee's unjustified failure to perform his duties hereunder,
for the benefit of Mega Art through August 31, 1999, and for the benefit of
Unidigital and its subsidiaries thereafter, or to follow reasonable directions
of William E. Dye with respect to such duties, provided such failure has a
material adverse effect on Mega Art through August 31, 1999, or Unidigital and
its subsidiaries thereafter, (B) willful misconduct by Employee in connection
with his employment, (C) Employee's conviction of, or plea of nolo contendere
to, any crime constituting a felony under the laws of the United States or any
State thereof, or any crime constituting a misdemeanor under any such law
involving moral turpitude, or (D) Employee's material breach of any of the
provisions of this Agreement, provided that the Company delivers a written
notice detailing the alleged misconduct to the Employee and the Employee
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has an opportunity to refute the allegations set forth in such notice in person,
or by teleconference, in front of the Board within five (5) business days of
receipt of such notice. Any termination for cause without the notice required
under this Section 8(a) shall be deemed a termination without cause.
(ii) If Employee is terminated for cause, he shall be entitled
to receive Employee's Base Salary from Company through the date of termination
and Employee shall be entitled to no other payments of Employee's Base Salary
under this Agreement, including, without limitation, the Non-Competition
Consideration (as defined below). All other benefits, if any, due Employee
following Employee's termination of employment pursuant to this Section 8(a)
shall be determined in accordance with the written plans, policies and practices
of the Company.
(b) Disability or Death. (i) Employee's employment hereunder shall
-------------------
terminate upon his death or if Employee becomes physically or mentally
incapacitated and is therefore unable (or will as a result thereof, be unable)
for a period of six (6) consecutive months or for an aggregate of twelve (12)
months in any twenty-four (24) consecutive month period to perform his duties
(such incapacity is hereinafter referred to as "Disability"). Any question as to
the existence of the Disability of Employee as to which Employee and the Company
cannot agree shall be determined in writing by a qualified independent physician
mutually acceptable to Employee (or a representative of the Employee) and the
Company. If Employee and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such
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determination in writing. The determination of Disability made in writing to the
Company and Employee shall be final and conclusive for all purposes of the
Agreement.
(ii) Upon termination of Employee's employment hereunder
during the Term for Disability, Employee shall receive from the Company 50% of
Employee's Base Salary through the end of the Term and the amount equivalent to
50% of the cash bonus paid in the immediately preceding fiscal year, if any,
received by the Employee under the terms of this Agreement, provided that any
payment under this Section 8(b)(ii) shall be reduced by the amount of any
disability benefits paid to Employee under any other disability plan, program or
arrangement maintained and paid for by the Company or its affiliates. Such
payments shall be payable in regular installments in accordance with the
Company's usual payment practices (which currently is in bi-monthly
installments). Except as provided for in this Section 8(b)(ii), in the event of
termination as a result of Disability, Employee shall not be entitled to any
further payments of Employee's Base Salary and the Non-Competition Consideration
under this Agreement.
(iii) Upon termination of Employee's employment hereunder
during the Term as a result of death, the Employee's estate or named
beneficiary(ies) shall receive from the Company (A) Employee's Base Salary at
the rate in effect at the time of Employee's death through the end of the month
in which his death occurs and, on a pro rata basis, the cash bonus paid to
Employee during the immediately preceding fiscal year, and (B) the proceeds of
any life insurance policy maintained for his benefit by the Company pursuant to
Section 6 under this Agreement.
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(iv) All other benefits, if any, due Employee following
Employee's termination of employment pursuant to this Section 8(b) shall be
determined in accordance with the written plans, policies and practices of the
Company and shall be at least equal to those received by employees of the
Company.
(c) Without Cause by the Company. If Employee's employment is
------------------------------
terminated by the Company without cause (other than Disability or death), then
Employee shall be entitled to receive (i) the Employee's Base Salary and, on a
pro rata basis, the cash bonus paid to Employee during the immediately preceding
fiscal year, from the Company through the end of the Term, payable in regular
installments in accordance with the Company's usual payment practices (which
currently is in bi-monthly installments), and (ii) the Earn-Out Payment (as
defined under that certain Agreement of Purchase and Sale dated as of August 3,
1998, and as amended by that certain letter agreement dated August 28, 1998,
among Unidigital, the Company, and the stockholders of the Company). All other
benefits, if any, due Employee following Employee's termination of employment
pursuant to this Section 8(c) shall be determined in accordance with the written
plans, policies and practices of the Company. If Employee breaches or threatens
to breach any of the covenants set forth in either Section 9 or 10, or both, of
this Agreement, Employee shall not be entitled to any further payments under
this Section 8(c).
(d) For Good Reason by Employee. (i) The Employee may terminate
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employment hereunder for good reason immediately and with prompt notice to the
Company. "Good reason" for termination by the Employee shall be limited to the
following conduct of the
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Company: (A) material breach of any provision of this Agreement by the Company,
which breach shall not have been cured by the Company within ten (10) days of
receipt of written notice of said breach; (B) failure to maintain the Employee
in a position commensurate with that referred to in Section 4 of this Agreement
including, without limitation, the alteration of the officer to whom the
Employee reports without the prior written consent of the Employee; (C) any
action by the Company which results in a material diminution of such position,
authority, duties or responsibilities, excluding for this purpose any isolated
action not taken in bad faith and which is promptly remedied by the Company
after receipt of written notice thereof given by the Employee; or (D) if
Company's principal executive offices are moved outside of a one hundred (100)
mile radius of New York City.
(ii) If Employee terminates his employment for good reason,
then Employee shall be entitled to receive payments in accordance with the
provisions set forth in Section 8(c).
(e) Termination by Employee Without Good Reason. (i) If Employee
---------------------------------------------
wishes to terminate his employment with the Company without good reason,
Employee must afford the Company with at least six (6) full month's written
notice of termination. Such termination shall not be deemed a breach of this
Agreement.
(ii) If Employee terminates his employment under this Section
8(e), he shall be entitled to receive Employee's Base Salary from Company
through the date of termination and Employee shall be entitled to no other
payments of Employee's Base Salary under this Agreement, including, without
limitation, the Non-Competition Consideration (as
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defined below). All other benefits, if any, due Employee following Employee's
termination of employment pursuant to this Section 8(e) shall be determined in
accordance with the written plans, policies and practices of the Company.
(f) Change of Control. For purposes of this Agreement, "Change of
-----------------
Control" shall mean (i) any transaction or series of transactions (including,
without limitation, a tender offer, merger or consolidation) the result of which
is that any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), becomes the "beneficial" owner (as defined in Rule 13(d)(3) under the
Exchange Act) of more than fifty percent (50%) of the total aggregate voting
power of all classes of the voting stock of Unidigital and/or warrants or
options to acquire such voting stock, calculated on a fully diluted basis, or
(ii) a sale of assets constituting all or substantially all of the assets of
Unidigital (determined on a consolidated basis). In the event of such a Change
of Control, the new entity (if the Company is not the surviving corporation)
shall be obligated to perform the Company's obligations under the terms of this
Agreement. Notwithstanding the foregoing, such Change in Control shall not
release the Company from its liability for the full and faithful performance of
all the terms and conditions of this Agreement. Any purported assignment of this
Agreement that is not agreed to by Unidigital's successor shall be deemed a
termination without cause.
(g) Loft Lease. In the event that Employee is terminated for any
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reason whatsoever, or upon the expiration of the Term hereof, the Company or its
successors or
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assigns shall take all necessary action to assign the lease of a certain loft
located at 529-535 West 20th Street, New York, New York to Employee.
9. NON-DISCLOSURE OF INFORMATION. Employee acknowledges that by virtue of
his position he will be privy to the Company's and Unidigital's and its
subsidiaries' confidential information including, but not limited to, scientific
and proprietary information, research, development, patents and applications
thereto, technical information, computer programs, know-how, trade secrets,
knowledge, designs, drawings, specifications, concepts, data, reports, methods,
processes, documentation, methodology, pricing, marketing plans, acquisition
plans, customer lists, salaries, business affairs, suppliers, profits, markets,
sales strategies, unique servicing techniques and any other information not
available to the general public (hereafter collectively "Confidential
Information"). Without the prior written consent of the Company, Employee shall
not, during the Term and for a period of two (2) years thereafter, intentionally
disclose all or any part of the Confidential Information to any person, firm,
corporation, association or any other entity for any reason or purpose
whatsoever, nor shall Employee and any other person by, through or with
Employee, during the Term and for a period of two (2) years thereafter,
intentionally make use of any of the Confidential Information for any purpose or
for the benefit of any other person or entity, other than Company or its
affiliates, under any circumstances. Company and Employee agree that a violation
of the foregoing covenants will cause irreparable injury to the Company, and
that in the event of a breach or threatened breach by the Employee of the
provisions of this Section 9, Company shall be entitled to an injunction.
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The foregoing to the contrary notwithstanding, no information, written or
oral, shall be construed or considered "Confidential Information" and thereby
subject to the restrictions of this Section 9 if such information was (i)
generally available to the public other than as a result of a disclosure by the
Employee or anyone to whom the Employee transmits the information in violation
hereof, (ii) in the possession of the Employee or known to him on a
non-confidential basis prior to its disclosure to him, (iii) available to the
Employee on a non-confidential basis from a source other than Company who is not
bound by a confidentiality agreement with Company, (iv) available in trade
publications, reference books or other resources and which may be compiled by
any person desirous of preparing a report or memorandum containing such
information, or (v) required by law to be disclosed.
10. RESTRICTIVE COVENANT.
Without the prior written approval of the Board first obtained:
(a) During the term of this Agreement and for a period of two (2)
years after the termination of this Agreement (the "Restrictive Period"),
Employee covenants and agrees that, within fifty (50) miles of the location of
any facility at which the Company, Unidigital or its subsidiaries conducts
business on the date hereof or at the date of termination, he shall not directly
or indirectly (i) manufacture, market or sell any products or services which
have the same or substantially the same function and primary application as any
existing products or services manufactured by the Company, Unidigital or its
subsidiaries on the date hereof or at the date of termination or (ii) engage in,
manage, operate, be connected
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with or acquire any interest in, as an employee, consultant, advisor, agent,
owner, partner, co-venturer, principal, director, shareholder, lender or
otherwise, any business competitive with the business of the Company, Unidigital
or its subsidiaries as conducted on the date hereof or at the date of
termination (a "Competitive Business"), except that the Employee may own not
more than five percent (5%) of the outstanding shares of any publicly held
corporation which is a Competitive Business which has shares listed for trading
on a securities exchange registered with the Securities and Exchange Commission
or through the automatic quotation system of a registered securities
association. Employee further covenants and agrees he shall not, directly or
indirectly, in any manner whatsoever interfere with, solicit or disrupt or
attempt to interfere with, solicit or disrupt the relationship, contractual or
otherwise, between Company, Unidigital or its subsidiaries and any of their
respective customers, suppliers, lessees or employees during the Restrictive
Period.
(b) During the Restrictive Period, Employee covenants and agrees
that within a radius of fifty (50) miles from each of the place(s) of Company's,
Unidigital's or its subsidiaries' business or any other area in which Company,
Unidigital or its subsidiaries are engaged in business (at the date of
termination), he shall not render any services to any person, firm, corporation,
association or other entity to whom any Confidential Information in whole or in
part, has been disclosed or is threatened to be disclosed in violation of this
Agreement.
(c) Company and Employee agree that a violation of either of the
foregoing covenants will cause irreparable injury to the Company, and that in
the event of a
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breach or threatened breach by Employee of the provisions of this Section 10,
Company shall be entitled to an injunction.
(d) During the Restrictive Period, in consideration for the
restrictive covenants set forth in this Section 10, Company shall make annual
payments to the Employee of $25,000 (the "Non-Competition Consideration"),
payable in regular installments in accordance with the Company's usual payment
practices (which currently is in equal bi-monthly installments); provided,
however, that if Employee breaches or threatens to breach the covenants set
forth in either Section 9 or 10, or both, of this Agreement, he shall not be
entitled to any further payments under this Section 10(d).
(e)(i) The Restrictive Period (together with the Company's
obligation to pay the Non-Competition Consideration) shall be terminated
immediately in the event that Unidigital:
(A) admits in writing its inability to pay its debts
generally as they become due;
(B) files a petition in bankruptcy or a petition to take
advantage of any insolvency act;
(C) is adjudicated bankrupt on a petition in bankruptcy
filed against it; or
(D) through the Company, terminates the Employee without
cause or the Employee terminates his employment hereunder for good
reason.
(ii) The Restrictive Period (together with the
Company's obligation to pay the Non-Competition Consideration) shall be reduced
to a period of six (6)
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months after the termination of this Agreement in the event that the closing
price of Unidigital's common stock on the Nasdaq National Market (or such other
quotation system or exchange on which Unidigital's common stock is then traded)
as reported by Nasdaq on the date of termination of this Agreement (other than
termination for cause by the Company or termination by the Employee without good
reason prior to the end of the Term hereof) is less than $4.00 per share (as
proportionately adjusted for any increase or decrease in the number of issued
shares of Unidigital's common stock resulting from a stock split, stock
dividend, combination or reclassification of Unidigital's common stock).
(f) Employee acknowledges that the restrictions contained in this
Section 10 are reasonable. In that regard, it is the intention of the parties to
this Agreement that the provisions of this Section 10 shall be enforced to the
fullest extent permissible under the law and public policy applied in each
jurisdiction in which enforcement is sought. Accordingly, if any portion of this
Section 10 shall be adjudicated or deemed to be invalid or unenforceable, the
remaining portions shall remain in full force and effect, and such invalid or
unenforceable portion shall be limited to the particular jurisdiction in which
such adjudication is made.
11. BREACH OR THREATENED BREACH OF COVENANTS. In the event of Employee's
actual or threatened breach of his obligations under either Section 9 or 10, or
both, of this Agreement, in addition to any other remedies Company may have,
Company shall be entitled to obtain a temporary restraining order and a
preliminary and/or permanent injunction restraining the other from violating
these provisions. Nothing in this Agreement shall be construed to prohibit
Company from pursuing and obtaining any other available
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remedies which Company may have for such breach or threatened breach, whether at
law or in equity, including the recovery of damages from the other.
12. REPRESENTATIONS AND WARRANTIES BY EMPLOYEE. Employee hereby warrants
and represents that he is not subject to or a party to any restrictive covenants
or other agreements that in any way preclude, restrict, restrain or limit him
(a) from being an Employee of Company, (b) from engaging in the business of
Company in any capacity, directly or indirectly, and (c) from competing with any
other persons, companies, businesses or entities engaged in the business of
Company.
13. ARBITRATION. Except as set forth in Section 11, any controversy or
claim arising out of or relating to this Agreement, the performance thereof of
its breach or threatened breach shall be settled by arbitration in the State of
New York, County of New York in accordance with the then governing rules of the
American Arbitration Association. The findings of the arbitration panel or
arbitrator shall be final and binding upon the parties. Judgment upon any
arbitration award rendered may be entered and enforced in any court of competent
jurisdiction. In no event may the arbitration determination change Employee's
compensation, title, duties or responsibilities, the entity to whom Employee
reports or the principal place where Employee is to render his services.
14. NOTICES. Any notice required, permitted or desired to be given under
this Agreement shall be sufficient if it is in writing and (a) personally
delivered to Employee or William E. Dye, as an authorized member of Company, (b)
sent by overnight delivery, or (c)
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sent by registered or certified mail, return receipt requested, to Employer's or
Employee's address as provided in this Agreement or to a different address
designated in writing by either party. In all instances of notices to be given
to Company, a copy by like means shall be delivered to Company's counsel care of
Buchanan Ingersoll Professional Corporation, 500 College Road East, Princeton,
NJ 08540, Attn: David Sorin, Esq. In all instances of notices to be given to
Employee, a copy by like means shall be delivered to Employee's counsel care of
Orrick, Herrington & Sutcliffe LLP, 30 Rockefeller Plaza, New York, New York
10112, Attn: Rubi Finkelstein, Esq. Notice is deemed given on the day it is
delivered personally or by overnight delivery, or five (5) business days after
it is mailed, if transmitted by the United States Post Office.
15. ASSIGNMENT. Employee acknowledges that his services are unique and
personal. Accordingly, Employee may not assign his rights or delegate his duties
or obligations under this Agreement. Company's rights and obligations under this
Agreement shall inure to the benefit of and shall be binding upon the Company's
successors and assigns. Company has the absolute right to assign its rights and
benefits under the terms of this Agreement.
16. WAIVER OF BREACH. Any waiver of a breach of provision of this
Agreement, or any delay of failure to exercise a right under a provision of this
Agreement, by either party, shall not operate or be construed as a waiver of
that or any other subsequent breach or right.
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17. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties. It may not be changed orally but only by an agreement in writing which
is signed by the parties. The parties hereto agree that any existing employment
agreement between them shall be terminated as of the date of this Agreement.
18. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the internal laws of the State of New York without giving regard
to conflicts of law principles.
19. SEVERABILITY. The invalidity or non-enforceability of any provision of
this Agreement or application thereof shall not affect the remaining valid and
enforceable provisions of this Agreement or application thereof.
20. SURVIVAL. The obligations of Employee set forth in Sections 9, 10, 11
and 13 represent independent covenants by which Employee is and will remain
bound notwithstanding any breach by the Company, and shall survive the
termination of this Agreement.
21. CAPTIONS. Captions in this Agreement are inserted only as a matter of
convenience and reference and shall not be used to interpret or construe any
provisions of this Agreement.
22. GRAMMATICAL USAGE. In construing or interpreting this Agreement,
masculine usage shall be substituted for those feminine in form and vice versa,
and plural
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usage shall be substituted or singular and vice versa, in any place in which the
context so requires.
23. CAPACITY. Employee has read and is familiar with all the terms and
conditions of this Agreement and has the capacity to understand such terms and
conditions hereof. By executing this Agreement, Employee agrees to be bound by
this Agreement and the terms and conditions hereof.
24. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same Agreement.
[signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first hereinabove written.
MEGA ART CORP.
/s/ William E. Dye
By: ----------------------
Name: William E. Dye
Title: Chief Executive Officer
EMPLOYEE
/s/ Ehud Aloni
--------------------------
Ehud Aloni
For purposes of Section 4 of this Agreement only, the undersigned has
executed this Agreement as of the date first hereinabove written.
UNIDIGITAL INC.
/s/ William E. Dye
By: ----------------------
Name: William E. Dye
Title: Chief Executive Officer
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