SEPARATION AGREEMENT
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This Separation Agreement (this "Agreement") is made and entered into
as of October 31, 1997 by and between Iwerks Entertainment, Inc., a
Delaware corporation (the "Company"), and, Xxxxx Xxxxxxxx, an individual
("Executive").
RECITALS:
X. Xxxxxx Entertainment Inc. (the "Corporation") considers it
essential to the best interests of its stockholders to xxxxxx the
continuous employment of key management personnel. In connection with
this, the Corporation's Board of Directors (the "Board") recognizes the
possibility of a change in management personnel or a change in control of
the Corporation may exist and that such possibility, and that such
uncertainty and questions that it may raise among management, could result
in the departure or distraction of management personnel to the detriment of
the Corporation and its stockholders.
B. The Board has decided to reinforce and encourage the continued
attention and dedication of members of the Corporation's management to
their assigned duties without distraction arising from the possibility of a
change in management of control of the Corporation.
C. In order to induce Executive to remain in its employ, the
Corporation has entered into this Agreement with Executive.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and
Executive agree as set forth below.
1. TERMINATION BY THE COMPANY FOR "CAUSE" OR VOLUNTARILY BY
EXECUTIVE.
The Company may terminate Executive's employment at any time with or
without Cause, and Executive may terminate his or her employment at any
time for any reason, in each case by delivery of written notice to the
other party. If the Company terminates Executive's employment with the
Company for Cause or if Executive terminates such employment by reason of
disability, death or voluntary resignation, then Executive shall be
entitled to receive all salary and benefits (including vacation, death,
disability and medical benefits, if any, to the extent such benefits are
accorded to Executive under the Company's benefit plans maintained for
employees generally) accrued and payable to him or her with respect to
services rendered through the date of termination and shall be entitled to
no additional separation or severance payment hereunder. Further, in such
case, this Agreement shall have no effect on, and shall not be deemed to
amend or modify, any of the terms of any stock option granted to Executive
by the Company through the date of termination (collectively, the
"Options") and Executive's rights thereunder shall be limited
to the terms and conditions set forth in the applicable stock option
agreement evidencing such Options. For purposes of this Agreement, "Cause"
shall mean and be limited to the following events: (i) an act of fraud,
embezzlement or similar conduct by Executive involving the Company; or (ii)
any action by Executive involving the arrest of Executive for violation of
any criminal statute constituting a felony or a misdemeanor involving moral
turpitude if the Board reasonably determines that the continuation of
Executive's employment after such event would have an adverse impact on the
operations or reputation of the Company in the financial community; or
(iii) gross misconduct or habitual negligence in the performance of
Executive's duties, or (iv) an act constituting a breach of Executive's
fiduciary duty to the Corporation under the Delaware General Corporation
Law, or (v) a continuing, repeated willful failure or refusal by Executive
to perform his duties; PROVIDED, HOWEVER, that termination shall not be
deemed to be for Cause under this subclause (v) unless Executive shall have
first received written notice from the Board advising Executive of the
specific acts or omissions alleged to constitute a failure or refusal to
perform and such failure or refusal to perform continues after Executive
shall have had a reasonable opportunity to correct the acts or omissions
cited in such notice.
2. TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE. Subject to the
provisions of Section 4 below, if the Company terminates Executive's
employment with the Company other than for Cause or if the Company causes a
Defacto Termination of Executive (as defined below) (each a "Separation
Termination"), Executive shall receive the "Separation Package." As used
herein, the "Separation Package" shall consist of (i) a cash amount equal
to the base salary which would have been payable to Executive over 12
months (computed at the annual rate in effect at the date of the Separation
Termination), plus (ii) a cash amount equal to the pro rated portion of the
performance bonus (computed by reference to the actual number of days
Executive is employed during the applicable fiscal year) which would have
been paid to Executive under the Company's performance bonus plan for the
fiscal year in which the Separation Termination occurs (if any such plan is
then in effect) if Executive's employment had continued through the end of
the fiscal year and the Company had achieved 100% of its scheduled
performance goals, plus (iii) paid up COBRA benefits for Executive and his
or her family for the 12 months following the date of the Separation
Termination. Further, notwithstanding any contrary provision in the
applicable stock option agreement, all Options which are not vested as of
the date of the Separation Termination shall become vested and immediately
exercisable and all Options held by Executive as of the date of the
Separation Termination (including those which become exercisable solely as
a result of the provisions of this sentence) shall remain exercisable for a
period of 15 months following the date of the Separation Termination. For
purposes of this paragraph, "Defacto Termination" shall include any of the
following events: (i) the Company shall reduce the Executive's 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 executive officers
compensation in general; (ii) the Company shall fail to cause Executive to
remain an executive officer of the Company; (iii) Executive shall not be
afforded the authority, powers, responsibilities and privileges customarily
accorded to an executive with his or her title; or (iv) the Company shall
require Executive's primary services to be rendered in an area other than
the Company's principal offices in the greater Los Angeles metropolitan
area.
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3. CHANGE IN CONTROL. The following provisions shall be applicable
in the case of an occurrence of a Change in Control of the Company:
3.1 Executive may (but shall not be obligated to) terminate his
or her employment with the Company effective 30 days after the giving of
such notice given at any time commencing with the sixth month anniversary
of such Change in Control and terminating on the one year anniversary of
the Change in Control, and receive the payments provided for in Section 3.3
hereof.
3.2 If the Company terminates Executive's employment for any
reason (including death, disability, Cause, without Cause or in the case of
a Defacto Termination) at any time within the one year period following the
date of a Change in Control, then Executive shall be entitled to the
payments provided for in Section 3.3 hereof.
3.3 In the circumstances described in Sections 3.1 and 3.2
above, Executive shall be entitled to and receive the Separation Package.
3.4 In addition to any amounts payable to Executive pursuant to
Sections 3.1 and 3.2 above, and without regard to whether Executive's
employment is terminated following a Change in Control, upon the occurrence
of a Change in Control, all Options then held by Executive which are not
yet vested shall vest as of the date of a Change in Control and shall
become immediately exercisable. Further, all Options that are exercisable
as of the date of such Change in Control (including those which do so as a
result of the provisions of the preceding sentence) shall remain so for 15
months following the date of such Change in Control.
3.5 For purposes of this Agreement, a Change in Control shall
mean:
3.5.1 The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act ("Rule 13d-3")) of
more than 25% of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); PROVIDED, HOWEVER, that
neither of the following acquisitions shall constitute a Change in Control:
(i) any acquisition by the Company or (ii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any corporation controlled by the Company; or
3.5.2 Individuals who, as of the date of this
Agreement, constitute the Board of Directors of the Company (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board; PROVIDED, HOWEVER, that any individual becoming a director
subsequent to the date of this Agreement whose election, or nomination for
election by the stockholders of the Company, shall be approved by a vote of
at least a majority of the directors
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then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board; or
3.5.3 Approval by the stockholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation: (i) more than 60% of the
combined voting power of the then outstanding voting securities of the
corporation resulting from such reorganization, merger, or consolidation,
which may be the Company (the "Resulting Corporation") entitled to vote
generally in the election of directors (the "Resulting Corporation Voting
Securities") shall then be owned beneficially, directly or indirectly, by
all or substantially all of the Persons who were the beneficial owners of
Outstanding Voting Securities immediately prior to such reorganization,
merger or consolidation, in substantially the same proportions as their
respective ownership of Outstanding Voting Securities immediately prior to
such reorganization, merger, or consolidation; (ii) no Person (excluding
the Company, any employee benefit plan (or related trust) of the Company,
the Resulting Corporation, and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 25% or more of the combined voting power of Outstanding Voting
Securities) shall own beneficially, directly or indirectly 25% or more of
the combined voting power of the Resulting Corporation Voting Securities;
and (iii) at least a majority of the members of the Board shall have been
members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or consolidation; or
3.5.4 Approval by the stockholders of the Company of (x)
a complete liquidation or dissolution of the Company or (y) the sale or
other disposition of all or substantially all of the assets of the Company,
other than to a corporation (the "Buyer") with respect to which (i)
following such sale or other disposition, more than 60% of the combined
voting power of securities of Buyer entitled to vote generally in the
election of directors ("Buyer Voting Securities"), shall be owned
beneficially, directly or indirectly, by all or substantially all of the
Persons who were the beneficial owners of the Outstanding Voting Securities
immediately prior to such sale or other disposition, in substantially the
same proportion as their respective ownership of Outstanding Voting
Securities, immediately prior to such sale or other disposition; (ii) no
Person (excluding the Company and any employee benefit plan (or related
trust) of the Company or Buyer and any Person that shall immediately prior
to such sale or other disposition own beneficially, directly or indirectly,
25% or more of the combined voting power of Outstanding Voting Securities),
shall own beneficially, directly or indirectly, 25% or more of the combined
voting power or, Buyer Voting Securities; and (z) at least a majority of
the members of the board of directors of Buyer shall have been members of
the Incumbent Board at the time of the execution of the initial agreement
or action of the Board providing for such sale or other disposition or
assets of the Company.
4. PAYMENT OF TERMINATION AMOUNTS. All amounts payable to Executive
pursuant to Sections 1, 2 or 5 hereof, shall be paid to Executive in a lump
sum on the second business day following termination of Executive's
employment with the Company.
Page 4
5. STOCK AND SIMILAR RIGHTS. Except with regard to the vesting and
exercise dates of Options as set forth in other Sections of this Agreement,
Executive's rights under any other agreement or plan under which stock
options, restricted stock or similar awards are granted shall be determined
in accordance with the terms and provisions of such plans or agreements.
6. NO MITIGATION OR OFFSET. Payment of any sum under this Agreement
shall not be subject to any claim of mitigation nor shall the Company be
entitled to any right of offset with respect thereto.
7. GENERAL RELEASE. As a condition to the payment of the Separation
Package, Executive shall execute and deliver a general release to the
Company in the form attached as Exhibit A attached hereto.
8. GENERAL PROVISIONS.
8.1 NOTICES. All notices, requirements, requests, demands,
claims or other communications hereunder shall be in writing. Any notice,
requirement, request, demand, claim or other communication hereunder shall
be deemed duly given (i) if personally delivered, when so delivered, (ii)
if mailed, two (2) business days after having been set by registered or
certified mail, return-receipt requested, postage prepaid and addressed to
the intended recipient as set forth below, (iii) if given by telecopier,
once such notice or other communication is transmitted to the telecopier
number specified below, and the appropriate telephonic confirmation is
received, provided that such notice or other communication is promptly
thereafter mailed in accordance with the provisions of clause (ii) above or
(iv) if sent through an overnight delivery service under circumstances by
which such service guarantees next day delivery, the date following the
date so sent:
IF TO THE COMPANY, TO: 0000 X. Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
IF TO EXECUTIVE TO: Xxxxx Xxxxxxxx
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Any party may change the address to which notices, requests, demands,
claims and other communications hereunder are to be delivered by giving the
other party notice in the manner herein set forth.
8.2 ASSIGNMENT. This Agreement and the benefits hereunder are
personal to the Company and are not assignable or transferable, nor may be
the services to be performed hereunder be assigned by the Company to any
person, firm or corporation; PROVIDED HOWEVER, that this Agreement and the
benefits hereunder may be assigned by the Company to any corporation into
which the Company may be merged or consolidated, and this Agreement and the
benefits hereunder will automatically be deemed assigned to any such
corporation, subject, however, to Executive's right to terminate this
Agreement to the extent provided herein.
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8.3 COMPLETE AGREEMENT. This Agreement contains the entire
agreement among the parties hereto with respect to the subject matter
hereof and supersedes and cancels any and all previous written or oral
negotiations, commitments, understandings, agreements and any other
writings or communications in respect of such subject matter.
8.4 AMENDMENTS. This Agreement may be modified, amended,
superseded or terminated only by a writing duly signed by both parties.
8.5 SEVERABILITY. Any provision of this Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality
or unenforceability, without affecting in any way the remaining provisions
hereof in such jurisdiction or rendering that or any other provision of
this Agreement invalid, illegal or unenforceable in any other jurisdiction.
8.6 NO WAIVER. Any waiver by either party of a breach of any
provisions of this Agreement shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Agreement. The failure of either party to insist upon
strict adherence to any term of this Agreement on one or more occasions
shall be considered a waiver or to deprive such party of the right
thereafter to insist upon strict adherence to that term or any other term
of this Agreement.
8.7 BINDING EFFECT. This Agreement shall be binding on, and
shall inure to the benefit of, the parties hereto and their permitted
assigns, successors and legal representatives.
8.8 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall
constitute one and the same document.
8.9 GOVERNING LAW. This Agreement has been negotiated and
entered into in the State of California and shall be construed in
accordance with the laws of the State of California.
8.10 ARBITRATION. The parties hereby expressly agree that any
controversy or claim relating to this Agreement, including the
construction, enforcement or application of the terms hereof, shall be
submitted to arbitration in Los Angeles, California by the American
Arbitration Association in accordance with the Commercial Arbitration Rules
of such association. The arbitrator shall be a retired judge of the Los
Angeles Superior Court or other party acceptable to the parties and the
rules of evidence shall apply. The costs of the arbitrator shall be borne
equally. Each party shall be responsible for its own attorneys' fees and
costs. However, the arbitrator shall have the right to award costs and
expenses (including actual attorneys' fees) to the prevailing party as well
as equitable relief. The award of the arbitrator shall be final and
binding and shall be enforceable in any court of competent jurisdiction.
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Nothing in this paragraph shall preclude the parties from seeking an
injunction or other equitable relief from a court of competent jurisdiction
under appropriate circumstances.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Executive has
executed the same as of the day and year first above written.
IWERKS ENTERTAINMENT, INC.
By: /s/ Xxx X. Xxxxxx
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Its: Chairman & CEO
/s/ Xxxxx Xxxxxxxx
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Xxxxx Xxxxxxxx
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EXHIBIT A
Waiver Under Section 1542 of the California Civil Code. With regard
to any claims which may exist or arise out of the Executive's current or
any prior affiliation with the Company (the "Disputes"), Executive
expressly waives all claims against the Company, including, without
limitation, any and all rights under Section 1542 of the Civil Code of the
State of California which provides as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
Executive waives and releases any right or benefit which he has or may
have under any similar law or rule of any other jurisdiction pertaining to
the Disputes. It is the intention of Executive, through this Agreement,
fully, finally, and forever to settle and release all such matters and
claims relative thereto which have existed, do now exist or may exist
between the parties arising out of or related to the Disputes. In
furtherance of such intention, the release herein given shall be, and
remain in effect as, a full and complete release of such matters
notwithstanding the discovery of the existence of any additional claims or
facts relating thereto.
