Jan. 3 2000 SEC filing for Bain / VMM Merger Corp

7/31/2019 Jan. 3 2000 SEC filing for Bain / VMM Merger Corp

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ACCESSION NUMBER: 0000950131-00-000006

CONFORMED SUBMISSION TYPE: SC 13D

PUBLIC DOCUMENT COUNT: 4

FILED AS OF DATE: 20000103

GROUP MEMBERS: BAIN CAPITAL FUND VI, L.P.

GROUP MEMBERS: BAIN CAPITAL INVESTORS VI, INC.

GROUP MEMBERS: BAIN CAPITAL PARTNERS VI, L.P.

GROUP MEMBERS: VMM MERGER CORP

GROUP MEMBERS: W. MITT ROMNEY

SUBJECT COMPANY:

COMPANY DATA:

COMPANY CONFORMED NAME: VDI MULTIMEDIA

CENTRAL INDEX KEY: 0001014733

STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE &

VIDEO TAPE PRODUCTION [7812]

IRS NUMBER: 954272619

STATE OF INCORPORATION: CA

FISCAL YEAR END: 1231

FILING VALUES:

FORM TYPE: SC 13D

SEC ACT:

SEC FILE NUMBER: 005-52979

FILM NUMBER: 500601

BUSINESS ADDRESS:

STREET 1: 6920 SUNSET BOULEVARD

CITY: HOLLYWOOD

STATE: CA

ZIP: 90028

BUSINESS PHONE: 2139575500

MAIL ADDRESS:

STREET 1: 6920 SUNSET BLVD

CITY: HOLLYWOOD

STATE: CAZIP: 90028

FORMER COMPANY:

FORMER CONFORMED NAME: VDI MEDIA

DATE OF NAME CHANGE: 19960516

FILED BY:

COMPANY DATA:

COMPANY CONFORMED NAME: VMM MERGER CORP

CENTRAL INDEX KEY: 0001102058

STANDARD INDUSTRIAL CLASSIFICATION: []

STATE OF INCORPORATION: DE

FISCAL YEAR END: 1231

FILING VALUES:

FORM TYPE: SC 13D

BUSINESS ADDRESS:

STREET 1: C/O BAIN CAPITAL INC

STREET 2: TWO COPLEY PLACE

CITY: BOSTON

STATE: MA

ZIP: 02116

BUSINESS PHONE: 6175722392


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MAIL ADDRESS:

STREET 1: C/O BAIN CAPITAL INC

STREET 2: TWO COPLEY PLACE

CITY: BOSTON

STATE: MA

ZIP: 02116

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Schedule 13D

(Rule 13d-101)

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO

RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a)

(Amendment No. __ )/1/

VDI MultiMedia

------------------------------------------------------

(Name of Issuer)

Common Stock, no par value

------------------------------------------------------

(Title of Class of Securities)

917916108

------------------------------------------------------

(CUSIP Number)

VMM Merger Corp.

c/o Bain Capital, Inc.

Two Copley Place

Boston, Massachusetts 02116

(617) 572-3000

Attn: Joseph Pretlow

------------------------------------------------------

(Name, Address and Telephone Number of Persons

Authorized to Receive Notices and Communications)

December 24, 1999

------------------------------------------------------

(Date of Event which Requires Filing of This Statement)

If the filing person has previously filed a statement on Schedule 13G to report

the acquisition which is the subject of this Schedule 13D, and is filing this

schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following

box. [_]

Note: Schedules filed in paper format shall include a signed original and five

copies of the schedule, including all exhibits. See Rule 13d-7(b) for other

parties to whom copies are to be sent.

/1/ The remainder of this cover page shall be filled out for a reporting

person's initial filing on this form with respect to the subject class of

securities, and for any subsequent amendment containing information which would


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alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed

to be "filed" for the purpose of Section 18 of the Securities Exchange Act of

1934 or otherwise subject to the liabilities of that section of the Act but

shall be subject to all other provisions of the Act (however, see the Notes).

Page 1 of 15 Pages

SCHEDULE 13D

- ----------------------- ---------------------

CUSIP NO. 917916108 PAGE 2 OF 15 PAGES

- ----------------------- ---------------------

- ------------------------------------------------------------------------------

NAME OF REPORTING PERSON

1

VMM Merger Corp.

- ------------------------------------------------------------------------------

CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*

2 (a) [_]

(b) [x]

- ------------------------------------------------------------------------------

SEC USE ONLY

3

- ------------------------------------------------------------------------------

SOURCE OF FUNDS*

4

00

- ------------------------------------------------------------------------------

CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT

TO ITEMS 2(d) or 2(e) [_]

5

- ------------------------------------------------------------------------------

CITIZENSHIP OR PLACE OF ORGANIZATION

6

Delaware

- ------------------------------------------------------------------------------

SOLE VOTING POWER

7

NUMBER OF

5,376,400 (See Item 5)

SHARES -----------------------------------------------------------

SHARED VOTING POWER

BENEFICIALLY 8

OWNED BY 0

-----------------------------------------------------------

EACH SOLE DISPOSITIVE POWER

9

REPORTING

0

PERSON -----------------------------------------------------------

SHARED DISPOSITIVE POWER

WITH 10

0

- ------------------------------------------------------------------------------

AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

11


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5,376,400 (See Item 5)

- ------------------------------------------------------------------------------

CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*

12

[_]

- ------------------------------------------------------------------------------

PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

13

Approximately 58%

- ------------------------------------------------------------------------------

TYPE OF REPORTING PERSON*

14

CO

- ------------------------------------------------------------------------------

*SEE INSTRUCTIONS BEFORE FILLING OUT!

SCHEDULE 13D

- ----------------------- ---------------------


- ----------------------- ---------------------

- ------------------------------------------------------------------------------


1

Bain Capital Fund VI, L.P.

- ------------------------------------------------------------------------------


2 (a) [_]

(b) [X]

- ------------------------------------------------------------------------------

SEC USE ONLY

3

- ------------------------------------------------------------------------------

SOURCE OF FUNDS*

4

OO

- ------------------------------------------------------------------------------


5 TO ITEMS 2(d) or 2(e)

[_]

- ------------------------------------------------------------------------------


6

Delaware

- ------------------------------------------------------------------------------

SOLE VOTING POWER

7

NUMBER OF

0

SHARES -----------------------------------------------------------

SHARED VOTING POWER

BENEFICIALLY 8

OWNED BY 5,376,400 (See Item 5)

-----------------------------------------------------------


9


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REPORTING 0

PERSON -----------------------------------------------------------


WITH 10

0

- ------------------------------------------------------------------------------


11

5,376,400 (See Item 5)

- ------------------------------------------------------------------------------


12

[_]

- ------------------------------------------------------------------------------


13

Approximately 58%

- ------------------------------------------------------------------------------


14

PN

- ------------------------------------------------------------------------------


SCHEDULE 13D

- ----------------------- ---------------------


- ----------------------- ---------------------

- ------------------------------------------------------------------------------


1

Bain Capital Partners VI, L.P.

- ------------------------------------------------------------------------------


2 (a) [_]

(b) [X]

- ------------------------------------------------------------------------------

SEC USE ONLY

3

- ------------------------------------------------------------------------------

SOURCE OF FUNDS*

4

OO

- ------------------------------------------------------------------------------



[_]

- ------------------------------------------------------------------------------


6

Delaware

- ------------------------------------------------------------------------------

SOLE VOTING POWER

7

NUMBER OF


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0

SHARES -----------------------------------------------------------

SHARED VOTING POWER

BENEFICIALLY 8


-----------------------------------------------------------


9

REPORTING 0

PERSON -----------------------------------------------------------


WITH 10

0

- ------------------------------------------------------------------------------


11

5,376,400 (See Item 5)

- ------------------------------------------------------------------------------


12

[_]

- ------------------------------------------------------------------------------


13

Approximately 58%

- ------------------------------------------------------------------------------


14

PN

- ------------------------------------------------------------------------------


SCHEDULE 13D

- ----------------------- ---------------------


- ----------------------- ---------------------

- ------------------------------------------------------------------------------


1

Bain Capital Investors VI, Inc.

- ------------------------------------------------------------------------------


2 (a) [_]

(b) [X]

- ------------------------------------------------------------------------------

SEC USE ONLY

3

- ------------------------------------------------------------------------------

SOURCE OF FUNDS*

4

OO

- ------------------------------------------------------------------------------



[_]


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- ------------------------------------------------------------------------------


6

Delaware

- ------------------------------------------------------------------------------

SOLE VOTING POWER

7

NUMBER OF

0

SHARES -----------------------------------------------------------

SHARED VOTING POWER

BENEFICIALLY 8


-----------------------------------------------------------


9

REPORTING 0

PERSON -----------------------------------------------------------


WITH 10

0

- ------------------------------------------------------------------------------


11

5,376,400 (See Item 5)

- ------------------------------------------------------------------------------


12

[_]

- ------------------------------------------------------------------------------


13

Approximately 58%

- ------------------------------------------------------------------------------


14

CO

- ------------------------------------------------------------------------------


SCHEDULE 13D

- ----------------------- ---------------------


- ----------------------- ---------------------

- ------------------------------------------------------------------------------


1

W. Mitt Romney

- ------------------------------------------------------------------------------


2 (a) [_]

(b) [X]

- ------------------------------------------------------------------------------

SEC USE ONLY


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3

- ------------------------------------------------------------------------------

SOURCE OF FUNDS*

4

OO

- ------------------------------------------------------------------------------



[_]

- ------------------------------------------------------------------------------


6

Delaware

- ------------------------------------------------------------------------------

SOLE VOTING POWER

7

NUMBER OF

0

SHARES -----------------------------------------------------------

SHARED VOTING POWER

BENEFICIALLY 8


-----------------------------------------------------------


9

REPORTING 0

PERSON -----------------------------------------------------------


WITH 10

0

- ------------------------------------------------------------------------------


11

5,376,400 (See Item 5)

- ------------------------------------------------------------------------------


12

[_]

- ------------------------------------------------------------------------------


13

Approximately 58%

- ------------------------------------------------------------------------------


14

IN

- ------------------------------------------------------------------------------


Item 1. Security and Issuer.

The class of equity security to which this Statement relates is the common

stock, no par value (the "Common Stock") of VDI MultiMedia, a California

corporation (the "Company"). The name and address of the principal executive

offices of the Company are VDI MultiMedia, 6920 Sunset Boulevard, Hollywood,


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California 90028.

Item 2. Identity and Background.

This Statement is being jointly filed by each of the following persons

pursuant to Rule 13d-1(f) promulgated by the Securities and Exchange Commission

(the "Commission") pursuant to Section 13 of the Securities Exchange Act of 1934

as amended (the "Exchange Act"):

(i) VMM Merger Corp. ("VMM"), a Delaware corporation, by virtue of its deemed

beneficial ownership of 5,376,400 shares of Common Stock;

(ii) Bain Capital Fund VI, L.P. ("BCF VI"), a Delaware limited partnership, as

the sole stockholder of VMM;

(iii) Bain Capital Partners VI, L.P. ("BCP VI"), a Delaware limited

partnership, as the sole general partner of BCF VI;

(iv) Bain Capital Investors VI, Inc. ("BCI VI Inc."), a Delaware corporation,

as the sole general partner of BCP VI; and

(v) W. Mitt Romney ("Mr. Romney"), a citizen of the United States, as the sole

stockholder of BCI VI Inc.

The address of the principal business and office of VMM, BCF VI, BCP VI and

BCI VI Inc. is c/o Bain Capital Inc., Two Copley Place, Boston, Massachusetts

02116. VMM is a newly formed corporation that will be used to effect the

acquisition of the Company. BCF VI is principally engaged in the business of

investing in securities. BCP VI is principally engaged in the business of

serving as the general partner for BCF VI. BCI VI Inc. is principally engaged

in the business of serving as the general partner of BCP VI. Mr. Romney is

principally engaged in the business of serving as the sole stockholder of BCI VI

Inc. VMM, BCF VI, BCP VI, BCI VI Inc. and Mr. Romney are collectively referred

to herein as the "Reporting Persons." The Reporting Persons have entered into a

Joint Filing Agreement, a copy of which is filed with this Statement as Exhibit

C (which is incorporated herein by reference), pursuant to which the Reporting

Persons have agreed to file this Statement jointly in accordance with the

provisions of Rule 13d-1(f)(1) under the Exchange Act.

Information with respect to each Reporting Person is given solely by such

Reporting Person, and no Reporting Person assumes responsibility for the

accuracy or completeness of the information furnished by another Reporting

Person. Attached as Schedule A to this Statement is information concerning the

Reporting Persons to which such information is required to be disclosed in

response to Item 2 and General Instruction C to Schedule 13D.

The Reporting Persons may be deemed to constitute a "group" for the

purposes of Section 13(d)(3) of the Act as a result of such Reporting Persons

being persons associated with Bain Capital, Inc., a Delaware corporation ("Bain

Capital"), which is a management company. The Reporting

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Persons expressly disclaim that they have agreed to act as a group other than as

described in this Statement.

During the last five years, none of the Reporting Persons or the persons

identified on Schedule A attached hereto has been convicted in a criminal

proceeding (excluding traffic violations or similar misdemeanors).

During the last five years, none of the Reporting Persons or the persons


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identified on Schedule A attached hereto was a party to a civil proceeding of a

judicial or administrative body of competent jurisdiction as a result of which

any person was or is subject to a judgment, decree or final order enjoining

future violations of, or prohibiting or mandating activities subject to, federal

or state securities laws or finding any violation with respect to such laws.

Item 3. Source and Amount of Funds or Other Consideration.

As more fully described in Item 4 hereof, VMM and R. Luke Stefanko and

Julia Stefanko (collectively, the "Shareholders") have entered into a

Shareholders Agreement, dated December 24, 1999 (the "Shareholders Agreement").

The transactions contemplated by the Shareholders Agreement prior to the

Effective Date (as defined in Item 4) are not expected to require the

expenditure of any funds. The Shareholders entered into the Shareholders

Agreement to induce VMM to enter into the Merger Agreement (as defined in Item

4).

Item 4. Purpose of Transaction.

On December 24, 1999, the Company, VDI MultiMedia, Inc., a Delaware

corporation and wholly-owned subsidiary of the Company ("Company Sub"), and VMM

entered into an Agreement and Plan of Merger (the "Merger Agreement") providing

for (i) the merger of the Company with and into Company Sub (the "Reorganization

Merger"), whereupon the existence of the Company will cease and Company Sub will

continue as the surviving corporation, followed by (ii) the merger of VMM with

and into Company Sub (the "Acquisition Merger" and together with the

Reorganization Merger, the "Mergers"), whereupon the existence of VMM will cease

and Company Sub will continue as the surviving corporation (the "Surviving

Corporation").

At the effective time of the Reorganization Merger (the "Reorganization

Effective Time") and subject to certain limitations set forth in the Merger

Agreement, each share of Common Stock issued and outstanding immediately prior

to the Reorganization Effective Time (other than shares held by shareholders

exercising appraisal rights in accordance with applicable law) will, by virtue

of the Reorganization Merger and without any action on the part of the holder

thereof, be converted into one fully paid and nonassessable share of common

stock, $.01 par value per share, of Company Sub ("Company Sub Common Stock"). At

the Reorganization Effective Time, the holders of the outstanding shares of

Common Stock so converted will become holders of record of the shares of Company

Sub Common Stock issued in consideration therefor upon such conversion without

any further action on the part of such holders.

At the Reorganization Effective Time, each share of Company Sub Common

Stock issued and outstanding immediately prior to the Reorganization Effective

Time will, by virtue of the Reorganization Merger and without any action on the

part of the holder thereof, cease to be outstanding, be canceled and be retired

without payment of any consideration therefor and cease to exist.

At the Reorganization Effective Time, Company Sub will assume all of the

Company's obligations with respect to any then-outstanding Options (as defined

in the Merger Agreement) that

Page 8 of 15 Pages

have not expired or been duly exercised by the holders thereof and the due

exercise of rights under any such Options will entitle the holders thereof to

acquire, immediately following the Reorganization Merger, upon the same terms

and conditions that were applicable under such Options immediately prior to the

Reorganization Merger, a number of shares of Company Sub Common Stock identical

to the class and number of shares of Common Stock that were subject to the

Options immediately prior to the Reorganization Merger.


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At the effective time of the Acquisition Merger (the "Acquisition Effective

Time" and together with the Reorganization Effective Time, the "Effective Time")

and subject to certain limitations set forth in the Merger Agreement, each share

of Company Sub Common Stock issued and outstanding immediately prior to the

Acquisition Effective Time (other than Company Sub Common Stock owned by VMM or

any other subsidiary or affiliate of VMM (collectively, the "VMM Companies") or

the Rollover Shareholders (as defined in the Merger Agreement)) will, by virtue

of the Acquisition Merger and without any action on the part of the holder

thereof, be converted into the right to receive the sum of $15.00 in cash (the

"Merger Consideration"). All such Company Sub Common Stock converted according

to the preceding sentence will automatically be canceled and retired and will

cease to exist. The Merger Consideration will be financed by VMM through a

combination of equity financing to be provided by investment funds affiliated

with Bain Capital, including BCF VI, and certain other investors and senior and

subordinated debt financing to be provided by Credit Suisse First Boston and/or

other financing sources, which may include affiliates of Bain Capital.

At the Acquisition Effective Time, each share of Company Sub Common Stock

issued and outstanding at the Acquisition Effective Time and owned by the VMM

Companies, and each share of Company Sub Common Stock issued and held in Company

Sub's treasury at the Acquisition Effective Time, shall, by virtue of the

Acquisition Merger and without any action on the part of the holder thereof,

cease to be outstanding, be canceled and be retired without payment of any

consideration therefor and cease to exist.

At the Acquisition Effective Time, (i) each Rollover Share (as defined in

the Merger Agreement) and (ii) each share of common equity of VMM issued and

outstanding immediately prior to the Acquisition Effective Time shall be

converted into and become the number of shares of Class A Common Stock, par

value $.01 per share, of Company Sub and Class L Common Stock, par value $.01

per share, of the Company Sub as are set forth on a schedule to be attached to

the Merger Agreement prior to the Effective Time.

Immediately prior to the Effective Time, all then outstanding but

theretofore unvested and non-exercisable stock options granted under the 1996

Plan (the "Plan Options") and granted under certain arrangements outside the

1996 Plan (the "Non-Plan Options") will become immediately vested and

exercisable in full (unless the Company is otherwise notified to the contrary in

writing by the holder of such Plan Options or Non-Plan Options). At the

Effective Time, the Plan Options and Non-Plan Options shall be converted into

options to acquire shares of common stock of the Surviving Corporation unless a

holder thereof agrees in writing to receive cash equal to the difference between

the exercise price of such options and the Merger Consideration (net of

withholding taxes).

Because the approval of the Company's shareholders is required by

applicable law in order to consummate the Reorganization Merger, the Company

will submit the Reorganization Merger to its shareholders for approval.

The obligations of the parties to the Merger Agreement to effect the

Mergers are subject to certain conditions, and prior to the Effective Time, the

Company, Company Sub or VMM may

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terminate the Merger Agreement under certain circumstances, in each case as set

forth in the Merger Agreement.

The Certificate of Incorporation of the Surviving Corporation will be in

the form set forth as Exhibit D to the Merger Agreement and, subject to the

terms of the Merger Agreement, the bylaws of VMM as in effect at the Acquisition


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Effective Time shall be the bylaws of the Surviving Corporation.

As a result of the Mergers, the entire equity interest in the Surviving

Corporation will be owned by investment funds associated with Bain Capital,

certain management members and certain other investors (collectively, the

"Investors"). The shareholders of the Company (other than the Rollover

Shareholders) will no longer have any interest in, and will not be shareholders

of the Company. Instead, each such holder of the Common Stock will have the

right to receive $15.00 in cash, without interest, for each share held (other

than the Rollover Shares and the Dissenting Shares (as defined in the Merger

Agreement), if any). Following the Mergers, the Investors will have the

opportunity to benefit from any earnings and growth of the Company, and will

bear the risk of any decrease in the Company's value. Following the Mergers,

the Common Stock will no longer be traded on the Nasdaq National Market, price

quotations will no longer be available and the registration of the Common Stock

under the Exchange Act, will be terminated. After such registration is

terminated, the Surviving Corporation will no longer be required to file

periodic reports with the Commission.

Concurrently with the execution and delivery of the Merger Agreement, VMM

and the Shareholders entered into the Shareholders Agreement. Pursuant to the

Shareholders Agreement, the Shareholders have agreed to vote, and have granted

VMM an irrevocable proxy to vote, their shares of Common Stock owned as of

December 24, 1999 and any shares of Common Stock acquired after December 24,

1999 and prior to the Effective Time (the "Subject Shares"): (i) in favor of the

Mergers, the Merger Agreement and all other Transactions (as defined in the

Merger Agreement), (ii) against any action or agreement that such shareholder is

advised by the Board of Directors of the Company in the applicable proxy

materials would result in a breach of any covenant, representation or warranty

or any other obligation or agreement of the Company under the Merger Agreement

and (iii) against any Competing Transaction (as defined in the Merger Agreement)

and any action in furtherance of a Competing Transaction, in each case during

the term of the Shareholders Agreement. Under the Shareholders Agreement, the

Shareholders have retained the right to vote their Subject Shares for the

election of directors of the Company and for or against any other matter other

than as to those specified in the preceding sentence.

The Shareholders Agreement also provides, except as contemplated by the

Shareholders Agreement, that the Shareholders shall not, during the term of the

Shareholders Agreement: (1) sell, transfer, assign, gift, pledge, hypothecate,

encumber or dispose of any or all of such Subject Shares; (ii) grant any proxies

or enter into any voting trust or other agreement or arrangement with respect to

the voting of the Subject Shares except as contemplated by the Shareholders

Agreement or as not otherwise inconsistent therewith; or (iii) enter into any

contract, option or other agreement or understanding with respect to, or consent

to, the sale, transfer, assignment, gift, pledge, hypothecation, encumbrance or

other disposition of any or all of such Shareholder's Subject Shares or any

interest therein; provided, however, that a Shareholder may sell, transfer,

assign, gift, pledge, hypothecate, encumbrance or otherwise dispose of all or a

portion of such Shareholder's Subject Shares to a person or entity who (x) is

either another Shareholder, a member of the Family Group of such Shareholder or

who is otherwise approved by VMM (such approval not to be unreasonably withheld

or delayed) and (y) agrees to be bound, by a written instrument reasonably

acceptable in form and substance to VMM (whose approval shall not be

unreasonably withheld or delayed), by each of the terms of the Shareholders

Agreement. As used in the Shareholders Agreement, "Family Group" means, with

respect to any Shareholder, (A) such Shareholder, (B) the spouse and issue

(whether natural

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or adopted) of such Shareholder, (C) the parents or step-parents of such


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Shareholder (whether natural or adopted), (D) the siblings of such Shareholder

(whether natural or adopted), (E) in the event such Shareholder is deceased, the

heirs or descendants of such Shareholder and (F) any one or more trusts or other

entities for the benefit of any one or more of the persons described in clause

(A) through clause (E) above. Subject to the terms and conditions of the

Shareholders Agreement, the Shareholders have also agreed, among other things,

to waive any appraisal rights they may be entitled to with respect to the

Mergers, to refrain from soliciting any other Competing Transactions, and to

take or refrain from taking certain other actions set forth in the Shareholders

Agreement.

The Shareholders Agreement and all rights and obligations of the parties

thereunder terminates immediately upon the earlier of: (a) the date upon which

the Merger Agreement is terminated in accordance with its terms or (b) the

Effective Time.

The preceding summaries of certain provisions of the Shareholders Agreement

and the Merger Agreement are not intended to be complete and are qualified in

their entirety by reference to the full text of such agreements, copies of which

are incorporated by reference as Exhibits I and II hereto and are incorporated

herein by reference.

Other than as described in this Statement, none of the Reporting Persons or

the persons identified on Schedule A attached hereto presently has any plans or

proposals that relate to or would result in any of the actions described in

subparagraphs (a) through (j) of Item 4 of Schedule 13D.

Item 5. Interest in Securities of the Issuer.

Prior to December 24, 1999, none of the Reporting Persons owned or was the

"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act)

of any shares of Common Stock. Upon execution of the Shareholders Agreement,

VMM may be deemed to have acquired "beneficial ownership" (as defined in Rule

13d-3 promulgated under the Exchange Act), of the Subject Shares, with the sole

power to vote the Subject Shares with respect to the matters set forth in the

Shareholders Agreement. As of December 24, 1999, the Subject Shares totaled

5,376,400 (including 55,000 shares of Common Stock deemed to be beneficially

owned by Mr. Stefanko as a result of his ownership of currently exercisable

options to purchase Common Stock) and constituted approximately 58% of the

issued and outstanding shares of Common Stock (based on the number of shares of

Common Stock represented to be issued and outstanding as of December 22, 1999,

by the Company in the Merger Agreement).

Bain Capital Fund VI, L.P. BCF VI owns all of the issued and outstanding

shares of capital stock of VMM. By virtue of this ownership, BCF VI may be

deemed to have the shared power to vote the Subject Shares with respect to the

matters set forth in the Shareholders Agreement.

Bain Capital Partners VI, L.P. BCP VI, as the sole general partner of BCF

VI, may be deemed to have the shared power to vote the Subject Shares with

respect to the matters set forth in the Shareholders Agreement.

Bain Capital Investors VI, Inc. BCI VI Inc., as the sole general partner

of BCP VI, may be deemed to have the shared power to vote the Subject Shares

with respect to the matters set forth in the Shareholders Agreement.

W. Mitt Romney. Mr. Romney, as the sole stockholder of BCI VI Inc., may be

deemed to have the shared power to vote the Subject Shares with respect to the

matters set forth in the Shareholders Agreement.

Page 11 of 15 Pages


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Neither the filing of this Statement nor any of its contents shall be

deemed to constitute an admission that any Reporting Person is the beneficial

owner of any Common Stock referred to in this Statement for the purposes of

Section 13(d) of the Act or for any other purpose, and such beneficial ownership

is expressly disclaimed.

Item 6. Contracts, Arrangements, Understandings of Relationships With

Respect to Securities of the Issuer.

Except as otherwise set forth in this Statement (and the agreements

referenced herein), to the best knowledge of the Reporting Persons, no

contracts, arrangements, understandings or relationships (legal or otherwise)

exist among the persons named in Item 2 or between such persons and any other

person with respect to any securities of the Company, including but not limited

to transfer or voting of any of the securities of the Company, finder's fees,

joint ventures, loan or option arrangements, puts or calls, guarantees or

profits, divisions of profits or loss, or the giving or withholding of proxies,

or a pledge or contingency, the occurrence of which would give another person

voting power over the securities of the Company.

Item 7. Material to be filed as Exhibits.

Exhibit A -- Shareholders Agreement, dated as of December 24, 1999, by and

among VMM Merger Corp., R. Luke Stefanko and Julia Stefanko.

Exhibit B -- Agreement and Plan of Merger, dated as of December 24, 1999,

by and among VDI MultiMedia, VDI MultiMedia, Inc. and VMM

Merger Corp.

Exhibit C -- Joint Filing Agreement, dated January 3, 2000, between VMM

Merger Corp., Bain Capital Fund VI, L.P., Bain Capital

Partners VI, L.P., Bain Capital Investors VI, Inc. and W. Mitt

Romney.

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SIGNATURES

----------

After reasonable inquiry and to the best of each of the undersigned's

knowledge and belief, each of the undersigned certify that the information set

forth in this Statement is true, complete and correct.

Date: January 3, 2000 VMM MERGER CORP.

By: /s/ Joseph Pretlow

_________________________________

Its: Vice President

Date: January 3, 2000 BAIN CAPITAL FUND VI, L.P.

By: Bain Capital Partners VI, L.P.,

its General Partner

By: Bain Capital Investors VI, Inc.,

its General Partner


_________________________________


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Its: Managing Director

Date: January 3, 2000 BAIN CAPITAL PARTNERS VI, L.P.

By: Bain Capital Investors VI, Inc.,

its General Partner


_________________________________


Date: January 3, 2000 BAIN CAPITAL INVESTORS VI, INC.

By: Joseph Pretlow

_________________________________


/s/ W. Mitt Romney

______________________________________

Date: January 3, 2000 W. Mitt Romney

Page 13 of 15 Pages

SCHEDULE A

Joseph Pretlow is a director and Vice President of VMM. Prescott Ashe is a

director, Vice President and Secretary of VMM. Blair Ford is a Vice President

and Assistant Secretary of VMM. All are citizens of the United States. Mr.

Pretlow is a Managing Director of Bain Capital, Inc. ("Bain Capital"), which,

through affiliated investment funds, is principally engaged in the business of

investing in securities. The business address of Mr. Pretlow is c/o Bain

Capital, Inc., Two Copely Place, Boston, Massachusetts 02116. Mr. Ashe is a

Principal at Bain Capital and Mr. Ford is an Associate at Bain Capital. The

business address for Mr. Ashe and Mr. Ford is c/o Bain Capital II, Inc., One

Embarcadero, Suite 2260, San Francisco, California 94111.

Bain Capital Partners VI, L.P. ("BCP VI") is the sole general partner

of Bain Capital Fund VI, L.P. ("BCF VI"). Bain Capital Investors VI, Inc. ("BCI

VI Inc.") is the sole general partner of BCP VI. W. Mitt Romney ("Mr. Romney")

is the sole stockholder, sole director, Chief Executive Officer, Managing

Director and President of BCI VI Inc. In addition, the following persons serve

as executive officers for BCI VI Inc.: Joshua Bekenstein (Treasurer and

Managing Director), Edward Conard (Managing Director), John P. Connaughton

(Managing Director), David Dominik (Managing Director), Paul B. Edgerley

(Managing Director), Robert C. Gay (Vice Chairman and Managing Director),

Michael A. Krupka (Managing Director), Jonathan A. Lavine (Managing Director),

Ronald P. Mika (Managing Director), Mark E. Nunnelly (Managing Director),

Stephen G. Pagliuca (Secretary and Managing Director) , Dwight Polar (Managing

Director), Joseph Pretlow (Managing Director) and Mr. Robert F. White (Managing

Director). Each director and/or executive officer of BCI VI, Inc. currently

serves as a Managing Director of Bain Capital. Certain of the Managing

Directors of BCI VI, Inc. hold similar positions at other investment funds

associated with Bain Capital. Each director and/or executive officer of BCI VI,

Inc. is a citizen of the United States. Except as otherwise noted, the business

address for each of the persons named above is c/o Bain Capital, Inc., Two

Copley Place, Boston, Massachusetts 02116. The business address for David

Dominik is c/o Bain Capital II, Inc., One Embarcadero, Suite 2260, San


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Francisco, California 94111.

Page 14 of 15 Pages

EXHIBIT INDEX

Exhibit No. Exhibit Name

- ------------ --------------------------------------------------------------

A Shareholders Agreement, dated as of December 24, 1999, by and

among VMM Merger Corp., R. Luke Stefanko and Julia Stefanko.

B Agreement and Plan of Merger, dated as of December 24, 1999,

by and among VDI MultiMedia, VDI MultiMedia, Inc. and VMM

Merger Corp.

C Joint Filing Agreement, dated January 3, 2000, between VMM

Merger Corp., Bain Capital Fund VI, L.P., Bain Capital

Partners, VI, L.P., Bain Capital Investors VI, Inc. and W.

Mitt Romney.

Page 15 of 15 Pages

EX-99.(A)

2

SHAREHOLDER AGREEMENT

SHAREHOLDERS AGREEMENT

SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of December 24, 1999,

between VMM Merger Corp., a Delaware corporation (the "Merger Sub") and the

Shareholders named on Exhibit A hereto (each a "Shareholder").

WHEREAS, each Shareholder is, as of the date hereof, the record and

beneficial owner of the number of shares of common stock, no par value (the

"Common Stock"), of VDI MultiMedia, a California corporation (the "Company"),

set forth next to such Shareholder's name on Exhibit A attached hereto; and

WHEREAS, Merger Sub, the Company and VDI MultiMedia, Inc., a Delaware

corporation ("Company Sub"), concurrently herewith are entering into an

Agreement and Plan of Merger, dated as of the date hereof (the "Merger

Agreement"; capitalized terms used herein without definition shall have the

respective meanings set forth in the Merger Agreement), which provides, among

other things, for the acquisition of the Company by Bain and certain other

investors by means of a merger of the Company with and into Company Sub followed

by the merger of Merger Sub with and into Company Sub, each upon the terms and

subject to the conditions set forth in the Merger Agreement (the "Mergers"); and

WHEREAS, as a condition to the willingness of Merger Sub to enter into the

Merger Agreement, and in order to induce Merger Sub to enter into the Merger

Agreement, each Shareholder has agreed to enter into this Agreement.

NOW, THEREFORE, in consideration of the execution and delivery by Merger


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Sub of the Merger Agreement and the foregoing and the mutual representations,

warranties, covenants and agreements set forth herein and therein, and other

good and valuable consideration, the receipt and sufficiency of which are hereby

acknowledged, the parties hereto agree as follows:

SECTION 1. Representations and Warranties of the Shareholders. Each

--------------------------------------------------

Shareholder hereby severally represents and warrants, as to such Shareholder, to

Merger Sub as follows:

a. Except as described on Schedule I hereto, such Shareholder is the

record and beneficial owner of the shares of Common Stock ("Shares") set forth

next to such Shareholder's name on Exhibit A attached hereto and such Shares

constitute all of the shares of capital stock of the Company owned by such

Shareholder as of the date hereof.

b. This Agreement has been duly authorized, executed and delivered by

such Shareholder and constitutes the legal, valid and binding obligation of such

Shareholder, enforceable against such Shareholder in accordance with its terms,

except as limited by applicable bankruptcy, insolvency, reorganization,

moratorium and other similar laws relating to creditors' rights generally and to

general principles of equity.

c. Neither the execution and delivery of this Agreement nor the

consummation by such Shareholder of the transactions contemplated hereby will

result in a violation of, or a default (or an event that with notice or lapse of

time or both would become a default) under, or conflict with, any contract,

trust, commitment, agreement, understanding or arrangement of any kind to which

the Shareholder is a party or bound or to which such Shareholder's Shares are

subject or result in the creation of any Lien (as defined below) on any of such

Shareholder's Shares. Consummation by such Shareholder of the transactions

contemplated hereby will not violate, or require any consent, approval, or

notice under any provision of any judgment, order, decree, writ, injunction,

statute, law, rule or regulation applicable to such Shareholder or such

Shareholder's Shares, except for any necessary filing under the Securities

Exchange Act of 1934, as amended (the "Exchange Act"), or the Hart-Scott-Rodino

Antitrust Improvements Act of 1976, as amended (the "HSR Act").

d. Except as described on Schedule I attached hereto, such Shareholder's

Shares and the certificates representing such Shareholder's Shares are now and

at all times during the term hereof will be held by such Shareholder, or by a

nominee or custodian for the benefit of such Shareholder, free and clear of all

liens, claims, security interests, proxies, voting trusts or agreements,

understandings or arrangements or any other encumbrances whatsoever

(collectively, "Liens"), except for any such encumbrances or proxies arising

hereunder or otherwise disclosed to Merger Sub; provided, however, that such

Shareholder may transfer all or a portion of the Shares in accordance with

Section 3 of this Agreement.

SECTION 2. Representations and Warranties of Merger Sub. Merger Sub

--------------------------------------------

hereby represents and warrants to each Shareholder as follows:

a. Merger Sub is a corporation duly organized, validly existing and in

good standing under the laws of the State of Delaware, has all requisite

corporate power and authority to execute and deliver this Agreement and to

consummate the transactions contemplated hereby, and has taken all necessary

corporate action to authorize the execution, delivery and performance of this

Agreement.

b. This Agreement has been duly authorized, executed and delivered by

Merger Sub and constitutes the legal, valid and binding obligation of it,


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enforceable against Merger Sub in accordance with its terms, except as limited

by applicable bankruptcy, insolvency, reorganization, moratorium and other

similar laws relating to creditors' rights generally and to general principles

of equity.

c. Neither the execution and delivery of this Agreement nor the

consummation by Merger Sub of the transactions contemplated hereby will result

in a violation of, or a default (or an event that with notice or lapse of time

or both would became a default) under, or conflict with, any contract, trust,

commitment, agreement, understanding or arrangement of any kind to which Merger

Sub is a party or bound. The consummation by Merger Sub of the transactions

contemplated hereby will not violate, or require any consent, approval, or

notice under any provision of any judgment, order, decree, writ, injunction,

statute, law, rule or regulation applicable to Merger Sub, except for any

necessary filing under the HSR Act.

2

SECTION 3. Transfer of the Shares.

----------------------

a. Prior to the termination of this Agreement, except as otherwise

provided herein or as described on Schedule I attached hereto, each Shareholder

agrees that it shall not: (i) sell, transfer, assign, gift, pledge,

hypothecate, encumber or dispose of any or all of such Shareholder's Shares and

any shares subsequently acquired after the date hereof (the "Subject Shares");

(ii) grant any proxies or enter into any voting trust or other agreement or

arrangement with respect to the voting of the Subject Shares except as

contemplated hereby or as not otherwise inconsistent herewith; or (iii) enter

into any contract, option or other agreement or understanding with respect to,

or consent to, the sale, transfer, assignment, gift, pledge, hypothecation,

encumbrance or other disposition of any or all of such Shareholder's Subject

Shares or any interest therein; provided, however, that a Shareholder may sell,

transfer, assign, gift, pledge, hypothecate, encumber or otherwise dispose of

all or a portion of such Shareholder's Subject Shares to a person or entity who

(x) is either another Shareholder, a member of the Family Group of such

Shareholder or who is otherwise approved by Merger Sub (such approval not to be

unreasonably withheld or delayed) and (y) agrees to be bound, by a written

instrument reasonably acceptable in form and substance to Merger Sub (whose

approval shall not be unreasonably withheld or delayed), by each of the terms of

this Agreement.

b. As used herein, "Family Group" means, with respect to any Shareholder,

(A) such Shareholder, (B) the spouse and issue (whether natural or adopted) of

such Shareholder, (C) the parents or step-parents of such Shareholder (whether

natural or adopted), (D) the siblings of such Shareholder (whether natural or

adopted), (E) in the event such Shareholder is deceased, the heirs or

descendants of such Shareholder and (F) any one or more trusts or other entities

for the benefit of any one or more of the persons described in clause (A)

through clause (E) above.

c. In addition, notwithstanding anything to the contrary contained

herein, if any term or provision of this Agreement triggers, or is deemed to

trigger, the application of the last paragraph of Section 1101 of the California

Corporations Code, (x) "Subject Shares" shall mean that number of shares of

Common Stock, together with all shares of Common Stock covered by agreements

similar hereto, which aggregate 49% of the then issued and outstanding Shares of

Common Stock and (y) each Shareholder's "Subject Shares" shall mean that number

of shares of Common Stock equal to the aggregate number of Subject Shares as

determined by item (x) above multiplied by a fraction, the numerator of which is

equal to such Shareholder's Subject Shares and the denominator of which is equal

to the aggregate Subject Shares of all Shareholders party hereto.


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SECTION 4. Voting of Shares.

----------------

a. Each Shareholder hereby agrees that, during the term of this

Agreement, at any meeting (whether annual or special and whether or not an

adjourned or postponed meeting) of the holders of Common Stock, however called,

or in connection with any written consent of the holders of Common Stock

solicited by the Board of Directors, such Shareholder will appear at the meeting

or otherwise cause its Subject Shares to be counted as present thereat for

purposes of

3

establishing a quorum and vote or consent (or cause to be voted or consented)

such Shareholder's Subject Shares (i) in favor of the Mergers, the Merger

Agreement and all other Transactions, (ii) against any action or agreement that

such Shareholder is advised by the Board of Directors of the Company in the

applicable proxy materials would result in a breach of any covenant,

representation or warranty or any other obligation or agreement of the Company

under the Merger Agreement, and (iii) against any Competing Transaction and any

action in furtherance of a Competing Transaction, in each case during the term

of this Agreement.

b. Merger Sub agrees that each Shareholder shall retain the right to vote

such Shareholder's Subject Shares for the election of directors of the Company

and for or against any other matter other than as to those specified in clause

(a) of this Section 4.

SECTION 5. Irrevocable Proxy. Each Shareholder hereby grants an

-----------------

irrevocable proxy during the term of this Agreement to, and hereby constitutes

and appoints, Merger Sub as such Shareholder's attorney-in-fact and proxy, with

full power of substitution, for and in such Shareholder's name, to vote (by

written consent or otherwise) the Subject Shares, which such holder is entitled

to vote at any meeting of Shareholders of the Company (whether annual or special

and whether or not an adjourned or postponed meeting) on the matters and in the

manner specified in Section 4 above. THIS PROXY IS IRREVOCABLE AND COUPLED WITH

AN INTEREST. Each Shareholder hereby revokes all previous proxies granted with

respect to the Subject Shares that such Shareholder may have heretofore

appointed or granted that are inconsistent herewith, and no subsequent proxy

shall be given (and if given or executed, shall not be effective) by such

Shareholder with respect thereto. All authority herein conferred or agreed to

be conferred shall survive the death or incapacity of such Shareholder.

SECTION 6. Competing Transactions. Each Shareholder will not, and will

----------------------

instruct its officers, directors, employees, investment banker, attorney,

financial advisor or other representatives or agents (the "Representatives")

during the term of the Agreement not to, initiate, solicit or encourage

(including by way of furnishing information or assistance) any Competing

Transaction, or enter into or maintain discussions or negotiate with any person

or entity in furtherance of or relating to or to obtain a Competing Transaction,

or agree to or endorse any Competing Transaction, or authorize or permit any

Representative to take any such action, and such Shareholder shall use its

reasonable best efforts to cause its Representatives not to take any such

action.

SECTION 7. Appraisal Rights. Each Shareholder agrees not to exercise any

----------------

rights (including without limitation, under Chapter 13 of the California General

Corporation Law) to demand appraisal of any Subject Shares which may arise with


20/82

respect to the Mergers.

SECTION 8. Stock Legend. At the request of Merger Sub, each Shareholder

------------

agrees to allow to be stamped, printed or typed on the face of his or her

certificates evidencing the Subject Shares, the following legend:

"THE VOTING, SALE, ASSIGNMENT, TRANSFER,

GIFT, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR

4

DISPOSITION OF THE SHARES REPRESENTED BY THIS

CERTIFICATE IS SUBJECT TO A SHAREHOLDERS

AGREEMENT DATED AS OF DECEMBER 24, 1999 BY

AND BETWEEN VMM MERGER CORP. AND THE RECORD

OWNER HEREOF, COPIES OF WHICH ARE ON FILE AT

THE OFFICES OF VDI MULTIMEDIA."

SECTION 9. Further Assurances; Shareholder Capacity.

----------------------------------------

a. Each Shareholder shall, upon request of Merger Sub, execute and

deliver any additional documents and take such further actions as may reasonably

be deemed by Merger Sub to be necessary or desirable to carry out the provisions

hereof and to vest the power to vote the Shares as contemplated by Section 5

hereof in Merger Sub.

b. Nothing in this Agreement shall be construed to prohibit any

Shareholder or any affiliate of any Shareholder who is or becomes or has

designated a member of the Board of Directors of the Company from taking any

action solely in his or her capacity as a member of the Board of Directors of

the Company or from exercising his or her fiduciary duties as a member of such

Board of Directors.

c. Each Shareholder hereby consents to the entry into this Agreement by

any other Shareholder with respect to all interests of such Shareholders.

SECTION 10. Termination. This Agreement and all rights and obligations of

-----------

the parties hereunder shall terminate immediately upon the earlier of (the

"Termination Date"): (a) the date upon which the Merger Agreement is terminated

in accordance with its terms or (b) the Effective Time. The provisions set forth

in Section 10 shall survive any termination of this Agreement.

SECTION 11. Expenses. Except as provided in Section 11.1 of the Merger

--------

Agreement, all fees and expenses incurred by any one party hereto shall be borne

by the party incurring such fees and expenses.

SECTION 12. Public Announcements. Merger Sub and each Shareholder agrees

--------------------

that it will not issue any press release or otherwise make any public statement

with respect to this Agreement or the transactions contemplated hereby without

the prior consent of the other party, which consent shall not be unreasonably

withheld or delayed; provided, however, that such disclosure can be made without

obtaining such prior consent if (i) the disclosure is required by law or

regulation or by obligations imposed pursuant to any listing agreement with the

NASDAQ National Market and (ii) the party making such disclosure has first used

its reasonable best efforts to consult with the other party about the form and

substance of such disclosure.


21/82

5

SECTION 13. Miscellaneous.

-------------

a. Capitalized terms used and not otherwise defined in this Agreement

shall have the respective meanings assigned to such terms in the Merger

Agreement.

b. All notices, requests, claims, demands and other communications

hereunder shall be in writing and shall be deemed given (and shall be deemed to

have been duly received if so given) by delivery in person, by facsimile

transmission , by registered or certified mail (postage prepaid, return receipt

requested) or courier service providing proof of delivery to the respective

parties, addressed at the following addresses (or at such other address for a

party as shall be specified in a notice in accordance with this Section 13(b)):

i. If to the Merger Sub, to the address set forth on Exhibit B:

ii. If to any Shareholder, to the address set forth next to such

Shareholder's name on Exhibit A hereto.

c. The Section captions herein are for convenience of reference only and

shall not be deemed to limit or otherwise affect any of the provisions hereof.

d. This Agreement may be executed in any number of counterparts, each

such counterpart being deemed to be an original instrument, and all such

counterparts shall together constitute the same agreement.

e. This Agreement (including the Merger Agreement and any other documents

and instruments referred to herein) constitutes the entire agreement and

supersedes all prior agreements and understandings, both written and oral, among

the parties, with respect to the subject matter hereof.

f. This Agreement shall be governed by, and construed in accordance with

the laws of the State of California without giving effect to the principles of

conflicts of laws thereof.

g. Except as provided in Section 3 hereof, neither this Agreement nor any

of the rights, interests, or obligations hereunder shall be assignable by

operation of law or otherwise without the prior written consent of the other

parties. Subject to the preceding sentence, this Agreement will be binding

upon, inure to the benefit of and be enforceable by, the parties and their

respective successors and assigns. This Agreement is not intended to be for the

benefit of, and shall not be enforceable by, any person or entity not a party

hereto.

h. If any term, provision, covenant or restriction herein is held by a

court of competent jurisdiction or other authority to be invalid, void or

unenforceable or against its regulatory policy, the remainder of the terms,

provisions, covenants and restrictions of this Agreement shall remain in full

force and effect and shall in no way be affected, impaired or invalidated.

6

i. Each of the parties hereto acknowledges and agrees that in the event

of any breach or failure of performance of this Agreement, each non-breaching

party would be irreparably and immediately harmed and could not be made whole by

monetary damages. It is accordingly agreed that the parties hereto shall be

entitled to injunctive relief and to compel specific performance of this

Agreement in addition to any other remedy to which they are entitled to at law


22/82

or in equity.

j. No amendment, modification or waiver in respect of this Agreement

shall be effective against any party unless it shall be in writing and signed by

such party.

IN WITNESS WHEREOF, Merger Sub and each Shareholder has executed and

delivered or caused this Agreement to be duly executed and delivered as of the

date first written above.

VMM MERGER CORP.


____________________________

Name: Joseph Pretlow

Title: Vice President

/s/ R. Luke Stefanko

____________________________

R. Luke Stefanko

/s/ R. Julia Stefanko

____________________________

R. Julia Stefanko

7

EXHIBIT A

Ownership of Outstanding

------------------------

Shares of Common Stock

----------------------

Name Record Ownership Beneficial Ownership

R. Luke Stefanko 100% 58.34%

Address for Notice:

c/o Daniel Jaffe, Esq.

Jaffe & Clemens

433 North Camden Drive

Suite 1000

Beverly Hills, CA 90210

Julia Stefanko -- 41.66%

Address for Notice:

c/o Harvey Sitzer, Esq.

Law Offices of Harvey Sitzer

1888 Century Park East

Suite 1700

Los Angeles, CA 90067


23/82

A-1

EXHIBIT B

To the Merger Sub:

c/o Bain Capital, Inc.

Two Copley Place

Boston, MA 02116

Facsimile: (617) 572-3274

Attention: Joseph Pretlow

with a copy to:

Kirkland & Ellis

200 East Randolph Drive

Chicago, IL 60601

Facsimile: (312) 861-2200

Attention: Jeffrey C. Hammes, P.C.

Gary M. Holihan

B-1

EX-99.(B)

3

AGREEMENT AND PLAN OF MERGER


by and among

VDI MultiMedia,

VDI MultiMedia, Inc.,

and

VMM Merger Corp.

Dated as of December 24, 1999

_____________________________________________________________________________

TABLE OF CONTENTS

Page

----


24/82

ARTICLE I THE REORGANIZATION

MERGER................................................. 2

Section 1.1 The Reorganization

Merger................................................. 2

Section 1.2 Reorganization

Closing.................................................... 2

Section 1.3 Reorganization Effective

Time............................................. 2

Section 1.4 Subsequent

Actions........................................................ 3

Section 1.5 Certificate of

Incorporation.............................................. 3

Section 1.6 The

Bylaws................................................................ 3

Section 1.7 Officers and

Directors.................................................... 3

Section 1.8 Employee Benefit

Plans.................................................... 3

ARTICLE II CONVERSION OR CANCELLATION OF SHARESIN THE REORGANIZATION

MERGER.......... 4

Section 2.1 Conversion or Cancellation of

Shares...................................... 4

Section 2.2 Transfer of Company Shares After the Reorganization Effective

Time........ 5

Section 2.3 Treatment of

Options...................................................... 5

ARTICLE III THE ACQUISITION

MERGER.................................................... 5

Section 3.1 The Acquisition

Merger.................................................... 5

Section 3.2 Acquisition

Closing....................................................... 5

Section 3.3 Acquisition Effective

Time................................................ 6

Section 3.4 Subsequent

Actions........................................................ 6

Section 3.5 Certificate of

Incorporation.............................................. 6

Section 3.6 The

Bylaws................................................................ 6

Section 3.7 Officers and

Directors.................................................... 6

ARTICLE IV CONVERSION OR CANCELLATION OF SHARES IN THE ACQUISITION

MERGER............ 7

Section 4.1 Conversion or Cancellation of

Shares...................................... 7

Section 4.2 Payment for Company Sub Shares and Stock Options in the

Acquisition

Merger........................................................ 7

Section 4.3 Transfer of Company Sub Shares After the Acquisition Effective

Time....... 9

Section 4.4 No

Liability.............................................................. 9

Section 4.5 Lost

Certificates......................................................... 9

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE

COMPANY............................. 9

Section 5.1 Organization and Qualification;

Subsidiaries.............................. 10


25/82

Section 5.2 Charter Documents and

Bylaws.............................................. 10

Section 5.3

Capitalization............................................................ 11

Section 5.4 Authority Relative to this

Agreement...................................... 12

Section 5.5 No Conflict; Required Filings and

Consents................................ 12

i

Section 5.6 SEC Filings; Financial

Statements......................................... 13

Section 5.7 Absence of Certain Changes or

Events...................................... 15

Section 5.8 Intellectual

Property..................................................... 16

Section 5.9 Material

Contracts........................................................ 17

Section 5.10 Environmental

Matters..................................................... 19

Section 5.11 Benefit

Plans............................................................. 19

Section 5.12 Tax

Matters............................................................... 21

Section 5.13

Litigation................................................................ 22

Section 5.14 Opinion of Financial

Advisor.............................................. 23

Section 5.15

Brokers................................................................... 23

Section 5.16 Properties and

Assets..................................................... 23

Section 5.17 Compliance with Laws in

General........................................... 24

Section 5.18 Labor

Matters............................................................. 24

Section 5.19

Insurance................................................................. 24

Section 5.20 Customers and

Suppliers................................................... 25

Section 5.21 Company

Expenses.......................................................... 25

Section 5.22 Required Company

Vote..................................................... 25

Section 5.23 State Takeover

Laws....................................................... 26

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF MERGER

SUB.............................. 26

Section 6.1 Organization and Qualification;

Subsidiaries.............................. 26

Section 6.2 Certificate of Incorporation and

Bylaws................................... 26

Section 6.3 Authority Relative to this

Agreement...................................... 26

Section 6.4 No Conflict; Required Filings and

Consents................................ 27


26/82

Section 6.5 Ownership of Merger Sub; No Prior

Activities.............................. 28

Section 6.6

Litigation................................................................ 28

Section 6.7

Financing................................................................. 28

Section 6.8

Brokers................................................................... 28

ARTICLE VII

COVENANTS................................................................. 28

Section 7.1 Interim Operations of the

Company......................................... 28

ARTICLE VIII ADDITIONAL

AGREEMENTS..................................................... 31

Section 8.1 Meeting of the

Shareholders............................................... 31

Section 8.2 Filings; Other

Action..................................................... 32

Section 8.3

Access.................................................................... 33

Section 8.4 Notification of Certain

Matters........................................... 33

Section 8.5

Publicity................................................................. 33

Section 8.6

Indemnification........................................................... 34

Section 8.7 Obligations of Merger

Sub................................................. 35

Section 8.8 Stock

Options............................................................. 35

Section 8.9 Employee Benefit

Plans.................................................... 37

Section 8.10 No Solicitation of

Transactions........................................... 37

Section 8.11 Third Party Standstill

Agreements......................................... 39

ii

Section 8.12

Consents.................................................................. 39

Section 8.13 SEC

Reports............................................................... 39

Section 8.14

Delisting................................................................. 39

Section 8.15 Actions Respecting Commitment Letters; Financing,Notification............ 39

Section 8.16 Financial

Statements...................................................... 40

Section 8.17 Shareholders

Agreement.................................................... 40

Section 8.18 State Takeover

Laws....................................................... 41

ARTICLE IX

CONDITIONS................................................................ 41


27/82

Section 9.1 Conditions to the Obligations of Each

Party............................... 41

Section 9.2 Additional Conditions to the Acquisition

Merger........................... 41

Section 9.3 Conditions to the Obligations of Merger

Sub............................... 41

Section 9.4 Conditions to the Obligations of the Company and Company

Sub.............. 43

ARTICLE X

TERMINATION............................................................... 44

Section 10.1 Termination by Mutual

Consent............................................. 44

Section 10.2 Termination by Either Merger Sub or the

Company........................... 44

Section 10.3 Termination by Merger

Sub................................................. 44

Section 10.4 Termination by the

Company................................................ 45

Section 10.5 Effect of Termination and

Abandonment..................................... 46

ARTICLE XI MISCELLANEOUS;

GENERAL.................................................... 46

Section 11.1 Payment of

Expenses....................................................... 46

Section 11.2

Survival.................................................................. 47

Section 11.3 Modification or

Amendment................................................. 48

Section 11.4

Counterparts.............................................................. 48

Section 11.5 Governing

Law............................................................. 48

Section 11.6

Notices................................................................... 48

Section 11.7 Entire Agreement,

etc..................................................... 49

Section 11.8

Captions.................................................................. 49

Section 11.9 Certain

Definitions....................................................... 49

Section 11.10 No Third Party

Beneficiaries.............................................. 49

Section 11.11 Company Disclosure

Schedule............................................... 49

iii

GLOSSARY OF DEFINED TERMS

Defined Term Position of Definition

- ------------ ----------------------

Acquisition Agreement of Merger (S)3.1

Acquisition Closing (S)3.2

Acquisition Constituent Corporations Preamble

Acquisition Effective Time (S)3.3

Acquisition Merger Recitals


28/82

affiliate (S)4.1(a)

Agreement Preamble

Bain Recitals

Bain Commitment Letter Recitals

Benefit Plans (S)5.11(c)

Certificates (S)4.2(b)

Claim (S)8.6(b)

Class A Common (S)4.1(c)

Class L Common (S)4.1(c)

Closing (S)3.2

Code (S)5.11(c)

Commitment Letters (S)6.7

Common Stock Recitals

Company Preamble

Company Disclosure Schedule Article V Preamble

Company Material Adverse Effect (S)5.1

Company Representatives (S)8.10(a)

Company Sub Preamble

Company Sub Common Stock (S)2.1(a)

Company Sub Shares (S)4.1(a)

Company Subsidiary (S)5.1

Competing Transaction (S)8.10(b)

Computer Systems (S)5.8(b)

Confidentiality Agreement (S)8.3

Conversion Schedule (S)4.1(c)

CGCL (S)1.3

COBRA (S)5.11(f)

DGCL (S)1.1

Debt Commitment Letters (S)6.7

Dissenting Shareholder (S)2.1(c)

Dissenting Shares (S)2.1(c)

Effective Time (S)3.3

Environmental Laws (S)5.10

ERISA (S)5.11(b)

Exchange Act (S)5.5(b)

iv

Exchange Fund (S)4.2(a)

Expenses (S)11.1(a)

Financing (S)8.16

Governmental Authority (S)5.5(b)

HSR Act (S)5.5(b)

Indemnified Parties (S)8.6(b)

Intellectual Property (S)5.8(a)

Law (S)5.5(a)

Liens (S)5.5(a)

Material Contracts (S)5.9(b)

Mergers Recitals

Merger Consideration (S)4.1(a)

Merger Sub Preamble

Merger Sub Companies (S)4.1(a)

Merger Sub Material Adverse Effect (S)6.1

Multiemployer Pension Plans (S)5.11(b)

NASDAQ/NMS (S)5.5(b)

Non-Plan Options (S)8.8

Option Consideration (S)8.8(c)

Options (S)5.3(a)

Option Plans (S)5.3(a)


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Paying Agent (S)4.2(a)

Payment Fund (S)4.2(a)

Pension Plans (S)5.11(b)

Plan Options (S)8.8(c)

Plans (S)5.3

Proxy Statement (S)8.1(b)

Reorganization Agreement of Merger (S)1.1

Reorganization Closing (S)1.2

Reorganization Constituent Corporations Preamble

Reorganization Effective Time (S)1.3

Reorganization Merger Recitals

Reorganization Surviving Corporation (S)1.1

Representatives (S)8.3

Rollover Shares (S)4.1(a)

Rollover Shareholder Recitals

SEC (S)5.6(a)

SEC Reports (S)5.6(a)

Securities Act (S)5.6(a)

Shares (S)2.1(a)

Shareholders Agreement Recitals

Shareholders Meeting (S)8.1(a)

Substitute Debt Financing (S)8.15(b)

Superior Proposal (S)8.10(c)

v

Surviving Corporation (S)3.1

Terminating Company Breach (S)10.3(a)

Terminating Merger Sub Breach (S)10.4(a)

Transactions Recitals

5% Shareholder (S)5.9(e)

vi


AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated

as of December 24, 1999, between VDI MultiMedia, a California corporation (the

"Company"), VDI MultiMedia, Inc., a Delaware corporation and wholly-owned

subsidiary of the Company ("Company Sub"), and VMM Merger Corp., a Delaware

corporation ("Merger Sub"); the Company and Company Sub sometimes being

hereinafter collectively referred to as the "Reorganization Constituent

Corporations" and Company Sub and Merger Sub sometimes being hereinafter

collectively referred to as the "Acquisition Constituent Corporations."

RECITALS

WHEREAS, the Company desires that it merge with and into Company Sub, all

upon the terms and subject to the conditions of this Agreement (the

"Reorganization Merger");

WHEREAS, Company Sub desires that, upon the completion of the

Reorganization Merger, Merger Sub merge with and into Company Sub, all upon the

terms and subject to the conditions of this Agreement (the "Acquisition Merger"

and collectively with the Reorganization Merger, the "Mergers");


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WHEREAS, the Board of Directors of the Company has, in light of and subject

to the terms and conditions set forth herein, (i) determined that (A) the

Mergers are in the best interests of the Company and its shareholders and (B)

the consideration to be paid for each share of common stock in the Acquisition

Merger is fair to the shareholders of the Company and (ii) resolved to approve

and adopt this Agreement and the transactions contemplated hereby (the

"Transactions") and to recommend approval and adoption by the shareholders of

the Company of this Agreement and the Transactions;

WHEREAS, the Company and Merger Sub desire to make certain representations,

warranties, covenants and agreements in connection with the Mergers;

WHEREAS, those shareholders of the Company that are identified on Schedule

I hereto or as may be added thereto from time to time by Merger Sub prior to the

Effective Time (as defined below), subject to the limitations set forth thereon

(each a "Rollover Shareholder" and collectively, the "Rollover Shareholders"),

shall have certain of their shares of common stock, no par value, of the Company

(the "Common Stock") converted into shares of the capital stock of the Surviving

Corporation (as defined below) in connection with the Mergers as more fully

described herein;

WHEREAS, concurrently with the execution of this Agreement, Bain Capital

Fund VI, L.P. ("Bain") has entered into an agreement with Merger Sub for the

benefit of the Company in which it has agreed to cause Merger Sub to perform its

obligations at or prior to the Effective Time (as defined below) hereunder and,

subject to the conditions set forth therein, to invest a

1

specified amount in Merger Sub at or prior to the Effective Time (the "Bain

Commitment Letter"); and

WHEREAS, concurrently with the execution of this Agreement, certain

existing shareholders of the Company have entered into a shareholders agreement

(the "Shareholders Agreement") pursuant to which such shareholders have agreed,

among other things, to vote for the Reorganization Merger and to grant to Merger

Sub a proxy with respect to the voting of their Subject Shares (as defined in

the Shareholders Agreement) under the circumstances set forth in the

Shareholders Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual

representations, warranties, covenants, agreements and conditions herein

contained, the parties hereto agree as follows:

ARTICLE I

THE REORGANIZATION MERGER

Section I.1 The Reorganization Merger. Subject to the terms and

conditions of this Agreement and of the Agreement of Merger attached hereto as

Exhibit A (the "Reorganization Agreement of Merger"), at the Reorganization

Effective Time (as defined below), the Company shall be merged with and into

Company Sub and the separate corporate existence of the Company shall thereupon

cease. Company Sub shall be the surviving corporation in the Reorganization

Merger (sometimes hereinafter referred to as the "Reorganization Surviving

Corporation") and shall continue to be governed by the laws of the State of

Delaware, and the separate corporate existence of Company Sub with all its

rights, privileges, immunities and franchises shall continue unaffected by the

Reorganization Merger. The Reorganization Merger shall have the effects

specified in the Delaware General Corporation Law (the "DGCL").

Section I.2 Reorganization Closing. Subject to the conditions contained


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in this Agreement, the closing of the Reorganization Merger (the "Reorganization

Closing") shall take place (i) at the offices of Kirkland & Ellis, New York, New

York, as promptly as practicable but in no event later than the third business

day after which the last to be fulfilled or waived of the conditions set forth

in Article IX hereof shall be fulfilled or waived in accordance with this

Agreement, at such time as the Company, Company Sub and Merger Sub may agree, or

(ii) at such other place and time and/or on such other date as the Company,

Company Sub and Merger Sub may agree.

Section I.3 Reorganization Effective Time. As soon as practicable

following fulfillment or waiver of the conditions specified in Article IX

hereof, and provided that this Agreement has not been terminated or abandoned

pursuant to Article X hereof, the Company and Company Sub will cause the

Reorganization Agreement of Merger to be executed and filed with the Secretary

of State of the State of Delaware and the Secretary of State of the State of

California, with an officer's certificate of each Reorganization Constituent

Corporation attached, as provided in the DGCL and the California General

Corporate Law (the "CGCL"), as

2

applicable. The Reorganization Merger shall become effective at the time of the

filing of the Reorganization Agreement of Merger with the Secretary of State of

the State of Delaware, and such time is hereinafter referred to as the

"Reorganization Effective Time."

Section I.4 Subsequent Actions. If, at any time after the

Reorganization Effective Time, the Reorganization Surviving Corporation shall

consider or be advised that any deeds, bills of sale, assignments, assurances or

any other actions or things are necessary or desirable to vest, perfect or

confirm of record or otherwise in the Reorganization Surviving Corporation its

right, title or interest in, to or under any of the rights, properties or assets

of either of the Reorganization Constituent Corporations acquired or to be

acquired by the Reorganization Surviving Corporation as a result of, or in

connection with, the Reorganization Merger or otherwise to carry out this

Agreement, the officers and directors of the Reorganization Surviving

Corporation shall be authorized to execute and deliver, in the name and on

behalf of each of the Reorganization Constituent Corporations or otherwise, all

such deeds, bills of sale, assignments and assurances and to take and do, in the

name and on behalf of each of the Reorganization Constituent Corporations or

otherwise, all such other actions and things as may be necessary or desirable to

vest, perfect or confirm any and all right, title and interest in, to and under

such rights, properties or assets in the Reorganization Surviving Corporation or

otherwise to carry out this Agreement.

Section I.5 Certificate of Incorporation. The Certificate of

Incorporation of the Reorganization Surviving Corporation shall be in the form

set fo