EXHIBIT 10.29

COMPENSATION AGREEMENT FOR PAST SERVICES

 

This Compensation Agreement for Past Services (the "Agreement') is made as of
the 27th day of December, 2001, by and between Moto Photo, Inc. ("Moto") and
David A. Mason ("Mason"). This Agreement is based on the following
understandings:

a. Moto is a franchisor and operator of a chain of over 300 stores providing
rapid photo processing, portraiture, and related imaging services in the United
States and Canada.

b. Mason has been a director of Moto since 1983 and was its Executive Vice
President and Chief Financial Officer from December 1983 through September 2001.
In addition, he was instrumental in the negotiation of Moto's current supplier
arrangement.

c. Mason intends to retire effective December 31, 2001. The Board of Directors
of Moto wishes to compensate Mason for his past services to Moto.

Accordingly, for good and valuable considerations the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:

1. Compensation for Past Services. In consideration of past services rendered to
Moto and the covenants set forth in this Agreement, Moto shall pay Mason $64,000
in 2002, $51,200 in 2003, $44,800 in 2004, $38,400 in 2005, and $32,000 in 2006.
Except to the extent a portion of any payment is deferred pursuant to Section 3
of this Agreement, the amount set forth above for any given calendar year shall
be paid to Mason in equal monthly installments on the fifteenth day of each
month, commencing January 15, 2002.

2. Bonus. As additional compensation to Mason for his accomplishment of specific
objectives in 2001, Moto shall pay Mason $10,000 in 2002, $20,000 in each of
2003 through 2005, and $10,000 in 2006. Except to the extent a portion of these
amounts is deferred pursuant to Section 3 of this Agreement, the amount due in
any year shall be paid on April 1 of that year.

Health Insurance. From January 1, 2002 through December 31, 2006, Moto shall pay
the health insurance premiums for Mason and his wife under Moto's health
insurance plan. Moto's obligation to pay health insurance premiums for Mason's
wife shall survive Mason's death, subject to the terms of the health insurance
plan and to the extent allowed by law. By the thirty-first day of December of
each year from 2002 through 2006, Moto shall pay Mason an amount equal to seven
and one-half percent of the cost of health insurance premiums paid for Mason and
his wife during such year. In the event of Mason's death, should the health
insurance premiums paid for Mason's wife be income taxable under FICA
regulations, Moto shall pay Mason's wife an amount equal to seven and one-half
percent of the cost of health insurance premiums paid for her during such year.

4. Deferral of payments.

a. If, in a given calendar year, Moto's EBITDA is less than the amount specified
in Section 4.c of this Agreement for that year ("the Specified EBITDA"), Moto
may, at its option:

(i) defer payment of twenty-five percent (25%) of the amount set forth in
Sections 1 and 2. In such case, the amount deferred shall be paid on a monthly
basis during the last three months of the first calendar year in which Moto
reasonably anticipates that EBITDA will exceed the Specified EBITDA. If Moto's
projections change to indicate that EBITDA will be less than the Specified
EBITDA for the year in which the deferral was to be paid, the amount deferred
will be deferred again as set forth above; or

(ii) defer payment of thirty-five percent (35%) of the amount set forth in
Sections 1 and 2. In such case, Moto will sign a promissory note for the amount
deferred, payable in equal monthly installments over two (2) years from the date
Moto's independent auditors issue Moto's annual audited financial statements for
the year for which payments are to be deferred, with interest at the prime rate
charged by Moto's principal lender.

b. To facilitate Moto's ability to defer payments should the need arise, Moto
may, in any calendar year(s) in which Moto's projections indicate EBITDA might
be less than $2,000,000, withhold payment of, at its option, the last
twenty-five percent or thirty-five percent of payments due under Sections 1 and
2. If EBITDA for that year(s) exceeds $2,000,000, Moto shall pay the deferred
amounts to Mason by March 15 of the following calendar year.

c. The Specified EBITDA shall be as follows: For fiscal years 2002, 2003, and
2004, $2,000,000; for fiscal years 2005 and 2006, $1,500,000.

5. Survival. Moto's obligations to pay the amounts set forth in Sections 1 and 2
of this Agreement shall survive Mason's death. If Mason dies while payments are
due under this Agreement, Moto shall pay Mason's surviving spouse, or if his
spouse does not survive him, as Mason may have directed in writing, the
remaining amounts due. Any payments to Mason's spouse or any other person(s)
shall be made in accordance with, and subject to, the terms set forth in this
Agreement.

6. Retirement. Mason will retire effective December 31, 2001. He acknowledges
and agrees that he has used all vacation to which he is entitled and that no
additional vacation will have accrued as of December 31, 2001. Mason
acknowledges and agrees that this Agreement supersedes all prior employment
agreements and/or severance arrangements between Mason and Moto.

7. Obligation for Taxes. Each party shall be responsible for payment of its own
portion of any FICA, Medicare, or related taxes, if any, that may be due, and
whenever due, with respect to the amounts payable under this Agreement.

8. Covenants.

8.1 Mason acknowledges that he will have access to confidential and proprietary
information belonging to Moto ("the Information") and/or its franchises, the
disclosure of which would injure Moto and/or its franchisees. The Information
may be written, verbal, or in electronic form. Mason shall at all times treat
the Information as confidential and shall use all reasonable efforts to maintain
the Information as secret and confidential. Except as may be necessary in
connection with his performance under this Agreement, Mason shall not at any
time copy, duplicate, record, or otherwise reproduce the Information, in whole
or in part. Mason shall not make the Information available in any manner
whatsoever to any unauthorized person. Mason shall keep no copy of any
Information provided to him and shall return all written and electronic forms of
Information to Moto upon termination of this Agreement, except as Mason may need
in the performance of his duties as a director of Moto and/or to comply with any
requirement of law.

8.2 Mason shall not, during the term of this Agreement or thereafter,
communicate, divulge, or use for the benefit of himself or of any other person,
persons, partnership, association, or corporation any of the Information which
may be communicated to Mason or of which Mason may be apprised, by virtue of his
performance under this Agreement. Any and all Information shall be deemed
confidential for purposes of this Agreement, except information which Mason can
demonstrate came to his attention prior to its disclosure by Moto or which, at
or after the time of disclosure by Moto to Mason, had become or becomes publicly
known by way of publication or communication by others.

 

8.3 Mason acknowledges that Moto's activities are international in scope. Mason
therefore covenants that, from the date of execution of this Agreement through
December 31, 2006 and for a period of two (2) years thereafter, Mason will not,
directly or indirectly, engage or be interested (as principal, agent, manager,
employee, consultant, owner, partner, officer, director, stockholder, trustee or
otherwise) in any entity engaged in a business which (a) competes in a material
manner with Moto and/or any Moto franchisee within a three mile radius of any
business location of Moto or any of its subsidiaries, affiliates, or
franchisees, (b) which, on a national or regional basis, is a major competitor
of Moto and/or its franchisees, and/or (c) which offers a photofinishing or
portraiture franchise. This Section 8.3 shall not apply to ownership by Mason of
less than two percent (2%) of the outstanding voting stock of any publicly-held
corporation, or of any interest in a MotoPhoto(R) franchise.

8.3.1 Notwithstanding the provisions of Section 8.3, if Moto fails, for a period
of six (6) months, to pay Mason the compensation due under Sections 1 and/or 2
of this Agreement, to pay the health insurance premiums as set forth in Section
3 of this Agreement, and/or to pay the amounts due under Section 3 of the
Agreement for Consulting Services of even date with this Agreement between Moto
and Mason, Mason shall have the right to terminate this Agreement upon ten days
written notice to Moto, without waiving any rights under this Agreement. In such
case, the post-termination period of the covenant against competition set forth
in Section 8.3 shall apply for only one (1) year after this Agreement terminates
unless Moto shall have cured the default before this Agreement terminates.
Deferral of payments pursuant to Section 4 shall not constitute a default in
payment.

8.4 Mason acknowledges that his breach of any of the terms of this Section 8
will cause Moto and/or its franchisees irreparable injury for which no adequate
remedy at law may be available. Accordingly, Mason consents to the issuance of
an injunction, without the posting of a bond by Moto, prohibiting any conduct by
Mason in violation of the terms of this Section 8 and/or any other equitable
remedy from a court of competent jurisdiction as may be necessary or appropriate
to prevent or curtail any such breach, threatened or actual. Mason submits to
personal jurisdiction of the Common Pleas Court of Montgomery County, Ohio.
These equitable remedies are in addition to and without prejudice to such other
rights as Moto may have at law or in equity.

9. Arbitration. All disputes between the parties arising out of or related to
this Agreement, and/or the making performance, breach, interpretation, or
termination of this Agreement, shall be finally settled by arbitration pursuant
to the then-prevailing

Commercial Arbitration Rules of the American Arbitration Association or any
successor to the American Arbitration Association. Any award of the
arbitrator(s) shall be in writing. The prevailing party shall be entitled to
recover its expenses, including reasonable attorneys' fees, in addition to any
other relief to which it is found entitled. All arbitration proceedings shall
take place in Dayton, Ohio. The arbitration award shall be binding upon the
parties and may be entered and enforced in any court of competent jurisdiction.

10. Entire Agreement; Modification. This Agreement represents the entire
agreement of the parties concerning its subject matter, no other representations
having induced the parties to enter into it. The parties acknowledge that the
terms of compensation approved for Mason by Moto's Board of Directors have been
modified within the parameters established by the Board and that this Agreement
supersedes any prior understandings between the parties concerning its subject
matter. No waiver, amendment or modification of any provision of this Agreement
will be effective unless it is in writing and signed by the party against whom
such waiver, amendment or modification is sought to be enforced.

11. Captions. All captions in this Agreement are intended solely for the
convenience of the parties and shall not be construed to affect the meaning or
construction of any provision of this Agreement.

12. Counterparts. This Agreement may be executed in multiple copies, each of
which shall be deemed an original document, and all of which, taken together,
shall constitute one and the same instrument.

13. Notices. All notices required or permitted under this Agreement shall be in
writing and shall be delivered personally, or by courier, or mailed certified
mail, return receipt requested, to the respective parties at the addresses set
forth below or at such other address as such party shall specify to the other
party in writing:

If to Moto: Chief Financial Officer

Moto Photo, Inc.

4444 Lake Center Drive

Dayton, Ohio 45426

If to Mason: David A. Mason

19396 N. 86th Drive

Peoria, Arizona 85382

Notices shall be deemed to have been received as follows, regardless of whether
delivery is refused: by personal delivery--at the time of delivery; by
courier--on the date scheduled for delivery according to the written
instructions given to the courier; and by certified mail--three days after the
date of mailing,.

14. Choice of Law. This Agreement shall take effect upon its execution by Moto
in Dayton, Ohio, and shall be governed by and construed in accordance with the
substantive laws of the State of Ohio, without reference to Ohio's choice of law
or conflicts of laws provisions.

15. Facsimile Signatures. Any signature transmitted by or on behalf of the
signing party by facsimile transmission shall be as binding as if the signature
were original.

The parties have executed this Agreement as of the date first set forth above.

"Mason"

 

David A. Mason

"MOTO"

MOTO PHOTO, INC.

 

By

Name: Linda Kramer

Title: Vice President - Human Resources