SEVERANCE AGREEMENT
THIS
AGREEMENT, dated September 30, 2003, is made by and between Point.360 (the
“Company”) and Xxxx Bagerdjian (the “Executive”).
WHEREAS,
the Company considers it essential to the best interests of its stockholders
to
xxxxxx the continued employment of key management personnel; and
WHEREAS,
the Board recognizes that, as is the case with many publicly held corporations,
the possibility of a Change in Control exists and that such possibility, and
the
uncertainty and questions which it may raise among management, may result in
the
departure or distraction of management personnel to the detriment of the Company
and its stockholders; and
WHEREAS,
the Board has determined that appropriate steps should be taken to reinforce
and
encourage the continued attention and dedication of members of the Company’s
management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from
the
possibility of a Change in Control;
NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as follows:
1. Defined
Terms.
The
definitions of capitalized terms used in this Agreement are provided in the
last
Section hereof.
2. Term
of Agreement.
The
Term of this Agreement shall commence on the date hereof and shall continue
in
effect through December 31, 2005; provided, however, that commencing on January
1, 2006 and each January 1 thereafter, the Term shall automatically be extended
for one additional year unless, not later than September 30 of the preceding
year, the Company or the Executive shall have given notice not to extend the
Term; and further provided, however, that if a Change in Control shall have
occurred during the Term, the Term shall expire no earlier than twenty-four
(24)
months beyond the month in which such Change in Control occurred.
3. Company’s
Covenants Summarized.
In
order to induce the Executive to remain in the employ of the Company and in
consideration of the Executive’s covenants set forth in Section 4 hereof, the
Company agrees, under the conditions described herein, to pay the Executive
the
Severance Payments and the other payments and benefits described herein. Except
as provided in Section 9.1 hereof, no Severance Payments shall be payable under
this Agreement unless there shall have been (or, under the terms of the second
sentence of Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive’s employment with the Company following a Change in
Control and during the Term. This Agreement shall not be construed as creating
an express or implied contract of employment and, except as otherwise agreed
in
writing between the Executive and the Company, the Executive shall not have
any
right to be retained in the employ of the Company.
4. The
Executive’s Covenants.
The
Executive agrees that, subject to the terms and conditions of this Agreement,
in
the event of a Potential Change in Control during the Term, the Executive will
remain in the employ of the Company until the earliest of (i) a date which
is
six (6) months from the date of such Potential Change in Control, (ii) the
date
of a Change in Control, (iii) the date of termination by the Executive of the
Executive’s employment for Good Reason or by reason of death, Disability or
Retirement, or (iv) the termination by the Company of the Executive’s employment
for any reason.
5. Compensation
Other Than Severance Payments.
5.1 Following
a Change in Control and during the Term, during any period that the Executive
fails to perform the Executive’s full-time duties with the Company as a result
of incapacity due to physical or mental illness, the Company shall pay the
Executive’s full salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period (other
than
any disability plan), until the Executive’s employment is terminated by the
Company for Disability.
5.2 If
the
Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay the Executive’s full salary
to the Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the rate in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, together with all compensation and benefits payable
to
the Executive through the Date of Termination under the terms of the Company’s
compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the first occurrence of an event
or
circumstance constituting Good Reason.
5.3 If
the
Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive the
Executive’s normal post-termination compensation and benefits as such payments
become due. Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Company’s retirement, insurance and
other compensation or benefit plans, programs and arrangements as in effect
immediately prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the occurrence of the first event
or circumstance constituting Good Reason.
6. Severance
Payments.
6.1 If
the
Executive’s employment is terminated following a Change in Control and during
the Term, other than (A) by the Company for Cause, (B) by reason of death or
Disability, or (C) by the Executive without Good Reason, then the Company shall
pay the Executive the amounts, and provide the Executive with the benefits,
described in this Section 6.1 (“Severance Payments”) and Section 6.2, in
addition to any payments and benefits to which the Executive is entitled under
Section 5 hereof. For purposes of this Agreement, the Executive’s employment
shall be deemed to have been terminated following a Change in Control by the
Company without Cause or by the Executive with Good Reason, if (i) the
Executive’s employment is terminated by the Company without Cause prior to a
Change in Control (whether or not a Change in Control ever occurs) and such
termination was at the request or direction of a Person who has entered into
an
agreement with the Company the consummation of which would constitute a Change
in Control, (ii) the Executive terminates his employment for Good Reason prior
to a Change in Control (whether or not a Change in Control ever occurs) and
the
circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Executive’s employment is terminated by
the Company without Cause or by the Executive for Good Reason and such
termination or the circumstance or event which constitutes Good Reason is
otherwise in connection with or in anticipation of a Change in Control (whether
or not a Change in Control ever occurs). For purposes of any determination
regarding the applicability of the immediately preceding sentence, any position
taken by the Executive shall be presumed to be correct unless the Company
establishes to the Committee by clear and convincing evidence that such position
is not correct.
(A) In
lieu
of any further salary payments to the Executive for periods subsequent to the
Date of Termination and in lieu of any severance benefit otherwise payable
to
the Executive, the Company shall pay to the Executive a lump sum severance
payment, in cash, equal to two and three quarters (2.75) times the sum of (i)
the Executive’s base salary as in effect immediately prior to the Date of
Termination or, if higher, in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason, and (ii) the higher of
(x)
average bonus earned by the Executive in respect of the three fiscal years
ending immediately prior to the fiscal year in which occurs the Date of
Termination; or (y) the Executive’s target annual bonus for the year in which
occurs the Date of Termination.
(B) For
the
thirty three (33) month period immediately following the Date of Termination,
the Company shall arrange to provide the Executive and his dependents life,
disability, accident and health insurance benefits substantially similar to
those provided to the Executive and his dependents immediately prior to the
Date
of Termination or, if more favorable to the Executive, those provided to the
Executive and his dependents immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such date or
occurrence; provided, however, that, unless the Executive consents to a
different method (after taking into account the effect of such method on the
calculation of “parachute payments” pursuant to Section 6.2 hereof), such health
insurance benefits shall be provided through a third-party insurer. Benefits
otherwise receivable by the Executive pursuant to this Section 6.1(B) shall
be
reduced to the extent benefits of the same type are received by or made
available to the Executive during the thirty three (33) month period following
the Executive’s termination of employment (and any such benefits received by or
made available to the Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall reimburse the Executive
for the excess, if any, of the cost of such benefits to the Executive over
such
cost immediately prior to the Date of Termination or, if more favorable to
the
Executive, the first occurrence of an event or circumstance constituting Good
Reason.
(C) Notwithstanding
any provision of any annual or long-term incentive plan to the contrary, the
Company shall pay to the Executive a lump sum amount, in cash, equal to any
unpaid incentive compensation which has been allocated or awarded to the
Executive for a completed fiscal year or other measuring period preceding the
Date of Termination under any such plan and which, as of the Date of
Termination, is contingent only upon the continued employment of the Executive
to a subsequent date.
(D) If
the
Executive would have become entitled to benefits under the Company’s
post-retirement health care or life insurance plans, as in effect immediately
prior to the Date of Termination or, if more favorable to the Executive, as
in
effect immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, had the Executive’s employment terminated at any time
during the period of thirty three (33) months after the Date of Termination,
the
Company shall provide such post-retirement health care or life insurance
benefits to the Executive and the Executive’s dependents commencing on the later
of (i) the date on which such coverage would have first become available and
(ii) the date on which benefits described in subsection (B) of this Section
6.1
terminate.
(E) The
Company shall provide the Executive with outplacement services suitable to
the
Executive’s position for a period of one (1) year or, if earlier, until the
first acceptance by the Executive of an offer of employment; provided, however,
that in no event shall the cost for such outplacement services exceed
$10,000.
6.2 (A) Whether
or not the Executive becomes entitled to the Severance Payments, if any of
the
payments or benefits (including the vesting of options) received or to be
received by the Executive in connection with a Change in Control or the
Executive’s termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated
with
the Company or such Person) (all such payments and benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the “Total Payments”) will be
subject to the Excise Tax, the Company shall pay to the Executive an additional
amount (the “Gross-Up Payment”) such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, and after taking into account the phase out of itemized
deductions attributable to the Gross-Up Payment, shall be equal to the Total
Payments.
(B) For
purposes of determining whether any of the Total Payments will be subject to
the
Excise Tax and the amount of such Excise Tax, (i) all of the Total Payments
shall be treated as “parachute payments” (within the meaning of section
280G(b)(2) of the Code) unless, in the opinion of tax counsel (“Tax Counsel”)
reasonably acceptable to the Executive and selected by the accounting firm
which
was, immediately prior to the Change in Control, the Company’s independent
auditor (the “Auditor”), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section 280G(b)(4)(A)
of
the Code, (ii) all “excess parachute payments” within the meaning of section
280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless,
in
the opinion of Tax Counsel, such excess parachute payments (in whole or in
part)
represent reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the Base Amount
allocable to such reasonable compensation, or are otherwise not subject to
the
Excise Tax, and (iii) the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state and locality
of the Executive’s residence on the Date of Termination (or if there is no Date
of Termination, then the date on which the Gross-Up Payment is calculated for
purposes of this Section 6.2), net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local
taxes.
(C) In
the
event that the Excise Tax is finally determined to be less than the amount
taken
into account hereunder in calculating the Gross-Up Payment, the Executive shall
repay to the Company, within five (5) business days following the time that
the
amount of such reduction in the Excise Tax is finally determined, the portion
of
the Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being repaid by
the
Executive), to the extent that such repayment results in a reduction in the
Excise Tax and a dollar-for-dollar reduction in the Executive’s taxable income
and wages for purposes of federal, state and local income and employment taxes,
plus interest on the amount of such repayment at 120% of the rate provided
in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder in calculating
the
Gross-Up Payment (including by reason of any payment the existence or amount
of
which cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time that the amount of
such
excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
(D) Section
6.2 of this Agreement shall supplant all other provisions for any Gross-Up
Payment or similar payment in any other agreements, options and arrangements
between the Company and the Executive.
6.3 The
payments provided in subsections (A), (C) and (D) of Section 6.1 hereof and
in
Section 6.2 hereof shall be made not later than the fifth day following the
Date
of Termination (or if there is no Date of Termination, then the date on which
the Gross-Up Payment is calculated for purposes of Section 6.2 hereof);
provided, however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such
day an estimate, as determined in good faith by the Executive or, in the case
of
payments under Section 6.2 hereof, in accordance with Section 6.2 hereof, of
the
minimum amount of such payments to which the Executive is clearly entitled
and
shall pay the remainder of such payments (together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to make
such
payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of
the
Code) as soon as the amount thereof can be determined but in no event later
than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined
to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section 1274(b)(2)(B)
of
the Code). At the time that payments are made under this Agreement, the Company
shall provide the Executive with a written statement setting forth the manner
in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or consultants (and
any
such opinions or advice which are in writing shall be attached to the
statement).
6.4 The
Company also shall pay to the Executive all legal fees and expenses incurred
by
the Executive in disputing in good faith any issue hereunder relating to the
termination of the Executive’s employment, in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the
Executive’s written requests for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
7. Termination
Procedures and Compensation During Dispute.
7.1 Notice
of Termination.
After a
Change in Control and during the Term, any purported termination of the
Executive’s employment (other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the other party hereto
in
accordance with Section 10 hereof. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and held
for
the purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive’s
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date
of Termination.
“Date
of Termination,” with respect to any purported termination of the Executive’s
employment after a Change in Control and during the Term, shall mean (i) if
the
Executive’s employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive’s duties during such
thirty (30) day period), and (ii) if the Executive’s employment is terminated
for any other reason, the date specified in the Notice of Termination (which,
in
the case of a termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15) days nor
more
than sixty (60) days, respectively, from the date such Notice of Termination
is
given).
7.3 Dispute
Concerning Termination.
If
within fifteen (15) days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard to this Section
7.3), the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination shall
be extended until the earlier of (i) the date on which the Term ends or (ii)
the
date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of an
arbitrator or a court of competent jurisdiction (which is not appealable or
with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by the Executive only if such notice
is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.
7.4 Compensation
During Dispute.
If a
purported termination occurs following a Change in Control and during the Term
and the Date of Termination is extended in accordance with Section 7.3 hereof,
the Company shall continue to pay the Executive the full compensation in effect
when the notice giving rise to the dispute was given (including, but not limited
to, salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given, until the Date of Termination,
as
determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other
than those due under Section 5.2 hereof) and shall not be offset against or
reduce any other amounts due under this Agreement.
8. No
Mitigation.
The
Company agrees that, if the Executive’s employment with the Company terminates
during the Term, the Executive is not required to seek other employment or
to
attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to Section 6 hereof or Section 7.4 hereof. Further, the amount of
any
payment or benefit provided for in this Agreement (other than Section 6.1(B)
hereof) shall not be reduced by any compensation earned by the Executive as
the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Executive to the Company, or
otherwise.
9. Successors;
Binding Agreement.
9.1 In
addition to any obligations imposed by law upon any successor to the Company,
the Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company) to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness
of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive were
to
terminate the Executive’s employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which
any
such succession becomes effective shall be deemed the Date of
Termination.
9.2 This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall die while any amount
would still be payable to the Executive hereunder (other than amounts which,
by
their terms, terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided herein, shall
be
paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.
10. Notices.
For the
purpose of this Agreement, notices and all other communications provided for
in
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed, if to the Executive, to the address
inserted below the Executive’s signature on the final page hereof and, if to the
Company, to the address set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual
receipt:
|
To
the Company:
Point.360
0000
Xxxxxxxxx Xxxxxxxxx,
Xxxxx
000
X.X.
Xxx 0000
Xxxxxxxxx,
XX 00000
Attention:
President
|
11. Miscellaneous.
No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by the
Executive and such officer as may be specifically designated by the Board.
No
waiver by either party hereto at any time of any breach by the other party
hereto of, or of any lack of compliance with, any condition or provision of
this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior
or
subsequent time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party, including but not
limited to the Benefits Agreement entered into between the Executive and the
Company; provided, however, that this Agreement shall supersede any agreement
setting forth the terms and conditions of the Executive’s employment with the
Company only in the event that the Executive’s employment with the Company is
terminated on or following a Change in Control, by the Company other than for
Cause or by the Executive for Good Reason. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws
of
the State of California. All references to sections of the Exchange Act or
the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed. The obligations of the Company
and the Executive under this Agreement which by their nature may require either
partial or total performance after the expiration of the Term (including,
without limitation, those under Sections 6 and 7 hereof) shall survive such
expiration.
12. Validity.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
13. Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.
14. Settlement
of Disputes; Arbitration.
14.1 All
claims by the Executive for benefits under this Agreement shall be directed
to
and determined by the Committee and shall be in writing. Any denial by the
Committee of a claim for benefits under this Agreement shall be delivered to
the
Executive in writing and shall set forth the specific reasons for the denial
and
the specific provisions of this Agreement relied upon. The Committee shall
afford a reasonable opportunity to the Executive for a review of the decision
denying a claim and shall further allow the Executive to appeal to the Committee
a decision of the Committee within sixty (60) days after notification by the
Committee that the Executive’s claim has been denied.
14.2 Any
further dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Los Angeles, California
in accordance with the rules of the American Arbitration Association then in
effect; provided, however, that the evidentiary standards set forth in this
Agreement shall apply. Judgment may be entered on the arbitrator’s award in any
court having jurisdiction.
Notwithstanding
any provision of this Agreement to the contrary, the Executive shall be entitled
to seek specific performance of the Executive’s right to be paid until the Date
of Termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement.
15. Definitions.
For
purposes of this Agreement, the following terms shall have the meanings
indicated below:
(A) “Affiliate”
shall have the meaning set forth in Rule 12b-2 promulgated under Section 12
of
the Exchange Act.
(B) “Auditor”
shall have the meaning set forth in Section 6.2 hereof.
(C) “Base
Amount” shall have the meaning set forth in section 280G(b)(3) of the
Code.
(D) “Beneficial
Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.
(E) “Board”
shall mean the Board of Directors of the Company.
(F) “Cause”
for termination by the Company of the Executive’s employment shall mean (i) the
willful and continued failure by the Executive to substantially perform the
Executive’s duties with the Company (other than any such failure resulting from
the Executive’s incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.1 hereof) that has not been cured
within 30 days after a written demand for substantial performance is delivered
to the Executive by the Board, which demand specifically identifies the manner
in which the Board believes that the Executive has not substantially performed
the Executive’s duties, or (ii) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii)
of
this definition, (x) no act, or failure to act, on the Executive’s part shall be
deemed “willful” unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive’s act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that
Cause
exists shall be given effect unless the Company establishes to the Committee
by
clear and convincing evidence that Cause exists.
(G) A
“Change
in Control” shall be deemed to have occurred if an the event 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 35% or more of the outstanding voting
securities of the Company, (ii) the Company shall be merged or consolidated
with another corporation and as result of such merger or consolidation less
than
50% of the outstanding voting securities of the surviving or resulting
corporation shall be owned in the aggregate by the former shareholders of the
Company, 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) the Company 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 Executive), as defined in Sections 13(d) and
14(d) (as in effect on the date hereof) of the Exchange Act, shall acquire
35%
or more of the outstanding voting securities of the Company (whether directly,
indirectly, beneficially or of record, in a single transaction or a series
of
related transactions by one person or more than one person acting in concert),
or (v) the shareholders of the Company approve a plan or proposal for the
liquidation or dissolution of the Company.
(H) “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(I) “Committee”
shall mean (i) the individuals (not fewer than three in number) who, on the
date
six months before a Change in Control, constitute the Compensation Committee
of
the Board, plus (ii) in the event that fewer than three individuals are
available from the group specified in clause (i) above for any reason, such
individuals as may be appointed by the individual or individuals so available
(including for this purpose any individual or individuals previously so
appointed under this clause (ii)).
(J) “Company”
shall mean Point.360 and, except in determining under Section 15(G) hereof
whether or not any Change in Control of the Company has occurred, shall include
any successor to its business and/or assets which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
(K) “Date
of
Termination” shall have the meaning set forth in Section 7.2
hereof.
(L) “Disability”
shall be deemed the reason for the termination by the Company of the Executive’s
employment, if, as a result of the Executive’s incapacity due to physical or
mental illness, the Executive shall have been absent from the full-time
performance of the Executive’s duties with the Company for a period of six (6)
consecutive months, the Company shall have given the Executive a Notice of
Termination for Disability, and, within thirty (30) days after such Notice
of
Termination is given, the Executive shall not have returned to the full-time
performance of the Executive’s duties.
(M) “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.
(N) “Excise
Tax” shall mean any excise tax imposed under section 4999 of the
Code.
(O) “Executive”
shall mean the individual named in the first paragraph of this
Agreement.
(P) “Good
Reason” for termination by the Executive of the Executive’s employment shall
mean the occurrence (without the Executive’s express written consent) after any
Change in Control, or prior to a Change in Control under the circumstances
described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof
(treating all references in paragraphs (I) through (VII) below to a “Change in
Control” as references to a “Potential Change in Control”), of any one of the
following acts by the Company, or failures by the Company to act, unless, in
the
case of any act or failure to act described in paragraph (i), (v), (vi) or
(vii)
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) the
assignment to the Executive of any duties inconsistent with the Executive’s
status as a senior executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive’s responsibilities from
those in effect immediately prior to the Change in Control including,
(ii) a
reduction by the Company in the Executive’s annual base salary as in effect on
the date hereof or as the same may be increased from time to time;
(iii) the
relocation of the Executive’s principal place of employment to a location more
than 50 miles from the Executive’s principal place of employment immediately
prior to the Change in Control or the Company’s requiring the Executive to be
based anywhere other than such principal place of employment (or permitted
relocation thereof) except for required travel on the Company’s business to an
extent substantially consistent with the Executive’s present business travel
obligations;
(iv) the
failure by the Company to pay to the Executive any portion of the Executive’s
current compensation or to pay to the Executive any portion of an installment
of
deferred compensation under any deferred compensation program of the Company,
within seven (7) days of the date such compensation is due;
(v) the
failure by the Company to continue in effect any compensation plan in which
the
Executive participates immediately prior to the Change in Control which is
material to the Executive’s total compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue the Executive’s
participation therein (or in such substitute or alternative plan) on a basis
not
materially less favorable, both in terms of the amount or timing of payment
of
benefits provided and the level of the Executive’s participation relative to
other participants, as existed immediately prior to the Change in
Control;
(vi) the
failure by the Company to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of the
Company’s pension, savings, life insurance, medical, health and accident, or
disability plans in which the Executive was participating immediately prior
to
the Change in Control, the taking of any other action by the Company which
would
directly or indirectly materially reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by the Executive at the time
of
the Change in Control, or the failure by the Company to provide the Executive
with the number of paid vacation days to which the Executive is entitled on
the
basis of years of service with the Company in accordance with the Company’s
normal vacation policy in effect at the time of the Change in Control;
or
(vii) any
purported termination of the Executive’s employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
Section 7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective. The Executive’s right to terminate the
Executive’s employment for Good Reason shall not be affected by the Executive’s
incapacity due to physical or mental illness. The Executive’s continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder. For purposes
of any determination regarding the existence of Good Reason, any claim by the
Executive that Good Reason exists shall be presumed to be correct unless the
Company establishes to the Committee by clear and convincing evidence that
Good
Reason does not exist.
(Q) “Gross-Up
Payment” shall have the meaning set forth in Section 6.2 hereof.
(R) “Notice
of Termination” shall have the meaning set forth in Section 7.1
hereof.
(S) “Pension
Plan” shall mean (i) any tax-qualified, supplemental or excess defined benefit
pension plan maintained by the Company and any other defined benefit plan or
agreement entered into between the Executive and the Company which is designed
to provide the Executive with supplemental retirement benefits and (ii)
tax-qualified, supplemental or excess defined contribution plan maintained
by
the Company and any other defined contribution plan or agreement entered into
between the Executive and the Company.
(T) “Person”
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or
any of its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially
the
same proportions as their ownership of stock of the Company.
(U) “Potential
Change in Control” shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(i) the
Company enters into an agreement, the consummation of which would result in
the
occurrence of a Change in Control;
(ii) the
Company or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in
Control;
(iii) any
Person becomes the Beneficial Owner, directly or indirectly, of securities
of
the Company representing 10% or more of either the then outstanding shares
of
common stock of the Company or the combined voting power of the Company’s then
outstanding securities (not including in the securities beneficially owned
by
such Person any securities acquired directly from the Company or its
affiliates); or
(iv) the
Board
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(V) “Retirement”
shall be deemed the reason for the termination by the Executive of the
Executive’s employment if such employment is terminated in accordance with the
Company’s retirement policy, including early retirement, generally applicable to
its salaried employees.
(W) “Severance
Payments” shall have the meaning set forth in Section 6.1 hereof.
(X) “Tax
Counsel” shall have the meaning set forth in Section 6.2 hereof.
(Y) “Term”
shall mean the period of time described in Section 2 hereof (including any
extension, continuation or termination described therein).
(Z) “Total
Payments” shall mean those payments so described in Section 6.2
hereof.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
above written.
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POINT.360
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By: __________________________________________________
Name:
Title:
_____________________________________________________
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Address:
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Xxxx
Bagerdjian
_____________________________________________________
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_____________________________________________________
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