THIS EMPLOYMENT
AGREEMENT (this “ Agreement ”) is entered into
this 9th day of November, 2005, between EMAK Worldwide, Inc. (the
“ Company ”) and Jim Holbrook (the “
Executive ”).
The Company
desires to employ the Executive, and the Executive desires to be so
employed by the Company, on the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in
consideration of the premises and the mutual promises set forth in
this Agreement, the Company and the Executive hereby agree as
follows:
(a) Subject
to the terms and conditions contained herein, the Company hereby
agrees to employ the Executive, and the Executive accepts such
employment commencing on November 14, 2005 (the “
Effective Date ”) until the earlier of
(i) December 31, 2010, or (ii) the date such
employment is terminated pursuant to Section 4 of this
Agreement (the “ Employment Term ”).
(b) The
Executive shall have the title of Chief Executive Officer of the
Company, and such other title or titles, if any, as from time to
time may be assigned to the Executive by the Board of Directors of
the Company (the “ Board ”). In such capacity,
the Executive shall be the highest-ranking officer of the Company
and shall have the same status, privileges, and responsibilities
normally inherent in such capacity in public corporations of
similar size and character. The Executive shall also perform such
duties for the Company as may from time to time be assigned to the
Executive by the Board which are consistent with Executive’s
Chief Executive Officer position. In addition, for so long as the
Executive remains Chief Executive Officer, the Board shall nominate
him as a director of the Company. In addition, the Executive shall
serve as an officer and director of such Company subsidiaries and
affiliates (domestic and foreign) as requested by the Board. As
Chief Executive Officer and Board Member, the Executive shall abide
by all of the policies, procedures and codes of ethics of the
Company applicable to senior executives and employees of the
Company, including, without limitation, any restrictions on
purchase and/or sale of Company securities.
(c) The
Executive will devote his entire business time, energy, attention
and skill to the services of the Company and its affiliates and to
the promotion of their interests. So long as the Executive is
employed by the Company, except as provided in
the last
paragraph of Section 1(c), the Executive shall not, without
the written consent of the Company:
(i) engage
in any other activity for compensation, profit or other pecuniary
advantage, whether received during or after the term of this
Agreement;
(ii) render
or perform services of a business, professional, or commercial
nature other than to or for the Company, either alone or as an
employee, consultant, director, officer, or partner of another
business entity, whether or not for compensation, and whether or
not such activity, occupation or endeavor is similar to,
competitive with, or adverse to the business or welfare of the
Company; or
(iii) invest
in or become a shareholder of another corporation or other entity;
provided , that the Executive’s investment solely as a
shareholder in another corporation shall not be prohibited hereby
so long as such investment is not in excess of two percent (2%) of
any class of shares that are traded on a national securities
exchange.
Notwithstanding
the foregoing, Executive shall have the right to devote a de
minimis portion of his business time to personal investments
and civic commitments that are not in any way competitive with the
Company’s business, provided that the time devoted thereto
shall not interfere in any material respect with the performance of
Executive’s duties.
(d) The
Executive shall sign and adhere to the Confidentiality and
Invention Assignment Agreement (the “ Confidentiality
Agreement ”) attached as Appendix A.
2.
Location of Employment . The Executive’s principal
place of employment shall be at the executive offices of the
Company, currently located at 6330 San Vicente Blvd., Los Angeles,
CA 90048; provided, that the Executive will routinely be required
to travel to various domestic and foreign locations.
(a)
Base Salary . In exchange for full performance of the
Executive’s obligations and duties under this Agreement, the
Company shall pay the Executive an annual base salary (the “
Base Salary ”) equal to $500,000, payable in
installments in accordance with the Company’s standard
payroll practices. On April 1, 2007 and on April 1 of each
subsequent year during the term of this Agreement, the Base Salary
shall be increased (but not decreased) to reflect cost of living
changes as determined by the Board. In addition, the Board shall
review the Base Salary annually during the period of the
Executive’s employment hereunder and, in its sole discretion,
the Board may increase the Base Salary from time to time based upon
the performance of the Executive, the financial condition of the
Company, prevailing industry salary levels and such other factors
as the Board determines.
2
(b)
Signing/Retention Bonus . The Company shall pay the
Executive a signing/retention bonus consisting of the
following:
(i)
Cash Bonus. The sum of $75,000, which shall be paid within
10 business days after the Effective Date. If Executive’s
employment is terminated under Section 4(c) or (d) prior to
January 1, 2007, the Executive shall repay the Company a pro-rata
portion of such bonus.
(ii)
Restricted Stock Units . On the Effective Date, the Company
shall grant the Executive a number of restricted stock units (the
“ RSUs ”) pursuant to the Company’s 2000
Stock Option Plan having a value on the date of grant, as
determined by the Board, based on the average closing price for the
30 calendar days preceding the Effective Date, of $225,000. The
RSUs shall vest monthly over the two year period ending
December 31, 2007, with the shares of Common Stock underlying
such RSUs issuable on December 31, 2007, subject to the
Executive remaining employed with the Company through such date.
The terms and conditions of the RSUs shall be governed by the 2000
Stock Option Plan and the Restricted Stock Unit Agreement in the
form attached as Appendix B executed by the Company and the
Executive.
(c)
Annual Incentive Bonus . Executive shall be eligible to
receive an annual incentive bonus (the “ Annual Incentive
Bonus ”) after the end of each fiscal year that is
included within the Employment Term (not including 2005). The
Annual Incentive Bonus shall consist of two components: the
“Annual EBITDA Bonus” and the “Strategic
Performance Bonus.”
(i)
Annual EBITDA Bonus . The Annual EBITDA Bonus shall be based
upon the targeted EBITDA (as defined below) of the Company as
approved by the Board at the beginning of the calendar year and as
set forth in the Company’s business or operating plan for
such year prepared in the ordinary course of business (the “
Earnings Target ”). The Annual EBITDA Bonus shall be
25% of the Base Salary for the applicable year if the
Company’s EBITDA is equal to 100% of the Earnings Target. The
Annual EBITDA Bonus shall be 50% of the Base Salary for the
applicable year if the Company’s EBITDA equals or exceeds
150% of the Earnings Target. If the EBITDA is between 100% and 150%
of the Earnings Target, the Annual EBITDA Bonus shall be prorated
between 25% and 50% of the Base Salary. If the EBITDA is between
80% and 100% of the Earnings Target, the Annual EBITDA Bonus shall
be prorated between 0% and 25% of the Base Salary. Executive shall
not receive such Annual EBITDA Bonus if the EBITDA is less than 80%
of the Earnings Target.
For purposes of
this Agreement, “EBITDA” shall be defined as the
earnings before interest, taxes, depreciation, and amortization of
the Company, derived from its audited consolidated financial
statements less a “Capital Charge” for
acquisitions, if any. The Capital Charge shall be calculated as the
weighted average cost of capital (“ WACC
”)
3
multiplied by
“ Average Invested Capital ” over the
measurement period. WACC shall be calculated as:
|
