EMPLOYMENT AGREEMENT
EXHIBIT
10.6
This
Employment Agreement (this “Agreement”) is made and entered into by and between
Digital Domain, Inc. (the “Company”) and Xxxx Xxxxxx (“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 (the “Term”) shall commence on September __, 2006
(“Commencement Date”) and shall, unless terminated sooner pursuant to the
provisions of Section 6, terminate on September __, 2008. On the second
anniversary of the Commencement Date, the Term shall, subject to the termination
provisions of Section 6, be automatically extended for an additional period
of
one year ending on September __, 2009, unless either the Company or Employee
notifies the other in writing, not less than one hundred twenty (120) days
prior
to such second anniversary, that it or he does not wish the Term to be so
extended.
3.
Position
and Duties.
During
the term of his employment under this Agreement, Employee shall serve as the
“President” of the Company. In such position, Employee will have the authority
and responsibility normally attendant to an employee holding such position
and
will, among other things, be responsible for overseeing and managing the
Company’s Production,
Marketing, Legal and Finance
divisions, adhering to the budgets set forth and approved by the Company, 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 of the Company, provided that, in the
event that Xxxx Xxxxx ceases for any reason to be the Chief Executive Officer
of
the Company at any time during the Term, then Employee shall have the right,
exercisable within sixty (60) days thereafter by notice to the Company’s Board
of Directors, to report directly to the Company’s Board of Directors, subject to
protocols instituted by the Board for such purpose. 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 annual base salary of $516,000.00 (the “Base Salary”). Such Base
Salary 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 subject to minimum
annual increases of 7% over the prior year’s Base Salary, with any increase in
excess of such minimum to be determined by the Company’s Board of Directors (or
the Compensation Committee of such Board of Directors), in its sole and absolute
discretion.
(b)
In
addition to the Base Salary, Employee will be eligible to receive an annual
discretionary bonus (the "Annual Bonus"). Employee’s Annual Bonus during the
Term shall be unconditionally guaranteed at a non-discretionary minimum of
10%
of the then applicable Base Salary, 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’s financial
and business objectives and goals for the fiscal year with respect to which
the
Annual Bonus is calculated, such determination to be made 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 is awarded and, if so, the amount. Employee must remain
continuously employed by Company through the date on which the Annual Bonus
is
paid to be eligible to receive such Annual Bonus. Any Annual Bonus shall be
subject to all required federal, state and local tax withholding.
(c)
Employee also is being granted a non-qualified stock option (the “Option”) to
purchase an aggregate of 800,000 shares of the common stock (the “Common Stock”)
of the Company’s parent corporation, Wyndcrest DD Holdings, Inc. (“Wyndcrest”).
Such Option will 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, subject to the provisions
of
Section 7(b), 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 $1.00, 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, provided that such form of stock option agreement as
entered into between Wyndcrest and Employee shall provide that, (x) in the
event
and to the extent that the Option would otherwise expire upon the consummation
of a fundamental corporate transaction constituting the sale of more than 50%
of
the capital stock of Wyndcrest, or the sale of all or substantially all of
the
assets of Wyndcrest and its subsidiaries on a consolidated basis, provided
that
Employee is then still employed pursuant to the terms of this Agreement, the
Board of Directors of Wyndcrest shall, as determined by it in its sole and
absolute discretion, either (i) accelerate the vesting of the entire unvested
portion of the Option with effect not later than five (5) business days prior
to
the consummation of such transaction, or (ii) cause Wyndcrest to enter into
such
contractual arrangements with the purchaser(s) in such transaction as are
necessary to ensure that the Option continues to survive in accordance with
its
original tenor from and after the consummation of such fundamental corporate
transaction, and (y) in the event that this Agreement is terminated (other
than
“for cause” as defined infra)
by the
Company (or a successor entity) or by Employee pursuant to Section 6(b), within
six (6) months after and as a result of the consummation of such a fundamental
corporate transaction, the then unvested portion of the Option shall become
fully vested upon such termination.
(d)
The
Company shall, or shall in its sole discretion arrange for Wyndcrest to, pay
to
Employee, simultaneously with the execution of this Agreement, a signing bonus
in an amount equal to $100,000, which amount shall be in lieu of any relocation
or similar benefit.
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 and arrangements 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)
Employee shall be entitled to twenty (20) days of paid vacation each year during
the Term. Such vacation time shall accrue and cumulate in accordance with the
Company’s vacation policy.
(d)
Employee shall be elected as a Director of the Company, subject to the approval
of Wyndcrest as the Company’s sole stockholder, which the Company will use its
reasonable efforts to procure, to serve in such capacity until the earlier
to
occur of (i) the expiration or termination of this Agreement, or
(ii) the consummation of an initial public offering of the Common Stock.
Employee also agrees to serve (i) as a Director of Wyndcrest, if so requested
by
Wyndcrest’s Board of Directors and if he is duly elected to such position,
without additional compensation, and (ii) as a Director of each significant
subsidiary of the Company, if so requested by the Company’s Board of Directors
and duly elected to such position, without additional compensation.
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(e)
Upon
Employee’s completion of five (5) years of full-time continuous employment with
the Company, Employee shall be entitled to a paid sabbatical for a period of
up
to six (6) weeks.
(f)
Employee shall be entitled to reimbursement of legal expenses incurred by
Employee in the event Lucasfilm institutes legal action against Employee based
on Employee terminating his employment with Lucasfilm and entering into this
Agreement.
6.
Termination.
(a)
The
Company may terminate Employee’s employment and the Company’s obligations under
this Agreement at any time within the first twelve (12) months following the
Commencement Date for any reason, or for no reason, for cause or without cause,
and the Company may terminate Employee’s employment and the Company’s
obligations under this Agreement at any time “for cause,” subject, in each case,
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 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
material breach by Employee of any material covenant contained in
this
Agreement or in Exhibit A;
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(ii)
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The
material breach by the Employee of any material provision of the
Company’s
rules, regulations, policies or procedures in effect from time to
time;
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(iii)
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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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(iv)
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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) and (ii) 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.
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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; 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.
(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 twelve (12) 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 the Employee, except as provide in Section 11(g) to comply with the
requirements of Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”). If Employee’s employment is terminated other than for cause within
the first twelve (12) months after the Commencement Date, Employee shall
thereupon be vested under the Option as to an aggregate (including shares
theretofore vested) of 200,000 shares of the Common Stock; if Employee’s
employment is so terminated after such twelve (12) month period, but prior
to
the second anniversary of the Commencement Date, Employee shall thereupon be
vested under the Option as to an aggregate (including shares theretofore vested)
of 400,000 shares of the Common Stock. 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; provided that with respect to any such employee
or
contractor personally recruited to the Company by Employee after the
Commencement Date, such obligation shall be in effect for the Term and for
a
period of six (6) months following any such termination.
9.
Confidentiality.
The
terms
of the Confidential Information and Inventions Agreement attached hereto as
Exhibit A 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 (other than compensation) in strictest confidence and not
to
disclose the same to any other person, other than Employee’s legal, accounting
and financial 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.
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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
(b)
Entire
Agreement.
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.
(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 the Employee is determined to be a “key employee” (as defined in
Code Section 416(i) (without regard to paragraph (5) thereof)) of 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) the 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 Company to the
Employee, whether pursuant to this Agreement or otherwise, shall be made within
two and one-half months (2½ months) after the end of the calendar year in which
the 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.
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(h)
Cooperation.
Employee shall provide Employee’s reasonable cooperation to the Company 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 or reference only and shall not be deemed part of this
Agreement.
(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 hereby execute and
deliver this Employment Agreement as of the __ day of September,
2006.
| DIGITAL DOMAIN, INC. | ||||
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Xxxx
Xxxxx
Chief
Executive Officer
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XXXX XXXXXX |
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| Address: | 00
Xxxxxxx Xxxxxx
Xxx
Xxxxxxx, Xxxxxxxxxx 00000
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The
undersigned Wyndcrest Holdings, LLC hereby expressly agrees to pay any of the
pecuniary obligations of the Company to Employee set forth in the foregoing
Employment Agreement between the Company and Employee, in the event that any
such obligation is not timely paid by the Company.
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WYNDCREST
HOLDINGS, LLC
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| By: | ||
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Name: |
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Title:
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EXHIBIT
A
[See
Attached Employee Confidential Information and Inventions
Agreement]
Page
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