SETTLEMENT AGREEMENT
This SETTLEMENT AGREEMENT dated March 9, 2000 (this "Settlement Agreement")
is by and among ▇▇▇▇ ▇▇▇▇▇ ("Aloni"), ▇▇▇▇▇ ▇▇▇▇▇▇ ("S. Primor"), ▇▇▇▇ ▇▇▇▇▇▇
("Primor"), ▇▇▇▇▇ ▇▇▇▇ ("Chen"), ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), Inlarge LLC
(a/k/a Enlarge LLC), a New York limited liability company ("Inlarge") (Aloni, S.
Primor, Primor, Chen, ▇▇▇▇▇▇▇ and Inlarge being hereinafter collectively
referred to as the "Aloni Group"), on the one hand, and Unidigital Inc., a
Delaware corporation (the "Company"), and Mega Art Corp., a New York corporation
("Mega Art") (the Company and Mega Art being hereinafter collectively referred
to as the "Company Group"), on the other hand.
WHEREAS, on or about January 20, 2000, Aloni commenced a lawsuit against
the Company and Mega Art in the Supreme Court of the State of New York, County
of New York (the "Court") captioned ▇▇▇▇ ▇▇▇▇▇ vs. Unidigital Inc. and Mega Art
Corp., Index No. 600247/00 (the "Aloni Action"), through the filing of a
Complaint;
WHEREAS, on or about February 9, 2000, the Company and Mega Art commenced a
lawsuit in the Court captioned Unidigital Inc. and Mega Art Corp. vs. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Infinite Graphic Technology Company,
Inlarge LLC, Index No. 600560/00 (the "Company's Action"), through the filing of
a Complaint;
WHEREAS, by decision dated February 14, 2000, the Court granted the Company
Group's motion for preliminary injunctive relief in the Aloni Action; and
WHEREAS, the parties hereto have determined that the best interests of
themselves, their members, their stockholders, their employees and their other
constituencies would be served by entering into this Settlement Agreement and in
order to avoid further expenses, inconvenience
and uncertainty.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
set forth herein and intending to be legally bound hereby, each of the members
of the Aloni Group, on the one hand, and each of the members of the Company
Group, on the other hand, hereby agree as follows:
1. Settlement of Litigation; Release of Claims
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(a) Upon execution of this Settlement Agreement, neither any member
of the Aloni Group nor any member of the Company Group will take or cause to be
taken any further action, by way of motion, discovery or otherwise, in either of
the Aloni Action or the Company's Action, except for the action contemplated by
this Section 1. Within fifteen (15) days of the effective date of this
Settlement Agreement (as determined in accordance with Section 24 below), the
Aloni Group and the Company Group will take all steps necessary to discontinue,
with prejudice and without costs, each of the Aloni Action and the Company's
Action pursuant to the appropriate Stipulation of Discontinuance in
substantially the forms attached hereto as Exhibits A-1 and A-2.
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(b) Each member of the Aloni Group, on the one hand, and each
member of the Company Group, on the other hand, hereby mutually releases and
discharges any and all claims, demands, rights, actions, causes of action,
damages, costs, losses, reimbursements, liabilities and expenses, including
attorney's fees, of any and every kind, nature or description whatsoever, at law
or in equity, which any member of the Aloni Group, or the Company Group, as the
case may be, may have had, may now have or may hereafter have or assert against
the other, including, in the case of any member of the Company Group or any
member of the Aloni Group, as the case may be, against his or its present and
former Affiliates (as hereinafter
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defined), Associates (as hereinafter defined), officers, directors,
stockholders, partners, employees, agents, representative, advisors and
attorneys (in the case of the Company Group, collectively, the "Company Group's
Representatives"; and, in the case of the Aloni Group, collectively, the "Aloni
Group's Representatives") on account of any matter whatsoever arising from the
beginning of time through and including the date of this Settlement Agreement
whether such claims are known or unknown, accrued or unaccrued, knowable or
suspected or unsuspected, excepting only any claims, demands, rights, actions,
causes of action, damages, costs, losses, reimbursements, liabilities or
expenses arising by virtue of an undertaking or promise contained in this
Settlement Agreement, or any breach thereof and except for the agreements
referred to in Section 24 hereof.
(c) Each member of the Aloni Group agrees that neither he, she or
it, nor (to the best of his or its efforts) his or its Affiliates or Associates,
nor anyone claiming under, through or for his or its or on his or its behalf
will ever bring, file, institute, commence, prosecute, maintain or recover upon,
or cause or permit or encourage to be brought, filed, instituted, commenced,
prosecuted, maintained or recovered upon, either directly or indirectly, any
suit, charge, administrative proceeding, investigation or action at law or in
equity against any member of the Company Group or the Company Group's
Representatives, or any of them, in any court, agency or forum, state or
federal, within the United States or elsewhere, to recover damages, injuries,
losses, claims, expenses or liabilities of any and every kind or nature
whatsoever, whether directly or by way of subrogation, indemnification,
contribution or otherwise, which may have been suffered or sustained by any
member of the Aloni Group or their Affiliates or Associates or the Aloni Group's
Representatives, or any of them, arising out of any transaction or event which
transpired or facts which existed from the beginning of time
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through and including the date of this Settlement Agreement, excepting only any
claims, demands, rights, actions, causes of actions, damages, costs, losses,
reimbursements, liabilities or expenses arising by virtue of an undertaking or
promise contained in this Settlement Agreement or any breach thereof.
(d) Each member of the Company Group hereby agrees that no member
member of the Company Group, nor (to the best of their respective efforts) any
Affiliates or Associates of any of them, will ever bring, file, institute,
commence, prosecute, maintain or recover upon, or cause or permit to be brought,
filed, instituted, commenced, prosecuted, maintained or recovered upon, either
directly or indirectly, any suit, charge, administrative proceeding,
investigation or action at law or in equity against the Aloni Group or the Aloni
Group's Representatives, or any of them, in any court, agency or forum, state or
federal, within the United States or elsewhere, to recover damages, injuries,
losses, claims, expenses or liabilities of any and every kind or nature
whatsoever, whether directly or by way of subrogation, indemnification,
contribution or otherwise, which may have been suffered or sustained by any
member of the Company Group or their Affiliates or Associates or the Company
Group's Representatives, or any of them, arising out of any transaction or event
which transpired or facts which existed from the beginning of time through and
including the date of this Settlement Agreement, excepting only any claims,
demands, rights, actions, causes of actions, damages, costs, losses,
reimbursements, liabilities or expenses arising by virtue of an undertaking or
promise contained in this Settlement Agreement or any breach thereof.
(e) Each member of the Company Group, on the one hand, and each
member of the Aloni Group, on the other hand, agrees that he, she or it will,
and will use his or its best efforts to cause his or its Affiliates and
Associates to, execute such documents and other papers
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and take such further actions as may be reasonably required to carry out the
agreements contemplated by this Section 1.
(f) As used in this Settlement Agreement, the term "Associate", with
respect to any person, means (1) any corporation or organization, of which such
person is a director, an officer or partner or is, directly or indirectly, the
beneficial owner of 20 percent (20%) or more of any class of equity securities,
(2) any trust as to which such person serves as trustee or in a similar
fiduciary capacity or any grantor trust as to which such person is sole
beneficiary, and (3) any relative (as used herein, the relatives of any person
shall include only such person's parents, children living in the same home with
the person and siblings) or spouse of such person, or any relative of such
spouse or, if such person is a corporation or partnership, any director, officer
or partner of such corporation or partnership or any relative or spouse of the
directors, officers or partners of such corporation or partnership or its
Affiliates. With respect to any Associate or Affiliate of any person who is a
party to this Settlement Agreement, such person shall be obligated to use only
his or its best efforts to cause such Associate or Affiliate to observe the
provisions of this Settlement Agreement as if the Associate or Affiliate was a
party hereto and bound hereby and shall bear no liability for failure of the
Associate or Affiliate to comply herewith.
(g) As used in this Settlement Agreement, the term "Affiliate", with
respect to any person means any director, officer or constituent member of such
person, or any person who controls, is controlled by, or under common control
with, such person.
2. Earn-Out Payments; Release of Guarantees and Other Payments;
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Resignations.
------------
(a) The Company hereby agrees to pay to Aloni earn-out payments
payable pursuant to that certain Agreement of Purchase and Sale dated as of
August 3, 1998 among
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Unidigital, Mega Art and stockholders of Mega Art (the "Mega Art Purchase
Agreement") of $550,000 by delivery of a promissory note in the form attached
hereto as Exhibit C (the "Aloni Note") which note is payable in eleven (11)
---------
equal installments on the fifteenth (15th) day of each month commencing on March
15, 2000.
(b) The Company hereby agrees to pay to Primor earn-out payments
payable pursuant to the Mega Art Purchase Agreement of 27,714 shares of the
Company's common stock ($150,000) within fifteen (15) days of the date hereof.
(c) The Company hereby agrees to pay to ▇▇▇▇▇▇▇ earn-out payments
payable pursuant to the Mega Art Purchase Agreement of 3,695 shares of the
Company's common stock ($20,000) within fifteen (15) days of the date hereof.
(d) The Company hereby agrees to use its commercially reasonable
efforts to cause the release of any guarantees by Aloni of any automobiles used
by Company employees and agrees to pay any amounts outstanding under Aloni's or
S. Primor's corporate credit card. The Company hereby acknowledges and agrees
that on the date hereof, neither Aloni nor S. Primor is indebted to the Company
or its affiliates.
(e) Aloni hereby confirms his resignation as a director and
President of Mega Art and, solely as a condition of this Agreement and not in
connection with the Mega Art Purchase Agreement, he shall enter into a new
Employment Agreement with Mega Art, substantially in the form attached hereto as
Exhibit B (the "Employment Agreement"). S. Primor hereby agrees to resign her
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position as a director and all other titles and positions of Mega Art held by S.
Primor on the date hereof.
3. Distribution of Assets and Liabilities of Inlarge. The Company Group,
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Inlarge and the members of Inlarge hereby agree that the Company Group will
acquire certain of the
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assets, and assume certain of the liabilities, of Inlarge pursuant to the terms
and conditions of an asset purchase agreement substantially in the form attached
hereto as Exhibit D which shall be executed concurrently herewith (the "Asset
---------
Purchase Agreement").
4. Arbitration. The parties hereto hereby agree that any controversy or
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claim arising out of or relating to this Settlement 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. Each party shall be responsible for their own fees and
expenses incurred in connection with any arbitration proceedings held in
accordance with this Section 4. In no event shall the arbitrator be permitted to
award fees and expenses in contravention of this Settlement Agreement.
5. Voting Agreement. In the event Aloni sells an aggregate of at least
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300,000 shares of the Company's common stock, Aloni hereby agrees to vote all
shares of capital stock of the Company then held by him in favor of ▇▇▇▇▇▇▇ ▇.
▇▇▇ in each election of directors in which the Company's stockholders are
entitled to elect directors of the Company and further agrees to vote with ▇▇.
▇▇▇ in all change of control transactions (as defined in the Employment
Agreement) in which the Company's stockholders are entitled to vote.
6. No Admission of Liability. Nothing contained in this Settlement
----------------------------
Agreement shall constitute an admission of liability by any party hereto or his
or its respective officers, directors, employees, agents, Affiliates or
Associates.
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7. Representations and Warranties of the Aloni Group. Each member of the
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Aloni Group, jointly and severally, represents and warrants to the Company Group
as follows:
(a) Each member of the Aloni Group has the power and authority to
execute, deliver and carry out the terms and provisions of this Settlement
Agreement and to consummate the transactions contemplated hereby, and has taken
all necessary action to authorize the execution, delivery and performance of
this Settlement Agreement and the transactions contemplated hereby.
(b) This Settlement Agreement has been duly and validly authorized,
executed and delivered by each member of the Aloni Group and constitutes the
valid and binding agreement of each member of the Aloni Group, enforceable in
accordance with its terms.
8. Representations and Warranties of the Company Group. Each member of
----------------------------------------------------
the Company Group, jointly and severally, represents and warrants to the Aloni
Group as follows:
(a) Each member of the Company Group has the power and authority to
execute, deliver and carry out the terms and provisions of this Settlement
Agreement, the Employment Agreement, the Asset Purchase Agreement and the Aloni
Note and to consummate the transactions contemplated hereby and thereby, and has
taken all necessary action to authorize the execution, delivery and performance
of this Settlement Agreement, the Employment Agreement, the Asset Purchase
Agreement and the Aloni Note and the transactions contemplated hereby and
thereby.
(b) This Settlement Agreement, the Employment Agreement, the Asset
Purchase Agreement and the Aloni Note has been duly and validly authorized,
executed and delivered by each member of the Company Group and constitutes the
valid and binding
8
agreement of each member of the Company Group, enforceable in accordance with
its or their respective terms.
9. Expenses. All fees and expenses incurred by the respective parties
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in connection with this Settlement Agreement and related matters, including the
Aloni Action and the Company's Action, shall be borne in their entirety by the
respective party incurring such costs.
10. Specific Performance. Each of the members of the Aloni Group, on the
---------------------
one hand, and each member of the Company Group, on the other hand, acknowledges
and agrees that irreparable injury to the other party would occur in the event
any of the provisions of this Settlement Agreement were not performed in
accordance with their specific terms or were otherwise breached and that such
injury would not be compensable in damages. It is accordingly agreed that each
party hereto (the "Moving Party") shall, subject to the arbitration provisions
set forth in Section 4 hereof, be entitled to specific enforcement of, and
injunctive relief to prevent any violation of, the terms of this Settlement
Agreement and the other parties hereto will not take action, directly or
indirectly, in opposition to the Moving Party seeking such relief on the grounds
that any other remedy or relief is available at law or in equity.
11. No Waiver. Any waiver by any party of a breach of any provision of
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this Settlement Agreement shall not operate as or be construed to be a waiver of
any other breach of such provision or of any breach of any other provision of
this Settlement Agreement. The failure of a party to insist upon strict
adherence to any term of this Settlement Agreement on one or more occasions
shall not be considered a waiver of or deprive the party of the right thereafter
to insist upon strict adherence to that term or any other term of this
Settlement Agreement.
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12. Certain Other Definitions. As used in this Settlement Agreement, the
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term "person" or "entity" shall mean any individual, partnership, corporation,
group, syndicate, trust, government or agency thereof, or any other association
or entity.
13. Successor and Assigns. This Settlement Agreement shall not be
-----------------------
assignable by any party hereto other than by operation of law. All the terms and
provisions of this Settlement Agreement shall inure to the benefit of and shall
be enforceable by and against the heirs and permitted successors and assigns of
the parties hereto.
14. Survival of Representations. Except as otherwise provided herein
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and except as to the mutual releases set forth in Section 1 above, all
representations, warranties and agreements made by members of the Aloni Group or
the Company Group in this Settlement Agreement or pursuant hereto shall survive
until the first anniversary of the date hereof.
15. Entire Agreement; Amendments. This Settlement Agreement including
------------------------------
the exhibits hereto contains the entire understanding of the parties with
respect to the subject matter hereof. There are no restrictions, agreements,
promises, representations, warranties, covenants or undertakings other than
those expressly set forth or referenced herein. This Settlement Agreement may be
amended only by written instrument duly executed by the parties or their
respective successors or assigns.
16. Headings. The Section headings contained in this Settlement Agreement
--------
are for reference purposes only and shall not effect in any way the meaning or
interpretation of this Settlement Agreement.
17. Notices. Except as otherwise provided herein, all notices, requests,
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claims, demands and other communications hereunder shall be in writing and shall
be given (and shall be deemed to have been duly given if so given) by hand
delivery, by overnight mail or by mail
10
(registered or certified postage prepaid, return receipt requested), to the
respective parties as follows:
If to the Company Group, then to:
▇▇▇▇▇▇▇ ▇. ▇▇▇, Chief Executive Officer
Unidigital Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
If to the Aloni Group or any member(s) thereof, then to:
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
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18. Governing Law; Choice of Forum. This Settlement Agreement shall be
------------------------------
governed by and construed and enforced in accordance with the laws of the State
of New York, without reference to conflict or choice of laws principles.
19. Counterparts. This Settlement Agreement may be executed in two or
------------
more counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
20. Third Party Beneficiaries. Nothing herein expressed or implied is
---------------------------
intended or shall be construed to confer upon or give to any person or
corporation other than the parties hereto and their successors or assigns, any
rights or remedies under or by reason of this Settlement Agreement.
21. Severability. If any provision of this Settlement Agreement shall be
------------
deemed or declared to be unenforceable, invalid or void, the same shall not
impair any of the other provisions of this Settlement Agreement.
22. Disclosure. The parties hereto agree that a material item of this
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Settlement Agreement is an agreement to keep confidential the terms and
conditions of this Settlement Agreement, except as otherwise provided in this
Settlement Agreement. No disclosure shall be made by any of the parties hereto
except to the extent that any of the parties is obligated to make disclosure to
such party's attorneys and accountants in the rendering of professional
services, or pursuant to the securities laws or any other laws of the United
States or any state thereof; provided, however, that (i) it is contemplated and
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agreed by and between the parties hereto that the Company will issue a press
release, substantially in the form attached hereto as Exhibit E, announcing this
---------
settlement and the dismissal of the Aloni Action and the Company's Action which
press release may or may not include other information pertaining to the
Company, and
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(ii) each of the parties hereto may make statements or disclose information with
respect to this Settlement Agreement in the form of, or substantially similar
to, the statements or information set forth in Exhibit F.
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23. Non-Disparagement.
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(a) Each member of the Aloni Group agrees not to engage in any
conduct or make any statement, or encourage others to engage in any conduct or
make any statement, that would disparage any member of the Company Group, or any
Associates or Affiliates of any member of the Company Group, or any of the
Company's Representatives, or the respective business interests of any of them
in any way.
(b) Each member of the Company Group agrees not to engage in any
conduct or make any statement, or encourage others to engage in any conduct or
make any statement, that would disparage any member of the Aloni Group, or any
Associates or Affiliates of any member of the Aloni Group, or any of the Aloni
Group's Representatives, or the respective business interests of any of them in
any way.
24. Conditions/Effective Date. This Settlement Agreement shall not be
--------------------------
effective unless and until (i) it has been fully executed by each and every
party hereto, (ii) Mega Art and Aloni enter into and execute the Employment
Agreement and the Aloni Note, (iii) the Company has entered into employment
agreements with Primor and Chen, (iv) the Company Group, Inlarge and its members
enter into and execute the Asset Purchase Agreement, and (v) the Company has
entered into an agreement with ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ ("SRR") for the
provision of legal and consulting services to the Company, it being understood
that: (x) the extent of services to be provided by SRR pursuant to such
agreement shall take account of the fact that the primary purpose of such
agreement is to serve as a vehicle for the payment of
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proceeds of settlement hereunder; and (y) in the event such agreement is, for
any reason, declared invalid or unenforceable, then it shall be null and void
and, in the place and stead of such agreement, the Company shall be obligated to
make payments hereunder to SRR in the same amounts and on the same schedule as
set forth in such agreement.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, and intending to be legally bound hereby, each of the
undersigned parties has executed or caused to be executed this Settlement
Agreement on the first date above.
ALONI GROUP:
/s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ by his attorney-in-fact,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
INLARGE LLC (A/K/A ENLARGE LLC)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
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COMPANY GROUP:
UNIDIGITAL INC.
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chief Executive Officer
MEGA ART CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: Chief Executive Officer
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EXHIBIT A-1
STIPULATION OF DISCONTINUANCE
ALONI ACTION
EXHIBIT A-2
STIPULATION OF DISCONTINUANCE
COMPANY'S ACTION
EXHIBIT B
FORM OF ▇▇▇▇ ▇▇▇▇▇
EMPLOYMENT AGREEMENT
EXHIBIT C
FORM OF PROMISSORY NOTE
EXHIBIT D
ASSET PURCHASE AGREEMENT
EXHIBIT E
FORM OF PRESS RELEASE
EXHIBIT F
1. A positive settlement was reached.
2. The settlement was positive for the Company and its stockholders as a whole.
3. An acceptable employment arrangement was reached with Aloni.
4. Mutual releases were exchanged.
