EXHIBIT 10.2
December 15, 2005
Mr. John V. Madison
24 Pocomo Road
Nantucket, MA 02554
Dear John:
The purpose of this letter agreement is to confirm our mutual understanding of
the terms of your employment by Entertainment Distribution Company, LLC (the
“Company") to serve as the Executive Vice President, Business Development, Sales
& Marketing of the Company.
     The terms of your employment are set forth below. For purposes of this
letter agreement, the “Effective Date” is the first day of your employment by
the Company, which shall be January 2, 2006.
     1. Duties.
          (a) You agree, that beginning on the Effective Date, you will serve as
the Senior Vice President, Business Development, Sales & Marketing of the
Company, and you will perform those duties and exercise those powers
commensurate with your office as may be reasonably requested of you by Jim
Caparro, the President & CEO of the Company, or the Board of Directors of the
Company (the “Board"). You will also: (1) devote substantially all of your
business time, attention, and abilities to the Company’s business and
(2) faithfully serve the Company and use your best efforts to promote the
interests of the Company.
     2. Term and Termination.
          (a) The initial term of your employment under this letter agreement
will be for a period of three (3) years, commencing as of the Effective Date
(the “Initial Term”), subject to early termination as set forth herein. The term
of your employment may be renewed only upon terms mutually agreed upon in
writing by the Company and you (a “Renewal term”). The Initial term or any
Renewal Term is each sometimes referred to in this letter agreement as a “Term".
          (b) Notwithstanding the provisions of Paragraph 2(a) above, your
employment under this letter agreement may be terminated prior to the expiration
of the Term as follows:
               (1) The Company may terminate your employment hereunder for
“Cause;”
               (2) The Company may terminate your employment hereunder upon your
“Disability;”
               (3) You may terminate your employment hereunder immediately for
“Good Reason” or without “Good Reason” on 30 days’ prior written notice;

 

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               (4) Your employment hereunder shall terminate automatically upon
your death;
               (5) The Company may terminate your employment hereunder at any
time without “Cause” on 30 days’ prior written notice.
               (6) In addition to any other amounts expressly provided
hereunder, you shall be paid all amounts and benefits accrued and owed to you
prior to and through the effective date of any termination of your employment
hereunder.
     3. Compensation and Benefits.
          (a) The Company will pay to you an initial salary of $400,000 per
annum (which as increased from time to time, is referred to as the “Base
Salary"). The Base Salary will be payable in accordance with the Company’s
normal payroll practices. The Base Salary shall be reviewed annually.
          (b) You will be eligible to participate in an annual Bonus Plan of the
Company for each calendar year of your employment with the Company. Such Bonus
Plan will be subject to revision by Company management and the Board for each
subsequent calendar year.
          (c) The Company shall provide you with an automobile allowance in the
amount of $750 per month.
          (d) You may take four (4) weeks of vacation in each calendar year
during the Term at such times as shall be mutually convenient to you and the
Company. Your vacation will be prorated for each partial calendar year during
the Term.
          (e) You may participate in all retirement plans, life, medical/dental
insurance plans and disability insurance plans of the Company, to the extent
that you qualify under the eligibility requirements of each plan or program.
          (f) On the Effective Date, subject to your execution and delivery to
the Company of a Joinder Agreement in the form attached as Exhibit 1 hereto in
which you agree to be bound by all of the terms and conditions of the Limited
Liability Company Agreement of the Company (a true and correct copy of which is
appended to the Joinder Agreement attached as Exhibit 1, and which is
hereinafter referred to as the “LLC Agreement"), you will receive Profits
Interests, allocated among Tier One, Tier Two and Tier Three, all as described
in the LLC Agreement.1 On the Effective Date, you shall become vested with
respect to one-third of each of your Tier One, Tier Two and Tier Three Profits
Interests. Provided that you are still employed by the Company under this letter
agreement at such time, you shall become vested with respect to an additional
one-third of each of your Tier One, Tier Two and Tier Three Profits Interests on
the first anniversary of the Effective Date. Provided that you are still
employed by the Company
 

1   Representing 5.0% of the Company’s total Profits Interests as specified in
the LLC Agreement (representing the right to receive 1.5% of the distributions
by the Company beyond certain thresholds, all as described in the LLC
Agreement).

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under this letter agreement at such time, you shall become vested with respect
to the final one-third of each of your Tier One, Tier Two and Tier Three Profits
Interests on the second anniversary of the Effective Date. Notwithstanding the
foregoing, you shall become fully vested in all of such entire Profits Interests
upon (1) a Change of Control of the Company, (2) your death, (3) the termination
of your employment hereunder because of your Disability, (4) the termination of
your employment hereunder by the Company without Cause or (5) the termination of
your employment hereunder by you for Good Reason. Upon the termination of your
employment under this letter agreement (other than after a Change of Control or
on account of the reasons specified in clauses (2) through (5) above), any
portion of your Profits Interests that has not previously vested shall be deemed
cancelled and of no further force or effect.
          (g) The Company agrees that it and its affiliates will conduct “Seller
Restricted Activities” (as such term is defined in the Asset Purchase Agreement
dated May 9, 2005 between the Company and UMG Manufacturing & Logistics, Inc.
and Universal Music & Video Distribution Corp.) only through the Company and its
subsidiaries or other entities in which you are granted Profits Interests
equivalent to the Profits Interest granted to you hereunder and under the LLC
Agreement.
          (h) In the event that your employment is terminated by the Company
without Cause or by you for Good Reason (a “Triggering Termination”) within the
first 24 months of your Initial Term, the Company will, in full settlement and
satisfaction of all claims for Base Salary or Bonus compensation hereunder, pay
you (1) your then-current Base Salary at the time of such Triggering Termination
for a period of 12 months (2) a prorated amount of your bonus payable under the
Bonus Plan for the then-current fiscal year. Such total amount payable to you as
set forth in this subsection (h) (1) or (2) above will be paid in equal
bi-weekly installments over the 12-month period after termination. In the event
that a Triggering Termination occurs at any time after the first 24 months of
your Initial Term and prior to the expiration of the Initial Term, the Company
will, in full settlement and satisfaction of all claims for Base Salary or Bonus
compensation hereunder, pay you (A) your then-current Base Salary at the time of
such Triggering Termination through the end of the Initial term (B) a prorated
amount of your bonus payable under the Bonus Plan for the then-current fiscal
year. Such total amount payable to you as set forth in this subsection (h)
(A) or (B) above will be paid in equal bi-weekly installments over the period
remaining in the Initial Term after termination. Except as specifically set
forth in this Section 3 (h) above, or any future payments due under the LLC
Agreement for any Profits Interests that are fully vested and nonforfeitable at
the time of termination, the Company shall have no other or further obligation
to pay any severance or other post-termination to Employee, including, without
limitation, in the event that your employment is terminated by the Company for
Cause or by you without Good Reason.
     In addition, upon the occurrence of a Triggering Termination, the Company
will provide medical benefits to you (and your dependents) for twelve
(12) months from the date of the Triggering Termination, or until the end of
your Initial Term, whichever ends soonest, at the same level of coverage as such
benefits are provided to active employees of the Company. Your right to continue
medical coverage required under the Consolidated Omnibus Budget Reconciliation
Act of 1985 (COBRA) shall begin at the expiration of the 12-month period
described in subsection (h) (1) above in the case of a Triggering Termination
within the first 24 months of your Initial Term, or shall begin at the
expiration of the Initial Term in the case of a

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Triggering Termination after the first 24 months of your Initial Term and prior
to the expiration of the Initial Term. Termination of your employment for
Disability shall not qualify you for benefits under this Paragraph 3(h). As used
in this letter agreement, the following terms shall have the following meanings:
          “Cause” means the occurrence of any of the following:
               (1) your resignation, except for Good Reason, from the Company;
               (2) acts of dishonesty or fraud on your part;
               (3) your conviction of a felony involving moral turpitude or the
entry of a plea of nolo contendere for such a felony; or
               (4) a material failure to perform your duties or a material
violation of your responsibilities or other agreements as set forth herein,
including the failure on your part to commence your full-time employment with
the Company on or before January 2, 2006.
          “Change of Control” means any one of the following: (i) a merger,
consolidation, security exchange, issuance or sale of “Units,” or other
reorganization of or involving the Company pursuant to which either (a) the
“Members,” determined immediately prior to such transaction is effected,
collectively have beneficial ownership of less than 51% of the total outstanding
“Units” (determined on a fully diluted basis) of the Company, or comparable
equity securities of the surviving entity if the Company is not the surviving
entity, immediately following such transaction or (b) the “Members” owning
“Class A Units,” determined immediately prior to such transaction is effected,
collectively have beneficial ownership of less than 51% of the total outstanding
“Class A Units” (determined on a fully diluted basis) of the Company, or
comparable equity securities of the surviving entity if the Company is not the
surviving entity, immediately following such transaction, (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions), of all or substantially all of the assets of the Company,
(iii) the “Members” or Board’s approval of any plan or proposal for the
liquidation or dissolution of the Company, or (iv) the Company’s submission or
becoming subject to any bankruptcy proceeding, the appointment of a trustee,
custodian or conservator or any other similar voluntary or involuntary
creditors’ right proceeding; provided, however, that notwithstanding the
foregoing, in no event shall any of the following transactions be deemed to have
effected a Change of Control: (1) any transaction following which “Members”
comprising a “Voting Majority” immediately prior to any such transaction
continue to have right to select a majority of the members of the Board of
Directors of the Company, or the surviving entity if the Company is not the
surviving entity, immediately following such transaction, (2) any
“Reorganization” which results in the Company merging, consolidating or
otherwise combining with the Company Technologies, Inc. or the Company, and
(3) any transaction involving the public offering of equity securities of the
Company or its successor or the distribution of equity securities of the Company
or its successor in a spin-off or similar transaction. All quoted terms used
herein have the meaning provided under the LLC Agreement.

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          “Disability” shall be deemed to occur if you qualify for disability
benefits under a long-term disability plan sponsored by the Company or its
affiliates.
          “Good Reason” means the occurrence of any of the following:
          (1) any assignment to you of duties materially inconsistent with your
position with the Company or any material diminution by the Company or the
Company of your authority, duties or responsibilities with the Company, provided
that you must first provide the Board with written notice specifying the failure
of the Company or the Company under this Paragraph and allow the Board 15 days
from receipt of notice to cure such failure; or
          (2) any failure by the Company to pay to you the Base Salary or other
compensation and benefits or perform its material obligations provided for
herein; provided that you must first provide the Company with written notice and
allow the Company 15 days from receipt of notice to cure such failure.
     4. Confidential Information. You will not use or divulge to any person not
employed by the Company or its Affiliates or otherwise engaged to render
services to the Company or its Affiliates, any Confidential Information during
or after your employment by the Company. For this purpose, “Confidential
Information” means: (1) the name, address or requirements of any customer of the
Company; or (2) any other secret or confidential information relating to any
strategy, acquisition, financial information, activity, invention, discovery or
intellectual property of the Company or its Affiliates or their customers not
already in the public domain that you have or shall have acquired during your
employment by the Company hereunder. This provision will not preclude you from
disclosing such Confidential Information as may be required by any applicable
law, regulation or directive or any governmental agency, court or other
authority having jurisdiction in the matter, or in the proper course of conduct
of the Company’s business in the prosecution of your rights or entitlements or
in defense of any claim against you. If any person seeks legally to compel you
to disclose, or you desire to disclose (in the prosecution of your rights or
entitlements or in the defense of any claim against you), Confidential
Information, you will promptly provide the Company with notice. For purposes of
this Paragraph 4, an “Affiliate” of a Person means any Person that, directly or
indirectly, through one or more intermediaries or otherwise, controls, is
controlled by, or is under common control with such Person, where “control”
means the ability to direct management or policies through the ownership of
voting securities, by contract or otherwise, such Persons to include without
limit Glenayre Technologies, Inc. and Glenayre Electronics, Inc.
     5. Non-Competition and Non-Solicitation.
          (a) You agree not to engage in any activities competitive with the
Company or its Affiliates at any time during the period of your employment
hereunder (including any activities similar to those described below), except in
furtherance of the Company’s business. Furthermore, you agree that, except as
otherwise approved in writing by the Company, during the Restricted Period, you
will not, directly or indirectly: (1) engage in the Business in the Territory or
market, sell or provide Products and Services in the Territory; (2) solicit any
Customer for purposes of marketing, selling or providing Products and Services
to such

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Customer; (3) accept as a customer any Customer for purposes of marketing,
selling or providing Products and Services to such Customer; (4) induce or
attempt to induce any employee of the Company or its Affiliates to terminate his
or her employment with the Company or its Affiliates; (5) interfere with the
business relationship between a Customer, Company employee or supplier and the
Company or its Affiliates; or (6) be or become a Representative of any Person
who engages in any of the foregoing activities.
     The Company agrees that your employment by a division or subsidiary that
does not engage in the Business in the Territory or market, sell or provide
Products and Services in the Territory (the “Non-Competing Division") of a
company with another division or subsidiary that does engage in the Business in
the Territory or does market, sell or provide Products and Services in the
Territory (the “Competing Division") shall not be deemed a violation of this
Paragraph 5(a), so long as (1) the Non-Competing Division does not directly or
indirectly engage in the Business in the Territory or market, sell or provide
Products and Services in the Territory, (2) the Non-Competing Division does not
engage in any of the activities described in subparagraphs (1) through (6) of
the second sentence of Paragraph 5(a), (3) you do not directly or indirectly
participate or become involved in the activities or business of the Competing
Division and (4) you do not violate the provisions of Paragraph 4 above.
          (b) The following terms have the meanings given to such terms below:
          For purposes of this Paragraph 5, an “Affiliate” of a Person means any
Person (i) that, directly or indirectly, through one or more intermediaries or
otherwise, controls, is controlled by, or is under common control with such
Person, where “control” means the ability to direct management or policies
through the ownership of voting securities, by contract or otherwise, such
Persons to include without limit Glenayre Technologies, Inc. and Glenayre
Electronics, Inc., and (ii) on which Person’s behalf you have provided or
rendered material executive management services prior to the Termination.
          “Business” means the Company’s or its Affiliates’ CD and DVD
manufacturing and physical distribution businesses and any other business(es) in
which the Company or its Affiliates are or were engaged at the time of, or
during the 12-month period prior to, the Termination.
          “Customer” means any Person who is or was a customer of the Company or
its Affiliates (i) at the time of, or during the 12-month period prior to, the
Termination or (ii) at the time of, or during the 12-month period prior to, the
Termination and with whom you had dealings in the course of your employment with
the Company.
          “Person” means any individual, corporation, limited liability company,
partnership, company, sole proprietorship, joint venture, trust, estate,
association, organization, labor union, governmental body or other entity.
          “Products and Services” means the products and/or services offered by
the Company or its Affiliates at the time of, or during the 12-month period
prior to, the Termination.

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          “Representative” of a Person means (i) a shareholder, director,
officer, member, manager, partner, joint venturer, owner, employee, agent,
representative, independent contractor, consultant, advisor, for, to or with
such Person, (ii) an investor in such Person or a lender to such Person or
(iii) any Person acting for, on behalf of or together with such Person.
          “Restricted Period” means the period commencing on the date of the
Termination and ending on the second anniversary of such date.
          “Termination” means the termination of your employment hereunder for
any reason.
          “Territory” means: (i) any county or State in the United States,
(ii) any State in which the Company or its Affiliates does or did business at
the time of, or during the 12-month period prior to, the Termination, (iii) the
United States of America, and (iv) any country in the world where the Company or
its Affiliates does or did business at the time of, or during the 12-month
period prior to, the Termination.
          (c) You agree that the covenants in this Paragraph 5 are reasonable
given the real and potential competition encountered (and reasonably expected to
be encountered) by the Company and its Affiliates and the substantial knowledge
and goodwill you will acquire with respect to the Business as a result of your
services to the Company. If, however, any provision of this Paragraph 5 is
determined by a court to be invalid or unenforceable, that court is authorized
to limit the terms of such provision to allow it to be enforced.
          (d) You acknowledge that the Company and its Affiliates will suffer
irreparable harm if you breach any of your obligations under this Paragraph 5
and that monetary damages will be inadequate to compensate the Company and its
Affiliates for that breach. Accordingly, you agree that, in such event, the
Company will be entitled to obtain from any court of competent jurisdiction
preliminary and permanent injunctive relief, and expedited discovery for the
purpose of seeking relief, in order to prevent or to restrain any such breach
(and you agree to waive any requirement for the securing or posting of any bond
in connection with such remedies). The Company will be entitled to recover its
costs incurred in connection with enforcing this Paragraph 5, including
reasonable attorneys’ fees and expenses.
     6. Ownership of Intellectual Property.
          (a) You will immediately and fully disclose in writing to the Company
all inventions, discoveries, ideas, technologies, trade secrets, know-how,
formulae, designs, patterns, marks, names, improvements, mask works, works of
authorship and other intellectual property conceived or developed in whole or in
part by you, or in which you may have aided in its conception or development,
while employed by the Company (collectively, “Intellectual Property").
          (b) You will from time to time immediately upon the conception or
development of any Intellectual Property assign, at the Company’s expense, to
the Company all of your right, title and interest in and to all such
Intellectual Property (whether or not patentable, registrable, recordable or
protectable by copyright and regardless of whether the Company

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pursues any of the foregoing). If any Intellectual Property falls within the
definition of “work made for hire”, as such term is defined in 17 U.S.C. § 101,
such Intellectual Property will be considered “work made for hire” and the
copyright of such Intellectual Property will be owned solely and exclusively by
the Company. If any Intellectual Property does not fall within such definition
of “work made for hire”, then your right, title and interest in and to such
Intellectual Property will be assigned to the Company pursuant to the first
sentence of this Paragraph 6(b). You will execute and deliver any assignment
instruments and do all other things reasonably requested by the Company (both
during and after the your employment with the Company) in order to more fully
vest in the Company sole and exclusive right, title and interest in and to all
Intellectual Property. The Company agrees to indemnify, defend and hold you
harmless from and against any claim that may be made against you in connection
with the Company’s use of any Intellectual Property assigned by you to the
Company or any resulting damages sustained by you by reason of such claim,
     7. Indemnity. You are entitled to indemnification from the Company to the
same extent as other directors of the Company, as described in Section 11.8 of
the LLC Agreement.
     8. Notices. All notices and other communications required or permitted
hereunder must be in writing and shall be deemed to have been duly given when
personally delivered or on the third business day after being placed in the
United States mail by certified mail, return receipt requested, postage prepaid,
addressed to the parties hereto as follows (provided that notice of change of
address shall be deemed given only when actually received):

     
As to the Company:
  Entertainment Distribution Company, LLC
 
  825 8th Avenue, 23rd Floor
 
  New York, New York 10019
 
  Attention: President & CEO
 
   
 
  With a copy to:
 
  Glenayre Electronics, Inc.
 
  11360 Lakefield Drive
 
  Duluth, Georgia 30097
 
  Attention: CFO
 
   
As to You:
  Mr. John V. Madison
 
  24 Pocomo Road
 
  Nantucket, MA 02554

     The address of any party may be changed from time to time by such party
serving notice on the other party.
     9. Miscellaneous. You may not assign this letter agreement or any of your
rights, benefits, obligations or duties hereunder to any other Person. The
Company may assign its rights, obligations and duties (with no continuing
obligation to you hereunder) to any company that acquires all or substantially
all of the Company’s assets or equity interests and expressly assumes such
obligations and duties hereunder. The Company may also assign its rights,
obligations and duties hereunder to the Company (with no continuing obligation
to you

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hereunder) if the Company and its affiliates collectively shall cease to have
beneficial ownership of a majority of the total outstanding Class A Units
(determined on a fully diluted basis) of the Company. This letter agreement is
made with the intention that the construction and validity shall be determined
in accordance with and governed by the laws of the State of New York. This
letter agreement shall be binding upon and inure to the benefit of the Company,
its successors and assigns, and of you and your heirs and personal
representatives. This letter agreement constitutes the entire agreement among
the Company, the Company and you with respect to the subject matter hereof and
supersedes and cancels all prior or contemporaneous oral or written agreements
and understandings among us with respect to the subject matter hereof. This
letter agreement may not be changed or modified orally but only by a writing
signed by the Company, the Company and you, which writing states that it is an
amendment to this letter agreement. If any provision of this letter agreement
were to be held invalid or unenforceable, that shall not affect or impair any
other provision of this letter agreement and shall not have any effect on or
impair the obligation of the Company, the Company or you.
     If the foregoing reflected your understanding of the terms of your
employment by the Company, please sign where provided below.

            ENTERTAINMENT DISTRIBUTION COMPANY, LLC.
      By:   /s/ James Caparro         Name:   James Caparro        Title:  
President & CEO     

AGREED:
/s/ John V. Madison

John V. Madison                    

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Exhibit 1
(Joinder Agreement With Limited Liability Company)
Attached.
 
 
 
 
 
 
 

 

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JOINDER TO LIMITED LIABILITY COMPANY AGREEMENT
     THIS JOINDER TO LIMITED LIABILITY COMPANY AGREEMENT (this “Joinder”) is
entered into as of December 15, 2005, by and between Entertainment Distribution
Company, LLC (the “Company”) and John V. Madison (“New Member”).
STATEMENT OF PURPOSE
     Pursuant to an Letter Agreement dated December 15, 2005 between the Company
and New Member (the “Employment Letter”), New Member has been granted Profits
Interests in the Company representing 5.0% of the Company’s total Profits as
specified in the Company’s Limited Liability Company Agreement (the “LLC
Agreement”) (representing the right to receive 1.5% of the distributions by the
Company beyond certain thresholds, all as described in the LLC Agreement). In
connection with the grant of the Profits Interests and in accordance with the
LLC Agreement, New Member is executing this Joinder to become a party to the LLC
Agreement with all right, title and interest as a Profits Member thereunder and
subject to all of the terms and conditions thereof.
     1. Definitions. All capitalized undefined terms used in this Joinder have
the meanings assigned thereto in the LLC Agreement.
     2. Joinder of New Member. New Member hereby agrees to become a party to the
LLC Agreement with all right, title and interest as a Profits Member thereunder
and subject to all of the terms and conditions thereof.
     3. Miscellaneous. This Joinder may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. This Joinder, together with the
Employment Letter and the LLC Agreement, contain the final, complete and
exclusive statement of the agreement between the parties with respect to the
transactions contemplated herein and therein.
     IN WITNESS WHEREOF, this Joinder has been executed by the parties hereto on
the date first above written.

            ENTERTAINMENT DISTRIBUTION COMPANY, LLC
      By:   EXHIBIT ONLY         Name:   James Caparro        Title:   President
& CEO              By:   EXHIBIT ONLY         John V. Madison