<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-23388
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VIDEO SERVICES CORPORATION
(formerly, International Post Limited)
(Exact name of registrant as
specified in its charter)
DELAWARE 13-3735647
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 Pegasus Avenue
Northvale, New Jersey 07647
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (201) 767-1000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(Title of Class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No |_|
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405) is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K |X|.
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The aggregate market value of the registrant's common stock, par value
$.01 per share, held by persons other than affiliates of the registrant, as of
November 21, 1997, was approximately $11,918,814.
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The number of outstanding shares of the registrant's common stock, par
value $.01 per share, as of November 21, 1997, was: 13,238,307.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers
The following table sets forth certain information with respect to the
Directors and certain executive officers of the Company at November 11, 1997:
Name Age Position
- ---- --- --------
Robert H. Alter (1)(2) 68 Director
Julius Barnathan (1) 70 Director
Terrence A. Elkes 63 Director and Chairman of the Board
Martin Irwin 61 Director and Vice Chairman of the Board
Louis H. Siracusano 55 Director, President and Chief Executive Officer
Raymond L. Steele (1)(2) 62 Director
Frank Stillo (2) 63 Director
Donald H. Buck 58 Vice President
Steven G. Crane 41 Vice President and Chief Financial Officer
Michael E. Fairbourne 44 Vice President-Administration
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Robert H. Alter has been a director of the Company since October 1993. Mr.
Alter is a director of Source Media, Inc. and the Vice Chairman and a director
of the Cabletelevision Advertising Bureau ("CAB"), the national trade
association of the cable television industry devoted to marketing and
advertising, a position he has held since October 1991. Prior to October 1991,
Mr. Alter, who founded the CAB, also served as its President and Chief Executive
Officer for ten years. In November 1992, Mr. Alter was elected President of
Alter Associates, Inc. From October 1991 to November 1992, Mr. Alter served as
the senior advisor to the Board of Directors of Star TV/Hong Kong.
Julius Barnathan has been a director of the Company since October 1993 and
during the 1994, 1995 and 1996 fiscal years served as a director of Video. Mr.
Barnathan is currently a consultant to
<PAGE> 3
the Company and to (and has been employed as such by) Quantel Ltd. since
February 1992, by Faroudja Laboratories Inc. since July 1994, by Statistical
Research Inc. since March 1995 and by Warner Bros. since March 1996. Mr.
Barnathan was employed by Capital Cities/ABC, Inc. for 39 years. Among other
positions, he served as Senior Vice President of Capital Cities/ABC, Inc. in
charge of Technology and Strategic Planning and President of ABC Broadcast
Operations and Engineering. Mr. Barnathan is the Chairman of the National
Captioning Institute.
Terrence A. Elkes has been a director and the Chairman of the Board of the
Company since October 1993 and had served on the partnership committee of MTE
Co. from July 1992 to February 1994, when it dissolved upon consummation of
IPL's initial public offering. Mr. Elkes is a Managing Director of Apollo
Partners, Ltd. ("Apollo"), a private investment firm involved in the acquisition
of companies in the media, communications, entertainment and broadcasting
fields, which he co-founded in 1987 with Mr. Gorman, a former director of IPL.
Prior to forming Apollo, Mr. Elkes was employed by Viacom International, Inc.
where he served as President from 1978-1982 and Chief Executive Officer from
1983-1987. Mr. Elkes serves as director of IDC Services, Inc., a private company
based in Illinois ("IDC") and is an indirect owner of IDC through his interest
in Apollo. On December 29, 1993, IDC filed for relief under Chapter 11 of the
Bankruptcy Code. Its prepetition debts and liabilities were discharged in
January 1996.
Martin Irwin has been a director of the Company since October 1993 and
became the Vice Chairman of the Board of the Company upon consummation of the
Merger. Prior thereto, Mr. Irwin served as President and Chief Executive Officer
of IPL and as President, Chief Executive Officer and was a member of the
partnership committee of MTE Co. from August 1992 to February 1994, when it
dissolved upon consummation of IPL's initial public offering. From September
1991 through June 1992, Mr. Irwin ran the post-production operations of Video,
which he co-founded in 1979. Mr. Irwin served as President, Chief Operating
Officer and a director of Video from 1979 to 1989 and then served as a director
of and Senior Consultant to Video from July 1989 until July 1992. Prior to
co-founding Video, Mr. Irwin was employed by EUE/Screen Gems, a division of
Columbia Pictures Industries, Inc., where he last served as Senior Vice
President and General Manager.
Louis H. Siracusano has been a director of the Company since October 1993
and became President and Chief Executive Officer of the Company upon
consummation of the Merger. Prior thereto, Mr. Siracusano had been a member of
the partnership committee of MTE Co. from July 1992 to February 1994, when it
dissolved upon consummation of IPL's initial public offering. He had served as
the Chairman, Chief Executive Officer and a director of Video since 1986 and
President since 1989. Mr. Siracusano also served as President of Audio Plus
Video from July 1989 to February 1994. Mr. Siracusano was a founder of Video and
has served in various capacities with Video since its formation. Mr. Siracusano
was with Ampex Corporation and the American Broadcasting Company in various
sales and engineering management positions prior to Video's formation in 1979.
Raymond L. Steele became a director of the Company upon consummation of
the Merger and currently serves as Chairman of the Compensation Committee. Prior
thereto, Mr. Steele had been a Principal of Pacholder Associates, Inc., an
institutional money manager and workout specialist, until
2
<PAGE> 4
his retirement in 1991. Since November 1993, he has been retained as a
consultant for Emerson Radio Corp., NUWAVE Technologies Inc., a distributor of
video enhancement chips, Home Holdings, Inc., an insurance holding company, and
GFTA, a German software developer. He has served as a director of numerous
companies, including Orion Pictures Corporation and Webcraft Technologies, Inc.,
and currently serves as a director of Emerson Radio Corp., Pharmhouse, Inc.,
Modernfold, Inc., a manufacturer of movable walls, and GFTA.
Frank Stillo became a director of the Company upon consummation of the
Merger and currently serves as Chairman of the Audit Committee. He has been
active in the printing industry since 1950 and co-founded his own printing
company in 1968. Since 1989, Mr. Stillo has been the Chairman and Chief
Executive Officer of Sandy Alexander, Inc., a printing company and Chief
Executive Officer of MGA Printing Co., a subsidiary of Sandy Alexander, Inc.,
Mr. Stillo also currently serves as the President of The Metropolitan
Lithographers Association, director of Web Offset ASS-PIA and trustee of ALA -
S&A Fund and Pension Fund.
Donald Buck became the Company's Vice President upon consummation of the
Merger. Prior thereto, Mr. Buck served as a Senior Vice President of Video since
August 1987, the President of Atlantic Satellite Communications, Inc. since
August 1992 and the President of Waterfront Communications Corporation since
April 1993. Mr. Buck served as President of Video Dub, Inc. (formerly, a
subsidiary of Video) from 1980. During 1975-1980 he was an Executive Vice
President of Sales for E.U.E. Screen Gems Video Division of Columbia Pictures
Industries.
Steven G. Crane has been the Company's Senior Vice President and the Chief
Financial Officer since October 27, 1997. Prior thereto, Mr. Crane started and
owned his own company, ATE, Inc., which supplies used, rebuilt and new packaging
relating equipment to the beverage industry worldwide, since February 1995. From
August 1990 to February 1995, Mr. Crane served as the Division Chief Financial
Officer of Pepsi-Cola International, a subsidiary of PepsiCo, Inc.
Michael E. Fairbourne became the Company's Vice President-Administration
upon consummation of the Merger. Prior thereto, Mr. Fairbourne served as the
Senior Vice President-Administration of Video since March 1994. Previously, Mr.
Fairbourne was the Vice President-Controller of Video from July 1987 to March
1994 and the Controller of Video from September 1983 to July 1987. Prior to
joining Video, from 1976 to 1983, Mr. Fairbourne, a certified public accountant,
was in private practice.
There are no family relationships among the above directors and executive
officers.
Board of Directors
The Board of Directors of the Company consists of seven members. Directors
serve for terms of one year and until their successors are duly elected and have
qualified.
Section 16(a) Beneficial Ownership Reporting Compliance
3
<PAGE> 5
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who beneficially own
more than ten percent (10%) of the Company's common stock (the "Common Stock")
(collectively, the "Reporting Persons") to file with the Securities and Exchange
Commission initial reports of beneficial ownership and reports of changes in
beneficial ownership of the Common Stock. Reporting Persons are required to
furnish the Company with copies of all such reports. To the Company's knowledge,
based solely on a review of copies of such reports furnished to the Company and
certain representations of the Reporting Persons, the Company believes that
during the 1997 fiscal year all of the Reporting Persons complied with all
applicable Section 16(a) reporting requirements.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation paid or accrued by the
Company for the 1997 fiscal year with respect to (a) the Company's Chief
Executive Officer and (b) each of the four most highly compensated executive
officers, other than the Chief Executive Officer, of the Company at July 31,
1997, whose salary and bonus from the Company in the 1997 fiscal year exceeded
$100,000, and Jeffrey J. Kaplan, who would have been amongst the most highly
compensated executive officers of the Company had he not resigned as executive
officer of the Company during the 1997 fiscal year (collectively, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------------- ------------
Number of
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation(1)(2) Options(3) Compensation
- --------------------------- ---- ------ ----- ------------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Martin Irwin
Director and Vice Chairman of 1997 $262,000 -- $ 1,933 -- --
the Board (prior to the Merger, 1996 233,500 -- 1,967 120,000(4) --
Chief Executive Officer, 1995 220,000 -- 1,868 -- --
President and Director of IPL)
Jeffrey J. Kaplan(5)
(prior to the Merger, Executive 1997 $110,000 $ 30,000 $ 1,098 -- $ 80,000(9)
Vice President, Chief Financial 1996 190,000 30,000 1,864 90,000 --
Officer and Director of IPL) 1995 190,000 30,000 1,866 -- --
Kenneth D. Lorber
President of The Post Edge, 1997 $119,519 -- $ 770 -- --
Inc. (prior to the Merger, Vice 1996 115,000 -- 797 25,000 --
President of IPL; President of 1995 -- -- -- -- --
Post Edge)
Adrien Macaluso(6)
(prior to the Merger, Vice 1997 $200,000 -- $ 1,097 -- --
President of IPL; President of 1996 178,000 $ 63,421 1,875 60,000 --
Audio Plus Video) 1995 160,000 64,640 1,865 -- --
Daniel Rosen
President of Manhattan 1997 $225,000 $ 25,000 $ 1,909 -- --
Transfer/Edit, Inc. (prior to 1996 229,808(7) 25,000 1,874 75,000 --
the Merger, Vice President of 1995 200,000 50,000(8) 1,066 -- --
IPL; President of MTE)
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------------- ------------
Number of
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus Compensation(1)(2) Options(3) Compensation
- --------------------------- ---- ------ ----- ------------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Jane Stuart
President of CABANA corp 1997 $100,000 -- $ 1,202 25,000 --
(prior to the Merger, Vice 1996 100,000 -- -- -- --
President of IPL; President of 1995 -- -- -- -- --
CABANA corp.)
</TABLE>
(1) The amounts set forth in this column represent matching contributions by
the Company on behalf of the Named Executive Officers under the Company's
401(k) plan.
(2) Excludes items which are, in the aggregate, less than the lesser of
$50,000 or 10% of the executive's total annual salary and bonus.
(3) All options granted to the Named Executive Officers in the 1996 fiscal
year represent the replacement of options which had been previously
granted under the 1993 Long Term Incentive Plan ("1993 Plan"). Such
replacement options were granted upon revised terms, including, without
limitation, a three-year vesting period commencing in the 1996 fiscal year
and a range in exercise prices from $4.00 to $6.00 per share.
(4) Does not include options to acquire an aggregate of 208,250 shares of
Common Stock granted by the stockholders of IPL's predecessor to Mr. Irwin
in consideration for his interest in the predecessor at exercise prices
which ranged from $1.80 to $7.78 per share. Mr. Irwin exercised a portion
of such options on January 5, 1996, pursuant to which he acquired 69,417
shares of Common Stock for $1.80 per share. The remainder of such options
expired in December 1995.
(5) Mr. Kaplan resigned as an officer of the Company effective February 14,
1997.
(6) Mr. Macaluso resigned as an officer of the Company effective August 22,
1997.
(7) Includes $4,808 of retroactive compensation attributable from May 1, 1995
to July 31, 1995 in connection with the approval by the Compensation
Committee of an increase in Mr. Rosen's base compensation, effective as of
May 1, 1995, to $225,000 per annum.
(8) Represents a $25,000 signing bonus paid on August 1, 1994 and a guaranteed
bonus of $25,000 for the 1995 fiscal year.
(9) Paid to Kapcorp Incorporated, a corporation of which Mr. Kaplan is the
sole stockholder, director and officer, pursuant to Mr. Kaplan's
consulting agreement with the Company dated February 15, 1997. See
Employment Contracts, Termination of Employment and Change-of- Control
Agreements.
5
<PAGE> 7
Option Grants in Last Fiscal Year
The following table provides information with respect to the grant of
stock options during the 1997 fiscal year to Jane Stuart, who was the only Named
Executive Officer to receive option grants in the 1997 fiscal year:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Number of % of Total Appreciation for
Securities Options Granted Exercise Option Term (5)
Underlying Options to Employees in Price per Expiration --------------------
Name Granted(1) Fiscal Year 1997 Share Date 5% 10%
- ---- ---------- ---------------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Jane Stuart 8,333(2) 33.33 4.00 4/10/06 $ 12,479 $ 39,614
8,333(3) 33.33 5.00 4/10/06 4,146 31,285
8,334(4) 33.33 6.00 4/10/06 0 22,948
</TABLE>
(1) For purposes of this table, such grants have been broken down according to
the exercise price thereof.
(2) Vested on April 10, 1997.
(3) Vests on April 10, 1998.
(4) Vests on April 10, 1999.
(5) Valuation is based upon the potential realizable dollar value of the
replacement option grants with assumed rates of appreciation of 5% and 10%
per annum from the date of grant to the end of the option term.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table provides information with respect to the exercise of
stock options during the 1997 fiscal year by the Named Executive Officers and
the value of unexercised options owned by the Named Executive Officers at July
31, 1997:
<TABLE>
<CAPTION>
Number of Securities
Number of Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired on Value July 31, 1997 July 31, 1997(1)(2)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Martin Irwin -- -- 40,000/80,000 0/0
Jeffrey J. Kaplan -- -- 211,818/60,000 0/0
Kenneth D. Lorber -- -- 8,333/16,667 0/0
Adrien Macaluso -- -- 20,000/40,000 0/0
Daniel Rosen -- -- 25,000/50,000 0/0
Jane Stuart -- -- 8,333/16,667 0/0
</TABLE>
6
<PAGE> 8
(1) The value is based on the excess of the market price of the Common Stock
at July 31, 1997 over the exercise price of the unexercised options.
(2) At July 31, 1997, the closing bid price of the Common Stock on The Nasdaq
National Market was $2 15/16 per share.
Long-Term Incentive Plans - Awards in the Last Fiscal Year
No awards were made to the Named Executive Officers under the 1993 Long
Term Incentive Plan during the 1997 fiscal year.
Compensation of Directors
Each member of the Board who is not an officer of the Company receives an
annual fee of $15,000 ($18,000 in the case of the Chairman of the Board) for
serving on the Board plus $750 ($1,500 in the case of the Chairman of the Board)
and reimbursement of expenses for each Board or committee meeting attended.
Directors who chair committees receive $1,000 plus reimbursement of expenses for
each committee meeting attended.
The stockholders and directors of the Company adopted a restricted share
plan for directors who are not employees of the Company (the "Director Plan"). A
total of 50,000 shares of Common Stock is available for issuance under such
plan. The Board recently approved the termination of an annual retainer payment
of $15,000 ($18,000 in the case of the Chairman of the Board) that had
previously been paid to members of the Board, and in lieu thereof and of new
grants available in that year to certain directors under the Director Plan,
granted to members of the Board who are not employees of the Company 4,000
shares of Common Stock each (3,000 shares in the case of Mr. Irwin and 6,000
shares in the case of the Chairman of the Board).
A special committee consisting of Messrs. Alter, Elkes and Gorman (a
director prior to the Merger) were appointed by the Board of Directors of IPL to
evaluate and negotiate the Merger Agreement on behalf of IPL. In connection with
this service, each of Messrs. Alter, Elkes and Gorman received $15,000.
Employment Contracts, Termination of Employment and Change-of-Control
Arrangements
The Company entered into employment agreements with Messrs. Louis H.
Siracusano and Donald H. Buck. Under Mr. Siracusano's employment agreement with
the Company, he will serve as the President and Chief Executive Officer of the
Company for (i) a four (4) year period or (ii) twenty four (24) months following
notice of termination by the Company or by Mr. Siracusano, whichever is later.
Under Mr. Buck's employment agreement with the Company, he will serve as the
Vice President of the Company for a three (3) year period or twelve (12) months
following notice of termination by either party, whichever is later.
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<PAGE> 9
Mr. Siracusano's employment agreement provides for base compensation of
$200,000 per annum, and annual bonuses and a long-term bonus based on the
Company's achievement of certain cash flow and net income targets to be
determined by Mr. Siracusano and the Compensation Committee of the Board. Under
the terms of the employment agreement, Mr. Siracusano will be entitled to
receive an annual bonus of between 5% and 40% of his base salary for the
relevant year upon the Company's achievement of a percentage (ranging from 90%
to 109.9% or greater) of the agreed upon cash flow and net income targets for
such year, which bonus will be payable within thirty (30) days of delivery to
the Board of the Company's audited financial statements. In addition, the
employment agreement provides that Mr. Siracusano will be entitled to receive a
long-term bonus of between 12.5% and 100% of his cumulative base salary for the
entire contract period if the Company achieves a percentage (ranging from 90% to
109.9% or greater) of the agreed upon cash flow and net income targets for such
period. The long-term bonus is payable in a single installment within thirty
(30) days following the delivery of the Company's audited financial statements
for the period ended June 30, 2001 and will be reduced by amounts previously
paid to Mr. Siracusano as annual bonuses. The employment agreement further
provides that the Compensation Committee of the Board may award Mr. Siracusano
other bonus payments in its discretion.
Mr. Buck's employment agreement provides for base compensation of $175,000
per annum and a bonus to be negotiated and agreed upon by the parties.
Each of Messrs. Siracusano's and Buck's employment agreements provides
that (i) the Compensation Committee may award a discretionary bonus to him on an
annual basis, (ii) each will be entitled to participate in such compensation
plans, incentive plans, group life, health, accident, disability and
hospitalization insurance plans, pension plans and retirement plans as the
Company may make available to its other executive employees, and (iii) upon
termination without cause, he is entitled to receive his annual base
compensation and any incentive compensation for the remainder of the originally
scheduled term of the employment agreement. Termination for cause includes
termination for breach, nonperformance, fraud or conviction of a felony.
Additionally, each such employment agreement provides that the employee is
entitled to terminate his employment at any time during the six-month period
following any "Change in Control" (as defined in the 1993 Plan) that results in
a material diminution in the capacity and terms of his employment. Any such
termination will be treated as a termination without cause.
Mr. Steven Crane's agreement with the Company provides for (i) base
compensation of $160,000 per annum, (ii) a bonus of 75% of the Chief Executive
Officer's bonus, (iii) stock options of 75,000 shares, (iv) a car allowance of
$600 per month, (v) $25,000 for moving expenses and (vi) a loan of $25,000 for
use in facilitating his move.
The Company and Martin Irwin entered into a severance agreement dated as
of August 26, 1997. The agreement provides for Mr. Irwin to be paid severance
of: (i) $150,000 per year for one year, (ii) $100,000 per year for the one year
period thereafter and (iii) $75,000 per year for the one year period thereafter.
Mr. Irwin is also entitled, for a period of three
8
<PAGE> 10
years from the date of the agreement, to participate in and receive such
benefits, services, equipment, compensation and incentive plans and group life,
health, accident, disability and hospitalization insurance plans, pension plans
and retirement plans as the Company may make available to employees of the
Company at the expense of the Company. In addition, as part of such severance
package, Video's stockholders agreed to grant to Mr. Irwin, on a pro rata basis,
options to purchase an aggregate of 75,000 shares of the Common Stock they
received in the Merger at an exercise price of $0.75 per share. Such options
vested upon consummation of the Merger.
On February 15, 1997, the Company entered into a Consulting Agreement (the
"Consulting Agreement") with Jeffrey J. Kaplan, and Kapcorp Incorporated, a
corporation of which Mr. Kaplan is the sole stockholder, director and officer
("Kapcorp"). Pursuant to the Consulting Agreement, (i) the employment agreement
between Mr. Kaplan and the Company, dated as of February 14, 1994, was
terminated, effective as of February 14, 1997, (ii) Mr. Kaplan resigned,
effective as of February 14, 1997, from all positions and directorships he had
with the Company and its affiliates (other than as a director of the Company),
(iii) stock options held by Mr. Kaplan to purchase an aggregate of 271,818
shares of the Common Stock became fully vested and immediately exercisable until
February 14, 2002, and (iv) the Company retained Mr. Kaplan, through Kapcorp, to
provide consulting services to the Company in connection with the Merger for a
one year term; however, as a result of the Merger, the expiration date of the
Consulting Agreement was automatically extended to the third anniversary date of
the consummation of the Merger. The consulting fee payable to Kapcorp under the
Consulting Agreement is $190,000 per annum; however, such fee was reduced to an
annual rate of $100,000 concurrently with the consummation of the Merger. In
addition, Kapcorp received a bonus of $50,000 payable in January 1998.
The Company and Adrien Macaluso entered into a letter agreement dated
August 25, 1997 ("Letter Agreement") setting forth the terms regarding Mr.
Macaluso's separation from the Company and Audio plus Video International, Inc.
("Audio"). The Letter Agreement modifies and becomes part of the employment
agreement between the Company and Mr. Macaluso dated February 15, 1997
("Employment Agreement"). Pursuant to the terms of the Letter Agreement, Mr.
Macaluso resigned as an officer of IPL and Audio and terminated his employment
with Audio effective as of August 22, 1997. Audio is obligated to pay Mr.
Macaluso's base salary of $200,000 per annum through March 18, 1998 and Mr.
Macaluso is obligated to continue until that time to abide by the all of the
terms and conditions of the Employment Agreement as modified by the Letter
Agreement. Audio will continue to pay for health insurance coverage through
December 31, 1997.
The Company entered into an employment agreement with Daniel Rosen, with a
term commencing on May 23, 1994 and ending on May 22, 1997 or twelve months
following a notice of termination by either party, whichever is later. Mr.
Rosen's contract provides for base compensation of $200,000 per annum and a
bonus equal to two percent (2%) of his base salary for each one percent (1%)
increase in the profitability of MTE and its subsidiaries compared to the prior
year or base year, whichever is higher. Effective as of May 1, 1995, Mr. Rosen's
base compensation was increased to $225,000 per annum. The agreement further
provides that (i) the Compensation Committee may award a discretionary bonus to
Mr. Rosen under certain circumstances, (ii) he will be entitled to
9
<PAGE> 11
participate in such compensation plans, incentive plans, group life, health,
accident, disability and hospitalization insurance plans, pension plans and
retirement plans as the Company may make available to its other executive
employees, and (iii) upon termination without cause, Mr. Rosen is entitled to
receive his annual base compensation and any incentive compensation for the
remainder of the originally scheduled term of the agreement. Termination for
cause includes termination for breach, nonperformance, fraud or conviction of a
felony. Additionally, the agreement provides that Mr. Rosen is entitled to
terminate his employment at any time during the six-month period following any
"change in control" (as defined in the 1993 Plan) that results in a material
diminution in the capacity and terms of his employment. Any such termination
will be treated as a termination without cause.
The Company and CABANA corp., formerly known as Big Picture/Even Time
Limited ("BPET"), entered into an employment contract with Jane Stuart, with a
term commencing on May 4, 1995 and ending on May 4, 2000. Ms. Stuart's contract
provides for base compensation of $100,000 per annum. Under her employment
contract, Ms. Stuart is entitled to participate in all stock option and other
equity related incentive programs, group life, health, accident, disability and
hospitalization insurance plans, pension plans and retirement plans as the
Company may make available to its other executive employees. Upon termination
without cause, Ms. Stuart is entitled to receive her annual base compensation
for the remainder of the originally scheduled term of the employment contract.
Termination for cause includes termination for breach, nonperformance, fraud or
conviction of a felony. Ms. Stuart is a partner in BPET Partnership, a New York
general partnership, which pursuant to a purchase agreement (the "BP/ET Purchase
Agreement"), dated as of April 25, 1995, by and among the Company, BPET and
certain other parties, is entitled to certain contingent purchase price payments
based on (i) increases in the profitability of BPET and (ii) increases in the
amount of post-production work performed for BPET or directed by BPET to the
Company, over a certain base number, for the twelve-month period ended April 30,
1996, up to a maximum amount of $1,920,000 in additional purchase price
payments. In connection therewith, BPET Partnership received $0 during the 1997
fiscal year.
Post Edge entered into an employment contract with Kenneth D. Lorber with
a term commencing on June 1, 1995 and ending on May 31, 1998, or twelve months
following notice of termination by either party, whichever is later. Mr.
Lorber's contract provides for base compensation of $115,000 per annum
(increased to $150,000 per annum on June 16, 1997) and a bonus equal to a
percentage of his base salary for any fiscal year within the term that the
targets set in the business plan of Post Edge are achieved. Under his employment
contract, Mr. Lorber is entitled to participate in such compensation plans,
incentive plans, group life, health, accident, disability and hospitalization
insurance plans, pension plans and retirement plans as Post Edge may make
available to its other executive employees. Upon termination without cause, Mr.
Lorber is entitled to receive his annual base compensation and any incentive
compensation for the remainder of the originally scheduled term of the contract.
Termination for cause includes termination for breach, nonperformance, fraud or
conviction of a felony. Mr. Lorber is entitled to terminate his employment at
any time during the six-month period following any "change in control" (as
defined in the 1993 Plan) that results in a material
10
<PAGE> 12
diminution in the capacity and terms of his employment. Any such termination
will be treated as a termination without cause.
The 1993 Plan provides that in the event of a "change in control" (as
defined in the 1993 Plan), (i) all stock appreciation rights outstanding for at
least six (6) months and all options awarded under the 1993 Plan not previously
vested and exercisable will immediately become fully vested and exercisable, and
(ii) the restrictions applicable to any restricted shares awarded under the 1993
Plan will lapse and such shares will be deemed fully vested. Consummation of the
Merger was deemed a change in control under the 1993 Plan, and, as a result of
the Merger, the following stock options held by the Named Executive Officers
immediately vested and became exercisable: Martin Irwin - 80,000; Kenneth D.
Lorber - 16,667; Adrien Macaluso - 40,000; Daniel Rosen - 50,000; Gary R. Strack
- - 8,333; and Jane Stuart - 16,667. If an employee's employment is terminated due
to a Change in Control, his stock options under the 1993 Plan remain exercisable
for the shorter of five (5) years or the remainder of the original term.
The 1993 Plan also provides that if, within one (1) year after the Change
in Control Date (as defined in the 1993 Plan), (i) no shares of Common Stock are
listed on a national securities exchange or on The Nasdaq Stock Market or (ii)
for a period of sixty (60) consecutive trading days, the fair market value of a
share of Common Stock on such an exchange or market has declined by twenty
percent (20%) or more from the fair market value of a share of Common Stock on
the Change in Control Date or the Change in Control Price (as defined in the
1993 Plan), whichever is higher, then the Company will provide written notice
thereof to each participant in the 1993 Plan and for a period of sixty (60) days
following the giving of such notice, the Company will, by written offer to the
participants which will accompany such notice, offer the opportunity to such
participants to be paid the value of all of their outstanding options and stock
appreciation rights, determined on the basis of the Change in Control Price.
Such amount will be payable in a cash lump sum within thirty (30) days after the
Company receives notification of the participant's election to accept this
offer. In addition, certain options issued outside of the 1993 Plan to Messrs.
Terrence Elkes, Kenneth Gorman and Jeffrey Kaplan contain similar provisions in
respect of a Change in Control. Each of Messrs. Kaplan, Irwin, Elkes and Gorman
has agreed to waive his rights under these provisions.
The 1997 Long Term Incentive Plan ("1997 Plan") was adopted by the Board
and approved by the Stockholders in connection with the consummation of the
Merger to replace the Company's 1993 Plan which would have expired in 2004.
These plans are similar in their terms except that, among other things, the
aggregate number of shares of Common Stock issuable under the 1997 Plan has been
increased to 735,000 from the 84,200 which remained available for issuance under
the 1993 Plan, stock options (other than incentive stock options) may be issued
under the 1997 Plan below the fair market value of the underlying Common Stock
on the date of grant, awards may be granted under the 1997 Plan to consultants
and independent contractors performing services for the Company, and certain
other revisions in respect of recent changes in federal securities regulations
affecting equity compensation plans, as well as revisions in respect of Section
162(m) of the Internal Revenue Code of 1986, as amended, have been made to the
1997 Plan. The 1997 Plan shall continue in effect until July 9, 2007.
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<PAGE> 13
Compensation Committee Interlocks and Insider Participation
During fiscal year 1997 the members of the compensation committee of the
Board were Messrs. Siracusano (Chairman), Alter and Barnathan. During such time,
none of Messrs. Siracusano, Alter and Barnathan were employees of the Company;
however, Mr. Siracusano is currently the President and Chief Executive Officer
of the Company.
The Company has from time to time entered into transactions with Video, in
which Mr. Siracusano owned approximately a 46% interest prior to the Merger, for
the purchase or sale of various services and materials. Services provided for
the Company by Video include duplication services, satellite services,
maintenance and repair of post-production computer systems, and equipment
rentals and repairs. During the fiscal year ended 1997, the Company provided
services totaling $157,000 to, and purchased materials and services totaling
$213,000 from, Video and its affiliated companies. Revenues included
post-production work and courier services, and direct costs included duplication
services, repairs and maintenance, equipment rentals and tape stock purchases.
In addition, the Company purchased certain machinery and equipment from Video
and its affiliated companies during the fiscal year ended 1997 for $331,000.
The Company sublets its New York City corporate office from a Video
affiliate, under a lease accounted for as an operating lease. The rental expense
under the lease for the fiscal year ended 1997 amounted to $27,434.
The Company leases a facility from a partnership, whose partners, one of
whom was Mr. Siracusano, then owned a majority interest in Video, under a lease
accounted for as operating lease. The rental expense under the lease for the
fiscal year 1997 amounted to $422,000.
In June 1997, Video granted Mr. Barnathan options to purchase 11,123
shares of Video Common Stock at an exercise price of $5.39 per share. These
options were canceled upon consummation of the Merger and replaced with options
to purchase approximately 30,000 shares of Common Stock from Messrs. Siracusano,
Ferolito and Buck (Video's stockholders) at an exercise price of $2.00 per
share.
In connection with the Merger, Mr. Siracusano entered into an employment
agreement with the Company. See "Item 11. Employment Contracts, Termination of
Employment and Change-of-Control Arrangements."
The Company is engaged in certain transactions with former subsidiaries of
Video which are owned in part by Mr. Siracusano. See "Item 13. Transactions with
Management and Others."
In connection with the Merger, Mr. Siracusano received approximately
25.33% of the total number of shares of Common Stock then outstanding. See "Item
13. Certain Business Relationships."
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<PAGE> 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock at November 21, 1997 by (a) all persons
known by the Company who own beneficially more than five percent (5%) of the
outstanding Common Stock, (b) each Director of the Company, (c) each of the
Named Executive Officers and current Executive Officers of the Company and (d)
all Directors and current Executive Officers of the Company as a group. Unless
otherwise indicated, each of the persons or entities listed below exercises sole
voting and investment power over the shares that each of them beneficially owns:
<TABLE>
<CAPTION>
Name Common Stock Percent of Class
---- ------------ ----------------
<S> <C> <C>
5% Beneficial Owners:
The Equitable Companies Incorporated, The Equitable Life
Assurance Society of the United States, Equitable Deal Flow Fund,
L.P. and Equitable Capital Management Corporation....... 2,562,105 (1) 19.35%
Sandler Capital Management, Sandler
Associates and J.K. Media L.P........................... 1,396,000 (2) 10.55%
Arnold P. Ferolito...................................... 3,350,382 (3) 25.31%
Directors:
Robert H. Alter......................................... 13,000 *
Julius Barnathan........................................ 51,000 (4)(5) *
Terrence A. Elkes....................................... 522,012 (6)(7)(8)(9) 3.94%
Martin Irwin............................................ 267,417 (10)(11) 2.02%
Louis H. Siracusano..................................... 3,352,882 (3) 25.33%
Raymond L. Steele....................................... 14,000 *
Frank Stillo............................................ 19,000 (12) *
Current Executive Officers:
Donald H. Buck.......................................... 525,681 (3) 3.97%
Steven G. Crane......................................... 75,000 (13) *
Michael E. Fairbourne ................................... 60,000 (14) *
Named Executive Officers:
Jeffrey J. Kaplan....................................... 271,818 (15)
Kenneth D. Lorber....................................... 25,000 (16)(17) *
Adrien Macaluso......................................... 60,000 (18)(19) *
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
Name Common Stock Percent of Class
---- ------------ ----------------
<S> <C> <C>
Daniel Rosen............................................ 86,250 (20)(21) *
Jane Stuart............................................. 25,000 (22) *
All directors and current officers as a group,
consisting of a group of 10 persons .................... 4,828,200 (23) 36.47%
</TABLE>
- ----------
* Less than 1%.
(1) Based on Amendment No. 1 dated July 8, 1997 to Schedule 13D filed on
November 8, 1996. The business address of The Equitable Companies
Incorporated ("Equitable"), The Equitable Life Assurance Society of the
United States ("ELAS"), Equitable Deal Flow Fund, L.P. ("EDFF") and
Equitable Capital Management Corporation ("ECMC") is 787 Seventh Avenue,
New York, New York 10019. ELAS is a wholly-owned subsidiary of Equitable
and is the general partner of the general partner of EDFF. ECMC is the
investment manager of EDFF. EDFF is the record holder of 1,633,758 shares
of Common Stock (approximately 26% prior to the Merger) and ELAS is the
record holder of 928,347 shares of Common Stock (approximately 15% prior
to the Merger). ELAS also beneficially owns indirectly the 1,633,758
shares held by EDFF through its control of EDFF. Because of its ownership
of ELAS, Equitable may be deemed to beneficially own indirectly the
2,562,105 shares of Common Stock held by ELAS and EDFF. Certain other
persons and entities (AXA Assurances I.A.R.D. Mutuelle; AXA Assurances Vie
Mutuelle; Alpha Assurances I.A.R.D. Mutuelle; Alpha Assurances Vie
Mutuelle; AXA Courtage Assurance Mutuelle; Finaxa; AXA; Claude Bebear,
Patrice Garnier and Henri de Clermont-Tonnerre) may also be deemed to
beneficially own indirectly such 2,562,105 shares because of their
relationships to Equitable; however, all of these parties expressly
disclaim any beneficial ownership of these shares. Messrs. Terrence A.
Elkes and Kenneth F. Gorman each has an option to purchase 149,512 shares
of such Common Stock. Such options were granted by Holdings in connection
with the Initial Public Offering and Acquisition (and assumed by Equitable
as a result of its acquisition of the underlying shares of Common Stock
from Holdings). These non-transferable options are exercisable at $2.06
per share and terminate in February 2000.
(2) Based on Amendment No. 4 dated August 21, 1997 to Schedule 13D dated
December 21, 1994. The Reporting Persons are Sandler Capital Management, a
registered investment adviser and a New York general partnership ("SCM"),
and Harvey Sandler, Barry Lewis (through June 30, 1997), John Kornreich,
Michael Marocco and Andrew Sandler (each, a "Individual", and
collectively, the "Individuals"). SCM shares are held through 21st Century
Communications Partners, L.P. ("21st Century"), 21st Century
Communications T.E. Partners, L.P. ("T-E") and 21st Century Communications
Foreign Partners, L.P. ("Foreign"), each of which is a Delaware limited
partnership (collectively, the "Partnerships"). SCM also hold shares on
behalf of certain managed accounts with respect to which SCM exercises
investment discretion. Each Individual, through a Delaware corporation
that is controlled by such Individual and that serves of a general partner
of SCM, may be deemed to be a beneficial
14
<PAGE> 16
owner of the shares of Common Stock held by the Partnerships and such
managed accounts. Of the 1,396,000 shares of Common Stock, Sandler
Associates, a New York limited partnership, owns 155,000 shares of Common
Stock (each Individual is a general partner of Sandler Associates) and
J.K. Media L.P., a New York limited partnership controlled by John
Kornreich, owns 20,000 shares of Common Stock. The business address of
these entities is 767 Fifth Avenue, New York, New York 10153.
(3) Messrs. Elkes and Gorman will have an option to purchase 14,616; 14,616
and 768 of Messrs. Siracusano's, Ferolito's and Buck's shares,
respectively. Mr. Barnathan will have an option to purchase 17,052; 17,052
and 896 of Messrs. Siracusano's, Ferolito's and Buck's shares,
respectively. Mr. Irwin received, upon the consummation of the Merger, an
option to purchase 36,540; 36,540 and 1,920 of Messrs. Siracusano's,
Ferolito's and Buck's shares, respectively. See footnote (10).
(4) Includes options to purchase 5,000 shares of Common Stock at an exercise
price of $1.00 per share granted by Video to Mr. Barnathan, which options
were canceled upon consummation of the Merger and replaced with options to
purchase the same number of shares of Common Stock on the same terms and
conditions from Video's stockholders.
(5) Includes options to purchase approximately 30,000 shares of Common Stock
granted by Video's stockholders to Mr. Barnathan upon consummation of the
Merger at an exercise price of $2.00 per share in replacement of options
to purchase 11,123 shares of Video Common Stock which were canceled upon
consummation of the Merger.
(6) Includes five-year, non-qualified options to purchase 30,000 shares of
Common Stock at an exercise price of $11.00 per share granted by the
Company as of February 15, 1994 to each of Messrs. Elkes and Gorman in
connection with the Initial Public Offering and the Acquisition. Such
options vested three (3) months after the consummation of the Initial
Public Offering and are non-transferable.
(7) Includes five-year options to purchase 30,000 shares of Common Stock at an
exercise price of $11.00 per share granted by Video as of the date of the
consummation of the Initial Public Offering to each of Messrs. Elkes and
Gorman in connection with the Initial Public Offering and the Acquisition.
Such options vested three (3) months after the consummation of the Initial
Public Offering and are non-transferable. Such options were canceled as of
the upon consummation of the Merger and replaced with options to purchase
the same number of shares of Common Stock on the same terms and conditions
from the Video stockholders.
(8) Includes six-year, non-qualified options to purchase 149,512 shares of
Common Stock at an exercise price of $2.06 per share granted by Holdings
(and assumed by Equitable) as of the date of the consummation of the
Initial Public Offering to each of Messrs. Elkes and Gorman in connection
with the Initial Public Offering and the Acquisition, and in settlement of
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<PAGE> 17
Apollo's rights under a certain contract with Holdings. Such options are
non-transferable and vested after January 1, 1995. See footnote (1).
(9) Includes 10,000 shares owned by Mr. Elkes' children. Mr. Elkes disclaims
beneficial ownership of all such shares.
(10) Includes options to purchase 40,000 shares of Common Stock granted to Mr.
Irwin under the 1993 Plan, exercisable at prices ranging from $4.00 to
$6.00 per share.
(11) Includes options to purchase an additional 80,000 shares of Common Stock
granted to Mr. Irwin under the 1993 Plan, exercisable at prices ranging
from $4.00 to $6.00 per share, which vested upon consummation of the
Merger. Also includes options to purchase an aggregate of 75,000 shares of
Common Stock at an exercise price of $0.75 per share to be granted by
Messrs. Siracusano, Ferolito and Buck.
(12) Includes 14,000 shares of Common Stock owned by the Frank Stillo
Children's Trust, of which Mr. Stillo's wife is the trustee. Mr. Stillo
disclaims beneficial ownership of such shares.
(13) Includes options to purchase 75,000 shares of Common Stock, granted to Mr.
Crane under his employment agreement with the Company, exercisable at
$3.33 per share.
(14) Includes options to purchase 60,000 shares of Common Stock from Video's
stockholders at an exercise price of $2.00 per share in replacement of
options to purchase approximately 22,245 shares of Video common stock at
an exercise price of $5.39 per share granted in June 1997 which were
cancelled upon consummation of the Merger.
(15) Includes options to purchase 271,818 shares of Common Stock granted to Mr.
Kaplan, of which 90,000 were issued under the 1993 Plan, exercisable at
prices ranging from $4.00 to $9.35 per share.
(16) Includes options to purchase 8,333 shares of Common Stock granted to Mr.
Lorber under the 1993 Plan, exercisable at prices ranging from $4.00 to
$6.00 per share.
(17) Includes options to purchase an additional 16,667 shares of Common Stock
granted to Mr. Lorber under the 1993 Plan, exercisable at prices ranging
from $4.00 to $6.00 per share, which vested upon consummation of the
Merger.
(18) Includes options to purchase 20,000 shares of Common Stock granted to Mr.
Macaluso under the 1993 Plan, exercisable at prices ranging from $4.00 to
$6.00 per share. Mr. Macaluso resigned as officer of the Company effective
August 22, 1997.
(19) Includes options to purchase an additional 40,000 shares of Common Stock
granted to Mr. Macaluso under the 1993 Plan, exercisable at prices ranging
from $4.00 to $6.00 per share, which vested upon consummation of the
Merger.
16
<PAGE> 18
(20) Includes (i) options to purchase 25,000 shares of Common Stock granted to
Mr. Rosen under the 1993 Plan, exercisable at prices ranging from $4.00 to
$6.00 per share, and (ii) shares of Common Stock owned by Mr. Rosen's son
and the Ned Rosen Trust, of which Mr. Rosen is the trustee, in the amounts
of 1,250 and 5,000, respectively. Mr. Rosen disclaims beneficial ownership
of all shares of Common Stock owned by his son and the Ned Rosen Trust.
(21) Includes options to purchase an additional 50,000 shares of Common Stock
granted to Mr. Rosen under the 1993 Plan, exercisable at prices ranging
from $4.00 to $6.00 per share, which vested upon consummation of the
Merger.
(22) Includes options to purchase 25,000 shares of Common Stock granted to Ms.
Stuart under the 1993 Plan, exercisable at prices ranging from $4.00 to
$6.00 per share.
(23) Does not include options to purchase stock from Messrs. Siracusano and
Buck granted to Messrs. Elkes, Gorman or Barnathan. See footnotes above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
The Company has entered into employment, termination of employment and
consulting arrangements with certain directors and officers. See "Item 11.
Employment Contracts, Termination of Employment and Change-of-Control
Arrangements."
The Company is engaged in certain transactions with companies and
partnerships in which Mr. Siracusano has an interest. See "Item 11. Compensation
Committee Interlocks and Insider Participation."
In connection with the Merger, Mr. Barnathan received options to purchase
approximately 30,000 shares of Common Stock from the Video stockholders at an
exercise price of $2.00 per share. See "Item 11. Compensation Committee
Interlocks and Insider Participation."
Mr. Fairbourne received options to purchase 60,000 shares of Common Stock
from Video's stockholders at an exercise price of $2.00 per share in replacement
of options to purchase approximately 22,245 shares of Video common stock at an
exercise price of $5.39 per share granted in June 1997 which were cancelled upon
consummation of the Merger.
In connection with acquisition of the business of Video Post Production,
Inc. in July 1992 from Video, MTE Co. assumed an obligation of Video to pay Mr.
Irwin the amount of $1,208,000. The obligation arose in 1989 when Mr. Irwin sold
his equity interest in Video back to Video for cash and notes and entered into a
five-year consulting agreement with Video. The balance of the debt owed to Mr.
Irwin in the amount of $408,000 was paid by the Company in August 1996.
17
<PAGE> 19
Video Dub, Inc., a former subsidiary of Video which is owned by the Video
stockholders, leases space at 240 Pegasus Avenue, Northvale, New Jersey, in
accordance with past practice, on a month-to-month basis at a rate of
approximately $11,000 per month. This lease was terminated on September 30,
1997. Further, the Company agreed to provide office services for up to six (6)
months after the Merger to certain former subsidiaries of Video which are owned
by the Video stockholders following the Merger for a monthly fee of $1,000,
provided such services are reasonably proportionate to such fee.
Certain Business Relationships
On August 27, 1997, IPL's stockholders voted to approve the Agreement and
Plan of Merger among Video, IPL and Messrs. Louis Siracusano, Arnold Ferolito
and Don Buck (the "Merger Agreement") pursuant to which Video merged with and
into IPL, with IPL being the surviving corporation, and the separate corporate
existence of Video ceased. At the effective time of the Merger, IPL's name was
changed to Video Services Corporation and the Nasdaq National Market symbol was
changed to "VSCX". Messrs. Louis Siracusano, Arnold Ferolito and Don Buck
collectively owned all of the stock of Video. As a result of the Merger, they
received in the aggregate 7,011,349 shares of Common Stock (plus an additional
212,096 shares of Common Stock which replaced an equal number of shares of IPL's
common stock then owned by Video which were canceled upon the Merger).
Individually, each of Messrs. Siracusano, Ferolito and Buck received 3,350,382,
3,350,382 and 525,681 shares of Common Stock, respectively, which accounted for
approximately 25.33%, 25.33% and 3.97%, respectively, of the total number of
shares of Common Stock outstanding. Approval of the Merger was sought by
solicitation of the IPL stockholders through a proxy statement dated July 25,
1996.
The representations, warranties and agreements of the parties contained in
the Merger Agreement survive for a period of fifteen (15) months following the
closing of the Merger; provided, however, that the representations and
warranties relating to environmental, employee benefit and tax matters and title
to Video common stock survive the closing for a period of three (3) years, plus
any extension of time with respect to employee benefit and/or tax matters agreed
to with the applicable governmental authorities. The indemnification obligations
of each of IPL on the one hand and Video and its stockholders on the other hand
as a result of a breach of their respective representations, warranties or
agreements generally will not exceed $5,000,000. No indemnification claim may be
made against any party unless and until the aggregate claims against such party
equals $350,000 and then only for claims in excess of such amount. The Merger
Agreement also provides for certain rights of set-off with respect to
indemnification claims. Video's stockholders have agreed to deposit in escrow
$6,250,000 in Common Stock (valued as of the closing of the Merger) under the
terms of the Losses Escrow Agreement in connection with their indemnification
obligations to the Company under the Merger Agreement and their indemnification
obligations to the Company are limited to the rights the Company has under this
escrow. Each stockholder of Video has the right to substitute cash for any
shares of Common Stock such stockholder so deposited in escrow based upon the
value of such deposited shares as of the closing of the Merger. No additional
deposit is required by Video's stockholders in the event of any decrease in the
value of the Common Stock so deposited in escrow.
18
<PAGE> 20
IBJ Schroder Bank & Trust Company acts as the escrow agent in connection with
this escrow. In addition, the Company has agreed to indemnify Video's
stockholders in connection with the lease between the Company and a partnership
owned by the Video stockholders, which indemnification obligations are not
subject to any of the foregoing limitations.
The Merger Agreement also provides that, from time to time after the
consummation of the Merger, and in any event at least semi-annually, the Audit
Committee of the Board will review the compliance of the Company and Video with
their respective representations and warranties contained in the Merger
Agreement and will report the results of such review to the Board, and, in
connection therewith, will seek such advice and retain such advisors (including,
without limitation, legal counsel and accountants) as it will determine to be
appropriate. Moreover, the Audit Committee of the Board will be responsible for
authorizing any action to be taken by the Company in respect of indemnification
claims by and against the Company.
[/R]
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<PAGE> 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) The consolidated financial statements, related notes
thereto and report of independent public accountants
required by Item 8 begin at page F-1 herein.
(2) The financial statement schedule appears on page F-29
herein.
(3) Exhibits:
Exhibit Number Exhibits
2.1* Acquisition Agreement dated as of December 23, 1993
among the Company, VSC Video Corporation, Waterfront
Communications Corporation, Martin Audio-Video
Corporation, Atlantic Satellite Communications, Inc.,
A.F. Associates, Inc. and Video Services Corporation.
2.2 Stock Purchase Agreement, dated as of May 4, 1995, by
and among the Company, The Post Edge, Inc. and all of
the stockholders of The Post Edge, Inc., including the
exhibits thereto but excluding the schedules thereto
(incorporated by reference to exhibit number 2.1
contained in the Company's Current Report on Form 8-K,
dated May 18, 1995).
2.3 Stock Purchase Agreement, dated as of April 25, 1995, by
and among the Company, The Big Picture Editorial, Inc.,
Even Time Ltd., BP Partnership, ET Partnership, BPET
Partnership, Barbara D'Ambrogio, David D'Ambrogio,
Gregory Letson, Michael Schenkein, Leonard Smalheiser,
Jane Stuart and Big Picture/Even Time Limited, including
the exhibits thereto but excluding the schedules thereto
(incorporated by reference to exhibit number 2.2
contained in the Company's Current Report on Form 8-K,
dated May 18, 1995).
2.4 Agreement and Plan of Merger, dated as of June 27, 1997,
by and among International Post Limited, Video Services
Corporation and Louis H. Siracusano, Arnold P. Ferolito
and Donald H. Buck (incorporated by reference to exhibit
number 10.57 contained in the Company's Current Report
on Form 8-K, dated July 7, 1997).
3.1 Certificate of Incorporation of the Company, as amended
(previously filed with Form 10-K for the fiscal year
ended July 31, 1997).
3.2+ By-Laws of the Company (previously filed with Form 10-K
for the fiscal year ended July 31, 1997).
4.1 Form of 4% Convertible Subordinated Note of the Company
(incorporated by reference to the exhibit of the same
number contained in the Company's Current Report on Form
8-K, dated May 18, 1995).
10.1*(M) Form of Employment Agreement between Martin Irwin
and the Company.
10.2*(M) Form of Employment Agreement between Jeffrey J.
Kaplan and the Company.
10.3*(M) Form of Employment Agreement between Adrien Macaluso
and the Company.
10.4*(M) Form of International Post Group Inc. Long-term
Incentive Plan, together with form of International Post
Group Inc. Stock Option Agreement.
10.5*(M) Form of International Post Group Inc. Restricted Share
Plan for Directors, together with form of Restricted
Share Agreement.
10.6* Form of Registration Rights Agreement among the Company,
Holdings, VSC, Martin Irwin, Jeffrey J. Kaplan, Adrien
Macaluso, Terrence A. Elkes and Kenneth F. Gorman.
10.7** Form of Lease Agreements between Audio Plus Video
and L.I.M.A. Partners.
10.8* Purchase Agreement, dated September 10, 1993, between
A.F. Associates, Inc. and MTE Co.
10.9+ Lease Agreements, dated as of June 30, 1993, between MTE
Co. and Nineteen New York Properties Limited
Partnership.
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<PAGE> 22
10.10+ Agreement of Lease, dated as of March 7, 1990, between
225 Realty Associates and VSC Post, together with First
Supplemental Agreement.
10.11+ Contribution Agreement, dated as of July 30, 1992,
between Holdings and VSC Post.
10.12* Forms of Promissory Notes made by Manhattan Transfer in
favor of Martin Irwin.
10.13+ Letter Agreement, dated February 22, 1993, between
Apollo and Holdings.
10.14+ Promissory Note, dated January 1, 1993, made by MTE Co.
in favor of Terrence A. Elkes and Kenneth F. Gorman.
10.15+ Security Agreement, dated as of January 1, 1993 among
MTE Co., Terrence A. Elkes and Kenneth F. Gorman.
10.16+ Agreement, dated as of July 1, 1993, among MTE Co.,
Terrence A. Elkes and Kenneth F. Gorman.
10.17+ Security Agreement, dated as of July 1, 1993, among MTE
Co., Terrence A. Elkes and Kenneth F. Gorman.
10.18** Promissory Note, dated July 31, 1992, made by MTE Co. in
favor of P.C. Leasing, a division of Phoenixcor, Inc.
10.19* Form of Services Agreement between VSC and Manhattan
Transfer.
10.20* Form of Services Agreement between VSC and Audio Plus
Video.
10.21* Form of Roll-Up and Exchange Agreement among Holdings,
VSC Video, Inc., Video Services Corporation, the Company
and Manhattan Transfer.
10.22**(M) Form of Stock Option Agreement among VSC, Holdings and
Martin Irwin.
10.23**(M) Form of Stock Option Agreement between the Company and
Jeffrey J. Kaplan.
10.24** Form of Settlement Agreement between Apollo and
Holdings.
10.25** Form of Services and Option Agreement between Holdings
and Kenneth F. Gorman.
10.26** Form of Services and Option Agreement between Holdings
and Terrence A. Elkes.
10.27** Form of Stock Option Agreement between VSC and Kenneth
F. Gorman.
10.28** Form of Stock Option Agreement between VSC and Terrence
A. Elkes.
10.29**(M) Form of Stock Option Agreement between the Company and
Kenneth F. Gorman.
10.30**(M) Form of Stock Option Agreement between the Company and
Terrence A. Elkes.
10.31** Consent and Authorization, dated December 23, 1993, by
Martin Irwin, Jeffrey J. Kaplan, Adrien Macaluso,
Terrence A. Elkes, Kenneth F. Gorman, VSC, the Company,
Holdings and Apollo.
10.32++(M) Employment Agreement, dated as of April 21, 1994,
between the Company and Daniel Rosen.
10.33++(M) Stock Option Agreement, dated as of April 21, 1994,
between the Company and Daniel Rosen.
10.34(M) Consulting Agreement, dated as of May 4, 1995, between
The Post Edge, Inc. and Michael Orsburn (incorporated by
reference to exhibit number 10.1 contained in the
Company's Current Report on Form 8-K, dated May 18,
1995).
10.35(M) Employment Agreement, dated as of May 4, 1995, among Big
Picture/Even Time Limited, the Company and Barbara
D'Ambrogio (incorporated by reference to exhibit number
10.2 contained in the Company's Current Report on Form
8-K, dated May 18, 1995).
10.36(M) Employment Agreement, dated as of May 4, 1995, among Big
Picture/Even Time Limited, the Company and David
D'Ambrogio (incorporated by reference to exhibit number
10.3 contained in the Company's Current Report on Form
8-K, dated May 18, 1995).
10.37(M) Employment Agreement, dated as of May 4, 1995, among Big
Picture/Even Time Limited, the Company and Gregory
Letson (incorporated by reference to exhibit number 10.4
contained in the Company's Current Report on Form 8-K,
dated May 18, 1995).
10.38(M) Employment Agreement, dated as of May 4, 1995, among Big
Picture/Even Time Limited, the Company and Michael
Schenkein (incorporated by reference to exhibit number
10.5 contained in the Company's Current Report on Form
8-K, dated May 18, 1995).
10.39(M) Employment Agreement, dated as of May 4, 1995, among Big
Picture/Even Time Limited, the Company and Leonard
Smalheiser (incorporated by reference to exhibit number
10.6 contained in the Company's Current Report on Form
8-K, dated May 18, 1995).
21
<PAGE> 23
10.40(M) Employment Agreement, dated as of May 4, 1995, among Big
Picture/Even Time Limited, the Company and Jane Stuart
(incorporated by reference to exhibit number 10.7
contained in the Company's Current Report on Form 8-K,
dated May 18, 1995).
10.41 Put/Call Agreement, dated as of May 4, 1995, between
Gregory Letson and the Company (incorporated by
reference to exhibit number 10.8 contained in the
Company's Current Report on Form 8-K, dated May 18,
1995).
10.42 Pledge Agreement, dated as of May 4, 1995, by and among
BP Partnership, ET Partnership, Barbara D'Ambrogio,
David D'Ambrogio, Michael Schenkein, Leonard Smalheiser,
Jane Stuart and the Company (incorporated by reference
to exhibit number 10.9 contained in the Company's
Current Report on Form 8-K, dated May 18, 1995).
10.43 Pledge Agreement, dated as of May 4, 1995, by and
between Gregory Letson and the Company (incorporated by
reference to exhibit number 10.10 contained in the
Company's Current Report on Form 8-K, dated May 18,
1995).
10.44 Escrow Agreement, dated as of May 4, 1995, by and among
ET Partnership, David D'Ambrogio, Barbara D'Ambrogio,
the Company and Cowan, Gold, DeBaets, Abrahams &
Sheppard, as Escrow Agent (incorporated by reference to
exhibit number 10.11 contained in the Company's Current
Report on Form 8-K, dated May 18, 1995).
10.45 Escrow Agreement, dated as of May 4, 1995, by and among
BP Partnership, Michael Schenkein, Leonard Smalheiser,
Jane Stuart, Gregory Letson, the Company and Cowan,
Gold, DeBaets, Abrahams & Sheppard, as Escrow Agent
(incorporated by reference to exhibit number 10.12
contained in the Company's Current Report on Form 8-K,
dated May 18, 1995).
10.46 Credit Agreement, dated as of May 4, 1995, by and among
the Company, The Bank of New York, in its capacity as a
Lender, as the Issuer and as the Agent, and Fleet Bank,
as a Lender (incorporated by reference to exhibit number
10.13 contained in the Company's Current Report on Form
8-K, dated May 18, 1995).
10.47 Security Agreement, dated as of May 4, 1995, by and
between the Company and The Bank of New York, as Agent
(incorporated by reference to exhibit number 10.14
contained in the Company's Current Report on Form 8-K,
dated May 18, 1995).
10.48 Guaranty, dated as of May 4, 1995, by and among the
Persons party thereto and The Bank of New York, as Agent
(incorporated by reference to exhibit number 10.15
contained in the Company's Current Report on Form 8-K,
dated May 18, 1995).
10.49*** Amendment No. 1 and Reallocation Agreement, dated as of
June 12, 1995, by and among The Bank of New York, Fleet
Bank, NatWest Bank N.A. and the Company, to the Credit
Agreement, dated as of May 4, 1995, by and among
International Post Limited, the Lenders party thereto,
and The Bank of New York, as the Issuer and as Agent.
10.50*** Form of Amendment No. 2, dated as of October 30, 1995,
to the Credit Agreement, dated as of May 4, 1995, by and
among the Company, the Lenders party thereto, and The
Bank of New York, as the Issuer and as Agent.
10.51*** Agreement, dated as of June 7, 1993, by and between MTV
Latin America, Inc. and The Post Edge, Inc.
10.52*** Agreement, dated as of December 9, 1993, by and between
Discovery Communications, Inc. and The Post Edge, Inc.,
and Amendment No. 1 thereto.
10.53+++ Amendment No. 3, dated as of November 30, 1995, to the
Credit Agreement, dated as of May 4, 1995, by and among
the Company, the Lenders party thereto and The Bank of
New York, as the Issuer and as Agent.
10.54+++ Amendment No. 4, dated as of October 3, 1996, to the
Credit Agreement, dated as of May 4, 1995, by and among
the Company, the Lenders party thereto and The Bank of
New York, as the Issuer and as Agent.
10.55+++ Amendment No. 1, dated as of September 15, 1995, to the
Agreement, dated as of June 7, 1993, by and between MTV
Latin America, Inc. and The Post Edge, Inc.
10.56+++ Assignment and Acceptance Agreement, dated as of August
22, 1996, by and between Fleet Bank, N.A. (formerly
known as NatWest Bank, N.A.) and KeyBank of New York.
22
<PAGE> 24
10.57 Voting Agreement, dated as of June 27, 1997, by and
among International Post Limited, Video Services
Corporation, Terrence A. Elkes, The Equitable Life
Assurance Society of the United States, Equitable Deal
Flow Fund, L.P., Louis H. Siracusano, Arnold P. Ferolito
and Donald H. Buck (incorporated by reference to exhibit
number 10.58 contained in the Company's Current Report
on Form 8-K, dated July 7, 1997).
10.58 Asset Purchase Agreement, dated as of January 22, 1997,
by and among Cognitive Communications, Inc., Susan
Wiener, Michael Rudnick and Cognitive Communications,
LLC (incorporated by reference to exhibit number 10.1
contained in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1997).
10.59 Agreement, dated as of January 22, 1997, by and among
the Company, Susan Wiener, Michael Rudnick, Cognitive
Communications, Inc. and David Leveen (incorporated by
reference to exhibit number 10.2 contained in the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.60(M) Employment Agreement, dated as of January 22, 1997, by
and among Cognitive Communications, LLC and Susan Wiener
(incorporated by reference to exhibit number 10.3
contained in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1997).
10.61(M) Employment Agreement, dated as of January 22, 1997, by
and among Cognitive Communications, LLC and Michael
Rudnick (incorporated by reference to exhibit number
10.4 contained in the Company's Quarterly Report on Form
10-Q for the quarterly period ended January 31, 1997).
10.62(M) Employment Agreement, dated as of January 22, 1997, by
and among Cognitive Communications, LLC and David Leveen
(incorporated by reference to exhibit number 10.5
contained in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1997).
10.63 Put Agreement, dated as of January 22, 1997, by and
among Cognitive Communications, LLC, the Company, Susan
Wiener, Michael Rudnick and David Leveen (incorporated
by reference to exhibit number 10.6 contained in the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.64 Sale Option Agreement, dated as of January 22, 1997, by
and among Cognitive Communications, LLC and Susan Wiener
(incorporated by reference to exhibit number 10.7
contained in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1997).
10.65 Sale Option Agreement, dated as of January 22, 1997, by
and among Cognitive Communications, LLC and Michael
Rudnick (incorporated by reference to exhibit number
10.8 contained in the Company's Quarterly Report on Form
10-Q for the quarterly period ended January 31, 1997).
10.66 Sale Option Agreement, dated as of January 22, 1997, by
and among Cognitive Communications, LLC and David Leveen
(incorporated by reference to exhibit number 10.9
contained in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1997).
10.67(M) Incentive Compensation Agreement, dated as of January
22, 1997, by and among Cognitive Communications, LLC,
Susan Wiener, Michael Rudnick and David Leveen
(incorporated by reference to exhibit number 10.10
contained in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1997).
10.68(M) Form of Incentive Option Agreement, undated, by and
between Cognitive Communications, LLC and Optionee
(incorporated by reference to exhibit number 10.11
contained in the Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31, 1997).
10.69(M) Consulting Agreement, dated February 15, 1997, by and
among the Company and Jeffrey J. Kaplan (incorporated by
reference to exhibit number 10.12 contained in the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
23
<PAGE> 25
10.70 Stock Resale Agreement, dated as of August 26, 1997, by
and among the Company, Louis H. Siracusano, Donald H.
Buck and Arnold P. Ferolito (previously filed with Form
10-K for the fiscal year ended July 31, 1997).
10.71 Registration Rights Agreement, dated as of August 26,
1997, by and among the Company, Louis H. Siracusano,
Donald H. Buck and Arnold P. Ferolito (previously filed
with Form 10-K for the fiscal year ended July 31, 1997).
10.72(M) Employment Agreement, dated as of August 26, 1997, by
and between the Company and Louis H. Siracusano
(previously filed with Form 10-K for the fiscal year
ended July 31, 1997).
10.73(M) Employment Agreement, dated as of August 26, 1997, by
and between the Company and Donald H. Buck (previously
filed with Form 10-K for the fiscal year ended July 31,
1997).
10.74 Losses Escrow Agreement, dated as of August 26, 1997, by
and among the Company, Louis H. Siracusano, Donald H.
Buck, Arnold P. Ferolito and IBJ Schroder Bank & Trust
Company (previously filed with Form 10-K for the fiscal
year ended July 31, 1997).
10.75(M) Agreement, dated as of August 26, 1997, by and between
the Company and Martin Irwin (previously filed with Form
10-K for the fiscal year ended July 31, 1997).
10.76(M) Agreement, dated as of August 26, 1997, by and between
the Company and Arnold P. Ferolito (previously filed
with Form 10-K for the fiscal year ended July 31, 1997).
10.77(M) Termination of employment agreement, dated as of August
25, 1997, by and between the Company and Adrien
Macaluso.
10.78(M) Letter Agreement, dated as of October 17, 1997, by and
between the Company and Steven G. Crane (incorporated by
reference to exhibit number 10.78 contained in the
Company's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997).
10.79(M) Agreement, dated as of June 1, 1995, by and between the
Company and Kenneth D. Lorber.
10.80 1997 Long Term Incentive Plan (incorporated by
reference to Appendix D to the Registrant's definitive
Proxy Statement with respect to its August 27, 1997
special meeting of stockholders).
16.1 Arthur Andersen LLP letter re change in certifying
accountant (incorporated by reference to the exhibit of
the same number contained in the Company's Current
Report on Form 8-K, dated September 4, 1997).
21.1 Subsidiaries of the Company (previously filed with Form
10-K for the fiscal year ended July 31, 1997).
23.1 Consent of Arthur Andersen LLP (previously filed with
Form 10-K for the fiscal year ended July 31, 1997).
23.2 Consent of Ernst & Young LLP (previously filed with Form
10-K for the fiscal year ended July 31, 1997).
27 Financial Data Schedule, which is submitted
electronically to the Securities and Exchange Commission
for information purposes only and not filed (see Form
10-K for the fiscal year ended July 31, 1997).
- ----------
* Incorporated by reference to the exhibit of the same number contained in
Amendment No. 4 to IPL's Registration Statement on Form S-1 (the
"Registration Statement"), filed with the Securities and Exchange
Commission (the "SEC") on February 4, 1994.
+ Incorporated by reference to the exhibit of the same number contained in
Amendment No. 1 to IPL's Registration Statement filed with the SEC on
October 21, 1993.
** Incorporated by reference to the exhibit of the same number contained in
Amendment No. 3 to IPL's Registration Statement filed with the SEC on
January 10, 1994.
++ Incorporated by reference to the exhibit of the same number contained in
IPL's Annual Report on Form 10-K for the fiscal year ended July 31, 1994.
*** Incorporated by reference to the exhibit of the same number contained in
IPL's Annual Report on Form 10-K for the fiscal year ended July 31, 1995.
24
<PAGE> 26
+++ Incorporated by reference to the exhibit of the same number contained in
IPL's Annual Report on Form 10-K for the fiscal year ended July 31, 1996.
(M) Management contract or compensatory plan or arrangement.
- ----------
(b) On July 8, 1997, IPL filed a Current Report on Form 8-K in respect of the
execution on June 27, 1997 of the Agreement and Plan of Merger, dated as
of June 27, 1997, by and among IPL, Video and Louis H. Siracusano, Arnold
P. Ferolito and Donald H. Buck, and the Voting Agreement, dated as of June
27, 1997, by and among IPL, Video, Terrence A. Elkes, The Equitable Life
Assurance Society of the United States, Equitable Deal Flow Fund, L.P.,
Louis H. Siracusano, Arnold P. Ferolito and Donald H. Buck.
(c) See Item 14(a)(3) above.
(d) Financial Statement Schedule.
Schedule II - Valuation and Qualifying Accounts.
25
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: November 26, 1997 VIDEO SERVICES CORPORATION,
formerly known as International Post Limited
By: /s/ Louis H. Siracusano
Name: Louis H. Siracusano
Title: President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person on behalf of the registrant
and in the capacities and on the dates indicated.
Name and Signature Title Date
- ------------------ ----- ----
/s/ Louis H. Siracusano President, Chief Executive 11/26/97
- --------------------------- Officer and Director
Louis H. Siracusano (Principal Executive Officer)
/s/ Michael E. Fairbourne Vice President - Administration 11/26/97
- --------------------------- (Principal Financial and
Michael E. Fairbourne Accounting Officer)
/s/ Terrence A. Elkes Chairman of the Board of 11/26/97
- --------------------------- Directors
Terrence A. Elkes
/s/ Robert H. Alter Director 11/26/97
- ---------------------------
Robert H. Alter
/s/ Julius Barnathan Director 11/26/97
- ---------------------------
Julius Barnathan
/s/ Martin Irwin Director 11/26/97
- ---------------------------
Martin Irwin
26
<PAGE> 28
/s/ Frank Stillo Director 11/26/97
- ---------------------------
Frank Stillo
/s/ Raymond L. Steele Director 11/26/97
- ---------------------------
Raymond L. Steele
27
<PAGE> 29
EXHIBIT INDEX
Sequentially
Numbered
Exhibit Number Exhibits Page
2.1* Acquisition Agreement dated as of December
23, 1993 among the Company, VSC Video
Corporation, Waterfront Communications
Corporation, Martin Audio-Video Corporation,
Atlantic Satellite Communications, Inc.,
A.F. Associates, Inc. and Video Services
Corporation.
2.2 Stock Purchase Agreement, dated as of May 4,
1995, by and among the Company, The Post
Edge, Inc. and all of the stockholders of
The Post Edge, Inc., including the exhibits
thereto but excluding the schedules thereto
(incorporated by reference to exhibit number
2.1 contained in the Company's Current
Report on Form 8-K, dated May 18, 1995).
2.3 Stock Purchase Agreement, dated as of April
25, 1995, by and among the Company, The Big
Picture Editorial, Inc., Even Time Ltd., BP
Partnership, ET Partnership, BPET
Partnership, Barbara D'Ambrogio, David
D'Ambrogio, Gregory Letson, Michael
Schenkein, Leonard Smalheiser, Jane Stuart
and Big Picture/Even Time Limited, including
the exhibits thereto but excluding the
schedules thereto (incorporated by reference
to exhibit number 2.2 contained in the
Company's Current Report on Form 8-K, dated
May 18, 1995).
2.4 Agreement and Plan of Merger, dated as of
June 27, 1997, by and among International
Post Limited, Video Services Corporation and
Louis H. Siracusano, Arnold P. Ferolito and
Donald H. Buck (incorporated by reference to
exhibit number 10.57 contained in the
Company's Current Report on Form 8-K, dated
July 7, 1997).
3.1 Certificate of Incorporation of the Company,
as amended (previously filed with Form 10-K
for the fiscal year ended July 31, 1997).
3.2+ By-Laws of the Company (previously filed
with Form 10-K for the fiscal year ended
July 31, 1997).
4.1 Form of 4% Convertible Subordinated Note of
the Company (incorporated by reference to
the exhibit of the same number contained in
the Company's Current Report on Form 8-K,
dated May 18, 1995).
10.1* (M) Form of Employment Agreement between Martin
Irwin and the Company.
10.2* (M) Form of Employment Agreement between Jeffrey
J. Kaplan and the Company.
10.3* (M) Form of Employment Agreement between Adrien
Macaluso and the Company.
10.4* (M) Form of International Post Group Inc.
Long-term Incentive Plan, together with form
of International Post Group Inc. Stock
Option Agreement.
10.5* (M) Form of International Post Group Inc.
Restricted Share Plan for Directors,
together with form of Restricted Share
Agreement.
10.6* Form of Registration Rights Agreement among
the Company, Holdings, VSC, Martin Irwin,
Jeffrey J. Kaplan, Adrien Macaluso, Terrence
A. Elkes and Kenneth F. Gorman.
10.7** Form of Lease Agreements between Audio Plus
Video and L.I.M.A. Partners.
10.8* Purchase Agreement, dated September 10,
1993, between A.F. Associates, Inc. and MTE
Co.
10.9+ Lease Agreements, dated as of June 30, 1993,
between MTE Co. and Nineteen New York
Properties Limited Partnership.
10.10+ Agreement of Lease, dated as of March 7,
1990, between 225 Realty Associates and VSC
Post, together with First Supplemental
Agreement.
28
<PAGE> 30
10.11+ Contribution Agreement, dated as of July 30,
1992, between Holdings and VSC Post.
10.12* Forms of Promissory Notes made by Manhattan
Transfer in favor of Martin Irwin.
10.13+ Letter Agreement, dated February 22, 1993,
between Apollo and Holdings.
10.14+ Promissory Note, dated January 1, 1993, made
by MTE Co. in favor of Terrence A. Elkes and
Kenneth F. Gorman.
10.15+ Security Agreement, dated as of January 1,
1993 among MTE Co., Terrence A. Elkes and
Kenneth F. Gorman.
10.16+ Agreement, dated as of July 1, 1993, among
MTE Co., Terrence A. Elkes and Kenneth F.
Gorman.
10.17+ Security Agreement, dated as of July 1,
1993, among MTE Co., Terrence A. Elkes and
Kenneth F. Gorman.
10.18** Promissory Note, dated July 31, 1992, made
by MTE Co. in favor of P.C. Leasing, a
division of Phoenixcor, Inc.
10.19* Form of Services Agreement between VSC and
Manhattan Transfer.
10.20* Form of Services Agreement between VSC and
Audio Plus Video.
10.21* Form of Roll-Up and Exchange Agreement among
Holdings, VSC Video, Inc., Video Services
Corporation, the Company and Manhattan
Transfer.
10.22** (M) Form of Stock Option Agreement among VSC,
Holdings and Martin Irwin.
10.23** (M) Form of Stock Option Agreement between the
Company and Jeffrey J. Kaplan.
10.24** Form of Settlement Agreement between Apollo
and Holdings.
10.25** Form of Services and Option Agreement
between Holdings and Kenneth F. Gorman.
10.26** Form of Services and Option Agreement
between Holdings and Terrence A. Elkes.
10.27** Form of Stock Option Agreement between VSC
and Terrence A. Elkes.
10.29** (M) Form of Stock Option Agreement between the
Company and Kenneth F. Gorman.
10.30** (M) Form of Stock Option Agreement between the
Company and Terrence A. Elkes.
10.31** Consent and Authorization, dated December
23, 1993, by Martin Irwin, Jeffrey J.
Kaplan, Adrien Macaluso, Terrence A. Elkes,
Kenneth F. Gorman, VSC, the Company,
Holdings and Apollo.
10.32++ (M) Employment Agreement, dated as of April 21,
1994, between the Company and Daniel Rosen.
10.33++ (M) Stock Option Agreement, dated as of April
21, 1994, between the Company and Daniel
Rosen.
10.34 (M) Consulting Agreement, dated as of May 4,
1995, between The Post Edge, Inc. and
Michael Orsburn (incorporated by reference
to exhibit number 10.1 contained in the
Company's Current Report on Form 8-K, dated
May 18, 1995).
10.35 (M) Employment Agreement, dated as of May 4,
1995, among Big Picture/Even Time Limited,
the Company and Barbara D'Ambrogio
(incorporated by reference to exhibit number
10.2 contained in the Company's Current
Report on Form 8-K, dated May 18, 1995).
10.36 (M) Employment Agreement, dated as of May 4,
1995, among Big Picture/Even Time Limited,
the Company and David D'Ambrogio
(incorporated by reference to exhibit number
10.3 contained in the Company's Current
Report on Form 8-K, dated May 18, 1995).
10.37 (M) Employment Agreement, dated as of May 4,
1995, among Big Picture/Even Time Limited,
the Company and Gregory Letson (incorporated
by reference to exhibit number 10.4
contained in the Company's Current Report on
Form 8-K, dated May 18, 1995).
10.38 (M) Employment Agreement, dated as of May 4,
1995, among Big Picture/Even Time Limited,
the Company and Michael Schenkein
(incorporated by
29
<PAGE> 31
reference to exhibit number 10.5 contained
in the Company's Current Report on Form 8-K,
dated May 18, 1995).
10.39 (M) Employment Agreement, dated as of May 4,
1995, among Big Picture/Even Time Limited,
the Company and Leonard Smalheiser
(incorporated by reference to exhibit
number 10.6 contained in the Company's
Current Report on Form 8-K, dated May 18,
1995).
10.40 (M) Employment Agreement, dated as of May 4,
1995, among Big Picture/Even Time Limited,
the Company and Jane Stuart (incorporated
by reference to exhibit number 10.7
contained in the Company's Current Report
on Form 8- K, dated May 18, 1995).
10.41 Put/Call Agreement, dated as of May 4,
1995, between Gregory Letson and the
Company (incorporated by reference to
exhibit number 10.8 contained in the
Company's Current Report on Form 8-K,
dated May 18, 1995).
10.42 Pledge Agreement, dated as of May 4, 1995,
by and among BP Partnership, ET
Partnership, Barbara D'Ambrogio, David
D'Ambrogio, Michael Schenkein, Leonard
Smalheiser, Jane Stuart and the Company
(incorporated by reference to exhibit
number 10.9 contained in the Company's
Current Report on Form 8-K, dated May 18,
1995).
10.43 Pledge Agreement, dated as of May 4, 1995,
by and between Gregory Letson and the
Company (incorporated by reference to
exhibit number 10.10 contained in the
Company's Current Report on Form 8-K,
dated May 18, 1995).
10.44 Escrow Agreement, dated as of May 4, 1995,
by and among ET Partnership, David
D'Ambrogio, Barbara D'Ambrogio, the
Company and Cowan, Gold, DeBaets, Abrahams
& Sheppard, as Escrow Agent (incorporated
by reference to exhibit number 10.11
contained in the Company's Current Report
on Form 8-K, dated May 18, 1995).
10.45 Escrow Agreement, dated as of May 4, 1995,
by and among BP Partnership, Michael
Schenkein, Leonard Smalheiser, Jane
Stuart, Gregory Letson, the Company and
Cowan, Gold, DeBaets, Abrahams & Sheppard,
as Escrow Agent (incorporated by reference
to exhibit number 10.12 contained in the
Company's Current Report on Form 8-K,
dated May 18, 1995).
10.46 Credit Agreement, dated as of May 4, 1995,
by and among the Company, The Bank of New
York, in its capacity as a Lender, as the
Issuer and as the Agent, and Fleet Bank,
as a Lender (incorporated by reference to
exhibit number 10.13 contained in the
Company's Current Report on Form 8-K,
dated May 18, 1995).
10.47 Security Agreement, dated as of May 4,
1995, by and between the Company and The
Bank of New York, as Agent (incorporated
by reference to exhibit number 10.14
contained in the Company's Current Report
on Form 8-K, dated May 18, 1995).
10.48 Guaranty, dated as of May 4, 1995, by and
among the Persons party thereto and The
Bank of New York, as Agent (incorporated
by reference to exhibit number 10.15
contained in the Company's Current Report
on Form 8-K, dated May 18, 1995).
10.49*** Amendment No. 1 and Reallocation
Agreement, dated as of June 12, 1995, by
and among The Bank of New York, Fleet
Bank, NatWest Bank N.A. and the Company,
to the Credit Agreement, date1995, byMay
4, and among International Post Limited,
the Lenders party thereto, and The Bank of
New York, as the Issuer and as Agent.
10.50*** Form of Amendment No. 2, dated as of
October 30, 1995, to the Credit Agreement,
dated as of May 4, 1995, by and among the
Company, the Lenders party thereto, and
The Bank of New York, as the Issuer and as
Agent.
10.51*** Agreement, dated as of June 7, 1993, by
and between MTV Latin America, Inc. and
The Post Edge, Inc.
30
<PAGE> 32
10.52*** Agreement, dated as of December 9, 1993,
by and between Discovery Communications,
Inc. and The Post Edge, Inc., and
Amendment No. 1 thereto.
10.53+++ Amendment No. 3, dated as of November 30,
1995, to the Credit Agreement, dated as of
May 4, 1995, by and among the Company, the
Lenders party thereto and The Bank of New
York, as the Issuer and as Agent.
10.54+++ Amendment No. 4, dated as of October 3,
1996, to the Credit Agreement, dated as of
May 4, 1995, by and among the Company, the
Lenders party thereto and The Bank of New
York, as the Issuer and as Agent.
10.55+++ Amendment No. 1, dated as of September 15,
1995, to the Agreement, dated as of June
7, 1993, by and between MTV Latin America,
Inc. and The Post Edge, Inc.
10.56+++ Assignment and Acceptance Agreement, dated
as of August 22, 1996, by and between
Fleet Bank, N.A. (formerly known as
NatWest Bank, N.A.) and KeyBank of New
York.
10.57 Voting Agreement, dated as of June 27,
1997, by and among International Post
Limited, Video Services Corporation,
Terrence A. Elkes, The Equitable Life
Assurance Society of the United States,
Equitable Deal Flow Fund, L.P., Louis H.
Siracusano, Arnold P. Ferolito and Donald
H. Buck (incorporated by reference to
exhibit number 10.58 contained in the
Company's Current Report on Form 8-K,
dated July 7, 1997).
10.58 Asset Purchase Agreement, dated as of
January 22, 1997, by and among Cognitive
Communications, Inc., Susan Wiener,
Michael Rudnick and Cognitive
Communications, LLC (incorporated by
reference to exhibit number 10.1 contained
in the Company's Quarterly Report on Form
10-Q for the quarterly period ended
January 31, 1997).
10.59 Agreement, dated as of January 22, 1997,
by and among the Company, Susan Wiener,
Michael Rudnick, Cognitive Communications,
Inc. and David Leveen (incorporated by
reference to exhibit number 10.2 contained
in the Company's Quarterly Report on Form
10-Q for the quarterly period ended
January 31, 1997).
10.60 (M) Employment Agreement, dated as of January
22, 1997, by and among Cognitive
Communications, LLC and Susan Wiener
(incorporated by reference to exhibit
number 10.3 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.61 (M) Employment Agreement, dated as of January
22, 1997, by and among Cognitive
Communications, LLC and Michael Rudnick
(incorporated by reference to exhibit
number 10.4 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.62 (M) Employment Agreement, dated as of January
22, 1997, by and among Cognitive
Communications, LLC and David Leveen
(incorporated by reference to exhibit
number 10.5 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.63 Put Agreement, dated as of January 22,
1997, by and among Cognitive
Communications, LLC, the Company, Susan
Wiener, Michael Rudnick and David Leveen
(incorporated by reference to exhibit
number 10.6 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.64 Sale Option Agreement, dated as of January
22, 1997, by and among Cognitive
Communications, LLC and Susan Wiener
(incorporated by reference to exhibit
number 10.7 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.65 Sale Option Agreement, dated as of January
22, 1997, by and among Cognitive
Communications, LLC and Michael Rudnick
(incorporated by reference to exhibit
number 10.8 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
31
<PAGE> 33
10.66 Sale Option Agreement, dated as of January
22, 1997, by and among Cognitive
Communications, LLC and David Leveen
(incorporated by reference to exhibit
number 10.9 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.67 (M) Incentive Compensation Agreement, dated as
of January 22, 1997, by and among
Cognitive Communications, LLC, Susan
Wiener, Michael Rudnick and David Leveen
(incorporated by reference to exhibit
number 10.10 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.68 (M) Form of Incentive Option Agreement,
undated, by and between Cognitive
Communications, LLC and Optionee
(incorporated by reference to exhibit
number 10.11 contained in the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended January 31, 1997).
10.69 (M) Consulting Agreement, dated February 15,
1997, by and among the Company and Jeffrey
J. Kaplan (incorporated by reference to
exhibit number 10.12 contained in the
Company's Quarterly Report on Form 10-Q
for the quarterly period ended January 31,
1997).
10.70 Stock Resale Agreement, dated as of August
26, 1997, by and among the Company, Louis
H. Siracusano, Donald H. Buck and Arnold
P. Ferolito (previously filed with Form
10-K for the fiscal year ended July 31,
1997).
10.71 Registration Rights Agreement, dated as of
August 26, 1997, by and among the Company,
Louis H. Siracusano, Donald H. Buck and
Arnold P. Ferolito (previously filed with
Form 10-K for the fiscal year ended July
31, 1997).
10.72 (M) Employment Agreement, dated as of August
26, 1997, by and between the Company and
Louis H. Siracusano (previously filed with
Form 10-K for the fiscal year ended July
31, 1997).
10.73 (M) Employment Agreement, dated as of August
26, 1997, by and between the Company and
Donald H. Buck (previously filed with Form
10-K for the fiscal year ended July 31,
1997).
10.74 Losses Escrow Agreement, dated as of
August 26, 1997, by and among the Company,
Louis H. Siracusano, Donald H. Buck,
Arnold P. Ferolito and IBJ Schroder Bank &
Trust Company (previously filed with Form
10-K for the fiscal year ended July 31,
1997).
10.75 (M) Agreement, dated as of August 26, 1997, by
and between the Company and Martin Irwin
(previously filed with Form 10-K for the
fiscal year ended July 31, 1997).
10.76 (M) Agreement, dated as of August 26, 1997, by
and between the Company and Arnold P.
Ferolito (previously filed with Form 10-K
for the fiscal year ended July 31, 1997).
10.77 (M) Termination of employment agreement, dated
as of August 25, 1997, by and between the
Company and Adrien Macaluso.
10.78 (M) Letter Agreement, dated as of October 17,
1997, by and between the Company and
Steven G. Crane (incorporated by reference
to exhibit number 10.78 contained in the
Company's Quarterly Report on Form 10-Q
for the quarterly period ended September
30, 1997).
10.79 (M) Agreement, dated as of June 1, 1995, by
and between the Company and Kenneth D.
Lorber.
10.80 1997 Long Term Incentive Plan (incorporated
by reference to Appendix D to the Registrant's
definitive Proxy Statement with respect to its
August 27, 1997 Special Meeting of stockholders).
16.1 Arthur Andersen LLP letter re: change in
certifying accountant (incorporated by
reference to the exhibit of the same
number contained in the Company's Current
Report on Form 8-K, dated September 4,
1997).
21.1 Subsidiaries of the Company (previously
filed with Form 10-K for the fiscal year
ended July 31, 1997).
23.1 Consent of Arthur Andersen LLP (previously
filed with Form 10-K for the fiscal year
ended July 31, 1997).
23.2 Consent of Ernst & Young LLP (previously
filed with Form 10-K for the fiscal year
ended July 31, 1997).
32
<PAGE> 34
27 Financial Data Schedule, which is
submitted electronically to the Securities
and Exchange Commission for information
purposes only and not filed (see Form 10-K
for the fiscal year ended July 31, 1997).
- -------
* Incorporated by reference to the exhibit of the same number contained in
Amendment No. 4 to IPL's Registration Statement on Form S-1 (the
"Registration Statement"), filed with the Securities and Exchange
Commission (the "SEC") on February 4, 1994.
+ Incorporated by reference to the exhibit of the same number contained in
Amendment No. 1 to IPL's Registration Statement filed with the SEC on
October 21, 1993.
** Incorporated by reference to the exhibit of the same number contained in
Amendment No. 3 to IPL's Registration Statement filed with the SEC on
January 10, 1994.
++ Incorporated by reference to the exhibit of the same number contained in
IPL's Annual Report on Form 10-K for the fiscal year ended July 31, 1994.
*** Incorporated by reference to the exhibit of the same number contained in
IPL's Annual Report on Form 10-K for the fiscal year ended July 31, 1995.
+++ Incorporated by reference to the exhibit of the same number contained in
IPL's Annual Report on Form 10-K for the fiscal year ended July 31, 1996.
(M) Management contract or compensatory plan or arrangement.
33
<PAGE> 1
Exhibit 10.77
International Post Limited
545 Fifth Avenue
New York, New York
August 25, 1997
Mr. Adrien Macaluso
611 Baylor Avenue
Rivervale, New Jersey 07675
Dear Andre:
This letter agreement ("Letter Agreement") sets forth the terms
mutually agreed to by yourself and the undersigned regarding your separation
from International Post Limited ("IPL") and Audio Plus Video International, Inc.
("Audio"). The undersigned agree that this Letter Agreement will modify and
become a part of your Employment Agreement, dated February 15, 1994 ("Employment
Agreement").
Your employment with Audio will cease effective August 22, 1997.
Audio will continue to pay your base salary through March 18, 1998, payable per
Audio's regular payroll schedule. You will continue through March 18, 1998 to
abide by all of the terms and conditions of your Employment Agreement as
modified herein, including but not limited to Article V thereof. Effective March
18, 1998, you will be released from any and all duties and obligations arising
under your Employment Agreement, except for Sections 5.01 and 5.02(e)
specifically, which will remain in effect through May 30, 1998. This release
will not cover any breach of the Employment Agreement which occurs prior to
March 18, 1998. In the event of any such breach, Audio will provide notice via
certified mail/return receipt requested to you at the above address and via
facsimile to Joseph Noto, Esq., your attorney, setting forth the specific
breach. You will have ten days from receipt of such notice to cure such breach.
As provided in Section 6.09 of the Employment Agreement, any and all issues will
be governed by New York law.
You may be entitled to a bonus for 1997. In accordance with its
regular business practices and your Employment Agreement, Audio will review its
audited financial results for the fiscal year ending July 31, 1997 to determine
any bonus. Audio will pay you for three weeks unused, accrued vacation time
within 10 business days of your signing this Letter Agreement.
Audio will reimburse you for any expenses incurred prior to August
22, 1997 which are promptly submitted to the Company and which are related to
the business activities of the Company. Effective August 22, 1997, you will not
be entitled to any Company benefits or
<PAGE> 2
Mr. Adrien Macaluso -2 August 25, 1997
benefit programs. Audio will continue to pay for your health insurance coverage
through December 31, 1997, unless you become covered by another insurance plan
prior to that date. You hereby agree to inform Audio of such coverage within ten
days of its effective date.
Any stock options that you may have will be determined according to
the International Post Limited ("IPL") Long Term Incentive Plan. You will return
your Company car and cellular phone and all other Company owned property to Mr.
Martin Irwin on August 22, 1997.
By this Letter Agreement, you shall resign as an officer of IPL and
Audio effective August 22, 1997. The signature of the undersigned constitutes
acceptance thereof. Your signature below also constitutes acceptance of the
terms set forth above. You further agree that you are not owed any other
payments by Audio or its successor company. Louis Siracusano has also signed
this Letter Agreement as President-designee of IPL upon the closing on August
26, 1997 of the merger between IPL and Video Services Corporation.
Very truly yours,
/s/ Martin Irwin /s/ Louis Siracusano
- --------------------------- ----------------------------------------
Martin Irwin, President Louis Siracusano, President-designee
Accepted to and Agreed,
/s/ Adrien Macaluso
- ---------------------------
Adrien "Andre" Macaluso Dated: 9/8/97
<PAGE> 3
International Post Limited
545 Fifth Avenue
New York, New York
September 17, 1997
Mr. Adrien Macaluso
611 Baylor Avenue
Rivervale, New Jersey 07675
Re: Adrien Macaluso ("Macaluso") Employment Agreement
("Employment Agreement") with International Post Limited, Inc. ("IPL");
Life Insurance Letter Agreement to modification to Employment Agreement
Dear Andre:
The undersigned entered into a Separation Letter Agreement ("Separation
Agreement") simultaneously with the execution of this Life Insurance Letter
Agreement (the "Insurance Agreement").
The purpose and intent of this Insurance Agreement is to clarify the next
to the last sentences of the last paragraph of the Separation Agreement
regarding any monies owed to Andre Adrien Macaluso ("Macaluso") by the
undersigned.
There is presently in effect a certain whole life insurance policy with
Massachusetts Mutual Life Insurance Company, ("Mass Mutual"), policy #7 742 440,
(the "Policy") with Macaluso as the Insured. Audio Plus Video International,
Inc. and Macaluso had previously entered into a Split Dollar Agreement on July
13, 1994, which among other things provided for the manner of the cash value
distribution upon the occurrence of certain events.
The undersigned hereby agree that Mass Mutual upon receipt from Audio Plus
Video International, Inc. of a duly executed Release of Assignment for the
Policy may issue a check payable to Audio Plus Video International, Inc. in the
amount of $22,181.61 representing the contribution of premium payments made by
it from July 31, 1994 through this date. Mass Mutual may rely on this Letter
Agreement to issue such check to Audio Plus Video. Pending such payment and
Release of Assignment, both parties agree that the Policy will remain in full
force and effect. Upon receipt of payment, Audio Plus Video will have no lien,
encumbrance, or claim upon the Policy and Macaluso will make any decisions
regarding the Policy.
By placing my signature below indicates my acceptance on behalf of IPL to
the terms, conditions and provisions as forth herein this Letter Agreement.
<PAGE> 4
Your signature below also indicates acceptance of this Letter Agreement.
Very truly yours,
/s/ Louis H. Siracusano
--------------------------------
Louis H. Siracusano, President
Confirmed and Agreed,
/s/ Adrien Macaluso
- -------------------------
Adrien "Andre" Macaluso, Dated: 9/17/97
<PAGE> 1
Exhibit 10.79
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of June 1, 1995, by and between The Post Edge, Inc., a
Florida corporation with its principal office at 2040 Sherman Street, Hollywood,
Florida 33140 (the "Company"), and Kenneth D. Lorber, with an address at 4235
Alton Road, Miami Beach, Florida 33140 (the "Employee").
INTRODUCTION
The parties hereto desire to provide for the employment of the Employee
with the Company. In order to accomplish such purpose, and in consideration of
the terms, covenants and conditions hereinafter set forth, the parties hereto
hereby enter into this employment agreement.
ARTICLE I
EMPLOYMENT; TERM; DUTIES
1.1 Employment. Upon the terms and conditions hereinafter set forth, the
Company hereby employs the Employee, and the Employee hereby accepts employment,
as President of the Company.
1.2 Term. Unless sooner terminated as provided in Article IV hereof, the
Employee's employment hereunder shall be for a term commencing on the date
hereof and ending on the later of (i) the close of business on May 31, 1998 or
(ii) the date which is twelve months after either party hereto gives written
notice to the other party that it desires to terminate this Agreement. The
actual term of employment hereunder, giving effect to any early termination of
employment under Article IV hereof, is hereinafter referred to as the "Term."
1.3 Duties. During the Term, the Employee shall perform such executive
duties for the Company and for its subsidiaries and affiliates, consistent with
his position hereunder, as may be assigned to him from time to time by the Board
of Directors of the Company. The Employee shall devote his entire business time,
attention and energies to the performance of his duties hereunder.
1.4 Exclusive Agreement. The Employee represents and warrants to the
Company that he is not a party to any agreement or arrangement, whether written
or oral, in effect which would prevent the Employee from rendering service to
the Company during the Term or which would create any conflict or which involve
any business relationship with customers, suppliers or competitors of the
Company.
1
<PAGE> 2
ARTICLE II
COMPENSATION
2.1 Base Salary. For all services rendered by the Employee hereunder and
all covenants and conditions undertaken by him pursuant to this Agreement, the
Company shall pay the Employee an annual base salary ("Base Salary") during the
Term or the Scheduled Term (as defined in Section 4.2 hereof), as the case may
be, in equal bi-weekly installments, of $115,000. The Base Salary payable to the
Employee hereunder shall be reviewed annually, and may be increased, by the
Compensation Committee of the Board of Directors of International Post Limited,
the Company's parent ("IPL").
If the first or last month of the Term or the Scheduled Term, as the
case may be, is not a full calendar month, then any calculation of Base Salary
for such Period shall be prorated for the number of days the Employee was
employed in such months.
2.2 Incentive Compensation. In addition to the Base Salary provided for
above, commencing with the 1996 fiscal year of the Company (which shall be
August 1 to July 31), the Employee shall be given an opportunity to earn annual
cash bonus payments (the "Incentive Compensation") based on the Company
achieving certain financial targets for each fiscal year during the Term or the
Scheduled Term, as the case may be. The Incentive Compensation for each fiscal
year shall be a percentage of the Base Salary based on the EBITDA (as
hereinafter defined) of the Company with respect to any fiscal year of the
Company ending during the Term or the Scheduled Term, as the case may be,
determined as follows:
% Achievement of Base Incentive Compensation as
EBITDA (as hereinafter defined) % of Base Salary
Under 90% 0
90% 20%
91% 21%
92% 22%
93% 23%
94% 24%
95% 25%
96% 26%
97% 27%
2
<PAGE> 3
98% 28%
99% 29%
100% or more 30%, plus an additional 2% of Base Salary for
each additional 1% increase in EBITDA over 100%
of the Base EBITDA
The Incentive Compensation for each fiscal year during the Term or
the Scheduled Term, as the case may be, shall be due and payable within 10 days
after receipt by IPL from its auditors of the final consolidated audited
financial statements of IPL (which include as part of the consolidation, the
Company's financial statements) with respect to such fiscal year (the date of
such receipt being referred to herein as the "Financial Statement Receipt
Date").
EBITDA of the Company with respect to any fiscal year of the Company
shall mean the net income of the Company on a consolidated basis for such fiscal
year, exclusive of each of the following to the extent utilized in determining
such net income (i) interest expense (after giving effect to any interest rate
swap, cap or collar arrangement or any other derivative product used by the
Company to reduce the Company's exposure to interest rate fluctuations), (ii)
provision for income taxes, (iii) depreciation, (iv) amortization and (v) all
other unusual and/or extraordinary non-cash additions and subtractions to such
net income, as disclosed in the audited financial statements of IPL with respect
to the Company and its subsidiaries with respect to such fiscal year. The Base
EBITDA for each fiscal year shall be an amount determined pursuant to the
Company's Business Plan for each fiscal year in the form approved by the Board
of Directors of IPL. The Employee will be notified promptly of such
determination.
If the Term or the Scheduled Term, as the case may be, ends on a day
which does not coincide with the last day of the Company's then current fiscal
year, then the amount of the Incentive Compensation payable to the Employee
hereunder with respect to such fiscal year shall be calculated by (x)
determining the amount of Incentive Compensation that would have been payable to
the Employee for such fiscal year had the Term or the Scheduled Term, as the
case may be, ended on the last day of such fiscal year and (y) multiplying the
amount determined in clause (x) by a fraction, the numerator of which is the
number of days in such fiscal year that have expired prior to the last day of
the Term or the Scheduled Term, as the case may be, and the denominator of which
is 365.
2.3 Options. Effective on the date hereof, the Company and the Employee
shall enter into an Option Agreement in the form attached hereto as Exhibit A
pursuant to which the Company shall grant the Employee non-qualified stock
options under The International Post Group Inc. 1993 Long Term Incentive Plan,
previously delivered to the Employee, to purchase 25,000 shares of its common
stock at an initial exercise price of $5.75 per share.
2.4 Deductions. The Company shall deduct from the compensation described
in Sections 2.1 and 2.2 hereof any Federal, state or city withholding taxes,
social security contributions and any
3
<PAGE> 4
other amounts which may be required to be deducted or withheld by the Company
pursuant to any Federal, state or city laws, rules or regulations.
2.5 Disability Adjustments. Any compensation otherwise payable to the
Employee pursuant to Section 2.1 hereof in respect of any period during which
the Employee is disabled (as contemplated in Section 4.3 hereof) shall be
reduced by any amounts paid to the Employee for loss of earnings or the like
under any insurance plan or policy, the premiums for which are paid for in their
entirety by the Company.
ARTICLE III
BENEFITS; EXPENSES
3.1 Benefits. During the Term, the Employee shall be entitled to
participate in such compensation and incentive plans and group life, health,
accident, disability and hospitalization insurance plans, pension plans and
retirement plans as the Company may make available to its other executive
employees as a group.
3.2 Expenses. The Company agrees that the Employee is authorized to incur
reasonable expenses in the performance of his duties hereunder, and, upon
presentation of a reasonably itemized account thereof, the Company shall
promptly pay or reimburse the Employee for such reasonable expenses so incurred
by the Employee.
3.3 Automobile. During the Term, the Company shall lease and provide the
Employee with an appropriate automobile, as determined by the then Chairman of
the Board of Directors of the Company, and shall pay all expenses relating to
the insurance, maintenance and operation thereof. In addition, the Company shall
promptly pay directly or reimburse the Employee for the costs and reasonable
expenses incurred in connection with the use of a cellular telephone in the
course of performing duties hereunder, upon presentation of a reasonably
itemized account thereof.
3.4 Vacations. During each full year of the Term, the Employee shall be
entitled to four (4) weeks of paid vacation to be taken at times determined by
the Employee which do not unreasonably interfere with the performance of his
duties hereunder, provided, that any such vacation time not taken during any
year shall be forfeited and that no single vacation shall exceed two (2)
consecutive weeks.
3.5 Domicile. During the Term, the Employee (except for reasonable
business travel required by the Company) shall conduct his activities hereunder
at a Company office located in South Florida.
ARTICLE IV
TERMINATION; DEATH; DISABILITY
4
<PAGE> 5
4.1 Termination of Employment With Cause. In addition to any other
remedies available to it at law, in equity or as set forth in this Agreement,
the Company shall have the right, upon written notice to the Employee, to
immediately terminate his employment hereunder if the Employee (a) breaches in
any material respect any material provision of this Agreement and such breach is
not remedied within thirty (30) days after written notice thereof from the Board
of Directors of the Company setting forth in reasonable detail the matters
constituting such breach; or (b) willfully fails or refuses in any material
respect to perform such duties as may be assigned to him from time to time by
the Board of Directors of the Company and fails to cure such failure or refusal
within thirty (30) days after receipt of notice from the Board of Directors of
the Company stating with specificity the nature of such failure or refusal; or
(c) has been convicted of a felony; or (d) has committed any act of fraud,
misappropriation of funds or embezzlement in connection with his employment
hereunder (clauses (a) through (d) above to mean "Cause," and termination as a
result of clauses (a) through (d) above to mean "Termination With Cause"). The
date of any termination of employment under this Section 4.1 or under Section
4.2, 4.3 or 4.4 hereof is referred to herein as the "Termination Date." In the
event of a Termination With Cause, the Company shall pay the Employee as
follows:
(i) within ten (10) days following the Termination Date, any accrued
but unpaid Base Salary as of the Termination Date;
(ii) within ten (10) days following the Termination Date, the
Employee's Base Salary on a daily basis (computed on a 365-day year) in effect
on the Termination Date, multiplied by the number of accrued and unused vacation
days at the Termination Date;
(iii) within ten (10) days following the Termination Date, any
accrued but unpaid expenses incurred by the Employee as of the Termination Date
in accordance with Section 3.2 hereof;
(iv) within ten (10) days following the Termination Date, any
accrued and unpaid benefits to which the Employee may be entitled pursuant to
Section 3.1 hereof;
(v) within ten (10) days after the next Financial Statement Receipt
Date to occur, an amount equal to (x) the amount of Incentive Compensation, if
any, that would have been payable to the Employee with respect to the fiscal
year during which the Termination Date occurred had the Termination Date not
occurred multiplied by (y) a fraction, the numerator of which is the number of
days in such fiscal year which expired prior to the Termination Date and the
denominator of which is 365;
(vi) within ten (10) days following the Termination Date, any other
accrued and unpaid compensation payable to the Employee as of the Termination
Date, the amount of which has already been calculated as of the Termination Date
in accordance with the terms hereof; and
(vii) within ten (10) days following the date after the Termination
Date as of which it is calculated in accordance with the terms hereof, any other
accrued and unpaid compensation payable to the Employee as of the Termination
Date.
5
<PAGE> 6
4.2 Termination of Employment Without Cause. Notwithstanding any provision
to the contrary herein, the Company may at any time upon written notice to the
Employee, in its sole and absolute discretion and for any or no reason,
terminate the employment of the Employee hereunder without Cause; provided, that
if such termination is not a Termination With Cause, the Company shall pay the
Employee as follows:
(a) within ten (10) days following the Termination Date, any accrued
but unpaid Base Salary as of the Termination Date;
(b) the Employee's Base Salary until the end of the Scheduled Term
(as hereinafter defined) as and when such Base Salary would have been paid had
the termination of employment not taken place;
(c) the Employee's Incentive Compensation until the end of the
Scheduled Term (if any would have been due and payable to him under Section 2.2
hereof), as and when such Incentive Compensation would have been paid had the
termination of employment not taken place;
(d) within ten (10) days following the Termination Date, a cash
payment equal to the Employee's Base Salary on a daily basis (computed on a
365-day year) in effect on the Termination Date, multiplied by the number of
accrued and unused vacation days at the Termination Date;
(e) within ten (10) days following the Termination Date, any accrued
but unpaid expenses incurred by the Employee as of the Termination Date in
accordance with Section 3.2 hereof;
(f) within ten (10) days following the Termination Date, any accrued
and unpaid benefits to which the Employee may be entitled pursuant to Section
3.1 hereof;
(g) within ten (10) days following the Termination Date, any other
accrued and unpaid compensation payable to the Employee as of the Termination
Date, the amount of which has already been calculated as of the Termination Date
in accordance with the terms hereof; and
(h) within ten (10) days following the date after the Termination
Date as of which it is calculated in accordance with the terms hereof, any other
accrued and unpaid compensation payable to the Employee as of the Termination
Date.
For purposes of this Agreement, "Scheduled Term" shall mean (x) if
the employment of the Employee is terminated under any provision of Article IV
hereof (other than Section 4.1 hereof) prior to May 31, 1997, the period ending
at the close of business on May 31, 1998, and (y) if the employment of the
Employee is terminated under any provision of Article IV hereof (other than
Section 4.1 hereof) on or after May 31, 1997, the period ending at the close of
business on the date which is twelve months after the date on which the
employment of the Employee is so terminated.
6
<PAGE> 7
In the event that the Employee terminates his employment following
an uncured material breach of this Agreement by the Company, then such
termination by the Employee shall be deemed for all purposes (including, without
limitation, the Plan) to be a termination by the Company of the employment of
the Employee hereunder without Cause pursuant to this Section 4.2. The Company
shall have thirty (30) days following written notice by the Employee to the
Company of such breach, setting forth in reasonable detail the matters
constituting such breach, to cure such breach.
The Employee acknowledges that the payments referred to in Section
4.1 hereof and this Section 4.2 constitute the only payments which the Employee
shall be entitled to receive from the Company under this Agreement in the event
of any termination of his employment pursuant to Section 4.1 hereof and this
Section 4.2, and that except for such payments the Company shall have no further
liability or obligation to him under this Agreement.
4.3 Death; Disability. The Employee's employment hereunder shall terminate
upon his death or, at the election of the Company by written notice to the
Employee, if the Employee becomes Disabled (as such term is hereinafter
defined). In the event of a termination of the Employee's employment for death
or Disability, the Company shall pay the Employee (or his legal representatives,
as the case may be), as follows:
(a) within ten (10) days following death or such notice, any accrued
but unpaid Base Salary as of the Termination Date;
(b) the Employee's Base Salary until the expiration of 12 months
from the date of death or termination for Disability (the "Extension Period"),
such Base Salary to be paid as and when such Base Salary would have been paid
had the employment of the Employee continued through the Extension Period;
(c) within ten (10) days after the next Financial Statement Receipt
Date to occur, an amount equal to (x) the amount of Incentive Compensation, if
any, that would have been payable to the Employee with respect to the fiscal
year during which the Termination Date occurred had the Termination Date not
occurred multiplied by (y) a fraction, the numerator of which is the number of
days in such fiscal year which expired prior to the Termination Date and the
denominator of which is 365;
(d) within ten (10) days following the Termination Date, a cash
payment equal to the Employee's Base Salary on a daily basis (computed on a
365-day year) in effect on the Termination Date, multiplied by the number of
accrued and unused vacation days at the Termination Date;
(e) within ten (10) days following the Termination Date, any accrued
but unpaid expenses incurred by the Employee as of the Termination Date in
accordance with Section 3.2 hereof;
7
<PAGE> 8
(f) within ten (10) days following the Termination Date, any accrued
and unpaid benefits to which the Employee may be entitled pursuant to Section
3.1 hereof;
(g) within ten (10) days following the Termination Date, any other
accrued and unpaid compensation payable to the Employee as of the Termination
Date, the amount of which has already been calculated as of the Termination Date
in accordance with the terms hereof; and
(h) within ten (10) days following the Termination Date as of which
it is calculated in accordance with the terms hereof, any other accrued and
unpaid compensation payable to the Employee as of the Termination Date.
For purposes of this Agreement, the Employee shall be deemed to be
"Disabled" or have a "Disability" if as a result of the occurrence of mental or
physical disability during the Term he has been unable to perform his duties
hereunder for three (3) consecutive months or ninety (90) days in any twelve
(12) consecutive month period, as determined in good faith by the Board of
Directors of the Company.
The Employee acknowledges that the payments referred to in this
Section 4.3 constitute the only payments to which the Employee (or his legal
representatives, as the case may be) shall be entitled to receive from the
Company under this Agreement in the event of a termination of his employment for
death or Disability, and that except for such payments the Company shall have no
further liability or obligation to him (or his legal representatives, as the
case may be) under this Agreement.
4.4 Change of Control. The Employee may, at any time during the six (6)
month period following a Change of Control (as defined in the Plan as of the
date hereof), by delivery of written notice to the Company, terminate his
employment hereunder in the event that during such period the compensation,
benefits, authority, responsibilities, privileges, duties and/or status or title
of the Employee are materially diminished (individually or in the aggregate).
Any such permitted termination by the Employee shall be deemed to constitute a
termination without Cause by the Company under Section 4.2 hereof for all
purposes (including, without limitation, the Plan).
ARTICLE V
INVENTIONS; NON-DISCLOSURE; NON-COMPETITION
5.1 Inventions. All processes, technologies and inventions (collectively,
"Inventions"), including new contributions, improvements, discoveries,
trademarks and trade names, conceived, developed, invented, made or found by the
Employee, alone or with others, during his employment by the Company or within
six (6) months after the termination thereof, whether or not patentable and
whether or not conceived, developed, invented, made or found on the Company's
time or with the use of the Company's facilities or materials and which relate
to the production, post production or network playback and studio services
business, shall be the property of the Company and shall be
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promptly and fully disclosed by the Employee to the Company. The Employee shall
perform all necessary acts (including, without limitation, executing and
delivering any confirmatory assignments, documents or instruments requested by
the Company) to vest title to any such Invention in the Company and to enable
the Company, at its expense, to secure and maintain domestic and/or foreign
patents or any other rights for such Inventions.
5.2 Non-Disclosure. The Employee shall not, at any time during the Term or
thereafter, directly or indirectly, disclose or furnish to any other person,
firm or corporation except in the course of the proper performance of his duties
hereunder (a) any information relating to any process, technique or procedure
used by the Company; or (b) any information relating to the operations or
financial status of the Company (including, without limitation, all financial
data), which information is not specifically a matter of public record; or (c)
any information of a confidential nature obtained as a result of his present or
future relationship with the Company, which information is not specifically a
matter of public record; or (d) the name , address or other Information relating
to any customer or supplier of the Company; or (e) any other trade secrets of
the Company, except that the Employee shall not be liable under the terms of
this Section 5.2 for disclosing or furnishing any of the foregoing which (i) are
or become generally available to the public other than as a result of a
disclosure in violation of this Agreement, or (ii) are generally known in any
industry in which the Company is or may become involved or (iii) is required to
be disclosed by the Employee pursuant to law or an order of a court of competent
jurisdiction, or other legal process or authority, it being understood, however,
that the Employee will provide the Company with prompt notice of the requirement
for such disclosure as soon as practical after the Employee is notified thereof
and prior to its disclosure thereof so as to enable the Company to challenge the
order compelling such disclosure if the Company so desires. Promptly upon the
expiration or termination of the Employee's employment hereunder for any reason,
the Employee shall surrender to the Company all documents, drawings, work
papers, lists, memoranda, records and other data (including all copies)
constituting or pertaining in any way to any of the foregoing information.
5.3 Non-Competition. The Employee agrees that during the Non-Competition
Term (as hereinafter defined) he will not in any manner, directly or indirectly,
except where specifically contemplated by the terms of his employment or this
Employment Agreement, (a) be employed by, engaged in or participate in the
ownership, management, operation or control of, or act in any advisory or other
capacity for, any Competing Entity which conducts its business within the
Territory (as the terms Competing Entity and Territory are hereinafter defined);
provided, however, that notwithstanding the foregoing, the Employee may make
solely passive investments in any Competing Entity, the common stock of which is
"publicly held" and of which the Employee shall not own or control, directly or
indirectly, in the aggregate securities which constitute 5% or more of the
voting rights or equity ownership of such Competing Entity; or (b) solicit or
divert any business or any customer from the Company or assist any person, firm
or corporation in doing so or attempting to do so; or (c) cause or seek to cause
any person, firm or corporation to refrain from dealing or doing business with
the Company or assist any person, firm or corporation in doing so; or (d) hire
or seek to hire any person who at the time so hired, or within 12 months prior
to such date, was an employee of the Company on the date hereof or during such
Non-Competition Term or assist any person, firm
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or corporation in doing so or attempting to do so.
For purposes of this Section 5.3, (i) the term "Non-Competition
Term" shall mean (x) the Term of this Agreement plus two (2) years, in the event
of a termination of employment pursuant to Section 4.1 hereof, or (y) the
Scheduled Term (as long as the Company is in compliance with its obligations
under Article IV hereof), in the event of a termination of employment pursuant
to any provision of Article IV hereof other than Section 4.1 hereof; (ii) the
term "Competing Entity" shall mean any entity which presently or hereafter
during the Non-Competition Term engages in any business activity in which the
Company or its successor is engaged during the Non-Competition Term; and (iii)
the term "Territory " shall mean any greater metropolitan area in which the
Company is engaged in business while the Employee is employed by the Company or
within six (6) months of the Termination Date.
5.4 Breach of Provisions. In the event that the Employee shall breach any
of the provisions of this Article V, or in the event that any such breach is
threatened by the Employee, in addition to and without limiting or waiving any
other remedies available to the Company at law or in equity, the Company shall
be entitled to immediate injunctive relief in any court, domestic or foreign,
having the capacity to grant such relief, to restrain any such breach or
threatened breach and to enforce the provisions of this Article V. The Employee
acknowledges and agrees that there is no adequate remedy at law for any such
breach or threatened breach and, in the event that any action or proceeding is
brought seeking injunctive relief, the Employee shall not use as a defense
thereto that there is an adequate remedy at law.
5.5 Reasonable Restrictions. The parties hereto acknowledge that (a) the
agreements in this Article V are essential to protect the business and goodwill
of the Company, and (b) the foregoing restrictions are under all of the
circumstances reasonable and necessary for the protection of the Company and its
business.
5.6 Definitions. For purposes of this Agreement, the term "Company" shall
be deemed to include any subsidiary or affiliate of the Company.
ARTICLE VI
MISCELLANEOUS
6.1 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives, heirs,
distributees and successors; provided, that the rights and obligations of the
Employee under this Agreement shall not be assignable by him.
6.2 Notices. All notices and other communications hereunder and all legal
process in regard hereto shall be validly given, made or served if in writing,
when delivered personally (by courier service or otherwise), or when actually
received when mailed by first-class certified or registered United States mail,
postage-prepaid and return receipt requested, to the address of the
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party to receive such notice or other communication set forth below, or at such
other address as any party hereto may from time to time advise the other party
pursuant to this Section 6.2:
If to the Company:
International Post Limited
545 Fifth Avenue
New York, New York 10017
Attention: Executive Vice President
and Chief Financial Officer
If to the Employee:
Kenneth D. Lorber
4235 Alton Road
Miami Beach, Florida 33140
6.3 Severability. If any provision of this Agreement, or portion thereof,
shall be invalid or unenforceable by a court of competent jurisdiction, such
invalidity or unenforceability shall attach only to such provision or portion
thereof, and shall not in any manner affect or render invalid or unenforceable
any other provision of this Agreement or portion thereof, and this Agreement
shall be carried out as if any such invalid or unenforceable provision or
portion thereof were not contained herein. In addition, any such invalid or
unenforceable provision or portion thereof shall be deemed, without further
action on the part of the parities hereto, modified, amended or limited to the
extent necessary to render the same valid and enforceable.
6.4 Waiver. No waiver by a party hereto of a breach or default hereunder
by the other party shall be considered valid, unless in writing signed by such
first party, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or any other nature.
6.5 Entire Agreement. This Agreement sets forth the entire agreement
between the parties hereto with respect to the subject matter hereof, and
supersedes any and all prior agreements between the Company and the Employee,
whether written or oral, relating to any or all matters covered by and contained
or otherwise dealt with in this Agreement. No representation, warranty,
undertaking or covenant is made by either party hereto except as provided herein
and any representations, warranties, undertakings or covenants not set forth
herein are specifically disclaimed. This Agreement does not constitute a
commitment of the Company with regard to the Employee's employment, express or
implied, other than to the extent expressly provided for herein.
6.6 Amendment. No modification, change or amendment of this Agreement or
any of its provisions shall be valid, unless in writing and signed by the party
against whom such claimed
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modification, change or amendment is sought to be enforced.
6.7 Authority. The parties hereto each represent and warrant that they
have the power, authority and right to enter into this Agreement and to carry
out and perform the terms, covenants and conditions hereof.
6.8 Titles. The titles of the Articles and Sections of this Agreement are
inserted merely for convenience and ease of reference and shall not affect or
modify the meaning of any of the terms, covenants or conditions of this
Agreement.
6.9 Applicable Law. This Agreement and all of the rights and obligations
of the parties hereto in connection with the employment relationship established
hereby, shall be governed by and construed in accordance with the internal laws
of the State of New York without giving effect to principles relating to
conflicts of law.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE POST EDGE, INC.
By: /s/ Jeffrey J. Kaplan
-----------------------------
Name: J. J. Kaplan
Title: EVP & CFO
/s/ Kenneth D. Lorber
---------------------------------
Kenneth D. Lorber
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