EXHIBIT 10.1
EMPLOYMENT AGREEMENT dated and effective as of July 1, 1998 (the
"Agreement"), between IMAX CORPORATION, a corporation organized under the laws
of Canada ("Imax"), and XXXXXXX X. XXXXXXX (the "Executive").
WHEREAS, the Executive is currently the Vice-Chairman and Co-Chief
Executive Officer of Imax and is employed pursuant to an Employment Agreement
dated as of January 1, 1997, (the "1997 Agreement"); and
WHEREAS, the Imax Board of Directors (the "Board") has approved
revised terms of employment, effective July 1, 1998, on August 26, 1998; and
WHEREAS, Imax wishes to enter into this Agreement to engage the
Executive to continue to provide services to Imax, and the Executive wishes to
be so engaged, pursuant to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
1. Employment. (a) Imax hereby employs the Executive, and the
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Executive hereby agrees to serve in accordance with the terms and conditions
hereof.
(b) The Executive's continued employment as Co-Chief Executive Officer
under this Agreement shall commence effective July 1, 1998, and shall continue
until June 30, 2001 (the "Employment Term").
(c) During the Employment Term, the Executive shall perform such
services with respect to Imax's business as may be reasonably requested from
time to time by the Board and which are consistent with the Executive's status
and the function performed by individuals holding a similar position with
similarly situated companies, and agrees to act in accordance with the written
instructions of the Board. It is anticipated that such services shall be
performed primarily within the United States.
(d) The Executive shall devote that portion of his business time that
is necessary to perform the services reasonably required of him hereunder, which
portion shall constitute a significant majority of his business time. The
Executive agrees that during the Employment Term (i) he will use reasonable
efforts to resolve any conflicting engagements and (ii) he will remain actively
involved in Imax's business.
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(e) As compensation for the services to be performed by the Executive
hereunder during the Employment Term, the Executive shall be entitled to receive
a base salary ("Base Salary") of U.S. $500,000 per annum, payable no less
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frequently than monthly in accordance with Imax's payroll practices.
(f) In addition to the Base Salary, the Executive shall be eligible to
participate during the Employment Term in the annual incentive bonus plan
adopted by the Board. The Executive shall be paid a bonus in respect of each of
1998, 1999, 2000 and the period January 1, 2001 to June 30, 2001 at a level of
U.S. $605,000, U.S. $500,000, U.S. $500,000, and U.S. $250,000 (subject to
adjustment as described below), respectively, (the "Standard"). Based on
certain qualitative and quantitative measures determined by the CEO Advisors (as
defined in Imax's Articles of Incorporation), for so long as Imax continues to
have CEO Advisors, and the Compensation Committee (the "Committee") of the
Board, as set forth below, the Committee shall determine the actual bonus paid,
which shall be a multiple of the Standard ranging from 0.0x - 2.0 x, provided,
however, that the multiple shall be at least 1.0x if Imax's reported earnings
per share (EPS) for the year (excluding any extraordinary charges approved by
the Board), or the six months ended June 30, 2001, as the case may be, meet the
approved budget target (except that, if in the sole discretion of the Committee,
the achievement EPS target was at the expense of, or to the material detriment
of, other(s) of the qualitative and quantitative measures set forth below, then
such minimum shall not apply).
Among the various factors the Committee shall consider in determining
the bonus to be paid for 1998, and, subject to amendment from year to year by
the Committee, after good faith consultation with the Executive, for 1999, 2000
and 2001, are: (i) the actual financial performance of Imax versus the approved
budget for EBITDA, EPS, revenue growth, and/or other financial targets; and
(ii) the Committee shall also take into account other qualitative factors
including (in no order of importance): (A) progress in theater signings, (B)
development of an enhanced management team, (C) improved performance of the
Ridefilm division (for 1998 only), (D) further advancement of Imax's film
strategy, (E) progress in "owned and operated" strategy (this factor to have
diminishing weighting beyond 1998, as Imax's "owned and operated" emphasis
refocuses on theatre joint ventures with conventional cinema operators), (F)
brand development, (G) continued growth of the business, and (H) other
performance related issues including, but not limited to, other goals
established in the budget process approved by the Board.
The bonus for 1998, 1999 and 2000 shall be paid within 50 days of the
applicable year-end, and for the period January 1, 2001 to June 30, 2001 within
50 days of June 30, 2001.
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(g) Pursuant to the 1997 Agreement, at the beginning of each of 1997
and 1998, Imax granted the Executive the right to receive 30,000 common shares
(on a post-split basis) of Imax (the "Restricted Stock"), or, if such Restricted
Stock may not be issued without shareholder approval, the 1997 Agreement
provided it shall be issued as "phantom stock". The Executive has the right to
request the Restricted Stock granted on January 1, 1997 and January 1, 1998 be
issued to him (or, if "phantom stock" is utilized, have payment made to him in
an amount equal to the fair market value of such number of common shares of Imax
on the date of such request), at any time after January 1, 1998 and January 1,
1999, respectively. It is hereby agreed that one half (i.e. 15,000) of such
Restricted Stock / "phantom stock" for 1998 shall be cancelled forthwith, and
that the Executive shall continue to have the right to the 30,000 Restricted
Stock / "phantom stock" that have vested, and the remaining 15,000 Restricted
Stock / "phantom stock" that shall vest on January 1, 1999. The Restricted
Stock / "phantom stock" shall be adjusted for stock splits and other similar
events. Imax agrees to indemnify the Executive, on an after-tax basis, for any
income taxes imposed by any taxing authority and resulting from any taxable
benefits to the Executive with respect to the Restricted Stock / "phantom stock"
which arises prior to the date of any such request (it being understood that
this indemnity relates to the timing of the payment of such taxes and not the
ultimate tax payable). Any request for payment with respect to "phantom stock"
must be made on or before December 31, 2009, after which date such "phantom
stock" shall lapse. The provisions of this Section 1(g) shall survive any
termination of this Agreement.
(h) Stock Options - Grant & Vesting. The Executive has been granted
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effective August 26, 1998, in accordance with the terms of the Imax Stock Option
Plan (the "SOP"), 378,000 options to purchase common shares, and effective
January 1, 1999 shall be granted a further 400,000 options, as follows:
Number of Options Grant Date Exercise Price Vesting Date
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111,333 August 26, 1998 $22.38 August 26, 1998
100,000 August 26, 1998 $22.38 January 1, 1999
166,667* August 26, 1998 $22.38 January 1, 1999
266,667* January 1, 2000 to be determined January 1, 2000
133,333* January 1, 2000 to be determined January 1, 2001
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778,000
* These options are subject to Imax obtaining any required regulatory and
shareholder approvals.
The exercise price of all options granted on August 26, 1998 in accordance with
the SOP is U.S. $22.38, and all such options shall expire on August 25, 2008.
The exercise price of all options to be granted on January 1, 2000 shall be
determined in accordance with the
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SOP, and all such options shall expire on December 31, 2009. Should any required
regulatory or shareholder approvals with respect to the granting of the 566,667
options subject thereto not be obtained by Imax, Imax shall make such
adjustments to the Executive's compensation hereunder as will put the Executive
in the same after-tax financial position as he would have been if such approvals
had been received. The provisions of this Section 1(h) shall survive any
termination of this Agreement.
All of the Executive's stock options shall be adjusted for stock
splits and other similar events after the effective date hereof and shall
contain other terms no less favorable to the Executive than the management stock
options of Imax's other senior level executives.
Resignation / Termination. If the Executive shall voluntarily resign
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prior to the end of the Employment Term, (i) all unvested options (including
those granted pursuant to previous employment agreements between Imax and the
Executive) shall be cancelled immediately upon such resignation, and (ii) all
vested options shall remain exercisable for the duration of their original term.
If (i) the employment of the Executive is not continued after the end
of the Employment Term, (ii) the Executive is terminated by Imax without "Cause"
(as defined below), or (iii) the Executive suffers a "Permanent Disability" (as
defined in the SOP), or dies: all options granted on or before August 26, 1998
shall remain exercisable for the duration of their original term.
Change of Control. Upon a "change of control" of Imax (i.e. any
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person or persons acting in concert acquiring greater than 50% of the
outstanding common shares of Imax, whether by direct or indirect acquisition or
as a result of a merger or reorganization), the vesting of the options granted
on August 26, 1998 and/or January 1, 1999 shall be accelerated as follows:
Change of Control Period % of Options Subject to Accelerated Vesting
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On or Prior to December 31, 1998 12.5% of options scheduled to vest on January 1, 1999
January 1, 1999 to June 30, 1999 25% of options scheduled to vest on January 1, 2000 *
July 1, 1999 to December 31, 1999 50% of options scheduled to vest on January 1, 2000 *
January 1, 2000 to June 30, 2000 25% of options scheduled to vest on January 1, 2001
July 1, 2000 to December 31, 2000 50% of options scheduled to vest on January 1, 2001
* If a "change of control" occurs prior to the grant of such options on January
1, 2000, stock appreciation rights ("SARs") equivalent in number to the options
subject to accelerated vesting shall be granted, with a reference price of U.S.
$22.38, and an expiry date of December 31, 2009. The SARs shall be treated, in
connection with a "change of
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control", in the same manner as if they were options (i.e. a cash offer for all
shares and options would trigger a payout of the SARs; a "rollover" of options
would result in the continuation of the SARs, reflecting the relevant exchange
ratio and with reference to the price of the substituted shares).
Miscellaneous. If the Executive is terminated with "Cause", the
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Executive's unvested options (including those granted pursuant to previous
employment agreements between Imax and the Executive) shall be cancelled
immediately, and all of the Executive's vested options must be exercised within
90 days of termination, after which date they shall be cancelled. "Cause" for
purposes of this Section 1(g) only means any willful and material violation by
the Executive of any law or regulation applicable to the business of Imax or one
of its subsidiaries, or the Executive's conviction of a felony, or any willful
perpetration by the Executive of a common law fraud. Imax's remedy for a
"breach of restrictive covenants" shall be the specific enforcement thereof, and
not the application of Section 14 of the SOP; and Imax shall be entitled to seek
any other legal and equitable remedies it may have against the Executive. In
the event of any conflict between the provisions of this Agreement and the
provisions of the SOP, the provisions of this Agreement shall prevail.
(i) The Executive shall, during the Employment Term, be eligible to
receive employee benefits at a level not less than those established by Imax
for, or made available to, its other key employees.
(j) Imax agrees to reimburse the Executive for all reasonable out-of-pocket
expenses incurred by the Executive in the performance of his obligations under
this Agreement for which documentation reasonably satisfactory to Imax is
provided, including expenses relating to the Executive's travel to, and
performance of duties in, Toronto, Canada.
(k) Any amounts payable to the Executive under this Agreement shall be
subject to applicable withholding taxes, and such other deductions as may be
required under applicable law.
2. Restrictions on Competitive Employment. During the term of the
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Executive's employment hereunder, absent Imax's prior written approval, the
Executive shall not (as principal, agent, employee, consultant or otherwise),
directly or indirectly, engage in activities with, or render services to, any
business engaged or about to become engaged in the business of producing or
distributing projection and sound systems or films for large screen theaters or
designing or supplying motion simulation theaters or producing or distributing
films for movie rides (collectively, "Competitive Business"); provided, however,
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that, notwithstanding the foregoing, the Executive may
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(i) have equity interests in companies engaged in a Competitive Business so long
as he is not employed by and does not consult with such companies in areas
related to the Competitive Business, (ii) render consulting services to or be
employed by a company engaged in a Competitive Business so long as he is not
employed in, or rendering services related to, the Competitive Business of such
company or (iii) perform usual investment banking services for a company engaged
in a Competitive Business.
3. Confidentiality. The Executive covenants and agrees with Imax that he
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will not at any time, except in performance of his obligations to Imax hereunder
or with the prior written consent of Imax, directly or indirectly, disclose any
secret or confidential information that he may learn or has learned by reason of
his association with Imax or any of its subsidiaries. The term "confidential
information" includes information not previously disclosed to the public or to
the trade by Imax's management, or otherwise in the public domain, with respect
to Imax's or any of its subsidiaries' products, facilities, applications and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, product price lists, customer lists, technical
information, financial information, business plans, prospects or opportunities,
but shall exclude any information which (i) is or becomes available to the
public or is generally known in the industry or industries in which Imax
operates other than as a result of disclosure by the Executive in violation of
his agreements under this Section 3 or (ii) the Executive is required to
disclose under any applicable laws, regulations or directives of any government
agency, tribunal or authority having jurisdiction in the matter or under the
subpoena or other process of law.
4. Assignment. Neither this Agreement nor any right, interest or
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obligation hereunder shall be assignable by the Executive without the prior
written consent of Imax. Neither this Agreement nor any right, interest or
obligation hereunder shall be assignable by Imax without the prior written
consent of the Executive, except that Imax may assign this Agreement or any such
right, interest or obligation to an affiliate of Imax without consent of the
Executive; provided, however, that no such assignment shall relieve Imax of any
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of its obligations hereunder.
5. Indemnification. (a) Imax shall hold the Executive harmless and
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indemnify the Executive, to the fullest extent permitted by applicable law,
against any and all liabilities (and all expenses related thereto) incurred by
the Executive as a result of, or in connection with, the services provided under
this Agreement; provided, however, that such indemnification shall not apply
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with respect to any action taken by the Executive that (i) is contrary to the
written instructions of the Board or (ii) constitutes gross negligence or
willful misconduct. Imax shall maintain a director and officer's liability
insurance policy covering the Executive and containing customary terms and
conditions.
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(b) Imax shall hold the Executive harmless and indemnify the Executive, on
an after-tax basis, against the amount of any income taxes imposed by Revenue
Canada, the United States Federal government or any state or local taxing
authority in Canada or the United States (collectively, "Taxes") with respect to
any amounts payable to the Executive under Section 1 of this Agreement, to the
extent such Taxes exceed the amount of Taxes that would have been imposed on
such amounts had all of the services performed by the Executive under this
Agreement been performed within the United States. Imax shall hold the
Executive harmless and indemnify the Executive, on an after-tax basis, against
the amount of any penalties or interest that are imposed on the Executive by
Revenue Canada, the United States Federal government or any state or local
taxing authority in Canada or the United States as a result of Imax's failure to
properly withhold any tax with respect to any amounts payable to the Executive
under Section 1 of this Agreement, to the extent such penalties or interest are
not attributable to the failure of the Executive to file any required tax
returns or pay any required taxes or any other willful act or omission of the
Executive.
6. Binding Effect. This Agreement shall inure to the benefit of, and be
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binding upon, the parties hereto, any successors to or permitted assigns of the
parties hereto.
7. Notices. Any notice required or permitted to be given under this
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Agreement shall be sufficient if in writing and either delivered in person or
sent by first class certified or registered mail, postage prepaid, to the
parties at the following address (or to such other address or addresses as
either party shall have designated in writing to the other party hereto:)
(a) if to Imax:
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxx, Xxxxxx
X0X 0X0
Attention: General Counsel
(b) if to the Executive:
000 Xxxx Xxxxxx, Xxx 0X
Xxx Xxxx, XX, 00000
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8. Severability; Waiver. If any provision of this Agreement shall
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be determined to be invalid, illegal or unenforceable in whole or in part,
neither the validity of the remaining part of such provision nor the validity of
any other provision of this Agreement shall in any way be affected thereby.
Failure to insist upon strict compliance with any term, covenant or condition
hereof shall not be deemed a waiver of such term, covenant or condition, nor
shall any waiver or relinquishment of any right or power hereunder at any one or
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.
9. Injunctive Relief. Without intending to limit the remedies
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available to Imax or the Executive, as the case may be, in the event of a breach
or threatened breach of any of the covenants contained in this Agreement, Imax
or the Executive, as the case my be, shall be entitled to seek such injunctive
relief as may be required specifically to enforce any such covenant.
10. Miscellaneous. This Agreement constitutes the entire agreement of
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the parties with respect to the subject matter hereof and, from the effective
date hereof, supersedes and terminates all prior agreements, oral and written,
between the parties hereto with respect to the subject matter hereof.
Notwithstanding the preceding sentence, nothing in this Agreement shall abrogate
the Executive's entitlement to (i) the 45,000 (post-split) Restricted Stock /
"phantom stock" granted pursuant to Section 1(g) of the 1997 Agreement, as
reduced from 60,000 (post-split) pursuant to Section 1(g) of this Agreement,
(ii) the 40,000 options (for 80,000 post-split shares) granted January 2, 1997
and the 80,000 options (for 80,000 post-split shares) granted January 2, 1998,
or (iii) the Special Bonus (as defined in Section 1(g) of the Employment
Agreement between Imax and the Executive dated as of March 1, 1994) payable
after a sale of Imax or upon the exercise of the Executive's liquidation rights.
Further, for so long as the Executive is the Co-CEO, Imax shall continue to use
its best efforts to cause the Executive to be elected to the Board and, for so
long as Imax continues to have CEO Advisors, to the designation as a CEO Advisor
under Imax's by-laws, provided that nothing in this sentence shall abrogate any
rights the Executive may have pursuant to any other agreement. This Agreement
may be modified or amended only by an instrument in writing signed by both
parties hereto. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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11. Governing Law. This Agreement shall be governed by and construed
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in accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein without regard to principles of conflicts of laws.
IN WITNESS WHEREOF, Imax and the Executive have duly executed and
delivered this Agreement, as of the day and year first above written, on this
3rd day of November, 1998.
IMAX CORPORATION
By: /s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
Director
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
Executive Vice President, Operations
and Chief Financial Officer
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxx
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XXXXXXX X. XXXXXXX
