Document:

Exhibit 10.3

 

RESIGNATION AGREEMENT

 

This Resignation Agreement (“Resignation Agreement”) is made between Jay M. Eastman (“Executive”) and Lucid, Inc. (“Lucid” or the “Company,” together with Executive, the “Parties”).

 

WHEREAS, Executive is resigning from his employment with the Company effective, September 30, 2012 (the “Resignation Date”);

 

WHEREAS, this Resignation Agreement fully supersedes any prior agreements and understandings related to Executive’s employment at Lucid, including, without limitation, the Employment Agreement dated December 1, 2010 (the “Employment Agreement”), provided, Sections 8, 9 and 15 of the Employment Agreement (the “Preserved Provisions”) and the Company’s 2007 and 2010 Long-Term Equity Incentive Plans and the associated stock option agreements governing Executive’s stock option grants thereunder (collectively the “Equity Documents”), shall remain in full force and effect;

 

WHEREAS, in exchange for, among other things, Executive entering into, not revoking and complying with this Resignation Agreement, the Company shall provide Executive with the cash payments as described below; and

 

WHEREAS, the payments set forth in this Resignation Agreement are the exclusive payments, benefits and rights to Executive in connection with the ending of Executive’s employment, and by entering into this Resignation Agreement, Executive acknowledges and agrees that he is not entitled to any other severance pay, benefits, equity rights or any other form of compensation or payment including without limitation pursuant to the Employment Agreement or any other agreement, severance plan, program, policy or arrangement, except as otherwise specifically set forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows:

 

1.                                      Resignation from Employment, Officer Positions and Directorships of the Company and its Subsidiaries and Affiliates.  As of the Resignation Date, Executive hereby resigns from his employment with the Company and as an officer of the Company as well as from any other officer positions he holds with any of the Company’s subsidiaries or entities affiliated with the Company.  Executive agrees to execute and deliver any documents reasonably necessary to effectuate such resignations.  Executive acknowledges and agrees that he is not entitled to any severance pay or benefits in connection with such resignation, including pursuant to the Employment Agreement.

 

2.                                      Final Pay. On the Company’s next regular payroll date following the Separation Date, the Company shall pay Executive his accrued but unpaid base salary based on Executive’s employment through the Separation Date (at the rate of $200,000 per year, prorated based on the Separation Date) Specifically, the Company will pay on November 8, 2012 the amount of $28,076.92 less applicable deductions and withholdings. Executive acknowledges and agrees that he is not entitled to any other salary, bonus or reimbursement amounts in connection with his services to the Company nor is he entitled to payment for any accrued vacation.

 

3.                                      Cash Payments.  The Company agrees to pay Executive: (i) a payment of $30,000, less deductions and withholdings, in April 2013,; and (ii) starting in December, 2012, thirty seven (37) monthly payments of $10,000 each payment to be less applicable deductions and withholdings and payable on the Company’s last regular payroll date of each month, and (iii) $844.71 towards Executives COBRA Health Insurance for as long as Executive is covered under COBRA, provided that:

 

(a)                                 in the event that (i) the Company shall fail to pay when due any installment, (ii) the Company shall make an assignment of the whole or a substantial part of its assets for the benefit of

 

 

creditors, or (iii) there shall be commenced by or against the Company any proceeding under any bankruptcy, insolvency, readjustment of debt or similar law of any jurisdiction which, in the case of a proceeding against the Company, shall not have been dismissed within sixty (60) days of its commencement, all remaining unpaid installments shall forthwith become and be due and payable to Executive.

 

For purposes of Section 409A of the Internal Revenue Code (“Section 409A”), each installment shall be a separate payment.  For the avoidance of doubt, in no event shall Executive be entitled to more than $400,000, plus the amount paid for the Executive COBRA coverage, in total pursuant to this Section 3.

 

4.                                      General Releases.  Executive irrevocably and unconditionally releases and forever discharges the Company, all of its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and the fiduciaries of such plans, and the current and former officers, directors, stockholders, executives, attorneys, accountants, and agents of each of the foregoing in their official and personal capacities (collectively referred to as the “Releasees”) generally from all claims, demands, debts, damages and liabilities of every name and nature, known or unknown (“Claims”) that, as of the date when Executive signs this Resignation Agreement, he has, ever had, now claims to have or ever claimed to have had against any or all of the Releasees.  This release includes, without implication of limitation, the complete waiver and release of all Claims of or arising in connection with or for: the Employment Agreement including Claims for breach of express or implied contract; wrongful termination of employment whether in contract or tort; intentional, reckless, or negligent infliction of emotional distress; breach of any express or implied covenant of employment, including the covenant of good faith and fair dealing; interference with contractual or advantageous relations, whether prospective or existing; deceit or misrepresentation; discrimination or retaliation under state, federal, or municipal law, including, without implication of limitation, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., as amended, the Americans with Disabilities Act, 42 U.S.C. § 12101 et seq., the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq.; the New York State Human Rights Law (“NYSHRL”), the New York Executive Law, the New York Labor Law; any other federal, state or local law or regulation prohibiting employment discrimination defamation or damage to reputation; reinstatement; punitive or emotional distress damages; wages, severance pay, vacation pay, back or front pay or other forms of compensation; and attorney’s fees and costs.  Executive understands that this general release of Claims extends to any and all Claims related to Executive’s employment by the Company (including without limitation, any claims against the Company in respect of any stock-based awards of any kind or alleged promises or assurances of such awards) and the termination of his employment, and all Claims in his capacity as a Company stockholder arising up to and through the date that Executive enters into this Resignation Agreement.  Executive understands that this general release does not extend to any rights or claims that may arise out of acts or events that occur after the date on which Executive signs this Resignation Agreement.  Executive represents that he has not assigned to any third party and has not filed with any agency or court any Claim released by this Resignation Agreement.  This release does not affect Executive’s rights or obligations under this Resignation Agreement, the Preserved Provisions or the Equity Documents nor shall it affect the Executive’s rights to indemnification as an officer and/or director of the Company to the fullest extent permitted under law for Executive’s service prior to the Resignation Date.

 

The Company irrevocably and unconditionally releases and forever discharges Executive and his heirs, administrators, representatives, executors, successors and assigns (collectively referred to as the “Executive Releasees”) generally from all Claims that, as of the date when the Company signs this Resignation Agreement, it has, ever had, now claims to have or ever claimed to have had against any or all of the Executive Releasees, provided this release does not release Executive Releasees from claims based on fraud or intentional misconduct by Executive nor does this release affect the Company’s or Executive’s rights and/or obligations under this Resignation Agreement, the Preserved Provisions or the Equity Documents.

 

5.                                      Return of Property.  Executive commits to returning to the Company all Company property, including, without limitation, computer equipment, software, keys and access cards, credit cards,

 

 

files and any documents (including computerized data and any copies made of any computerized data or software) containing information concerning the Company, its business or its business relationships, provided Executive may retain the laptop issued to him by the Company so long as he promptly returns it to Company so that a mirror image of the hard drive may be taken and the device is wiped clean.  After returning all such property, Executive commits to deleting and finally purging any duplicates of files or documents that may contain Company or customer information from any non-Company computer or other device that remains Executive’s property after the Resignation Date. As soon as practical the Company agrees it will discontinue using all credit cards under which Executive is guarantor. Immediately following the Return of the Property the Company agrees to sell to the Executive the computer equipment returned to the Company pursuant to this Section for the amount of One Dollar.

 

6.                                      Advice of Counsel.  This Resignation Agreement is a legally binding document and the Company’s and Executive’s signatures will commit each to its terms.  Executive acknowledges that he has been advised to discuss all aspects of this Resignation Agreement with his attorney, that he has carefully read and fully understands all of the provisions of this Resignation Agreement and that Executive is voluntarily entering into this Resignation Agreement.

 

7.                                      Time for Consideration; Effective Date.  Executive acknowledges that he has been provided with the opportunity to consider this Resignation Agreement for twenty-one (21) days before signing it.  To accept this Resignation Agreement, Executive must return a signed original of this Resignation Agreement so that it is received by Michael Hone the Company’s Chief Executive Officer, on or before the expiration of this twenty-one (21) day period.  Executive and the Company agree that any changes or modifications to this Resignation Agreement shall not restart the twenty-one (21) day period.  For a period of seven (7) days from the day of the execution of this Resignation Agreement, Executive shall retain the right to revoke this Resignation Agreement by written notice that must be received by Mr. Hone before the end of such revocation period.  This Resignation Agreement shall become effective on the business day immediately following the expiration of the revocation period (the “Effective Date”), provided that Executive does not revoke this Resignation Agreement during the revocation period.

 

8.                                      Enforceability.  Executive acknowledges that, if any portion or provision of this Resignation Agreement, including any part of the Preserved Provisions, shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision shall be valid and enforceable to the fullest extent permitted by law.

 

9.                                      Entire Agreement.  This Resignation Agreement constitutes the entire agreement between Executive and the Company concerning Executive’s relationship with the Company, and supersedes and replaces any and all prior agreements and understandings between the Parties concerning the Executive’s relationship with the Company including, without limitation, the Employment Agreement, provided, the Preserved Provisions and the Equity Documents shall continue to be in full force and effect.

 

10.                               Waiver.  No waiver of any provision of this Resignation Agreement, including the Preserved Provisions, which are incorporated by reference into his Agreement, shall be effective unless made in writing and signed by the waiving party.  The failure of either Party to require the performance of any term or obligation of this Resignation Agreement or the Preserved Provisions, or the waiver by either Party of any breach of this Resignation Agreement, including any part of the Preserved Provisions, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

 

11.                               Taxes.  The Company shall undertake to make deductions, withholdings and tax reports with respect to payments and benefits under this Resignation Agreement and in connection with other compensation matters to the extent that it reasonably and in good faith determines that it is required to make such deductions, withholdings and tax reports.  Payments under this Resignation Agreement shall be in amounts net of any such deductions or withholdings.  Nothing in this Resignation Agreement shall be construed to require the Company to make any payments to compensate Executive for any adverse tax

 

 

effect associated with any payments or benefits made to Executive in connection with Executive’s employment with the Company.

 

12.                               Governing Law; Interpretation.  This Resignation Agreement shall be interpreted and enforced under the laws of the State of New York without regard to conflict of law principles.  In the event of any dispute, this Resignation Agreement is intended by the parties to be construed as a whole, to be interpreted in accordance with its fair meaning, and not to be construed strictly for or against either Party or the “drafter” of all or any portion of this Resignation Agreement.

 

13.                               No Mitigation.  Executive shall not be required to mitigate the amount of any payment provided for in this Resignation Agreement by seeking other employment or otherwise, and no payment provided for this Resignation Agreement shall be reduced by any compensation earned by Executive as the result of employment by another employer, or Executive’s receipt of income from any other source.

 

14.                               Counterparts.  This Resignation Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original, but all of which together shall constitute one and the same document.  Facsimile and PDF signatures shall be deemed to be of equal force and effect as originals.

 

IN WITNESS WHEREOF, the Parties, intending to be legally bound, have executed this Resignation Agreement on the date(s) indicated below.

 

LUCID, INC.

 

 

	
/s/   L. Michael Hone
    	
 
    	
11/8/2012
    
	
L. Michael Hone
    	
Date
    
	
Director and Chief Executive Officer
    	
 
    

 

 

I HAVE READ THIS RESIGNATION AGREEMENT THOROUGHLY, UNDERSTAND ITS TERMS AND HAVE SIGNED IT KNOWINGLY AND VOLUNTARILY.  I UNDERSTAND THAT THIS RESIGNATION AGREEMENT IS A LEGAL DOCUMENT.

 

 

	
/s/   Jay M. Eastman
    	
 
    	
11/8/2012
    
	
Jay   M. Eastman
    	
DateExhibit 10.1

 

EXHIBIT A

 

AMC Entertainment Holdings, Inc.

Management Profit Sharing Plan

 

Section 1.  Purpose.  The AMC Entertainment Holdings, Inc. Management Profit Sharing Plan (the “Plan”) is intended to provide incentive bonus awards to certain eligible employees of AMC Entertainment Holdings, Inc. (the “Company”) and its subsidiaries or affiliates in order to attract, retain and incentivize a talented management team.

 

Section 2.  Eligibility.  Each employee who receives a letter (an “Award Letter”) from the Company promptly following the Closing Date, as defined in the Agreement and Plan of Merger, dated as of May 21, 2012, by and among AMC Entertainment Holdings, Inc., Dalian Wanda Group Co., Ltd. (“Wanda”) and, solely with respect to Section 2.11, Article 12 and Section 13.01 and Section 13.06 thereunder, Apollo Management V, L.P. as the “Stockholder Representative” (the “Merger Agreement”) that sets forth his or her allocation of the Aggregate Incentive Bonus (as defined below) as of the Closing Date (individually an “Initial Participant”, and collectively the “Initial Participants”), and any additional employee proposed by the President and Chief Executive Officer of the Company (the “CEO”) and approved by the Company’s Board of Directors (the “Board”) who receives an Award Letter from the Company (any such additional employees, together with the Initial Participants, “Participants”), shall be eligible to participate in the Plan.  Attachment A hereto sets forth the names of the Initial Participants, their respective titles and allocations of Aggregate Incentive Bonus.  The Company shall not be required to disclose Attachment A to Participants; provided that, at the written request of a Participant at or promptly following the payment of the Aggregate Incentive Bonus, the Company shall provide to such Participant the percentage of the Aggregate Incentive Bonus that was unallocated for the Plan Year (as defined below) in respect of which the payment was made.

 

Section 3.  Duration.  This Plan shall become effective on the Closing Date, and, subject to Section 11, shall terminate following the payment of all amounts required to be paid under the Plan (including payment of each Incentive Bonus (as defined below) and each Catch-Up Payment (as defined below) to which any Participant becomes entitled pursuant to the terms of the Plan and the Additional Incentive Bonus (as defined below) if payable pursuant to the terms of the Plan).

 

Section 4.  Administration; Participant Representatives.  The Plan shall be administered by the Board and, subject to Section 5(e)(ii) and Section 18(b), any action of the Board shall be final, conclusive and binding on all persons, including the Company and its subsidiaries and affiliates, Participants and their beneficiaries, and any other persons claiming rights from or through a Participant.  For purposes of this Plan, the “Participant Representatives” shall be (a) the CEO and the Chief Financial Officer of the Company (the “CFO”), if each of the then-current CEO and CFO has an interest in the Aggregate Incentive Bonus at least equal to 6.98% or (b) if any of the then-current CEO or the then-current CFO has an interest in the Aggregate Incentive Bonus less than 6.98%, (i) the two Participants with the largest interest in the Aggregate Incentive Bonus (determined on an individual basis), (ii) if multiple Participants have the largest interest in the Aggregate Incentive Bonus (determined on an individual basis) (the “Interested Participants”), the two Participants appointed by a majority of the Interested Participants or (iii) if one Participant has the largest interest in the Aggregate Incentive Bonus and multiple Participants have the second largest interest in the Aggregate Incentive Bonus (determined on an individual basis) (the “Secondary Interested Participants”), the

 

 

Participant with the largest interest in the Aggregate Incentive Bonus and the Participant appointed by a majority of the Secondary Interested Participants.  For the avoidance of doubt, only a then-current employee of the Company is eligible to be a Participant Representative, an Interested Participant or a Secondary Interested Participant.

 

Section 5.  Incentive Bonus; Catch-Up Payment; Additional Incentive Bonus; “Net Profit”.  (a)  Each Participant shall be eligible to receive an Incentive Bonus (as defined below) for each year ending on December 31, 2012, 2013, 2014 and 2015 (each such year, a “Plan Year”, and the period from the Closing Date through and including December 31, 2015, the “Applicable Period”), calculated as described in Section 5(b), payable in a single lump sum as soon as reasonably practicable following the issuance of the Company’s audited financial statements for the Plan Year to which the Incentive Bonus relates, but in no event shall any Incentive Bonus be paid after May 15th of the year following the Plan Year to which such Incentive Bonus relates.  Each Incentive Bonus and Catch-Up Payment and the Additional Incentive Bonus shall be paid in cash; provided, however, that the Board may determine that such payments be paid in a form other than cash, including payment in marketable securities, subject to the consent of both of the Participant Representatives.  The Board and the Participant Representatives will determine the form of payment, the amount to be received in such form and the terms and conditions of using such form of payment.

 

Section 1.01For each Plan Year that the Company achieves the applicable Net Profit target set forth on Attachment B hereto (the “Net Profit Target”), the Company shall pay to Participants an aggregate amount equal to 10% of the Net Profit (as defined below) for the applicable Plan Year (the aggregate amount for each such Plan Year, the “Aggregate Incentive Bonus”).  For any Plan Year in which the Company achieves the applicable Net Profit Target, the Aggregate Incentive Bonus for such Plan Year shall be unlimited.  Except as provided in Section 5(c), if the Company does not achieve the applicable Net Profit Target for a Plan Year, no Aggregate Incentive Bonus shall be payable for such Plan Year.  Subject to Sections 5(a), 6, 7 and 10, for each Plan Year, the Company shall pay to each Participant an amount equal to the percentage of the Aggregate Incentive Bonus allocated to such Participant as set forth in such Participant’s Award Letter (each such payment, an “Incentive Bonus”).  Notwithstanding anything to the contrary herein, if the Reported Net Profit (as defined below) is less than zero for any Plan Year, no Aggregate Incentive Bonus shall be paid for such Plan Year.

 

Section 1.02Notwithstanding Section 5(b), if the Company fails to achieve the applicable Net Profit Target for one or more Plan Years, each Participant shall be eligible to receive Catch-Up Payments (as defined below) as set forth in this Section 5(c).

 

(a)                                 The following definitions shall apply for purposes of this Section 5:

 

(i)                                     “Cumulative Net Profit Surplus” shall mean, as of the end of any Plan Year, the aggregate Net Profit Surplus for all Qualified Surplus Years as of the end of such Plan Year.

 

(ii)                                  “Net Profit Deficit” shall mean, for each Qualified Deficit Year, the difference between the applicable Net Profit Target for such Qualified Deficit Year and the Net Profit achieved by the Company for such Qualified Deficit Year.

 

 

(iii)                               “Net Profit Surplus” shall mean, for each Qualified Surplus Year, the excess of the Net Profit achieved for such Qualified Surplus Year over the applicable Net Profit Target for such Qualified Surplus Year.

 

(iv)                              “Qualified Deficit Year” shall mean each Qualified Year in which the Company achieves Net Profit that is less than 100% of the applicable Net Profit Target for such Qualified Year.

 

(v)                                 “Qualified Surplus Year” shall mean each Qualified Year in which the Company achieves Net Profit that is more than 100% of the applicable Net Profit Target for such Qualified Year.

 

(vi)                              “Qualified Year” shall mean each Plan Year in which the Company achieves Net Profit that is at least 80% of the applicable Net Profit Target for such Plan Year (for the avoidance of doubt, “Qualified Year” includes any Plan Year in which Net Profit exceeds 100% of the applicable Net Profit Target for such Plan Year).

 

(b)                                 For each Qualified Year, if the Cumulative Net Profit Surplus (measured as of the end of such Qualified Year) equals or exceeds the Net Profit Deficit for any one or more Qualified Deficit Year(s) (including, if applicable, such Plan Year), the Company shall pay to Participants an amount equal to 10% of the Net Profit achieved for such Qualified Deficit Year(s) in which the Cumulative Net Profit Surplus applied to such Qualified Deficit Year(s) equals or exceeds the Net Profit Deficit for such Qualified Deficit Year(s) (the “Aggregate Catch-Up Payment”).  Any Cumulative Net Profit Surplus shall be applied first to the most recently completed Qualified Deficit Year in which such Cumulative Net Profit Surplus equals or exceeds the full amount of the Net Profit Deficit for such Qualified Deficit Year, and successively thereafter to each preceding Qualified Deficit Year in which such Cumulative Net Profit Surplus (subject to Section 5(c)(iv)(B)) equals or exceeds the full amount of the Net Profit Deficit for such Qualified Deficit Year.  Following the Plan Year ending December 31, 2015, the Cumulative Net Profit Surplus for all Plan Years shall be reapplied in a manner in which results in the largest Aggregate Catch-Up Payment (see Section 5(c)(v)(J) for an example of such reapplication).

 

(c)                                  Subject to Sections 6, 7 and 10, the Company shall pay to each Participant an amount equal to the percentage of the Aggregate Catch-Up Payment allocated to such Participant as set forth in such Participant’s Award Letter (each such payment, a “Catch-Up Payment”).  For the avoidance of doubt, subject to Sections 6 and 7, each Participant’s allocated percentage of the Aggregate Catch-Up Payment shall be equal to such Participant’s allocated percentage of the Aggregate Incentive Bonus for the year of payment of the Aggregate Incentive Bonus that gave rise to the Aggregate Catch-Up Payment.  Each Catch-Up Payment shall be payable in a single lump sum as soon as reasonably practicable following the issuance of the Company’s audited financial statements for the Qualified Year in which such Catch-Up Payment is earned, but in no event later than May 15th of the Plan Year following the Qualified Year in which such Catch-Up Payment is earned.  Except as provided in Section 5(a), each Catch-Up Payment shall be paid in cash.  For purposes of this Plan, a Catch-Up Payment shall be deemed to be earned in a Qualifying Year if, at the end of such Qualifying Year, the right to the Aggregate Catch-Up Payment is

 

 

established pursuant to this Section 5(c) through the application of Cumulative Net Profit Surplus.

 

(d)                                 For the avoidance of doubt, (A) for any Qualified Year in which the Company achieves at least 100% of the Net Profit Target, any Aggregate Catch-Up Payment shall be paid in addition to the Aggregate Incentive Bonus for such Qualified Year and (B) any portion of the Cumulative Net Profit Surplus that is applied to the Net Profit Deficit for a Qualified Deficit Year shall not be applied to the Net Profit Deficit for any other Qualified Deficit Year during the Applicable Period, but any portion of the Cumulative Net Profit Surplus that is not applied to the Net Profit Deficit for a Qualified Deficit Year may be applied to the Net Profit Deficit for any other Qualified Deficit Year during the Applicable Period.

 

(e)                                  Examples.  The following examples are intended to demonstrate the principles of this Section 5(c) and, in each case, are presented for illustrative purposes only.  For the avoidance of doubt, the Net Profit Target in each of the following examples has been fictionalized for ease of calculation.

 

(i)                                     If for the Plan Year ending on December 31, 2012 the Company achieves the Net Profit Target and the applicable Net Profit is equal to US$ 10,000,000, Participants would be entitled to an Aggregate Incentive Bonus equal to US$ 1,000,000.  The US$ 1,000,000 will be distributed to Participants based on the allocations set forth in their Award Letters.  If the Company did not achieve the Net Profit Target for the Plan Year ending on December 31, 2012, then the Aggregate Incentive Bonus will be US$ 0, regardless of the Net Profit achieved by the Company.

 

(ii)                                  If for the Plan Year ending on December 31, 2012 the Company achieves 80% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 8,000,000), and for the Plan Year ending on December 31, 2013 the Company achieves 110% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 22,000,000), then (1) the Plan Year ending on December 31, 2012 would be a Qualified Deficit Year, (2) the Aggregate Incentive Bonus for the Plan Year ending on December 31, 2012 would be equal to US$ 0, (3) the Plan Year ending on December 31, 2013 would be a Qualified Surplus Year, (4) the Cumulative Net Profit Surplus as of December 31, 2013 would be equal to US$ 2,000,000 (5) the Aggregate Incentive Bonus for the Plan Year ending on December 31, 2013 would be equal to US$ 2,200,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2013) and (6) the Aggregate Catch-Up Payment for the Plan Year ending on December 31, 2013 would be equal to US$ 800,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2012 due to application of US$ 2,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2013 to the Net Profit Deficit for the Plan Year ending December 31, 2012).

 

(iii)                               If for the Plan Year ending on December 31, 2012 the Company achieves 120% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 12,000,000) and for the Plan Year ending on December 31, 2013 the Company achieves 90% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 18,000,000), then (1) the Plan Year ending

 

 

December 31, 2012 would be a Qualified Surplus Year, (2) the Cumulative Net Profit Surplus as of December 31, 2012 would be equal to US$ $2,000,000, (3) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2012 would be US$ 1,200,000 (i.e., 10% of the Net Profit achieved for the year ending December 31, 2012), (4) the Plan Year ending December 31, 2013 would be a Qualified Deficit Year, (5) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2013 would be equal to US$ 0 and (6) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2013 would be equal to US$ 1,800,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2013 due to application of US$ 2,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2012 to the Net Profit Deficit for the Plan Year ending December 31, 2013).

 

(iv)                              If for the Plan Year ending on December 31, 2012 the Company achieves 85% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 8,500,000), for the Plan Year ending on December 31, 2013 the Company achieves 100% of the Net Profit Target of US$ 20,000,000 and for the Plan Year ending on December 31, 2014 the Company achieves 105% of the Net Profit Target of US$ 30,000,000 (i.e., US$ 31,500,000), then (1) the Plan Year ending December 31, 2012 would be a Qualified Deficit Year, (2) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2012 would be equal to US$ 0, (3) the Plan Year ending on December 31, 2013 would be a Qualified Year (but not a Qualified Surplus Year or a Qualified Deficit Year), (4) the Aggregate Incentive Bonus for the year ending December 31, 2013 would be equal to US$ 2,000,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2013), (5) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2013 would be equal to US$ 0, (6) the Plan Year ending on December 31, 2014 would be a Qualified Surplus Year, (7) the Cumulative Net Profit Surplus as of December 31, 2014 would be equal to US$ 1,500,000, (8) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 would be equal to US$ 3,150,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2014) and (9) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2014 would be equal to US$ 850,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2012 due to application of US$ 1,500,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2014 to the Net Profit Deficit for the Plan Year ending December 31, 2012).

 

(v)                                 If for the Plan Year ending on December 31, 2012 the Company achieves 85% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 8,500,000), for the Plan Year ending on December 31, 2013 the Company achieves 70% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 14,000,000) and for the Plan Year ending on December 31, 2014 the Company achieves 105% of the Net Profit Target of US$ 30,000,000 (i.e., US$ 31,500,000), then (1) the Plan Year ending December 31, 2012 would be a Qualified Deficit Year, (2) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2012 would be equal to US$ 0, (3) the Plan Year ending on December 31, 2013 would not be a Qualified Year (or a Qualified Surplus Year or a Qualified Deficit Year),

 

 

(4) the Aggregate Incentive Bonus for the year ending December 31, 2013 would be equal to US$ 0, (5) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2013 would be equal to US$ 0, (6) the Plan Year ending on December 31, 2014 would be a Qualified Surplus Year, (7) the Cumulative Net Profit Surplus as of December 31, 2014 would be equal to US$ 1,500,000, (8) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 would be equal to US$ 3,150,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2014) and (9) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2014 would be equal to US$ 850,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2012 due to application of US$ 1,500,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2014 to the Net Profit Deficit for the Plan Year ending December 31, 2012).

 

(vi)                              If for the Plan Year ending on December 31, 2012 the Company achieves 90% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 9,000,000), for the Plan Year ending on December 31, 2013 the Company achieves 90% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 18,000,000) and for the Plan Year ending on December 31, 2014 the Company achieves 110% of the Net Profit Target of US$ 30,000,000 (i.e., US$ 33,000,000), then (1) the Plan Year ending December 31, 2012 would be a Qualified Deficit Year, (2) the Aggregate Incentive Bonus for Plan Year ending December 31, 2012 would be equal to US$ 0, (3) the Plan Year ending December 31, 2013 would be a Qualified Deficit Year, (4) the Aggregate Incentive Bonus for the year ending December 31, 2013 would be equal to US$ 0, (5) the Aggregate Catch-Up Payment for the year ending December 31, 2013 would be equal to US$ 0, (6) the Plan Year ending December 31, 2014 would be a Qualified Surplus Year, (7) the Cumulative Net Profit Surplus as of December 31, 2014 would be equal to US$ 3,000,000, (8) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 would be equal to US$ 3,300,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2014) and (9) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2014 would be equal to US$ 2,700,000 (i.e., the sum of 10% of the Net Profit achieved for the Plan Year ending December 31, 2013 (due to application of US$ 2,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2014 to the Net Profit Deficit for the Plan Year ending December 31, 2013) and 10% of the Net Profit achieved for the Plan Year ending December 31, 2012 (due to application of US$ 1,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2014 to the Net Profit Deficit for the Plan Year ending December 31, 2012)).

 

(vii)                           If for the Plan Year ending on December 31, 2012 the Company achieves 130% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 13,000,000), for the Plan Year ending on December 31, 2013 the Company achieves 70% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 14,000,000) and for the Plan Year ending on December 31, 2014 the Company achieves 90% of the Net Profit Target of US$ 30,000,000 (i.e., US$ 27,000,000), then (1) the Plan Year ending on December 31, 2012 would be a Qualified Surplus Year, (2) the

 

 

Cumulative Net Profit Surplus as of December 31, 2012 would be $3,000,000, (3) the Aggregate Incentive Bonus for Plan Year ending December 31, 2012 would be equal to US$ 1,300,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2012), (4) the Plan Year ending on December 31, 2013 would not be a Qualified Year (or a Qualified Surplus Year or a Qualified Deficit Year), (5) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2013 would be equal to US$ 0, (6) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2013 would be equal to US$ 0, (7) the Cumulative Net Profit Surplus as of December 31, 2013 would be $3,000,000, (8) the Plan Year ending December 31, 2014 would be a Qualified Deficit Year, (9) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 would be equal to US$ 0 and (10) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2014 would be equal to US$ 2,700,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2014 due to application of US$ 3,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2012 to the Net Profit Deficit for the Plan Year ending December 31, 2014).

 

(viii)                        If for the Plan Year ending on December 31, 2012 the Company achieves 80% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 8,000,000), for the Plan Year ending on December 31, 2013 the Company achieves 80% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 16,000,000), for the Plan Year ending on December 31, 2014 the Company achieves 100% of the Net Profit Target of US$ 30,000,000 and for the Plan Year ending on December 31, 2015 the Company achieves 115% of the Net Profit Target of US$ 40,000,000 (i.e., US$ 46,000,000), then (1) the Plan Year ending December 31, 2012 would be a Qualified Deficit Year, (2) the Aggregate Incentive Bonus for Plan Year ending December 31, 2012 would be equal to US$ 0, (3) the Plan Year ending December 31, 2013 would be a Qualified Deficit Year, (4) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2013 would be equal to US$ 0, (5) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2013 would be equal to US$ 0, (6) the Plan year ending December 31, 2014 would be a Qualified Year (but not a Qualified Surplus Year or a Qualified Deficit Year), (7) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 would be equal to US$ 3,000,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2014), (8) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2014 would be equal to US$ 0, (9) the Plan Year ending December 31, 2015 would be a Qualified Surplus Year, (10) the Cumulative Net Profit Surplus as of December 31, 2015 would be equal to US$ 6,000,000, (11) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2015 would be equal to US$ 4,600,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2015) and (12) the Aggregate Catch-Up Payment for the year ending December 31, 2015 would be equal to US$ 2,400,000 (i.e., the sum of 10% of the Net Profit achieved for the Plan Year ending December 31, 2013 (due to application of US$ 4,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2015 to the Net Profit Deficit for the Plan Year ending December 31, 2013) and 10% of the Net Profit achieved for the Plan Year ending December 31, 2012 (due to

 

 

application of US$ 2,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2015 to the Net Profit Deficit for the Plan Year ending December 31, 2012)).

 

(ix)                              If for the Plan Year ending on December 31, 2012 the Company achieves 80% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 8,000,000), for the Plan Year ending on December 31, 2013 the Company achieves 105% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 21,000,000), for the Plan Year ending on December 31, 2014 the Company achieves 130% of the Net Profit Target of US$ 30,000,000 (i.e., US$ 39,000,000) and for the Plan Year ending on December 31, 2015 the Company achieves 80% of the Net Profit Target of US$ 40,000,000 (i.e., US$ 32,000,000), then (1) the Plan Year ending on December 31, 2012 would be a Qualified Deficit Year, (2) the Aggregate Incentive Bonus for Plan Year ending December 31, 2012 would be equal to US$ 0, (3) the Plan Year ending on December 31, 2013 would be a Qualified Surplus Year, (4) the Cumulative Net Profit Surplus as of December 31, 2013 would be equal to US$ 1,000,000, (5) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2013 would be equal to US$ 2,100,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2013), (6) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2013 would be equal to US$ 0, (7) the Plan Year ending December 31, 2014 would be a Qualified Surplus Year (8) the Aggregate Incentive Bonus for the year ending December 31, 2014 would be equal to US$ 3,900,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2014), (9) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2014 would be equal to US$ 800,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2012 due to application of US$ 2,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2014 to the Net Profit Deficit for the Plan Year ending December 31, 2012), (10) the Cumulative Net Profit Surplus as of December 31, 2014 (after application of the Cumulative Net Profit Surplus to the Net Profit Deficit for the Plan Year ending December 31, 2012) would be equal to US$ 8,000,000 (i.e., US$ 1,000,000 Cumulative Net Profit Surplus as of December 31, 2013 plus US$ 9,000,000 Cumulative Net Profit Surplus as of December 31, 2014 minus US$ 2,000,000 Net Profit Deficit for the Plan Year ending December 31, 2012), (11) the Plan Year ending December 31, 2015 would be a Qualified Deficit Year, (12) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2015 would be equal to US$ 0 and (13) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2015 would be equal to US$ 3,200,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2015 due to application of US$ 8,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2015 to the Net Profit Deficit for the Plan Year ending December 31, 2015).

 

(x)                                 If for the Plan Year ending on December 31, 2012 the Company achieves 90% of the Net Profit Target of US$ 10,000,000 (i.e., US$ 9,000,000), for the Plan Year ending on December 31, 2013 the Company achieves 90% of the Net Profit Target of US$ 20,000,000 (i.e., US$ 18,000,000), for the Plan Year ending on December 31, 2014 the

 

 

Company achieves 105% of the Net Profit Target of US$ 30,000,000 (i.e., US$ 31,500,000) and for the Plan Year ending on December 31, 2015, the Company achieves 102% of the Net Profit Target of US$ 40,000,000 (i.e., US$ 40,800,000), then (1) the Plan Year ending December 31, 2012 would be a Qualified Deficit Year, (2) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2012 would be equal to US$ 0, (3) the Plan Year ending on December 31, 2013 would be a Qualified Deficit Year, (4) the Aggregate Incentive Bonus for the year ending December 31, 2013 would be equal to US$ 0, (5) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2013 would be equal to US$ 0, (6) the Plan Year ending on December 31, 2014 would be a Qualified Surplus Year, (7) the Cumulative Net Profit Surplus as of December 31, 2014 would be equal to US$ 1,500,000, (8) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 would be equal to US$ 3,150,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2014), (9) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2014 would be equal to US$ 900,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2012 due to application of US$ 1,000,000 of the Cumulative Net Profit Surplus as of the end of the Plan Year ending December 31, 2014 to the Net Profit Deficit for the Plan Year ending December 31, 2012), (10) the Plan Year ending on December 31, 2015 would be a Qualified Surplus Year, (11) the Cumulative Net Profit Surplus as of December 31, 2015 would be equal to US$ 1,300,000 (i.e., the sum of US$ 500,000 (the unapplied Net Profit Surplus for the Plan Year ending December 31, 2014) and US$ 800,000 (the Net Profit Surplus earned during the Plan Year ending December 31, 2015), (12) the Aggregate Incentive Bonus for the Plan Year ending December 31, 2015 would be equal to US$ 4,080,000 (i.e., 10% of the Net Profit achieved for the Plan Year ending December 31, 2015) and (13) the Aggregate Catch-Up Payment for the Plan Year ending December 31, 2015 would be equal to US$ 0.  Following the end of the Plan Year ending December 31, 2015, the Cumulative Net Profit Surplus for all Plan Years would be reapplied so that Participants receive the largest Aggregate Catch-Up Payment (i.e., 10% of the Net Profit achieved in the Plan Year ending December 31, 2013).  The Net Profit Surplus for the Plan Year ending December 31, 2014 (i.e., US$ 1,500,000) and the Net Profit Surplus for the Plan Year ending December 31, 2015 (i.e., US$ 800,000) would be applied to the Net Profit Deficit for the Plan Year ending December 31, 2013 (i.e., US$ 2,000,000) so that, following the end of the Plan Year ending December 31, 2015, Participants would be entitled to an Aggregate Catch-Up Payment of US$ 900,000 (i.e., the difference between 10% of the Net Profit achieved for the Plan Year ending December 31, 2013 (i.e., US$ 1,800,000) and the Aggregate Catch-Up Payment received by Participants following the end of the Plan Year ending December 31, 2014 (i.e., US$ 900,000)).

 

Section 1.03Except as otherwise set forth in Section 5(d)(i), if (x) each Plan Year is a Qualified Year, (y) the Company achieves aggregate Net Profit for all Plan Years equal to or greater than the aggregate Net Profit Targets for such Plan Years and (z) the aggregate amount of the Aggregate Incentive Bonuses paid for all Plan Years is less than US$ 50,000,000, then Participants who have been continuously employed by the Company or a subsidiary or affiliate of the Company from the Closing Date through

 

 

the first business day of 2016 (“Continuous Participants”) shall be entitled to receive an additional bonus award in the aggregate equal to US$ 50,000,000 less the aggregate amount of the Aggregate Incentive Bonuses and the Aggregate Catch-Up Payments paid for all Plan Years (the “Additional Incentive Bonus”).  The Additional Incentive Bonus shall be allocated to each Continuous Participant in accordance with the allocation set forth in such Continuous Participant’s Award Letter; provided that any unallocated or forfeited amount shall be reallocated to each Continuous Participant pro rata in accordance with the allocations set forth in the Award Letters for all Continuous Participants, unless the CEO (or, if applicable, the CEO’s successor) recommends a different reallocation of such amounts to the Board and the Board approves such recommendation.  For the avoidance of doubt, the CEO’s recommendation with respect to the reallocation of such amount may include allocations to any then-current or former Participants, as well as any new Participants (any such additional current, former or new Participants, together with the Continuous Participants, “Final Participants”).  The portion of the Additional Incentive Bonus to which each individual is entitled shall be payable in a single lump sum as soon as reasonably practicable following the issuance of the Company’s audited financial statements for the Plan Year ending December 31, 2015, but in no event later than May 15, 2016.

 

(a)                                 Plan Year ending on December 31, 2012.  If (A) the Company does not achieve the Net Profit Target for the Plan Year ending on December 31, 2012, (B) the Reported Net Profit (as defined below) for such Plan Year equals at least (US$ 30,000,000) and (C) no member of Senior Management (as defined on Attachment C) has engaged in any act of fraud, dishonesty, gross negligence or other misconduct that resulted in a reduction in Reported Net Profit for the Plan Year ending on December 31, 2012, then the Board will consider, in the exercise of its reasonable good faith discretion, whether the Net Profit Target for such Plan Year shall be deemed to have been achieved at the US$ 10,000,000 target for purposes of determining whether Continuous Participants are eligible to receive an Additional Incentive Bonus under Section 5(d) above.

 

(b)                                 Example.  The following example is intended to demonstrate the principles of this Section 5(d) and is presented for illustrative purposes only.  If (i) the Company achieves at least 100% of the Net Profit Target for each Plan Year ending on December 31, 2012, 2013 and 2014, (ii) the Company achieves 80% of the Net Profit Target for the Plan Year ending December 31, 2015, (iii) for all Plan Years the Company achieves aggregate Net Profit equal to the aggregate Net Profit Targets for such Plan Years (which ,for the avoidance of doubt, includes the Net Profit Deficit in the Plan Year ending December 31, 2015), and (iv) the aggregate amount of the Aggregate Incentive Bonuses paid in such Plan Years is equal to US$ 40,000,000, Final Participants will be entitled to an aggregate Additional Incentive Bonus of US$ 10,000,000.  However, if the Company achieves the Net Profit Targets for each Plan Year except the Plan Year ending on December 31, 2013 is not a Qualified Year (i.e., the Company fails to achieve at least 80% of the Net Profit Target for the Plan Year ending on December 31, 2013), no Additional Incentive Bonus will be paid to Final Participants.  For the avoidance of doubt, if the Company achieves at least 80% of the Net Profit Target each Plan Year and the aggregate amount of the Aggregate Incentive Bonuses paid for such Plan Years is equal to US$ 60,000,000, Continuous Participants will not be entitled to any Additional Incentive Bonus.

 

 

Section 1.04For purposes of the Plan, “Net Profit” means (w) net earnings or net loss, calculated under U.S. GAAP, as reported in the Company’s audited financial statements (the “Reported Net Profit”) increased or decreased as identified and specified in Attachment B hereto, as applicable, by (x) any Specified Exclusions, (y) any Transaction Adjustments and (z) any Dividend Alternative.

 

(a)                                 The Net Profit Target for each Plan Year is set forth on Attachment B hereto.

 

(b)                                 An independent accounting firm, which shall be a “Big Four” accounting firm appointed by the Board (the “Independent Accounting Firm”), shall perform agreed upon procedures on the calculation of Net Profit and shall determine the amount of any Aggregate Incentive Bonus and any Aggregate Catch-Up Payment for each Plan Year, which shall be the final, conclusive and binding determination of Net Profit, and the amount of any Aggregate Incentive Bonus and any Aggregate Catch-Up Payment, on all persons, including the Company and its affiliates and subsidiaries, Participants and their beneficiaries, and any other persons claiming rights from or through a Participant.  For the avoidance of doubt, the Independent Accounting Firm will determine the amount of any Specified Exclusion, Transaction Adjustment or Dividend Alternative based on information provided by the Company.

 

Section 6.  Termination of Employment.  In order to be eligible to receive an Incentive Bonus or a Catch-Up Payment, a Participant must remain employed by the Company or a subsidiary or affiliate of the Company through the first business day following the end of the Plan Year to which the Incentive Bonus relates or through the first business day following the end of the Plan Year in which the Catch-Up Payment is earned, as applicable.  If a Participant was allocated a portion of the Aggregate Incentive Bonus or the Aggregate Catch-Up Payment but subsequently forfeits such allocation due to his or her termination of employment for any reason, such allocation will be reallocated to the other Participants pro rata in accordance with the then-current allocation of the Aggregate Incentive Bonus or Aggregate Catch-Up Payment, as applicable, unless the CEO recommends to the Board a different allocation of such amount and the Board approves such alternative allocation.

 

Section 7. Unallocated Amount.  10% of the Aggregate Incentive Bonus and the Aggregate Catch-Up Payment (each such 10% portion of the Aggregate Incentive Bonus and the Aggregate Catch-Up Payment, the “Unallocated Amount”) shall remain unallocated as of the effective date of the Plan.  In the event of any payment of an Aggregate Incentive Bonus or Aggregate Catch-Up Payment, the Unallocated Amount shall be allocated and paid to the Participants pro rata in accordance with the then-current allocation of the Aggregate Incentive Bonus or Aggregate Catch-Up Payment, as applicable, unless the CEO recommends to the Board a different allocation of the Unallocated Amount and the Board approves such alternative allocation.  For the avoidance of doubt, the CEO’s recommendation as to the Unallocated Amount with respect to any Plan Year may be made at any time prior to the payment of the Aggregate Incentive Bonus or Aggregate Catch-Up Payment for such Plan Year.  Any unallocated amount of the Additional Incentive Bonus shall be allocated in accordance with Section 5(d).

 

Section 8.  Reallocations.  Except as expressly provided for herein, the allocation set forth in each Award Letter shall not be adjusted.

 

 

Section 9. “Clawback”. (a)  From the Closing Date through the third anniversary of the termination of the Plan, as determined pursuant to Section 3 above, each Participant shall be subject to mandatory repayment of all or a portion of any Incentive Bonus, Catch-Up Payment or Additional Incentive Bonus by the Participant solely to the extent that the payment was based on materially inaccurate financial statements; provided that financial statements will not be considered to be materially inaccurate due to changes required as a result of a change in U.S. GAAP or a change in guidance promulgated by a governing regulatory body, or retroactive changes in law or regulation.  If the Company seeks repayment of all or a portion of an Incentive Bonus, Catch-Up Payment or Additional Incentive Bonus pursuant to this Section 9, the Company shall deliver to all Participants to which such repayment would be applicable a written notice (a “Clawback Notice”) that sets forth the amount of the Incentive Bonus, Catch-Up Payment or Additional Incentive Bonus that the Company seeks repayment of and, in reasonable detail, the basis for such repayment.  Any repayment pursuant to this Section 9 shall be due forty-five (45) days following delivery of the Clawback Notice.

 

Section 1.05Example.  The following example is intended to demonstrate the principles of this Section 9 and is presented for illustrative purposes only.  If (i) the Company achieves Net Profit for the Plan Year ending December 31, 2014 equal to US$ 200,000,000, (ii) Participants receive an Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 equal to US$ 20,000,000 and (iii) as a result of inaccurate financial statements, Net Profit for the Plan Year ending December 31, 2014 is restated to US$ 120,000,000, Participants who received a portion of the Aggregate Incentive Bonus for the Plan Year ending December 31, 2014 may be required to repay an aggregate amount of such Aggregate Incentive Bonus equal to US$ 8,000,000.

 

Section 10.  Withholding.  Any amounts payable under this Plan shall be subject to withholding and to such other deductions as shall at the time of such payment be required for any Federal, state, local, foreign or other taxes as are required to be withheld pursuant to any applicable law or regulation.

 

Section 11.  Termination or Amendment.  The Board may amend or terminate the Plan at any time; provided that, without the prior written consent of an affected Participant, no amendment or termination of the Plan may (i) materially adversely affect the rights of such Participant or (ii) adversely affect the amount of any Incentive Bonus, Catch-Up Payment or portion of the Additional Incentive Bonus payable to such Participant; provided that, subject to Section 17, the Board may amend the Plan without the prior written consent of Participants to cause the Plan to comply with applicable law or accounting or tax rules and regulations.  The failure of a Participant or the Company to insist upon strict adherence to any term of this Plan on any occasion shall not be considered a waiver of such Participant’s or the Company’s rights or deprive such Participant or the Company of the right thereafter to insist upon strict adherence to such term or any other term of this Plan.  No failure or delay by any Participant or the Company in exercising any right or power hereunder will operate as a waiver thereof, nor will any single or partial exercise of any such right or power, or any abandonment of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power.

 

Section 12. Confidentiality.  The terms of the Plan (including without limitation the allocations set forth in any Award Letter) are confidential.  Participants shall not disclose any terms of the Plan or any Award Letter except to the extent such information becomes generally available to the public other than as a result of disclosure by a Participant.

 

 

Section 13.  No Right to Continued Employment. Nothing in the Plan constitutes an express or implied contract or other agreement concerning the duration of any Participant’s employment with the Company or any of its subsidiaries or affiliates.  In consideration of being eligible to participate in the Plan, following the Merger (as defined in the Merger Agreement), each Participant who is a party to an employment agreement with the Company immediately prior to the Merger shall continue to be subject to the terms and conditions of such Participant’s employment agreement following the Merger, unless and until such Participant enters into a new Board-approved employment agreement with the Company.

 

Section 14.  Non-Exclusivity of Rights.  Nothing in the Plan shall prevent or limit any Participant’s continuing or future participation in any plan, practice, policy or program provided by the Company or any of its affiliates for which the Participant may qualify, nor shall anything in the Plan limit or otherwise affect any rights the Participant may have under any contract or agreement with the Company or any affiliate.  Vested benefits and other amounts that any Participant is otherwise entitled to receive under any incentive compensation (including any equity award agreement), deferred compensation, retirement, pension or other plan, practice, policy or program of, or any contract or agreement with, the Company or any affiliate shall be payable in accordance with the terms of each such plan, practice, policy, program, contract or agreement, as the case may be.

 

Section 15.  Miscellaneous.  This Plan is written in both English and Chinese. The Company acknowledges that this Plan was negotiated based on the English version and has been translated into a Chinese version.  Notwithstanding the foregoing, the Company hereby agrees that, in the event that there is any discrepancy or inconsistency between the English version and Chinese version, the English version shall prevail in all cases over the Chinese version.

 

Section 16.  Notices.  All notices or other communications required or permitted by this Plan will be made in writing and all such notices or communications will be deemed to have been duly given when delivered or (unless specified) mailed by United States certified or registered mail, return receipt requested, postage prepaid, address as follows:

 

(a)  If to the Company:

 

AMC Entertainment Holdings, Inc.

920 Main Street

Kansas City, MO 64105

Facsimile: (816) 480-4700

Attention: General Counsel

 

with a copy to:

 

Dalian Wanda Group Co. Ltd.

21/F Block B, Wanda Plaza

93 Jianguo Road

Chaoyang District, Beijing

China 100022

Facsimile: +86 (10) 8585-3095

Attention: Wu Hua

 

 

(b)  If to a Participant, to such Participant’s address as most recently supplied to the Company and set forth in the Company’s records;

 

or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

 

Section 17.  Section 409A.  (a)  All payments hereunder are intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, the Treasury Regulations promulgated thereunder, and other Treasury Department guidance and interpretive authority issued with respect thereto (“Section 409A”). If a payment is deemed subject to Section 409A, the Board may, in its sole discretion and without a Participant’s prior consent, amend the Plan, adopt policies and procedures, or take any other necessary or appropriate actions (including actions with retroactive effect) to (i) preserve the intended tax treatment of any such payment, or (ii) comply with the requirements of Section 409A, including without limitation any such regulations guidance, compliance programs and other interpretative authority issued after the effective date of the Plan, in a manner determined by the Board in good faith in its sole discretion to have the least adverse consequences to the Participants.  Whenever a payment under this Plan specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

Section 1.06Neither any Participant nor any of such Participant’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Plan to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment.  Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to any Participant or for such Participant’s benefit under this Plan may not be reduced by, or offset against, any amount owing by the Participant to the Company or any of its affiliates.  It is intended that each payment provided under this Plan is a separate “payment” for purposes of Section 409A.

 

If a Participant is deemed on the date of termination of employment to be a “specified employee” within the meaning of that term under Section 409A, then with regard to any payment that is considered nonqualified deferred compensation under Section 409A payable on account of a “separation from service,” such payment shall be made on the tenth (10th) business day following the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Participant, and (ii) the date of Participant’s death (the “Delay Period”).  Upon the expiration of the Delay Period, all payments delayed pursuant to this section (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid to the Participant in a lump sum on the tenth (10th) business day following the Delay Period, and any remaining payments due under this Plan shall be paid in accordance with the normal payment dates specified for them herein.

 

Section 18.  Governing Law; Clawback; Dispute Resolution.  (a)  The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to any choice of law or conflicting provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the law of any jurisdiction other than the State of Delaware to be applied.

 

 

Section 1.07If a Participant in good faith objects to the clawback of all or any portion of his or her Incentive Bonus, Catch-Up Payment or Additional Incentive Bonus pursuant to Section 9, within forty-five (45) days following delivery of the Clawback Notice, such Participant shall deliver to the Clawback Representative (as defined below) a written notice that sets forth in reasonable detail the basis for the Participant’s objection to the clawback (the “Participant Clawback Dispute Notice”).  For purposes of this Section 18(b), “Clawback Representative” shall mean: (i) the CEO, if the then-current CEO has an interest in the Aggregate Incentive Bonus at least equal to 6.98% or (ii) if the then-current CEO has an interest in the Aggregate Incentive Bonus less than 6.98%, (A) the Participant who is also a current employee of the Company with the largest interest in the Aggregate Incentive Bonus or (B) if multiple Participants have the largest interest in the Aggregate Incentive Bonus (determined on an individual basis), the Participant appointed by a majority of the Interested Participants.  For the avoidance of doubt, (x) only a then-current employee of the Company is eligible to be the Clawback Representative and (y) the Clawback Representative shall be permitted to object to the clawback of all or any portion of his or her Incentive Bonus, Catch-Up Payment or Additional Incentive Bonus, in which case the Clawback Representative shall deliver to the Board the Representative Clawback Dispute Notice in his or her own name as described below.  If the Clawback Representative reviews the Participant Clawback Dispute Notice and in good faith agrees with the Participant’s objection to the clawback, within thirty (30) days following delivery of the Participant Clawback Notice, the Clawback Representative shall deliver to the Board a written notice that sets forth in reasonable detail the basis for the dispute (the “Representative Clawback Dispute Notice”).  If the Clawback Representative delivers the Representative Clawback Dispute Notice, then the Clawback Representative and the Board shall attempt in good faith to resolve such dispute.  If no such resolution can be reached during the forty-five (45) day period following the Board’s receipt of a Representative Clawback Dispute Notice, then, at the sole discretion of the Clawback Representative, such dispute may be brought for resolution by a third-party arbitrator, in accordance with the applicable rules of the London Court of International Arbitration.  The arbitration proceedings shall be located in New York, New York.  Each of the parties to the arbitration proceedings shall bear its own attorneys’ fees, costs and expenses and an equal share of the arbitrator’s and administrative fees of arbitration.  The determination of such third-party arbitrator shall be final, conclusive and binding on all persons, including the Company and its subsidiaries and affiliates, Participants and their beneficiaries, and any other persons claiming rights from or through a Participant.

 

 

ATTACHMENT B

 

Net Profit Targets

 

	
Plan Year Ending
    	
 
    	
Net Profit Target
    	
 
    
	
December   31, 2012
    	
 
    	
USD   $
    	
10,000,000
    	
 
    
	
December   31, 2013
    	
 
    	
USD   $
    	
50,000,000
    	
 
    
	
December   31, 2014
    	
 
    	
USD   $
    	
115,000,000
    	
 
    
	
December   31, 2015
    	
 
    	
USD   $
    	
130,000,000
    	
 
    

 

“Specified Exclusions”

 

Pursuant to Section 5(e), Net Profit shall be increased or decreased as follows:

 

Net Profit to be decreased by any increase in the Reported Net Profit that results from any injection of cash by Wanda or any of its affiliates or subsidiaries, including without limitation cash used (i) to repay or otherwise reduce indebtedness of the Company or its subsidiaries (calculated based on the interest rate of the debt retired, or weighted average interest rate if more than one tranche of debt is retired, after applicable income taxes at the effective tax rate and prorated over the applicable period after the date of capital investment) or (ii) to fund any merger, acquisition or other similar transactions involving the Company or any of its subsidiaries only if such funds are requested by the Company (calculated based on 10% of the funds drawn by the Company and prorated over the applicable period after the date of capital investment). For the avoidance of doubt, if the Company utilizes Wanda cash to fund an acquisition, the incremental Net Profit generated from the acquisition in excess of 10% of the Wanda funds used to effect said acquisition would remain in the calculation of Net Profit for purposes of the Plan. Conversely, if Net Profits for the related acquisition did not exceed 10% of the Wanda funds used to effect said acquisition, Net Profit for purposes of this calculation would be reduced by the full 10% of the Wanda funds used for said acquisition (which would be partially offset by the actual profits achieved for the related acquisition);

 

Net Profit to be decreased by 50% of any increase in the Reported Net Profit arising out of any interest reduction as a result of a corporate guaranty or other securities provided by Wanda or any of its affiliates to the Company, any of its subsidiaries or the relevant creditors (calculated based on the difference in overall cost of debt capital (% interest rate) immediately before and immediately after the credit enhancement, applied against total debt capital, net of applicable taxes at the effective tax rate and prorated over the applicable period after the date of credit enhancement);

 

Net Profit to be decreased by any increase in the Reported Net Profit, and Net Profit to be increased by any decrease in the Reported Net Profit, in each case arising out of or resulting from any disposition of the shares of NCM (calculated based on the gain or loss on disposition on a GAAP basis, net of applicable income taxes at the effective tax rate and disregarding the use of proceeds from such disposition); provided that the Board has approved in advance such disposition;

 

Net Profit to be decreased by any increase in the Reported Net Profit, and Net Profit to be increased by any decrease in the Reported Net Profit, in each case due to purchase accounting directly relating to the Merger (net of applicable income taxes at the effective tax rate); and

 

Net Profit to be increased by any decrease in the Reported Net Profit related to the Incentive Bonuses accrued for under the Plan (net of applicable income taxes at the effective tax rate).

 

For the avoidance of doubt, (i) Net Profit shall be decreased by any increase in the Reported Net Profit that results from a reduction in interest expense due to the repayment of all or a portion of the Company’s debt obligations with cash invested by Wanda or any of its affiliates or subsidiaries, and (ii) Net Profit shall

 

 

be increased by any decrease in the Reported Net Profit that results from financing charges incurred with respect to a repayment or other reduction of any indebtedness of the Company or its subsidiaries due to the repayment of all or a portion of the Company’s debt obligations with cash invested by Wanda or any of its affiliates or subsidiaries.

 

“Transaction Adjustment”

 

Pursuant to Section 5(e), Net Profit shall be decreased by any increase in the Reported Net Profit, and Net Profit shall be increased by any decrease in the Reported Net Profit, in each case relating to any disposition of strategic or key assets of the Company or any of its subsidiaries that has an aggregate value of US$ 5,000,000 or more (calculated based on the gain or loss in accordance with GAAP), net of applicable income taxes at the effective tax rate); provided that the Board has approved in advance such disposition and an estimated impact on current and future Reported Net Profit; and provided further that, to the extent the actual increase or decrease in Reported Net Profit is greater than the estimate approved by the Board, Board approval will be required to include any adjustment to Reported Net Profit that exceeds such approved estimate.

 

“Dividend Alternative”

 

Pursuant to Section 5(e), Net Profit shall be increased by the sum of (A) the product of (i) the amount of each dividend paid by the Company during the applicable Plan Year, (ii) 20% and (iii) a fraction, the numerator of which shall be the number of days remaining in such Plan Year following the payment of such dividend and the denominator of which shall be 365 and (B) 20% of each dividend paid by the Company following the Closing Date through December 31st of the year before the applicable Plan Year.

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