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EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into
by and between Hollywood Theaters, Inc., a Delaware corporation (the
"Company"), and Thomas W. Stephenson, Jr., a resident of Dallas, Texas (the
"Executive"), effective as of October 1, 1996.
1. Introduction. The Executive is currently the
President of the Company, an owner and operator of motion picture theaters. In
contemplation of the expansion of the business of the Company through the
acquisition and construction of additional theaters, and in connection with the
equity investment of the Beacon Fund III-Focus Value Fund, L.P. in the Company
and the related change in control of the Board of Directors of the Company (the
"Board"), the Company desires to continue to employ Executive and Executive
desires to continue to remain in the employ of the Company. To this end, the
Executive and the Company believe that an agreement is necessary and
appropriate to outline the new employment relationship that will exist between
the Company and the Executive. Therefore, the Company and the Executive intend
by this Agreement to specify the terms and conditions of the Executive's
employment relationship with the Company.
2. Employment. The Company hereby employs the Executive
and the Executive hereby accepts employment with the Company upon the terms and
subject to the conditions set forth herein.
3. Duties and Responsibilities.
(a) Subject to the power of the Board to elect and remove
officers, the Executive shall serve the Company as its Chairman of the Board,
President and Chief Executive Officer and shall perform, faithfully and
diligently, the services and functions relating to such offices or otherwise
reasonably incident to such offices as may be designated from time to time by
the Board.
(b) The Executive shall, during the term of this
Agreement (or any extension thereof), devote such of his time, attention,
energies and business efforts to his duties as an executive of the Company as
are reasonably necessary to carry out his duties specified in Section 3(a).
The Executive shall not, during the term of this Agreement (or any extension
thereof), engage in any other business activity (regardless of whether such
business activity is pursued for gain, profit or other pecuniary advantage) if
such business activity would impair the Executive's ability to carry out his
duties hereunder. This Section 3(b), however, shall not be construed to
prevent the Executive from (i) investing his personal assets as a passive
investor in such form or manner as will not contravene the best interests of
the Company, (ii) participating in various charitable efforts or (iii) serving
as a director or member of a committee of any organization when such position
has previously been approved in writing by the Board.
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4. Compensation and Other Employee Benefits. As
compensation for his services under the terms of this Agreement:
(a) The Executive shall be paid an annual salary of not
less than $275,000, payable in accordance with the then current payroll
policies of the Company. Such annual salary is herein referred to as the "Base
Salary." The Base Salary shall be reviewed annually by the Board and shall be
subject to increase (but not decrease) in the sole discretion of the Board
based upon a review of the performance and accomplishments of the Executive.
(b) In addition to annual Base Salary, the Executive
shall be eligible to receive annual bonus awards (the "Annual Bonus") in cash
upon the achievement by the Executive of performance goals or targets
established by the Board. The Board shall establish these performance goals in
advance of each fiscal year. In the event that the performance goals or
targets established by the Board are satisfied by the Executive at least at the
85% level, the Executive shall be entitled to a bonus for such year equal to at
least 50% of his Base Salary for such year, with the actual percentage subject
to determination of the Board. In addition, the Executive shall have the
opportunity to receive additional bonuses above the level of the Annual Bonus
up to a maximum of 100% of Base Salary for such year based upon the Board's
review of annual achievements of the Company's five-year financial plan and the
determination by the Board, in its sole discretion, that such additional bonus
awards are warranted. Bonuses in excess of that amount in respect of
exceptional performance by the Executive as determined by the Board may be made
in the sole discretion of the Board.
(c) The Executive will be granted non-transferrable
options to purchase shares of common stock, par value $.01 per share (the
"Common Stock"), of Hollywood Theater Holdings, Inc., the parent company of the
Company ("Holdings"), in an initial amount equal to 6% of the fully diluted
shares of Common Stock of Holdings as of the closing by the Company and
Holdings of certain pending acquisitions, equity financings and debt
financings. The exercise price for the initial grant of options will be $175
per share of Common Stock. The options will be granted under an option plan
(the "Option Plan") proposed to be adopted by Holdings in the near future,
which plan will require that the Executive enter into an option agreement (the
"Option Agreement). The options, when granted, will vest in equal amounts on
the first, second, third, fourth and fifth anniversary of grant, subject to
accelerated vesting in the event of an initial public offering of the Common
Stock by Holdings or upon defined change of control events under the Option
Plan, and subject to continued employment. The Option Agreement will restrict
the transfer of shares of Common Stock issuable under the option.
(d) Subject to the right of the Company to amend or
terminate any employee and/or group or senior executive benefit plan, the
Executive shall be entitled to receive the following employee benefits:
(i) the Executive shall have the right to
participate in all current or future employee and/or group welfare
benefit plans of the Company that are available to its exempt
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salaried employees generally (including, without limitation,
disability, accident, medical, life insurance and hospitalization
plans) at the same level and on the same basis as other senior
executives of the Company participate;
(ii) the Executive shall have the right to
participate in the Company's 401(k) savings plan (with matching
contributions to the extent that the Company hereafter offers such
benefit generally to its senior executives) and all future senior
executive benefit plans of the Company, including, without limitation,
any pension or retirement plan that may hereafter be established, all
in accordance with the Company's regular practices with respect to its
senior executive officers;
(iii) the Executive shall be entitled to
reimbursement from the Company for reasonable out- of-pocket business
expenses incurred by him in the course of the performance of his
duties hereunder, subject to receipt of appropriate supporting
documentation;
(iv) the Executive shall be entitled to such
vacation (in no event less than three weeks per year), holidays and
other paid or unpaid leaves of absence as are consistent with the
Company's normal policies or as are otherwise approved by the Board;
and
(v) the Executive shall be entitled to an
automobile allowance in the amount of $850 per month during the
Employment Term to cover the cost of personally leasing an automobile
and related operating expenses.
5. Term.
(a) Subject to the provisions of Section 7, the term of
this Agreement shall commence on October 1, 1996 and shall end on September 30,
1998. The term of this Agreement is referred to herein as the "Employment
Term."
(b) The term of this Agreement may be extended for
additional one year periods by mutual consent of the Executive and the Board,
acting on behalf of the Company, with the first renewal being automatic unless
the Executive is terminated for Due Cause (as defined in Section 7(a)].
(c) If the Company elects not to renew this Agreement
after termination pursuant to this Section 5, then the Company shall pay to the
Executive, at such times as they would otherwise be paid in accordance with the
Company's payroll practices, his full Annual Salary for a period of one year
from the date of termination.]
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6. Competition and Confidentiality.
(a) If, during the Employment Term (or any extension
thereof), the employment of the Executive is terminated pursuant to Section
7(a) or the Executive voluntarily terminates his employment pursuant to Section
7(d), or if the Company elects not renew this Agreement after the first
automatic renewal referred to in Section 5(b) (subject to the Company's right
to terminate for Due Cause) for one year from the date of such termination, the
Executive shall not, without the prior written consent of the Board (which
consent shall not be unreasonably withheld), with respect to the States of
Texas, Oklahoma, Kansas, Missouri, Ohio, Idaho and any other state in which the
Company owns, leases or operates motion picture theaters at the time of
termination, (i) accept employment or render service to any person, firm or
corporation that is engaged in a business directly competitive with the
business then engaged in by the Company in such states or (ii) directly or
indirectly enter into or in any manner take part in or lend his name, counsel
or assistance to any venture, enterprise, business or endeavor, either as
proprietor, principal, investor, partner, director, officer, employee,
consultant, advisor, agent, independent contractor, or in any other capacity
whatsoever, for any purpose that would be competitive with the business of the
Company in such states.
(b) It is the desire and intent of each of the parties
that the provisions of Section 6(a) shall be enforced to the fullest extent
permissible under the laws and public policies applied in the State of Texas.
Accordingly, if any particular portion of Section 6(a) shall be adjudicated to
be invalid or unenforceable, Section 6(a) shall be deemed amended to (i) reform
the particular portion to provide for such maximum restrictions as will be
valid and enforceable, or if that is not possible, then (ii) delete therefrom
the portion thus adjudicated to be invalid or unenforceable.
(c) During and after the Employment Term, the Executive
will not divulge or appropriate to his own use or to the use of others any
secret or confidential information or secret or confidential knowledge
pertaining to the business of the Company obtained by the Executive in any way
while he was employed by the Company. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
(d) The Executive acknowledges that Sections 6(a) and (c)
are expressly for the benefit of the Company, that the Company would be
irreparably injured by a violation of Section 7(a) or (c), and that the Company
would have no adequate remedy at law in the event of such violation.
Therefore, the Executive acknowledges and agrees that injunctive relief,
specific
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performance or any other appropriate equitable remedy (without any bond or
other security being required) are appropriate remedies to enforce compliance
by the Company with Sections 6(a) and (c).
7. Termination of Employment.
(a) For Due Cause. Nothing herein shall prevent the
Company from terminating, without prior notice, the Executive for "Due Cause"
(as hereinafter defined), in which event the Executive shall be entitled to
receive his Base Salary on a pro rata basis to the date of termination. In the
event of such termination for Due Cause, all other rights and benefits the
Executive may have under the employee and/or group or senior executive benefit
plans and programs of the Company, generally, shall be determined in accordance
with the terms and conditions of such plans and programs. The term "Due Cause"
shall mean (i) the Executive has committed a willful serious act, such as
embezzlement, against the Company intending to enrich himself at the expense of
the Company or been convicted of a felony, (ii) the Executive has engaged in
conduct which has caused demonstrable and serious injury, monetary or
otherwise, to the Company as evidenced by a binding and final judgment, order
or decree of a court or administrative agency of competent jurisdiction in
effect after exhaustion of all rights of appeal of the action, suit or
proceeding, whether civil, criminal, administrative or investigative, (iii) the
Executive, in carrying out his duties hereunder, has been guilty of willful
gross neglect or willful gross misconduct, resulting in either case in material
harm to the Company, or (iv) the Executive has refused to carry out his duties
in gross dereliction of duty and, after receiving notice to such effect from
the Board, the Executive fails to cure the existing problem within 30 days.
(b) Due To Death. In the event of the death of the
Executive, this Agreement shall terminate on the date of death and the estate
of the Executive shall be entitled to (i) the Executive's Base Salary through
the end of the month in which he died, and (ii) a cash payment equal to the pro
rata portion (calculated through the end of the month in which he died) of the
annual bonus, if any, received by the Executive in respect of the full calendar
year next preceding his death. In the event of such termination due to death,
all other rights and benefits the Executive (or his estate) may have under the
employee and/or group or senior executive benefit plans and programs of the
Company, generally, shall be determined in accordance with the terms and
conditions of such plans and programs.
(c) Disability. In the event the Executive suffers a
"Disability" (as hereinafter defined), this Agreement shall terminate on "the
date on which the Disability occurs" (as hereinafter defined) and the Executive
shall be entitled to (i) his Base Salary through the end of the month in which
his employment is terminated due to the Disability, and (ii) a cash payment
equal to the pro rata portion (calculated through the end of the month in which
his employment is terminated due to Disability) of the annual bonus, if any,
received by the Executive in respect of the full calendar year next preceding
his Disability. In the event of such termination due to Disability, all other
rights and benefits the Executive may have under the employee and/or group or
senior executive benefit plans and programs of the Company, generally, shall be
determined in accordance with the terms and
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conditions of such plans and programs. For purposes of this Agreement,
"Disability" shall mean the inability or incapacity of the Employee for six
months to perform the essential functions of the job or position with the
Company described in Section 3, even with reasonable accommodation, and "the
date on which the Disability occurs" shall mean the first day following such
six month period. Such inability or incapacity shall be documented to the
reasonable satisfaction of the Board by appropriate correspondence from
registered physicians reasonably satisfactory to the Board.
(d) Voluntary Termination. The Executive may voluntarily
terminate his employment under this Agreement at any time by providing at least
60 days' prior written notice to the Company. In such event, the Executive
shall be entitled to receive his Base Salary until the date his employment
terminates and all other benefits the Executive may have under the employee
and/or group or senior executive benefit plans and programs of the Company,
generally, shall be determined in accordance with the terms and conditions of
such plans and programs.
(e) Other Termination. If the Company terminates the
employment of the Executive other than for Due Cause or because of a
Disability, then the Company shall pay to the Executive, at such times as they
would otherwise be paid in accordance with the Company's payroll practices, his
full Annual Salary for a period of one year from the date of termination. All
benefits under the Company's employee and/or group or senior executive benefit
plans and programs shall continue to the extent permissible in accordance with
the terms and conditions of such plans and programs. To the extent that the
Board determines such payments are appropriate, the Executive shall also be
entitled to any bonus payments that the Board may award in its sole discretion.
8. Preservation of Business; Fiduciary Responsibility.
The Executive shall use his best efforts to preserve the business and
organization of the Company, to keep available to the Company the services of
present employees and to preserve the business relations of the Company with
suppliers, distributors, customers and others. The Executive shall not commit
any act, or in any way assist others to commit any act, that would injure the
Company. So long as the Executive is employed by the Company, the Executive
shall observe and fulfill proper standards of fiduciary responsibility
attendant upon his service and office.
9. Notices. All notices, requests, demands and other
communications given under or by reason of this Agreement shall be in writing
and shall be deemed given when delivered in person or when mailed, by certified
mail (return receipt requested), postage prepaid, addressed as follows (or to
such other address as a party may specify by notice pursuant to this
provision):
(a) To the Company:
Hollywood Theaters, Inc.
2911 Turtle Creek Blvd.
Suite 1150
Dallas, TX 75219
Attn: Chief Executive Officer
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(b) To the Executive:
Robert E. Painter
115 Skyline Drive
Westwood, MA 02090
10. Controlling Law and Performability. The execution,
validity, interpretation and performance of this Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
11. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled by arbitration in
Dallas, Texas. In the proceeding, the Executive shall select one arbitrator,
the Company shall select one arbitrator and the two arbitrators so selected
shall select a third arbitrator. The decision of a majority of the arbitrators
shall be binding on the Executive and the Company. Should one party fail to
select an arbitrator within five days after notice of the appointment of an
arbitrator by the other party or should the two arbitrators selected by the
Executive and the Company fail to select an arbitrator within ten days after
the date of the appointment of the last of such two arbitrators, any person
sitting as a Judge of the United States District Court for the Federal District
of Texas in which the City of Dallas is then situated, upon application of the
Executive or the Company, shall appoint an arbitrator to fill such space with
the same force and effect as though such arbitrator had been appointed in
accordance with the first sentence of this Section 11. Any arbitration
proceeding pursuant to this Section 11 shall be conducted in accordance with
the rules of the American Arbitration Association. Judgment may be entered on
the arbitrators' award in any court having jurisdiction.
12. Additional Instruments. The Executive and the
Company shall execute and deliver any and all additional instruments and
agreements that may be necessary or proper to carry out the purposes of this
Agreement.
13. Entire Agreement and Amendments. This Agreement
(together with the Option Plan and Option Agreement, upon the effectiveness
thereof) contains the entire agreement of the Executive and the Company
relating to the matters contained herein and supersedes all prior agreements
and understandings, oral or written, between the Executive and the Company with
respect to the subject matter hereof. This Agreement may be changed only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
14. Separability. If any provision of this Agreement is
rendered or declared illegal or unenforceable by reason of any existing or
subsequently enacted legislation or by the decision of any arbitrator or by
decree of a court of last resort, the Executive and the Company shall promptly
meet and negotiate substitute provisions for those rendered or declared illegal
or unenforceable to preserve the original intent of this Agreement to the
extent legally possible, but all other provisions of this Agreement shall
remain in full force and effect.
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15. Assignments. This Agreement shall inure to the
benefit of and be binding upon the Company and its successors and assigns. The
rights and obligations of the Executive under this Agreement are personal to
him, and no such rights, benefits or obligations shall be subject to voluntary
or involuntary alienation, assignment or transfer. This Agreement shall be
binding upon the Executive and his heirs, executors, administrators, legal
representatives and assigns.
16. Execution. This Agreement may be executed in
multiple counterparts each of which shall be deemed an original and all of
which shall constitute one and the same instrument.
17. Waiver of Breach. The waiver by either party to this
Agreement of a breach of any provision of the Agreement by the other party
shall not operate or be construed as a waiver by such party of any subsequent
breach by such other party.
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IN WITNESS WHEREOF, the Executive and the Company have
executed this Agreement effective as of the date first above written.
"COMPANY"
HOLLYWOOD THEATERS, INC.
By: /s/ James Featherstone
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James Featherstone
Chief Financial Officer
"EXECUTIVE"
/s/ Thomas W. Stephenson, Jr.
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Thomas W. Stephenson, Jr.
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