EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into this 27th day of June,
1996, by and between VDI Media, a California corporation ("VDI"), and R. Xxxx
Xxxxxxxx("Employee").
Whereas, VDI desires to assure that VDI retains the services of Employee,
whose experience, knowledge and abilities with respect to the business and
affairs of VDI are valuable to VDI;
Now, therefore, VDI and Employee agree as follows:
1. POSITIONS AND DUTIES.
1.1 VDI hereby employs Employee as Chief Executive Officer and
President of VDI during the term of this Agreement, with powers and duties
consistent with such position. Employee shall report to the Board of Directors
of VDI.
1.2 Employee shall devote his full working time to the promotion of
the VDI's business and welfare, and use his best efforts to promote the VDI's
products and services. During the term of his employment with VDI, Employee
will not accept employment or engage in any manner, directly or indirectly, in
any other business. Employee shall perform such duties and responsibilities
incidental to his employment as may from time to time be requested by VDI and
shall faithfully observe the VDI's policies and procedures.
2. COMPENSATION AND BENEFITS.
2.1 GENERALLY; BASE SALARY. Beginning on the date of this Agreement,
during the term of employment, for the services to be rendered by Employee
hereunder, Employee shall receive the following compensation and benefits,
payable as earned, in the intervals indicated, and prorated for any partial
year:
(a) An annual salary (the "Base Salary"), at the rate of Two
Hundred Fifty Thousand dollars ($250,000) payable from the period commencing as
of the date of commencement of the Term. The Base Salary shall automatically
increase annually by a percentage equal to the change in the Consumer Price
Index. The Base Salary may be increased (but not decreased) by the
Compensation Committee of the Board of Directors of VDI by a vote at a meeting
duly held; provided that Employee shall abstain from participating in such
vote. The Base Salary shall be payable no less frequently than monthly. VDI
may deduct from each installment of the Base Salary an amount sufficient to
cover applicable federal, state and/or local income tax withholdings, old age
and survivors and other social security payments, state disability insurance
premiums and any other amounts which VDI is required to withhold by applicable
law;
(b) a stock option grant as of or prior to the commencement of
the Term of with respect to 20,000 shares (the "Option Shares") of VDI common
stock, to be issued pursuant to the 1996 Stock Incentive Plan(the "Stock
Options"); and
(c) the quarterly bonus payments described below to the extent
VDI achieves quarterly earnings per share results adopted by the Board of the
Directors at the beginning of each year, or, with respect to the fourth quarter
of 1996, on or before September 30, 1996, ("Targeted Earnings"). If VDI attains
the Targeted Earnings with respect to a particular quarter, Employee shall
receive a bonus payment of $6,250 within 45 days after the last day of such
quarter. If VDI's actual earnings per share are less than 75% of the Targeted
Earnings, Employee shall not receive any bonus. If VDI's actual earnings per
share equal 125% or more of the Targeted Earnings, Employee shall receive an
increased bonus payment (subject to a maximum payment in any quarter of
$12,500). To the extent VDI's earnings per share equal between 75% and 125% of
the Targeted Earnings, Employee shall be entitled to receive a pro rated bonus
payment within the range set forth above.
2.2 FRINGE BENEFITS. Employee shall receive the following fringe
benefits from VDI during the Term:
(a) four weeks of paid vacation during each fiscal year of VDI
(as used in this Paragraph, a "fiscal year" shall be the date which is 12 months
following the date of commencement of the Term under this Agreement and each 12-
month period thereafter). Any such vacation shall be taken at times in
accordance with the vacation policies of VDI, unless approved otherwise by VDI,
or if accrued by Employee and not taken in any fiscal year shall be accrued and
carried forward to the subsequent fiscal year;
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(b) payment of the premium payable with respect to the health
insurance plan provided by VDI for its executive officers and their families as
from time to time in effect. In addition, Employee shall be permitted during
the term hereof, if and to the extent eligible, to participate in any group
life, hospitalization or disability insurance plan, health program, pension
plan, similar benefit or other fringe benefits of VDI which may be available to
executive officers of VDI;
(c) an automobile allowance in the amount of Two Thousand
dollars($2,000)per month (such allowance to include related automobile insurance
and ordinary maintenance costs); and
(d) reimbursement to Employee for all reasonable costs and
expenses he incurs in connection with the performance of his duties and
obligations under this Agreement, and which are consistent with the policies of
VDI for executive officers.
3. TERM. The term of this Agreement (the "Term") shall commence on the
date hereof and shall terminate upon the first to occur of the following events:
3.1 June 27, 2001;
3.2 The death or permanent disability of Employee as defined in
Section 5.1 herein;
3.3 The discharge of Employee for cause as defined in Section
5.2(a)herein.
4. COVENANT NOT TO SOLICIT OR HIRE EMPLOYEES OR CUSTOMERS. For a period
of two years commencing upon the termination of Employee's employment, Employee
shall not, directly or indirectly, solicit or induce any of VDI's employees to
terminate their employment with VDI, hire or cause any of the then current
employees of VDI to be hired by any other company, or solicit or assist in
soliciting any business from any of the then current customers or prospective
customers of VDI on behalf of Employee or any other company.
5. TERMINATION.
5.1 TERMINATION DUE TO DISABILITY, ETC. VDI may, by written notice
to Employee, terminate his employment under the
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Agreement as of the date of that notice if Employee shall fail or be unable to
perform his duties as the result of any physical or mental disability for 180
consecutive days or during any 210 days in any 240-day period (a "Permanent
Disability"); Employees's employment under this Agreement shall terminate
automatically upon Employee's death or adjudication of incompetency.
5.2 TERMINATION FOR CAUSE. By complying with the provisions of
Section 5.2(b) hereof, VDI may terminate Employee's employment under this
Agreement for "Cause."
(a) For purposes of this agreement, "Cause" shall mean:(i)
fraud, embezzlement or conviction of or the pleading of guilty or no contest to
any felony or to any misdemeanor involving dishonesty, (ii) gross negligence or
willful failure of Employee to perform his duties hereunder, or (iii) any breach
by Employee of his covenants or obligations under this Agreement.
(b) If any one or more of the events enumerated under (a) above
shall occur, VDI shall provide written notice (the "Warning Notice") to Employee
of its intention to terminate this Agreement for Cause, the basis of such Cause,
and the steps which VDI believes should be taken by the Employee to correct and
cure the same. Unless Employee, within 30 days following receipt of the Warning
Notice, substantially corrects and cures all matters delineated in the Warning
Notice to VDI's reasonable satisfaction or if the matters set forth in the
Warning Notice are not reasonably susceptible of being so cured or corrected
within such 30-day period, VDI may terminate this Agreement so that VDI shall
have no further obligation to Employee except as set forth in Section 5.3
herein, by delivering a notice of termination to Employee, which notice of
termination shall be effective as of the date of delivery of such notice;
PROVIDED HOWEVER, that Employee shall not be entitled to any notice or
opportunity to cure a termination arising as a result of the "Cause" set forth
in Section 5.2(a)(i) hereof.
5.3 PAYMENTS UPON TERMINATION.
(a) In the event Employee is terminated for any reason, VDI
shall pay to Employee all accrued and unpaid Base Salary, all accrued and unpaid
vacation and other accrued and unpaid benefits set forth herein to the date of
termination, reimbursement of expenses prior to the date of termination in
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accordance with the provisions of this Agreement; continued insurance benefits
under such circumstances and for such periods of time as are mandated by
applicable state or federal law; and such other benefits or entitlements that
are deemed to be vested pursuant to the provisions of Employee Retirement Income
Security Act of 1974, as from time to time amended, and any regulations
promulgated pursuant thereto. Such benefits shall be payable in accordance with
the provisions therefor in this Agreement, or with regard to benefits for which
no provision is made, promptly following termination of employment.
(b) In the event Employee is terminated by VDI without Cause,
then, in addition to the payments due to Employee under Section 5.3(a), and as
Employee's sole and exclusive rights and remedies, VDI shall, for the remainder
of the Term, be obligated to continue to provide to the Employee his Base Salary
in accordance with the terms hereof (but no other payments or benefits except
the Options vested in accordance with the Stock Option Agreement).
(c) If a Change in Control of VDI shall have occurred while
Employee is an employee of VDI, upon the subsequent Termination of the
Employment of Employee within two years of such Change in Control, then, in
addition to the payments due to Employee under Section 5.3(a), (i) VDI shall pay
Employee his full Base Salary on a bi-weekly basis at the rate in effect at the
time the notice of terminatino is given for a period of two years following the
date of termination and (ii) VDI shall continue to provide Employee with medical
insurance, life insurance, disability insurance and such other similar insurance
benefits until Employee obtains other employment on a full-time basis, but not
to exceed two years from the date of termination.
(d) Employee shall have no duty to seek alternative employment
in the event of termination. Notwithstanding the foregoing, VDI and Employee
agree that if Employee enters into employment after termination by VDI hereunder
without Cause, the total compensation earned by Employee together with any
welfare or other benefits earned or received by Employee during any period that
Employee continues to receive Base Salary shall be deducted from the amount, if
any, which VDI would otherwise be required to pay or provide to Employee during
such period hereunder. Employee agrees that he
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shall give written notice to VDI (promptly after accepting any engagement or
employment or furnishing his services after termination of his employment with
VDI) of any amounts earned (or to be earned) by Employee and any benefits
provided (or to be provided) to Employee pursuant to his new engagement or
employment arrangement.
(e) For the purposes of this Agreement, "Change in Control" of
VDI shall mean a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934, as amended ("Exchange Act"); provided
that, without limitation, such a change in control shall be deemed to have
occurred if (i) a tender offer shall be made and consummated for the ownership
of 25% or more of the outstanding voting securities of VDI,(ii) VDI shall be
merged or consolidated with another corporation and as a result of such merger
or consolidation less than 75% of the outstanding voting securities of the
surviving or resulting corporation shall be owned in the aggregate by the former
shareholders of VDI, other than affiliates (within the meaning of the Exchange
Act) of any party to such merger or consolidation, as the same shall have
existed immediately prior to such merger or consolidation, (iii) VDI shall sell,
lease, exchange or transfer substantially all of its assets to another
corporation, entity or person which is not a wholly-owned subsidiary, (iv) a
person (other than Employee), as defined in Sections 13(d) and 14(d)(as in
effect on the date hereof) of the Exchange Act, shall acquire 25% or more of the
outstanding voting securities of VDI (whether directly, indirectly, beneficially
or of record),(v) the shareholders of VDI approve a plan or proposal for the
liquidation or dissolution of VDI, or (vi) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board of
Directors cease for any reason to constitute at least a majority thereof unless
the election, or the nomination for election by VDI's shareholders, of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period. For purposes
hereof, ownership of voting securities shall take into account and shall include
ownership as determined by applying the provisions of Rule 13d-3 (as in effect
on the date hereof) under the Exchange Act.
(f) The phrase "Termination of the Employment" of Employee for
purposes of this Agreement shall mean:
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(i) Termination by VDI of the employment of Employee for any
reason other than death, disability, or for Cause as defined above; or
(ii) Termination by Employment of his employment by VDI within
six months of the occurrence of any of the following events:
(a) The assignment to Employee of any duties inconsistent
with his positions, duties, responsibilities and status with the Company
immediately prior thereto, or a change in Employee's reporting responsibilities,
titles or offices as in effect immediately prior thereto, or any removal of
Employee from or any failure to re-elect Employee to any of such positions,
except in connection with the termination of Employee's employment due to death,
disability or for Cause;
(b) A reduction by VDI in Employee's Base Salary as in
effect on the date hereof or as the same may be increased from time to time;
(c) Without his express written consent, VDI requiring
Employee to be based anywhere other than within thirty-five (35) miles of
Employee's present office location, except for required travel on VDI's business
to an extent substantially consistent with Employee's present business travel
obligations;
(d) Subsequent to a Change in Control of VDI, the failure
by VDI to continue in effect any benefit or compensation plan, stock ownership
plan, stock purchase plan, stock option plan, life insurance plan,
health-and-accident plan or disability plan in which Employee is participating
at the time of a Change in Control of VDI (or plans providing him with
substantially similar benefits), the taking of any action by VDI which would
adversely affect Employee's benefits under any of such plans or deprive Employee
of any material fringe benefit enjoyed by him at the time of the Change in
Control, or the failure by VDI to provide Employee with the number of paid
vacation days to which he is then entitled in accordance with VDI's normal
vacation policy in effect on the date hereof;
(e) Subsequent to a Change in Control of VDI, the failure
by VDI to obtain the assumption of this Agreement by any successor.
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6. CONFIDENTIAL INFORMATION. Employee acknowledges that the information,
observations and data obtained by him while employed by VDI concerning the
business or affairs of VDI (the "Confidential Information") are the property of
VDI. Therefore, Employee agrees that Employee shall not disclose to any
unauthorized person or use for Employee's own account any Confidential
Information without the prior written consent of the Board of Directors of the
Company, unless and to the extent that the aforementioned matters become
generally known to and available for use by the public other than as a result of
Employee's acts or omissions to act or unless such information is required to be
disclosed in connection with an administrative or judicial proceeding, provided
that in such case, Employee agrees to notify VDI of the Confidential Information
to be disclosed sufficiently in advance of such disclosure, and agrees, if
requested, to use reasonable efforts to cooperate with VDI in seeking a
protective order for such information. Employee shall deliver to VDI at the
termination of the Term, or at any other time VDI may request, all "documents"
and "writings", as defined in the California Evidence Code, and copies thereof,
relating to the Confidential Information, work product or the business of VDI
which Employee may then possess or have under his control. In the event of the
breach or a threatened breach by Employee of any of the provisions of this
Section 6, VDI, in addition and supplementary to other rights and remedies
existing in its favor, may apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce or prevent any violations of the provisions hereof (without posting a
bond or other security). Employee acknowledges and agrees that the covenant
under this Section 6 shall apply during the Term and thereafter regardless of
the reason for the termination of Employee's employment.
7. RIGHT TO INJUNCTION. Employee acknowledges that any remedy at law for
a breach by him of the provisions of Sections 4.1 or 6 hereof will be
inadequate. Accordingly, in the event of the breach or threatened breach by
Employee of Sections 4.1 or 6 hereof, VDI shall be entitled to injunctive relief
in addition to any other remedy it may have.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties and supersedes all prior agreements of the parties with respect to
the subject matter hereof. This Agreement may not changed or amended except in
writing signed by the parties and approved by VDI.
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9. GOVERNING LAW. This Agreement shall be subject to, and be governed
by, the laws of the State of California.
10. ASSIGNMENT. Employee may not assign, transfer or convey this
Agreement or any interest therein. This Agreement and all of VDI's rights and
obligations hereunder may be assigned or transferred by it, in whole but not in
part, to and shall be binding upon and inure to the benefit of any successor of
VDI, but any such assignment shall not relieve VDI of any of its obligations.
The term "successor" shall mean only any corporation or other business entity
which by merger, consolidation, purchase of assets or otherwise succeeds to or
otherwise acquires all or substantially all of the assets of VDI.
11. SEVERABILITY. If any provision of this Agreement as applied to either
party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement.
12. WAIVER. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
13. COUNTERPARTS. This Agreement shall be executed in a number of
identical counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.
14. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and delivered in person or sent by registered or
certified Unites States mail, postage and fees prepaid, to the addresses of the
parties set forth below, or such other address as shall be furnished by notice
hereunder by any such party:
VDI VDI Media
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
with copy to:
EMPLOYEE: R. Xxxx Xxxxxxxx
0000 Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
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No failure or refusal to accept delivery of any envelope containing such notice
shall affect the validity of such notice or the giving thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
VDI Media
By: /s/ Xxxxxx X. Xxxxx
---------------------------------
Title: CFO
---------------------------------
R. Xxxx Xxxxxxxx
---------------------------------
Employee
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