EXHIBIT 10.14(a)
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is made and entered into
as of March 12, 2004, by and between Cinemark, Inc., a Delaware corporation (the
"COMPANY"), and Xxx Xxx Xxxxxxxx ("EXECUTIVE").
W I T N E S S E T H:
WHEREAS, the Company and Executive desire to enter into an employment
arrangement and this Agreement to assure the Company of the continuing and
exclusive service of Executive and to set forth the terms and conditions of
Executive's employment with the Company;
WHEREAS, this Agreement is being entered into in connection with the
execution and delivery of the Agreement and Plan of Merger, dated as of the date
hereof, between the Company and Popcorn Merger Corp., a Delaware corporation
(the "MERGER AGREEMENT"), pursuant to which Popcorn Merger Corp. will merge with
and into the Company, with the Company continuing as the surviving corporation;
and
WHEREAS, this Agreement shall become effective between the parties
hereto only upon the consummation of the merger under the Merger Agreement (the
"MERGER") as provided in Section 18 hereof;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. Employment.
1.1 Title and Duties. The Company hereby employs
Executive as the Chief Executive Officer of the Company. Executive's duties,
responsibilities and authority shall be normal, customary and consistent with
Executive's position and title and shall include serving in a similar capacity
with Cinemark USA, Inc. and such other duties, responsibilities and authority as
may be assigned to Executive by the Board of Directors of the Company (the
"BOARD"). Executive shall report directly to the Board. Executive shall have
responsibility and authority for (a) managing the day-to-day operations of the
Company and its Subsidiaries and (b) hiring, supervising and terminating other
executives of the Company and its Subsidiaries, subject to a duty of
consultation with the Executive Committee or Compensation Committee of the
Board, as applicable, and subject to the final authority of the Board.
1.2 Services and Exclusivity of Services. Executive shall
devote his reasonable efforts, skill and attention to the business and affairs
of the Company and its Subsidiaries. Notwithstanding the foregoing, so long as
Executive has not breached any of the terms contained in Section 4 hereof and so
long as his engaging in the following activities does not materially interfere
with Executive's performance of his duties as provided in this Agreement,
Executive may engage in the following activities: (a) religious, charitable and
other community activities; (b) service on the boards of directors of other
companies; (c) investment activities and other business activities in any
industry, other than the motion picture exhibition industry (except to the
extent that such activity constitutes a Permitted Activity as hereafter
defined); and (d) participation in a Permitted Activity as defined below.
"PERMITTED ACTIVITY" means the investment in, development of, and/or operation
of, one or more combined family restaurant and entertainment facilities, each of
which facilities shall conduct all of the following activities: (A) the
operation of one or more restaurants, (B) the operation of no more than sixteen
(16) movie screens with no more than an average of 200 seats per screen, and (C)
the operation of one or more game rooms (which shall include amusement rides,
climbing walls, football passing machines and billiard tables), one or more
lounges and one or more party rooms.
1.3 Location of Office. The Company shall make available
to Executive an office and support services appropriate for Executive's position
at the Company's headquarters in the Dallas/Plano, Texas area. Executive's
principal office shall be located at the Company's headquarters in Plano, Texas.
1.4 Approval Rights. So long as Executive is Chief
Executive Officer of the Company, the Company shall not sell or otherwise
dispose of, or permit any Subsidiary to sell or otherwise dispose of, in the
aggregate more than $50,000,000 of the assets of the Company and its
Subsidiaries during any twelve-month period (computed on the basis of fair
market value, determined by the Board in its reasonable good faith judgment), or
(B) acquire directly or indirectly (by merger, consolidation or otherwise) any
movie theatres for an aggregate consideration in excess of $50,000,000 during
any twelve-month period.
1.5 Subsidiaries; Person. For purposes of this Agreement,
"SUBSIDIARY" or "SUBSIDIARIES" means, as to any Person, any other Person (i) of
which such Person or any other Subsidiary of such Person is a general partner,
(ii) of which such Person, any one or more of its other Subsidiaries of such
Person, or such Person and any one or more of its other Subsidiaries, directly
or indirectly owns or controls securities or other equity interests representing
more than fifty percent (50%) of the aggregate voting power, or (iii) of which
such Person, any one or more of its other Subsidiaries of such Person, or such
Person and any one or more its other Subsidiaries, possesses the right to elect
more than fifty percent (50%) of the board of directors or Persons holding
similar positions; and "PERSON" means any individual, corporation, partnership,
limited liability company, firm, joint venture, association, joint-stock
company, trust, unincorporated organization, or other entity or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended).
2. Term. The term of Executive's employment under this Agreement
(the "TERM") shall commence on the Effective Date (as defined in Section 18) and
shall continue for a period of three (3) years thereafter; provided, however,
that at the end of the Term, the Term shall be extended for an additional
one-year period unless either party notifies the other party in writing, at
least thirty (30) days prior to the end of the Term, of such party's intent not
to extend the Term.
3. Compensation.
3.1 Base Salary. During the Term, the Company will pay to
Executive a base salary at the rate of $716,625 per year, payable in accordance
with the Company's practices in effect from time to time ("BASE SALARY").
Amounts payable shall be reduced by standard withholding and other authorized
deductions. Such Base Salary shall be reviewed for increase
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(but not decrease) in the sole discretion of the Board or such individual, group
or committee that the Board may select as its delegate not less frequently than
annually during the Term. In conducting any such review, the Board or such
delegate shall consider and take into account, among other things, any change in
Executive's responsibilities, performance of Executive, and compensation of
other senior executives of the other comparable companies and other pertinent
factors. Executive's Base Salary shall not be decreased, except upon mutual
agreement between Executive and the Company.
3.2 Bonuses; Incentive, Savings and Retirement Plans;
Welfare Benefit Plans.
(a) Executive shall be entitled to participate
in all annual and long-term bonuses and incentive, savings and retirement plans
generally available to other senior executive employees of the Company.
Executive, and Executive's family as the case may be, shall be eligible to
participate in and receive all benefits under welfare benefit plans, practices,
programs and policies provided to other senior executive employees of the
Company, including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs. The Company reserves the right to
modify, suspend or discontinue any and all of its benefits referred to in this
Section 3.2 at any time without recourse by Executive so long as such action is
taken generally with respect to other senior executives and does not single out
Executive.
(b) Executive shall be entitled to receive a
special bonus upon the Effective Date equal to $2,400,000 (the "SPECIAL BONUS").
In addition to his Base Salary and Special Bonus, for each fiscal year during
the Term, commencing with the fiscal year ended December 31, 2004, Executive
shall be entitled to receive an annual incentive cash bonus (the "ANNUAL BONUS")
based upon reasonable Company targets established by the Board (or the
Compensation Committee of the Board). The Annual Bonus targets established by
the Board for the fiscal year ended December 31, 2004, are set forth on Exhibit
A. All such Annual Bonus payments shall be payable within ninety (90) days after
the end of the fiscal year during which the criteria for payment of the Annual
Bonus are achieved, and all bonus payments shall be reduced by standard
withholding and other authorized deductions.
3.3 Fringe Benefits. Executive shall be entitled to
receive fringe benefits consistent with Executive's duties and position, and in
accordance with the benefits provided to other senior executive employees of the
Company. The Company reserves the right to modify, suspend or discontinue any
and all of its fringe benefits referred to in this Section 3.3 at any time
without recourse by Executive so long as such action is taken generally with
respect to other senior executives and does not single out Executive.
3.4 Travel and Expenses. Executive shall be entitled to
reimbursement for expenses incurred in the furtherance of the business of the
Company in accordance with the Company's practices and procedures, as they may
exist from time to time. Executive may, in his discretion, elect to purchase,
and be reimbursed for, business class tickets on any international flights which
scheduled flight time exceeds five hours. Executive shall keep complete and
accurate records of all expenditures such that Executive may fully account
according to the Company's practices and procedures.
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3.5 Vacation. Executive shall be entitled to paid
vacations and other absences from work that are reasonably consistent with the
performance of Executive's duties as provided in this Agreement; provided,
however, that Executive will be provided a minimum of eight (8) weeks of paid
vacation in each calendar year of the Company. Such vacations and absences shall
be not less than those generally provided to other senior executive employees.
3.6 Country Club Entertainment Benefit. The Company
shall, if Executive so requests, provide Executive with a country club
membership at a country club selected by Executive, reimburse Executive for all
membership costs and dues related thereto, and reimburse Executive for all
charges for goods and services incurred that relate to the Company's business.
Executive shall keep complete and accurate records of all expenditures such that
Executive may fully account according to the Company's practices and procedures.
3.7 Automobile Allowance. The Company shall provide
Executive with a company car, which car shall be a full size current model
luxury automobile or other car selected by Executive.
3.8 Life Insurance. The Company shall pay the premiums
on, and maintain, in effect throughout the Term, a whole life insurance policy
on the life of Executive in an amount of not less than Five Million Dollars
($5,000,000.00). Executive shall have the right to designate the beneficiary
under such policy.
3.9 Disability Insurance. The Company shall pay the
premiums on, and maintain in effect throughout the Term, long-term disability
insurance providing for payment of benefits at rates not less than sixty-six
percent (66%) of Executive's Base Salary.
3.10 Board Service. So long as Executive serves as a
director on the Board in accordance with the terms of the Stockholders
Agreement, dated as of the date hereof, Executive agrees to serve as the
Chairman of the Board, provided he is indemnified for serving in such capacity
as set forth in the Indemnification Agreement, which indemnity shall survive the
termination of the Indemnification Agreement and of this Agreement. The Company
will provide appropriate directors' and officers' insurance naming Executive as
a named insured with limits of no less than that provided to other directors and
officers of the Company.
3.11 Payment of Compensation and Benefits. Executive
acknowledges and agrees that all payments required to be paid to Executive and
benefits to be provided to Executive may be paid or provided by the Company or
its successor or any Subsidiary of the Company or its successor.
4. Confidential Information; Non-Competition; Non-Solicitation.
4.1 General. Executive acknowledges that during his
employment and as a result of his relationship with the Company and its
affiliates, Executive has obtained and will obtain knowledge of, and has been
given and will be given access to, information, including, but not limited to,
information regarding the business, operations, services, proposed services,
business processes, advertising, marketing and promotional plans and materials,
price lists, pricing policies, ticket sales, film licensing, purchasing, real
estate acquisition and leasing, other financial information and other trade
secrets, confidential information and proprietary material of
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the Company and its affiliates or designated as being confidential by the
Company or its affiliates which are not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Executive (collectively referred to herein as
"CONFIDENTIAL INFORMATION"). The term "Confidential Information" does not
include any information which (i) at the time of disclosure is generally
available to the public (other than as a result of a disclosure by Executive in
breach of this Agreement), or (ii) was available to Executive on a
non-confidential basis from a source (other than the Company or its Affiliates
or their representatives) that is not and was not prohibited from disclosing
such information to Executive by a contractual, legal or fiduciary obligation.
Executive agrees that during the Term and, to the fullest extent permitted by
law, thereafter, Executive shall, in a fiduciary capacity for the benefit of the
Company and its affiliates, hold all Confidential Information strictly in
confidence and will not directly or indirectly reveal, report, disclose, publish
or transfer any of such Confidential Information to any Person, or utilize any
of the Confidential Information for any purpose, except in furtherance of
Executive's employment under this Agreement and except to the extent that
Executive may be required by law to disclose any Confidential Information.
Executive acknowledges that the Company and its affiliates are providing
Executive additional Confidential Information that Executive was not given prior
to execution of this Agreement, as further consideration to Executive for
executing this Agreement, including the promises and covenants made by Executive
in this Section 4.
4.2 Non-Competition. In further consideration of the
compensation to be paid to Executive hereunder, Executive acknowledges that
during the course of his employment with the Company and its Subsidiaries, he
has, and will, become familiar with the trade secrets of the Company and its
Subsidiaries and with other Confidential Information concerning the Company and
its Subsidiaries and that his services have been and shall continue to be of
special, unique and extraordinary value to the Company and its Subsidiaries.
Therefore, subject to Section 5.4(c), Executive agrees that, during Executive's
employment hereunder and for one year after the date of termination of
Executive's employment (the "NON-COMPETE PERIOD"), he shall not directly or
indirectly own any interest in, manage, control, participate in, consult with,
render services for, be employed in an executive, managerial or administrative
capacity by, or in any manner engage in, any Competing Business. For purposes of
this Agreement, "COMPETING BUSINESS" means any business (including, to the
extent applicable, any Permitted Activity) that owns, operates or manages any
movie theatre within a 25-mile radius (if such theatre is outside of a Major
DMA) or a 10-mile radius (if such theatre is within a Major DMA) of any theatre
(i) being operated by the Company or any of its Subsidiaries during Executive's
employment hereunder (but excluding any theatres which the Company and its
Subsidiaries have ceased to operate as of the date of the termination of
Executive's employment hereunder), or (ii) under consideration by the Company or
any of its Subsidiaries for opening as of the date of termination of Executive's
employment; "MAJOR DMA" means a Designated Market Area in the United States with
a number of households in excess of 700,000; "DESIGNATED MARKET AREA" means each
of those certain geographic market areas in the United States designated as such
by Xxxxxxx Media Research, Inc. ("XXXXXXX"), as modified from time to time by
Xxxxxxx, whereby Xxxxxxx divides the United States into non-overlapping
geography for planning, buying and evaluating television audiences across
various markets and whereby a county in the United States is exclusively
assigned, on the basis of the television viewing habits of the people residing
in the county, to one and only one Designated Market Area; and all theatres
operated by the Company and its Subsidiaries in the Western Hemisphere (other
than the United States) shall be treated as
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being outside a Major DMA. Nothing herein shall prohibit Executive from being a
passive owner of not more than five percent (5%) of the outstanding stock of any
class of a corporation which is publicly traded, so long as Executive has no
active participation in the business of such corporation. Notwithstanding the
foregoing, Executive's obligations under this Section 4.2 shall terminate and
become null and void upon the consummation of a Sale of the Company to any
Person that directly or indirectly owns, operates or manages theatres with an
aggregate of more than 50 movie screens, each of which movie screens is used for
the primary purpose of exhibiting commercially distributed full-length motion
pictures. For purposes hereof, "SALE OF THE COMPANY" means the sale of the
Company to a Person or Persons pursuant to which such Person or Persons directly
or indirectly acquire (i) capital stock of the Company possessing the voting
power under normal circumstances to elect a majority of the Company's board of
directors or entitling such Person to exercise more than fifty percent (50%) of
the total voting power of the shares of capital stock of the Company or the
surviving entity entitled to vote (whether by merger, consolidation or sale or
transfer of the Company's capital stock) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
4.3 Non-Solicitation. During the Term and for three (3)
years thereafter (the "NON-SOLICITATION PERIOD"), Executive shall not directly
or indirectly through another Person (i) induce or attempt to induce any
managerial or executive-level employee of the Company or any Subsidiary to leave
the employ of the Company or such Subsidiary, or in any way interfere with the
relationship between the Company or any Subsidiary and any employee thereof,
(ii) without the Company's prior written consent, hire any person who was a
managerial or executive level employee of the Company or any Subsidiary at any
time during the Term or (iii) induce or attempt to induce any customer,
supplier, landlord, developer, licensee, licensor, franchisee or other business
relation of the Company or any Subsidiary to cease doing business with the
Company or such Subsidiary, or in any way interfere with the relationship
between any such customer, supplier, licensee or business relation and the
Company or any Subsidiary or (iv) make any negative, derogatory or disparaging
statements or communications regarding the Company or any of its Subsidiaries or
any of their officers, directors or affiliates. Notwithstanding the foregoing,
after Executive's employment is terminated for any reason, Executive may hire
members of his family (which members shall be limited to his spouse,
descendants, spouses of his descendants and siblings of his spouse) who are
employed by the Company or any of its Subsidiaries or any former employee of the
Company or any of its Subsidiaries who were involuntarily terminated by the
Company or any of its Subsidiaries.
4.4 Proprietary Interest. All inventions, designs,
improvements, patents, copyrights and discoveries conceived by Executive during
Executive's employment by the Company or its affiliates whether prior to or
after the Effective Date (as defined in Section 18 hereof)(other than with
respect to any Permitted Project) that are useful in or directly or indirectly
related to the business of the Company and its affiliates or to any experimental
work carried on by the Company or its affiliates, shall be the property of the
Company and its affiliates. Other than with respect to any Permitted Projects,
Executive will promptly and fully disclose to the Company or its affiliates all
such inventions, designs, improvements, patents, copyrights and discoveries
(whether developed individually or with other persons) and shall take all steps
necessary and reasonably required to assure the Company's or such affiliate's
ownership thereof and to assist the Company and its affiliates in protecting or
defending the Company's or such affiliate's proprietary rights therein.
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4.5 Return of Materials. Executive expressly acknowledges
that all data, books, records and other Confidential Information of the Company
and its affiliates obtained in connection with the Company's business whether
prior to or after the Effective Date (as defined in Section 18 hereof) are the
exclusive property of the Company or its affiliates and that upon the
termination of Executive's employment by the Company or its affiliates,
Executive will immediately surrender and return to the Company or its affiliates
all such items and all other property belonging to the Company or its affiliates
then in the possession of Executive. Executive shall not make or retain any
copies thereof. The Company expressly acknowledges that all data, books, records
and other information relating to the Permitted Projects are the exclusive
property of Executive and shall not be used or retained by the Company.
4.6 Property of the Company. Executive acknowledges that
from time to time in the course of providing services to the Company whether
prior to or after the Effective Date (as defined in Section 18 hereof),
Executive shall have the opportunity to inspect and use certain property, both
tangible and intangible, of the Company and its affiliates, and Executive hereby
agrees that such property shall remain the exclusive property of the Company and
its affiliates. Executive shall have no right or proprietary interest in such
property, whether tangible or intangible, including, without limitation,
Executive's customer and supplier lists, contract forms, books of account,
computer programs and similar property.
4.7 Reasonable in Scope and Duration; Consideration.
Executive agrees and acknowledges that the restrictions contained in this
Section 4 are reasonable in scope and duration and are necessary to protect the
business interests and Confidential Information of the Company and its
affiliates after the Effective Date of this Agreement, and Executive further
agrees and acknowledges that he has reviewed the provisions of this Agreement
with his legal counsel. Executive acknowledges and agrees that Executive will
receive substantial, valuable consideration from the Company for the covenants
contained in this Section 4, including without limitation, compensation and
other benefits.
4.8 Permitted Activities. Notwithstanding anything to the
contrary contained herein, Executive may at any time during the Term and
thereafter engage in the Permitted Activities so long as the Permitted
Activities do not constitute a Competing Business, and prior to committing to
any lease or purchase of any real property for use in connection with any
facility to be used as the location of a Permitted Activity, Executive shall
provide written notice to the Company describing such facility and its location
in reasonable detail.
5. Termination.
5.1 Termination Prior to Expiration of Term.
Notwithstanding the provisions of Section 2, Executive's employment may be
terminated prior to the expiration of the Term only as provided in this Section
5.
5.2 Death or Disability.
(a) The Company may terminate Executive's
employment hereunder due to death or Disability (as defined below). If
Executive's employment hereunder is terminated as a result of death or
Disability, Executive (or Executive's estate or personal
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representative in the event of death) shall be entitled to receive (i) all Base
Salary due to Executive through the date of termination, (ii) a pro-rata portion
of the Annual Bonus, if any, payable for the period of Executive's employment
during the fiscal year of the Company prior to Executive's termination of
employment, (iii) any previously vested stock options and benefits, such as
retirement benefits, in accordance with the terms of the plan or agreement
pursuant to which such stock options or benefits were granted to Executive
(items (i) through (iii) above collectively referred to as "ACCRUED EMPLOYMENT
ENTITLEMENTS"), (iv) Executive's full Base Salary until the expiration of six
months from the date on which Executive was first unable substantially to
perform Executive's duties hereunder and, as of the last day of such six-month
period, shall be entitled to receive a lump sum payment equal to an additional
six months of Base Salary and (v) any benefits payable to Executive or
Executive's beneficiaries, as applicable, in accordance with the terms of the
applicable benefit plan. At the Company's expense, Executive and/or Executive's
dependents shall be entitled to continue to participate in the Company's welfare
benefit plans and programs on the same terms as other senior, actively-employed
executives for a period of twelve months from the date of such termination.
Executive and/or Executive's dependents shall thereafter be entitled to any
continuation of such benefits provided under such benefit plans or by applicable
law. Following the death or Disability of Executive, Executive's participation
under any stock option or other incentive compensation plan (other than bonuses
included in the definition of Accrued Employment Entitlements) shall be governed
by the terms of such plans.
(b) "DISABILITY" shall mean a physical or mental
impairment that (a) renders Executive unable to perform the essential functions
of Executive's positions, even with reasonable accommodation that does not
impose an undue hardship on the Company or its Subsidiaries, (b) has existed for
at least sixty (60) consecutive days, and (c) in the opinion of a physician
mutually agreed upon by the Company and Executive (which agreement shall not be
unreasonably withheld) will last for a duration of at least one hundred eighty
(180) consecutive days. Executive's Disability shall be determined by the
Company, in good faith, based upon information supplied by Executive and the
physician mutually agreed upon by the Company and Executive. Executive agrees to
submit to physical exams and diagnostic tests reasonably recommended by such
physician.
5.3 Termination by the Company for Cause or by Executive
because of a Voluntary Termination.
(a) Executive's employment hereunder may be
terminated by the Company for Cause (as hereinafter defined) or by Executive
under a Voluntary Termination (as hereinafter defined). If Executive's
employment hereunder is terminated under this Section 5.3, Executive shall be
entitled to receive all Base Salary due to Executive through the date of
termination. Furthermore, all previously vested rights of Executive under a
stock option or similar incentive compensation plan or program shall be treated
in accordance with the terms of such plan or program. Except as specifically set
forth in this Section 5.3, the Company shall have no further obligations to
Executive following a termination for Cause, or a Voluntary Termination.
(b) "CAUSE" shall mean (i) subject to clause
(ii) below, a felony or a violation by Executive of the federal securities laws
which results in a conviction, a guilty plea
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or a plea of nolo contendere, (ii) the commission of fraud, embezzlement or
theft by Executive in connection with Executive's employment hereunder; (iii)
engaging in conduct involving moral turpitude that causes the Company and its
affiliates substantial public disrepute or substantial economic harm; (iv) a
material breach by Executive of this Agreement or any other agreement to which
Executive and the Company are parties and/or Executive's gross neglect of
Executive's duties hereunder which is not cured to the Board's reasonable
satisfaction within fifteen (15) days after notice thereof is given to Executive
by the Board; (v) the intentional wrongful damage to material property of the
Company or its affiliates; or (vi) drug or alcohol abuse or other intentional
conduct by Executive which causes the Company and its affiliates substantial
public disrepute or substantial economic harm. Notwithstanding the foregoing,
the Company shall not be entitled to terminate Executive for Cause under clause
(ii) above, unless (A) the Board shall have made a good faith investigation into
the existence of the commission of the fraud, embezzlement or theft which would
serve as the basis of Executive's termination for Cause under clause (ii) above,
during which investigation the Company may place Executive on a paid
administrative leave of absence and (B) no less than two-thirds (2/3) of the
members of the Board (excluding the Xxxxxxxx Directors) shall have made a good
faith determination that the Company is entitled to terminate Executive for
Cause under clause (ii) above. For purposes hereof, "XXXXXXXX DIRECTORS" shall
have the meaning assigned to such term in the Stockholders Agreement, dated the
date hereof, by and among Popcorn Merger Corp., a Delaware corporation, MDCP,
Executive and the other Persons signatories thereto.
(c) "VOLUNTARY TERMINATION" shall mean a
termination of employment by Executive on Executive's own initiative other than
(i) a termination due to Disability or (ii) a termination for Good Reason.
5.4 Termination by the Company without Cause or by
Executive for Good Reason. The Company may terminate Executive's employment
hereunder without Cause, and Executive shall be permitted to terminate
Executive's employment hereunder for Good Reason (as hereinafter defined). If
the Company terminates Executive's employment hereunder without Cause, other
than due to death or Disability, or if Executive effects a termination for Good
Reason, Executive shall be entitled to receive the payments and benefits set
forth in this Section 5.4.
(a) If Executive's employment hereunder is
terminated under this Section 5.4, so long as Executive has not breached any of
the terms contained in Section 4, Executive shall be entitled to receive the
following:
(i) Executive's Accrued Employment
Entitlements (in accordance with the terms of the benefit plans providing such
benefits, where applicable); plus
(ii) Executive's annual Base Salary in
effect as of the date of such termination, payable in accordance with the
Company's normal payroll practices for a period of twelve (12) months following
any such termination, plus an amount equal to the most recent Annual Bonus
received by Executive prior to the date of such termination (determined without
regard to any performance goals), payable within ninety (90) days after the end
of the Company's then current fiscal year; plus
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(iii) Executive and Executive's dependents
shall be entitled to continue to participate in the Company's welfare benefit
plans and insurance programs on the same terms as other actively employed senior
executives for a period of twelve (12) months from the Termination Date.
Following the expiration of such twelve-month period, Executive and/or
Executive's dependents shall be entitled to any continuation of benefits as are
provided under such benefit plans by the Company or as are required to be
provided in accordance with applicable law.
(b) Any outstanding stock-based, equity-based or
performance compensation awards granted to Executive shall be vested and/or
exercisable for the period through the date of such termination of employment
and shall remain exercisable in accordance with the terms contained in the plan
and agreement pursuant to which such compensation awards were granted.
(c) If Executive's employment hereunder is
terminated under this Section 5.4, notwithstanding anything to the contrary
contained in Section 4.2, Executive shall be permitted to own, operate and
invest in up to sixteen (16) movie theatres, so long as each such theatre is
outside of a 25-mile radius (if such theatre is outside of a Major DMA) or a
10-mile radius (if such theatre is within a Major DMA) of the theatres being
operated by the Company or any of its Subsidiaries or under consideration by the
Company or any of its Subsidiaries for opening, in each case, as of the time of
such termination of Executive's employment. During the one-year period following
the termination of Executive's employment for any reason (including by
expiration of the Term), Executive shall provide reasonable notice to the
Company of his plans for acquiring ownership in, commencing operations of, or
investing in, any movie theatre prior to any such event.
(d) For purposes of the calculation of
Executive's benefits under any supplemental defined benefit plan in which
Executive participates, Executive shall be credited with one additional year as
a result of termination pursuant to this Section 5.4.
(e) "GOOD REASON" shall mean, and shall be
deemed to exist, if, without the prior written consent of Executive, (i) the
Executive suffers a significant reduction in duties, responsibilities or
effective authority associated with Executive's title and position as set forth
and described in this Agreement or is assigned any duties or responsibilities
inconsistent in any material respect therewith (other than in connection with a
termination for Cause); (ii) the Company fails to pay Executive any amounts or
provide any benefits required to be paid or provided under this Agreement or is
otherwise in material breach of this Agreement; (iii) the Company adversely
changes the Executive's title or reporting requirements; (iv) Executive's
compensation or benefits provided for hereunder are decreased, other than, in
the case of benefits, as part of reductions affecting the Company's executives
generally; (v) the Company transfers Executive's primary workplace by more than
twenty miles from the current workplace; or (vi) without duplication of clause
(ii) above, the Company or Madison Dearborn Capital Partners IV, L.P., a
Delaware limited partnership ("MDCP"), is in material breach of any agreement to
which Executive, the Company and MDCP are parties. No termination by Executive
shall be for "Good Reason" unless written notice of such termination setting
forth in particular the event(s) constituting Good Reason is delivered to the
Company (and to MDCP, in the case of clause (vi) above) within thirty (30) days
following the date on which the event
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Xxx Xxx Xxxxxxxx
constituting Good Reason occurs and the Company (and/or MDCP, in the case of
clause (vi) above) fails to cure or remedy the event(s) identified in the notice
within fifteen (15) days after receipt of such notice. Notwithstanding the
foregoing, Good Reason shall not arise under either clause (i) or clause (iii)
above to the extent that the actions described therein are taken in connection
with the implementation of a succession plan for Executive, which succession
plan has been agreed to by Executive.
5.5 General Release. Except where the termination is the
result of Executive's death and notwithstanding the foregoing, no payments shall
be made by the Company to Executive under this Section 5, unless otherwise
required by state, local or federal law, until Executive executes a general
release of all claims in a form reasonably approved by the Company.
5.6 Continuing Assistance. Unless Executive's employment
is terminated by the Company for Cause or by Executive under a Voluntary
Termination, for a period of five (5) years beginning on the date of the
termination of Executive's employment, the Company will provide such reasonable
assistance and support to Executive or Executive's estate as he or such estate
shall reasonably require in connection with the preparation and filing of tax
returns, statements, and forms insofar as such returns, statements, or forms
relate to Executive's employment or other association with the Company, or any
of its predecessors or affiliates. At the Company's election, such assistance
and support shall be provided by either tax personnel from the Company or
certified public accountants selected and compensated by the Company.
6. Arbitration.
6.1 General. Any dispute, controversy or claim arising
out of or relating to this Agreement, the breach hereof or the coverage or
enforceability of this arbitration provision shall be settled by arbitration in
Dallas, Texas (or such other location as the Company and Executive may mutually
agree), conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as such rules are in effect in Dallas/Fort
Worth, Texas on the date of delivery of demand for arbitration. The arbitration
of any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any equitable remedy in a court to enforce the
provisions of this Agreement, including but not limited to an action for
injunctive relief or attachment, without waiving the right to arbitration.
6.2 Procedure.
(a) Either party may demand such arbitration by
giving notice of that demand to the other party. The party demanding such
arbitration is referred to herein as the "DEMANDING PARTY," and the party
adverse to the Demanding Party is referred to herein as the "RESPONDING PARTY."
The notice shall state (x) the matter in controversy, and (y) the name of the
arbitrator selected by the party giving the notice.
(b) Not more than fifteen (15) days after such
notice is given, the Responding Party shall give notice to the Demanding Party
of the name of the arbitrator selected
EMPLOYMENT AGREEMENT Page 11
Xxx Xxx Xxxxxxxx
by the Responding Party. If the Responding Party shall fail to timely give such
notice, the arbitrator that the Responding Party was entitled to select shall be
named by the Arbitration Committee of the American Arbitration Association. Not
more than fifteen (15) days after the second arbitrator is so named; the two
arbitrators shall select a third arbitrator. If the two arbitrators shall fail
to timely select a third arbitrator, the third arbitrator shall be named by the
Arbitration Committee of the American Arbitration Association.
(c) The dispute shall be arbitrated at a hearing
that shall be concluded within ten days immediately following the date the
dispute is submitted to arbitration unless a majority of the arbitrators shall
elect to extend the period of arbitration. Any award made by a majority of the
arbitrators (x) shall be made within ten days following the conclusion of the
arbitration hearing, (y) shall be conclusive and binding on the parties, and (z)
may be made the subject of a judgment of any court having jurisdiction.
(d) Any amount to which Executive is entitled
under this Agreement (including any disputed amount) which is not paid when due
shall bear interest from the date due but not paid at a rate equal to the lesser
of eight percent (8%) per annum and the maximum lawful rate.
6.3 Costs and Expenses. All administrative and
arbitration fees, costs and expenses shall be borne fifty percent (50%) by the
Company and fifty percent (50%) by Executive.
7. Non-Assignment. This Agreement shall not be assignable nor the
duties hereunder delegable by Executive. None of the payments hereunder may be
encumbered or in any way anticipated by Executive (or Executive's estate or
personal representative). The Company shall not assign this Agreement nor shall
it transfer all or any substantial part of its assets without first obtaining in
conjunction with such transfer the express assumption of the obligations hereof
by the assignee or transferee.
8. Remedies. Executive acknowledges that the services Executive
is to render under this Agreement are of a unique and special nature, the loss
of which cannot reasonably or adequately be compensated for in monetary damages,
and that irreparable injury and damage will result to the Company and its
Subsidiaries in the event of any default or breach of this Agreement by
Executive. The parties agree and acknowledge that the breach by Executive of any
of the terms of this Agreement will cause irreparable damage to the Company and
its affiliates, and upon any such breach, the Company shall be entitled to
injunctive relief, specific performance, or other equitable relief (without
posting a bond or other security); provided, however, that this shall in no way
limit any other remedies which the Company and its affiliates may have
(including, without limitations, the right to seek monetary damages).
9. Survival. The provisions of Sections 4 through 19 shall
survive the expiration or earlier termination of the Term.
10. Taxes. All payments to Executive under this Agreement shall be
reduced by all applicable withholding required by Federal, state or local law.
EMPLOYMENT AGREEMENT Page 12
Xxx Xxx Xxxxxxxx
11. No Obligation to Mitigate; No Rights of Offset.
11.1 Executive shall not be required to mitigate the
amount of any payment or other benefit required to be paid to Executive pursuant
to this Agreement, whether by seeking other employment or otherwise, nor shall
the amount of any such payment or other benefit be reduced on account of any
compensation earned by Executive as a result of employment by another person;
provided that Executive and Executive's dependents shall not be entitled to
continue to participate in the welfare benefit plans of the Company and its
Subsidiaries if Executive is covered by the welfare benefit plans of another
employer.
11.2 The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others.
12. Notices. Any notice or other communications relating to this
Agreement shall be in writing and delivered personally or mailed by certified
mail, return receipt requested, or sent by overnight courier, to the party
concerned at the address set forth below:
If to Company: Cinemark, Inc.
0000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Attn: Board of Directors
If to Executive: At Executive's residence address as maintained
by the Company in the regular course of its business
for payroll purposes.
Either party may change the address for the giving of notices
at any time by written notice given to the other party under the provisions of
this Section 12. If notice is given by personal delivery or overnight courier,
said notice shall be conclusively deemed given at the time of such delivery or
upon receipt of such couriered notice. If notice is given by mail, such notice
shall be conclusively deemed given upon deposit thereof in the United States
mail.
13. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. Without limiting the generality of the foregoing
sentence, this Agreement supersedes any prior employment agreement, oral or
written, including the Employment Agreement, dated as of June 19, 2002, between
the Company and Executive which shall terminate and be cancelled as of the
Effective Date (as defined in Section 18 hereof), except for any breaches
thereof by Executive prior to the Effective Date which shall survive such
termination. This Agreement may not be changed orally, but only by an agreement
in writing signed by both parties.
14. Counterparts. This Agreement may be executed in counterparts,
each of which shall be an original, but all of which together shall constitute
one agreement.
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15. Construction. This Agreement shall be governed under and
construed in accordance with the laws of the State of Texas, without regard to
the principles of conflicts of laws. The paragraph headings and captions
contained herein are for reference purposes and convenience only and shall not
in any way affect the meaning or interpretation of this Agreement. It is
intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
16. Severability. The parties agree that if any provision of this
Agreement as applied to any party or to any circumstance is adjudged by a court
or arbitrator to be invalid or unenforceable, the same will in no way affect any
other circumstance or the validity or enforceability of this Agreement. Without
limiting the generality of the foregoing, in particular, if any provision in
Section 4, or any part thereof, is held to be unenforceable because of the
duration of such provision or the area covered thereby, the parties agree that
the court or arbitrator making such determination shall have the power to reduce
the duration and/or area of such provision, and/or to delete specific words or
phrases, and in its reduced form, such provision shall then be enforceable and
shall be enforced. In addition, in the event of a breach or violation by
Executive of Section 4, the Non-compete Period and the Non-solicitation Period
shall be automatically extended respectively by the amount of time between the
initial occurrence of the breach or violation and when such breach or violation
has been duly cured.
17. Binding Effect. Subject to Section 7 hereof, the rights and
obligations of the parties under this Agreement shall be binding upon and inure
to the benefit of the permitted successors, assigns, heirs, administrators,
executors and personal representatives of the parties.
18. Effective Date. This Agreement shall become effective
automatically without any further actions by the Company or Executive
immediately upon the consummation of the Merger (the "EFFECTIVE DATE"). However,
this Agreement shall terminate and shall be of no further force and effect if
the Merger Agreement is terminated prior to the Effective Date in accordance
with its terms.
19. Executive's Cooperation. During the Term and for five (5)
years thereafter, Executive shall cooperate with the Company and its
Subsidiaries in any internal investigation, any administrative, regulatory or
judicial proceeding or investigation or any material dispute with a third party,
in each case as reasonably requested by the Company (including, without
limitation, Executive's being reasonably available to the Company upon
reasonable notice for interviews and factual investigations, appearing at the
Company's request to give testimony without requiring service of subpoena or
other legal process, volunteering to the Company all pertinent information and
turning over to the Company all relevant documents which are or may come into
Executive's possession, all at times and on schedules that are reasonably
consistent with Executive's other activities and commitments), in each case
limited to the extent that such cooperation (a) becomes unduly burdensome for
Executive (including in terms of the time commitments required by Executive in
connection with such cooperation), (b) in the event that such cooperation is
required after the Term, unreasonably interferes with Executive's duties under
his then current employment, (c) causes Executive to breach in any material
respect any material agreement by which he is bound, or (d) is limited to the
extent Executive is advised by legal counsel that such cooperation would not be
in Executive's best interests. In the event that
EMPLOYMENT AGREEMENT Page 14
Xxx Xxx Xxxxxxxx
the Company requires Executive's cooperation in accordance with this paragraph,
the Company shall reimburse Executive solely for: (i) his reasonable
out-of-pocket expenses (including travel, lodging and meals) upon submission of
receipts and (ii) any reasonable attorneys' fees incurred by Executive to the
extent that, after consultation with the Company, Executive deems it advisable
to seek the advice of legal counsel regarding his obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
on the day and in the year first written above.
COMPANY:
CINEMARK, INC.
By: /s/ Xxxx X. Stock
-----------------------------------
Name: Xxxx X. Stock
Title: President
EXECUTIVE:
/s/ Xxx Xxx Xxxxxxxx
---------------------------------------
Xxx Xxx Xxxxxxxx
EMPLOYMENT AGREEMENT Page 15
Xxx Xxx Xxxxxxxx
EXHIBIT A
2004 ANNUAL BONUS TARGETS
Executive will be entitled to participate in the Company's current bonus program
in effect or as may be amended from time to time during the Term of this
Agreement. Pursuant to the bonus plan as currently in effect as of the date of
this Agreement, Executive is entitled to an Annual Bonus determined as follows.
During December of each fiscal year, the Board (or such individual, group or
committee that the Board may select as its delegate), shall set a target EBITDA
for the Company on a consolidated basis (the "Target") for the next fiscal year.
Targeted EBITDA shall be equal to EBITDA adjusted by adding back advanced and
deferred rent, amortization of stock options and other noncash items and all
costs related to the acquisition and refinancing of the Company in 2004. For the
2004 fiscal year the Target is $228.6 million. The Executive shall receive a
cash bonus equal to (i) a minimum of 20% of Executive's annual Base Salary if
the EBITDA of the Company is at least 96.8% of the Target, (ii) 40% of
Executive's annual Base Salary if the EBITDA of the Company is at least equal to
the Target, (iii) 60% of Executive's annual Base Salary if the EBITDA of the
Company is at least 103.20% of the Target, and (iv) a maximum of 80% of
Executive's annual Base Salary if the EBITDA of the Company is at least 106.4%
of the Target. The percentage of the Executive's annual Base Salary used to
determine the amount of Annual Bonus shall be adjusted proportionately upward or
downward from the threshold percentages specified above, as applicable,
utilizing the percentage difference between actual EBITDA and the Target
relative to the 3.2% increments multiplied by the 20% increments (or 6.25% for
every one percentage difference from the target). For purposes of example if the
adjusted EBITDA is $240.0 million, which is 104.98% (240/228.6) of the Target,
the adjustment would be 4.98% multiplied by 6.25% + 40% (base), resulting in a
bonus equal to 71.125% of annual Base Salary. If EBITDA for fiscal year 2004 is
less than 96.8% of the Target, no Annual Bonus will be paid.
