2001 EMPLOYMENT AGREEMENT
This 2001 Employment Agreement (the "Agreement") is executed as of the
____ day of _______________, 2000, by and between XXXXXXX X. XXXXX
("Employee") and CEC ENTERTAINMENT, INC.., a Kansas corporation ("Company").
RECITALS:
WHEREAS, the Employee and the Company have heretofore entered
into an agreement whereby Employee is employed by the Company as
Chief Executive Officer pursuant to certain terms and conditions;
and
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") has offered Employee continued employment in
consideration for the compensation and the other benefits
hereinafter set forth, and Employee is willing to continue in the
employ of the Company on these terms;
NOW, THEREFORE, in consideration of the mutual promises
hereinafter contained and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, it is
agreed:
1. Current Employment Agreement. The Company and Employee
heretofore entered into an employment agreement dated March 3, 1997
(the "Current Employment Agreement"). The term of the Current
Employment Agreement expires on the last day of the fiscal year of
the Company ending on or about December 31, 2000. Company and
Employee hereby agree and affirm that the Current Employment
Agreement is and shall be in full force and effect through the last
day of the fiscal year of the Company ending on or about December
31, 2000.
2. Term. Following the expiration of the Current Employment
Agreement, the Company employs Employee and Employee accepts
employment from the Company upon the terms and conditions specified
in this Agreement. Subject to the provisions regarding termination
set forth in Sections 15 and 16 hereof, the term of this Agreement
shall begin as of January 1, 2001 (the "Effective Date") and shall
terminate on the last day of the fiscal year of the Company ending
on or about December 31, 2005 (the "Term").
3. Basic Salary. For services rendered by Employee under
this Agreement, the Company shall pay Employee the "Basic Salary,"
provided for in this Section 3, as follows:
(a) During the Term of Employee's employment under this
Agreement, the Employee shall receive as minimum
Basic Salary the amount of One Million Dollars
($1,000,000.00) per year. The Basic Salary may be
increased in such amounts and on such dates as the
Compensation Committee of the Board of Directors
may determine from time to time.
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(b) The Basic Salary provided for in this Section 3
shall be in addition to any other compensation
and/or benefits provided to Employee (i) pursuant
to this Agreement or (ii) otherwise at the
discretion of the Board of Directors, including,
but not limited to, the annual bonus opportunity
available to home office employees and officers of
the Company at a level commensurate with his
position as Chief Executive Officer.
4. Stock Options. Employee has received from the Company on
March 7, 2000 options (the "Stock Options") to purchase two hundred
fifty thousand (250,000) shares of the Company's Common Stock, par
value $ .10 per share (Common Stock) pursuant to the Company's 1997
Non-Statutory Stock Option Plan. Of the Stock Options granted as
described in this Section 4, twenty percent (20%) shall vest on
March 7, 2001, forty percent (40%) shall vest on March 7, 2002,
sixty percent (60%) shall vest on March 7, 2003,eighty percent
(80%) shall vest on March 7, 2004 and one hundred percent (100%)
shall vest on March 7, 2005. During the Term of this Agreement,
Employee shall be entitled to receive additional options to
purchase shares of Common Stock of the Company in such amounts and
at such prices as may be determined by the Stock Option Committee
of the Board of Directors.
5. Severance Pay. If the Company terminates the employment
of Employee at any time (other than pursuant to Section 16 hereof),
or if a "Change of Control" occurs with respect to the Company and
Employee voluntarily terminates his employment with the Company
within one year after such a Change of Control, the Company shall
be required to pay Employee severance pay in the amount of Three
Million Dollars ($3,000,000.00). Such severance pay shall be
payable to Employee by the Company in cash on or before the tenth
(10th) day after theTermination Date, as defined in Section 15.
For purposes of this Section 5, a "Change of Control"
shall be deemed to have occurred with respect to the Company if:
(a) any person or group of persons acting in concert, in which
person or group of persons the Employee is not an investor,
partner, officer, director or member, shall acquire, directly or
indirectly, the power to vote, or direct the voting of, more than
thirty-three percent (33%) of the then outstanding voting
securities of the Company; or (b) during any consecutive eighteen
(18) month period a majority of the Company's Board of Directors is
elected or appointed and consists of persons who are not directors
of the Company as of the Effective Date, and whose election or
appointment as directors of the Company was actively opposed by
Employee, as evidenced by Employee's vote (in his capacity or
capacities, if any, as a director and/or stockholder of the
Company) against their election of appointment and by written
notice of his opposition to their election or appointment given by
Employee to the current directors of the Company not more than five
(5) business days following their respective election or
appointment; provided, however, that in no event shall a change in
composition of the Company's Board of Directors pursuant to an
election of Board of Directors members pursuant to Section 4.6 of
the Company's Articles of Incorporation, as amended through the
date of this Agreement, constitute or result in a "Change of
Control" for purposes of this Section 5.
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6. Additional Payments.
(a) In the event that any payment or benefit (within the
meaning of Section 280G of the Internal Revenue Code of 1986,
as amended (the "Code")), to the Employee or for his benefit
paid or payable or distributed or distributable (at any time
or from time to time) pursuant to the terms of this Agreement
or otherwise in connection with, or arising out of, his
employment with the Company or a change in ownership or
effective control of the Company or of a substantial portion
of its assets (a "Payment" or "Payments"), would be subject to
the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any
such interest and penalties, being hereinafter collectively
referred to as the "Excise Tax"), then the Employee will be
entitled to receive an additional payment or payments, as the
case may be (referred to individually or collectively as a
"Gross-Up Payment") in an amount such that after payment by
the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes and the Excise Tax, other
than interest and penalties imposed by reason of the
Employee's failure to file timely a tax return or pay taxes
shown due on his return), including any Excise Tax imposed
upon the Gross-Up Payment, the Employee retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) An initial determination as to whether a Gross-Up
Payment is required pursuant to this Agreement and the amount
of such Gross-Up Payment shall be made at the Company's
expense by an accounting firm selected by the Company and
reasonably acceptable to the Employee which is designated as
one of the largest national accounting firms in the United
States (the "Accounting Firm"). The Accounting Firm shall
provide its determination (the "Determination"), together with
detailed supporting calculations and documentation to the
Company and the Employee within ten (10) days of the
Termination Date, as defined in Section 15, or such other time
as requested by the Company or by the Employee (provided the
Employee reasonably believes that any of the Payments may be
subject to the Excise Tax) and if the Accounting Firm
determines that no Excise Tax is payable by the Employee with
respect to a Payment or Payments, it shall furnish the
Employee with an opinion reasonably acceptable to the Employee
that he has substantial authority not to report any Excise Tax
on his federal tax return with respect to any such Payment or
Payments. Within ten (10) days of the delivery of the
Determination to the Employee, the Employee shall have the
right to dispute the Determination. The Gross-Up Payment, if
any, as determined pursuant to this Section 6(b) shall be paid
by the Company to the Employee within five (5) days of the
receipt of the Determination. The existence of the dispute
shall not in any way affect the Employee's right to receive
the Gross-Up Payment in accordance with the Determination.
Upon the final resolution of a dispute, the Company shall
promptly pay to the Employee any additional amount required by
such resolution. If there is no dispute, the Determination
shall be binding, final and conclusive upon the Company and
the Employee.
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(c) The Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the
Employee knows of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is
requested to be paid. The Employee shall not pay such claim
prior to the expiration of the thirty (30) day period
following the date on which he gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such
claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing
from time to time, including, without limitation,
accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company.
(iii) cooperate with the Company in good faith in
order to effectively contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim, provided, however, that the
Company shall bear and pay directly all costs and
expenses (including additional interest and penalties)
incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax
basis, for any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as
a result of such representation and payment of costs and
expenses. Without limitation of the foregoing provisions
of this Section 6(c), the Company shall control all
proceeding taken in connection with such contest and, at
its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Employee to pay the tax claimed and xxx for a refund, or
contest the claim in any permissible manner, and the
Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine;
provided, however, that if the Company directs the
Employee to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify
and hold the Employee harmless, on an after-tax basis,
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from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee
with respect to which such contested amount is claimed to
be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Employee shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 6(c), the Employee
becomes entitled to receive any refund with respect to such
claim, the Employee shall (subject to the Company's complying
with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 6(c), a determination is made that
the Employee shall not be entitled to any refund with respect
to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
7. Expenses. Subject to the rules and procedures the
Company may specify from time to time, the Company shall reimburse
Employee for all reasonable expenses incurred by Employee on behalf
of the Company.
8. Automobile. Employer shall pay to Employee the sum of
One Thousand Three Hundred Dollars ($1,300.00) per month (subject
to adjustment from time to time in direct proportion to generally
applicable adjustment by the Company to its automobile allowances)
to reimburse Employee for the use of Employee's automobile in the
performance of his duties under this Agreement, and the Company
shall further pay directly or by reimbursement to Employee (as the
Company and Employee may from time to time agree) the premiums upon
a policy of collision and liability insurance covering such
automobile. All other costs and expenses incurred in the operation
and maintenance of Employee's automobile, including but not limited
to the cost of all fuel, oil, maintenance and repairs, shall be
paid solely by Employee.
9. Duties of Employee. In accepting continued employment by
the Company, Employee agrees to undertake and assume the
responsibility, subject to the general direction and control of the
Board of Directors, of performing for and on behalf of the Company
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the duties of Chairman of the Board of Directors and Chief
Executive Officer of the company, including formulation of the
policies and administration of the Company's affairs, and such
other duties as are normally associated with and inherent in such
capacity. Employee shall have authority to hire the staff
necessary to accomplish the Company's goals. In addition, if
requested, Employee shall serve as an officer and/or director of
any affiliates of the Company without additional compensation.
10. Exclusive Service. Employee shall devote substantially
his full time and attention to rendering services to the Company
and in furtherance of the Company's best interests, provided that
Employee may make and manage his personal passive investments.
During the Term of this Agreement, other than as an officer and/or
director of an affiliate of the Company, Employee shall not be
employed by any other person or engage in any other business or
occupation; provided that Employee may engage in the business of
making and managing his personal passive investments.
11. Health and Disability Insurance. The Company shall
provide Employee and his family with health, medical,
hospitalization and dental insurance coverage and/or cost
reimbursement benefits which provide for 100% of such costs and
expenses to be paid on behalf of and/or reimbursed to Employee and
his family, whether through existing insurance and/or reimbursement
plans covering the Company's employees or through special plans
relating specifically to Employee, or a combination thereof. For
purposes of this Section 11, the Employee's family shall include
his spouse and children. The Company shall also take the necessary
action to (a) include Employee under a Company sponsored disability
plan for executives, (b) adopt a specific plan for Employee or (c)
assist Employee in acquiring or paying for a plan or policy, which
action results in Employee having coverage providing total
disability income benefits of at least 50% of Employee's Basic
Salary.
12. Continuation of Health Benefit Coverage. Upon the
termination of Employee's employment for any reason, including a
termination due to the expiration of the Term of this Agreement or
any renewal thereof; the Company shall provide Employee and his
family the health, medical, hospitalization and dental insurance
coverage and/or cost reimbursement benefits set forth in Section 11
hereof, for a period not to exceed the earlier of (a) five (5)
years or (b) the date on which Employee and his family become
covered under a policy or plan paid for by a new employer of
Employee providing substantially similar coverage and benefits. In
the event Employee's employment terminates and this Section 12
becomes effective, and thereafter Employee dies while the benefits
provided herein are still in effect, such benefits shall continue
for Employee's family until five (5) years have passed following
his termination of employment. The benefits set forth under this
Section 12 shall be provided in addition to any other payments,
benefits or compensation, if any, to which Employee, his estate of
his designated beneficiary is entitled due to his termination of
employment as set forth in this Agreement.
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13. Life Insurance. The Company shall maintain and pay the
premiums on one or more life insurance policies on Employee's life,
which may include insurance on Employee's life under any group term
life insurance plan maintained from time to time by the Company for
its employees. The aggregate face amount(s) of such policy or
policies shall be at least Five Hundred Thousand Dollars
($500,000.00).
Any policy of insurance or certificate of insurance under a
group term policy maintained by the Company under this Section 13
shall be owned by the Company, and the Employee (or his assignee)
shall have the sole right to designate the beneficiary or
beneficiaries of the proceeds payable thereunder upon the death of
the Employee.
14. Vacation and Days Off. Employee may take reasonable
vacations and days off agreeable to the Company and Employee;
provided, however, that Employee shall be entitled to at least five
(5) weeks of paid vacation per year, which Employee may use at any
time during each year, and to the extent not used, during a
subsequent year.
15. Termination After Notice. Either Employee or the Company
may terminate the employment of Employee at any time during the
Term of this Agreement or any renewal thereof upon at least ninety
(90) days' prior written notice. In the event of such termination,
the Company shall pay to Employee the severance pay provided for
under Section 5 hereof, if applicable, together with all other
compensation that would otherwise have been payable to Employee, as
provided in Section 17 hereof, and for the purposes of said Section
17, the "Termination Date" shall be the effective date of
termination set forth in the ninety (90) days prior written notice
referred to in the preceding sentence.
16. Termination Upon Death or Disability.
(a) Upon the termination of Employee's employment due to
the death of Employee, the Company shall pay to the estate of
Employee certain compensation that would otherwise have been
payable to Employee, as provided in Section 17 hereof, and for
the purposes of said section, the "Termination Date" shall be
the date of Employee's death. If events had occurred prior to
Employee's death entitling him to payments under Section 17
but the payments had not yet been made, such payments shall be
made to his estate. If Employee dies during the Term of this
Agreement and all of the Stock Options listed in Section 4, as
well as any other stock options issued to Employee by the
Company that are not listed in Section 4 (such other stock
options being defined as "Stock Options" for purposes of this
Section 16(a)), are not vested at the time of his death, then
all such Stock Options that have been outstanding for at least
one year shall become immediately vested at Employee's death
and shall be exercisable by the representative of his estate
pursuant to the terms of his respective Stock Option
agreements or certificates.
(b) (i) During any period of disability, illness or
incapacity during the Term of this Agreement, which renders
Employee temporarily unable to perform the services required
under this Agreement, Employee shall continue to receive the
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compensation payable under this Agreement. Employee's
employment under this Agreement may be terminated as provided
below upon Employee's permanent disability (as defined below).
(ii) Employee shall be deemed to have suffered
"permanent disability" if Employee is unable by reason of any
medically determined physical or mental impairment to perform
the duties required of him under this Agreement for a period
of one hundred eighty (180) consecutive days in any twelve-
month period. Periods of disability arising from unrelated
causes shall not be combined. Upon a determination of
permanent disability, the Board of Directors may terminate
Employee's employment upon thirty (30) days' prior written
notice. In the event of such termination, the Company shall
pay to Employee certain compensation that would otherwise have
been payable to Employee, as provided in Section 17, and for
the purposes of said Section, the "Termination Date" shall be
the effective date of termination following the Company's
notice under the preceding sentence.
17. Payments Due Upon Termination of Employee's Employment.
In the event of termination of Employee's employment under this
Agreement pursuant to Sections 15 or 16 hereof, the Company shall
pay Employee or his estate, as the case may be, the following
payments or other items of compensation, for which purpose the
"Termination Date" shall be the Termination Date specified in
Sections 15 or 16 hereof, whichever is applicable:
(a) Basic Salary that would otherwise have been payable
to Employee under Section 3(a) hereof through the
Termination Date;
(b) all payments, if any, payable pursuant to Section 5
hereof.
18. Waiver of Breach. The waiver by the Company of a breach
of any of the provisions of this Agreement by Employee shall not be
construed as a waiver of any subsequent breach of Employee.
19. Binding Effect: Assignment. The rights and obligations
of the Company under this Agreement shall inure to the benefit of
and shall be binding upon the successors and assigns of the
Company, whether by reason of merger, consolidation, acquisition or
other business combination, or otherwise. This Agreement is a
personal employment contract that may not be sold, assigned,
transferred or pledged as collateral by the Employee.
20. Invalid Provisions. It is understood and agreed that in
the event any paragraph, provision or clause of this Agreement or
any combination thereof is found to be unenforceable at law, in
equity, or under any presently existing or hereafter enacted
legislation, regulation or order of the United States, any state of
subdivision thereof or any municipality, those findings shall not
in any way affect the other paragraphs, provisions or clauses in
this Agreement, which shall continue in full force and effect.
21. Performance. This Agreement shall be performed in Dallas
County, Texas.
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22. Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Texas.
23. Entire Agreement. This Agreement contains the entire
agreement of the parties and supersedes all prior agreements and
understandings, oral or written, with respect to the subject matter
hereof, except to the extent that provisions of the Current
Employment Agreement are expressly stated herein to be effective.
This Agreement may be changed only by an agreement in writing
signed by the party against whom any waiver, change, amendment,
modification or discharge is sought.
24. Headings. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
25. Notice. Any notice required or permitted to be given
under this Agreement to the Company shall be sufficient if in
writing and if sent by certified or registered mail, first class,
return receipt requested, to the registered office of the Company.
Any notice required or permitted to be given under this Agreement
to Employee shall be sufficient if in writing and if sent by
certified or registered mail, first class, return receipt requested
to Employee at his last known address. Employee shall be solely
responsible for notifying the Company of his address on the date of
this Agreement and all subsequent changes of address.
26. Gender. When the context in which words are used in this
Agreement indicate that such is the intent, words in the singular
number shall include the plural and vice versa and words in the
masculine gender shall include the feminine and neuter genders and
vice versa.
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IN WITNESS WHEREOF, the parties have executed this Agreement,
effective as of the date and year first above written.
COMPANY:
CEC ENTERTAINMENT, INC.
By:
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Xxxxxxx X. Xxxxxxxx
President
EMPLOYEE:
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Xxxxxxx X. Xxxxx
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