Document:

Exhibit 10.3

 

EMPLOYMENT
AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made as of April 12,
2006, by and among Festival Fun Parks, LLC, a Delaware limited liability
company (the “Company”), Palace
Entertainment Holdings, Inc., a Delaware corporation (“Holdings”) and Daniel S. Martinez (the “Executive”), each a “Party” and collectively the “Parties.” 
Unless otherwise indicated, capitalized terms used herein are defined in
Section 2.1.

 

ARTICLE I

EMPLOYMENT
TERMS

 

1.1                                 Employment.
The Company will employ the Executive, and the Executive accepts employment
with the Company, upon the terms and conditions set forth in this Agreement for
the period beginning on the closing date of the Acquisition (the “Effective Date”) and ending as provided in
Section 1.4(a) hereof (the “Employment
Period”).

 

1.2                                 Position and Duties.

 

(a)                                  Generally.
The Executive shall serve as the Chief Operating Officer of each of Holdings
and the Company and, in such capacity shall be responsible for the general
management of the business, affairs and operations of Holdings and the Company,
shall perform such duties as are customarily performed by a chief
operating officer of a company of a similar size and shall have such power and
authority as shall reasonably be required to enable him to perform his
duties hereunder; provided, however, that in exercising such power and
authority and performing such duties, he shall at all times be subject to the
authority and control of the Chief Executive Officer and the Boards of
Directors of Holdings and the Company. At all times that Executive is employed
by Holdings and/or the Company as the Chief Operating Officer, he shall be
permitted to attend, as a non-voting observer, all meetings (including
participation in telephonic meetings) of the Board of Directors of the Company
and Holdings or any committee thereof and to receive copies of all written
materials (including copies of meeting minutes) given to directors in
connection with such meetings; provided that Holdings and the Company shall not
be in default of such obligation to the extent Executive is appointed to the
Board of Directors of Holdings and the Company.

 

(b)                                 Duties
and Responsibilities. The Executive shall report to the Chief Executive
Officer and the Board of Directors
of the Company and shall devote his full business time and attention to the
business and affairs of Holdings, the Company and its Subsidiaries. The
Executive shall perform his duties and responsibilities in a diligent,
trustworthy, businesslike and efficient manner. The Executive shall not engage
in any other business activities that could reasonably be expected to conflict
with the Executive’s duties, responsibilities and obligations hereunder. During
the Employment Period, the Executive shall promptly bring to the Company or its
Subsidiaries, as applicable, all investment or business opportunities relating
to the activities described in Section 1.9(a) of which the
Executive becomes aware.

 

1.3                                 Compensation.

 

(a)                                  Base
Salary. The Executive’s base salary shall be $275,000.00 per annum (the “Base Salary”). The Base Salary payable for
Fiscal Year 2006 shall be pro rated based on the

 

 

number of days from and including the Effective Date
through and including December 31, 2006. The Base Salary will be payable
to the Executive by the Company in regular installments in accordance with the
Company’s general payroll practices. The Executive shall receive such increases
in his Base Salary as the Board of Directors of the Company may approve in
its sole discretion from time to time; provided that the Executive’s Base
Salary will be reviewed not less often than annually.

 

(b)                                 Bonus.

 

(i) For Fiscal Year 2006, the Executive shall
receive an annual cash bonus, payable to Executive on or before April 30,
2007, in an amount determined in the sole discretion of the Company’s Board of
Directors, which amount shall be deemed earned if Executive is employed as of December 31,
2006.

 

(ii)  For Fiscal Year 2007 and for each
subsequent Fiscal Year during the Term (as defined below), the Executive shall
be eligible to receive an annual cash bonus (the “Annual Cash Bonus”), which shall consist of two separate
components and be payable to Executive on or before the end of the fourth month
following the end of the relevant Fiscal Year, but in the event that the
Company has not received its audited financial statements for the relevant
Fiscal Year by the date that is three and one-half months after the end of such
relevant Fiscal Year, the Company shall make such payment within fifteen days
but not later than the last day of the calendar year following such Fiscal
Year) after the Company’s receipt of audited financial statements for such
Fiscal Year, so long as Executive is employed by the Company on the last day of
such Fiscal Year, as follows:

 

(A)                              if the Company’s EBITDA for a Fiscal Year is
greater than or equal to the EBITDA Target for such Fiscal Year, Executive
shall receive an Annual Cash Bonus for such Fiscal Year equal to 100% of
Executive’s Base Salary; and

 

(B)                              if the Company’s EBITDA for a Fiscal Year is greater than or equal to the
EBITDA Target for such Fiscal Year, Executive shall receive an additional
Annual Cash Bonus for such Fiscal Year equal to the product of the Available
Cash Flow Excess multiplied by 25%.

 

(iii) For Fiscal Year 2007 only, the Annual Cash
Bonus, if any, payable to Executive pursuant to this Section 1.3(b)(ii)(A) and
(B), shall be increased on a pro rata basis to include the complete months
in Fiscal Year 2006 following the date the Acquisition is consummated minus any annual bonus amount paid to
Executive pursuant to Section 1.3(b)(i) (which shall be deducted
first out of any amount payable to Executive pursuant to Section 1.3(b)(ii)(A) and
second out of any amount payable to Executive pursuant to Section 1.3(b)(ii)(B)).

 

(iv)  
Notwithstanding anything in this Section 1.3(b) to the
contrary and in lieu of any cash obligation, the Company shall pay all of
Executive’s Annual Cash Bonuses in the form of Class C Units with a
Fair Market Value (as defined in the LLC Agreement) equal to the Annual Cash
Bonus owed at such time to the Executive, until the aggregate cost basis of
(x)  Class A Units issued to
Executive under that certain Investment Agreement dated as of the date

 

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hereof, (y) any
additional Class A Units purchased pursuant to Section 3.1 and (z)
any Class C Units issued (excluding any Class C Units withheld
pursuant to Section 1.3(c)) to Executive in respect of the Annual Cash
Bonuses equals $1,250,000. For purposes of determining Fair Market Value under
this Section 1.3(b)(iv), the Company shall provide Executive a draft
analysis at least ten (10) business days before such determination and
shall consider in good faith the Executive’s comments and questions prior to
finalizing such determination. For the avoidance of doubt, the Class C
Units shall be treated identical to Class A Units that Executive acquires
on the date hereof pursuant to the terms of the Investment Agreement, other
than for distributions upon a liquidation as set forth in Section 10.2 of
the LLC Agreement and the requirement for Executive to disgorge distributions
if there are not sufficient profits to allocate to Executive, as set forth in Section 10.3
of the LLC Agreement.

 

(c)                                  Withholding.
All payments made under this Agreement (including Base Salary,   bonus payments, and other amounts) shall be
subject to withholding for income taxes, payroll taxes and other legally
required deductions. For bonus payments made in the form of Class C
Units, Executive shall elect whether to have the Company withhold on such
amounts by withholding an appropriate number of Class C Units or other
cash compensation payable to Executive, or by the Executive funding the
withholding obligation through a cash payment to the Company.

 

(d)                                 Expenses.
The Company will reimburse the Executive for all reasonable expenses incurred
by him in the course of performing his duties under this Agreement which are
consistent with the Company’s policies in effect at that time with respect to
travel, entertainment and other business expenses, subject to the Company’s
requirements with respect to reporting and documentation of such expenses.

 

(e)                                  Vacation;
Holiday Pay and Sick Leave. The Executive shall be entitled to four (4) weeks’
paid vacation in each calendar year, which if not taken during any year may be
carried forward to any subsequent year. Executive shall receive holiday pay and
paid sick leave as provided to other executive employees of Holdings and the
Company. Upon cessation of Executive’s employment for any reason, Executive
shall receive pay for all accrued and unused vacation, calculated at his base
salary rate in effect at the time of the cessation of his employment, provided
that the amount of vacation that Executive shall be entitled to accrue during
the Term shall be in accordance with Company policy and in no event shall such
accrued vacation exceed 8 weeks at any given time.

 

(f)                                    Additional
Benefits. During the Employment Period, the Executive shall be entitled to
participate (for himself and, as applicable, his dependents) in the group
medical, life, 401k and other insurance programs, employee benefit plans and
perquisites which may be adopted by the Board for participation by the
Company’s senior management or executives, as well as dental, life and
disability insurance coverage, with payment of, or reimbursement for, such
insurance premiums by the Company, subject to, in all cases, the terms and
conditions established by the Board with respect to such plans (collectively,
the “Benefits”); provided,
however, that the Board, in its discretion, may revise the terms of any
Benefits so long as such revision does not have a disproportionately negative
impact on the Executive vis-à-vis other Company employees, to the extent
applicable.

 

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(g)                                 Incentive
Unit Grant. On the Effective Date, the Executive shall receive a grant (the
“Equity Grant”) of 1020.28 Class B-1
Units, 1700.47 Class B-2 Units and 680.19 Class B-3 Units (as defined
in the LLC Agreement) of Palace Holdings Group, LLC. The Equity Grant shall be
subject to the terms and provisions of the LLC Agreement including, without
limitation, the vesting, forfeiture, repurchase and giveback provisions of
Sections 3.1(c), 10.3 and 11.3 of the LLC Agreement.

 

(h)                                 Director
and Officer Insurance. The Company shall use commercially reasonable
efforts to purchase and maintain a Directors and Officers liability insurance
policy on terms and conditions deemed acceptable to the Board of Directors,
acting in good faith, which policy will cover Executive at all times during his
employment.

 

(i)                                     Potential
Board Seat. The Company agrees that during the Term it may consider
Executive’s request to be appointed to the Board of Directors of Holdings and
the Company.

 

(j)                                     Potential
Adjustments for Significant Transactions. In the event that the Company
acquires a material Family Entertainment Center or similar business, then the
Company and Executive shall discuss in good faith adjustments to Executive’s
overall compensation package to compensate Executive for increases in his job
duties.

 

1.4                                 Term and
Termination.

 

(a)                                  Duration.
The Employment Period shall commence on the Effective Date and shall terminate
three (3) years from the Effective Date (the “Term”), unless earlier terminated by the Company or the
Executive as set forth in this Section 1.4. The Term of the
Agreement shall renew automatically for one-year periods, unless either party
gives the other party written notice of its intention not to renew the
Agreement no later than 90 days prior to the expiration of the then current
Term. This Agreement may be terminated during the Term upon the first to
occur of (i) termination of the Executive’s employment by the Company for
Cause, (ii) termination of the Executive’s employment by the Company
without Cause, (iii) the Executive’s resignation with Good Reason, (iv) the
Executive’s resignation other than for Good Reason, or (v) the Executive’s
death or Disability. The Executive shall not terminate the Agreement with or
without Good Reason, unless he gives the Company written notice that he intends
to terminate the Agreement at least 90 days prior to the Executive’s proposed
Termination Date. Upon termination of this Agreement, the Executive shall
execute and deliver to the Company a release in form and substance
acceptable to the Company.

 

(b)                                 Severance
Upon Termination Without Cause or Upon Resignation by the Executive For Good
Reason. If the Employment Period is terminated by the Company without Cause
or if the Executive resigns for Good Reason, subject to the Executive’s
continued performance of the terms of this Agreement that survive the
Termination Date, the Executive will be entitled to receive (1) (i) if
such termination occurs prior to the eighteen-month anniversary of the
Effective Date, his Base Salary for the greater of (x) twelve months and (y)
the period of time remaining in such eighteen-month period, (ii) if such
termination occurs after the eighteen-month anniversary of the Effective Date,
his base salary equal to twelve months and (2) if such termination or
resignation occurs between October 1 and December 31, Executive will
be entitled to a prorated Annual Cash Bonus based on the number of days during
the

 

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relevant Fiscal Year that precede the date of
termination (each of (1) and (2) referred to as the “Severance Payment”). The Executive also
shall be entitled to receive payment for all reimbursable expenses or other
entitlements then due and owing to the Executive as of the Termination Date. In
the event that the Executive breaches his obligations under Section 1.6,
1.7, 1.8 or 1.9 of this Agreement, the Company’s
obligation to make any Severance Payments and provide any Benefits shall cease
as of the date of such breach.

 

(c)                                  Death
and Disability. In the event of the Company terminates this Agreement due
to the death or Disability of the Executive, the Executive shall be entitled to
no severance or other termination benefits from and after the termination of
his employment, except as provided in Section 1.4(b) hereof. Any
other rights and benefits the Executive may have under employee benefit
plans and programs of the Company generally in the event of the Executive’s
Disability shall be determined in accordance with the terms of such plans and
programs. In the event of Executive’s death, any rights and benefits that the
Executive’s estate or any other person may have under employee benefit
plans and programs of the Company generally in the event of the Executive’s
death shall be determined in accordance with the terms of such plans and
programs.

 

(d)                                 Salary
and Other Payments Through Termination. If the Executive’s employment with
the Company is terminated during the Term (i) by the Company for Cause or (ii) by
the Executive other than for Good Reason, the Executive will be entitled to
receive his Base Salary through the Termination Date, but will not be entitled
to receive any Severance Payments or Benefits after the Termination Date. The
Executive shall be entitled to receive payment for all reimbursable expenses or
other entitlements then due and owing to the Executive as of the Termination
Date.

 

(e)                                  Other
Rights. Except as set forth in Section 1.4(b), all of the
Executive’s rights to Base Salary, Benefits and Annual Cash Bonuses hereunder
(if any) which accrue or become payable after the termination of the Employment
Period shall cease upon such termination.

 

1.5                                 Key
Man Life Insurance. The Company shall have the right to purchase in the
Executive’s name a “key man” life insurance policy naming the Company or any of
its Subsidiaries as the sole beneficiary thereunder. The Executive agrees to
take all reasonable measures necessary to effect the foregoing, including
without limitation submitting to a physical examination for the purpose of
determining eligibility therefore and cooperating with any matters related to
the application for, and if obtained, the maintenance of, such insurance policy.
If Executive is found ineligible for some reason for such “key man” life
insurance either at the inception of his employment or at anytime thereafter,
this ineligibility will not affect Executive’s employability under this
Agreement or constitute Cause for termination of Executive’s employment.

 

1.6                                 Confidential
Information.

 

(a)                                  The
Executive shall not disclose or, directly or indirectly, use at any time,
during the Employment Period or thereafter, any Confidential Information (as
defined below) of which the Executive is or becomes aware, whether or not such
information is developed by his, except to the extent that (i) such
disclosure or use is required by the Executive’s performance of the duties
assigned to the Executive by the Board, (ii) the Executive is required by
subpoena or

 

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similar process to disclose or discuss any
Confidential Information, provided, that in such case, the Executive shall
promptly inform the Company of such event and shall cooperate with the
Company in attempting to obtain a protective order or to otherwise restrict
such disclosure or (iii) such Confidential Information becomes generally
known to and available for use by the public, other than as a result of any
action or inaction by the Executive. At the Company’s expense, the Executive
shall take all appropriate steps to safeguard Confidential Information and to
protect it against disclosure, misuse, espionage, loss and theft. The Executive
acknowledges that the Confidential Information obtained by him (i) during
the course of his employment with the Company or (ii) during the course of
his employment with VisionMaker and its Subsidiaries in connection with the
Acquisition is the sole and exclusive property of the Company and its
Subsidiaries, as applicable.

 

(b)                                 The
Executive understands that the Company and its Subsidiaries will receive from
third parties confidential or proprietary information (“Third Party Information”) subject to a
duty on the part of the Company and its Subsidiaries to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During the Employment Period and thereafter, and without in any way
limiting the provisions of Section 1.6(a) above, the Executive
will hold Third Party Information in the strictest confidence and will not
disclose to anyone (other than personnel of the Company or its Subsidiaries who
need to know such information in connection with their work for the Company or
its Subsidiaries) or use, except in connection with his work for the Company or
its Subsidiaries, Third Party Information unless expressly authorized by the
Board in writing.

 

(c)                                  As
used in this Agreement, the term “Confidential
Information” means information that is not generally known to the
public and that is used, developed or obtained by Holdings and its Subsidiaries
(including the Company and its Subsidiaries) and any of the Company’s
predecessor entities in connection with its business, including but not limited
to (i) business development, growth and other strategic business plans, (ii) properties
available for acquisition, financing development or sale, (iii) accounting
and business methods, (iv) services or products and the marketing of such
services and products, (v) fees, costs and pricing structures, (vi) designs,
(vii) analysis, (viii) drawings, photographs and reports, (ix) computer
software, including operating systems, applications and program listings, (x)
flow charts, manuals and documentation, (xi) data bases, (xii) inventions,
devices, new developments, methods and processes, whether patentable or
unpatentable and whether or not reduced to practice, (xiii) copyrightable
works, (xiv) all technology and trade secrets, (xv) confidential terms of
material agreements and customer relationships, and (xvi) all similar and
related information in whatever form. Confidential Information shall not
include any information that has become generally available to the public prior
to the date the Executive proposes to disclose or use such information or
general know-how of the Executive.

 

1.7                                 Inventions
and Patents. In the event that the Executive, as part of his
activities on behalf of the Company or any of its Subsidiaries, generates,
authors or contributes to any invention, design, new development, device,
product, method or process (whether or not patentable or reduced to practice or
comprising Confidential Information), any copyrightable work (whether or not
comprising Confidential Information) or any other form of Confidential
Information relating directly or indirectly to the business of the Company or
any of its Subsidiaries as now or hereinafter conducted (collectively, “Intellectual Property”), the

 

 

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Executive acknowledges that such Intellectual Property
is the sole and exclusive property of the Company and its Subsidiaries and
hereby assigns all right, title and interest in and to such Intellectual
Property to the Company and its Subsidiaries. Any copyrightable work prepared
in whole or in part by the Executive will be deemed “a work made for hire”
under Section 201(b) of the 1976 Copyright Act, and the Company and
its Subsidiaries shall own all of the rights comprised in the copyright therein.
The Executive shall promptly and fully disclose all Intellectual Property to
the Company and shall cooperate with the Company and its Subsidiaries to
protect the Company’s and its Subsidiaries’ interests in and rights to such
Intellectual Property (including, without limitation, providing reasonable
assistance in securing patent protection and copyright registrations and
executing all documents as reasonably requested by the Company, whether such
requests occur prior to or after termination of the Executive’s employment with
the Company). Anything herein to the contrary notwithstanding, the obligations
of Executive shall be limited to and subject to the terms and provisions of
California Labor Code Section 2870, a copy of which is attached hereto as Exhibit A.

 

1.8                                 Delivery
of Materials Upon Termination of Employment. As requested by the Company
from time to time and upon the termination of the Executive’s employment with
the Company for any reason, the Executive shall promptly deliver to the Company
all copies and embodiments, in whatever form, of all Confidential Information,
Intellectual Property and property of the Company and its Subsidiaries in the
Executive’s possession or within his control (including, but not limited to,
office keys, access cards, written records, notes, photographs, manuals,
notebooks, documentation, program listings, flow charts, magnetic media, disks,
diskettes, tapes and any other materials containing any Confidential
Information or Intellectual Property) irrespective of the location or form of
such material and, if requested by the Company, shall provide the Company with
written confirmation that all such materials have been delivered to the
Company.

 

1.9                                 Non-Compete,
Non-Solicitation.

 

(a)                                  The
Executive acknowledges and agrees that the Executive’s services to the Company
and its Subsidiaries are unique in nature and that the Company and its
Subsidiaries would be irreparably damaged if the Executive were to provide
similar services to any Person competing with the Company and its Subsidiaries
or engaged in the Business. The Executive further acknowledges that, in the
course of his employment with the Company, he will become familiar with the
Company’s and its Subsidiaries’ trade secrets and with other Confidential
Information. During the Noncompete Period other than as an employee of the
Company, he shall not, directly or indirectly, whether for himself or for any
other Person, permit his name to be used by or participate in any business or
enterprise (including, without limitation, any division, group or franchise of
a larger organization) that engages or proposes to engage in the Business in
the Restricted Territories. For purposes of this Agreement, the term “participate
in” shall include, without limitation, having any direct or indirect interest
in any Person, whether as a sole proprietor, owner, stockholder, partner,
member, joint venturer, creditor or otherwise, or rendering any direct or
indirect service or assistance to any Person (whether as a director, officer,
supervisor, employee, agent, consultant or otherwise). Nothing herein will
prohibit the Executive from mere passive ownership of not more than five
percent (5%) of the outstanding stock of any class of a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market. As used herein, the phrase “mere passive

 

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ownership” shall include voting or otherwise granting
any consents or approvals required to be obtained from such Person as an owner
of stock or other ownership interests in any entity pursuant to the charter or
other organizational documents of such entity, but shall not include, without
limitation, any involvement in the day-to-day operations of such entity.

 

(b)                                 During
the Nonsolicitation Period, the Executive will not directly, or indirectly through
another Person, induce or attempt to induce any customer, supplier, licensee,
or other business relation of the Company or any of its Subsidiaries to cease
doing business with the Company or any of its Subsidiaries, or induce or
attempt to induce any corporate officer, general manager or other employee of
the Company or any of its Subsidiaries to terminate such employee’s employment
with the Company or any of its Subsidiaries, or hire any such person unless
such person’s employment was terminated by the Company or any of its
Subsidiaries, or in any way interfere with the relationship between any such
customer, supplier, licensee, employee or business relation and the Company or
any of its Subsidiaries, including, without limitation, knowingly making any
negative statements or communications concerning the Company or any of its
Subsidiaries. The Executive acknowledges and agrees that the Company and its
Subsidiaries would be irreparably damaged if the Executive were to breach any
of the provisions contained in this Section 1.9(b).

 

1.10                           VisionMaker
Relationship. During the Employment Period, Executive shall not have any
day-to-day involvement in ongoing VisionMaker, LLC, a Delaware limited
liability company, activities and shall recuse himself from any VisionMaker
decision (and shall abstain from voting upon any matter) concerning a Family
Entertainment Center within the Territory.

 

1.11                           Enforcement.
If, at the time of enforcement of Section 1.6, 1.7, 1.8,
1.9 or 1.10 a court holds that the restrictions stated herein are
unreasonable under circumstances then existing, the Parties agree that, to the
extent permitted by applicable law, the maximum period, scope or geographical
area reasonable under such circumstances will be substituted for the Noncompete
Period, scope or area. Because the Executive’s services are unique and because
the Executive has access to Confidential Information and Intellectual Property,
the Parties agree that money damages would be an inadequate remedy for any
breach of Section 1.6, 1.7, 1.8,  1.9 or 1.10.
Therefore, in the event of a breach or threatened breach of Section 1.6,
1.7, 1.8,  1.9 or 1.10 the Company or any of its
Subsidiaries or any of their respective successors or assigns may, in addition
to other rights and remedies existing in their favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce, or prevent any violations of, the provisions hereof
(without posting a bond or other security). The Parties hereby acknowledge and
agree that (a) performance of the services of the Executive hereunder may occur
in jurisdictions other than the jurisdiction whose law the Parties have agreed
shall govern the construction, validity and interpretation of this Agreement, (b) the
law of the State of New York shall govern construction, validity and
interpretation of this Agreement to the fullest extent possible, and (c) Section 1.6,
1.7, 1.8, 1.9 or 1.10 shall restrict the Executive
only to the extent permitted by applicable law.

 

1.12                           Survival.
Sections 1.6, 1.7, 1.8 and 1.9 will survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.

 

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1.13                           Consideration.
The Executive hereby agrees and acknowledges that the Equity Grant constitutes
good and valuable consideration for the covenant and obligations incurred by
Executive pursuant to Section 1.9.

 

ARTICLE III

DEFINED
TERMS

 

2.1                                 Definitions.
For purposes of this Agreement, the following terms will have the following
meanings:

 

“Acquisition”
means the purchase of the stock of the Company by Holdings, as contemplated by
that certain Stock Purchase Agreement by and among Palace Entertainment, Inc.
the Company and Holdings, dated February 9, 2006.

 

“Available Cash
Flow Excess” means, for any Fiscal Year, the product of (x) the amount by which EBITDA for such Fiscal
Year exceeds Target EBITDA, multiplied by (y) 20%; provided that the aggregate
amount payable by the Company to all employees in respect of the Available Cash
Flow Excess shall in no event exceed (i) for Fiscal Year 2007, $2,250,000
plus a pro rata increase based on the number of complete months in
Fiscal Year 2006 following the date the Acquisition is consummated, and (ii) for each subsequent Fiscal Year
during the Employment Period, such amount that is determined by the Company’s
Board of Directors in its sole discretion.

 

“Business”
means the business of owning and operating Family Entertainment Centers.

 

“Cause”
means with respect to the Executive one or more of the following:  (i) the commission of a felony or other
crime involving moral turpitude or the commission of any other act or omission
involving dishonesty or fraud with respect to the Company or any of its
Subsidiaries or any of their customers or suppliers, (ii) reporting to
work under the influence of alcohol or illegal drugs, or the use of illegal
drugs (whether or not at the workplace), (iii) substantial and repeated
failure to perform duties as reasonably directed by the Board, (iv) any
act or omission aiding or abetting a competitor, supplier or customer of the
Company or any of its Subsidiaries to the material disadvantage or detriment of
the Company and its Subsidiaries, (v) breach of fiduciary duty, gross
negligence or willful misconduct with respect to the Company or any of its
Subsidiaries, or (vi) any other material breach of this Agreement;
provided, however, that if any such breach is subject to cure, Executive shall
be entitled to written notice of and an opportunity to cure such breach to the
Board’s reasonable satisfaction within 30 calendar days of notice of such
breach. For purposes of clarification, VisionMaker shall not be deemed a
competitor or supplier during such time as it is in compliance with that
certain License Agreement dated as of the date hereof with the Company.

 

“Disability”
shall have the meaning set forth in a policy or policies of disability
insurance, if any, the Company obtains for the benefit of itself and/or its
employees. If there is no definition of “disability” applicable under any such
policy or policies, if any, then the Executive shall be considered disabled due
to mental or physical impairment or disability, despite reasonable
accommodations by the Company and its Subsidiaries, to perform his

 

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customary or other
comparable duties with the Company or its Subsidiaries immediately prior to
such disability for a period of at least 120 consecutive days or for at least
180 non-consecutive days in any 12-month period.

 

“EBITDA”
means, for a Fiscal Year, earnings before interest, taxes, depreciation and
amortization determined in good faith by the Company’s Board of Directors
following each Fiscal Year based on the audited financial statements of the
Company and its subsidiaries for such Fiscal Year using the same methodology
used in developing the EBITDA Target for such Fiscal Year, as adjusted to
reflect capital expenditures and changes in average working capital during the
Fiscal Year. Notwithstanding the foregoing, not later than 30 days after the
commencement of the Fiscal Year, the Compensation Committee of the Board of
Directors in consultation with the Executive may adjust the criteria to
calculate EBITDA.

 

“EBITDA Target”
means for each Fiscal Year the target amount established by the Company’s
Compensation Committee of the Board of Directors not later than thirty days
after the commencement of the Fiscal Year (it being understood that the Company’s
Board of Directors may, but shall not be obligated to, make adjustments to
adjust for the effect of extraordinary corporate transactions (acquisitions or
dispositions of businesses) during the Fiscal Year and shall be adjusted to
include the aggregate amount of Annual Bonuses for such Fiscal Year).

 

“Family
Entertainment Center” means amusement parks, theme parks or similar
facilities that (x) offer water-leisure recreational facilities and other water
attractions and/or (y) offer a broad selection of attractions, including but
not limited to, miniature golf, go kart raceways, batting cages, rides and/or
arcade pavilions.

 

“Fiscal Year”
means the fiscal year of the Company and its Subsidiaries ended December 31.

 

“Good Reason”
means the occurrence, without the Executive’s written consent, of one or more
of the following events: (i) the Company reduces the amount of Executive’s
Base Salary or Annual Cash Bonus, (ii) the Company requires that the
Executive relocate his principal place of employment to a site that is more
than 50 miles from the Company’s current headquarters at 4590 MacArthur
Boulevard, Newport Beach, California 92660 or if the Company changes the
location of its headquarters with the consent of Executive to a location that
is more than 50 miles from such location, (iii) the Company materially
reduces the Executive’s responsibilities or (iv) the Company changes
Executive’s title or otherwise materially breaches the terms of this Agreement;
provided that no such event shall constitute Good Reason hereunder unless (a) the
Executive shall have given written notice to the Company of the Executive’s
intent to resign for Good Reason within 60 days after the Executive becomes
aware of the occurrence of any such event and (b) such event or occurrence
shall not have been resolved to the Executive’s reasonable satisfaction within
60 days of the Company’s receipt of such notice.

 

“LLC Agreement”
means the Limited Liability
Company Agreement of Palace Holdings Group, LLC as of dated April 12,
2006, as amended from time to time.

 

10

 

“Noncompete Period”
means the Employment Period and 24 months thereafter, provided that if the
Employment Period is terminated by the Company without Cause or if Executive
resigns for Good Reason, then the Noncompete Period means the Employment Period
and 12 months thereafter.

 

“Nonsolicitation
Period” means the Employment Period and 24 months thereafter.

 

“Person”
means an individual, a partnership, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or the United States of America any other nation,
any state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.

 

“Restricted
Territories” means the United States and its territories and
possessions in which the Company engages in the business as of the Termination
Date.

 

“Subsidiary”
has the meaning given such term in the LLC Agreement.

 

“Termination Date”
means the date of the Executive’s termination of employment with the Company.

 

2.2                                 Other Definitional
Provisions.

 

(a)                                  Section references
contained in this Agreement are references to sections in this Agreement, unless
otherwise specified. Each defined term used in this Agreement has a comparable
meaning when used in its plural or singular form. Each gender-specific term
used in this Agreement has a comparable meaning whether used in a masculine,
feminine or gender-neutral form.

 

(b)                                 Whenever
the term “including” (whether or not that term is followed by the phrase “but
not limited to” or “without limitation” or words of similar effect) is used in
this Agreement in connection with a listing of items within a particular
classification, that listing will be interpreted to be illustrative only and
will not be interpreted as a limitation on, or an exclusive listing of, the
items within that classification.

 

ARTICLE III

MISCELLANEOUS
TERMS

 

3.1                                 Option
to Acquire Additional Units. Until such time as Executive owns Class A
and Class C Units issued by Parent with an aggregate cost basis of
$1,250,000, Executive shall have the right to purchase additional Class A
Units of Parent having an aggregate Fair Market Value equal to $750,000 less
the Fair Market Value (at the time of issuance) of all Class C Units
issued to Executive in accordance with Section 1.3(b)(iv). The purchase
price for such Class A Units shall be equal to the Fair Market Value of
such Units at the time of purchase. As soon as practicable following the date
that Executive notifies the Company of his intent to purchase such Class A
Units, the Board shall inform Executive of the Fair Market Value of such
Units. The purchase price for such Class A Units shall be paid by check or
a wire transfer of funds within

 

11

 

five (5) business days after the Company notifies
Executive of the Fair Market Value (and purchase price) of such Class A
Units.

 

3.2                                 Dispute Resolution.

 

(a)                                  Except
with respect to disputes and claims under Section 1.6, 1.7, 1.8
or 1.9 hereof (which may be pursued in any court of competent
jurisdiction), each Party agrees that arbitration, pursuant to the rules of
the Federal Mediation and Conciliation Service (the “FMCS”) in effect as of the date of commencement of the
arbitration (the “FMCS Rules”),
shall be the sole and exclusive method for resolving any claim or dispute (“Claim”) arising out of or relating to the
rights and obligations of the parties under this Agreement and the employment
of the Executive by the Company (including, without limitation, claims and
disputes regarding employment discrimination, sexual harassment, termination
and discharge), whether such claim arose or the facts on which such Claim is
based occurred prior to or after the execution and delivery of this Agreement. The
Parties agree that (i) one arbitrator shall be appointed pursuant to the
FMCS Rules to conduct any such arbitration and (ii) all meetings of
the Parties and all hearings with respect to any such arbitration shall take
place in New York, New York, or if such Claim does not arise out of or include
a Claim under Section 1.9, then such arbitration shall take place in Los
Angeles, CA. The Parties further agree that, unless otherwise determined by the
arbitrator, (x) each Party to the arbitration shall bear its own costs and
expenses (including, without limitation, all attorneys’ fees and expenses,
except to the extent otherwise required by applicable law) and (y) all costs and
expenses of the arbitration proceeding (such as filing fees, the arbitrator’s
fees, hearing expenses, etc.) shall be borne equally by the Parties; provided
that nothing herein shall be interpreted to preclude the arbitrator from
allocating the costs and expenses of the Parties and of such proceeding among
the Parties in any manner that the arbitrator may lawfully determine to do
so. The Parties agree that the judgment, award or other determination of any
arbitration under the FMCS Rules shall be final, conclusive and binding on
all of the Parties. Nothing in this Section 3.1(a) shall
prohibit any Party from instituting litigation to enforce any final judgment,
award or determination of the arbitration. Each Party hereby irrevocably
submits to the jurisdiction of the United States District Court for the
Southern District of New York, or if such Claim does not arise out of or
include a Claim under Section 1.9, then to the jurisdiction of the United
States District Court for the Central District of California, and agrees that
such court shall be the exclusive forum for the enforcement of any such final
judgment, award or determination of the arbitration. Each Party irrevocably
consents to service of process by registered mail or personal service and
waives any objection on the grounds of personal jurisdiction, venue or
inconvenience of the forum.

 

(b)                                 Notwithstanding
the foregoing, prior to any Party instituting any arbitration proceeding
hereunder to resolve any Claim, such Party first shall submit the Claim to a
mediation proceeding among the Parties which shall be governed by the
prevailing procedures of the FMCS and shall be conducted in New York, New York,
or if such Claim does not arise out of or include a Claim under Section 1.9,
then such mediation shall be conducted in Los Angeles, CA. If the Parties have
not agreed in writing to a resolution of the Claim pursuant to the mediation
within 45 days after the commencement thereof of if any Party refuses to
participate in the mediation process, then the Claim may be submitted to
arbitration under Section 3.1(a) above. Unless otherwise
determined by the mediator, each Party shall bear its own costs and expenses
incurred in connection with the mediation, and all costs and expenses of the
mediation

 

12

 

proceeding shall be borne equally by the Parties;
provided that nothing herein shall be interpreted to preclude the mediator from
allocating the costs and expenses of the Parties and of such proceeding among
the Parties in any manner that the arbitrator may lawfully determine to do
so.

 

3.3                                 Notices.
Any notice provided for in this Agreement must be in writing and must be either
personally delivered, mailed by first class mail (postage prepaid and
return receipt requested), sent by reputable overnight courier service (charges
prepaid) or sent by facsimile (voice confirmed) to the recipient at the address
or facsimile number indicated below:

 

To the Company:

 

4590 MacArthur Boulevard

Newport Beach, CA 92660

Telephone:                                    (949)
797-9721

Telecopy:                                           (949)
261-1414

Attention:                                         Chief
Executive Officer

 

With copies to:

 

MidOcean Partners, LP

320 Park Avenue, 17th
Floor

New York, NY 10022

Telephone:                                    (212)
497-1400

Telecopy:                                           (212)
497-1375

Attention:                                         Tyler
Zachem

 

and

 

Kirkland & Ellis
LLP

655 Fifteenth Street,
N.W.

Suite 1200

Washington, D.C. 20005

Telephone:                                    (202)
879-5000

Telecopy:                                           (202)
879-5200

Attention:                                         Andrew
M. Herman, Esq.

 

To the Executive:

 

c/o
VisionMaker, LLC

333 City Boulevard
West

17th Floor

Orange,
CA 92868

Telephone:                                    (714)
456-9942

Telecopy:                                           (714)
242-7440

 

or such other address or to the attention of such
other Person as the recipient Party will have specified by prior written notice
to the sending Party. Any notice under this Agreement will be

 

13

 

deemed to have been given when so delivered or sent
or, if mailed, five days after deposit in the U.S. mail.

 

3.4                                 Severability.
Whenever possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.

 

3.5                                 Complete
Agreement. This Agreement, the LLC Agreement, that certain Investment
Agreement by and among Palace Holdings Group, LLC, a Delaware limited liability
company (“Parent”) and the
Investors Listed on Schedule I thereto, dated April 12, 2006, and
that certain Letter Agreement Regarding the Grant of Incentive Units by and
between Parent and the Executive, dated April 12, 2006, embodies the
complete agreement and understanding among the Parties with regard to the
subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the Parties, written or oral, which may have
related to the subject matter hereof in any way. To the extent that this
Agreement provides greater benefits to the Executive than available under the
Company’s employee handbook or other corporate policies, then this Agreement
shall prevail.

 

3.6                                 Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and all of which taken together constitute one and the
same agreement.

 

3.7                                 Assignment.
Without the Executive’s consent, the Company may not assign its rights and
obligations under this Agreement except (i) to a “Successor” (as defined below)
or (ii) to an entity that is formed and controlled by the Company or any
of its Subsidiaries. This Agreement is personal to the Executive, and the
Executive shall not have the right to assign the Executive’s interest in this
Agreement, any rights under this Agreement or any duties imposed under this
Agreement, nor shall the Executive have the right to pledge, hypothecate,
transfer, assign or otherwise encumber the Executive’s right to receive any form of
compensation hereunder without the prior written consent of the Board. As used
in this Section 3.7, “Successor”
shall include any Person that at any time, whether by purchase, merger or
otherwise, directly or indirectly acquires all or substantially all of the
assets of, or ownership interests in, the Company and its Subsidiaries.

 

3.8                                 Successors
and Assigns. This Agreement is intended to bind and inure to the benefit of
and be enforceable by the Company, the Executive, and their respective heirs,
successors and permitted assigns.

 

3.9                                 Choice
of Law. All questions concerning the construction, validity and
interpretation of this Agreement will be governed by and construed in
accordance with the domestic laws of the State of New York without giving
effect to any choice of law or conflict of law provision or rule (whether
of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.

 

14

 

3.10                           Remedies.
Subject to the provisions of Section 3.1, each Party will be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs caused by any breach of any provision of this Agreement and
to exercise all other rights existing in its favor. Nothing herein shall
prohibit any arbitrator or judicial authority from awarding attorneys’ fees or
costs to a prevailing Party in any arbitration or other proceeding to the
extent that such arbitrator or authority may lawfully do so.

 

3.11                           Amendment
and Waiver. The provisions of this Agreement may be amended or waived
only with the prior written consent of the Company and the Executive, and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement will affect the validity, binding effect or enforceability of this
Agreement.

 

3.12                           Third
Party Beneficiaries. This Agreement will not confer any rights or remedies
upon any Person other than the Parties and their respective successors and
permitted assigns.

 

3.13                           The
Executive’s Representations. The Executive hereby represents and warrants
to the Company that (a) the execution, delivery and performance of this
Agreement by the Executive do not and shall not conflict with, breach, violate
or cause a default under any contract, agreement, instrument, order, judgment
or decree to which the Executive is a party or by which he is bound, (b) the
Executive is not a party to or bound by any employment agreement, noncompete
agreement or confidentiality agreement with any other Person and (c) upon
the execution and delivery of this Agreement by the Company, this Agreement
shall be the valid and binding obligation of the Executive, enforceable in
accordance with its terms.

 

3.14                           Amendment
to Comply with Section 409A of the Code. To the extent that this Agreement
or any part thereof is deemed to be a nonqualified deferred compensation
plan subject to Section 409A of the Code and the Treasury Regulations
(including proposed regulations) and guidance promulgated thereunder, (a) the
provisions of this Agreement shall be interpreted in a manner to the maximum
extent possible to comply in good faith with Code Section 409A, and (b) the
parties hereto agree to amend this Agreement for purposes of complying with
Code Section 409A promptly upon issuance of any Treasury regulations or
guidance thereunder, provided,
that any such amendment shall not materially change the present value of the
benefits payable to the Executive hereunder or otherwise materially adversely
affect the Executive, the Company, or any affiliate of the Company, without the
consent of such party.

 

[END OF
PAGE]

[SIGNATURE
PAGE FOLLOWS]

 

15

 

IN WITNESS WHEREOF, the Parties have executed this
Employment Agreement as of the date first written above.

 

	
   

  	
  FESTIVAL FUN PARKS, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John
  A. Cora

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  A. Cora

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer and

  	
   

  
	
   

  	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PALACE ENTERTAINMENT HOLDINGS,

  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John
  A. Cora

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  A. Cora

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer and

  	
   

  
	
   

  	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Daniel S. Martinez

  	
   

  
	
   

  	
  DANIEL S. MARTINEZExhibit 10.4

 

Execution Copy

 

AMENDED AND RESTATED AGREEMENT

 

THIS AMENDED AND RESTATED AGREEMENT (“Agreement”) is
made as of the 12th day of April, 2006, by and between Festival Fun
Parks, LLC (the “Company”) and James Cleary (“Executive”).

 

W I T N E S S E T H :

 

WHEREAS, Palace Entertainment, Inc. (“Palace”) has
entered into a Stock Purchase Agreement dated as of February 9, 2006 pursuant
to which Palace Entertainment Holdings, Inc. (“Buyer”), has agreed to acquire,
and Palace has agreed to sell to Buyer, 100% of the equity interest of the
Company (the “Transaction”);

 

WHEREAS, the Executive currently is employed by the
Company as the Vice President of Operations — Water Park Division;

 

WHEREAS, the Company and the Executive are parties to
that certain Agreement, dated July 22, 1999, as amended by that certain First
Amendment to Employment Agreement, dated July 21, 2002 (the “Existing Agreement”);
and

 

WHEREAS, the parties have agreed that the Existing
Agreement shall be deemed to have been amended and restated and superceded by
this Agreement upon the consummation of the Transaction (the “Effective Date”).

 

NOW THEREFORE, in consideration of the premises and
the mutual covenants and obligations hereinafter set forth, the Company and
Executive hereby agree as follows:

 

1.             Effectiveness. Each of
Executive and the Company agree that as of the Effective Date, the Existing
Agreement is amended and restated as set forth herein, and that the Existing
Agreement is of no further force or effect. Unless and until consummation of
the Transaction, the Existing Agreement shall remain in effect and govern the
relationship between the parties.

 

2.             Engagement. The Company
agrees to engage the Executive and the Executive agrees to serve as an employee
of the Company and shall have the title “Senior Vice President of New Business
Development.”

 

3.             Engagement Period. Except
as otherwise provided in this Agreement to the contrary, the terms and
conditions of this Agreement shall be and remain in effect during the period of
the engagement (“Engagement Period”) established under this ¶3. The Engagement
Period shall be for a term of three (3) years from the Effective Date unless
terminated in accordance with the terms hereof. The term shall be automatically
renewed for successive one (1) year periods thereafter, unless either party
gives notice to the other that the term shall not be renewed at least three (3)
months before the Engagement Period (including automatic renewal thereof)
expires.

 

4.             Duties. As of the
date of this Agreement, Executive shall act as Senior Vice President of New
Business Development for the Company, and, in such capacity, shall assist with
the general management, business, affairs and operations of Company’s Family

 

 

Entertainment
Centers and be responsible for and assist with the acquisition, design and
development of new Family Entertainment Centers (as defined in ¶16 below), and
shall have such power and authority as shall reasonably be required to enable
him to perform his duties hereunder; provided, however, that in exercising such
power and authority and performing such duties, he shall at all times be
subject to the authority of the Chief Operating Officer, the Chief Executive
Officer and the Board of Directors of the Company. The Executive shall report
to the Chief Operating Officer and the Chief Executive Officer of the Company. The
Executive agrees to devote substantially all of his business time, attention
and services to the diligent, faithful and competent discharge of such duties
for the successful operation of the Company’s business, and use his best
efforts to advance the Company’s interests.

 

5.             Compensation.   (a)  Base
Salary. In consideration of the services rendered by Executive under
this Agreement, the Company shall pay him a base salary at an annual rate equal
to $267,000.00. The Executive shall receive such increases in his base salary
as the Board of Directors of the Company may from time to time approve in its
discretion. The base salary shall be payable in accordance with the Company’s
regular payroll practice, but in no event less frequently than bi-weekly. All
applicable withholding taxes and insurance contributions shall be deducted from
such payments.

 

(b)           Annual Bonus. Executive will be eligible
to receive a performance-based bonus based on achieving annual performance
goals that may be determined by the Board of Directors or the compensation
committee thereof on an annual basis and communicated to Executive if
established. The Board of Directors or its compensation committee may establish
an additional bonus pool for any fiscal year to benefit members of management. Executive
may participate in such a bonus pool if and to the extent that the Board of
Directors or its compensation committee so determines.

 

(c)           Stock Options. Executive will be eligible
to receive incentive units (as defined in the limited liability company
agreement of Palace Holdings Group, LLC (the “LLC Agreement”) as may be awarded
by its board of directors or its compensation committee from time to time in
accordance with the terms of the LLC Agreement and any related incentive award
program adopted by its board of directors.

 

6.             Benefit Plan and Program. Executive
shall, during the Engagement Period, be entitled to and receive benefits under
the Company’s 401(k) plan, group life, health (including hospitalization,
medial and major medical), prescription drug, dental, vision and such other
employee benefit plans and programs, including but not limited to any other
incentive compensation plans or programs (whether or not employee benefit plan
or programs) as the Company may maintain from time to time, and in accordance
with the Company’s customary practices to the extent maintained by the Company
provided that Executive is a member of the class of employees authorized to
participate in such plan or programs.

 

7.             Outside Activities. While
employed by the Company, Executive shall not, directly or indirectly, provide
services on behalf of any competing Family Entertainment Center business as
defined in ¶16 below or on behalf for any subsidiary or affiliate of any such
competing Family Entertainment Center business as an employee, consultant,
independent contractor, agent, sole proprietor, partner, joint venturer,
corporate officer, director or lender; nor

 

2

 

shall Executive
acquire while employed by the Company, the ownership of more than 5% of the
outstanding equity interest in any such competitive entity. Subject to the
foregoing, Executive may serve on board of directors of unaffiliated
corporations, who do not compete with the Company, subject to Company’s
approval. Except as specifically set forth herein, and subject to any
restrictions thereon, Executive may engage in personal business and investment
activities that do not conflict with the business of the Company. Notwithstanding
the foregoing, in no event shall Executive’s outside activities, services,
personal business and investments materially interfere with the performance of
his duties under this Agreement.

 

8.             Working Facilities. Executive
shall perform his duties at Splish Splash, Riverhead, New York. The Company
shall provide Executive with support services suitable and appropriate to his
position with the Company and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement.

 

9.             Vacation and Expenses. (a)  Executive shall be entitled to a minimum of
four (4) weeks of paid vacation time each year during the Engagement Period to
be taken at a time which does not conflict with the Executive’s duties
hereunder. Accrued vacation may be carried forward and used in subsequent
calendar years.

 

(b)           The
Executive shall also be entitled to reimbursement for all reasonable and
preapproved expenses necessarily incurred by him in the performance of his
duties upon presentation of a voucher indicating the amount and business
purposes and consistent with the Company’s policies. The Executive’s
reimbursement shall include, but not be limited to, transportation costs,
travel expenses, trade show expenses, cellular phone expenses and expenses
incurred by Executive and his spouse in connection with IAAPA functions and
meetings.

 

10.           Termination of Engagement. (a)  Executive’s engagement with the Company shall
terminate during the Engagement Period on account of Executive being convicted
of a felony or misdemeanor involving moral turpitude, including entry of a plea.
If the Executive’s employment terminates in accordance with this ¶10(a), (x)
the Company shall pay and provide to Executive: 
(i) his earned but unpaid salary as of the date of the termination of
his engagement, (ii) the benefits, if any, to which he is entitled under the
Company’s benefit plan and programs and compensation plan and programs; (iii)
accrued but unpaid bonus; and (iv) payment for unused vacation days through the
date of termination, and (y) the Executive shall not be entitled to any
severance or other benefits. For purposes of this Agreement, moral turpitude
shall include embezzlement of the Company’s property.

 

(b)           The
Company shall have the right to terminate this Agreement for “good cause” upon
twenty (20) days written notice to the Executive setting forth the grounds for
terminating the Agreement. For purposes of this ¶10(b), “good cause” shall be
defined as the following:  (i) Executive’s
failure to perform his duties in a manner consistent with the Company’s
performance standards and the terms of this Agreement; (ii) Executive’s failure
to devote substantially all of his business time and attention to the business
of the Company and otherwise comply with his duties under ¶4; and (iii)
Executive’s violation of ¶7 and ¶12 of this Agreement. In the event Executive
fails to cure his breach of the Agreement as set forth in the notice, then and
in that event, this Agreement shall automatically terminate at the expiration
of said twenty (20) day period. The Company shall pay and provide to
Executive:  (i) his earned but unpaid

 

3

 

salary as of the
date of the termination of his engagement; (ii) the benefits, if any, to which
he is entitled under the Company’s benefit plan and programs and compensation
plan and programs; (iii) accrued but unpaid bonus; and (iv) payment for unused
vacation days through the date of termination.

 

(c)           The
Company may at any time during the Engagement Period, upon twenty (20) days
written notice to Executive, terminate this Agreement. Except in the event of a
termination of Executive’s employment in accordance with the provisions of
¶10(a) and ¶10(b), the restrictive covenant set forth in ¶12 of this Agreement
shall continue only so long as the Company makes the payment set forth in
¶10(f).

 

(d)           This
Agreement shall automatically terminate upon the death of Executive.

 

(e)           Executive
shall have the right to terminate this Agreement for “good reason” upon twenty
(20) days written notice to the Company setting forth the grounds for
terminating the Agreement. For purposes of this ¶10(e), “good reason” shall be
defined as follows:  (i) a material
breach of the Company’s obligations under this Agreement; (ii) the Board by
vote, but excluding those directors who are officers or employees, or former
officers or employees, of the Company, or its subsidiaries, determines in its
sole discretion that the voluntary termination of the Executive is for “good
reason” under the circumstances then prevailing; (iii) a material reduction in
salary paid to the Executive; and (iv) a material reduction in the Executive’s
duties, authority or responsibilities. In the event the Company fails to cure
its breach of the Agreement as set forth in the notice, then and in that event,
this Agreement shall automatically terminate at the expiration of said twenty
(20) day period.

 

(f)            In
the event Executive’s engagement with the Company is terminated by either party
pursuant to ¶10(c), (d) or (e), then and in such an event, Executive shall be
entitled to (i) payment of any earned but unpaid salary and payment for unused
vacation days, through the date of termination; (ii) any cash bonus previously
earned in full or awarded but not yet paid; (iii) termination payment equal to
the Executive’s base salary for the greater of (x) the remainder of the initial
Engagement Period or (y) one year, paid in installments at such time as
Executive would normally receive such payment; and (iv) the continuation of
benefits provided by the Company through the end of the Engagement Period.

 

(g)           In
the event Executive terminates this Agreement without “good reason” as defined
in ¶10(e), then and in such an event, the restrictive covenant set forth in ¶12
shall continue but the restrictions set forth in ¶7 of the Agreement shall
terminate. The Company shall pay and provide to Executive:  (i) his earned but unpaid salary as of the
date of the termination of his engagement; (ii) the benefits, if any, to which
he is entitled under the Company’s benefit plan and programs and compensation
plan and programs; (iii) accrued but unpaid bonus; and (iv) payment for unused
vacation days through the date of termination.

 

(h)           The
Company shall not be obligated to make any payment to Executive required
pursuant to the terms of this ¶10 unless and until Executive executes and
delivers to the Company a release in form and substance acceptable to the
Company.

 

4

 

11.          Confidentiality; Work Product.

 

(a) Executive acknowledges that the continued success
of the Company (which, for purposes of this ¶11(a) shall include its
subsidiaries and affiliates) depends upon the use and protection of a large
body of confidential and proprietary information (all of such confidential and
proprietary information now existing or to be developed in the future being the
“Confidential Information”). Confidential Information includes all information
of any sort (whether merely remembered or embodied in a tangible or intangible
form) that is (i) related to the Company’s prior, current or potential
business and (ii) is not generally or publicly known. Confidential
Information further includes, without limitation, the information, observations
and data obtained by Executive during the course of his employment with the
Company’s predecessors and his performance under this Agreement concerning the
business and affairs of the Company, information concerning acquisition
opportunities in or reasonably related to the Company’s business or industry of
which Executive is aware or becomes aware during the Engagement Period, the
persons or entities that are current, former or prospective suppliers or
customers of it during Executive’s employment with the Company’s predecessor
and his course of performance under this Agreement, as well as development,
transition and transformation plans, methodologies and methods of doing
business, strategic, marketing and expansion plans, including plans regarding
planned and potential sales, financial and business plans, employee lists and
telephone numbers, locations of sales representatives, new and existing
programs and services, prices and terms, customer service, integration processes,
requirements and costs of providing service, support and equipment. Therefore,
Executive agrees that he shall not disclose to any unauthorized person or use
for his own account any of such Confidential Information without the Board’s
prior written consent, unless and to the extent that any Confidential
Information (x) becomes generally known to and available for use by the
public other than as a result of Executive’s acts or omissions to act or
(y) is required to be disclosed pursuant to any applicable law or court
order.

 

(b)           All
materials developed by Executive for Company pursuant to his employment under
this Agreement are to be considered “works made for hire” as that term is
defined in Section 101 of the Copyright Act (17 U.S.C. Section 101) and are the
sole and exclusive property of Company. Executive agrees that any and all
patent and copyright rights to the materials developed hereunder, to the extent
they are available, are the sole and exclusive property of Company, free from
any claim or retention of rights thereto on the part of Executive. Executive
agrees that he promptly will make full written disclosure to Company and will
hold in trust for the sole right and benefit of Company and its subsidiaries,
and Executive hereby assigns to Company or its designee, his entire right,
title and interest in and to, any and all inventions, innovations,
improvements, original works of authorship, developments, concepts, methods,
trade secrets, designs, analyses, drawings, reports and all similar or related
information (whether or not patentable or registrable under copyright or
similar laws) which are solely or jointly conceived, developed, made or reduced
to practice, or caused to be conceived, developed, made or reduced to practice,
by Executive during the Engagement Term (collectively “Work Product”);
provided, however, that Executive shall not be required to assign to Company,
Work Product that he may develop entirely on his own time without using Company’
or any subsidiary’s equipment, supplies, facilities, Confidential Information
or proprietary documents, except for Work Product which either: (i) relates
directly to Company’ business, or actual or demonstrably anticipated research
or development of Company; or (ii) results from any work

 

5

 

performed by Executive for Company. Executive
represents to Company that there are no inventions, original works of
authorship, developments, improvements or trade secrets which were made by him
prior to his employment by Company or any subsidiary, which are owned by him or
in which he has an interest, which may relate to Company’ or its subsidiaries’
business, products or research and development and which are not assigned to
Company hereunder. During the three-year period commencing on the effective
date of this Agreement and for six (6) months thereafter, Executive agrees (i)
to keep and maintain adequate and current records of all Work Product made by
him (solely or jointly with others), and (ii) to assist Company, or its
designee, at Company’ expense, in every proper way to secure Company’ rights in
the Work Product and any copyrights, patents, mask work rights or other
intellectual property rights relating thereto in any and all countries,
including the disclosure to Company of all pertinent information and data with
respect thereto, the execution of all applications, specifications, oaths,
assignments, powers of attorney and all other instruments that Company shall
deem necessary or appropriate in order to apply for and obtain such rights. To
the extent that any material produced under this Agreement may not be
considered works made for hire, or to the extent that this ¶11(b) is declared
invalid either in substance or purpose, in whole or in part, Executive hereby
agrees to irrevocably transfer, grant, convey, assign, and relinquish
exclusively to Company any and all of Executive’s right, title, and interest,
including ownership of copyright and/or patent rights, to any material
developed by Executive under this Agreement without the necessity of further
consideration.

 

12.           Restrictive Covenant. Executive
acknowledges and agrees with respect to the Company that the business of the
Company is conducted primarily in the United States (the “Territory”), and that
the Company’s reputation and goodwill are an integral part of its business
success throughout the Territory. If Executive deprives the Company of any of
the Company’s goodwill or in any manner utilizes its reputation and goodwill in
competition with the Company, the Company will be deprived of the benefits for
which it has bargained. Accordingly, Executive agrees that during the Effective
Time, he shall not, directly or indirectly, alone or as a member of a
partnership, or as an officer, director, employee, consultant, lender or
shareholder of any other corporation or entity, compete with the Company in any
Family Entertainment Center business as defined in ¶16 that is located within
100 miles of any Family Entertainment Center owned as of the date of this
Agreement, or that is acquired, developed or owned during the Effective Period
(if the Executive had knowledge that such Family Entertainment Center was to be
acquired, developed or owned during the Effective period), by the Company, its
subsidiaries or its affiliates. Executive further agrees not to solicit the
employment or services of, or hire any person who was known to be employed by
the Company while employed by the Company for a period of six months following
termination of this Agreement. Notwithstanding anything herein to the contrary,
this restrictive covenant shall not apply if the Company fails to compensate
Executive as set forth in this Agreement during the Engagement Period, or in
the event the Agreement is sooner terminated, the Company fails to make any of
the payments set forth in ¶10 of this Agreement. For purposes of this
Agreement, “Effective Time” shall mean the Engagement Period and one (1) year
thereafter; provided first that if the Agreement is terminated during the
initial Engagement Period, then the Effective Period shall be the greater of
the period during which Executive receives severance from the Company and one
year from the termination date, except that Executive may reduce the Effective
Time to one year by releasing the Company from any and all severance
obligations owed under Section 10(f).

 

6

 

13.           Remedies. If, at the
time of enforcement of ¶11 and ¶12 a court holds that the restrictions stated
herein are unreasonable under circumstances then existing, the parties agree
that, to the extent permitted by applicable law, the maximum period, scope or
geographical area reasonable under such circumstances will be substituted for
the period, scope or area. Because the Executive’s services are unique and
because the Executive has access to confidential information, the parties agree
that money damages would be an inadequate remedy for any breach of ¶11 and ¶12.
Therefore, in the event a breach or threatened breach of ¶11 and ¶12, the
Company or any of its subsidiaries or any of their respective successors or
assigns may, in addition to other rights and remedies existing in their favor,
apply to any court of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce, or prevent any violations of,
the provisions hereof (without posting a bond or other security). The parties
hereby acknowledge and agree that (a) performance of the services of the
Executive hereunder may occur in jurisdictions other than the jurisdiction
whose law the parties have agreed shall govern the construction, validity and
interpretation of this Agreement, (b) the law of the State of New York
shall govern construction, validity and interpretation of this Agreement to the
fullest extent possible, and (c) ¶11 and ¶12 shall restrict the Executive
only to the extent permitted by applicable law.

 

14.           Delivery of Materials Upon
Termination of Employment. As requested by the Company from time
to time and upon the termination of the Executive’s employment with the Company
for any reason, the Executive shall promptly deliver to the Company all copies
and embodiments, in whatever form, of all Confidential Information and Company
property in the Executive’s possession or within his control (including, but
not limited to, written records, notes, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential Information)
irrespective of the location or form of such material and, if requested by the
Company, shall provide the Company with written confirmation that all such
materials have been delivered to the Company.

 

15.           Indemnification. The
Company agrees to indemnify and hold harmless Executive to the fullest extent
which it is empowered to do so by the LLC Agreement, against all expense,
liability and loss (including attorneys’ fees actually and reasonably incurred
by Executive in connection with any proceedings) resulting from any action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director or officer of the Company or
any of its Subsidiaries during the Engagement Period, provided however, such
indemnification shall not extend to any liability for breach of this Agreement.
The Company shall also use its commercially reasonable efforts to obtain
coverage for him under any insurance policy now in force or hereinafter
obtained during the term of this Agreement covering the other officers and
directors of the Company against lawsuits.

 

16.           Definition of Family Entertainment
Center. For
the purposes of this Agreement, a “Family Entertainment Center” or “Family
Entertainment Center business” means an amusement park, theme park or similar
facility that (x) offers water-leisure recreational facilities and other water
attractions, and/or (y) offers a broad selection of attractions, including, but
not limited to, miniature golf, go kart raceways, batting cages, rides and/or
arcade pavilions.

 

7

 

17.           Notices. All notices,
requests, demands and other communications provided for by this Agreement shall
be in writing and shall be deemed to have been given when mailed at any general
or branch United States Post Office enclosed in a certified postpaid envelope,
return receipt requested, and addressed to the address of the respective party
stated below or to such changed address as the party may have fixed by notice:

 

To the Company:

 

	
   

  	
  Festival Fun Parks, LLC

  	
   

  
	
   

  	
  MidOcean Partners

  	
   

  
	
   

  	
  320 Park Avenue

  	
   

  
	
   

  	
  17th Floor

  	
   

  
	
   

  	
  New York, NY 10022

  	
   

  
	
   

  	
  Attn:  Tyler Zachem

  	
   

  

 

To the Executive:

 

	
   

  	
  17 Lost Meadow Lane

  	
   

  
	
   

  	
  Port Jefferson, NY 11777

  	
   

  

 

Any notice of change of address shall only be
effective, however, when received.

 

18.           Successors and Assigns. This
Agreement shall inure to the benefit of, and be binding upon, the Company, its
successors and assigns, including, without limitation, any corporation, company
or entity which may acquire all or substantially all of the Company’s assets
and business or into which the Company may be consolidated or merged, and the
Executive, his heirs, executors, and legal representatives. The Executive may
assign his right to payment, but not his obligations, under this Agreement.

 

19.           Applicable Law. This
Agreement shall be governed by the laws of the State of New York without giving
effect to principles of conflicts of law.

 

20.           Other Agreements. This
Agreement supersedes all prior understandings and agreements between the
parties. It may not be amended orally, but only by a writing signed by the
parties hereto.

 

21.           Non-Waiver. No delay
or failure by either party in exercising any right under this Agreement, and no
partial or single exercise of that right, shall constitute a waiver of that or
any other right.

 

22.           Arbitration. Any and
all claims, disputes or controversies arising out of or related to this
Agreement, or the breach thereof, shall be resolved by arbitration in
accordance with the rules of the American Arbitration Association then in
existence. Such arbitration shall be conducted by a single arbitrator in the
County of Suffolk.

 

23.           Headings. Headings in
this Agreement are for convenience only and shall not be used to interpret or
construe its provisions.

 

8

 

24.           Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.

 

25.           Severability. In the
event that one or more of the provisions of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity, legality, and enforceability
of the remainder of the Agreement shall not in any way be affected or impaired
thereby. Moreover, if any one or more of the provisions contained in this
Agreement shall be held to be excessively broad as to duration, activity or
subject, such provisions shall be construed by limiting and reducing them so as
to be enforceable to the maximum extent allowed by applicable law.

 

26.           Executive’s Cooperation.
During the Engagement Period and thereafter, Executive shall cooperate with the
Company and its subsidiaries in any internal investigation, any administrative,
regulatory or judicial proceeding or any dispute with a third party as
reasonably requested by the Company (including, without limitation, Executive
being 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 a 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
permitted activities and commitments). If Company requires Executive’s
cooperation in accordance with this ¶26, the Company shall reimburse Executive
solely for reasonable travel expenses (including lodging and meals) upon
submission of receipts.

 

9

 

In witness whereof, the parties have executed this
Amended and Restated Agreement on the date first written above.

 

	
   

  	
  /s/ James Cleary

  	
   

  
	
   

  	
  James Cleary, Executive

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FESTIVAL FUN PARKS, LLC

  
	
   

  	
   

  
	
   

  	
  /s/ John A. Cora

  	
   

  
	
   

  	
  Name: John A. Cora

  
	
   

  	
  Title: Chief Executive
  Officer and President

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