EXHIBIT 10.23
Iwerks Entertainment, Inc.
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
February 20, 1998
Xx. Xxxxxxx Xxxxxxxxx
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxxxxxxx:
Iwerks Entertainment, Inc. (the "Company") and you have agreed as follows:
1. Employment and Services:
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The Company has employed you as Chairman of the Board, Chief Executive
Officer and President, and you have agreed, commencing on February 20, 1998 (the
"Commencement Date"), to perform your exclusive and full-time services in that
capacity for the Company upon the terms and conditions herein set forth. You
shall report directly to the Company's Board of Directors or its duly authorized
representatives. All other officers of the Company shall report directly to you
or another officer of the Company as designated by you. You shall have all the
duties customarily accorded to a Chairman of the Board, Chief Executive Officer
and President of a corporation and such additional duties commensurate with your
offices as are from time to time delegated to you by the Board of Directors of
the Company. You shall devote your business time, energy and efforts faithfully
and diligently to promote the Company's interests. You will render your
services primarily at the Company's offices which shall be in the Los Angeles
metropolitan area and which are presently on West Valerio Street in Burbank, and
shall travel on business on a temporary basis to such other places as the
Company may direct.
2. Term:
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The term of this Agreement shall be the Initial Period and the Additional
Period, if the Company's option is exercised, unless sooner terminated.
a. Initial Period: The initial period shall commence on the
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Commencement Date and continue for a three year period; and
b. Additional Period: The Company shall have the irrevocable option to
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extend the Term of this Agreement following the termination of the Initial
Period for an additional two year period (the "Additional Period"), upon the
same terms and conditions as during the Initial Period. Such option is
exercisable by written notice sent on or before August 19, 2000.
c. Notice at Expiration of Additional Term. If the option referred to in
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clause b above is exercised by the Company. at your request, the Company shall
provide to you written notice on or prior to August 19, 2002 as to whether it
desires to extend the Term beyond the Additional Term.
3. Salary:
------
As compensation for all your services rendered under this Agreement, and so
long as you are not in default of any material obligation, for the period ending
June 30, 1999, the Company shall pay you a base salary at an annual rate of
$330,000. Commencing on the first day of the fiscal year ending June 30, 1999,
your base salary for each fiscal year of the Company during the Term of your
employment (including the Initial Term and the Additional Term) shall be
increased by an amount equal to 5% of the base salary prevailing during the
prior fiscal year of the Company.
Such compensation shall be payable in equal installments on the Company's
regular paydays during the Term subject to the usual and required employee
payroll deductions, withholding and reduction to offset payments you receive
from governmental agencies or programs, including, but not limited to, State
Disability Insurance benefits. (You are obligated to seek such payments or
benefits and report them to the Company). The Company is not obligated to
actually utilize your services, subject to its obligations set forth in this
Agreement.
4. Performance Bonus:
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Commencing in Fiscal 1999, you will be eligible for a performance based
bonus. As soon as practicable following the commencement of your employment
hereunder, the Compensation Committee of the Board of Directors in consultation
with you will develop a bonus plan to be first implemented for Fiscal 1999 for
the benefit of you and the other executive officers of the Company. You will be
eligible to receive a bonus in an amount of up to 50% of your then current
annual base salary upon achieving 100% of the established performance goals. It
is anticipated that the bonus plan will provide bonus payments in amounts less
than this percentage if the Company achieves a portion of the stated goals and a
percentage greater than 50% (up to an agreed upon maximum contemplated to be set
at 100%) if the Company's performance exceeds the stated goals. Performance
goals will be established by the Compensation Committee of the Board of
Directors after consultation with you during the first quarter of each fiscal
year and shall be commensurate with the corresponding bonus targets. It is
anticipated that the performance goals will include financial goals for the
Company as well as nonfinancial goals for the Company. During the fiscal year
ending June 30, 1998 ("Fiscal 1998"), the performance bonus will not be
available; however, the Board of Directors will consider the grant of a
discretionary bonus based on your performance during the third and fourth
quarters of Fiscal 1998.
5. Stock Options:
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The Company will grant to you options to purchase 250,000 shares of common
stock of the Company upon commencement of your employment hereunder. Of these
250,000 options, 150,000 options shall be priced at the closing sale price of
the Company's common stock on the Nasdaq National Market on February 19, 1998,
the date prior to the execution of this Agreement (the
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"Closing Price"). Of the remaining options, 50,000 shall be priced at 125% of
the Closing Price and 50,000 shall be priced at 150% of the Closing Price.
Effective as of the beginning of each fiscal year in which you are employed by
the Company (commencing with the fiscal year ending June 30, 2000) and if the
Company achieves 100% of the performance goals as established for purposes of
the performance bonus described above for the prior fiscal year, you will be
granted options to purchase an additional 100,000 shares of common stock at the
closing sale price of the common stock on the Nasdaq National Market on the last
trading day of such prior fiscal year. If the Company achieves less than 100% of
the performance goals for any fiscal year, but you qualify for a bonus under the
bonus plan for such fiscal year, you shall be granted options for that number of
shares which bears the same ratio to 100,000 as the percentage bonus actually
received bears to 50%. If you are awarded a discretionary bonus for the Fiscal
1998, then you shall be granted an additional number of options computed by
reference to the following formula: the result obtained by multiplying a
fraction where the numerator is a percentage derived by dividing the amount of
such bonus by the actual base salary paid to you during Fiscal 1998 and the
denominator is 50%, by 41,667. Of the options described herein, 50,000 of the
250,000 initially granted pursuant to the terms of this Agreement shall vest
upon execution of this Agreement. All other options described herein shall vest
in equal monthly installments over four years from the date of grant. All
options described herein shall be subject to accelerated vesting as described
below under "Severance Arrangements" and "Change of Control." All options shall
terminate on the earlier to occur of three years from the date of your
termination of employment and ten years from the date of grant.
6. Benefits:
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During the period for which the Company actually utilizes your services and
so long as you are not in default of any material obligation:
a. Vacation. You shall be entitled to four weeks paid vacation for each
calendar year during your employment; provided, however, that vacation shall
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only be taken at such times as not to interfere with the necessary performance
of your duties and obligations under this Agreement. Vacation time shall accrue
and may be carried over only in accordance with Company policy. It shall be
your responsibility to schedule and take all accrued vacation prior to the
expiration of the Term hereof.
b. Automobile. The Company shall provide you with an automobile
allowance in an amount equal to $ 1,000.00 per month.
c. Reimbursement. You shall be entitled to reimbursement from the
Company for the reasonable costs and expenses (including first class air and
airport sedan service) incurred in connection with the performance of the duties
and obligations provided for in this Agreement (including the cost of a cellular
phone to the extent used for Company business). Reimbursement shall be paid
upon prompt presentation of expense statements or vouchers and such other
supporting information as the Company may from time to time require.
d. Other Benefits; Insurance. During the term of your employment under
this Agreement, if and to the extent eligible, you shall be entitled to
participate in all operative employee
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benefit and welfare plans of the Company then in effect ("Company Officer
Benefit Plans"), including, to the extent then in effect, group life, medical,
disability and other insurance plans, all on the same basis generally
applicable to the executives of the Company; provided, however, that nothing
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contained in this Section 6 shall, in any manner whatsoever, directly or
indirectly, require or otherwise prohibit the Company from amending, modifying,
curtailing, discontinuing or otherwise terminating, any Company Officer Benefit
Plan at any time (whether during or after the Term hereof). In addition
(assuming you are of reasonable health and that such insurance can be obtained
for reasonable cost, the Company shall provide you a $1,000,000 term life
insurance policy for the benefit of beneficiaries from time to time designated
by you. The Company shall use its commercially reasonable efforts to obtain any
waivers of any applicable waiting periods under all of the Company Officer
Benefit Plans from the insurer or, if applicable, administrator of the plan.
7. Severance Arrangements:
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In the event of a termination not "for cause" or a "defacto termination",
(either prior to or at the expiration of the Initial Term or Additional Term, as
applicable (i.e. whether you are terminated during the Initial Term or the
Additional Term, as applicable, or your employment is terminated as a result of
the Company's failure to renew your employment at the end of the Initial Term or
Additional Term, as applicable), you will be entitled to receive the following
(the "Severance Amount"): (i) a cash amount equal to the base salary which
would have been payable to you over the remaining Term (but not less than 18
months), as computed based on your base salary at the date of notice of
termination, (ii) a cash amount equal to the pro rated portion (based on time
served) of the performance bonus which would have been paid to you under the
performance bonus plan for the fiscal year in which the termination occurs, if
your employment had continued through the end of the fiscal year and the Company
had achieved 100% of its scheduled performance goals, and (iii) the automobile
allowance, (iv) COBRA benefits for you and your family (medical and dental, if
applicable), and (v) other applicable benefits under other Company Officer
Benefit Plans for the remaining Term (but not less than 18 months). In
addition, if termination occurs for any of the foregoing reasons prior to or at
the expiration of the Initial Term or Additional Term, as applicable, all of the
stock options then held by you which would vest during the remainder of the
Initial Term or Additional Term, as applicable, and during the 12 months
thereafter, shall become vested and immediately exercisable and the time for
exercise shall be extended until the expiration of three years from the date of
termination of employment. Notwithstanding the foregoing, (x) if a termination
giving rise to an obligation by the Company to pay the Severance Amount occurs
at any time during the Initial Term or upon the expiration of the Initial Term,
each reference to 18 months above shall be deemed to refer to 24 months, and (y)
if during the fiscal year in which a termination giving rise to an obligation by
the Company to pay the Severance Amount occurs the Company achieves 100% of its
scheduled performance goals, the Company shall pay to you 100% of the
performance bonus (in lieu of the pro rated portion referred to above) as part
of the Severance Amount. The amounts payable to you pursuant to this Section 7
shall be paid to you within 10 days of your termination
"For cause" is defined to mean (a) an act of fraud, embezzlement or similar
conduct by you involving the Company, (b) any action by you involving your
arrest for violation of any criminal statute constituting a felony or a
misdemeanor involving moral turpitude if the Board of Directors
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reasonably determines that the continuation of your employment after such event
would have an adverse impact on the operations or reputation of the Company in
the financial community, (c) gross misconduct or habitual negligence in the
performance of your duties, (d) an act constituting a breach of your fiduciary
duty to the Company under the Delaware General Corporation Law, or (e) a
continuing, repeated and willful failure or refusal by you to perform your
duties. A "defacto termination" is defined to include any of the following
events: (a) the Company reduces your base salary in an aggregate amount in
excess of 10% from that paid in the prior fiscal year, except as part of a
general reduction of compensation of executive officers, (b) the Company fails
to cause you to remain an executive officer of the Company, (c) you were not
afforded the authority, powers, responsibilities and privileges customarily
accorded to an executive with your title, or (d) the Company requires your
primary services to be rendered in an area other than the Company's principal
offices in the greater Los Angeles metropolitan area.
8. Change in Control:
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If there is a "change in control" of the Company during the Initial Term or
the Additional Term, as applicable, upon the expiration of 90 days (or such
longer period as is then mutually agreeable to you and the Company) following
the date of such Change in Control (if you are requested to serve during such
period) and for a 180 day period thereafter you shall be entitled to terminate
your employment by delivery of written notice and receive (i) a cash amount
equal to the base salary which would have been payable to you over the remaining
Term (but not less than 24 months), as computed based on your base salary at the
date of notice of termination, (ii) a cash amount equal to the performance bonus
which would have been paid to you under the performance bonus plan for the
fiscal year in which the termination occurs, if your employment had continued
through the end of the fiscal year and the Company had achieved 100% of its
scheduled performance goals, and (iii) the automobile allowance, (iv) COBRA
benefits for you and your family (medical and dental, if applicable), and (v)
other applicable benefits under other Company Officer Benefit Plans for the
remaining Term (but not less than 24 months). In addition, all options held by
you on the date of the Change in Control which are unvested shall vest and
become exercisable at the time of the Change in Control and will remain
exercisable (if they are not terminated as a result of the Change in Control)
for a period ending at the end of the third year following the date of such
Change in Control. Nothing contained in this Section 8 shall modify or alter
the Company's obligations under Paragraph 7 above with respect to termination
without cause or defacto termination during the period following a Change in
Control; provided, however, if a termination without cause or a defacto
termination occurs between the date of a Change in Control and the expiration of
the period in which you are entitled to terminate your employment pursuant to
this Section 8, the Severance Amount payable to you shall be the benefits
described in this Section 8 and not the benefits described in Section 7. The
amounts payable to you pursuant to this Section 8 shall be paid to you within 10
days of your termination.
A "change in control" is defined to mean (a) the acquisition by any
individual, entity or group (within the meaning of the Exchange Act of 1934, as
amended) of 25% or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote in the election of directors,
(b) a liquidation, dissolution, reorganization, merger or consolidation of the
Company, except where (i) more than 60% of the combined voting power of the then
outstanding
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voting securities of the resulting corporation entitled to vote in the election
of directors shall be owned by substantially all of the persons who were owners
immediately prior to such event in substantially the same proportions as their
respective ownership immediately prior to such event, or (ii) no person owns 25%
or more of the combined voting power of the resulting corporation, or (iii) at
least a majority of the members of the Board of Directors shall have been
members of the Board of Directors at the time of the execution of the initial
agreement providing for such event, or (c) a change in the membership of the
Board of Directors such that the directors sitting on the Board of Directors on
the effective date of this Agreement cease to constitute at least a majority of
the Board of Directors following the event.
9. No Mitigation:
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The payments required to be paid to you by the Company pursuant to Sections
7 and 8 shall not be reduced by or mitigated by amounts which you earn or are
capable of earning during any period following your termination date.
10. Indemnification:
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The Company and you are parties to an Indemnification Agreement, pursuant
to which, inter alia, the Company has agreed, on the terms and conditions
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therein set forth, to indemnify you against certain claims arising by reason of
the fact that you were an officer or director of the Company.
11. Trade Secrets:
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The Company and you are parties to a separate confidentiality agreement in
a form which is required of all employees pursuant to the Company's personnel
policies.
12. Injunctive Relief
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You hereby recognize, acknowledge and agree that in the event of any
material breach by you of any of your covenants, agreements, duties or
obligations hereunder, the Company would suffer great and irreparable harm,
injury and damage, the Company would encounter extreme difficulty in attempting
to prove the actual amount of damages suffered by the Company as a result of
such breach, and the Company would not be reasonably or adequately compensated
in damages in any action at law. You therefore agree that, in addition to any
other remedy the Company may have at law, in equity, by statute or otherwise, in
the event of any material breach by you of any of the covenants, agreements,
duties or obligations hereunder, and after written notice is provided to you
with a reasonable opportunity to cure, the Company or its subsidiaries shall be
entitled to seek and receive temporary, preliminary and permanent injunctive and
other equitable relief from any court of competent jurisdiction to enforce any
of the rights of the Company or its subsidiaries or any of the covenants,
agreements, duties or obligations of you hereunder, or otherwise to prevent the
violation of any of the terms or provisions hereof, all without the necessity of
proving the amount of any actual damage to the Company or its subsidiaries
thereof resulting therefrom; provided, however, that nothing contained in this
Section 12 shall be deemed or construed in any manner whatsoever as a waiver by
the Company or its subsidiaries of any of the rights which any of them
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may have against you at law, in equity, by statute or otherwise arising out of,
in connection with or resulting from the breach by you of any of your covenants,
agreements, duties or obligations hereunder.
13. Survivability:
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Without prejudice to the survival of any of your other rights or
obligations and/or any of the Company's other rights or obligations, you and we
expressly acknowledge that your obligations and/or the Company's rights under
paragraphs 7, 8, 9, 12 and 13 will survive the expiration or termination of this
Agreement.
14. Notices:
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All notices, requests, consents and other communications required or
permitted to be given hereunder shall be written and shall be deemed to have
been duly given if delivered personally or sent by prepared telegram, by
facsimile, or mailed first-class, postage prepaid, as follows:
Employee: Xx. Xxxxxxx Xxxxxxxxx
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
with a copy to: Xxxxx Xxxx, Esq.
00000 Xxxxxxxx Xxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
the Company: Iwerks Entertainment, Inc.
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
with a copy to: Troop Xxxxxxxxx Xxxxxxx & Xxxxxx LLP
00000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: C.N. Xxxxxxxx Xxxxxxx III, Esq.
or at such other addresses as either party may specify by written notice to the
other.
15. General:
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a. During the Term of this Agreement, except within the final one hundred
eighty (180) days of the Term or a Change in Control (whichever is the first to
occur), you shall not seek, or negotiate for, employment other than with the
Company.
b. This Agreement sets forth the entire agreement and understanding of
the parties hereto, and, effective on the Commencement Date hereof, supersedes
all prior agreements,
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arrangements, and understandings. No representation, promise or inducement has
been made by either party that is not embodied in this Agreement.
c. Nothing herein contained shall be construed so as to require the
commission of any act contrary to law. Wherever there is any conflict between
any provision of this Agreement and any present or future statute, law,
ordinance or regulation, the latter shall prevail, but in such event the
provision of this Agreement affected shall be curtailed and limited only to the
extent necessary to bring it within legal requirements. Without limiting the
generality of the foregoing, in the event any compensation payable hereunder
shall be in excess of the amount permitted by any statute, law, ordinance or
regulation, payment of the maximum amount allowed thereby shall constitute full
compliance by the Company with the payment requirements of this Agreement.
d. The section headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.
e. The provisions of this Agreement are severable, and if any one or more
provisions are determined to be judicially unenforceable, in whole or in part,
the remaining provisions shall nevertheless be binding and enforceable.
f. This Agreement and all obligations and benefits of you and the Company
hereunder shall bind and inure to the benefit of you and the Company and your
and the Company's respective affiliates, successors and assigns; provided,
however, you shall not be entitled to assign any of your obligations under this
Agreement and the Company's right to assign this Agreement is subject to the
provisions of Section 8 hereof.
g. No amendment or waiver of any term or provision of this Agreement
shall be effective unless made in writing. Any written amendment or waiver
shall be effective only in the instance given and then only with respect to the
specific term or provision (or portion thereof) of this Agreement to which it
expressly relates, and shall not be deemed or construed to constitute a waiver
of any other term or provision (or portion thereof) waived in any other
instance.
h. This Agreement has been made and entered into in the State of
California and shall be construed in accordance with the laws of the State of
California without regard to the conflict of laws principles thereof.
i. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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j. You have read this Agreement, fully understand its contents and terms,
and have had the opportunity to ask the Company about any questions, concerns or
issues you may have in connection with the Agreement or the terms of the
Agreement. You also have had the opportunity, and taken it to the extent you
choose, to consult legal counsel or any other advisers of your choice in
connection with this Agreement.
Very truly yours,
IWERKS ENTERTAINMENT, INC.
By: /s/ Xxx Xxxxxx
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Xxx Xxxxxx
Director
AGREED:
/s/ Xxxxxxx Xxxxxxxxx
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XXXXXXX XXXXXXXXX
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