<PAGE>

                                                                    EXHIBIT 10.1


                        EXECUTIVE ENGAGEMENT AGREEMENT
                        ------------------------------



          THIS AGREEMENT is made as of the 9th day of December, 1999, by and
between FILM ROMAN, INC., a Delaware Corporation, 12020 Chandler Street, North
Hollywood, California 91607 ("Company") and PRODUCERS SALES ORGANIZATION, a
California Corporation, c/o Fairlea Ranch, P. O. Box 93603 ("Contractor")
furnishing the  services of John W. Hyde ("Executive").

          In consideration of the mutual covenants contained herein and other
good and valuable considerations, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:

     1.   Employment:
          ----------

          1.1  Company shall engage Contractor to furnish the services of
Executive and Contractor and Executive accept such engagement with the Company
upon the terms and conditions set forth in this agreement.

          1.2  During Term (defined below) Contractor shall furnish Executive's
services to serve as a consultant; additionally, during the period from the
commencement of the Term through December 31, 2001 and, at Company's option,
during the period from January 1, 2002 through December 31, 2002, Executive
shall have the title of President and Chief Executive Officer of Company and
such subsidiaries as may be designated by Company.

               In addition to consulting to the Company, Executive's obligations
(and rights) while serving as President and Chief Executive Officer shall be
commensurate with those normally performed by a President and Chief Executive
Officer. In rendering services hereunder Executive shall report only to the
Board of Directors (the "Board"). In this connection Executive shall promptly
establish and submit a business plan to the Board, and Executive shall adhere to
the Company's business plan as proposed by Executive and approved by the Board.
In preparing the business plan it is contemplated that Executive will (i)
incorporate proposals for substantial cost cuts in the operation of the Company,
(ii) incorporate proposals for implementing infusion of cash for the Company, it
being understood by Executive that this will be a major goal of the business
plan and (iii) make recommendations for restructuring of the accounting and
administrative departments of the Company.

                                       1
<PAGE>

               Executive shall serve as a Member of the Board during the Term
hereof, but not otherwise.

          1.3  Executive shall devote Executive's best efforts and Executive's
exclusive full business time and attention to the business of Company (except
that such services shall be non-exclusive during the third contract period
[defined below] if Company does not elect to continue Executive as President and
Chief Executive Officer during that period). In connection with the foregoing,
Executive shall be expected to render services at such times and at such places
as the Board may from time to time designate; provided, however, that if Board
were to designate or to determine that Executive is to render services outside
of the Metropolitan Los Angeles Area, Executive shall not be required to render
such services for any continuous period of more than thirty (30) days without
his consent. Executive may continue to exercise direct oversight over Fairlea
Ranch and his involvement with Crownstar, LLC, provided such activities do not
interfere with his performance hereunder.

          1.4  Executive shall cooperate with Company to enable Company to
obtain, at its expense, life insurance on the life of Executive for the benefit
of Company in such amounts as Company may from time to time determine.

     2.   Term:
          ----

          The Term ("Term") of this Agreement shall commence as of December 9,
1999, and shall continue unless sooner terminated as elsewhere provided for
three (3) consecutive "contract periods," as follows:

               (i)   first contract period: December 9, 1999 through
     December 31, 2000;

               (ii)  second contract period: January 1, 2001 through
     December 31, 2001; and

               (iii) third contract period: January 1, 2002 through
     December 31, 2002.

     3.   Termination:
          -----------

          3.1  Company's Right to Terminate: Company shall have the right to
               ----------------------------
terminate the Term of this agreement prior to the expiration date specified
herein:

               (i)   Upon the death of Executive;

                                       2
<PAGE>

               (ii)  For cause. "Cause" as used herein means (a) conviction of a
felony or a crime involving moral turpitude or the commission of any other act
involving willful malfeasance with respect to Company, (b) gross negligence or
willful misconduct with respect to Company, (c) Executive's failure to adhere to
Board policies or the Board-approved business plan which is not cured within
five (5) business days after notice of the same from Company, or (d) any other
material breach of this agreement not covered above which is not cured within
five (5) business days after notice of the same from Company.

               (iii) As provided in paragraphs 8 and 9 below; and

               (iv)  Without cause.

          3.2  Effect of Termination:
               ---------------------

               (a)   With Cause: If Company terminates this agreement for cause
                     ----------
Company shall have no further obligation to pay Contractor any compensation
(other than accrued but unpaid compensation or expense reimbursement and accrued
but unpaid vacation days, if any).

               (b)   Death, Disability: If Company terminates this agreement
                     -----------------
because of Executive's death or disability (as defined below) Company shall have
the obligation to pay Contractor Contractor's compensation hereunder up to the
time of such termination (including that attributable to vacation time allowed
to Executive which has accrued but not been taken), and any unpaid expense
reimbursement.

               (c)   Without Cause: If termination hereunder is without cause
                     -------------
Company shall pay all remaining compensation for the remainder of the first and
second contract periods of the Term and the third contract period if Company has
elected to cause Executive to serve as President and Chief Executive Officer
during such third contract period subject to Company's right to fully mitigate
payment obligations by crediting against such amounts any sums received by
Contractor or Executive for Executive's services rendered to any other company
or entity not controlled by Executive in an entertainment executive capacity.

     4.   Compensation:
          ------------

          Company shall pay Contractor the following compensation for its
furnishing of Executive's services hereunder.

                                       3
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          (a)  For the first contract period, Company shall pay Contractor
monthly payments of $20,833.33 for each calendar month of such period, or
prorata for any portion of the calendar month which payment is based on an
annual payment at the rate of $250,000.00 per annum.

          (b)  For each month of the second contract period Company shall pay
Contractor at the rate of $22,916.67 per month for each month of such period,
i.e. based on a rate of $275,000.00 per annum.

          (c)  If Company elects to continue to require Contractor to furnish
Executive's services both as a consultant and as President and Chief Executive
Officer during the third contract period then Company shall pay Contractor the
sum of $25,000.00 per month for each month of such period, i.e. based on the
rate of $300,000.00 per annum. If Company elects to require Contractor to
furnish Executive's services as a consultant only then Company shall pay to
Contractor only such amounts as may be equal to the annual base fee and fees for
meetings then paid to other Members of the Board.

          It is understood that Executive shall not be entitled to any payments
as a Board Member except as provided in paragraph 4.(c) above. Additionally
neither Contractor nor Executive shall be entitled to any stock options granted
to Board Members it being understood that the stock options granted to
Contractor and Executive shall be only those provided for in paragraph 7 below.

     5.   Expenses:
          --------

          5.1  Executive is authorized to incur reasonable expenses in
connection with Company's business in such amounts as may be from time to time
approved by the Company. Company agrees to pay or to reimburse Contractor, or at
its direction, Executive for such expenses which are reasonably incurred by
Executive on behalf of or for the benefit of Company upon the presentation by
Contractor or Executive from time to time of an itemized account of such
expenditures setting forth the date, the purposes for which incurred, and the
amounts thereof, and such other information as Company may reasonably require,
together with such receipts showing payments as Executive has been able to
obtain. If Executive is required to travel, he shall receive business class
airfare (first class if business class not available) except on flights within
California, and first class accommodations.

          5.2  Executive shall be entitled to a car allowance in the amount of
Five Hundred Dollars ($500.00) per month, which amount shall be reported as
income to Contractor and shall cover all normal work-related automobile expenses
and shall be payable in accordance with Company's then-existing policies
(currently, payment to be made at the beginning of each applicable month).]

                                       4
<PAGE>

     6.   Benefits:
          --------

          (a)  During any periods during which Executive is serving as President
and Chief Executive Officer and during which PSO is entitled to payments
hereunder Company shall reimburse PSO for any amounts paid by it under any
health plan maintained by it for Executive's benefit, it being understood
however that the maximum reimbursement hereunder shall not exceed the amounts
which Company would have been obligated to pay had Executive been insured (as an
individual without dependents) under Company's then current health insurance
plan.

          (b)  PSO shall secure and maintain workers compensation insurance
pertaining to Executive's services unless Company is able to cover Executive
under its workers compensation insurance coverage as the "special Employer" of
Executive for such purposes. Whether or not Executive is so covered, PSO and
Executive both will agree that they shall not make any third party claim with
respect to any injury which Executive might receive.

          (c)  Company understands that Contractor affords Executive four (4)
weeks paid vacation per year; Executive shall be entitled to such vacation time,
consistent with the reasonable time requirements of Company without reduction of
compensation to Contractor.

          (d)  Executive shall be entitled to designate the person to act as his
assistant, provided that such assistant's salary is consistent with those
generally paid by Company for assistants to members of top management. Company
shall employ such assistant directly, on at-will basis.

     7.   Stock Options:
          -------------

          (a)  In consideration for furnishing of Executive's services as
aforesaid Contractor will be entitled to participate in the Company's Employee
Stock Option Plan. Said Plan includes usual provisions included in a non-
qualified stock option plan including the right to satisfy the exercise price
with cash, promissory notes (if secured to the reasonable satisfaction of
Company) or, with Company's agreement, stock in the Company. Executive
acknowledges that such Plan is not intended to be an "incentive stock option"
within the meaning of Section 422A of the Internal Revenue Code of 1986 as
amended and is to be considered in all respects as "non-qualified." Contractor
and Executive have been furnished with a copy of Company's 1996 Stock Option
Plan ("Plan") and a copy of Company's standard form Non-Qualified Stock Option
Agreement.

                                       5
<PAGE>

          (b)  Subject to Contractor's and Executive's execution of Company's
standard form of Non-Qualified Stock Option Agreement (as modified by this
Agreement) effective as of the date hereof Company grants to Contractor the
right and option to purchase from Company all or any part of an aggregate of
100,000 shares of Company's common stock and effective as of January 3, 2000,
the right and option to purchase from Company all or any part of an aggregate of
400,000 shares of Company's common stock, both options upon the terms and
conditions set forth in the Company's standard Non-Qualified Stock Option
Agreement, subject to the Plan, except as hereby modified.

          (c)  Specific terms applying to such options are as follows:

               (i)   Price: the exercise price for the 100,000 shares
     shall be the market value as of the close of market on the date
     immediately preceding the date of the grant, i.e. close of market
     on December 8, 1999, and the exercise price for the 400,000
     shares shall be the market value as of the close of market on
     December 31, 1999 (the last market date preceding January 3,
     2000).

               (ii)  Term: the options shall expire on the 10/th/
     anniversary of the grant date unless terminated earlier per the
     Plan;

               (iii) Vesting: Options with respect to all 500,000
     shares shall vest in equal quarterly increments over a three (3)
     year period commencing January 1, 2000; the first quarterly
     increment shall vest on March 30,2000, and each subsequent
     quarterly increment shall vest at the expiration of each calendar
     quarter thereafter;

               (iv)  Termination for Cause: In the event for
     termination for cause, all options granted shall terminate
     effective as of the date of such termination;

               (v)   Termination for Death or Disability: In the event
     of termination for death or disability, all unvested options
     shall terminate effective as of the date of such termination;

               (vi)  Termination Without Cause: In the event of
     termination without cause, the options granted hereunder, to the
     extent not theretofore vested, shall vest effective as of such
     termination; and

                                       6
<PAGE>

               (vii) Exercise in the Event of Termination: Except for
     termination of the agreement for cause (in which event all
     options shall terminate on the date of termination) all options
     to the extent exercisable at the time of termination shall be
     exercisable for a period of six (6) months immediately following
     the month of termination, unless they expire sooner because of
     any other conditions specified in the Plan.

               Contractor's rights will otherwise be identical to those
generally accorded the other participants in the Plan for whom exceptions are
not extended and Executive will be subject to the such generally applied
arrangements, terms and conditions. Notwithstanding anything above to the
contrary, with respect to stock options granted Contractor, Company may elect to
require Contractor to exercise such options on a cashless basis, deducting from
the number of option shares to be received a number of shares equal in value to
the exercise price of the option as determined in accordance with the provisions
of the Plan, as applicable.

     8.   Incapacity:
          ----------

          8.1  If Executive is physically or mentally incapacitated from
rendering services hereunder, and if Executive's incapacity or disability shall
continue for a period or aggregate of periods of eight (8) consecutive weeks or
more during any contract period of the Term of this Agreement, Company may, at
its option, terminate and cancel this Agreement by notice mailed or delivered to
Contractor at any time prior to Executive's return to work hereunder. Executive
shall be deemed to be physically or mentally incapacitated if Executive is
unable for any physical or mental reason whatsoever to devote full time to the
business of the Company, as determined by the Board.

          8.2  If Company determines that Executive is permanently disabled and
if Contractor and Executive do not agree, determination shall be made by a panel
of three (3) doctors, the first to be chosen by Company, the second to be chosen
by Contractor and the third to be chosen by the first two. Any doctor selected
by a party will not be affiliated, associated or related to the party selecting
that doctor in any manner whatsoever. The opinion of a majority of the panel of
doctors shall be binding on the parties hereto. Each party shall bear its own
cost for their own doctor, and the parties shall split the cost of the third
doctor (unless it is determined that Executive is not permanently incapacitated,
in which event all doctor costs shall be borne by Company).

     9.   Force Majeure; Discontinuance of Business:
          -----------------------------------------

          If Company is prevented from or materially hampered or interrupted in
conducting its business by reason of any present or future statute, law,
ordinance, regulation, order, judgment or decree, or by reason of any act of
God, or by reason of any contingency beyond the control of Company, then, if all
other top management Employees

                                       7
<PAGE>

are also suspended. Executive's services and Contractor's compensation hereunder
may be suspended as often as any such event occurs and during such period of
time as any such event continues while all such other Employees' salaries
continue to be suspended. The term of this agreement shall automatically be
extended by the period of any suspension hereunder. If such suspension continues
for sixteen (16) consecutive weeks or more either party may terminate the Term
while such suspension is still in effect, except that Company may negate
Contractor's termination by then terminating such suspension with the
understanding that the Term may not again be suspended for the same cause.

     10.  Contractor's and Executive's Warranties and Indemnification
          -----------------------------------------------------------
Agreements:

          (a)  Contractor and Executive each warrant that they have the right to
enter into and fully perform this Agreement. Executive further warrants that
Executive has an agreement with Contractor pursuant to the terms of which
Executive is engaged as an employee of Contractor.

          (b)  Contractor and Executive agree that Executive shall be considered
for all purposes as an employee of Contractor. Contractor shall assume all
obligations of employer; without limiting the foregoing Contractor shall assume
all obligations to pay any and all taxes due with respect to payments made
hereunder and all obligation to withhold taxes from any payments which may be
made by Contractor to Executive. Additionally, Contractor shall assume and pay
the employer and the employee share (to the extent not paid by Executive) of any
payments required to be paid on account of FICA, SDI, SUI or any other fund. In
the event of any contest or audit with respect to any payments made hereunder,
Contractor shall assume and pay all expenses and/or liabilities incurred in
connection with such audit.

               Contractor and Executive shall defend, indemnify and hold Company
free and harmless from and against any claim, demand, loss or liability arising
out of any breach by its/him of any obligations outlined above.

          (c)  Executive's Inducement and Guarantee:
               ------------------------------------

               As an inducement to Company to enter into this Agreement with
Contractor, by execution below and by execution of the attached Inducement
Letter, Executive warrants and guarantees that Executive will perform any
obligations which are required of him under this Agreement and will not do
anything or take any action or fail to take any action which would cause
Contractor to be in breach of its obligations to furnish Executive's services
under the Agreement. Executive further warrants that in the event, for any
reason, Contractor should be dissolved or otherwise unable to furnish
Executive's service, then Executive shall contract directly with Company with
respect to the furnishing of such services on the same terms and conditions as
set forth herein.

                                       8
<PAGE>

     11.  Company's Rights:
          ----------------

          11.1  Contractor and Executive acknowledges that Company, shall own
all right, title and interest in and to the results of Executive's services
hereunder, including all material developed or conceived by Executive within the
scope of his engagement. Company shall have the right to use all such materials
and the elements thereof and the programs or other productions in which the
material is contained worldwide and in perpetuity, without limitation or
restriction whatsoever and Company may distribute, broadcast and otherwise
exhibit, use and/or exploit, in whole or in part, worldwide, in perpetuity, same
in any manner and through any media, whether presently in existence or
subsequently devised, as Company may elect. Executive hereby waives the so-
called "moral rights" of an author. Contractor and Executive agrees and
acknowledges that for purposes of Section 201 of the United States Copyright Act
and for ownership purposes, all materials and the results and proceeds of
Executive's services shall be considered "works for hire" and Company shall have
all ownership rights in the material and services of Executive hereunder as the
author thereof. Company shall have no obligation to use the product of
Executive's services.

                If for any reason any materials and /or the results and proceeds
of Executive's services hereunder are not considered works for hire which are
owned by Company then Contractor and Executive shall, and do hereby, assign to
Company, in perpetuity, all right (including but not limited to rights of
copyright), title and interest in and to such materials and/or the results and
proceeds of Executive's services, without any restriction or reservation
whatsoever.

          11.2. Existing Rights and Properties:
                ------------------------------

                (a) Contractor and/or Executive currently own or control certain
audiovisual or other intellectual properties or rights in certain audiovisual or
other intellectual properties (all herein for convenience the "PSO Properties").

               (b)  If at any time during the Term hereof (including the third
contract period) Contractor or Executive should determine to make or permit
others to make any use whatsoever of any PSO Property (other than "smartTalk"),
Contractor (on its own behalf or on behalf of Executive) shall promptly notify
Company to such effect. Thereafter for a period of fifteen (15) days Contractor
shall negotiate only with Company with respect to Company's acquiring such PSO
Property or rights therein for use by Company. If during the forty-five (45) day
"first negotiation" period Contractor and Company are unable to reach an
agreement with respect to such PSO Property, then Contractor shall be free to
enter into negotiations with other parties with respect to their acquiring such
PSO Property, provided however that if Contractor proposes to enter into any
agreement with any third party on terms equal to or more or less favorable than
those last negotiated between Contractor and Company, Contractor shall first
offer such terms

                                       9
<PAGE>

to Company and Company shall have a "right of last refusal" for five (5)
business days thereafter within which to accept or reject the same. Any offer
made by Contractor hereunder shall be capable of being accepted solely by the
payment of money, it being understood that such offers shall not be subject to
conditions other than the payment of money that Company might not be able to
meet due to the nature of the conditions. An offer which is changed in any way
shall be deemed a new offer. It is understood that the first negotiation/last
refusal procedure outlined above shall apply to each PSO Property now owned,
created or hereafter acquired by Contractor and/or Executive.

                (c) Notwithstanding anything above to the contrary it is
understood that Executive shall not render any services whatsoever in connection
with the use of any PSO Property (which is not accepted by Company) during the
first and second contract periods hereof and during the third contract period if
Company elects to continue to require Contractor to cause Executive to render as
President and Chief Executive Officer during the third contract period.

                    Notwithstanding that Executive may not render services in
connection with a PSO Property during the term as aforesaid, Contractor or
Executive may receive credit in connection with any use of such PSO property,
provided that the according of such credit to Executive (other than executive
producer or producer credit for "Scudder" and/or "smartTalk" which have
heretofore been established) shall be subject to Company's prior reasonable
approval, it being understood that Company's refusal to agree to the according
of such credit because of its belief that the same would conflict with Company's
business shall not be an unreasonable disapproval hereunder.

          11.3. Company shall have the right to use, disseminate, reproduce,
print and publish Executive's name, likeness, voice and biographical material
concerning Executive as news or informative matter in connection with Company's
business.

          11.4. Executive's services and rights herein granted are unique in
character and value such that the loss thereof could not be reasonably
compensable in damages in an action at law. Accordingly, Company shall be
entitled to equitable relief by way of injunction or otherwise to prevent the
breach or continued breach of this Agreement. The sole right of Executive as to
any breach or alleged breach hereof by Company shall be the recovery of money
damages, and the rights herein granted by Executive shall not be terminated by
reason of such breach. The waiver by either party of any breach hereof shall not
be deemed a waiver of any prior or subsequent breach hereof. All remedies of
either party shall be cumulative and the pursuit of one remedy shall not be
deemed a waiver of any other remedy.

                                       10
<PAGE>

     12.  Federal Communications Act:
          --------------------------

          Reference is hereby made to Section 507 of the Federal Communications
Act, making it a criminal offense for any person, in connection with the
production or preparation of any program intended for broadcasting, to accept or
pay any money, service or other valuable consideration for the inclusion of any
matter as part of any such program or program matter without disclosing in
advance the same to the employer of the person to whom such payment is made or
to the person for whom such program is being produced, or to the station over
which such program is broadcast. Executive understands that it is the policy of
Company not to permit any Employee of Company to accept or pay any such
consideration, and Executive represents and agrees that Executive has not
accepted and will not accept, and has not paid and will not pay, any money,
services, or other valuable consideration for the inclusion of any "plug,"
reference or product identification, or any other matter in the programs
produced hereunder.

     13.  Confidential Information:
          ------------------------

          Executive acknowledges that the information, observations, work
product, trade secrets and data obtained by Executive while engaged by Company
and its subsidiaries concerning the business or affairs of the Company or any
subsidiary thereof ("Confidential Information") are the property of Company or
such subsidiary. Therefore, Executive agrees that Executive shall not disclose
to any unauthorized person or use for Executive's own account any Confidential
Information without the prior written consent of the Board, unless and to the
extent that the aforementioned matters (i) become generally known to and
available for use by the public other than as a result of Executive's acts or
omissions to act or (ii) must be disclosed under a subpoena or other
governmental order or (iii) was possessed by Executive prior to Executive's
employment by the Company. Executive shall deliver to Company at the termination
of the employment period, or at any other time Company may request, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, work product or the business of Company or any subsidiary which
Executive may then possess or have under Executive's control.

     14.  Non-Compete, Non-Solicitation:
          -----------------------------

          During Executive's engagement and for two (2) years after the end of
the Term Contractor and Executive will not attempt to hire or to solicit (for
its/his own purposes or for any other company) any regular employee (other than
Executive's assistant) of or independent contractor rendering artistic or
production services to Company other than freelance actors or others who render
services to Company on a non-exclusive basis. Further, during Executive's
engagement and for three (3) years after the end of the Term Contractor and
Executive will not (i) transfer or attempt to transfer any projects in which

                                       11
<PAGE>

Company is involved (whether in negotiation, development or production) from
Company to Executive or to any other company and/or (ii) encourage any company
or business with whom Company is doing business (e.g. a network or other
exhibitor) from ceasing to do business with Company with respect to any project
which is then in negotiation, development or production.

     15.  Notices:
          -------

          All notices required to be given hereunder shall be in writing and
shall be delivered personally, electronically, or by express, certified or
registered mail to the respective addresses of the parties hereto set forth
elsewhere in this Agreement, or at such other addresses as may be designated by
written notice. Delivery of any notice shall be deemed conclusively made (i) if
personally delivered at the time of delivery, (ii) if delivered by transmittal
over electronic or telephonic transmitting devices (such as telex or telecopy)
to the addressee's telecopy or telex number, at the time of transmittal,
provided that the party to whom the notice is delivered has a compatible device,
(iii) if delivered by any private overnight express mail service, twenty-four
(24) hours after deposit with such service (this period shall be seventy-two
(72) hours if addressed to or from a party outside the United States), (iv) if
mailed, properly addressed and postage prepaid, three (3) business days from
date of mailing (seven (7) business days if mailed to or from a country other
than U.S.). A copy of any notice hereunder to Company shall also be given to the
Law Offices of Dixon Q. Dern, P.C., 1901 Avenue of the Stars, Suite 400, Los
Angeles, California 9967; a copy of any notice to Company shall also be given to
Leroy Bobbitt, Esq., Bobbit & Roberts, 1260 26/th/ Street, #150 South, Santa
Monica, California 90404.

     16.  Immigration:
          -----------

          Company's engagement of Contractor to furnish services of Executive is
subject to Executive's compliance with the terms and provisions of the Federal
Immigration and Naturalization Act. In that regard concurrently with the
execution of this agreement Executive shall provide Company with such proof of
Company's United States Citizenship or authorization to work in the United
States as may be required by the Immigration and Naturalization Service and
shall also complete and return to Company an I-9 Form or such other forms as may
be required.

     17.  Arbitration:
          -----------

          Any controversy or claim arising out of relating to this agreement the
breach thereof or the coverage of this arbitration provision shall be settled by
arbitration pursuant to the provisions of Section 1280 et seq. of the California
Code of Civil Procedure, or such substitute provisions therefor then in effect.
Any arbitrators selected shall have experience in or knowledge of the business
in which the parties are primarily engaged. Any such arbitration shall be
conducted in Los Angeles, California before a single arbitrator or, if the

                                       12
<PAGE>

parties are unable to agree upon a single arbitrator, then before three
arbitrators, one selected by each party and the third (i.e. neutral) arbitrator
to be selected by the other two arbitrators. If the parties or the arbitrator(s)
appointed by the parties are unable to agree upon the selection of a neutral
arbitrator then any party may at its election require that the neutral
arbitrator shall be selected by the American Arbitration Association, Los
Angeles, California. The arbitration of all issues including the determination
of the amount of any damages suffered by any party hereto by reason of the acts
or omissions of another shall be to the exclusion of any court of law (except
for court actions permitted as provided below). The parties each acknowledge
that they are giving up the right to a trial by jury or by the court. The
arbitrator(s) shall have the full authority to award legal or equitable relief,
such as but not limited to specific performance, as the arbitrator(s) deem
appropriate. However, the arbitrator(s) shall not have authority or jurisdiction
to award punitive damages, the same being waived. There shall be no discovery
except as authorized by the arbitrator(s). The decision of the arbitrator or a
majority of the arbitrators shall be final and binding on all parties and their
respective heirs, executors, administrators, successors and assigns. Any action
to secure judicial confirmation of the arbitration award may be brought in any
state or federal court of competent jurisdiction. The prevailing party in any
proceeding brought under this paragraph or in any proceeding brought to enforce
an arbitration award hereunder shall be entitled to its costs and to its
reasonable attorneys fees incurred in connection with the preparation and
conduct of any such arbitration and/or any other proceeding hereunder.
Arbitration hereunder shall not in any event (i) prevent any party from seeking
and obtaining interim equitable relief including but not limited to prohibitory
or mandatory injunctions, specific performance or extraordinary writs in any
court of law or equity having jurisdiction nor (ii) prevent any party from
enjoining any other party in any action brought by or against a third party with
respect to the subject matter of the arbitration nor (iii) prevent any party
from filing legal action hereunder to effectuate any attachment or garnishment,
provided that such party stipulates in such action, at any other party's
request, to arbitration on the merits of the case, nor (iv) prevent a party from
filing legal action to compel arbitration under the arbitration provisions
hereof.

     18.  General Provisions:
          ------------------

          18.1 Warranties: Contractor and Executive warrants that each is free
               ----------
to enter into this Agreement and will not do or permit any act which will
interfere with or derogate from the full performance of Executive's services or
Company's exercise of the rights herein granted.

          18.2 Indemnity: Contractor and Executive shall hold Company, its
               ---------
licensees and assigns, and the directors, officers, employees and agents of the
foregoing, harmless from all claims, liabilities, damages, costs and legal fees
arising from any breach by Contractor or Executive of any warranty or agreement
made by Contractor and/or Executive hereunder. Company will hold Contractor and
Executive harmless from all

                                       13
<PAGE>

claims, liabilities, damages, costs and legal fees arising from the use of any
material supplied Executive by Company or incorporated at Company's discretion.
The party receiving notice of any claim or action subject to indemnity hereunder
shall promptly notify the other party. This indemnity shall survive any
termination or expiration of this Agreement.

          18.3 Waiver: A waiver by either party of any of the terms or
               ------
conditions of this agreement in any one instance shall not be construed to be a
waiver of such term or condition for the future, or any subsequent breach
thereof; all remedies, rights, undertakings, obligations and agreements
contained in this agreement shall be cumulative, and none of them shall be in
limitation of any other remedy, right, undertaking, obligation or agreement of
either party.

          18.4 Construction: This agreement shall be governed by and construed
               ------------
in accordance with the laws of the State of California applicable to contracts
entered into and fully to be performed therein. In view of the fact that this
agreement was in whole or in part negotiated and entered into in California, the
parties consent to and agree to submit to the jurisdiction of the courts of the
State of California (and/or the federal courts within California), and each
party agrees that service of process may be effected by mail (certified or
registered mail, return receipt requested), to or by personal service upon such
party (or any officer of a corporate party) at such party's address as set forth
in this agreement or such other address as such party may specify in writing.

               Wherever the context of this agreement requires it, each gender
shall be deemed to embrace and include the others, and the singular shall be
deemed to embrace and include the plural.

          18.5 Severability of Provisions: If any provision hereof as applied
               --------------------------
to either party or to any circumstance shall be adjudged by a court to be void
or unenforceable, the same shall in no way affect any other provisions hereof,
the application of such provision in any other circumstances or the validity or
enforceability hereof.

          18.6 Entire Understanding: This agreement contains the entire
               --------------------
understanding of the parties hereto relating to the subject matter herein
contained and supersedes any and all prior negotiations, understanding and
agreements (including but not limited to the Term Sheet dated December 8, 1999)
between the parties (whether oral or in writing); this agreement cannot be
changed, rescinded or terminated except by a writing signed by the Company.

          18.7 Successors and Assigns: Except where expressly provided to the
               ----------------------
contrary, this agreement, and all provisions hereof, shall inure to the benefit
of and be binding upon the parties hereto, their successors in interest,
assigns, administrators, executors, heirs and devisees. In this regard it is
understood that without limiting the

                                       14
<PAGE>

foregoing Company may assign this Agreement in whole or in part to Film Roman,
Inc., a California Corporation, and/or delegate to that subsidiary the
responsibility for making payments and discharging other obligations of Company
hereunder.

          18.8 Paragraph Titles: The titles of the paragraphs of this agreement
               ----------------
are for convenience only and shall not in any way affect the interpretation of
any paragraphs of this agreement or of the agreement itself.

          IN WITNESS WHEREOF, the parties hereto have executed this agreement as
of the day and year first above written.


                                        FILM ROMAN, INC.
                                        "Company"

                                        By  /s/ Dixon Q. Dern
                                            ----------------------------
                                            Its Secretary



                                        PRODUCERS SALES ORGANIZATION


                                        By: /s/ John W. Hyde
                                            ----------------------------

                                            Its ------------------------



                                        APPROVED:

                                        /s/ John W. Hyde
                                        --------------------------------
                                        JOHN W. HYDE

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