printer-friendly

Sample Business Contracts

Separation and Consulting Agreement - Media Arts Group Inc. and Kenneth E. Raasch

Sponsored Links

                       SEPARATION AND CONSULTING AGREEMENT

                  This Separation and Consulting Agreement (the "Agreement") is
entered into between MEDIA ARTS GROUP INC. ("MAGI"), a Delaware corporation, and
Kenneth E. Raasch (the "Consultant") effective the 27th day of May, 1999.

                                    RECITALS


         WHEREAS, THE PARTIES ENTERED INTO AN EMPLOYMENT AGREEMENT DATED JANUARY
1, 1994, AND A UNANIMOUS BOARD RESOLUTION AMENDING SUCH EMPLOYMENT AGREEMENT
DATED OCTOBER 29, 1997 (COLLECTIVELY REFERRED TO AS THE "EMPLOYMENT AGREEMENT").


         WHEREAS, THE PARTIES WISH TO TERMINATE THE EMPLOYMENT AGREEMENT.

C. WHEREAS, MAGI desires to retain the services of the Consultant as an
independent contractor, and Consultant is willing to perform such services, on
the terms set forth herein.

         NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth in this Agreement, and contingent upon approval of this
Agreement by the Compensation Committee of the MAGI Board of Directors and a
disinterested majority of the Board, MAGI and the Consultant agree as follows:

         1.       RESIGNATION, CONSULTING SERVICES AND COMPENSATION

(a)      Consultant agrees to perform for MAGI the services described in the
         attached EXHIBIT A ("Services").

         (b) MAGI agrees to pay Consultant the compensation set forth in the
attached EXHIBIT B for the performance of the Services. Payment for the
Consultant's Services is contingent upon the Consultant making himself
available, at mutually agreeable times, for up to 80 hours of consulting per
month during the Term of this Agreement. The parties acknowledge and agree
that Consultant may conduct a substantial amount of the Services via
telephone, fax, e-mail and off-site attendance, and that in circumstances
where in-person attendance is required, MAGI shall give Consultant reasonable
notice prior to such required attendance. Consultant shall be permitted
reasonable opportunity for vacation time.

         2.       TERM AND TERMINATION OF AGREEMENT

         (a) This Agreement will commence on May 27, 1999 and will continue
until December 31, 2000 or until otherwise terminated as provided by this
Section 2 (the "Term").


         (b) MAGI, upon a majority vote by its Board of Directors, may terminate
this Agreement for good cause upon sixty (60) days prior written notice to
Consultant. For the purposes of this agreement "good cause" shall mean
termination upon (1) the failure by the Consultant to substantially perform his
duties with MAGI (other than any such failure resulting from his incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to him by the MAGI Board, which demand specifically
identifies the manner in which the Board believes that he has not substantially
performed his duties or (2) the willful engaging by the Consultant in conduct
which is demonstrably and materially injurious to the Employer, monetary or
otherwise. For purposes of this paragraph, no act, or failure to act, on the
Consultant's part shall be deemed "willful" unless done, or omitted to be done,
by him not in good faith and without the reasonable belief that this action or
omission was in the best interest of the MAGI.

Notwithstanding the foregoing, the Consultant shall not be deemed to have been
terminated for good cause unless and until the parties achieve resolution of the
issue pursuant to Section 16 below, with such resolution resulting in a final
award of an
<PAGE>

arbitrator finding that Consultant has engaged in the conduct set
forth above in this paragraph (b) and specifying the particulars thereof in
detail. In the event such arbitrator returns an award in favor of MAGI,
Consultant shall repay all monies paid to him under the Agreement after the date
60 days from the date the notice is provided by the Board pursuant to paragraph
(b) above, unless the arbitrator determines otherwise.

         (c) Upon such termination all rights and duties of the parties shall
cease except that: (i) MAGI shall be obligated to pay, within thirty (30) days
of the effective date of termination, all amounts owing to Consultant for
Services rendered and expenses, if any, incurred prior to the termination date,
in accordance with the provisions of Section 1 hereof; and (ii) Sections 3
(Confidentiality), 4 (Ownership), 8 (Independent Contractor) shall survive
termination of this Agreement.

         3.       CONFIDENTIALITY

         (a) "Confidential Information" means any MAGI proprietary information,
technical data, trade secrets or know-how, and the proprietary information,
technical data, trade secrets of know-how of any third party imparted to MAGI in
confidence. "Confidential Information" includes, but is not limited to,
research, product plans, products, services, suppliers, supplier lists,
customers, customer lists, markets, software, Developments, processes, formulas,
technology, designs, drawings, engineering, marketing, finances or other
business information disclosed by MAGI to Consultant either directly or
indirectly in writing, orally, electronically, or by drawings or inspection of
parts or equipment.

         (b) Consultant will not, during or subsequent to the Term of this
Agreement, use Confidential Information for any purpose whatsoever other than
the performance of the Services on behalf of MAGI or disclose Confidential
Information to any third party. Consultant agrees that Confidential Information
shall remain the sole property of MAGI. Consultant agrees to take all reasonable
precautions to prevent unauthorized disclosure of Confidential Information.
Notwithstanding the above, Consultant's obligation under this Section 3(b)
relating to Confidential Information shall not apply to information which:

     (1) is known to Consultant at the time of disclosure to Consultant by MAGI
         as evidenced by written records of Consultant,

         (2) has become publicly known and made generally available through
             no wrongful act of Consultant, or

              (3) has been rightfully received by Consultant without restriction
                  from a third party authorized to make such a disclosure.

         (c) Consultant will not, during the term of this Agreement, improperly
use or disclose any proprietary information or trade secrets of any former or
current employer or any other person or entity with which Consultant has an
agreement or a duty to keep in confidence information acquired by Consultant.
Consultant will not bring onto the premises of MAGI any unpublished document or
proprietary information belonging to any former or current employer or any other
person or entity with which Consultant has an agreement or a duty to keep in
confidence information acquired by Consultant unless consented to in writing by
such employer, person, or entity. Consultant will indemnify MAGI and hold it
harmless from and against all claims, liabilities, damages and expenses,
including reasonable attorneys' fees and costs of suit, arising out of or in
connection with any violation or claimed violation of a third party's rights
resulting in whole or in part from MAGI's possession or use of the work product
of Consultant under this Agreement.

         (d) Consultant recognizes that MAGI has received and will continue to
receive from third parties their confidential or proprietary information subject
to a duty on MAGI's part to maintain the confidentiality of such information and
to use it only for certain limited purposes. Consultant will, during the Term of
this Agreement and thereafter, hold all such confidential or proprietary
information in the strictest confidence and will not disclose it to any person,
firm or corporation or use it in any manner except as necessary in carrying out
the Services for MAGI, consistent with MAGI's agreement with such third party.

         (e) Upon the termination of this Agreement, or upon MAGI's earlier
request, Consultant will deliver to MAGI all of MAGI's property relating to, and
all hard copy, tangible and electronic embodiments of, Confidential Information
in Consultant's possession or control.

         (f) The parties acknowledge and agree that during the course of his
employment with MAGI, Consultant

<PAGE>

learned certain information and formed relationships with vendors and financing
organizations, and the parties further agree that these relationships are not
considered "Confidential Information" for the purposes of this Agreement.



         4.       OWNERSHIP OF INTELLECTUAL PROPERTY

         (a) Consultant agrees that all copyrightable material, notes, records,
drawings, designs, developments, improvements, discoveries and trade secrets
(collectively, "Developments") conceived, made or discovered by Consultant in
performing the Services, solely or in collaboration with others, during the term
of this Agreement relating to the business of MAGI shall be the sole property of
MAGI. In addition, to the extent allowed by law, any Developments which
constitute copyrightable subject matter shall be considered "works made for
hire" as that term is defined in the United States Copyright Act. Consultant
further agrees to assign (or cause to be assigned) and does hereby assign fully
to MAGI all such Developments and any copyrights, patents, mask work rights, or
other intellectual property rights relating thereto.

         (b) Upon the termination of this Agreement, or upon MAGI's earlier
request, Consultant will deliver to MAGI all of MAGI's property relating to, and
all embodiments of, Developments in Consultant's possession and control.

         (c) Consultant will assist MAGI, or its authorized representative, at
MAGI's expense, to obtain and from time to time enforce and defend MAGI's rights
in the Developments and any copyrights, patents, mask work rights or other
intellectual property rights relating thereto in any and all countries, and to
execute all documents reasonably necessary for MAGI to do so.

         (d) MAGI agrees that if in the course of performing the Services,
Consultant incorporates into any Development developed hereunder any invention,
improvement, development, concept, discovery or other proprietary information
owned by Consultant or in which Consultant has an interest ("Item"), MAGI is
hereby granted and shall have a nonexclusive, royalty-free, perpetual,
irrevocable worldwide license to make, have made, modify, reproduce, display,
use and sell such Item as part of or in connection with such Invention.

         (e) The provisions in this Section 4 shall not apply to concepts or
ideas where MAGI has specifically acknowledged that it has no interest or
ownership rights in such concept or idea.

         (f) Consultant represents and warrants that each employee of
Consultant, and each independent contractor of Consultant, if any, has executed
an agreement with Consultant containing provisions in MAGI's favor substantially
similar to this Section 4.

         5.       CONFLICTS OF INTEREST

         (a) Consultant certifies that Consultant has no outstanding agreement
or obligation that is in conflict with any of the provisions of this Agreement,
or that would preclude Consultant from complying with the provisions hereof, and
further certifies that Consultant will not enter into any such conflicting
agreement or obligation during the Term of this Agreement.

         (b) Consultant represents and warrants that each employee of
Consultant, and each independent contractor of Consultant, if any, has executed
an agreement with Consultant containing provisions in MAGI's favor substantially
similar to those of this Section 5.

         6.       NONCOMPETITION

         During the Term of this Agreement, Consultant will not compete with
MAGI, but will be permitted to conduct business in areas of business identified
by the parties under executed confidentiality and/or nondisclosure agreements.
Without limiting the foregoing, Consultant agrees that he will not, without
prior approval of MAGI which shall not be unreasonably withheld, a) engage in
any sales related to Thomas Kinkade products b) engage in any sale of art or c)
offer any retail management products or services designed to assist retailers in
the operation of their businesses.
<PAGE>

         7.       NONSOLICITATION

         During the Term of this Agreement, Consultant agrees that he will not,
directly or indirectly, solicit for hire any person employed by MAGI or hire any
employee of MAGI without first giving MAGI ninety (90) days notice of his intent
to hire such person.

         8.       INDEPENDENT CONTRACTOR NATURE OF RELATIONSHIP AND PAYMENT OF
                  TAXES

         The parties intend that Consultant shall perform Services pursuant to
this Agreement as an independent contractor, and not as an employee. Consultant
acknowledges and agrees that MAGI is obligated to report all consulting fees
paid pursuant to this Agreement to the taxing authorities, and that Consultant
is liable for taxes on such income. Consultant agrees that he is responsible for
payment of all taxes due on consulting fees. MAGI will pay the consulting fees
without any withholdings or deductions for tax or Social Security. Consultant
shall indemnify and hold harmless MAGI for any liabilities, penalties, costs and
expenses, including attorneys' fees, incurred by MAGI in responding to a claim
by any tax authority or any other agency, person or entity relating to the
classification of Consultant as an independent contractor, except for the
employer portion of Social Security.

         9.       SUBLEASE

         Effective September 1, 1999, MAGI will sublease the office space
located at 333 West Santa Clara Street, San Jose, CA 95113 to Consultant.
Consultant will cooperate with MAGI in securing the landlord's consent to the
sublease.

         10. RIGHT OF FIRST REFUSAL TO CONSULTANT'S SHARES IN MAGI AND
CONSULTANT'S RIGHT TO INFORMATION

         By separate Stock Sale Agreement entered into concurrently herewith,
Consultant agrees to give MAGI a first right of refusal in his shares of MAGI.
Consultant may continue to have access to certain financial information of MAGI
beyond that normally given to shareholders, including strategic plans and annual
operating plans and budgets, so long as he owns no less than ten percent (10%)
of MAGI's outstanding common stock.

         11.      NOTICES

For the purpose of this Agreement, notices provided for in this Agreement shall
be in writing and shall be deemed to have been duly given when delivered or
mailed by United States certified or registered mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth below, or to
such other address as any party may have furnished to the other in writing in
accordance herewith, except that notice of a change of address shall be
effective only upon actual receipt:

MAGI:             MEDIA ARTS GROUP, INC.
                  521 Charcot Ave.
                  San Jose, CA 95131
                  Attn.  Chief Executive Officer

Consultant:       Kenneth E. Raasch
                  333 West Santa Clara Street, Suite 1000
                  San Jose, California  95113

         12.      PUBLIC STATEMENTS

         The parties shall agree upon the terms of a press release and Company
announcement of the Consultant's resignation of his position as Chairman of the
Board of MAGI. Any future public statements regarding the Consultant's
relationship with MAGI shall be limited to the contents of the press release and
Company announcement, unless otherwise mutually agreed to by the Consultant and
MAGI.

         13.      RELEASE BY THE CONSULTANT
<PAGE>

                  (a) The Consultant, on behalf of himself, his executors,
administrators, representatives, heirs and assigns, hereby releases MAGI and its
owners, stockholders, parent corporation[s], affiliates, predecessors,
successors, officers, managers, employees, insurers, representatives and agents
(the "MAGI Releasees") of and from any and all manner of action or actions,
cause or causes of action, in law or in equity, suits, debts, liens, contracts,
agreements, promises, liabilities, claims, demands, damages, charges, losses,
costs or expenses, of any nature whatsoever, known or knowable based on the
facts and circumstances, by Consultant as of the effective date of this
Agreement. The Claims released herein are limited only to any Claims based upon
contract, tort or statute arising out of, based upon, or relating to the
Consultant's former employment relationship with MAGI as an employee including
his hire as an employee, performance, remuneration as an employee or termination
of his employment and/or Employment Agreement with MAGI, including any claims
arising under Title VII of the Civil Rights Act of 1964, as amended; the Equal
Pay Act, as amended; the Age Discrimination in Employment Act, as amended; the
Employee Retirement Income Security Act, as amended; the Older Workers Benefit
Protection Act of 1990; the California Fair Employment and Housing Act, as
amended; the California Labor Code, as amended; and/or any other local, state,
or federal law governing discrimination in employment and/or the payment of
wages and benefits. Notwithstanding the generality of the foregoing, the
Consultant shall continue to be indemnified by MAGI for all acts performed as an
officer, to the extent permitted by law and MAGI's certificate of incorporation
and bylaws.

                  (B) IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION
ACT OF 1990, THE CONSULTANT ACKNOWLEDGES THAT HE IS AWARE OF THE FOLLOWING:

                                                     (I)      HE HAS A RIGHT TO
                                    CONSULT WITH AN ATTORNEY BEFORE ACCEPTING
                                    THIS OFFER;

                                                     (II)     HE HAS 21 DAYS
                                    FROM THE DATE SET FORTH ABOVE TO CONSIDER
                                    THIS OFFER; AND

                                                     (III) HE HAS SEVEN DAYS
                                    AFTER ACCEPTING THIS OFFER TO REVOKE HIS
                                    ACCEPTANCE, AND HIS ACCEPTANCE (AS WELL AS
                                    ALL OTHER TERMS OF THIS AGREEMENT) WILL NOT
                                    BE EFFECTIVE UNTIL THAT REVOCATION PERIOD
                                    HAS EXPIRED.

         14.      RELEASE BY MAGI

         MAGI releases the Consultant and his executors, administrators,
representatives, heirs and assigns of and from any and all manner of action or
actions, cause or causes of action, in law or in equity, suits, debts, liens,
contracts, agreements, promises, liabilities, claims, demands, damages, charges,
losses, costs or expenses, of any nature whatsoever, that are known or knowable
based on the facts and circumstances, by the Board of Directors of MAGI as of
the effective date of this Agreement. The Claims released herein are limited
only to any Claims based upon contract, tort or statute arising out of, based
upon, or relating to the Consultant's former employment relationship with the
Company as an employee including his hire as an employee, performance,
remuneration as an employee or termination of his employment and/or Employment
Agreement with MAGI.

         15.      ASSIGNMENT

         Neither this Agreement nor any right hereunder or interest herein may
be assigned or transferred by Consultant without the express written consent of
MAGI. MAGI may assign its rights and interests under this Agreement to any
successor-in-interest.

         16.      GOVERNING LAW AND ARBITRATION

         The internal laws of the State of California applicable to contracts
entered into and wholly to be performed in California by California
residents, without reference to any principles concerning conflicts of law,
shall govern the validity of this Agreement, the construction of its terms
and the interpretation of the rights and duties of the parties; provided,
however, that this Section 16 and the parties' rights under Section 16(a)
through 16(c) shall be governed by and construed in accordance with the
Federal Arbitration Act, 9 U.S.C. Section 1 ET. SEQ. Except as provided in
Section 16(d), any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled by the following
procedures:

<PAGE>

         (a) Either party may send the other party written notice identifying
the matter in dispute and invoking the procedures of this Section 16. Within
fourteen (14) days after such written notice is given, one or more principals of
each party involved in the dispute shall meet at a mutually agreeable location
in San Jose, California, for the purpose of determining whether they can resolve
the dispute themselves by written agreement and, if not, whether they can agree
upon an arbitrator (the "Arbitrator") affiliated with Judicial Arbitration and
Mediation Services/Endispute, Inc. ("JAMS/Endispute") to whom to submit the
matter for final and binding arbitration.

         (b) If the parties fail to resolve the dispute by written agreement or
to agree on the Arbitrator within said fourteen (14) day period, either party
may make written application to JAMS/Endispute for the appointment of a single
Arbitrator to resolve the dispute by arbitration. The selection of the
Arbitrator shall be the exclusive decision of JAMS/Endispute and shall be made
within ten (10) days of the written application to JAMS/Endispute.

         (c) The arbitration shall be conducted in accordance with the Federal
Rules of Evidence and rules or procedures adopted by JAMS/Endispute, except that
each party shall have no longer than one day to present its position, the entire
proceedings before the Arbitrator shall be on no more than two consecutive days,
and the award shall be made in writing no more than thirty (30) days following
the end of the proceeding. Such award shall be a final and binding determination
of the dispute and shall be fully enforceable as an arbitration award in any
court having jurisdiction and venue over such parties. The prevailing party (as
determined by the Arbitrator) shall be awarded by the Arbitrator such party's
own attorneys' fees and expenses in connection with such proceeding. The
non-prevailing party (as determined by the Arbitrator) shall pay the
Arbitrator's fees and expenses, as well as the attorneys' fees and expenses of
the prevailing party.

         (d) Consultant agrees that it would be impossible to measure and
calculate MAGI's damages from any breach of the covenants set forth in Sections
3 or 4 hereof. Accordingly, Consultant agrees that if Consultant breaches or is
alleged to have breached Sections 3 or 4, MAGI has, in addition to any other
right or remedy available, the right to obtain from any court of competent
jurisdiction an order restraining such breach or threatened breach and specific
performance of such provisions. Consultant further agrees, to the extent
permitted by law, that no bond or other security shall be required in obtaining
such equitable relief and Consultant hereby consents to the issuance of such
injunction and the ordering of such specific performance.

         17.      PROVISIONS OF AGREEMENT SEVERABLE

         The provisions of this agreement are severable. If any provision is
held to be invalid or unenforceable, it shall not affect the validity or the
enforceability of any other provision.

         18.      ENTIRE AGREEMENT

         This Agreement, the Stock Sale Agreement executed concurrently
herewith, and any executed confidentiality agreements set forth the entire
agreement between the parties hereto and supersede any and all other prior oral
or written agreements or understandings between the parties concerning the
subject matters thereof.

         19.      AMENDMENT OF AGREEMENT; WAIVER

         Any amendment to this Agreement must be in writing and signed by duly
authorized representatives of each of the parties hereto and must expressly
state that it is the intention of each of the parties to amend the Agreement. No
breach of any provision of this Agreement shall be deemed waived unless the
waiver is in writing signed by a duly authorized representative of the waiving
party. Waiver of any one breach shall not be deemed a waiver of any other breach
of the same or any other provision of this Agreement.

         20.      EXECUTION IN COUNTERPARTS

         This Agreement may be executed in counterparts with the same force and
effectiveness as if it were executed in one complete document.

         21.      INTERPRETATION
<PAGE>

         This Agreement is the product of negotiation, with each party having
had the opportunity to propose modification of terms. Accordingly, any ambiguity
in this Agreement shall not be construed for or against any party based upon who
prepared such terms. The parties hereby expressly waive their rights, if any,
under California Civil Code Section 1654.



         IN WITNESS WHEREOF, the undersigned are duly authorized to execute and
do execute this Agreement on behalf of Consultant and MAGI as of the day and
year first written above.


ACCEPTED AND AGREED:

KENNETH E. RAASCH                   MEDIA ARTS GROUP, INC.



By  /s/ Kenneth E. Raasch                            By  /s/ Bud Peterson
    --------------------------                          -----------------------
  Kenneth E. Raasch                                    Bud Peterson
                                                       CEO & President
                                                       Media Arts Group, Inc.


Dated:  May 27, 1999                        Dated:  May 27, 1999



Attest:  /s/ James F. Landrum
         --------------------------
             James F. Landrum, Jr.
             Secretary
             Media Arts Group, Inc.


Dated:  May 27, 1999

<PAGE>

                                    EXHIBIT A



Services to be performed by Consultant:

    A.     As a MAGI Board member, serve as a Corporation's spokesperson for the
           business and financial opportunities the Corporation creates, when
           requested by the MAGI Board of Directors or MAGI CEO;
    B.     Provide strategic input in formulating the Business Plan, when
           requested by MAGI CEO;
    C.     Provide strategic input on MAGI's internet strategy, when requested
           by MAGI CEO;
    D.     Provide strategic input relating to investor relations, when
           requested by MAGI CEO;
    E.     Provide strategic input in media opportunities, when requested by
           MAGI CEO;
    F.     Provide strategic input in foreign opportunities, when requested by
           MAGI CEO;
    G.     Working independently of existing MAGI relationships, Consultant can
           earn additional compensation through:

-  Bringing acquisition targets to MAGI;
-  Bringing potential licenses and strategic alliances;
-  Bringing media opportunities;
-  Bringing Signature Gallery candidates;
-  Developing new retail concepts for consideration and eventual use by MAGI;
-  Developing new products and product advancements for consideration and
   eventual use by MAGI.

<PAGE>

                                    EXHIBIT B


Compensation of Consultant:

A.   Rate of Pay: $110,000.00 per month, with payment to be made on the first
     day of every month.
B.   Reimbursement of "out-of-pocket" expenses relating to performance of
     duties.
C.   Other incentive compensation based on transactions brought to MAGI, and
     referenced in Exhibit A section G, will be negotiated on a case-by-case,
     deal-by-deal basis.
D.   Amounts due under the Raasch Employment Agreement through May 27, 1999:
-    $122,270 for Q4 EPS Bonus;