EXHIBIT 10.26

Execution Version

 

AMENDMENT TO EMPLOYMENT AGREEMENT

 

This agreement (this “Amendment”) amends, effective as of January 1, 2020 (the
Effective Date”), the employment agreement between Richard L. Gelfond (the
“Executive”) and IMAX Corporation (the “Company”), dated November 8, 2016 (the
“Agreement”), in accordance with the provisions of Section 15 of the
Agreement.  Except as otherwise expressly set forth below in this Amendment from
and after the Effective Date, the Agreement shall continue in full force and
effect on the same terms and conditions.  Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to such terms in the
Agreement.

 

1.

Term. Section 2 of the Agreement shall be amended to replace references to
“December 31, 2019” with references to “December 31, 2022”.

 

2.

Base Salary.  Section 3(a) of the Agreement shall be deleted in its entirety and
replaced with the following:  

 

“During the Term, the Company shall pay to the Executive an annual salary (the
“Base Salary”) at the rate of no less than $1,200,000, subject to increases at
the discretion of the Board, payable in substantially equal installments in
accordance with the Company’s ordinary payroll practices as established from
time to time.  

 

3.

Annual Bonus.  Section 3(b) of the Agreement shall be deleted in its entirety
and replaced with the below:

 

(b)  Bonus. The Executive shall be eligible to receive an incentive bonus of up
to 200% of his Base Salary for each calendar year during the Term (the “Bonus”).
The Executive’s target bonus shall be 100% of his Base Salary (“Target
Bonus”).  For each year of the Term, as well as for 2019, 80% of Executive’s
Bonus shall be calculated based on achievement of non-discretionary criteria
(the “Formula Bonus”) established by the Compensation Committee of the Board
(the “Compensation Committee”) for the applicable year and 20% shall be
determined at the end of the applicable year in the discretion of the
Compensation Committee. The discretionary component of the Bonus will be a
judgment-based assessment by the Compensation Committee looking at performance
in non-quantifiable areas of performance that are clearly connected to the
business strategy and strategic drivers of Company performance.  The Formula
Bonus shall be comprised of goals in quantifiable areas that are either
financial metrics or drivers of financial performance, and shall be established
and developed reasonably and in good faith by the Compensation Committee after
meaningful consultation with Executive and communicated to Executive within the
first quarter of each calendar year. The Executive’s performance against each
such goal shall be measured on a sliding scale basis using linear interpolation,
with performance ranges developed for each such measure; provided, that (i) 0%
of the applicable portion of the Formula Bonus will be paid for performance
below threshold; (ii) 50% of the applicable portion of the Formula Bonus will be
paid for performance at threshold; (iii) 100% of the applicable portion

1

--------------------------------------------------------------------------------

 

Execution Version

of the Formula Bonus will be paid for performance at target; and (iv) a maximum
of 200% of the applicable portion of the Formula Bonus will be paid for
performance at or above maximum.  Schedule A of the Amendment contains the
performance criteria that the Compensation Committee has developed for Executive
for 2019. The Bonus (if any) shall be paid on the date on which the Company pays
out bonuses to Company management (but not later than March 15th of the year
following the year in respect of which the Bonus is earned), subject to the
Executive’s continued employment through such date except otherwise provided
herein; provided, that the Bonus, if any is earned, for calendar year 2022 shall
be subject to the Executive’s continued employment only through December 31,
2022.  

 

4.

Prior Grants.  Exhibit A of the Agreement is amended to read as attached hereto,
effective as of the date hereof.

 

5.

SERP.  Section 3(g)(i) shall be deleted in its entirety and replaced with the
following:

 

The Executive shall continue to participate in the Company’s Supplemental
Executive Retirement Plan (the “SERP”) in accordance with the terms and
conditions set forth therein, as amended from time to time.  Notwithstanding
anything herein or in the SERP or otherwise to the contrary, the Company and the
Executive agree that the total amount of benefit payable to Executive under the
SERP shall be fixed at $$20,298,168.

 

6.

Annual Long-Term Incentive Compensation.  A new Section 3(l) shall be added to
the Agreement as follows:

 

(l)  As soon as practicable after each of January 1, 2020, January 1, 2021 and
January 1, 2022, Executive shall be granted a total of $5,500,000 worth of
stock-based awards, as follows:

 

(i)  Time-Based RSUs: The Executive shall be granted RSUs having a grant date
value of $2,750,000 (the “Time-Based RSUs”).  The number of Time-Based RSUs
granted shall be determined by dividing (i) $2,750,000 by (ii) the closing price
of the Company’s common stock on the New York Stock Exchange on the date
thereof.  The Time-Based RSU’s shall vest in three (3) equal installments on
each of the first, second and third anniversaries of the grant date, subject to
Executive’s employment with the Company on each such date, except as otherwise
provided in this Agreement.  The Time-Based RSUs shall be granted on the terms
and conditions set forth in the LTIP, the grant agreement to be entered into
between the Company and the Executive and otherwise in accordance with this
Section 3(l)(i).

 

(ii)  PSUs: The Executive shall be granted RSUs that vest based upon the
achievement of performance criteria (the “PSUs”) having a grant date value of
$2,750,000.  60% of the PSUs, or $1,650,000 in value, shall be subject to the
“EBITDA Performance Condition” and 40% of the PSUs, or $1,100,000 in grant date
value, shall be subject to the “Relative TSR Performance Condition” (both as
defined in Schedule B).  The performance shall be measured as set forth on
Schedule B on a sliding scale basis using linear

2

--------------------------------------------------------------------------------

 

Execution Version

interpolation and based upon a three-year performance period extending from
January 1 of the year of grant to December 31 of the second year following the
year of grant, except as otherwise provided in this Agreement, the LTIP or the
grant agreement to be entered into.  The number of EBITDA Performance Condition
PSUs granted shall be determined by dividing (i) $1,650,000 by (ii) the closing
price of the Company’s common stock on the New York Stock Exchange on the date
thereof.  For determining the number of Relative TSR Performance Condition PSUs
to be granted pursuant to this section, the Company shall value the PSUs in
manner consistent with the Company’s financial statement reporting and,
specifically, pursuant to a “Monte Carlo” simulation.

 

7.

Treatment of Equity Awards Upon Termination Without Cause; Resignation for Good
Reason. The first paragraph of Section 4(c)(iii) of the Agreement shall be
deleted in its entirety and replaced with the following:

 

(iii)  The Executive’s outstanding equity awards will be treated as
follows:  (1) with respect to outstanding Unvested Equity Awards that are
subject to time-based vesting only (including without limitation RSUs and stock
options), the portion of each such Unvested Equity Award that shall vest upon
the Executive’s Separation from Service under this Section 4(c) shall be with
respect to a number of Common Shares underlying such award equal to the excess
of (A) over (B), where (A) is the total number of Common Shares underlying the
original award multiplied by a fraction, the numerator of which is the number of
calendar days of the entire vesting period applicable to the award in which the
Executive was employed by the Company and the denominator of which is the total
number of days in such period (such fraction, the “Pro Rata Fraction”), and (B)
is the number of Common Shares underlying the portion of the award that has
already vested as of the Executive’s Separation from Service; and (2) with
respect to outstanding Unvested Equity Awards that are subject to
performance-based vesting criteria (including without limitation the PSUs), the
percentage of each such Unvested Equity Award that shall vest at the end of the
applicable performance period shall equal the Pro Rata Fraction multiplied by
the percentage corresponding to the achievement of the performance conditions
enumerated in Schedule B, measured at the dates designated thereon. Any Unvested
Equity Awards that do not vest in accordance with the foregoing shall be
forfeited and cancelled and the Executive shall have no further rights with
respect thereto.  All outstanding stock options granted to the Executive prior
to Executive’s Separation from Service shall remain exercisable as follows:

 

8.

Severance Upon Termination Without Cause; Resignation for Good Reason. Section
4(c)(iv) of the Agreement shall be deleted in its entirety and replaced with the
following:

 

(iv)  The Company shall pay the Executive an amount equal to 200% of Base Salary
for each remaining year or partial year of the Term, if any, but not to exceed
two years (the “Severance Amount”) for the period (the “Severance Period”)
beginning on the day following the Executive’s Separation from Service and
continuing until the later of (x) December 31, 2022 and (y) the first
anniversary of the Executive’s Separation from Service, payable on the following
schedule:  (1) 50% of the Severance Amount shall be

3

--------------------------------------------------------------------------------

 

Execution Version

paid in equal installments over the Severance Period, in accordance with the
Company’s ordinary payroll practices in effect from time to time, and (2) the
remaining 50% of the Severance Amount will be payable as follows:  (A)  if the
Executive’s Separation from Service occurs in the 2020 calendar year, one-sixth
(1/6th) of the Severance Amount will be payable on each of March 1, 2021, March
1, 2022 and March 1, 2023; (B) if the Executive’s Separation from Service occurs
in the 2021 calendar year, one-fourth (1/4th) of the Severance Amount will be
payable on each of March 1, 2022 and March 1, 2023; or (3) if the Executive’s
Separation from Service occurs in the 2022 calendar year, one-half (1/2) of the
Severance Amount will be payable on March 1, 2023.

 

9.

Other Terminations. Section 4(d) of the Agreement shall be deleted in its
entirety and replaced with the following:

 

(d)  Resignation without Good Reason; Death or Disability.  If, prior to the
expiration of the Term, the Executive incurs a Separation from Service by reason
of the Executive’s resignation other than for Good Reason, or as the result of
the Executive’s death or “disability,” as such term is defined in the Company’s
long-term disability policy applicable to the Executive, the following
provisions shall apply:  (i) the Executive will receive the Other Accrued
Compensation and Benefits, payable in accordance with Company policies and
practices and in no event later than thirty (30) days after the Executive’s
Separation from Service, unless otherwise expressly set forth in the applicable
plan, program or agreement; (ii)  (A) in the case of a Separation from Service
resulting from the Executive’s resignation other than for Good Reason, all then
outstanding Unvested Equity Awards shall be cancelled immediately, and the
Executive will cease to have any further right thereto, and (B) in the case of a
Separation from Service resulting from the Executive’s death or disability, 100%
of the outstanding Unvested Equity Awards shall immediately vest (it being
understood that with respect to any PSUs, vesting shall be at target and the
Executive will forfeit any right to additional vesting based on actual
performance), and in either case all vested Options shall remain exercisable
until the shorter of (x) their original term and (y) two (2) years from
Executive’s Separation from Service; (iii) in the case of a Separation from
Service resulting from the Executive’s death or disability, the Target Bonus,
paid when bonuses are otherwise paid to Company management; and (iv) other than
pursuant to those provisions that survive termination of this Agreement, the
Executive shall have no further right to receive any other compensation or
benefits following his termination of employment pursuant to this Section 4(d).

 

10.

Retirement. The first paragraph of Section 4(e) of the Agreement shall be
deleted in its entirety and replaced with the following:

 

(e)    Non-Renewal of Agreement; Retirement.  If, upon the expiration of the
Term, the Company does not offer to continue the Executive’s employment on
substantially similar terms to those set forth herein, or if the Executive
elects to retire from employment with the Company following expiration of the
Term, and in either such case upon the expiration of the Term the Executive
incurs a Separation from Service, the Executive shall be entitled to a pro-rated
bonus, based on the number of calendar days of such year

4

--------------------------------------------------------------------------------

 

Execution Version

that have elapsed as of the Separation from Service, under the Company's annual
bonus plan for the year in which the termination occurs, to the extent not
already paid, based upon actual performance and paid when annual bonuses are
otherwise paid to Company management, and the Executive’s outstanding equity
awards will be treated as follows:  (1) with respect to outstanding Unvested
Equity Awards that are subject to time-based vesting only (including without
limitation RSUs and stock options), the percentage of each such Unvested Equity
Award that shall vest upon the Executive’s Separation from Service shall equal
100%; and (2) with respect to outstanding Unvested Equity Awards that are
subject to performance-based vesting criteria (including without limitation the
PSUs), the percentage of each such Unvested Equity Awards that shall vest upon
the end of the applicable performance period shall equal the Pro Rata Fraction
multiplied by the percentage corresponding to the achievement of the performance
conditions enumerated in Schedule B, measured at the dates designated thereon,
and the remainder shall be forfeited and cancelled.  All outstanding stock
options granted to the Executive prior to Executive’s Separation from Service
shall remain exercisable as follows:

 

11.

Consultancy. Section 4(g) of the Agreement shall be deleted in its entirety and
replaced with the following:

 

(g)    Consultancy.  At the end of Executive’s employment (for whatever reason),
Executive agrees to consult with the Company on such issues and items as
requested by the Company including, but not limited to, theatre signings,
management issues, film strategy issues, technological issues and/or issues with
respect to management transition, subject to the Executive’s other commitments
and the parties entering into a written agreement on terms to be negotiated by
the Company and the Executive in good faith; provided, that notwithstanding the
foregoing, the parties agree that if Executive incurs a Separation of Service by
reason of the Company’s termination of the Executive’s employment without Cause
or the Executive’s Resignation for Good Reason, then the above-referenced
consultancy shall be for a period of one (1) year from the date of such
Separation of Service at a total compensation for such year of $1,000,000,
payable in accordance with the Company’s ordinary payroll practices as
established from time to time.

 

12.

Change of Control.  New Sections 5(e) and 5(f) shall be added to the Agreement
as follows:

 

(e)  (i) Notwithstanding anything to the contrary in Section 4(c)(iii) or 4(e)
of the Agreement, which shall be superseded, to the extent necessary, by this
Section 5(e)(i), with respect to outstanding Unvested Equity Awards that are
subject to time-based vesting only (including, without limitation, RSUs and
stock options), 100% of each such Unvested Equity Award shall vest and be
settled upon the Executive’s Separation from Service by reason of the Company’s
termination of the Executive’s employment without Cause or the Executive’s
resignation for Good Reason, in either case within two years following a Change
of Control; and (ii) with respect to outstanding Unvested Equity Awards that are
subject to performance-based vesting (including, without limitation, PSUs), the
number of each such Unvested Equity Award that may become vested and

5

--------------------------------------------------------------------------------

 

Execution Version

settled in accordance with the terms thereof at the end of the applicable
performance period shall be, with respect to each of the EBITDA Performance
Condition and the Relative TSR Performance Condition, the greater of performance
(x) as of the last trading day immediately preceding the date upon which the
Change of Control is consummated or (y) to the extent the EBITDA Performance
Condition and/or the Relative TSR Condition remains applicable to the Company
following the Change of Control, as determined in good faith by the Board,
actual performance as of the end of the applicable performance period (it being
understood that if the EBITDA Performance Condition or the Relative TSR
Performance Condition does not remain applicable following the Change of
Control, then clause (x) shall determine the number of EBITDA Performance
Condition PSUs or Relative TSR Performance Condition PSUs, as applicable, that
may vest); provided, that, with respect to clause (ii), in the event Executive’s
Separation from Service pursuant to either Sections 4(c) or 4(e) is within two
years following a Change of Control that constitutes a “change in control event”
under Section 409A of the Code, the vesting and settlement of a number of PSUs
as determined in clause (ii) hereof shall occur upon such Separation from
Service and the references to “performance period” in this clause (ii) shall
instead be a reference to the date upon which the Separation from Service
occurs.  Any Unvested Equity Awards that do not vest in accordance with the
foregoing shall be forfeited and cancelled and the Executive shall have no
further rights with respect thereto

 

(f) Any Bonus payable with respect to the year in which a Change of Control
occurs shall be paid based on achievement of the applicable metrics as of the
consummation of such Change of Control, annualized over the full year, and
excluding any costs incurred in connection with or otherwise attributable to
such Change of Control.

 

13.

Clawback; Stock Ownership Guidelines. Section 9 of the Agreement shall be
deleted in its entirety and replaced with the following:

 

(a)  Recovery of Compensation.  All payments and benefits provided under this
Agreement shall be subject to any compensation recovery, clawback or similar
policy as required under law and which is thereafter adopted by the Company from
time to time. Notwithstanding the foregoing, (a) if the Company is required to
file a material adverse restatement of its financials (regardless of whether
such restatement is due to actions taken by the Executive or actions the
Executive knew or should have known) and (b) the original reporting of such
financials resulted in compensation to the Executive with respect to his Bonus
or the vesting of his equity awards that otherwise would not have been earned,
vested or paid, then the Company’s Board may require the Executive to repay (or
may withhold from future payments to Executive to the maximum extent permitted
by Section 409A, as defined below) the amount by which his Bonus or equity award
vesting or payment would have been reduced had the original financial statements
not been reported.

 

(b) Stock Ownership Guidelines.  The Executive’s required share ownership under
the Company’s share ownership requirement shall equal or exceed (i) 400% of Base
Salary, following the grant pursuant to this Agreement of RSUs and PSUs in 2020,
and (ii) 500%

6

--------------------------------------------------------------------------------

 

Execution Version

of Base Salary, following the grant pursuant to this Agreement of RSUs and PSUs
in 2021.  

 

14.

The entering into this Amendment shall not prejudice any rights or waive any
obligations under the Agreement or any other agreement between the Executive and
the Company.

 

DATED as of November 1, 2019.

 

 

AGREED AND ACCEPTED:

 

 

 

 

 

 

 

 

 

 

 

/s/ Richard L. Gelfond

 

Richard L. Gelfond

 

 

 

 

 

 

 

 

 

 

 

 

IMAX CORPORATION

 

 

 

 

 

 

 

 

 

 

 

Per:  

/s/ Darren Throop

 

 

Name:

Darren Throop

 

 

 

Title:  

Director

 

 

 

 

7

--------------------------------------------------------------------------------

 

Schedule A

 

2019 Formula Bonus Criteria

 

I.

Financial

Weighting

Target

Threshold

Max

 

a. EPS (up 26% from 2018)

25%

$1.16

down 15%

Up 20%

 

b. EBITDA (up 20% from 2018)

25%

$150MM

down 15%

Up 20%

 

c. Free Cash Flow (Budget)

10%

$50MM

down 10%

Up 20%

 

II.

 

Backlog

 

 

 

 

 

a. Signings of 125

10%

125

down 10%

Up 20%

III.

GBO

 

 

 

 

 

a. GBO (up 7% from 2018)

10%

$1.lB

down 15%

Up 25%

 

 

--------------------------------------------------------------------------------

 

Schedule B

 

EBITDA and TSR Performance Conditions

 

 

•

EBITDA (Applies to 60% of PSUs)

 

Average Annual

EBITDA Growth Over

Performance Period

# PSUs Earned as %

of Target at end of

Performance Cycle

< 5%

0%

5%

50%

10%

75%

12.5%

100%

15.0%

125%

17.5%

150%

> 20%

175%

 

 

•

Relative TSR vs. Russell 2000 (Applies to 40% of PSUs)

 

3-Year Relative TSR vs.

Russell 2000 Over

Performance Period

# PSUs Earned as %

of Target at end of

Performance Cycle

< 40th Percentile

0%

40th Percentile

37.5%

50th Percentile

50%

60th Percentile

75%

70th Percentile

100%

80th Percentile

125%

> 90th Percentile

175%