EMPLOYMENT AGREEMENT
EXHIBIT
10.8
This
Employment Agreement (this “Agreement”) is made and entered into by and between
Digital Domain, Inc. (the “Company”) and Xx Xxxxxxx (“Employee”).
1.
Employment.
The
Company agrees to employ Employee, and Employee agrees to perform his
services
exclusively for the Company, on the terms and conditions set forth
in this
Agreement.
2.
Term.
The
term
of this Agreement shall commence on October 31, 2006 (“Commencement Date”) and
shall terminate on December 31, 2009 (the “Term”), unless terminated sooner
pursuant to the provisions of Section 6.
3.
Position
and Duties.
During
the term of his employment under this Agreement, Employee shall serve
as the
President, Commercials Division, and as Executive Vice President, of
the
Company. In such positions, Employee will have the authority and responsibility
normally attendant to an employee holding such positions and will,
among other
things, be responsible for overseeing and managing the Company’s advertising
business unit, and select feature films and alternative media projects
of the
Company,
adhering to the budgets set forth and approved by the Company, participating
in
all of the Company’s Executive Staff meetings relating to the Company’s future
strategic direction, taking direction from his superiors, and acting
at all
times in the Company’s best interests. From time to time Employee may be asked
to perform other duties for the Company which may include, but shall
not be
limited to, sitting on various committees, acting on behalf of the
Company for
trade organizations, and/or assisting others in the Company in their
divisions.
Employee shall report directly to the Chief Executive Officer or the
President
of the Company, as determined by the Chief Executive Officer in his
sole and
absolute discretion. Employee will at all times perform all of the
duties and
obligations required of him by the terms of this Agreement in a loyal
and
conscientious manner and to the best of Employee’s ability and
experience.
4.
Base
Salary and Bonus Compensation.
(a)
In
consideration for all rights and services provided by Employee, Employee
shall
receive an annualized base salary during the Term (the “Base Salary”), which
shall be payable at such intervals as salaries are paid by the Company
to other
employees of the Company, subject to the usual and required employee
payroll
deductions and withholdings. The Base Salary shall be $300,000.00 during
the
period commencing on the Commencement Date and ending on December 31, 2006,
and shall be increased to $450,000.00 effective January 1, 2007. The Base
Salary for each of calendar years 2008 and 2009 shall be in an amount
equal to
one hundred seven percent (107%) of the respective prior calendar year’s Base
Salary (i.e., $481,500.00 from January 1, 2008 through December 31,
2008, and
$515,205.00 from January 1, 2009 through December 31, 2009).
(b)
In
addition to the Base Salary, Employee will be eligible to receive an
annual
bonus (the “Annual Bonus”). With respect to calendar year 2006, Employee shall
receive an Annual Bonus in a maximum amount equal to $150,000.00, fifty
percent
(50%) of which shall be contingent upon satisfaction in full of the
net profit
target set forth in Exhibit A attached hereto. The first $75,000.00 of the
maximum Annual Bonus for 2006 shall be paid to Employee on January 31,
2007. There shall be no conditions or contingencies with respect to
the payment
of the first $75,000.00 of the maximum Annual Bonus for 2006. The remaining
$75,000.00 of the maximum Annual Bonus for 2006 shall be paid to Employee
upon
completion (not later than March 31, 2007) by the Company’s outside auditors of
their audit of the Company’s financial statements for its 2006 fiscal year, but
only if such financial statements as so audited indicate that the net
profit
target set forth in Exhibit A was satisfied in full. Employee’s Annual
Bonus for each of the calendar years 2007, 2008 and 2009 shall be
unconditionally guaranteed at a non-discretionary minimum of 10% of
the then
applicable Base Salary for such year, payable (subject to the penultimate
sentence of this paragraph) on January 31 of the subsequent calendar
year,
provided that any amount in addition thereto shall be within the sole
and
absolute discretion of the Company's Board of Directors (or the Compensation
Committee of the Board of Directors) and shall be based upon Employee’s
achievement of certain mutually agreed objectives and goals and/or
Employee’s
contribution to the success of the Company in achieving its financial
and
business objectives and goals for the fiscal year with respect to which
the
Annual Bonus is calculated, in each case as determined by the Company's
Board of
Directors (or the Compensation Committee of the Board of Directors)
in its sole
and absolute discretion. The Company's overall financial performance
will also
be considered in determining whether any of the discretionary portion
of the
Annual Bonus for calendar years 2007, 2008 and 2009 is awarded and,
if so, the
amount thereof. Employee must remain continuously employed by the Company
through the date on which any Annual Bonus is paid to be eligible to
receive
such bonus. Any Annual Bonus shall be subject to all required federal,
state and
local tax withholding.
(c)
Employee shall also be granted (within 45 days of the date of this
Agreement) a
non-qualified stock option (the “Option”) to purchase an aggregate of 500,000
shares of the common stock (the “Common Stock”) of the Company’s parent
corporation, Wyndcrest DD Holdings, Inc. (“Wyndcrest”). The Option shall vest as
to 250,000 shares on the Commencement Date, and the remaining 250,000
shares
covered thereby shall vest as follows: one-eighth (1/8) thereof shall
vest on
the date six (6) months following the Commencement Date and one-eighth
(1/8)
portions thereof shall vest on the final date of each 6 month period
thereafter
until such Option is fully vested, provided that all vesting under
the Option
shall cease as of the date that Employee’s employment by the Company ceases for
any reason. The Option will have an exercise price per share equal
to the fair
market value of a share of Common Stock on the date of grant, as determined
by
the Board of Directors of Wyndcrest, and will be governed in all other
respects
by (and Employee agrees to enter into) Wyndcrest’s standard form of stock option
agreement, and by the terms of the equity incentive plan under which
it is
granted. In consideration of the grant of the Option to Employee, Employee
agrees that all of the options previously issued to him by the Company,
under
the Company’s 1995 Stock Option Plan, or otherwise, vested or unvested, are
hereby cancelled in their entirety, and Employee agrees to execute
such
additional instruments as are requested by the Company to evidence
this
cancellation.
5.
Expenses
and Benefits.
(a)
Employee shall be entitled to reimbursement for all reasonable and
ordinary
expenses incurred by Employee in the course of, and directly related
to, the
rendering of services pursuant to this Agreement in accordance with
the
Company’s policies for reimbursement of such expenses, and the limitations
thereon, that are in effect at the time such expenses are incurred.
Such
expenses shall be supported by reasonable documentation and accepted
standards
and rules that the Company will put into place from time to time.
(b)
During his employment under this Agreement, Employee shall be entitled
to
participate in or receive benefits under the Company’s medical, health,
disability, retirement, welfare and insurance plans then in effect
and generally
made available from time to time to the management employees of the
Company,
subject to and on a basis consistent with the terms, conditions and
overall
administration of such plans and arrangements.
(c)
If
the Company enters into indemnification agreements with executive officers
of
the Company similar in title to Employee, the Company will offer to
enter into
such an agreement with Employee on substantially similar terms and
conditions.
(d)
Employee shall be entitled to twenty (20) days of paid vacation each
12-month
period during the Term. Such vacation time shall accrue and cumulate
in
accordance with the Company’s vacation policy.
6.
Termination.
(a)
The
Company may terminate Employee’s employment and the Company’s obligations under
this Agreement at any time for any reason, or for no reason, for cause
or
without cause, subject only to the termination compensation requirements
set
forth in Section 7. The following shall constitute termination “for
cause”:
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(1)
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Employee’s
death or permanent disability; or
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(2)
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The
Company’s termination of Employee’s employment under any of the following
circumstances, which also shall without limitation each
be deemed to be a
material breach of this Agreement:
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(i)
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The
failure by Employee to substantially perform his duties
(other than any
such failure resulting from the Employee’s temporary incapacity due to
physical or mental illness);
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(ii)
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The
material breach by Employee of any material covenant contained
in this
Agreement or in Exhibit B attached
hereto;
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(iii)
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The
engaging by Employee in conduct materially adverse to the
Company;
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(iv)
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The
material breach by Employee of any material provision of
the Company’s
rules, regulations, policies or procedures in effect from
time to
time;
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(v)
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The
repudiation or purported termination of this Agreement
by Employee (other
than a termination by Employee pursuant to Section 6(b));
or
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(vi)
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The
conviction (by trial or upon a plea) of Employee of
a felony involving
moral turpitude;
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provided
that, with respect to paragraphs (i), (ii), (iii) and (iv) supra,
if the
underlying breach is capable of cure, the basis of a “for cause” termination by
the Company shall only arise if such breach is not cured within thirty
(30) days
after written demand for cure is given to Employee by the Company identifying
such breach with reasonable particularity.
(b)
Employee may terminate Employee’s employment under this Agreement and the
Company’s obligations under this Agreement if:
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(1)
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The
Company materially breaches any material covenant contained
in this
Agreement which breach, if capable of cure, is not cured
within thirty
(30) days after written demand for cure is given to the Company
by
Employee identifying the breach with reasonable particularity;
or
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(2)
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The
Company assigns to Employee duties and responsibilities substantially
inconsistent with the duties and responsibilities described
in Section 3
of this Agreement and (i) Employee thereafter notifies the
Company in
writing of the fact that Employee believes such has occurred,
describing
with reasonable particularity the facts upon which such conclusion
is
based, and (ii) the Company fails, within forty-five (45)
days following
receipt of such notice, to reassign to Employee duties and
responsibilities substantially consistent with those described
in Section
3 hereof.
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(c)
Any
termination by the Company or by Employee pursuant to this Section
6 shall be
effected by written notice of termination given to the other, and such
termination shall be effective upon the giving of such notice, unless,
in the
case of a termination notice given by the Company to Employee, such
notice
states that the termination shall become effective on a later date
(“Delayed
Termination”), in which case such termination shall become effective on the date
set forth in the notice. In the event of a Delayed Termination, the
Company
shall have the right in its sole discretion to determine whether or
not Employee
comes into the office and works during the period of time from the
date the
notice is given until the termination date; provided that, in any case,
Employee
shall be considered a full-time employee of the Company through the
termination
date.
7.
Compensation
Upon Termination.
(a)
If
the Company terminates Employee’s employment and its obligations under this
Agreement for cause, the Company shall pay Employee his Base Salary
and accrued
but unused vacation through the date on which his employment is terminated,
and
the Company shall have no other obligations to Employee under this
Agreement
after the date of termination (other than indemnification of Employee
pursuant
to California Labor Code Section 2802); provided that the Company shall
retain
all rights and remedies it may have against Employee by reason of any
breach of
this Agreement by Employee.
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(b)
If
the Company terminates Employee’s employment under this Agreement other than for
cause, or if Employee terminates such employment pursuant to Section
6(b) of
this Agreement, then in either such event the Company shall pay Employee
his
accrued compensation through the date on which his employment is terminated,
and
additionally shall continue to pay to Employee the Base Salary for
a period
equal to six (6) months (or such lesser period as is coextensive with
the
remainder of the Term) following the termination of employment. Continuation
of
Base Salary under this clause (b) shall be paid in accordance with
the Company’s
normal payroll practices at the time such amounts would otherwise have
been paid
to Employee, except as provided in Section 11(g) to comply with the
requirements
of Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”).
The Company retains the right to discontinue any severance payments
if Employee,
after termination, acts in such a manner as to harm or defame the
Company.
8.
Non-Solicitation
of Employees.
Employee
agrees that he will not at any time during the Term, or during the
twelve-month
period following any termination of this Agreement or his employment
hereunder,
solicit (directly or indirectly) any employees or then engaged contractors
of
the Company to render services as an employee or contractor for or
on behalf of
Employee or any other person.
9.
Confidentiality.
The
terms
of the Confidential Information and Inventions Agreement attached hereto
as
Exhibit B are incorporated herein by this reference as if set forth
in full
herein and Employee agrees to act in accordance with and be bound by
all of such
terms. Employee covenants and agrees to keep the specific terms and
provisions
of this Agreement in strictest confidence and not to disclose the same
to any
other person, other than Employee’s legal, financial and accounting advisers, to
the extent necessary in order for them to discharge their professional
responsibilities to Employee.
10.
Rules,
Regulations, Policies and Procedures.
Employee
acknowledges that he shall perform his services in full compliance
with all of
the Company’s rules, regulations, policies and procedures, as the same may be in
effect from time to time.
11.
Miscellaneous
Provisions.
(a)
Notices.
All
notices or other communications required or permitted to be given pursuant
to
this Agreement shall be in writing and shall be considered properly
given if
delivered to the address set forth below, in the case of the Company,
or to the
address set forth beneath Employee’s signature hereto, in the case of Employee,
by (1) U.S. certified mail, return receipt requested, postage prepaid,
(2)
facsimile with confirmation of successful transmission, or (3) personal
delivery. Either party may change his or its address by giving written
notice of
the change to the other party in accordance with this provision. Any
notice
given prior to the notice of change of address shall not be affected
by the
notice of address change.
Address
for the Company:
Digital
Domain, Inc.
000
Xxxx
Xxxxxx
Xxxxxx,
Xxxxxxxxxx 00000
Attention:
Chief Executive Officer
Telecopier:
(000) 000-0000
with
a
copy to:
Digital
Domain, Inc.
000
Xxxx
Xxxxxx
Xxxxxx,
Xxxxxxxxxx 00000
Attention:
General Counsel
Telecopier:
(000) 000-0000
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(b)
Entire
Agreement; Amendment.
This
Agreement constitutes the entire agreement between the parties with
respect to
the subject matter hereof and supersedes all prior agreements between
the
parties with respect thereto. This Agreement may only be amended or
modified
pursuant to a writing executed by both of the parties hereto.
(c)
Employee
Representation.
Employee hereby represents to the Company that the execution and delivery
of
this Agreement by Employee and the Company and the performance by Employee
of
Employee’s duties hereunder shall not constitute a breach of, or otherwise
contravene, the terms of any employment agreement or other agreement
or policy
to which Employee is a party or otherwise bound.
(d)
Governing
Law and Venue.
This
Agreement shall be enforced, governed by and construed in accordance
with the
laws of the State of California. The parties agree that all actions
or
proceedings initiated by either party hereto arising directly or indirectly
out
of this Agreement shall be litigated in federal or state court in Los
Angeles,
California. The parties hereto expressly submit and consent in advance
to such
jurisdiction and agree that service of summons and complaint or other
process or
papers may be made by registered or certified mail addressed to the
relevant
party at the address set forth herein. The parties hereto waive any
claim that a
federal or state court in Los Angeles, California, is an inconvenient
or an
improper forum.
(e)
Assignment.
This
Agreement, and all of Employee’s rights and duties hereunder, shall not be
assignable or delegable by Employee. Any purported assignment or delegation
by
Employee in violation of the foregoing shall be null and void ab initio
and of
no force and effect. This Agreement may be assigned by the Company
to a person
or entity which is an affiliate or a successor in interest to substantially
all
of the business operations of the Company. Upon such assignment, the
rights and
obligations of the Company hereunder shall become the rights and obligations
of
such affiliate or successor person or entity.
(f)
Survival.
The
terms set forth in Sections 7-11, inclusive, shall survive any termination
of
this Agreement.
(g)
Section
409A.
All
payments of “nonqualified deferred compensation” (within the meaning of Section
409A of the Code) are intended to comply with the requirements of Code
Section
409A, and shall be interpreted in accordance therewith. Neither party
individually or in combination may accelerate any such deferred payment,
except
in compliance with Code Section 409A, and no amount shall be paid prior
to the
earliest date on which it is permitted to be paid under Code Section
409A. In
the event that Employee is determined to be a “specified employee” (as defined
in Code Section 409A(a)(2)(B) (and regulations and guidance thereunder))
of the
Company at a time when its stock is deemed to be publicly traded on
an
established securities market, payments determined to be “nonqualified deferred
compensation” payable following termination of employment shall be made no
earlier than the earlier of (i) the last day of the sixth (6th) complete
calendar month following such termination of employment, or (ii) Employee’s
death, consistent with the provisions of Code Section 409A. Any payment
delayed
by reason of the prior sentence shall be paid out in a single lump
sum at the
end of such required delay period in order to catch up to the original
payment
schedule. Unless otherwise expressly provided, any payment of compensation
by
the Company to Employee, whether pursuant to this Agreement or otherwise,
shall
be made within two and one-half months (2½ months) after the end of the
Company’s fiscal year in which Employee’s right to such payment vests (i.e., is
not subject to a substantial risk of forfeiture for purposes of Code
Section
409A). Notwithstanding anything herein to the contrary, no amendment
may be made
to this Agreement if it would cause the Agreement or any payment hereunder
not
to be in compliance with Code Section 409A.
(h)
Cooperation.
Employee shall provide Employee’s reasonable cooperation in connection with any
action or proceeding (or any appeal from any action or proceeding)
which relates
to events occurring during Employee’s employment hereunder, provided that the
Company reimburses Employee for any costs or expenses reasonably incurred
in
connection with such cooperation.
(i)
Severability.
If any
provision of this Agreement is determined to be invalid or unenforceable
for any
reason and to any extent, the remainder of this Agreement shall not
be affected
thereby, but shall be enforced to the greatest extent permitted by
law.
(j)
Captions.
All
titles and captions of sections and subsections contained in the Agreement
are
for convenience of reference only and shall not be deemed part of this
Agreement.
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(k)
Counterparts.
This
Agreement may be signed in counterparts, each of which shall be an
original,
with the same effect as if the signatures thereto and hereto were upon
the same
instrument.
[signature
page follows]
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6
In
witness whereof, the parties hereto intending to be bound thereby hereby
execute
and deliver this Employment Agreement as of the 31 day of October,
2006.
EXHIBIT
A
FY
2006 Net Profit Target
A
minimum
of $6,898,000.00 of net profit earned by the Commercials Division of
Digital
Domain, Inc. (“DDI”) in DDI’s 2006 fiscal year, as determined in accordance with
DDI’s financial reporting system.
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EXHIBIT
B
[See
Attached Employee Confidential Information and Inventions
Agreement]
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