EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Agreement, dated as of February 2, 1998, is entered into by and
between Four Media Company, a Delaware corporation (the "Company"), and Xxxx
Xxxxxxxxx ("Executive").
INTRODUCTION
The Company and its operating subsidiaries ("Affiliates") are engaged in
the business of providing technical and creative services to the entertainment
industry. The Company desires to employ Executive, and Executive desires to
accept such employment, under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
EMPLOYMENT; TERM; DUTIES
------------------------
1.1 Employment. Upon the terms and conditions hereinafter set forth, the
----------
Company hereby employs Executive, and Executive hereby accepts employment, as
President of Strategic Development and New Business Ventures of the Company.
1.2 Term. Subject to Article IV, Executive's employment hereunder shall
----
be for a term of three (3) years commencing on the date hereof and expiring at
the close of business on the day prior to the third anniversary of the date
hereof (together with any extensions, the "Term").
1.3 Duties. During the Term, Executive shall oversee strategic growth and
------
development of the Company and otherwise perform such executive duties for the
Company and/or its Affiliates, consistent with his position hereunder, as may be
assigned to him from time to time by the Board of Directors. Executive shall
devote his entire productive business time, attention and energies to the
performance of his duties hereunder. Executive shall use his best efforts to
advance the interests and business of the Company and its Affiliates. Executive
shall abide by all rules, regulations and policies of the Company, as may be in
effect from time to time. Notwithstanding the foregoing, Executive may act for
his own account in passive-type investments as provided in Section 5.3, or as a
member of other boards of directors, where the time allocated for those
activities does not materially interfere with or create a conflict of interest
with the discharge of his duties for the Company.
1.4 Performance.
-----------
(a) Executive shall render his services primarily at one of the
Company's present places of business in the West Los Angeles Area, at such other
premises as may be occupied by the Company during the Term and, to the extent
able to perform his duties hereunder from such location, in Montecito,
California. Executive and Company agree that, notwithstanding that Executive may
be required to temporarily travel to other places in the course of performing
his duties, the principal place of such performance shall be in the West Los
Angeles Area and in Montecito. Company shall provide Executive with an office at
its premises in the West Los Angeles Area commensurate with Executive's
position. In addition, Company shall provide Executive with up to two assistants
to the extent necessary to facilitate the performance by Executive of his duties
hereunder.
(b) Notwithstanding anything to the contrary, Employee shall be
permitted to work, during and after regular business hours, on creative and
artistic projects (including by way of illustration and not as a limitation, the
Xxxx Xxxxxxx Foundation) which are not in any manner competitive with or which
in any way interfere with the business of the Company, and in connection
therewith shall have access to and be permitted to use without charge (except
for hard costs actually incurred by the Company, e.g., tape stock) the
facilities of the Company. The results and proceeds of any such artistic or
creative endeavors shall not be the property of the
Company. The Company understands and acknowledges that such activities engaged
in by Employee are intended to enhance the reputation and stature of the Company
and to xxxxxx relationships with creative talent which is critical to the
continued success of the Company.
1.5 Reporting. Executive shall report directly to the Chairman of the
---------
Board of the Company.
1.6 Exclusive Agreement. Executive represents and warrants to the Company
-------------------
that there are no agreements or arrangements, whether written or oral, in effect
which would prevent Executive from rendering his exclusive services to the
Company during the Term.
ARTICLE
COMPENSATION
------------
2.1 Compensation. For all services rendered by Executive hereunder and
------------
all covenants and conditions undertaken by him pursuant to this Agreement, the
Company shall pay, and Executive shall accept, as full compensation, the amounts
set forth in this Article II.
2.2 Base Salary. The base salary shall be an annual salary of $200,000
-----------
("Base Salary"), payable by the Company in accordance with the Company's normal
payroll practices.
2.3 Increase in Base Salary. The Base Salary may be increased annually as
-----------------------
determined by the Company's Board of Directors, or compensation committee, in
their sole discretion.
2.4 Discretionary Bonus. In addition to the Base Salary, the Company may
-------------------
make discretionary bonus payments to Executive, under such terms, conditions and
requirements as may be established by the Company's Board of Directors in its
sole discretion.
2.5 Deductions. The Company shall deduct from the compensation described
----------
in this Article II any federal, state or local withholding taxes, social
security contributions and any other amounts which may be required to be
deducted or withheld by the Company pursuant to any federal, state or local
laws, rules or regulations.
2.6 Disability Adjustment. Any compensation otherwise payable to
---------------------
Executive pursuant to this Article II in respect of any period during which
Executive is substantially unable to perform his duties hereunder (as
contemplated in Section 4.3) shall be reduced by any amounts payable to
Executive under any insurance plan sponsored by the Company and by any
governmental disability payments.
ARTICLE III
BENEFITS; EXPENSES
------------------
3.1 Benefits. During the Term, Executive shall be entitled to participate
--------
in such group life, health, accident, disability or hospitalization insurance
plans, pension plans and retirement plans as the Company may make available to
its other executive employees as a group, subject to the terms and conditions of
any such plans. The health benefits for Executive shall be no less favorable
than his health benefits at Visualize and shall include the same benefits for
his spouse.
3.2 1997 Stock Option Plan. Executive shall be entitled to nonqualified
----------------------
stock options covering 50,000 shares of Company's common stock, par value $.01
to be granted under Company's 1997 Stock Option Plan (the "Plan"), within ten
(10) days of the date of this Employment Agreement, at an exercise price equal
to the fair market value of the Company's common stock on the Friday prior to
the date of this Agreement. One-third of the options will vest on each of the
first three anniversaries of the commencement of the Term. The remaining terms
of the grant shall be substantially in accord with the Company's standard Stock
Option Agreement.
3.3 Expenses. The Company agrees that Executive is authorized to incur
--------
reasonable expenses in the performance of his duties hereunder and in promoting
the business of the Company. The Company shall from time to time pay or
reimburse Executive for the reasonable and necessary expenses incurred by
Executive in connection with the performance of his duties hereunder if such
expenses have been previously approved by the Company or if reimbursement is
otherwise appropriate in accordance with the Company's established policies and
if the Company receives such verification thereof as the Company may require in
order to qualify such expenses as deductible
business expenses. It is understood that authorized international travel shall
be by first class and authorized domestic travel shall be by business class or,
if unavailable, by first class.
3.4 Vacation. Executive shall accrue, on a daily basis, a total of five
--------
(5) work weeks of vacation per year following the date of this Agreement. If
Executive's earned but unused vacation time reaches six (6) work weeks,
Executive will not continue to accrue additional vacation time until he uses
enough vacation to fall below this maximum amount. Thereafter, Executive will
start earning vacation benefits again until the six (6) work week maximum is
again reached. Any accrued but unused vacation time will be paid to Executive
on a pro rata basis at termination of employment.
3.5 Key Man Insurance. The Company may secure in its own name or
-----------------
otherwise, and at its own expense, life, health, accident and other insurance
covering Executive alone or with others, and Executive shall not have any right,
title or interest in or to such insurance other than as expressly provided
herein. Executive agrees to assist the Company in procuring such insurance by
submitting to the usual and customary medical and other examinations to be
conducted by such physicians as the Company or such insurance company may
designate and by signing such applications and other written instruments as may
be required by the insurance companies to which application is made for such
insurance. Executive's failure to submit to such usual and customary medical
and other examinations shall be deemed a material breach of this Agreement.
ARTICLE
TERMINATION; DEATH; DISABILITY
------------------------------
4.1 Termination of Employment With Cause. In addition to any other
------------------------------------
remedies available to the Company at law, in equity or as set forth in this
Agreement, the Company shall have the right, upon written notice to Executive,
to immediately terminate his employment hereunder without any further liability
or obligation to him in respect of his employment (other than its obligation to
pay Base Salary, accrued vacation and expenses accrued but unpaid as of the date
of termination) if Executive: (a) breaches any material provision of this
Agreement and, if such breach is curable, in the sole judgment of the Company,
such breach is not cured within ten (10) days after written notice thereof from
the Company; or (b) has committed an act of gross misconduct in connection with
the performance of his duties hereunder, as determined in good faith by the
Board of Directors; or (c) demonstrates habitual negligence or incompetence in
the performance of his duties, as determined by the Board of Directors; or (d)
is convicted of or pleads nolo contendere to any misdemeanor involving moral
turpitude or to any felony; or (e) has committed any material act of fraud,
misappropriation of funds or embezzlement in connection with his employment
hereunder (a "Termination With Cause").
4.2 Termination of Employment Without Cause. During the Term, the Company
---------------------------------------
may at any time, in its sole discretion, terminate the employment of Executive
hereunder without cause by written notice to him. In such event, the Company
shall pay Executive an amount equal to the sum of the following:
(a) any Base Salary accrued but unpaid as of the date of termination;
(b) an amount equal to Executive's monthly Base Salary in effect on
the date of termination for the remainder of the Term, payable as and when such
amounts would have been payable hereunder had such termination not occurred (the
"Severance Period"); and
(c) any reimbursement for expenses incurred in accordance with Section
3.3.
(d) the options granted pursuant to Section 3.2 shall become fully
vested.
In addition, the Company shall use its best efforts to arrange for the
continuation, through the Severance Period, of such health and/or medical
benefits or plans as are in effect as of the date of termination, if and only if
permissible under such plans. If not so permissible, the Company shall pay to
Executive an amount sufficient to enable Executive to arrange for substantially
equivalent health and/or medical coverage during the Severance Period.
Executive acknowledges that the payments and benefits referred to in
this Section 4.2, together with any rights or benefits under any written plan or
agreement which have vested on or prior to the termination date of Executive's
employment under this Section 4.2, and together with any Bonus, if actually
awarded, constitute the only payments to which Executive shall be entitled to
receive from the Company hereunder in the event of any
termination of his employment pursuant to this Section 4.2, and that except for
such payments or benefits the Company shall have no further liability or
obligation to him hereunder or otherwise in respect of his employment.
Executive shall have no duty to secure other employment. If Executive
secures other employment or becomes self-employed during the Severance Period,
the Company's obligations under this Section 4.2 shall be reduced by the
earnings from such employment or self-employment received by Executive.
Executive will immediately notify the Company in writing if Executive becomes
employed or self-employed during the Severance Period.
4.3 Death; Disability. In the event that Executive dies or becomes
-----------------
Disabled (as defined herein), Executive's employment shall terminate when such
death occurs or, upon written notice by the Company, at any time after
Disability occurs and the Company shall pay Executive (or his legal
representative, as the case may be) as follows:
(a) any Base Salary and accrued but unpaid vacation as of the date of
death or termination for Disability;
(b) any reimbursement for expenses incurred in accordance with Section
3.3; and
(c) an amount equal to Executive's monthly Base Salary in effect on
such termination date for the lesser of (i) six months or (ii) the remainder of
the Term, payable as and when such amounts would have been due and payable
hereunder had such termination not occurred. The monthly Base Salary with
respect to any period during which Executive is Disabled shall be reduced by
amounts payable to him under any insurance plan sponsored by the Company and by
any governmental disability payments, provided that Executive's aggregate
compensation during the period of Disability shall be equal to 100% of his
monthly Base Salary then in effect.
For purposes of this Agreement, Executive shall be deemed to be
"Disabled" or have a "Disability" if, because of Executive's physical or mental
disability, he has been substantially unable to perform his duties hereunder for
twelve (12) work weeks in any twelve (12)-month period. Executive shall be
considered to have been substantially unable to perform his duties hereunder
only if he is either (i) unable to reasonably and effectively carry out his
duties with reasonable accommodations by the Company or (ii) unable to
reasonably and effectively carry out his duties because any reasonable
accommodation which may be required would cause the Company undue hardship. In
the event of a disagreement concerning Executive's perceived Disability,
Executive shall submit to such examinations as are deemed appropriate by three
practicing physicians specializing in the area of Executive's Disability, one
selected by Executive, one selected by the Company, and one selected by both
such physicians. The majority decision of such three physicians shall be final
and binding on the parties. Nothing in this paragraph is intended to limit the
Company's right to invoke the provisions of this paragraph with respect to any
perceived Disability of Executive.
Executive acknowledges that the payments referred to in this Section
4.3, together with any rights or benefits under any written plan or agreement
which have vested on or prior to the termination date of Executive's employment
under this Section 4.3, constitute the only payments to which Executive (or his
legal representative, as the case may be) shall be entitled to receive from the
Company hereunder 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) hereunder or otherwise in respect of his employment.
4.4 Continued Compliance. The amounts or benefits payable by the Company
--------------------
under Sections 4.2(b) and 4.3(c) are subject to Executive's continued compliance
with the provisions of Article V below. If Executive violates the provisions of
Article V, then the Company will have no obligation to make any of the payments
that remain payable by the Company under Sections 4.2(b) and 4.3(c) on or after
the date of such violation.
ARTICLE
OWNERSHIP OF PROCEEDS OF EMPLOYMENT;
------------------------------------
NON-DISCLOSURE; NON-COMPETITION
-------------------------------
5.1 Ownership of Proceeds of Employment. Except as specifically set forth
-----------------------------------
in Section 1.4(b), The Company shall be the sole and exclusive owner throughout
the universe in perpetuity of all of the results and proceeds of Executive's
services, work and labor during the Term in connection with Executive's
employment by the Company, free and clear of any and all claims, liens or
encumbrances. All results and proceeds of Executive's services, work and labor
during the Term shall be deemed to be works-made-for-hire for the Company within
the meaning of the copyright laws of the United States and the Company shall be
deemed to be the sole author thereof in all territories and for all purposes.
5.2 Non-Disclosure of Confidential Information. As used herein,
------------------------------------------
"Confidential Information" means any and all information affecting or relating
to the business of the Company and its Affiliates, including without limitation,
financial data, customer lists and data, licensing arrangements, business
strategies, pricing information, product development, intellectual, artistic,
literary, dramatic or musical rights, works, or other materials of any kind or
nature (whether or not entitled to protection under applicable copyright laws,
or reduced to or embodied in any medium or tangible form), including without
limitation, all copyrights, patents, trademarks, service marks, trade secrets,
contract rights, titles, themes, stories, treatments, ideas, concepts,
technologies, art work, logos, hardware, software, and may be embodied in any
and all computer programs, tapes, diskettes, disks, mailing lists, lists of
actual or prospective customers and/or suppliers, notebooks, documents,
memoranda, reports, files, correspondence, charts, lists and all other written,
printed or otherwise recorded material of any kind whatsoever and any other
information, whether or not reduced to writing, including "know-how", ideas,
concepts, research, processes, and plans. "Confidential Information" does not
include information that is in the public domain, information that is generally
known in the trade, or information that Executive can prove he acquired wholly
independently of his employment with the Company. Executive shall not, at any
time during the Term or thereafter, directly or indirectly, disclose or furnish
to any other person, firm or corporation any Confidential Information, except in
the course of the proper performance of his duties hereunder or as required by
law (in which event Executive shall give prior written notice to Company and
shall cooperate with Company and Company's counsel in complying with such legal
requirements). Promptly upon the expiration or termination of Executive's
employment hereunder for any reason or whenever the Company so requests,
Executive 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 Confidential Information.
5.3 Non-Competition. Executive shall not, for so long as he is entitled
---------------
to compensation under or pursuant to this Agreement (whether or not he is
actively employed by the Company hereunder), directly or indirectly: (a)
compete with the Company; or (b) be interested in, 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 such terms are hereinafter defined); provided, however,
that notwithstanding the foregoing, Executive may make solely passive
investments in any Competing Entity the common stock of which is "publicly
held," and of which Executive shall not own or control, directly or indirectly,
in the aggregate securities which constitute more than one (1%) percent of the
voting rights or equity ownership of such Competing Entity; or (c) 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 (d) 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 attempting
to do so.
For purposes of this Section 5.3, (i) the term "Competing Entity" shall
mean any entity which presently or during the period referred to above engages
in any business activity the Company is then engaged in or proposes to be
engaged in; and (ii) the term "Territory" shall mean any geographic area in
which the Company conducts business during such period.
5.4 Non-Solicitation. Executive shall not, for a period of two (2) years
----------------
from the date of any termination or expiration of his employment hereunder,
directly or indirectly: (a) solicit or hire, or attempt to solicit
or hire, any employee of the Company, or assist any person, firm or corporation
in doing so or attempting to do so; or (b) plan for, acquire any financial
interest in or perform any services for himself or any other entity in
connection with a business in which Executive's interest, duties or activities
would inherently require Executive to reveal any Confidential Information; or
(c) solicit or cause to be solicited the disclosure of or disclose any
Confidential Information for any purpose whatsoever or for any other party.
5.5 Breach of Provisions. In the event that Executive shall breach any of
--------------------
the provisions of this Article V, or in the event that any such breach is
threatened by Executive, 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, without the necessity of posting a
bond, to restrain any such breach or threatened breach and to enforce the
provisions of this Article V. Executive 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,
Executive shall not use as a defense thereto that there is an adequate remedy at
law.
5.6 Reasonable Restrictions. The parties acknowledge that the foregoing
-----------------------
restrictions, the duration and the territorial scope thereof as set forth in
this Article V, are under all of the circumstances reasonable and necessary for
the protection of the Company and its business.
5.7 Definition. For purposes of this Article V, the term "Company" shall
----------
be deemed to include any subsidiary of, affiliate of, predecessor to, or
successor of the Company.
ARTICLE
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, successors and assigns; provided that the rights and obligations
of Executive hereunder shall not be assignable by him.
6.2 Notices. Any notice provided for herein shall be in writing and shall
-------
be deemed to have been given or made when personally delivered or three (3) days
following deposit for mailing by first class registered or certified mail,
return receipt requested, or if delivered by facsimile transmission, upon
confirmation of receipt of the transmission, to the address of the other party
set forth below or to such other address as may be specified by notice given in
accordance with this Section 6.2:
If to the Company: Four Media Company
0000 X. Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, C.E.O.
Fax No.:818/000-0000
With a copy to: Xxxxxxxxx Glusker Fields Claman
& Machtinger LLP
0000 Xxxxxx xx xxx Xxxxx, #0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx, Esq.
Fax No.:310/000-0000
If to Executive: Xxxx Xxxxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Fax No.: 805/000-0000
With a copy to: Xxxxx & Xxxxx
0000 Xxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax No.: 310/000-0000
6.3 Severability. If any provision of this Agreement, or portion thereof,
------------
shall be held 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 parties hereto, modified, amended or limited to the
extent necessary to render the same valid and enforceable.
6.4 Confidentiality. The parties hereto agree that they will not, during
---------------
the Term or thereafter, disclose to any other person or entity the terms or
conditions of this Agreement (excluding the financial terms hereof) without the
prior written consent of the other party or as required by law, regulatory
authority or as necessary for either party to obtain personal loans or
financing. Approval of the Company and of Executive shall be required with
respect to any press releases regarding this Agreement and the activities of
Executive contemplated hereunder.
6.5 Arbitration. Any controversy, claim or dispute arising out of or in
-----------
any way relating to this Agreement, the alleged breach thereof, and/or
Executive's employment with the Company or termination therefrom, including
without limitation, any and all claims for employment discrimination or
harassment, shall be determined by binding arbitration administered by the
American Arbitration Association under its National Rules for Resolution of
Employment Disputes ("Rules") which are in effect at the time of the arbitration
or the demand therefor. The Rules are hereby incorporated by reference.
California Code of Civil Procedure (S)1283.05, which provides for certain
discovery rights, shall apply to any such arbitration, and said code section is
also hereby incorporated by reference. In reaching a decision, the arbitrator
shall have no authority to change, extend, modify or suspend any of the terms of
this Agreement. The arbitration shall be commenced and heard in Los Angeles
County, California. The arbitrator(s) shall apply the substantive law (and the
law of remedies, if applicable) of California or federal law, or both, as
applicable to the claim(s) asserted. Judgment on the award may be entered in
any court of competent jurisdiction, even if a party who received notice under
the Rules fails to appear at the arbitration hearing(s). The parties may seek,
from a court of competent jurisdiction, provisional remedies or injunctive
relief in support of their respective rights and remedies hereunder without
waiving any right to arbitration. However, the merits of any action that
involves such provisional remedies or injunctive relief, including, without
limitation, the terms of any permanent injunction, shall be determined by
arbitration under this paragraph. The prevailing party in any such arbitration
shall be entitled to an award of reasonable attorneys' fees and costs of the
arbitration.
6.6 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.
6.7 Controlling Nature of Agreement. To the extent any terms of this
-------------------------------
Agreement are inconsistent with the terms or provisions of the Company's
Employee Manual or any other personnel policy statements or documents, the terms
of this Agreement shall control. To the extent that any terms and conditions of
Executive's employment are not covered in this Agreement, the terms and
conditions set forth in the Employee Manual or any similar document shall
control such terms.
6.8 Entire Agreement. This Agreement sets forth the entire agreement
----------------
between the parties with respect to the subject matter hereof, and supersedes
any and all prior agreements or understanding between the Company and Executive,
whether written or oral, fully or partially performed relating to any or all
matters covered by and contained or otherwise dealt with in this Agreement.
This Agreement does not constitute a commitment of the Company with regard to
Executive's employment, express or implied, other than to the extent expressly
provided for herein.
6.9 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 modification, change or amendment is sought to be
enforced.
6.10 Authority. The parties 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.
6.11 Applicable Law. This Agreement, and all of the rights and
--------------
obligations of the parties in connection with the employment relationship
established hereby, shall be governed by and construed in accordance with the
substantive laws of the State of California without giving effect to principles
relating to conflicts of law.
6.12 Counterparts. Thus Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"COMPANY"
FOUR MEDIA COMPANY, a Delaware corporation
By: __________________________________
Title: __________________________________
"EXECUTIVE"
__________________________________________
Xxxx Xxxxxxxxx
