<PAGE>
As filed with the Securities and Exchange Commission on July 29, 1998
Registration No. 333-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FOUR MEDIA COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7819 95-4599440
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA 91505
(818) 840-7000
(Address, including ZIP code, and telephone number, including area code,
of Registrant's Principal Executive Offices)
ROBERT T. WALSTON
2813 WEST ALAMEDA AVENUE
BURBANK, CALIFORNIA 91505
(818) 840-7000
(Name, address, including ZIP code, and telephone number, including area code,
of Agent for service)
Copy to:
PAULA J. PETERS, ESQ.
GREENBERG GLUSKER FIELDS CLAMAN & MACHTINGER LLP
1900 AVENUE OF THE STARS, SUITE 2100
LOS ANGELES, CALIFORNIA 90067
(310) 553-3610
<PAGE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE OF THE SECURITIES TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than Securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of Proposed maximum Amount of
Securities to be Amount to be maximum offering aggregate registration
registered registered price per share/1/ offering price fee
<S> <C> <C> <C> <C>
Common Stock, $.01 par 324,268 $7.875 $2,553,611 $754
value
</TABLE>
1. Based upon the average of the high and low sale price of the Common Stock
as reported by the Nasdaq Stock Market's National Market on July 23, 1998,
estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
2
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED July 29, 1998
PROSPECTUS
FOUR MEDIA COMPANY
324,268 SHARES OF COMMON STOCK
The shares offered hereby (the "Registrable Shares") consist of 324,268
shares of common stock, $.01 par value per share (the "Common Stock"), of Four
Media Company ("4MC" or the "Company"), which are owned by the selling
shareholders listed herein under "Selling Security Holders" (collectively, the
"Selling Shareholders"). The Registrable Shares are being offered by the
Selling Shareholders. See "Selling Security Holders." The Company shall pay
its own legal and accounting fees, all registration and filing fees attributable
to the registration of the Registrable Shares, all legal fees and filing fees
relating to state securities or "blue sky" filings, the filing fee payable to
the Nasdaq Stock Market's National Market ("Nasdaq") and all printing fees
Cincurred in connection herewith. The Company will not receive any of the
proceeds from the sale of the Registrable Shares by the Selling Shareholder.
The Selling Shareholders have not informed the Company of any specific
plans for the distribution of the Registrable Shares covered by this Prospectus,
but it is anticipated that the Registrable Shares will be sold from time to time
primarily in transactions (which may include block transactions) on Nasdaq at
the market price then prevailing, although sales may also be made in negotiated
transactions or otherwise. The Selling Shareholders and the brokers and dealers
through whom sale of the Registrable Shares may be made may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and their commissions or discounts and other compensation may
be regarded as underwriters' compensation. See "Plan of Distribution."
On _____________, 1998, the last reported sale price of the Company's
Common Stock on Nasdaq (where it trades under the symbol "FOUR") was $_______
per share.
SEE `RISK FACTORS' BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR CERTAIN
INFORMATION RELATING TO THE SALE OF THE SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_____________, 1998
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC" or the "Commission"). Reports,
proxy statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W. Washington, D.C. 20549, and at the Commission's Regional
Offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained by mail from the Public Reference
Section of the Commission at 450 West Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The reports, proxy statements and other information
may also be obtained from the Web site that the Commission maintains at The
Company's Common Stock is listed on Nasdaq and such materials may be inspected
at the offices of Nasdaq, National Association of Securities Dealers, Inc., 1735
K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the
securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which were
omitted in accordance with the rules and regulations of the Commission. For
further information, reference is hereby made to the Registration Statement.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended August 3,
1997;
2. The Company's quarterly reports on Form 10-Q for the fiscal quarters ended
November 2, 1997, January 31, 1998 and May 3, 1998;
3. The description of the Company's Common Stock contained in the Company's
Report on Form 8-A, filed January 31, 1997; and
4. The Company's Current Reports on Form 8-K dated February 2, 1998 and May 4,
1998 (each as amended on Form 8-K/A).
4
<PAGE>
All other documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing such documents.
Any statement contained in this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in this Prospectus or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner of Registrable Shares, to whom a copy of this Prospectus is
delivered, upon the written or oral request of such person, a copy of any and
all information that has been incorporated by reference in the Prospectus not
including exhibits to the information that is incorporated by reference (unless
such exhibits are specifically incorporated by reference into such documents).
Requests should be directed to the Company's Secretary at the Company's
principal offices located at 2813 W. Alameda Avenue, Burbank, California 90505.
The telephone number is (818) 840-7000.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained herein regarding matters that are not
historical facts are forward-looking statements (within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act). Because such
forward-looking statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that could cause actual results to differ materially
include, but are not limited to, those discussed under "RISK FACTORS."
RISK FACTORS
Prospective investors should carefully consider the risk factors set forth
below, as well as the other information contained or incorporated by reference
in this Prospectus, in evaluating an investment in the securities offered
hereby. This Prospectus contains certain forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth below and elsewhere in this
Prospectus.
5
<PAGE>
LOSS OF RELATIONSHIPS WITH KEY CUSTOMERS
Revenue Concentration. A significant portion of the Company's revenues is
derived from a small number of customers. The Company's ten largest customers
accounted for 57.4% and 52.0% of total revenues in fiscal 1996 and 1997,
respectively. In addition, 29.5% and 38.8% of the Company's revenues were
generated by the six major domestic studios (Disney, Universal, Sony Pictures,
Viacom/Paramount, Warner Bros./Turner and Twentieth Century Fox) in fiscal 1996
and 1997, respectively. Except for MTV Asia, TVN and a limited number of other
customers, none of 4MC's customers has a long-term contractual relationship with
the Company whereby the customer is obligated to purchase any specified level of
services from the Company. Accordingly, there can be no assurance that revenues
generated from these customers, individually or in the aggregate, will reach or
exceed historical levels in any future period. Any substantial decrease in
services provided to one or more of these customers would have a material
adverse effect on the Company's results of operations and financial condition.
Relationship with MTV Asia. MTV Asia, partially owned by Viacom Inc.,
accounted for 15% and 13% of the Company's consolidated revenues in fiscal 1996
and 1997, respectively. 4MC Asia provides broadcast services to MTV Asia under
a contract which expires in April 2002 and provides for certain minimum
performance standards including, among other things, maintenance by 4MC Asia of
specified staffing levels and on-air reliability. MTV Asia has the right to
terminate the contract at any time if, among other things, 4MC Asia fails to
meet the performance standards or certain key employees cease to be employed by
the Company. See "Risk Factors -- Dependence on Key Personnel." MTV Asia also
has the right to terminate the contract any time after April 14, 2000 upon
payment of specified amounts to 4MC Asia. Termination of the MTV Asia contact
would have a material adverse effect on the Company's results of operations and
financial condition. Further, there can be no assurance that the MTV Asia
contract will be renewed upon expiration. Any such failure to renew could have
a material adverse effect on the Company's business.
Relationship with TVN. TVN, a pay-per-view service that provides movies,
sporting events and concerts to satellite dish owners and certain cable systems,
accounted for 7% and 4% of the Company's revenues during fiscal 1996 and 1997,
respectively. The Company provides broadcast services to TVN under a contract
which expires in January 1999. In August 1997, the Company and TVN entered into
a letter agreement pursuant to which TVN agreed to pay $2,300,000 of outstanding
accounts receivable on or prior to December 31, 1997 (which amount was timely
paid) and to pay $4,436,337 of additional outstanding accounts receivable, with
10% interest thereon, in 60 equal monthly installments of $98,972.01 commencing
March 31, 1998, with no principal or interest payments due from August 19, 1997
to March 30, 1998. In addition, TVN and the Company agreed to negotiate in
good faith the terms of an expanded service contract in connection with TVN's
recently-implemented digital technology. The Company agreed to these terms in
view of: (i) the revenues historically collected by the Company from the TVN
relationship; (ii) the prospect of new services based upon TVN's expansion; and
(iii) the complementary nature of TVN's requirements with the Company's
anticipated conversion of its broadcast infrastructure from analog to digital
technology. TVN is current with respect to its payment obligations under the
August 1997 letter agreement. In
6
<PAGE>
addition, TVN has paid the Company $2,604,112 of the $5,050,000 billed by the
Company for broadcast services rendered since August 4, 1997. The Company is
currently negotiating with TVN the terms of an expanded service contract. There
can be no assurance, however, that TVN will ultimately repay all outstanding
amounts due to the Company, fulfill its obligations under the August 1997 letter
agreement or reach agreement with the Company with respect to a new service
contract.
Minimum Performance Standards; Possible Termination of Contracts or
Liquidated Damages. Most of the Company's customer contracts, including those
with MTV Asia and TVN, contain provisions that require the Company to meet
specified performance standards. Failure to meet specified performance
standards could result in the termination of the contract and payment of
liquidated damages, the amount of which depends on the nature and duration of
the nonperformance.
Conversion to In-House Operations. Many of the major studios and other
customers of the Company have substantial capabilities to perform several or all
of the services offered by the Company, and evaluate from time-to-time whether
to perform those services in-house. For example, in 1995, The Disney Channel, a
subsidiary of The Walt Disney Company, changed its operating strategy and moved
its network origination and uplink operations in-house. The Disney Channel
accounted for 6%, 4%, and 1% of the Company's revenues in fiscal 1994, 1995 and
1996, respectively. A decision by other major customers to move in-house
services they currently purchase from the Company could have a material adverse
effect on the Company's results of operations.
INCURRENCE OF SUBSTANTIAL INCREMENTAL COSTS AND CAPITAL EXPENDITURES PRIOR TO
GENERATION OF REVENUES
The Company incurs substantial incremental costs (primarily labor) and
makes significant capital expenditures prior to generating revenues. For
example, the Company has expanded its television services operations, which has
increased labor and depreciation expense significantly, through the addition of
new personnel at increased compensation levels and through the purchase of new
equipment and the construction of infrastructure. The Company incurs such costs
before the equipment and infrastructure generate revenues or achieve capacity
utilization and before the new services gain market acceptance. The incurrence
of incremental costs prior to the generation of revenues will have an immediate
adverse effect on the Company's net income. In addition, the Company may elect
to discontinue services that fail to generate sufficient levels of revenue and
write off the net book value of the assets related to such services. Failure of
the Company to generate anticipated levels of revenue or the write-off of assets
would have an immediate and adverse effect on the Company's results of
operations and financial condition.
7
<PAGE>
RISK OF IMPLEMENTING NEW TECHNOLOGY; TECHNOLOGICAL OBSOLESCENCE
A key growth strategy of the Company is to integrate new systems and
equipment in its facilities and offer new services to customers. The Company
may experience difficulties in deploying new technologies that could delay or
prevent the successful introduction of new services. There can be no assurance
that the deployment of new technology or introduction of new services by the
Company will achieve market acceptance. Failure of the Company to implement new
technology and develop new services successfully or the failure of new
technology and services to achieve market acceptance could have a material
adverse effect on the Company's results of operations.
The systems and equipment utilized by the Company in providing certain
services to customers are subject to rapid technological change and
obsolescence, as well as evolving customer needs and industry standards. In
addition, the Company's competitors may introduce services embodying new
technology which could render the Company's existing services obsolete or
unmarketable. The Company thus may be required to undertake significant capital
expenditures to maintain its technological and competitive position in the
industry. There can be no assurance that the Company will have sufficient
capital or be able to obtain sufficient financing to fund such capital
expenditures, or that subsequent technological change will not make acquired
infrastructure obsolete before the Company recovers its investment.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends in large part on the continued service
of its executive officers, its key creative artists and skilled technicians, and
other key personnel. A significant percentage of the Company's revenues can be
attributed to services requiring highly compensated creative technicians. In
some instances, certain of the Company's customers specify by name the personnel
that are to work on their projects. Competition for highly qualified employees
is intense and the process of locating key technical, creative and management
personnel with the combination of skills and attributes required to execute the
Company's strategy is often lengthy. There can be no assurance that the Company
will continue to attract, motivate and retain key personnel. Failure by the
Company to retain and attract qualified key personnel could have a material
adverse effect on the Company's business and results of operations.
4MC Asia's contract with MTV Asia permits MTV Asia to terminate the
contract if both Robert T. Walston, Chairman and Chief Executive Officer, and
Gavin W, Schutz, Vice President and Chief Technology Officer, cease to be
employed by the Company and replacements acceptable to MTV Asia are not found.
Termination of this agreement would have a material adverse effect on the
Company's results of operations and financial condition. The Company's bank
line of credit similarly requires that all of Robert Walston, Gavin Schutz,
Robert Bailey and John Donlon, or replacement officers acceptable to the lending
banks, continue their full time employment by the Company.
8
<PAGE>
RISKS OF ACQUISITION GROWTH STRATEGY
Ability to Implement Strategy. An important element of the Company's
growth strategy is the acquisition of complementary businesses which may enhance
the Company's operations and profitability. Execution of its growth strategy
requires the Company's existing management to, among other things: (i) identify
acquisition candidates for sale at reasonable prices; (ii) obtain financing for
acquisitions; (iii) consummate identified acquisitions; (iv) hire, train and
assimilate new personnel; and (v) in some instances, invest substantial funds to
enhance the capabilities of the acquired business. There can be no assurance
that the Company will successfully identify, finance, consummate or assimilate
acquisitions. Further, the Company's focus on acquisition opportunities could
lessen the effectiveness of management with respect to existing operations,
which could have a material adverse effect on the Company's results of
operations. In addition, certain of the Company's competitors may seek to
acquire some of the same types of companies that the Company seeks to acquire.
Such competition for acquisitions may increase acquisition prices and related
costs and result in fewer acquisition opportunities, which could have a material
adverse effect on the Company's growth. The Company has entered into an
agreement that provides for an exclusive negotiating period for a potential
acquisition. The Company has not completed its due diligence with respect to
such potential acquisition and there can be no assurance that the Company will
be successful in consummating the transaction if it continues to pursue this
opportunity.
Potential Adverse Financial Impacts of Acquisitions. With respect to
certain of the Company's past acquisitions, it generally has taken two years
before the necessary balance sheet restructuring, consolidation with the
Company's existing operations and/or repositioning of marketing strategies,
personnel or equipment has been achieved and the acquisition has been successful
from a financial and operational perspective. The Company expects that certain
of its future acquisitions will take an equal or longer period of time to become
successful, if they ever are successful. Accordingly, the Company expects that
certain future acquisitions could have a material adverse effect on the
business, results of operations and financial condition of the Company for a
minimum period of two years. The Company expects that its future acquisitions
often will involve the recording of a significant amount of goodwill and
deferred charges on its balance sheet. In addition, the Company also might
record deferred charges related to noncompetition agreements. Amortization of
goodwill and deferred charges will reduce net income. The Company may issue
equity securities to finance all or a portion of future acquisitions, which may
have a dilutive effect on the Company's earnings and net tangible book value per
share.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced significant quarterly fluctuations in operating
results and anticipates that these fluctuations will continue. These
fluctuations have been caused by a number of factors, including: (i) with
respect to the Company's studio division, seasonal and sometimes fluctuating
demand for programming by international broadcasters and other content buyers,
increased labor costs and uneven capacity utilization due to delays caused by
factors
9
<PAGE>
outside the Company's control (for example, changes in customers' production key
personnel; (ii) with respect to the Company's broadcast division, the expiration
of month-to-month service contracts, the unpredictable use of the Company's
facilities for the broadcast of news stories and special events, and the
inability of the Company to remarket its unused transponder capacity
consistently; (iii) with respect to the Company's television division, the
unpredictability of television production schedules; and (iv) with respect to
the Company's film division, the absorption by the Company of cost overruns in
fixed price contracts and delays in meeting completion deadlines (for reasons
other than the fault of the Company). The Company therefore believes that
quarter-to-quarter comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
COMPETITION
The Company experiences intense competition in each of its divisions.
Although the Company believes no one competitor offers a comparable range of
services, some of the Company's current and potential competitors, particularly
those production companies that perform services in-house, have substantially
greater financial, technical, creative, marketing and other resources than the
Company. The Company's competitors may devote substantially greater resources
to the development and marketing of new competitive services. The Company
expects that competition will increase substantially as a result of industry
consolidations and alliances, as well as the emergence of new competitors.
Increased competition could result in price reductions, reduced profit margins
or loss of market share, all of which would have a material adverse effect on
the Company's results of operations.
DEPENDENCE ON ENTERTAINMENT INDUSTRY
The Company's business is dependent on the success of the motion picture
and television industries, which success in turn is highly dependent upon a
number of factors, including the quality of content produced, the availability
of alternative forms of entertainment and leisure activities, general economic
conditions and international demand for content originated in the United States.
The Company's business also is subject to downturns in the event of a strike by
any creative or other personnel integral to the production of motion pictures or
television programming.
RISKS ASSOCIATED WITH SINGAPORE OPERATIONS
Foreign Exchange Rate Fluctuations. The Company provides certain of its
broadcast services in Singapore through its Singapore subsidiary, 4MC Asia.
Substantially all of 4MC Asia's transactions are denominated in Singapore
dollars. Although 4MC Asia is not subject to foreign exchange transaction gains
or losses, its financial statements are translated into United States dollars as
part of the Company's consolidated financial reporting. Fluctuations in the
exchange rate therefore will affect the Company's consolidated balance sheets
and may, upon
10
<PAGE>
repatriation of funds from 4MC Asia to the Company and payment of related income
taxes, affect the Company's net income. Until recently, the Singapore dollar has
been stable relative to the United States dollar. However, between June 1997 and
June 1998, the Singapore dollar lost approximately 20% of its value relative to
the United States dollar. There can be no assurance that the Company will not
experience material losses as a result of changes in the relative value of the
Singapore dollar as compared to the United States dollar. The Company currently
does not engage in any hedging activities to mitigate its exchange rate risk. In
the event the Company engages in hedging activities in the future, there can be
no assurance that the Company will not experience losses as a result of such
hedging activities.
Foreign Country Operating Risks. In addition to exchange rate risks, the
Company's Singapore operations are subject to a number of risks inherent in
international operations, including unexpected changes in regulatory
requirements, the costs and burdens of complying with a variety of complex
foreign laws, tariffs and other trade barriers, and political and economic
instability. There can be no assurance that the foregoing factors will not have
a material adverse effect on the Company's future results of operations.
Loss of Tax Exemption. In 1995, the government of the Republic of
Singapore granted 4MC Asia a seven-year tax exemption as a "pioneer status"
company. The tax exemption is conditioned upon 4MC Asia meeting certain
investment and expenditure requirements. Although the Company has met these
requirements, the Republic of Singapore retains the right to review certain
expenditures. The termination or expiration of the tax exemption would have a
material adverse effect on the Company's results of operations. The Company is
subject to taxation in the United States to the extent that 4MC Asia's income
(in excess of intercompany debt) is repatriated from Singapore, less applicable
taxes paid in Singapore, if any.
CONCENTRATION OF OWNERSHIP
Robert T. Walston, Chairman and Chief Executive Officer, beneficially owns
approximately 15% of the outstanding shares of Common Stock, and the present
executive officers and directors of the Company and their affiliates, as a
group, beneficially own approximately 49% of the outstanding shares of Common
Stock. Accordingly, these stockholders have the ability to control or
significantly influence all matters requiring approval by the stockholders of
the Company, including the election of directors and approval of significant
corporate transactions. Such a level of ownership may have the effect of
delaying, deferring or preventing a change in the control of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market following this offering could adversely affect the market price of the
Common Stock. As of July 1, 1998, the Company had 9,876,770 shares of Common
Stock outstanding. Of these shares, 5,000,000 shares of Common Stock are freely
tradable without restriction or further registration under the
11
<PAGE>
Securities Act. The remaining 4,876,770 shares of Common Stock outstanding are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act ("Rule 144"). The restricted securities include the Registrable Shares and
4,552,502 shares of Common Stock owned by officers, directors and affiliates of
the Company. The number of shares of Common Stock available for sale in the
public market is limited by restrictions under the Securities Act and lock-up
agreements executed by all of the officers and directors of the Company under
which the officers and directors (other than Messrs. Kirtman and Topor in
respect of Common Stock pursuant to a distribution from the principal
stockholder) have agreed not to sell or otherwise dispose of any of their shares
prior to February 7, 2000, without the prior written consent of Furman Selz LLC.
Furman Selz LLC may, however, in its sole discretion and at any time without
notice, release all or any portion of the shares subject to lock-up agreements.
As a result of the lock-up agreements described above and the provisions of
Rules 144(k), 144 and 701, the restricted shares will be available for sale in
the public market as follows: (i) the 3,119,627 shares owned by the principal
stockholders are currently eligible for sale, subject to the limitations imposed
by Rule 144; and (ii) 1,432,875 shares will be eligible for sale February 7,
2000, upon expiration of lock-up agreements.
In addition to the outstanding shares of Common Stock, the Company has the
obligation to issue shares of Common Stock upon the exercise of options and upon
the conversion of Preferred Stock. The Company has granted options to purchase
a total of 2,080,000 shares, of which options to purchase 568,333 shares are
presently exercisable. Presently exercisable options to purchase a total of
513,333 shares are held by officers and directors of the Company and shares
acquired upon the exercise of those options would be subject to the lock-up
arrangements described above. All of the shares of Common Stock subject to
options have been registered under the Securities Act.
In February 1998 the Company issued 150,000 shares of Preferred Stock in a
private placement. The Preferred Stock is convertible, at the option of the
holders thereof, into 1,500,000 shares of Common Stock. The holders have the
right to demand registration of the shares of Common Stock underlying the
Preferred Stock under certain circumstances, as well as the right to participate
in certain registrations initiated by the Company or by other Stockholders. The
holders of the Preferred Stock have waived their right to registration of the
Common Stock subject to their conversion rights in connection with this
offering.
RISK OF LOSS FROM EARTHQUAKES, FIRE OR OTHER CATASTROPHIC EVENTS
The Company is subject to the risk of loss arising from earthquakes, fires
and other catastrophic events due to the concentration of its business
activities and operations in specific structures. The structures housing the
Company's business activities consist of commercial office buildings subject to
vibration and movement that, in such a catastrophic event, could cause the
dislocation of various pieces of equipment, potentially creating downtime in the
Company's operations. The Company's operations, other than its Singapore
operations, are located in Southern California which may expose the Company to
greater risk from earthquakes and fires. For example, the Northridge,
California earthquake in January 1994 damaged certain of the
12
<PAGE>
Company's facilities and equipment and temporarily interrupted the Company's
operations. Because of the large amount of specialized equipment combined with
customized listening and viewing environments, the Company's operations cannot
temporarily be relocated to mitigate the occurrence of a catastrophic event. The
Company also may be unable to broadcast signals for an extended period of time.
Consequently, the Company carries insurance for property loss and business
interruption resulting from such events, subject to deductibles. Although the
Company believes that it possesses adequate insurance coverage for damage to its
property and the disruption of its business from earthquakes, fire and other
casualties, there can be no assurance that such insurance would be sufficient to
cover all of the Company's potential losses or that it will continue to be
available at rates acceptable to the Company, if at all.
RENEWAL OF FCC LICENSES
Pursuant to the Communications Act of 1934, as amended (the "Communications
Act"), transmissions from the Company's domestic broadcast division's earth
station to satellites must be made pursuant to license granted by the Federal
Communications Commission ("FCC"). Catalina Transmission Corp. ("Catalina"), a
wholly owned subsidiary of the Company, holds three licenses for satellite earth
stations. The three licenses (two for fixed earth stations and one for a
transportable earth station) were granted for a period of ten years with one
expiring in 2001, one expiring in 2004 and one expiring in 2007. While the FCC
generally renews licenses for satellite earth stations routinely, there can be
no assurance that the Company's licenses will be renewed at their expiration
dates, and failure to obtain such renewal could have a material adverse effect
on the Company.
ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF PREFERRED STOCK
Certain provisions of the Company's Certificate of Incorporation and By-
Laws may be deemed to have anti-takeover effects and may delay, defer or prevent
a tender offer, proxy contest or takeover attempt that a stockholder might
consider to be in such stockholder's best interest, including those attempts
that might result in a premium over the market price for the shares held by such
stockholder. In addition, the Board of Directors, without further stockholder
approval, may issue additional preferred stock that could have the effect of
delaying, deterring or preventing a change in control of the Company. The
issuance of additional preferred stock could also adversely affect the voting
power of the holders of Common Stock, including the loss of voting control to
others. The Company has no present plans to issue any additional preferred
stock.
YEAR 2000 COMPLIANCE
Substantially all of the Company's software and computer systems are Year
2000 compliant. Software and computer systems not currently Year 2000 compliant
will be upgraded to Year 2000 compliant condition in fiscal 1998 under existing
maintenance agreements. The
13
<PAGE>
Company has not yet determined, but will attempt to the extent practicable to
determine, if any significant Year 2000 risks exist in the operations of its key
business partners that may be material to the Company.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act
concerning the Company's future operations, economic performances and financial
condition, including such things as business strategy and measures to implement
strategy, competitive strengths, goals, expansion and growth of the Company's
business and operations and references to future success. These statements are
based on certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results and
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, in addition to the risk factors
discussed above, including a global economic slowdown in the entertainment
industry, difficulties and unanticipated expense of assimilating newly-acquired
businesses, technological shifts away from the Company's technologies and core
competencies, unforeseen interruptions to the Company's business with its
largest customers resulting from, but not limited to, strikes, financial
instabilities, unexpected government policies and regulations affecting the
Company or its significant customers, the effects of extreme changes in monetary
and fiscal policies in the U.S. and abroad, including extreme currency
fluctuations and unforeseen inflationary pressures, drastic and unforeseen price
pressures on the Company's services or significant cost increases that cannot be
recovered through price increases or productivity improvements, significant
changes in interest rates and the availability of financing for the Company, any
difficulties in obtaining or retaining the management or other human resource
competencies that the Company needs to achieve its business objectives, and
other factors, many of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Prospectus are
qualified by these cautionary statements, and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or
that they will have the expected consequences to or effects on the Company and
its subsidiaries or their business or operations.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Registrable
Shares by the Selling Stockholders.
14
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth the name of each Selling Stockholder and:
(i) the number of shares owned by each Selling Stockholder as of July 1, 1998;
(ii) the number of shares being offered for sale by each Selling Stockholder
under this Prospectus; and (iii) the number of shares owned by each Selling
Stockholder after the offering.
<TABLE>
<CAPTION>
NAME OF SELLING NUMBER OF SHARES NUMBER OF SHARES BEING NUMBER OF SHARES
SECURITYHOLDER OWNED BEFORE THE OFFERED FOR SALE OWNED AFTER THE
OFFERING OFFERING
<S> <C> <C> <C>
Michael Flanagan 143,363 143,363 *
Thomas Flanagan 36,438 36,438 *
Michael Herbert 10,460 10,460 *
Greg Howard 129,091 129,091 *
Richard Andrew Webb 4,916 4,916 *
</TABLE>
_____________
* Because the Selling Stockholders may, pursuant to this Prospectus, offer
all or some portion of the Common Stock they presently hold, no estimate
can be given as to the amount of the Common Stock that will be held by the
Selling Stockholders upon termination of any such sales. In addition, the
Selling Stockholders identified above may have sold, transferred or
otherwise disposed of all or a portion of their Common Stock since the date
on which they provided the information regarding their Common Stock, in
transactions exempt from the registration requirements of the Securities
Act. See "Plan of Distribution."
Only Selling Stockholders identified above who beneficially own the Common
Stock set forth opposite each such Selling Stockholder's name in the foregoing
table on the effective date of the Registration Statement may sell such Common
Stock pursuant to this Prospectus. The Company may from time to time include
additional Selling Stockholders in supplements to this Prospectus.
PLAN OF DISTRIBUTION
The Selling Stockholders may from time to time sell all or a portion of the
Shares in transactions on Nasdaq, in the over-the-counter market, in negotiated
transactions or a combination of such methods of sale, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Shares may be sold directly or through
underwriters or broker-dealers. If the Shares are sold through underwriters or
broker-dealers, the Selling Stockholders may pay underwriting discounts or
brokerage commissions and charges. The methods by which the Shares may be sold
include: (i) a block trade in which the broker or dealer so involved will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (ii) purchases by a broker
or dealer as principal and resale by such broker or dealer for its own account
pursuant to this Prospectus; (iii) exchange distributions and/or secondary
distributions in accordance with the rules of Nasdaq; (iv) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (v)
privately negotiated transactions.
15
<PAGE>
The Company will pay the costs and expenses incident to its registration
and qualification of the Shares offered hereby, including registration and
filing fees. In addition, the Company has agreed to indemnify the Selling
Stockholders in certain circumstances, against certain liabilities. Each
Selling Stockholder has agreed to indemnify the Company and its directors,
officers, employees and agents against certain liabilities.
Any securities covered by this Prospectus that qualify for sale pursuant to
Rule 144 or Rule 144A may be sold under Rule 144 or Rule 144A rather than
pursuant to this Prospectus. There can be no assurance that any Selling
Stockholder will sell any or all of the Shares described herein, and any Selling
Stockholder may transfer, devise or gift such securities by other means not
described herein.
LEGAL MATTERS
Certain legal matters relating to the validity of the Common Stock offered
hereby will be passed upon for the Company by Greenberg Glusker Fields Claman &
Machtinger LLP, Los Angeles, California.
EXPERTS
The consolidated balance sheets as of August 3, 1997 and August 4, 1996 and
the consolidated statements of operations, stockholders' equity and cash flows
for the years ended August 3, 1997, August 4, 1996 and July 30, 1995 and the
notes thereto, included in the Company's Annual Report on Form 10-K for the year
ended August 3, 1997, incorporated herein by reference, have been incorporated
herein in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The combined balance sheets of Visualize (d/b/a Pacific Ocean Post) and
Affiliate, as of October 31, 1997 and December 31, 1996, and the related
combined statements of operations, shareholders equity and cash flows for the
ten months ended October 31, 1997 and the year ended December 31, 1996
incorporated herein by reference to the Company's Current Report on Form 8-K
dated February 2, 1998, have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The combined balance sheets of Video Symphony, Inc. and Affiliate as of
December 31, 1997, 1996 and 1995, and the related combined statements of
operations, shareholders' equity and cash flows for the years then ended
incorporated herein by reference to the Company's Current Report on Form 8-K
dated May 4, 1998 have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts on accounting and auditing.
16
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law (the "DGCL"), a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorney's fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding by reason of their
serving or having served in such capacity. The DGCL provides, however, that
such person must have acted in good faith and in a manner he or she reasonably
believed to be in (or not opposed to) the best interests of the corporation and,
in the case of a criminal action, such person must have had no reasonable cause
to believe his or her conduct was unlawful. In addition, the DGCL does not
permit indemnification in an action or suit by or in the right of the
corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnity for expenses the court deems proper in
light of liability adjudication. With respect to present or former directors
and officers, indemnity is mandatory to the extent a claim, issue or matter has
been successfully defended.
The Company's Bylaws (the "Bylaws") provide for mandatory indemnification
of directors and officers generally to the same extent authorized by the DGCL.
Under the Bylaws, the Company shall advance expenses incurred by an officer or
director in defending any such action if the director or officer undertakes to
repay such amount if it is determined that he or she is not entitled to
indemnification. The Company has obtained directors' and officers' liability
insurance.
The Company has entered into separate indemnification agreements with its
directors and officers. Each indemnification agreement provides for, among
other things: (i) indemnification against any and all expenses, liabilities and
losses (including attorney's fees, judgments, fines, taxes, penalties and
amounts paid in settlement) of any claim against an indemnified party unless it
is determined, as provided in the indemnification agreement, that
indemnification is not permitted under any applicable law; and (ii) prompt
advancement of expenses to any indemnified party in connection with his or her
defense against any claim.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
17
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATIONS
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
PAGE
----
<S> <C> <C>
Available Information................................ 4
Incorporation Of Certain Information By.............. 324,268 SHARES
Reference............................................ 4 FOUR MEDIA COMPANY
Cautionary Statement Regarding Forward-Looking
Statements......................................... 5
Risk Factors......................................... 5 COMMON STOCK
Forward-Looking Statements........................... 14
Use Of Proceeds...................................... 14
Selling Security Holders............................. 15 PROSPECTUS
Plan Of Distribution................................. 15 __________, 1998
Legal Matters........................................ 16
Experts.............................................. 16
Indemnification Of Directors And Officers............ 17
</TABLE>
18
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with
the registration of the Common Stock offered hereby. The Company will bear all
of such expenses. All amounts are estimated except for the Securities and
Exchange Commission registration fee.
PAYABLE BY REGISTRANT
<TABLE>
<CAPTION>
<S> <C>
SEC registration fees............................................. _____________
Legal fees and expenses........................................... _____________
Accounting fees and expenses...................................... _____________
Miscellaneous fees and expenses................................... _____________
Total........................................................ _____________
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the California General Corporation Law (the "DGCL"), a
corporation may indemnify its directors, officers, employees and agents and its
former directors, officers, employees and agents and those who serve, at the
corporation's request, in such capacities with another enterprise, against
expenses (including attorneys' fees), as well as judgments, fines and
settlements in nonderivative lawsuits, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding in parties by
reason of their serving or having served in such capacity. The DGCL provides,
however, that such person must have acted in good faith and in a manner he or
she reasonably believed to be in (or not opposed to) the best interests of the
corporation and, in the case of a criminal action, such person must have had no
reasonable cause to believe his or her conduct was unlawful. In addition, the
DGCL does not permit indemnification in an action or suit by or in the right of
the corporation, where such person has been adjudged liable to the corporation,
unless, and only to the extent that, a court determines that such person fairly
and reasonably is entitled to indemnify for expenses the court deems proper in
light of liability adjudication. With respect to present or former directors
and officers, indemnity is mandatory to the extent a claim, issue or matter has
been successfully defended.
The Company's Bylaws (the "Bylaws") provide for mandatory indemnification
of directors and officers generally to the same extent authorized by the DGCL.
Under the Bylaws, the Company shall advance expenses incurred by an officer or
director in defending any such action if the director or officer undertakes to
repay such amount if it is determined that he or she
19
<PAGE>
is not entitled to indemnification. The Company has obtained directors' and
officers' liability insurance.
The Company has entered into separate indemnification agreements with its
directors and officers. Each indemnification agreement provides for, among
other things: (i) indemnification against any and all expenses, liabilities and
losses (including attorneys' fees, judgments, fines, taxes, penalties and
amounts paid in settlement) of any claim against an indemnified party unless it
is determined, as provided in the indemnification agreement, that
indemnification is not permitted under applicable law; and (ii) prompt
advancement of expenses to any indemnified party in connection with his or her
defense against any claim.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1 Certificate of Incorporation of the Company./1/
3.2 Bylaws of the Company./2/
4.1 Specimen of Common Stock Certificate./3/
4.2 Asset Purchase Agreement and Plan of Reorganization/4/
4.3 Registration Rights Agreement
5.1 Opinion of Greenberg Glusker Fields Claman & Machtinger LLP
regarding the legality of the securities being registered.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Greenberg Glusker Fields Claman & Machtinger LLP
(contained in Exhibit 5.1).
24.1 Power of Attorney (contained in the signature page hereof).
(b) Financial Statement Schedules.
Schedules have been omitted because the information required to be set
forth therein is not applicable or is shown in the financial statements or notes
thereto.
/1/ Incorporated herein by reference to the Company's Registration Statement on
Form S-1, filed October 8, 1996.
/2/ Incorporated herein by reference to the Company's Annual Report on Form 10-K
for the fiscal year ended August 3, 1997.
/3/ Incorporated herein by reference to Amendment No. 2 to the Company's
Registration Statement on Form S-1, filed February 4, 1997.
/4/ Incorporated herein by reference to the Company's Current Report on Form 8-
K, dated May 4, 1998
20
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represents a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of
21
<PAGE>
the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing of Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Burbank, State of California, on this 16th day of
July, 1998.
FOUR MEDIA COMPANY
By: /s/ Robert T. Walston
---------------------
Robert T. Walston
Chairman of the Board and
Chief Executive Officer
23
<PAGE>
POWER OF ATTORNEY
KNOW ALL ME BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert T. Walston and Alan S. Unger his true and
lawful attorneys-in-fact and agents, each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, and hereby ratifies and confirms all his said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert T. Walston Chairman of the Board and July 16, 1998
- -------------------------- Chief Executive Officer
Robert T. Walston (principal executive officer)
/s/ Alan S. Unger Vice President and Chief Financial Officer July 16, 1998
- -------------------------- (principal financial and accounting officer)
Alan S. Unger
/s/ William Amon
- -------------------------- Director July 6, 1998
William Amon
/s/ Robert Bailey
- -------------------------- Director July 20, 1998
Robert Bailey
/s/ Paul Bricault
- -------------------------- Director July 10, 1998
Paul Bricault
/s/ John H. Donlon
- -------------------------- Director July 16, 1998
John H. Donlon
/s/ Edward Kirtman
- -------------------------- Director July 14, 1998
Edward Kirtman
/s/ Gavin W. Schutz
- -------------------------- Director July 16, 1998
Gavin W. Schutz
/s/ Shimon Topor
- -------------------------- Director July 14, 1998
Shimon Topor
/s/ Thomas Wertheimer
- -------------------------- Director July 10, 1998
Thomas Wertheimer
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
3.1 Certificate of Incorporation of the Company./1/
3.2 Bylaws of the Company./2/
4.1 Specimen of Common Stock Certificate./3/
4.2 Asset Purchase Agreement and Plan of Reorganization./4/
4.3 Registration Rights Agreement.
5.1 Opinion of Greenberg Glusker Fields Claman & Machtinger LLP regarding the
legality of the securities being registered.
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Greenberg Glusker Fields Claman & Machtinger LLP (contained in
Exhibit 5.1).
24.1 Power of Attorney (contained in the signature page hereof).
</TABLE>
____________________________
/1/ Incorporated herein by reference to the Company's Registration Statement
on Form S-1, filed October 8, 1996.
/2/ Incorporated herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended August 3, 1997.
/3/ Incorporated herein by reference to Amendment No. 2 to the Company's
Registration Statement on Form S-1, filed February 4, 1997.
/4/ Incorporated herein by reference to the Company's Current Report on Form
8-K, dated May 4, 1998.
25
<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is made as of the 4th day of May, 1998
(the "Agreement") between Four Media Company, a Delaware corporation ("4MC"),
and Michael Herbert, an individual ("Herbert"); Greg Howard, an individual
("Howard"); Michael Flanagan, an individual ("M. Flanagan"); and Thomas
Flanagan, an individual ("T. Flanagan") (collectively the "Initial Sellers"),
with reference to the following facts:
A. Pursuant to the Asset Purchase Agreement and Plan of Reorganization
dated April 27, 1998, among Video Symphony, Inc., a California corporation
("VS"); Digital Doctors, Inc., a California corporation ("DD"); the Initial
Sellers; 4MC; and VSDD Acquisition Corp., a Delaware corporation ("Acquisition")
(the "Purchase Agreement"), 4MC has agreed to issue and sell to VS shares of its
common stock, $.01 par value par share (the "Common Stock") which shares will be
distributed by VS to the Initial Sellers.
B. 4MC has agreed to provide with respect to the Common Stock issued
pursuant to the Purchase Agreement certain registration rights under the
Securities Act.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
-----------
meaning set forth below.
1.1 "Commission" means the Securities and Exchange Commission.
1.2 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, or any similar
successor statute.
1.3 "4MC Shares" means the Common Stock issued pursuant to the Purchase
Agreement; provided, however, a share of Common Stock shall cease to be a 4MC
Share for purposes of this Agreement when it no longer is a Restricted Security.
1.4 "Person" means any individual, partnership, corporation, limited
liability company, joint stock company, association, trust, unincorporated
organization or a government or agency or political subdivision thereof.
<PAGE>
1.5 "Prospectus" means the prospectus included in the Registration
Statement, as amended or supplemented, including all material incorporated by
reference in such prospectus and all documents filed after the date of such
prospectus by 4MC under the Exchange Act and incorporated by reference therein.
1.6 "Registration Expenses" means any and all expenses incident to
performance of or compliance with this Agreement including, without limitation,
(i) all Commission and stock exchange or National Association of Securities
Dealers registration and filing fees, (ii) all fees and expenses of complying
with securities or blue sky laws; (iii) all printing, messenger and delivery
expenses; and (iv) the fees and disbursements of counsel for the Company and of
its independent public accountants; but excluding underwriting discounts and
commissions and transfer taxes, if any.
1.7 "Registration Statement" means a registration statement of 4MC filed
under the Securities Act on Form S-3 providing for the registration of, and the
sale on a continuous or delayed basis by the holders of, all of the 4MC Shares
pursuant to Rule 415 under the Securities Act, including the Prospectus
contained therein and forming a part thereof, any amendments to such
registration statement and supplements to such Prospectus, and all exhibits and
other material incorporated by reference in such registration statement and
Prospectus.
1.8 "Restricted Security" means any share of Common Stock issued or
issuable pursuant to the Purchase Agreement except any such share that (i) has
been registered pursuant to an effective registration statement under the
Securities Act and sold in a manner contemplated by the Prospectus, or (ii) has
been transferred in compliance with the resale provisions of Rule 144 under the
Securities Act (or any successor provision thereto) or is transferable pursuant
to paragraph (k) of Rule 144 under the Securities Act (or any successor
provision thereto).
1.9 "Securities Act" means the Securities Act of 1933, as amended and the
rules and regulations of the Commission thereunder, or any similar successor
statute.
1.10 "Sellers" means, collectively, the Initial Sellers and any
transferees or assignees of 4MC Shares who agree to become bound by all of the
terms and provisions of this Agreement in accordance with Section 8 hereof.
2. Registration
------------
2.1 Filing and Effectiveness of Registration Statement. Promptly after
--------------------------------------------------
4MC files with the Commission a Form 8-K, or amendment to Form 8-K, reporting
the transactions contemplated by the Purchase Agreement and including the
financial statements
<PAGE>
required in connection therewith, 4MC shall file with the Commission the
Registration Statement. 4MC shall thereupon use its best efforts to cause the
Commission to declare the Registration Statement effective under the Securities
Act as promptly as practicable.
2.2 Eligibility for Use of Form S-3. 4MC agrees that it shall file all
-------------------------------
reports and information required to be filed by it with the Commission in a
timely manner and take all such other action so as to maintain eligibility for
the use of Form S-3.
3. Post-Registration Procedure
---------------------------
3.1 4MC shall promptly (i) prepare and file with the Commission such
amendments (including post-effective amendments) to the Registration Statement
and supplements to the Prospectus as may be necessary to keep the Registration
Statement continuously effective and in compliance with the provisions of the
Securities Act applicable thereto so as to permit the Prospectus forming part
thereof to be current and usable by the Sellers for resales of the 4MC Shares
for a period of two (2) years from the Closing (as defined in the Purchase
Agreement) or such shorter period that will terminate when all the 4MC Shares
covered by the Registration Statement are no longer Restricted Shares (the
"Registration Period"), and (ii) take all lawful action such that each of (A)
the Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, not misleading, and (B) the Prospectus forming part of the Registration
Statement, and any amendment or supplement thereto, does not at any time during
the Registration Period include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing provisions of this Section 3.1,
4MC may, during the Registration Period, suspend the use of the Prospectus for a
period not to exceed ninety (90) days (whether or not consecutive) in any 12-
month period if the Board of Directors of 4MC determines in good faith that
because of valid business reasons, including pending mergers or other business
combination transactions, the planned acquisition or divestiture of assets,
pending material corporate developments and similar events, it is in the best
interests of 4MC to suspend such use, and prior to or contemporaneously with
suspending such use, 4MC provides the Sellers with written notice of such
suspension, which notice need not specify the nature of the event giving rise to
such suspension. At the end of any such suspension period, 4MC shall provide
the Sellers with written notice of the termination of such suspension.
3.2 4MC shall (i) prior to the filing with the Commission of any
Registration Statement (including any amendments thereto) and the distribution
or delivery of any Prospectus (including any supplements thereto), provide draft
copies thereof to the Sellers and reflect in such documents all such comments as
the Sellers (and their counsel) reasonably may propose, and (ii) furnish to each
Seller whose 4MC Shares are included in the Registration Statement and its legal
counsel identified by 4MC, (A) promptly after the same is prepared and publicly
distributed, filed with the Commission, or received by 4MC, one copy of the
Registration Statement, each Prospectus, and each amendment or supplement
thereto, and (B) such number of copies of the Prospectus and all amendments
<PAGE>
and supplements thereto and such other documents, as such Seller may reasonably
request in order to facilitate the disposition of the 4MC Shares owned by such
Seller.
3.3 4MC shall (i) register or qualify the 4MC Shares covered by the
Registration Statement under such securities or "blue sky" laws of such
jurisdictions as Sellers reasonably request, (ii) prepare and file in such
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof at all times during the Registration Period,
(iii) take all such other lawful actions as may be necessary to maintain such
registrations and qualifications in effect at all times during the Registration
Period, and (iv) take all such other lawful actions reasonably necessary or
advisable to qualify the 4MC Shares for sale in such jurisdictions, provided,
however, that 4MC shall not be required in connection therewith or as a
condition thereto to (A) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3.3, (B) subject
itself to general taxation in any such jurisdiction, or (C) file a general
consent to service of process in any such jurisdiction.
3.4 4MC shall, as promptly as practicable after becoming aware of such
event, notify each Seller of the occurrence of any event, as a result of which
the Prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
promptly prepare an amendment to the Registration Statement and supplement to
the Prospectus to correct such untrue statement or omission, and deliver a
number of copies of such supplement and amendment to each Seller as such Seller
may reasonably request.
3.5 4MC shall, as promptly as practicable after becoming aware of such
event, notify each Seller who holds 4MC Shares being sold of the issuance by the
Commission of any stop order or other suspension of the effectiveness of the
Registration Statement at the earliest possible time and take all lawful action
to effect the withdrawal, recision or removal of such stop order or other
suspension.
3.6 4MC shall cause all the 4MC Shares covered by the Registration
Statement to be listed on the principal national securities exchange, and
included in an inter-dealer quotation system of a registered national securities
association, on or in which securities of the same class or series issued by 4MC
are then listed or included.
3.7 4MC shall make generally available to its securityholders as soon as
practicable, but in no event later than eighteen (18) months after (i) the
effective date (as defined in Rule 158(c) under the Securities Act) of the
Registration Statement, and (ii) the effective date of each post-effective
amendment to the Registration Statement, as the case may be, an earnings
statement of 4MC and
<PAGE>
its subsidiaries complying with Section 11(a) of the Securities Act and the
rules and regulations of the Commission thereunder (including, at the option of
4MC, Rule 158).
4. Obligations of the Sellers. In connection with the registration of the 4MC
--------------------------
Shares, each Seller shall have the following obligations:
4.1 It shall be a condition precedent to the obligations of 4MC to
complete the registration pursuant to this Agreement with respect to the 4MC
Shares of a particular Seller that such Seller shall furnish to 4MC such
information regarding himself, the 4MC Shares held by him and the intended
method of disposition of the 4MC Shares held by him as shall be reasonably
required to effect the registration of such 4MC Shares and shall execute such
documents in connection with such registration as 4MC may reasonably request.
At least seven (7) days prior to the first anticipated filing date of the
Registration Statement, 4MC shall notify each Seller of the information 4MC
requires from each such Seller (the "Requested Information") if such Seller
elects to have any of its 4MC Shares included in the Registration Statement. If
at least two (2) business days prior to the anticipated filing date 4MC has not
received the Requested Information from a Seller (a "Non-Responsible Seller"),
then 4MC may file the Registration Statement without including 4MC Shares of
such Non-Responsive Seller and have no further obligations to the Non-Responsive
Seller.
4.2 Each Seller by its acceptance of the 4MC Shares agrees to cooperate
with 4MC in connection with the preparation and filing of the Registration
Statement hereunder, unless such Seller has notified 4MC in writing of his
election to exclude all of its 4MC Shares from the Registration Statement.
4.3 Each Seller agrees that, upon receipt of any notice from 4MC of the
occurrence of any event of the kind described in Section 3.4 or 3.5, it shall
immediately discontinue its disposition of 4MC Shares pursuant to the
Registration Statement covering such 4MC Shares until such Seller's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section 3.4
or until such Seller's receipt of notice of withdrawal, recision or removal of
the stop order or other suspension referred to in Section 3.5.
5. Expenses of Registration. All Registration Expenses shall be borne by 4MC.
------------------------
6. Indemnification and Contribution.
--------------------------------
6.1 4MC shall indemnify and hold harmless each Seller (an "Indemnified
Person") from and against any losses, claims, damages or liabilities, joint or
several, to which such Indemnified Person may become subject under the
Securities Act or otherwise, insofar as losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or an omission or alleged omission to state therein a
<PAGE>
material fact required to be stated therein or necessary to make the statements
therein not misleading, or arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Prospectus or an
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and 4MC hereby agrees
to reimburse such Indemnified Person for all reasonable legal and other expenses
incurred by them in connection with investigating or defending any such action
or claim as and when such expenses are incurred; provided, however, that 4MC
shall not be liable to any such Indemnified Person in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon (i) any untrue statement or alleged untrue statement made in, or an
omission or alleged omission from, such Registration Statement or Prospectus in
reliance upon and in conformity with written information furnished to 4MC by
such Indemnified Person expressly for use therein or (ii) in the case of the
occurrence of an event of the type specified in Section 3.4, the use by the
Indemnified Person of an outdated or defective Prospectus after 4MC has provided
to such Indemnified Person an updated Prospectus correcting the untrue statement
or alleged untrue statement or omission or alleged omission giving rise to such
loss, claim, damage or liability.
6.2 Indemnification by the Sellers. Each Seller agrees, as a consequence
------------------------------
of the inclusion of any of its 4MC Shares in a Registration Statement, severally
and not jointly, to (i) indemnify and hold harmless 4MC, its directors
(including any person who, with his or her consent, is named in the Registration
Statement as a director nominee of 4MC), its officers who sign any Registration
Statement and each person, if any, who controls 4MC within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which 4MC or such other persons may
become subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in such Registration Statement or Prospectus or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
light of the circumstances under which they were made, in the case of the
Prospectus), not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to 4MC by such Seller expressly for use therein, and (ii) reimburse
4MC for any legal or other expenses incurred by 4MC in connection with
investigating or defending any such action or claim as such expenses are
incurred.
6.3 Notice of Claims, etc. Promptly after receipt by a party seeking
---------------------
indemnification pursuant to this Section 6 (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section 6 is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with
<PAGE>
any Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, costs and expenses, (y)
the Indemnified Party and the Indemnifying Party shall reasonably have concluded
that representation of the Indemnified Party and the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, potentially differing
interests between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or (z)
the Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) and (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle or compromise any Claim or consent to the entry of any
judgment that does not include an unconditional release of the Indemnified Party
from all liabilities with respect to such Claim or judgment.
6.4 Contribution. If the indemnification provided for in this Section 6
------------
is unavailable to or insufficient to hold harmless an Indemnified Person under
Section 6.1 or 6.2 above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party and the Indemnified Party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof); as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such Indemnified Party or by such Indemnifying Party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contribution pursuant to this Section 6.4 were determined by
pro rata allocation (even if the Sellers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in this Section 6.4. The amount paid or
payable by an Indemnified Party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. No person guilty of fraudulent
<PAGE>
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The obligations of the Sellers in this Section 6.4
to contribute shall be several in proportion to the percentage of 4MC Shares
registered by them and not joint.
6.5 Notwithstanding any other provision of this Section 6, in no event
shall any Seller be required to undertake liability to any person under this
Section 6 for any amounts in excess of the dollar amount of the proceeds to be
received by such Seller from the sale of such Seller's 4MC Shares (after
deducting any fees, discounts and commissions applicable thereto) pursuant to
any Registration Statement under which such 4MC Shares are to be registered
under the Securities Act.
6.6 The obligations of 4MC under this Section 6 shall be in addition to
any liability which 4MC may otherwise have to any Indemnified Person and the
obligations of any Indemnified Person under this Section 6 shall be in addition
to any liability which such Indemnified Person may otherwise have to 4MC. The
remedies provided in this Section 6 are not exclusive and shall not limit any
rights or remedies which may otherwise be available to an indemnified party at
law or in equity.
7. Rule 144. With a view to making available to the Sellers the benefits of
--------
Rule 144 under the Securities Act or any other similar rule or regulation of the
Commission that may at any time permit the Sellers to sell securities of 4MC to
the public without registration ("Rule 144"), 4MC agrees to:
7.1 comply with the provisions of paragraph (c)(1) of Rule 144; and
7.2 file with the Commission in a timely manner all reports and other
documents required to be filed by 4MC pursuant to Section 13 or 15(d) under the
Exchange Act; and, if at any time it is not required to file such reports but in
the past had been required to or did file such reports, it will, upon the
request of any Seller, make available other information as required by, and so
long as necessary to permit sales of, its 4MC Shares pursuant to Rule 144.
8. Assignment. The rights to have 4MC register 4MC Shares pursuant to this
----------
Agreement shall be automatically assigned by the Seller to any transferee of all
or any portion of such securities only if: (a) the Seller agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to 4MC within a reasonable time after such assignment,
(b) 4MC is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) immediately following such transfer or
assignment, the securities so transferred or assigned to the transferee
constitute Restricted Securities, and (d) at or before the time 4MC received the
written notice contemplated by clause (b) of this sentence the transferee or
assignee agrees in writing with 4MC to be bound by all of the provisions
contained herein.
<PAGE>
9. Miscellaneous
-------------
9.1 Notices. All notices, requests, demands, or other communications with
-------
respect to this Agreement shall be in writing and shall be (i) personally
delivered, (ii) sent by facsimile transmission, (iii) sent by the United States
Postal Service, registered or certified mail, return receipt requested, or (iv)
delivered by a nationally recognized express overnight courier service, charges
prepaid, to the following addresses (or such other addresses as the parties may
specify from time to time in accordance with this Section 9.1):
<TABLE>
<S> <C>
To 4MC: Four Media Company
2813 West Alameda Avenue
Burbank, CA 91505-4455
Attn: Robert T. Walston
Fax No.: (818) 846-5197
With a copy to: Greenberg Glusker Fields
Claman & Machtinger LLP
1900 Avenue of the Stars, Suite 2100
Los Angeles, CA 90067
Attn: Bernard Shearer, Esq.
Fax No.: (310) 553-0687
To Sellers: Michael Herbert
1019 Linda Glen Drive
Pasadena, CA 91105
Fax No.: 626/577-4726
Greg Howard
2046 Oakdale Avenue
Pasadena, CA 91107
Fax No.: 626/356-7444
Michael Flanagan
1915 Midwick Drive
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Altadena, CA 91001
Fax No.: 626/398-3565
Thomas Flanagan
413 Tamarac Drive
Pasadena, CA 91105
Fax No.: 626/398-3565
With copy of notices Perkins Coie LLP
to VSDD and/or 1999 Avenue of the Stars, Ninth Floor
Shareholders to: Los Angeles, CA 90067
Attn: Leslie N. Murdock, Esq.
Fax No.: 310/788-3399
</TABLE>
Any such notice shall, when sent in accordance with the preceding sentence,
be deemed to have been given and received on the earliest of (i) the day
delivered to such address, (ii) the day sent by facsimile transmission, (iii)
the fifth business day following the date deposited with the United States
Postal Service, or (iv) 24 hours after shipment by such courier service.
9.2 Remedies; Severability. The remedies provided in this Agreement are
----------------------
cumulative and not exclusive of any remedies provided by law. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction.
9.3 Arbitration; Attorneys' Fees.
----------------------------
9.3(a) Any controversy or claim arising out of or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default or misrepresentation in connection with any of its provisions, or
arising out of or relating in any way to the relationship between the parties,
shall be determined by binding arbitration. The arbitration proceedings shall
be held and conducted in accordance with California Code of Civil Procedure
Sections 1282-1284.2, with the power to grant equitable relief, including
injunctions and temporary restraining orders. California Code of Civil
Procedure Section 1283.05, which provides for certain discovery rights, shall
apply to any such arbitration, and said code section is hereby incorporated by
reference. In reaching a
<PAGE>
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 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. 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. If the parties do not agree upon an arbitrator
within ten (10) days after a written demand for arbitration is served upon one
party by the other, the arbitrator shall be appointed pursuant to Section 1281.6
of the California Code of Civil Procedure; provided, however, that only persons
who are retired Superior Court, California Appellate Court or federal judges or
lawyers admitted to the bar for at least twenty (20) years and classified as
"A-v" by the Martindale Hubbell Law Directory shall be eligible to be selected
as an arbitrator.
9.3(b) If any legal action, arbitration or other proceeding is
brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred therein,
in addition to any other relief to which it or they may be entitled. The court
or arbitrator shall consider, in determining the prevailing party, (i) which
party obtains relief which most nearly reflects the remedy or relief which the
parties sought, and (ii) any settlement offers made prior to commencement of the
trial in the proceeding.
9.4 Binding on Successors. Subject to the requirements of Section 8
---------------------
hereof, this Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto.
9.5 Counterparts. This Agreement may be executed in two or more
-------------
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same Agreement.
9.6 No Implied Waiver; Remedies. No failure or delay on the part of the
---------------------------
parties hereto to exercise any right, power, or privilege hereunder or under any
instrument executed pursuant hereto shall operate as a waiver nor shall any
single or partial exercise of any right, power, or privilege preclude any other
or further exercise thereof or the exercise of any other right, power, or
privilege. All rights, powers, and privileges granted herein shall be in
addition to other rights and remedies to which the parties may be entitled at
law or in equity.
<PAGE>
9.7 Entire Agreement. This Agreement sets forth the entire understandings
----------------
of the parties with respect to the subject matter hereof, and it incorporates
and merges any and all previous communications, understandings, oral or written
as to the subject matter hereof.
9.8 Amendments; Actual Waivers. Any provision of this Agreement may be
--------------------------
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of 4MC and Sellers who hold a majority-in-interest of 4MC
Shares. Any amendment or waiver effected in accordance with this Section 9
shall be binding upon each Seller and 4MC.
9.9 Headings. The headings of the Sections of this Agreement, where
--------
employed, are for convenience only and do not form a part hereof and in no way
modify, interpret or construe the meanings of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day
and year first above written.
"4MC"
FOUR MEDIA COMPANY
By: /s/ Alan S. Unger
-----------------
Alan Unger
Chief Financial Officer
/s/ Michael Herbert
-------------------
Michael Herbert
/s/ Greg Howard
---------------
Greg Howard
/s/ Michael Flanagan
--------------------
Michael Flanagan
/s/ Thomas Flanagan
-------------------
Thomas Flanagan
<PAGE>
EXHIBIT 5.1
LAW OFFICES OF
GREENBERG GLUSKER FIELDS CLAMAN & MACHTINGER LLP
July 29, 1998
Four Media Company
2813 West Alameda Avenue
Burbank, CA 91505
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3 to
be filed by Four Media Company (the "Company") with the Securities and Exchange
Commission in connection with the registration under the Securities Act of 1933,
as amended, of an aggregate of 324,268 issued and outstanding shares of the
Company's Common Stock, par value $.01 per share (the "Shares").
As your counsel, we are familiar with the proceedings taken in connection
with the authorization, issuance and delivery of the Shares, and we have
examined such matters of fact and law as we have deemed relevant in connection
with this opinion.
Based upon the foregoing, we are of the opinion that the Shares have been
duly authorized and are validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to our firm under the caption "Legal Matters" in the Prospectus
that is a part thereof.
Respectfully submitted,
GREENBERG GLUSKER FIELDS
CLAMAN & MACHTINGER LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of Four Media Company on Form S-3 of our report dated October 6, 1997 on our
audits of the consolidated financial statements of Four Media Company as of
August 3, 1997 and August 4, 1996 and for the years ended August 3, 1997, August
4, 1996 and July 30, 1995, which report is included in Four Media Company's
Annual Report on Form 10-K for the year ended August 3, 1997; our report dated
January 15, 1998 on our audits of the combined financial statements of Visualize
(d/b/a Pacific Ocean Post) and Affiliate as of October 31, 1997 and December 31,
1996 and for the ten months ended October 31, 1997 and the year ended December
31, 1996, which report is included in Four Media Company's Current Report on
Form 8-K dated February 2, 1998 (as amended on Form 8-K/A); our report dated
April 8, 1998 on our audits of the combined financial statements of Video
Symphony, Inc. and Affiliate as of December 31, 1997, 1996 and 1995 and for the
years then ended, which report is included in Four Media Company's Current
Report on Form 8-K dated May 4, 1998 (as amended on Form 8-K/A). We also
consent to the references to our firm under the caption "Experts."
PricewaterhouseCoopers LLP
Los Angeles, CA
July 29, 1998
