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, Xxx X. Xxxxxx, 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
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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 24
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 group medical, supplemental life and
disability and other insurance benefits made available to senior executives
under the Company's employee benefit plans for Executive and his or her
family for the 24 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 36
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 Chief
Executive Officer of the Company; (iii) Executive shall not be afforded the
authority, powers, responsibilities and privileges customarily accorded to
an executive with his title; or (iv) the Company shall require Executive's
primary services to be
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rendered in an area other than the Company's principal offices in the
greater Los Angeles metropolitan area.
3. SPECIAL BONUS ARRANGEMENTS. In addition to Executive's base
salary, annual stipend and any Separation Package payable to him and
regardless of whether a Separation Termination occurs, the following
provision shall apply:
3.1 BONUS. Subject to the provisions of Section 4 hereof (if
applicable), and in addition to the Separation Package, Executive shall be
paid a one-time bonus payment in the amount of $250,000 if the Company's
realizes net income per share in an amount which equals or exceeds $0.20
for the six months ended June 30, 1998 (prior to giving effect to the
accrual of the bonus provided for in this Section 3.1), as computed by
reference to the Company's Quarterly Report on Form 10-Q for the six months
ended December 31, 1997 and the Company's financial statements for the year
ended June 30, 1998, as audited by Ernst & Young.
3.2 PAYMENT OF AMOUNTS. The amounts referred to in Sections 3.1
above, if payable, shall be paid in one lump sum on the second business day
following delivery by Ernst & Young of their audit opinion with respect to
the financial statements of the Company for the year ended June 30, 1998.
4. TRANSITION SERVICES. As a condition to the payments referred to
in Sections 2 and 3 hereof, Executive agrees, if requested by the Board of
Directors of the Company, to provide continued employment services to the
Company for a minimum period of three months and a maximum period of six
months from the date of notice of termination without cause or the date of
de facto termination, as applicable, to assist in an orderly transition to
his successor. During such period, Executive shall receive base salary in
an amount equal to twice that of the base salary he was being paid prior to
termination or Defacto termination plus his annual stipend.
5. CHANGE IN CONTROL. The following provisions shall be applicable
in the case of an occurrence of a Change in Control of the Company:
5.1 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 5.3
hereof.
5.2 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 5.3 hereof.
5.3 In the circumstances described in Sections 5.1 and 5.2
above, Executive shall be entitled to and receive the Separation Package.
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5.4 In addition to any amounts payable to Executive pursuant to
Sections 5.1 and 5.2 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 36
months following the date of such Change in Control.
5.5 For purposes of this Agreement, a Change in Control shall
mean:
5.5.1 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
5.5.2 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 then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board;
or
5.5.3 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
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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
5.5.4 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. GENERAL PROVISIONS.
10.1 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
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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: Xxx X. Xxxxxx
00000 Xxx Xxxxxxx
Xxx Xxxx Xxxxxxxxxx, 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.
10.2 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.
10.3 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.
10.4 AMENDMENTS. This Agreement may be modified, amended,
superseded or terminated only by a writing duly signed by both parties.
10.5 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.
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10.6 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.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
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.
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10.11 PRESS RELEASE. Any press release issued in a
circumstance described in Section 2 hereof, shall be in form and substance
mutually acceptable to the Company and Executive, which approval shall not
be unreasonably withheld or delayed.
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.
/s/ Xxx Xxxxxxxxx
By: ----------------------
Its: Director
/s/ Xxx X. Xxxxxx
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Xxx X. Xxxxxx
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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.
