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Exhibit 10.55
THE XXXXXX ENTERTAINMENT COMPANY
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
As of May 1, 1998
Xxxxx Xxxxxxx Productions
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxx Xxx, Xxxxxxxxxx 00000
Re: Consulting Agreement
Gentlemen:
When executed by you ("Lender") and by a duly authorized representative
of The Xxxxxx Entertainment Company (the "Company"), this letter will set forth
the terms and conditions of your provision to Company of the services of Xxxxx
Xxxxxxx ("Xxxxxxx") (this document is hereinafter referred to as the
"Agreement").
1. SERVICES.
1.1 CONSULTANCY. Company hereby contracts with Lender during the
Term (as hereinafter defined) to provide the consulting services of Xxxxxxx to
create, during the Term, an entertainment magazine prototype, together with
certain subsequent issues of such magazine should the prototype be accepted by
Company for publication, featuring Company's characters and properties in a
form and content deemed acceptable by Company, as determined in Company's sole
discretion, together with such other services related to Company's characters
and properties, as requested by Company, for exploitation in other
entertainment related fields, such as, but not limited to, Direct to Video
programs and Theatrical films (all such activities are referred to herein as
the "Services") and such other duties as Company may from time to time
reasonably request and which are consistent with Xxxxxxx' stature and
experience. The Services shall be performed at Company's principal offices in
the City of Los Angeles, and from time to time on a temporary travel basis at
such other location as Company shall reasonably request consistent with its
reasonable business needs. Xxxxxxx agrees to perform such Services in a
competent and professional manner.
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1.2. REPORTING REQUIREMENTS. Xxxxxxx shall report to the Chief Executive
Officer ("CEO") and the Chief Financial Officer ("CFO") of Company and/or such
other individuals as may be designated by the CEO, the CFO, or their authorized
representatives, as the case may be.
1.3. TERM/EXCLUSIVITY.
1.3.1. The Term of this Agreement shall be for one (1) year; shall
commence as of May 1, 1998 and shall end on May 1, 1999 (the "Initial Term")
unless sooner terminated in accordance with the provisions of this Agreement and
subject to the following sentence. Notwithstanding the foregoing, Company shall
have two (2) separate, immediately subsequent options, consisting of one (1)
year each (referred to, respectively, as the First Option Period and the Second
Option Period) to extend the term of this agreement, upon notice to Lender or
Xxxxxxx, upon the same terms and conditions contained herein. Each such option
period shall commence upon the expiration of the immediately preceeding Initial
Term or, if exercised, the First Option Period. Any such option periods, to the
extent exercised, taken together with the Initial Term, shall be referred to
herein as the "Term". Options can only be exercised if Xxxxxxx has been paid at
least two hundred thousand dollars ($200,000) for the prior year.
1.3.2. The Services shall be rendered on a full time basis during normal
working hours and all Services of Xxxxxxx shall be exclusive to Company except
for those activities not competitive with Company's activities and only to the
extent the performance of such activities do not reduce or inhibit the
performance of the Services by Xxxxxxx for the Company. Xxxxxxx agrees that
during the Term he shall not, without the further approval of an authorized
officer of Company, directly or indirectly engage in or participate as an
officer, employee, director, agent of or consultant for any business directly
competitive with that of Company's business. Xxxxxxx can be a passive executive
producer on a non-competitive (non-children's) project.
1.3.3. Notwithstanding anything to the contrary contained in this
Section 1.3, Xxxxxxx may acquire and/or retain, solely as an investment, and may
take customary actions to maintain and preserve Xxxxxx'x ownership of:
(a) Securities of any partnership, trust, corporation or other person
which are registered under Sections 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and which are publicly traded as long as Executive's
investment amounts to less than five percent (5%) of the equity in such entity;
and
(b) Any securities of a partnership, trust, corporation or other person
not registered as set forth in 1.3.3.(a) above so long as Xxxxxxx remains a
passive investor in that entity and does not become part of any control group
thereof and so long as such entity is not, directly or indirectly, in
competition with Company.
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1.4. CONFIDENTIALITY. Xxxxxxx acknowledges that the Services will,
throughout the Term, bring Xxxxxxx into close contact with many confidential
affairs of Company, including information about costs, profits, markets, sales,
products, key personnel, pricing policies, operational methods, technical
processes and other business affairs and methods and other information not
readily available to the public, and plans for future development. Xxxxxxx
further acknowledges that the business of Company is international in scope,
that its products are marketed throughout the world, that Company competes in
nearly all of its business activities with other organizations which are or
could be located in nearly any part of the world and that the nature of Xxxxxxx'
services, position and expertise are such that he is capable of competing with
Company from nearly any location in the world. In recognition of the foregoing,
Xxxxxxx covenants and agrees:
1.4.1. That Xxxxxxx will keep secret all trade secrets of Company which are
not otherwise in the public domain and will not intentionally disclose them to
anyone outside of Company, either during or after the Term, except with
Company's written consent and except for such disclosure as is necessary in the
performance of Xxxxxxx' duties during the Term; and
1.4.2. That Xxxxxxx will deliver promptly to Company on termination of the
Term or at any other time Company may so request, at Xxxxxxx' expense, all
confidential memoranda, notes, records, reports and other documents (and all
copies thereof) relating to Company's business, which Xxxxxxx obtained while
consulting, or otherwise serving or acting on behalf of, Company or which
Xxxxxxx may then possess or have under his control.
2. COMPENSATION.
As compensation and consideration for all Services provided by Xxxxxxx
during the Term pursuant to this Agreement, Company agrees to pay to Lender the
compensation set forth below.
2.1. PUBLISHING PROTOTYPE COSTS. Company shall provide Twenty Five Thousand
Dollars ($25,000.00) for the prototype issue of the magazines to be produced by
Xxxxxxx pursuant to his performance of the Services. Said advance shall cover
all preliminary expenses necessary for the production of such prototype and
shall be inclusive of the first issue payment of Ten Thousand Dollars
($10,000.00) for the month of May, 1998 pursuant to paragraph 2.2 below and
shall be payable upon the complete execution of this agreement. Xxxxxxx shall
provide Company with original invoices and detailed accountings of all costs, as
they are incurred, relating to the expenditure of the Fifteen Thousand Dollar
expense allotment for the production of the prototype specified in this
paragraph. The prototype shall be completed in a manner deemed satisfactory to
Company and delivered to Company (together with proof of payments) by June 30,
1998. Xxxxxxx shall be solely responsible for the payment of costs incurred in
connection with the production of the prototype, and shall be reimbursed by the
Company upon submission of appropriate documentation.
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2.2. PUBLISHING COSTS. Subsequent to the production of the prototype
specified in 2.2 above, Company shall provide Ten Thousand Dollars ($10,000.00)
per issue for Xxxxxxx' services on the magazines which are the subject of the
Services. Such amount shall be payable by Company upon the initial date of U.S.
commercial publication of each wholly new issue of the relevant magazine
subsequent to the prototype issue. In addition to the foregoing, Company shall
pay Lender a bonus in an amount equal to ten percent (10%) of the pre-tax net
income actually derived by Company from the magazines which are the subject of
the Services. The bonus specified in the immediately preceding sentence shall
be separate from the per issue payment specified in the first sentence of this
paragraph and shall be subject to an annual maximum limit of One Hundred
Thousand Dollars ($100,000.00) per year (regardless of the number of issues or
magazines involved) and shall be calculated and accounted for according to
Company's standard definitions and accounting practices. Bonuses will be paid
on completion of annual audit.
2.3. THEATRICAL MOTION PICTURES. Should Xxxxxxx render substantial
Services on any full length theatrical motion picture to be domestically
released in the United States featuring a character or property of the Company,
at Company's sole request, then Lender shall be entitled to an executive
producing fee of One Hundred and Fifty Thousand Dollars ($150,000.00) for each
such motion picture if Company is not the Producer (as such term is commonly
understood in the motion picture industry) of the motion picture in question.
In addition, if Company does not produce such motion picture, Lender shall be
entitled to an additional fee equal to ten percent (10%) of Company's actually
received net receipts derived from the exhibition of the picture concerned and
received from the producer or distributor of the picture in question. In the
event that the Company serves as the Producer of the motion picture in
question, then the fees to be payable to Lender for Xxxxxxx' Services shall be
negotiated in good faith between the parties hereto. With respect to the fees
payable pursuant to this paragraph, the Company shall make the sole
determination, in its reasonable business judgment, as to whether Xxxxxxx has
rendered Services substantial enough to qualify for such fees. Payment of the
executive production fees specified in the first sentence of this paragraph
shall be made: One third (1/3) upon the commencement of principal photography;
one third (1/3) upon the completion of principal photography; and the remaining
one third (1/3) upon the delivery of the answer print to, and acceptance of
such by, the Company. Bonuses will be paid on completion of annual audit.
2.4. DIRECT TO VIDEO MOTION PICTURES. The parties agree that Xxxxxxx
render substantial Services on any full length "direct to video" motion picture
to be domestically released in the United States featuring a character or
property of the Company. Lender shall be entitled to a producing fee of One
Hundred Thousand Dollars ($100,000.00) per each such direct to video motion
picture. In addition, Lender shall be entitled to an additional fee equal to
two percent (2%) of Company's actually received net receipts derived from the
sale of the home video version of the picture concerned plus ten percent (10%)
of the Company's actually received net receipts derived from ancillary
exploitation of such direct to video motion picture. All net receipts payments
specified in this paragraph shall be subject to a maximum payable of
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One Hundred and Fifty Thousand Dollars ($150,000.00) per motion picture, subject
to the following sentence. In the event that any direct to video motion picture
specified in this paragraph, and for which a payment is payable to Lender, is
domestically theatrically released and generally distributed throughout the
United States, then the maximum cap specified in the immediately preceding
sentence shall be removed (in which event the provisions of this paragraph shall
apply and the provisions of the immediately preceding paragraph shall not be
applicable even though it may be claimed that the direct to video motion picture
should now be qualified as a motion picture under paragraph 2.3 above). With
respect to the fees payable pursuant to this paragraph, the Company shall make
the sole determination, in its reasonable business judgment, as to whether
Xxxxxxx' has rendered Services substantial enough to qualify for such fees.
Payment of the production fees specified in the first sentence of this paragraph
shall be made: One third (1/3) upon the commencement of principal photography;
one third (1/3) upon the completion of principal photography; and the remaining
one third (1/3) upon the delivery of all video masters to, and acceptance of
such by, the Company. Bonuses will be paid upon completion of annual audit.
2.5. STOCK OPTION AWARDS. Lender shall receive a grant of Ten
Thousand (10,000) performance based options in and to the Company's common stock
at the beginning of each year of the Term at a price equal to the market price
then in effect at the time of each such grant, pursuant to the Company's 1997
Stock Option Plan.
2.6 EXPENSES. Company will reimburse Xxxxxxx for his reasonable
Company approved business expenses incurred in connection with the performance
of his Services under the Agreement, subject to, and in accordance with,
Company's general policies regarding business expenses.
3. TERMINATION.
3.1. TERMINATION BY COMPANY.
(a) Xxxxxxx' or Lender's Material Breach. The Company shall have the
right, at its election, to terminate the Term for "Xxxxxxx' or Lender's Material
Breach," which shall consist of (i) material and repeated instances of
misconduct or habitual inability to perform the Services, or violation of
Company's established policies or procedures, (ii) a single act so grievous as
to constitute the equivalent of such repeated instances (including, without
limitation, theft, misappropriation of Company's assets, conviction of a felony,
or sexual harassment), (iii) unauthorized intentional disclosure of any of
Company's trade secrets or (iv) a material breach of any covenant, condition
agreement or term of this Agreement and only if Company shall have given written
notice to Lender or Xxxxxxx specifying the claimed cause or breach and, provided
such breach is curable, Lender or Xxxxxxx fail to correct the claimed breach or
fails to alter the objectionable patter of conduct specified in the applicable
written notice as soon as practical thereafter but no later than thirty (30)
days after receipt of the applicable notice or such longer time as may be
reasonably required by the nature of the claimed breach.
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(b) Effect of Termination by Company. Should the Term be terminated
by Company by reason of Lender's or Xxxxxxx' Material Breach, Lender or Xxxxxxx
shall have no right to any further benefits or compensation from and after
termination.
3.2 TERMINATION BY LENDER OR XXXXXXX.
(a) Company's Material Breach. Lender or Xxxxxxx shall have the
right, at their election, to terminate the Term only for "Company's Material
Breach," which shall consist of the Company's failure or refusal to comply with
a material term of this Agreement or misfeasance or gross negligence in
performing under this Agreement. In order to terminate the Term, Lender or
Xxxxxxx shall be required to give written notice specifying the claimed breach
and the Company shall have failed to correct the claimed breach, if such breach
is curable, or alter the objectionable pattern of conduct specified in the
applicable written notice, no later than thirty (30) days after receipt of the
applicable notice or such longer time as may be reasonably required by the
nature of the claimed breach.
(b) Effect of Termination by Lender or Xxxxxxx. Should Lender or
Xxxxxxx terminate the Term due to Company's Material Breach, the Company shall,
subject to any right of offset for any indebtedness of Lender or Xxxxxxx, pay
Lender what Lender would have been entitled to during the then remaining
portion of the Term with respect to the producer's fees or percentage
participations specified above.
4. DEATH AND DISABILITY.
4.1 DEATH. The Term shall immediately terminate upon Xxxxxxx' death
as certified in accordance with the provisions of California law ("Death").
4.2 DISABILITY. As used herein, the term "Disability" shall mean
Xxxxxxx becoming unable to fully perform the Services as a result of his
permanent or temporary, total or partial, physical or mental disability for any
two (2) months during the Term ("Disability"). In such event, Company shall
have the right (notwithstanding any other provision of this Agreement to the
contrary) to terminate the Term upon notice to Lender or Xxxxxxx.
4.3 EFFECT OF DEATH OR DISABILITY. Should the Term be terminated in
accordance with the provisions of Paragraphs 4.1 or 4.2 by reason of Death or
Disability, Xxxxxxx (or his estate) or Lender shall have no right to any
further compensation (other than any stock options vested at the time of such
Death or Disability; fees or percentage participations, but solely to the
extent Services have been fully performed in connection with such).
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5. COVENANT NOT TO SOLICIT.
Until one year after actual termination of Xxxxxxx' consultancy with
the Company, Xxxxxxx or Lender shall not, directly or indirectly, solicit or
induce any of the Company's or its parent's or subsidiaries' employees to
terminate their employment with the Company or its parent or any of its
subsidiaries or knowingly interfere with the Company's or its parent or any of
its subsidiaries then contractual relationships or knowingly disparage the
company or its parent or any of its subsidiaries or its executives.
6. ATTORNEY'S FEES.
In the event there is commenced any action, suit or proceeding in
respect of a dispute arising out of this Agreement, the parties hereto agree
that the prevailing party shall be entitled to reimbursement upon demand for
all reasonable fees and actual expenses of counsel in connection with each
claim constituting a portion of such action, suit or proceeding in which he is
the prevailing party. A party shall be a "prevailing party" as to a claim if
such party is successful in proving or disproving the cause of action asserted
or contested.
7. GENERAL.
7.1 APPLICABLE LAW CONTROLS. Nothing contained in this Agreement shall be
construed to require the commission of any act contrary to law and wherever
there is any conflict between any provisions of this Agreement and any material
statute, law, ordinance or regulation contrary to which the parties have no
legal right to contract, then the latter shall prevail; provided, however, that
in any such event the provisions of the Agreement so affected shall be
curtailed and limited only to the extent necessary to bring them within
applicable legal requirements.
7.2 WAIVER/ESTOPPEL. Any party hereto may waive the benefit of any term,
condition or covenant in this Agreement or any right or remedy by law or in
equity to which any party may be entitled but only by an instrument in writing
signed by the parties to be charged. No estoppel may be raised against any
party except to the extent the other parties rely on an instrument in writing,
signed by the party to be charged, specifically reciting that the other parties
may rely thereon. The parties' rights and remedies under and pursuant to this
Agreement or at law or in equity shall be cumulative and the exercise of any
rights or remedies under one provision hereof or rights or remedies at law or
in equity shall not be deemed an election of remedies; and any waiver or
forbearance of any breach of this Agreement or remedy granted hereunder or at
law or in equity shall not be deemed a waiver of any preceding or succeeding
breach of the same or any other provision hereof or of the opportunity to
exercise such right or remedy or any other right or remedy, whether or not
similar, at any preceding or subsequent time.
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7.3. NOTICES. Any notice which Company is required or may
desire to give to Lender hereunder shall be in writing and may be served by
delivering it to Lender or Xxxxxxx, or by sending it to Lender or Xxxxxxx by
mail, telex, or telegraph, at such address as Lender or Xxxxxxx may from time to
time designate to Company. Any notice which is required or may be served upon
Company hereunder shall be in writing and may be served by delivering it
personally or by sending it by mail, telex or telegraph to the address set forth
on Page 1 hereof or such other substitute addresses as Company may from time to
time designate by notice. Notices regarding cure of an alleged breach hereof
shall be sent by certified registered mail and shall be effective upon receipt.
7.4 GOVERNING LAW. This Agreement shall be governed by,
construed and enforced, and the legality and validity of each term and condition
shall be determined, in accordance with the internal, substantive laws of the
State of California applicable to agreements fully executed and performed
entirely in California. Any actions brought relating to this Agreement may be
brought only in the Courts, State or Federal, located within County of Los
Angeles, State of California.
7.5 CAPTIONS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
7.6 NO JOINT VENTURES. Nothing herein contained shall
constitute a partnership between or joint venture by the parties hereto or
appoint any party the agent of any other party. No party shall hold itself out
contrary to the terms of this paragraph and, except as otherwise specifically
provided herein, no party shall become liable for the representation, act or
omission of any third party who is not referred to herein and shall not be
deemed to give right or remedy to any such third party.
7.7 NO EMPLOYMENT. In entering into this Agreement, and in
providing the Services, Lender and Xxxxxxx have and shall have the status of
independent consultants and contractors and nothing herein shall contemplate or
constitute Lender or Xxxxxxx as Company's agents or employees.
7.8 VALIDITY. This Agreement shall not become effective,
further subject 7.10 below, until executed by all proposed parties hereto.
7.9 MODIFICATION/ENTIRE AGREEMENT. This Agreement may not be
altered, modified or amended except by an instrument in writing signed by all
of the parties hereto. No person, whether or not an officer, agent, employee or
representative of any party, has made or has any authority to make for or on
behalf of that party any agreement, representation, warrant, statement,
promise, arrangement or understanding not expressly set forth in any other
document executed by the parties concurrently herewith ("Parol Agreements").
This Agreement and all other documents executed by the parties concurrently
herewith constitute the entire agreement between the parties and supersede all
express or implied, prior or concurrent, Parol Agreements
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and prior written agreements with respect to the subject matter hereof. The
parties acknowledge that in entering into this Agreement, they have not relied
and will not in any way rely upon any Parol Agreements.
7.10 BOARD APPROVAL. Notwithstanding anything to the contrary contained
herein, the validity and effectiveness of this Agreement, as well as any of
Company's obligations thereunder, are expressly contingent upon the approval by
the Company's Board of Directors of all material terms contained above.
Notwithstanding the foregoing, in the event that the Company's Board of
Directors fails to approve this Agreement, Lender shall nonetheless receive
from Company an amount representing the "commencement of photography" payment
($33,333.00) referred to in paragraph 2.4 above for services already rendered
by Xxxxxxx in connection with the direct to video motion picture currently
referred to as "Xxxx Xxxx'x Easter."
Please confirm your agreement to the foregoing by signing below where
indicated.
Very truly yours,
THE XXXXXX ENTERTAINMENT COMPANY
By: /s/ XXXXXXX X. HOPE
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Agreed to and Accepted
/s/ XXXXX XXXXXXX PRES. XXXXX XXXXXXX PRODUCTIONS, INC.
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Xxxxx Xxxxxxx Productions
Tax ID# 00-0000000
I have read and understand the foregoing agreement and agree to be bound by its
terms and conditions insofar as they relate to my services as an independent
consultant.
/s/ XXXXX XXXXXXX
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Xxxxx Xxxxxxx
SS# ###-##-####
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