<PAGE>   1

                 EMPLOYMENT AND DEFERRED COMPENSATION AGREEMENT


                  Agreement, made as of the 1st day of January 1998, by and
between NortaVOD Corporation., a Delaware corporation (the "Company"), and
Dermott O'Flanagan ("Executive").

                                    RECITALS

         A. The Company desires to employ Executive as Senior Vice President 
and Director of Overseas Operations; and

         B. Executive is willing to accept such employment on the terms and
conditions set forth in this Agreement.

                  THE PARTIES AGREE as follows:

                  1. Position and Term of Employment. Executive's employment
hereunder shall commence as of January 1, 1998 and shall end December 31, 2000,
unless terminated sooner pursuant to Section 6 of this Agreement or extended by
the mutual agreement of the parties. During the term hereof, Executive shall be
employed as Senior Vice President and Director of Overseas Operations of the
Company and shall devote his full business time, skill, attention and best
efforts in carrying out his duties and promoting the best interests of the
Company. Executive shall also serve as a director and/or officer of one or more
of the Company's subsidiaries as may be requested from time to time by the Board
of Directors. Subject always to the instructions and control of the Board of
Directors of the Company, Executive shall report to the Chief Executive Officer
of the Company and shall be responsible for the duties of the Senior Vice
President and Director of Overseas Operations. Executive's 



<PAGE>   2

duties under this Agreement shall be limited to those duties performed while
outside of the United States and shall be subject to the fulfillment by
Executive of his duties under his Employment Agreement with The DII Group, Inc.
("DII").

                  Executive shall not at any time while employed by the Company
or any of its affiliates or for a period of one (1) year following the later of
(i) termination of employment for any reason or (ii) the date on which the last
payment is required to be made under Section 2.1(a)(ii) hereof, without the
prior consent of the Board of Directors, knowingly acquire any financial
interests, directly or indirectly, in or perform any services for or on behalf
of any business, person or enterprise which undertakes any business in
competition with the business of the Company and its affiliates or sells to or
buys from or otherwise transacts business with the Company and its affiliates;
provided that Executive may acquire and own not more than five percent (5%) of
the outstanding capital stock of any public corporation or mutual fund.
Executive shall not at any time while employed by the Company or any of its
affiliates or for a period of two (2) years following termination of employment
for any reason, directly or indirectly, solicit for employment, employ or enter
into any business or contractual relationship with any employee of the Company
or any of its affiliates.

                  2.1 Base Salary. (a) (i) Executive shall be paid an initial
salary at the monthly rate of Eight Thousand Eight Hundred Seventy-Three and
50/100 Dollars ($8,873.50) which shall be paid in accordance with the Company's
normal payroll practice with respect to salaried employees, subject to
applicable payroll taxes and deductions (the "Base Salary"). Executive's Base
Salary shall be subject to review and possible change in accordance with the
usual practices and policies of the Company. However, Executive's base annual
salary shall not be reduced unless such reduction is part of a Company-wide
reduction in pay scale and such 

                                      -2-


<PAGE>   3

reduction is proportionate to reductions imposed on the Company's and its
subsidiaries' employees; however, in no event may Executive's then current Base
Salary be reduced by more than 10%.

         (ii) If for any reason other than Executive's voluntary resignation or
termination pursuant to Sections 6(a), (b) or (c) hereof, Executive does not
continue to be employed by the Company, Executive shall continue to receive an
amount equal to his then current Base Salary under this Agreement plus an annual
performance bonus equal to the highest annual bonus payment Executive has
received under this Agreement in the previous three years for the then remaining
balance of the term of this Agreement. In no event shall such payment be less
than one year's base salary plus such highest annual bonus. The foregoing
amounts shall be paid to Executive over the remaining term of this Agreement or
one year (whichever is applicable) in accordance with the Company's payroll and
bonus payment policies. Notwithstanding the foregoing, no payments under this
subparagraph (ii) shall be made if the Company makes all payments to Executive
required to be made under the Executive's Senior Executive Severance Agreement
(the "Severance Agreement") in the event of a Change in Control. For purposes of
this Agreement, a Change in Control shall be deemed to have taken place upon the
occurrence of any of the following events:

              (A) any corporation, person, other entity or group (other than
the trustee of any qualified retirement plan maintained by DII) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of securities representing twenty percent
(20%) or more of the combined voting power of DII's then outstanding securities;
or

                                      -3-

<PAGE>   4

                  (B) during any period of twenty-four consecutive months,
individuals who at the beginning of such consecutive twenty-four month period
constitute the Board of Directors of DII cease for any reason (other than
retirement upon reaching normal retirement age, disability or death) to
constitute at least a majority thereof, unless the election or the nomination
for election by DII's stockholders 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 such twenty-four month period; or

                  (C) the stockholders of DII approve a merger or consolidation
of DII with any other corporation, other than a merger or consolidation which
would result in the voting securities of DII outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of the
combined voting power of the voting securities of DII or such surviving entity
outstanding immediately after such merger or consolidation, or the stockholders
of DII approve a plan of complete liquidation of DII or an agreement for the
sale or disposition by DII of all or substantially all of DII's assets; or

                  (D) there shall occur a transaction or series of transactions
which the Board of Directors shall determine to have the effect of a Change in
Control.

              (b) If Executive resigns voluntarily or ceases to be employed
by the Company (or any affiliate) for any reason described in Section 6(a) or
(c) of this Agreement, all benefits described in Sections 2 and 3 hereof shall
terminate (except to the extent previously earned or vested).


                                      -4-

<PAGE>   5

                  (c) If Executive's employment shall have been terminated
pursuant to Section 6(b), the Company shall pay in equal monthly installments
for the then remaining balance of the term of this Agreement to Executive (or
his beneficiaries or personal representatives, as the case may be) disability
benefits at a rate per annum equal to one hundred percent (100%) of his then
current Base Salary under this Agreement, plus amounts equal to the highest
annual bonus as provided in clause (ii) of Section 2.1(a), less payments and
benefits, if any, received under any disability plan or insurance provided by
the Company and less any "sick leave" payments received from the Company for the
applicable period.

                  2.2 Bonuses. Executive shall be eligible for an annual
performance bonus for calendar years beginning after December 31, 1997, in the
discretion of the Company's Board of Directors

                  2.3 Expenses. During the term hereof, the Company shall pay or
reimburse Executive in accordance with the Company's normal practices any
travel, hotel and other expenses or disbursements reasonably incurred or paid by
Executive in connection with the services performed by Executive hereunder, in
each case upon presentation by Executive of itemized accounts of such
expenditures or such other supporting information as the Company may require.

                  3.1 Stock Options; Performance Shares. Executive shall be
eligible for grants of stock options and performance share awards under DII's
1994 Stock Incentive Plan (the "Plan"), as may hereafter be determined by the
Compensation Committee of the Board of Directors of DII under the Plan. Stock
options and performance share awards under this Section 3.1 shall be deemed to
be granted exclusively for Executive's services under this Agreement.

                                      -5-

<PAGE>   6

                  3.2 Effect of Termination of Employment; Change in Control.
(a) Notwithstanding the provisions of Executive's options, if Executive shall
resign voluntarily or cease to be employed by the Company (or an affiliate)
other than as a result of death or disability, Executive shall be entitled to
exercise such options to the extent such options could otherwise have been
exercised immediately prior to the time of termination at any time up to and
including 90 days after the date of termination, but not beyond the expiration
date of an option. This provision is not intended to limit any other rights that
Executive may have with respect to the vesting or exercise of options.

                  (b) If Executive shall die or become disabled, all options and
performance shares which have not vested will accelerate and vest immediately,
and, in the event of Executive's death, all option rights will transfer to
Executive's representative. All then unexercised options will be cancelled one
year after Executive dies or becomes disabled.

                  (c) If there is a Change in Control, all options and
performance shares which have not vested will accelerate and vest immediately.

                  4. Confidential Information. Except as specifically permitted
by this Section 4, and except as required in the course of his employment with
the Company, while in the employ of the Company or thereafter, Executive will
not communicate or divulge to or use for the benefit of himself or any other
person, firm, association, or corporation without the prior written consent of
the Company, any Confidential Information (as defined herein) owned, or used by
the Company or any of its affiliates that may be communicated to, acquired by or
learned of by Executive in the course of, or as a result of, Executive's
employment with the Company or any of its affiliates. All Confidential
Information relating to the business of the Company or any 

                                      -6-

<PAGE>   7


of its affiliates which Executive shall use or prepare or come into contact with
shall become and remain the sole property of the Company or its affiliates.

                  "Confidential Information" means information not generally
known about the Company and its affiliates, services and products, whether
written or not, including information relating to research, development,
purchasing, marketing plans, computer software or programs, any copyrightable
material, trade secrets and proprietary information, including, but not limited
to, customer lists.

                  Executive may disclose Confidential Information to the extent
it (i) becomes part of the public domain otherwise than as a result of
Executive's breach hereof or (ii) is required to be disclosed by law. If
Executive is required by applicable law or regulation or by legal process to
disclose any Confidential Information, Executive will provide the Company with
prompt notice thereof so as to enable the Company to seek an appropriate
protective order.

                  Upon request by the Company, Executive agrees to deliver to
the Company at the termination of Executive's employment, or at such other times
as the Company may request, all memoranda, notes, plans, records, reports and
other documents (and all copies thereof) containing Confidential Information
that Executive may then possess or have under his control.

                  5. Assignment of Patents and Copyrights. Executive shall
assign to the Company all inventions and improvements within the existing or
contemplated scope of the Company's business made by Executive while in the
Company's employ, together with any such patents or copyrights as may be
obtained thereon, both domestic and foreign. Upon request by the Company and at
the Company's expense, Executive will at any time during his employment with the
Company and after termination regardless of the reason therefor, execute all
proper papers for use in applying for, obtaining and maintaining such domestic
and foreign patents and/or copyrights as the Company may desire, and will
execute and deliver all proper assignments therefor.

                                      -7-

<PAGE>   8

                  6.  Termination.

                  (a) Subject to the provisions of Section 8, this Agreement
shall terminate upon Executive's death.

                  (b) The Company may terminate Executive's employment hereunder
upon fifteen (15) days' written notice if in the opinion of the Board of
Directors, Executive's physical or mental disability has continued or is
expected to continue for one hundred and eighty (180) consecutive days and as a
result thereof, Executive will be unable to continue the proper performance of
his duties hereunder. For the purpose of determining disability, Executive
agrees to submit to such reasonable physical and mental examinations, if any, as
the Board of Directors may request and hereby authorizes the examining person to
disclose his findings to the Board of Directors of the Company.

                  (c) The Company may terminate Executive's employment hereunder
"for cause" (as hereinafter defined). If Executive's employment is terminated
for cause, Executive's salary and all other rights not then vested under this
Agreement shall terminate upon written notice of termination being given to
Executive, subject to the provisions of Section 8. As used herein, the term "for
cause" means the occurrence of any of the following:

                                    (i) Executive having willfully and
                  continually failed to perform substantially his duties with
                  the Company (other than such failure resulting from incapacity
                  due to physical or mental illness, death or disability) after
                  a written demand for substantial performance has been
                  delivered to the Executive by the Board or the President of
                  the Company which specifically identifies the manner in which
                  the Executive is not substantially performing his duties; or
                  (ii) Executive having willfully 

                                      -8-

<PAGE>   9


                  engaged in conduct which is materially demonstrably injurious
                  to the Company. For purposes of this section, no act, or
                  failure to act, on the part of the Executive shall be
                  considered "willful" unless done, or omitted to be done, by
                  the Executive in bad faith and without reasonable belief that
                  such action or omission was in, or not opposed to, the best
                  interests of the Company. Any act or failure to act based upon
                  authority given pursuant to a resolution duly adopted by the
                  Board or based upon the advice of counsel to the Company shall
                  be conclusively presumed to be done or omitted to be done by
                  the Executive in good faith and in the best interests of the
                  Company. Notwithstanding the foregoing, the Executive shall
                  not be deemed to have been terminated for cause unless and
                  until there shall have been delivered to the Executive a copy
                  of a written 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 called and held for that purpose
                  after reasonable notice to and opportunity for the Executive
                  and the executive's counsel to be heard by the Board, finding
                  that in the good faith opinion of the Board the Executive was
                  guilty of the conduct set forth above in (i) or (ii) and
                  specifying the particulars thereof in detail.

                  7. Additional Remedies. Executive recognizes that irreparable
injury will result to the Company and to its business and properties in the
event of any breach by Executive of the non-compete or non-solicitation
provisions of Section 1, the confidentiality provisions of Section 4 or the
assignment provisions of Section 5 and that Executive's continued employment is
predicated on the covenants made by him pursuant to such Sections. In the event
of any breach by Executive of his obligations under said provisions, the Company
shall be entitled, in addition to any other remedies and damages available, to
injunctive relief to restrain any such breach by Executive or by any person or
persons acting for or with Executive in any capacity whatsoever and other
equitable relief.

                  8. Deferred Compensation Account; Contributions to Trust. All
compensation earned under this Agreement (other than stock option grants) shall
be deferred in accordance with the provisions of this Section 8.


                                      -9-

<PAGE>   10

                  (a) The Company shall credit to a book reserve (the "Deferred
Compensation Account") established for this purpose an amount equal to all
compensation earned under this Agreement (other than stock option grants). Any
amounts represented by credits made to the Deferred Compensation Account in
accordance with the preceding sentence shall be contributed by the Company to
the trust (the "Trust") established under the Trust Agreement annexed as Exhibit
A hereto. In the case of Performance Shares, the amount of the deferred
Performance Shares shall be credited to the Deferred Compensation Account upon
vesting in the form of Stock Units. A corresponding number of shares of Common
Stock shall be transferred by the Company to the Trust, to be held in accordance
with the provisions of the Trust Agreement.

                  (b) The Deferred Compensation Account shall be credited with
all amounts of cash compensation that are deferred pursuant to this Agreement,
and shall be debited or credited with amounts representing all losses or
earnings debited or credited to an account established in respect of the
Executive under the Trust. The Deferred Compensation Account also shall be
charged from time to time with all amounts that are distributed to the
Executive.

                  (c) With respect to Stock Units, in the event DII declares and
pays a dividend, the Deferred Compensation Account shall be credited with an
amount equal to the amount of the dividend paid on the number of shares of
Common Stock equal to the number of Stock Units in the Deferred Compensation
Account. In the event of any stock dividend, stock split, combination or
exchange of shares of Common Stock, recapitalization or other change in the
capital structure of DII, corporate separation or division (including, but not
limited to, split-up, spin-off or distribution to DII shareholders other than a
normal cash dividend), sale by DII of all or a substantial portion of its
assets, rights offering, merger, consolidation, reorganization or 


                                      -10-

<PAGE>   11

partial or complete liquidation, or any other corporate transaction or event
having an effect similar to any of the foregoing, the number of Stock Units in
the Deferred Compensation Account shall be appropriately adjusted in an
equitable manner or there shall be made such other equitable adjustments to the
Deferred Compensation Account.

                  (d) Amounts contributed to the Trust and credited to the
Executive's account thereunder shall be invested and reinvested, at the
direction of the Executive, in accordance with the provisions of the Trust
Agreement. The assets of the Trust shall be considered part of the general
assets of the Company subject to the claims of its general creditors.

                  (e) The Executive agrees on behalf of himself and his
designated beneficiary to assume all risk in connection with any debits or
credits made to his account under the Trust by reason of losses or earnings on
investments made in accordance with the provisions of the Trust Agreement.

                  (f) If the Executive experiences an Unforeseeable Financial
Emergency, the Executive may, with the approval of the Company, receive a
partial or full distribution of his Deferred Compensation Account. The
distribution shall not exceed the amount reasonably needed to satisfy the
Unforeseeable Financial Emergency.

                  (g) The Executive may at any time elect to withdraw all of the
balance then credited to his Deferred Compensation Account, less a ten (10)
percent withdrawal penalty. Thereafter, the provisions of this Section 8 shall
no longer continue in effect.

                  (h) Upon the earlier of (i) a period of 30 days shall have
elapsed after the Executive ceases to be a resident of the United States, and
(ii) the earliest date reasonably 


                                      -11-

<PAGE>   12

practicable following the Executive's Termination of Employment, the Company
shall pay (or cause to be paid from the Trust) to the Executive or to the
Executive's beneficiary or estate (in the event of his death) a lump sum amount
equal to his Deferred Compensation Account. All payments shall be made in cash,
except that distributions representing Stock Units shall be made in shares of
Common Stock.

                  (i) The beneficiary referred to in paragraph (h) above may be
designated or changed by the Executive on a form provided by the Company and
delivered to the Company before his death. If no such beneficiary shall have
been designated, or if no designated beneficiary shall survive the Executive,
the lump sum payment payable under paragraph (h) above shall be payable to the
Executive's surviving spouse or, if none, his estate.

                  (j) For purposes of this Agreement:

                      "Change in Control" shall mean a change in control of the 
Company, which shall be deemed to have occurred if the conditions set forth in
any one of the following four paragraphs shall have been satisfied:

                     (i) any corporation, person, other entity or group (other
         than the trustee of any qualified retirement plan maintained by DII)
         becomes the "beneficial owner" (as defined in Rule 13d-3 under the
         Securities Exchange Act of 1934), directly or indirectly, of securities
         representing twenty percent (20%) or more of the combined voting power
         of DII's then outstanding securities; or

                     (ii) during any period of twenty-four consecutive months,
         individuals who at the beginning of such consecutive twenty-four month
         period constitute the Board 


                                      -12-

<PAGE>   13

         of Directors of DII cease for any reason (other than retirement upon
         reaching normal retirement age, disability or death) to constitute at
         least a majority thereof, unless the election or the nomination for
         election by the Company'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 such twenty-four month
         period;

                     (iii) the shareholders of DII approve a merger or
         consolidation of DII with any other corporation, other than a merger or
         consolidation which would result in the voting securities of DII
         outstanding immediately prior thereto continuing to represent (either
         by remaining outstanding or by being converted into voting securities
         of the surviving entity) at least 80% of the combined voting power of
         the voting securities of DII or such surviving entity outstanding
         immediately after such merger or consolidation, or the shareholders of
         DII approve a plan or complete liquidation of DII or an agreement for
         the sale or disposition by DII of all or substantially all DII's
         assets;

                     (iv) there shall occur a transaction or series of
         transactions which the Board of Directors of DII shall determine to
         have the effect of a Change in Control.

                  "Common Stock" shall mean the Common Stock, par value $0.01 of
DII, or any security of DII issued in substitution, exchange or in lieu thereof.

                  "Performance Shares" shall mean performance shares awarded
under DII's 1994 Stock Incentive Plan and under any successor plan of DII which
permits the awardee to elect to defer the Performance Shares.


                                      -13-

<PAGE>   14

                  "Stock Units" shall mean bookkeeping units in the Deferred
Compensation Account, each of which represents a share of Common Stock.

                  "Termination of Employment" shall mean the Executive's
cessation of employment or service with the Company or any affiliate voluntarily
or involuntarily, for any reason.

                  "Unforeseeable Financial Emergency" shall mean an
unanticipated emergency that is caused by an event beyond the control of the
Executive that would result in severe financial hardship to the Executive
resulting from (i) a sudden and unexpected illness or accident of the Executive
or a dependent of the Executive, (ii) a loss of the Executive's property due to
casualty, or (iii) other such extraordinary and unforeseeable circumstances, all
as determined in the sole discretion of the Company.

                  (k) It is the intention of the parties hereto that the
arrangement described in this Agreement be unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended. Nothing in this Agreement or the Trust Agreement and no action taken
pursuant to the provisions of this Agreement or the Trust Agreement shall create
or be construed to create a fiduciary relationship between the Company and the
Executive, his designated beneficiary or any other person. Any funds that may be
invested under the provisions of the Trust Agreement shall continue for all
purposes to be a part of the general funds of the Company and no person other
than the Company shall by virtue of the provisions of this Agreement have any
interest in such funds. To the extent that any person acquires a right to
receive payments from the Company under this Agreement, such right shall be no
greater than 

                                      -14-

<PAGE>   15

the right of any unsecured general creditor of the Company. This Agreement
constitutes a mere promise by the Company to make a benefit payment in the
future.

                  (l) The Company or the trustee of the Trust shall withhold
from benefits distributed under this Agreement all income, employment and other
taxes required to be withheld by applicable law.

                  (m) After a Change in Control, if any person or entity has
failed to comply (or is threatening not to comply) with any of its obligations
under this Agreement or the Trust, or takes or threatens to take any action to
deny, diminish or to recover from the Executive the benefits intended to be
provided hereunder, the Company shall reimburse the Executive for reasonable
attorneys' fees and related costs incurred in the successful pursuance or
defense of the Executive's rights. If the Executive does not prevail, attorneys'
fees shall also be payable under the preceding sentence to the extent the
Executive had reasonable justification for retaining counsel, but only to the
extent that the scope of such representation was reasonable.

                  (n) No benefit under this Agreement shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void. No benefit under
this Agreement shall in any manner be liable for or subject to the debts,
contracts, liabilities, engagements or torts of the person entitled to any such
benefit, except as specifically provided in this Agreement.

                  9. Successors and Assigns. This Agreement is intended to bind
and inure to the benefit of and be enforceable by Executive and the Company and
their respective legal representatives, successors and assigns. Neither this
Agreement nor any of the duties or obligations hereunder shall be assignable by
Executive.


                                      -15-

<PAGE>   16


                  10. Governing Law; Jurisdiction. This Agreement shall be
interpreted and construed in accordance with the laws of the State of Colorado.
Each of the Company and Executive consents to the jurisdiction of any state or
federal court sitting in Colorado, in any action or proceeding arising out of or
relating to this Agreement.

                  11. Headings. The paragraph headings used in this Agreement
are for convenience of reference only and shall not constitute a part of this
Agreement for any purpose or in any way affect the interpretation of this
Agreement.

                  12. Severability. If any provision, paragraph or subparagraph
of this Agreement is adjudged by any court to be void or unenforceable in whole
or in part, this adjudication shall not affect the validity of the remainder of
this Agreement. In addition, to the extent possible, a like valid term which
meets the objective of the void or unenforceable term shall be substituted for
any such void or unenforceable term.

                  13. Complete Agreement. This document embodies the complete
agreement and understanding among the parties, written or oral, which may have
related to the subject matter hereof in any way and shall not be amended orally,
but only by the mutual agreement of the parties hereto in writing, specifically
referencing this Agreement.

                  14. Counterparts. This Agreement may be executed in one or
more separate counterparts, all of which taken together shall constitute one and
the same Agreement.

                  15. Miscellaneous. Executive acknowledges that the Company is
not responsible for the tax attributes of Executive's compensation under this
Agreement. Executive shall be solely responsible for Executive's income tax
liability and any other tax liability, and the Company expressly disavows any
responsibility or warranty in connection therewith.

                                      -16-


<PAGE>   17


                  IN WITNESS WHEREOF, the parties have executed this Agreement 
as of the day and year first above written.



                                            NORTAVOD CORPORATION


                                            By:      /s/ Thomas J. Smach
                                               --------------------------------
                                            Title:       Vice President 
                                                  -----------------------------

                                                     /s/ Dermott O'Flanagan
                                            -----------------------------------
                                            DERMOTT O'FLANAGAN





                                      -17-