EXHIBIT 10.4
CONSULTING AGREEMENT
1. Identification
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This Consulting Agreement (the "Agreement") is made and entered into as of
February 2, 1998 by and between Four Media Company, a Delaware corporation
("4MC"), and Xxxxx Xxxxxx ("Xxxxxx").
2. Recitals
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2.1 4MC and its operating subsidiaries are engaged in the business of
providing technical and creative services to the entertainment industry.
2.2 Pursuant to the certain Stock Purchase Agreement dated November 14,
1997, entered into by and among 4MC and the Shareholders of Visualize, a
California corporation d/b/a POP ("POP"), 4MC agreed to acquire all of the
Common Stock of POP. POP is engaged in providing post production services to
the entertainment industry.
2.3 Xxxxxx was a substantial stockholder of POP and was engaged in the
active management of POP. Xxxxxx has accumulated substantial knowledge in the
fields in which POP is engaged, in the management of companies engaged in such
fields and in particular in the management of POP.
2.4 4MC desires to engage Xxxxxx as an independent contractor to provide
advice in connection with the POP business and related activities of other
operating subsidiaries of 4MC and Xxxxxx desires to provide such services on
the terms and conditions hereinafter set forth.
3. Term
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This Agreement shall commence on the date hereof and shall continue for
three (3) years, through the day prior to the third anniversary hereof ("Term").
4. General Terms
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4.1 Nature of Agreement. The parties acknowledge and agree that Xxxxxx
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will be retained by 4MC as an independent contractor, and not as an employee,
and that, as an independent contractor of 4MC, Xxxxxx will be under the control,
supervision and direction of 4MC only as to the results of the services provided
to 4MC under the terms of this Agreement, and not as to the means by which such
services are provided.
4.2 Duties and Services. During the term of this Agreement, Xxxxxx agrees
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to perform such consulting services as may be assigned to Xxxxxx by the Chief
Executive Officer of 4MC consistent with the knowledge and expertise of Xxxxxx.
Except as specifically directed by 4MC, it is agreed that Xxxxxx shall have no
authority to act on behalf of 4MC. Although no specific number of hours is
required of Xxxxxx hereunder, it is understood that substantial time may be
required to fulfill Xxxxxx'x obligations hereunder and that Xxxxxx shall work at
such time or times as are reasonably required to fulfill his obligations
hereunder.
5 Compensation
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5.1 Basic Compensation. In consideration of the consulting services to be
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rendered by Xxxxxx hereunder, 4MC shall pay to Xxxxxx the sum of Fifty Thousand
Dollars ($50,000) per annum, payable quarterly, commencing on the 90th day after
the date of this Agreement and continuing on the same day of each third month
during the Term.
5.2 Discretionary Bonus. In addition to the quarterly compensation, 4MC
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may make discretionary bonus payments to Xxxxxx under such terms, conditions and
requirements as may be determined by 4MC's Chief Executive Officer in his sole
discretion, it being contemplated that any such bonus or bonuses, if awarded,
shall not exceed One Hundred Thousand Dollars ($100,000) during the Term.
5.3 Expenses. 4MC shall from time to time pay or reimburse Xxxxxx for the
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reasonable and necessary expenses incurred by Xxxxxx in connection with the
performance of his duties hereunder if such expenses have been previously
approved by 4MC or if reimbursement is otherwise appropriate in accordance with
4MC's established policies and if 4MC receives such verification thereof as 4MC
may require in order to qualify such expenses as deductible business expenses.
5.4 No Withholding. Because Xxxxxx is retained as an independent
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contractor and not as an employee, 4MC and Xxxxxx acknowledge and agree that no
federal and state taxes, social security contributions or other deductions shall
be made by 4MC from the payments made to Xxxxxx pursuant to this Article 5, and
that Xxxxxx will remain solely liable for the payment of all such taxes. Xxxxxx
further acknowledges that 4MC will report compensation paid pursuant to this
Agreement on a Form 1099 at the end of the year in which Xxxxxx'x services were
provided. Xxxxxx hereby expressly covenants to make such tax payments as may be
required by applicable law and to indemnify and hold 4MC harmless for any
liability 4MC may incur as a consequence of Xxxxxx'x failure to make such
payments.
6. Benefits
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6.1 No Additional Benefits. Except as set forth in Section 6.2, Xxxxxx
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shall receive no additional benefits hereunder, and Xxxxxx acknowledges that 4MC
shall not be responsible for providing Xxxxxx with health insurance, pension
benefits or any other benefits provided by 4MC to its employees.
6.2 1997 Stock Option Plan. Xxxxxx shall be entitled to nonqualified
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stock options covering fifty thousand (50,000) shares of 4MC's common stock, par
value $.01, to be granted under 4MC's Stock Option Plan (the "Plan"), within ten
(10) days of the date of this Agreement, at an exercise price equal to the fair
market value of 4MC's common stock at the close of trading on the Friday before
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 4MC's standard Stock Option
Agreement.
7. Termination, Death, Disability.
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7.1 Termination of Agreement With Cause. In addition to any other
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remedies available to 4MC at law, in equity or as set forth in this Agreement,
4MC shall have the right, upon written notice to Xxxxxx, to immediately
terminate this Agreement if Xxxxxx: (a) breaches any material provision of this
Agreement and, if such breach is curable, in the sole judgment of 4MC, such
breach is not cured within ten (10) days after written notice thereof from 4MC;
or (b) has committed an act of gross misconduct in connection with the
performance of his duties hereunder as determined by the Board of Directors; or
(c) demonstrates incompetence or habitual negligence 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 act of fraud, misappropriation of funds or embezzlement
in connection with is services hereunder.
7.2 Death; Disability. In the event that Xxxxxx dies or becomes Disabled
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(as defined herein), this Agreement shall terminate when such death occurs or,
upon written notice by 4MC, at any time after Disability occurs.
7.3 For purposes of this Agreement Xxxxxx shall be deemed to be "Disabled"
or have a "Disability" if, because of his 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.
7.4 Obligations. Xxxxxx acknowledges that, if this Agreement is
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terminated under this Article 7, 4MC shall have no further obligation to Xxxxxx
except to pay any quarterly compensation accrued but unpaid as of the date of
termination, any reimbursement for expenses incurred in accordance with Section
5.3, and any unpaid bonus theretofore actually awarded under Section 5.2.
8. Ownership of Proceeds; Non-Disclosure
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8.1 Results and Proceeds of Employment. 4MC shall be the sole and
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exclusive owner throughout the universe in perpetuity of all of the results and
proceeds of Xxxxxx'x services, work and labor during the Term in connection with
Xxxxxx'x services rendered to 4MC, free and clear of any and all claims, liens
or encumbrances. All results and proceeds of such services, work and labor
during the Term shall be deemed to be works-made-for-hire for 4MC within the
meaning of the copyright laws of the United States and 4MC shall be deemed to be
the sole author thereof in all territories and for all purposes.
8.2 Non-Disclosure of Confidential Information. As used herein,
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"Confidential Information" means any and all information affecting or relating
to the business of 4MC 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 Xxxxxx can prove he acquired wholly
independently of his services for 4MC. Xxxxxx 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 Xxxxxx shall give prior written notice to 4MC and shall cooperate
with 4MC and 4MC's counsel in complying with such legal requirements). Promptly
upon the expiration or termination of Xxxxxx'x services hereunder for any reason
or whenever 4MC so requests, Xxxxxx shall surrender to 4MC 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.
8.3 Non-Competition. Xxxxxx shall not, for so long as he is entitled to
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compensation under or pursuant to this Agreement, directly or indirectly: (a)
compete with 4MC; 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,
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that notwithstanding the foregoing, Xxxxxx may make solely passive investments
in any Competing Entity the common stock of which is "publicly held," and of
which Xxxxxx shall not own or control, directly or indirectly, in the aggregate
securities which constitute more than two (2%) percent of the voting rights or
equity ownership of such Competing Entity; or (c) solicit or divert any business
or any customer from 4MC 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 4MC or assist any
person, firm or corporation in doing so or attempting to do so.
For purposes of this Section 8.3, (i) the term "Competing Entity" shall
mean any entity which presently or during the period referred to above engages
in any business activity 4MC is then engaged in or proposes to be engaged in;
and (ii) the term "Territory" shall mean any geographic area in which 4MC
conducts business during such period.
8.4 Non-Solicitation. Xxxxxx shall not, for a period of two (2) years
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from the date of any termination or expiration of his services hereunder,
directly or indirectly: (a) solicit or hire, or attempt to solicit or hire, any
employee of 4MC, 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 Xxxxxx'x interest, duties or activities would inherently
require Xxxxxx 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.
8.5 Breach of Provisions. In the event that Xxxxxx shall breach any of
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the provisions of this Article 8, or in the event that any such breach is
threatened by Xxxxxx, in addition to and without limiting or waiving any other
remedies available to 4MC at law or in equity, 4MC 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 8. Xxxxxx 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, Xxxxxx shall not use
as a defense thereto that there is an adequate remedy at law.
8.6 Reasonable Restrictions. The parties acknowledge that the foregoing
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restrictions, the duration and the territorial scope thereof as set forth in
this Article 8, are under all of the circumstances reasonable and necessary for
the protection of 4MC and its business.
8.7 Definition. For purposes of this Article 8, the term "4MC" shall be
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deemed to include any subsidiary of, affiliate of, predecessor to or successor
of 4MC.
9. Miscellaneous
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9.1 Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of the parties hereto and their respective legal representatives, heirs,
distributees, successors and assigns; provided that the rights and obligations
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of Xxxxxx hereunder shall not be assignable by him.
9.2 Notices. Any notice provided for herein shall be in writing and shall
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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 9.2:
If to 4MC: Four Media 4MC
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 Xxxxxx: Xxxxx Xxxxxx
000 00xx Xxxxxx
Xxxxx Xxxxxx, XX 00000
Fax No.: __________________________
With a copy to: ___________________________________
___________________________________
___________________________________
___________________________________
Fax No.: _______________________
9.3 Severability. If any provision of this Agreement, or portion thereof,
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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.
9.4 Arbitration. Any controversy, claim or dispute arising out of or in
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any way relating to this Agreement, the alleged breach thereof, and/or Xxxxxx'x
relationship with 4MC or termination therefrom shall be determined by binding
arbitration administered by the American Arbitration Association applicable
rules ("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.
9.5 Waiver. No waiver by a party hereto of a breach or default hereunder
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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.
9.6 Entire Agreement. This Agreement sets forth the entire agreement
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between the parties with respect to the subject matter hereof, and supersedes
any and all prior agreements or understanding between 4MC and Xxxxxx, 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.
9.7 Amendment. No modification, change or amendment of this Agreement or
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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.
9.8 Authority. The parties each represent and warrant that they have the
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power, authority and right to enter into this Agreement and to carry out and
perform the terms, covenants and conditions hereof.
9.9 Applicable Law. This Agreement, and all of the rights and obligations
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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.
9.10 Counterparts. Thus Agreement may be executed in counterparts, each
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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.
"4MC"
FOUR MEDIA COMPANY
By:________________________________
Name:______________________________
Title:_____________________________
"XXXXXX"
___________________________________
Xxxxx Xxxxxx
