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EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, made as of May 27, 1998, by and between Regal
Cinemas, Inc., a Tennessee corporation (the "Company"), and Xxxxxxx X. Xxxxxxxx
("Executive").
RECITALS
In order to induce Executive to serve as the Chief Executive
Officer and Chairman of the Board of Directors of the Company, the Company
desires to provide Executive with compensation and other benefits on the terms
and conditions set forth in this Agreement.
Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company (or the company existing after the integration, if any, of the Company
and Act III Cinemas, Inc. ("Act III")) agrees to employ Executive during the
term hereof as its Chief Executive Officer and Chairman of the Board of
Directors. In his capacity as the Chief Executive Officer of the Company,
Executive shall report to the Board of Directors of the Company (the "Board")
and shall have the powers, responsibilities and authorities of chief executive
officers of corporations of the size, type and nature of the Company, as it
exists from time to time, as are assigned by the Board consistent with the
position of Chief Executive Officer.
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1.2 Subject to the terms and conditions of this Agreement,
Executive hereby agrees to be employed as the Chief Executive Officer and
Chairman of the Board of the Company (or the company existing after the
integration, if any, of the Company and Act III) and agrees to devote such
working time and efforts (except for permitted vacation periods and reasonable
periods of illness and other incapacity), to the best of his ability, experience
and talent, to the performance of services, duties and responsibilities in
connection therewith so that such performance shall be his primary business
activity. Executive shall perform such duties and exercise such powers with
respect to the activities of the Company, commensurate with his positions, as
the Chief Executive Officer and Chairman of the Board of the Company as the
Board shall from time to time delegate to him on such terms and conditions and
subject to such restrictions as such Board may reasonably from time to time
impose. Executive will be responsible for the selection of the members of the
Company's management team, subject to the good faith approval of the Board.
1.3 Nothing in this Agreement shall preclude Executive from
serving on boards of directors of other companies and participating in
charitable or community activities that do not substantially interfere with his
duties and responsibilities hereunder or conflict with the interest of the
Company.
1.4 Headquarters of the Company will be in Knoxville, TN, or
any other reasonable location acceptable to the Executive.
2. Term of Employment. Executive's term of employment under
this Agreement shall commence as of the date hereof, and, subject to the terms
hereof, shall terminate (the "Termination Date") on the earlier of (i) May 27,
2001, or (ii) termination of
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Executive's employment pursuant to this Agreement; provided, however, that any
termination of employment by Executive (other than for death or Permanent
Disability) may only be made upon 90 days prior written notice to the Company.
The Executive shall resign from the Board upon any termination of employment.
3. Compensation.
3.1 Salary. The Company shall pay Executive a base salary
("Base Salary") at the rate of $500,000 per annum for the period commencing on
the beginning of Executive's term of employment hereunder and ending on the
Termination Date. Base Salary shall be payable in accordance with the ordinary
payroll practices of the Company. Any increase in Base Salary shall be in the
discretion of the Board and, as so increased, shall constitute "Base Salary"
hereunder.
3.2 Annual Bonus. In addition to his Base Salary, Executive
shall, commencing with the 1998 fiscal year and continuing each fiscal year
thereafter, be paid an annual cash bonus (the "Bonus") during the term of his
employment hereunder. Executive's target bonus shall be 140% of Base Salary. For
1998, 70% of such bonus will depend on the achievement of the Company EBITDA
target of $156 million (excluding (i) synergies, if any, from the combined
operations and (ii) extraordinary charges related to the acquisition of the
Company and the integration, if any, of the Company and Act III) and 30% will
depend on achievement of Board established integration/synergy goals. After
1998, the Board, after consultation with management, will establish EBITDA
targets based on the performance of the Company, taking into account the
combined operations, if any, and synergies, if any. With respect to the EBITDA
component, upon attainment of 90% of the EBITDA target the
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Executive will earn 50% of the EBITDA component, which will increase from 50% to
100% in a linear progression for achievement between 90% and 100% of the EBITDA
target. Similarly, the EBITDA portion of the bonus will increase (up to a cap of
150% on the EBITDA portion of the bonus) in a linear progression from 100% to
150% for achievement of EBITDA over 100% of the EBITDA target. EBITDA
achievement will be measured using the budgeted capital expenditures previously
disclosed in the Xxxxxxx Xxxxx presentation to the Board dated December 29,
1997.
4. Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices. The
Company shall provide Executive during the term of his employment hereunder with
coverage under all employee pension and welfare benefit programs, plans and
practices (to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company generally makes available
to its senior executives.
4.2 Vacation. While employed hereunder, Executive shall be
entitled to no less than 20 business days paid vacation in each calendar year,
which shall be taken at such times as are consistent with Executive's
responsibilities hereunder.
5. Expenses. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement.
The Company will reimburse Executive for such expenses upon presentation by
Executive from time to time of appropriately itemized and approved (consistent
with the Company's policy) accounts of such expenditures.
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6. Termination of Employment.
6.1 Termination Without Cause. The Company may terminate
Executive's employment at any time for any reason and nothing herein shall be
construed as a representation or covenant to continue Executive's employment. If
Executive's employment is terminated by the Company other than for Permanent
Disability, death or Cause (as such terms are defined in Sections 6.2 and 6.4
hereof) or the Executive resigns for Good Reason (as defined below) during the
term hereunder, Executive shall receive such payments, if any, under applicable
plans or programs, including but not limited to those referred to in Section 4.1
hereof, to which he is entitled pursuant to the terms of such plans or programs,
and any unpaid payments of Base Salary previously earned, bonus awarded, accrued
vacation and expense incurred for which Executive is entitled to reimbursement
hereunder. If Executive is terminated or resigns under this Section 6.1,
Executive shall also be entitled to receive (i) an amount (the "Termination
Amount") in lieu of any other cash compensation beyond that provided in the
immediately preceding sentence, which Termination Amount shall be equal to the
greater of (x) two times Executive's annual Base Salary and (y) Base Salary
payable over the then remaining balance of the employment term, in either case,
payable in installments as normal payroll over the 24 months following such
termination of employment (or, if longer, the remaining balance of the
employment term); and (ii) continued coverage for the same period that the
Termination Amount is payable under any employee medical, disability and life
insurance plans in accordance with the respective terms thereof (other than the
requirement of continued employment); provided, however, that payments and
benefits due hereunder shall be reduced by any amounts owed by the Executive to
the Company. Good Reason shall be
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defined as: (i) a reduction in Executive's Base Salary or an amendment to the
annual cash bonus plan which would materially impair the ability of the
Executive to receive a bonus (other than the establishment of the EBITDA or
other performance targets to be set in good faith by the Board), (ii) a
substantial reduction in Executive's duties and responsibilities, (iii) a
transfer of the Executive's primary workplace by more than fifty (50) miles from
the current workplace or (iv) Executive is not Chief Executive Officer of the
combined operations following an integration, if any, of the Company and Act
III.
6.2 Permanent Disability. If the Executive is unable to engage
in the activities required by the Executive's job by reason of any medically
determined physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months ("Permanent Disability"), the Company or Executive may
terminate Executive's employment on written notice thereof, and Executive shall
receive or commence receiving, as soon as practicable:
(i) the actual bonus, if any, he would have received in
respect of the fiscal year in which his termination occurs, prorated by
a fraction, the numerator of which is the number of days of the fiscal
year until termination and the denominator of which is 365, payable at
the same time as bonuses are paid to other executives; and
(ii) accrued but unpaid Base Salary and such payments under
applicable plans or programs, including but not limited to those
referred to in Sections 4.1, 4.2 and 5 hereof, to which he is entitled
pursuant to the terms of such plans or programs.
6.3 Death. In the event of Executive's death during the term
of his employment hereunder, Executive's estate or designated beneficiaries
shall receive or commence receiving, as soon as practicable:
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(i) the actual bonus, if any, he would have received in
respect of the fiscal year in which his death occurs, prorated by a
fraction, the numerator of which is the number of days of the fiscal
year until his death and the denominator of which is 365, payable at
the same time as bonuses are paid to other executives; and
(ii) accrued but unpaid Base Salary and such payments under
applicable plans or programs, including but not limited to those
referred to in Sections 4.1, 4.2 and 5 hereof, to which Executive's
estate or designated beneficiaries are entitled pursuant to the terms
of such plans or programs.
6.4 Termination for Cause; Resignation by Executive. (a) The
Company shall have the right to terminate the employment of Executive for Cause.
In the event that Executive's employment is terminated by the Company for Cause
or by Executive for any reason (other than by Executive for Good Reason or as a
result of the Executive's Permanent Disability or death) during the term
hereunder, Executive shall not be entitled to the payment of any compensation
otherwise included under this Agreement. After the termination of Executive's
employment under this Section 6.4., the obligations of the Company under this
Agreement to make any further payments, or provide any benefits specified
herein, to Executive shall thereupon cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i)
the willful refusal to perform in any material respect his duties or
responsibilities for the Company, or willful disregard in any material respect
of any financial or other budgetary limitations established in good faith by the
Board; (ii) the engaging by the Executive in conduct that causes material and
demonstrable injury, monetarily or otherwise, to the Company, including, but not
limited to, misappropriation or conversion of assets of the Company (other than
nonmaterial assets); (iii) conviction of or entry of a plea of nolo contendere
to a felony; or (iv)
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a material breach of this Agreement by engaging in action in violation of the
restrictive covenants in this Agreement. No act or failure to act by the
Executive shall be deemed "willful" if done, or omitted to be done, by him in
good faith and with the reasonable belief that his action or omission was in the
best interest of the Company.
7. Equity Arrangements. (a) Promptly upon commencement of his
employment hereunder, the Executive shall make a minimum investment of 60% of
the aggregate value of his equity ownership immediately prior to the Effective
Time (as defined in the Agreement and Plan of Merger dated as of January 19,
1998 among the Company, Screen Acquisition Corp. and Monarch Acquisition Corp.)
(which shall be calculated without regard to any interest held by his former
spouse, which interest shall be cashed out in full at the time of closing) on a
rollover or other basis in the equity ("Purchased Equity") of the Company. As a
result, Executive will cash out approximately $6.3 million in value (to be
comprised of directly owned shares) and roll over the balance of his directly
owned shares with a value of approximately $2.28 million and the unrealized gain
on his options with a value of approximately $7.18 million, for an aggregate
rollover value of approximately $9.46 million. The Company and the Executive
shall endeavor to structure such investment in the most tax efficient manner
possible under the relevant circumstances. In respect of such investment, the
Company will grant the Executive options to purchase shares of the Company's
Common Stock ("New Options") equal to 1.1 times the dollar value of his
Purchased Equity. In addition, the Company will grant the Executive Performance
Options (as defined in the Non-Qualified Stock Option Agreement between the
Executive and the Company) for 250,000 shares of the Company's Common Stock, on
a pre-split basis. All New Option terms will be
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consistent with the 1998 Stock Purchase and Option Plan for Key Employees of
Regal Cinemas, Inc. It is the intention of the parties that, in the event that a
combination of the Company and Act III is consummated, the value of each of the
companies shall be the purchase price therefor, absent any subsequent adverse
change.
(b) Other provisions for Purchased Equity and Options shall be
governed by a management shareholder agreement which will provide for repurchase
rights, piggyback registration rights, tag-along rights and drag-along rights as
heretofore agreed by the parties.
8. Notices. All notices or communications hereunder shall be
in writing, addressed as follows:
To the Company:
x/x Xxxxxxxx Xxxxxx
Xxxxxxx & Co.
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Xxxxxxx
with copies to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
and
Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxxxx X. Xxxxxx, Xx.
xxx
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Xxxx Xxxxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
To Executive:
Xx. Xxxxxxx X. Xxxxxxxx
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
with a copy to:
Bass, Xxxxx & Xxxx PLC
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx Xxxxxx
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
9. Separability; Legal Fees. If any provision of this
Agreement shall be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining provisions
hereof which shall remain in full force and effect. Each party shall bear the
costs of any legal fees and other fees and expenses which may be incurred in
respect of enforcing its respective rights under this Agreement.
10. Assignment. This contract shall be binding upon and inure
to the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company,
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but neither this Agreement nor any rights or obligations hereunder shall be
assignable or otherwise subject to hypothecation by Executive (except by will or
by operation of the laws of intestate succession) or by the Company, except that
the Company may assign this Agreement to any successor (whether by merger,
purchase or otherwise) to all or substantially all of the stock, assets or
businesses of the Company, if such successor expressly agrees to assume the
obligations of the Company hereunder.
11. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
12. Nondisclosure of Confidential Information;
Non-competition. (a) Executive shall not, without the prior written consent of
the Company, use, divulge, disclose or make accessible to any other person,
firm, partnership, corporation or other entity any Confidential Information
pertaining to the business of the Company or any of its affiliates, except (i)
while employed by the Company, in the business of and for the benefit of the
Company, or (ii) as required by law. For purposes of this Section 12(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing, acquisition and
divestiture plans and other non-public, proprietary and confidential information
of the Company, its subsidiaries, its theater affiliates, Kohlberg Kravis
Xxxxxxx & Co. ("KKR"), Hicks, Muse, Xxxx & Xxxxx Incorporated ("HM") or any
affiliate of KKR or HM principally engaged in the theater business in existence
as of the date of Executive's termination of employment (the "Restricted Group")
or suppliers (including, without
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limitation, any motion picture distributor or exhibitor) or vendors, that, in
any case, is not otherwise available to the public (other than by Executive's
breach of the terms hereof).
(b) During the period of his employment hereunder and for one
year thereafter Executive agrees that, without the prior written consent of the
Company, (A) he will not, directly or indirectly, either as principal, manager,
agent, consultant, officer, stockholder, partner, investor, lender or employee
or in any other capacity, carry on, be engaged in or have any financial interest
in, any business in Competition (as defined in Section 12(c)) with the business
of the Restricted Group (excluding KKR and HM in any non-theater business) and
(B) he shall not, on his own behalf or on behalf of any person, firm or company,
directly or indirectly, solicit or hire for the benefit of anyone, other than
the Restricted Group, any person who is, or was at any time during the 6 months
immediately preceding the time of the solicitation or hiring by the Executive
employed by the Restricted Group (other than Executive's secretary or other
administrative employee who worked directly for him).
(c) For purposes of this Section 12, a business shall be
deemed to be in "Competition" with the Restricted Group if it is principally
engaged in the theater business within the same geographic area in which the
Restricted Group conducts such business. Nothing in this Section 12 shall be
construed so as to preclude Executive from investing in any publicly or
privately held company, provided Executive's beneficial ownership of any class
of such company's securities does not exceed 1% of the outstanding securities of
such class.
(d) Executive and the Company agree that this covenant not to
compete is a reasonable covenant under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction such restraint is not
reasonable in any respect, such court shall
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have the right, power and authority to excise or modify such provision or
provisions of this covenant as to the court shall appear not reasonable and to
enforce the remainder of the covenant as so amended. Executive agrees that any
breach of the covenants contained in this Section 12 would irreparably injure
the Company. Accordingly, Executive agrees that the Company may, in addition to
pursuing any other remedies it may have in law or in equity, obtain an
injunction against Executive from any court having jurisdiction over the matter
restraining any further violation of this Agreement by Executive and cease
making any payments otherwise required by this Agreement; provided, however,
that in the event a court of competent jurisdiction, which recognizes the
validity of the provisions of this Section 12, finds the Executive not to be in
violation of the provisions of this Section 12, then the Company shall pay to
Executive, in a lump sum, within ten days of such determination, all amounts
that would have been payable to Executive hereunder through the date of such
determination and continue making any other payments due with respect to periods
of time subsequent to such determination in accordance with the provisions of
this Agreement.
13. Beneficiaries; References. Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in either
case by giving the Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary, estate or other legal representative, and the Company shall pay
amounts payable under this Agreement, unless otherwise provided herein, in
accordance with the terms of this Agreement,
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to Executive's personal or legal representatives, executors, administrators,
heirs, distributees, devisees, legatees or estate, as the case may be. Any
reference to the masculine gender in this Agreement shall include, where
appropriate, the feminine.
14. Survival. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
Specifically, but not exclusively, notwithstanding the expiration of the term of
this Agreement, the provisions of Section 12 hereunder shall remain in effect as
long as is necessary to give effect thereto. The provisions of this Section 14
are in addition to the survivorship provisions of any other section of this
Agreement.
15. Governing Law. This Agreement shall be construed,
interpreted and governed in accordance with the laws of the state of New York,
without reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the
entire understanding between the parties hereto and supersedes in all respects
any prior or other agreement or understanding between the Company or any
affiliate of the Company and Executive.
17. Withholding. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
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18. Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original.
REGAL CINEMAS, INC.
By
---------------------------------
Name:
Title:
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Xxxxxxx Xxxxxxxx
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