EX-10.2



 






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;



 









 





               (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



8









 







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.




 




 




 




 




 




 




 





 









 








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