This Employment Agreement involves
Title: EMPLOYMENT AGREEMENT
Governing Law: Colorado Date: 8/11/2016
THIS EMPLOYMENT AGREEMENT (the “ Agreement ”) by and between National CineMedia, Inc. (the “ Company or Employer ”), and Katherine L. Scherping (“ Executive ”, and together with the Company or Employer, the “ Parties ”), is entered into as of August 11, 2016 (the “ Execution Date ”). In consideration of the covenants and agreements contained herein, the Parties agree as follows:
1. Employment . The Employer agrees to employ Executive and Executive agrees to be employed by the Employer, beginning as of August 11, 2016 (the “ Effective Date ”) and Executive’s employment under this Agreement shall terminate on the earlier of (i) December 31, 2018 or (ii) the termination of Executive’s employment under this Agreement. The period from the Effective Date until the termination of Executive’s employment under this Agreement is referred to as the “ Employment Period. ” To the extent Executive remains employed by the Company after the expiration of the Employment Period, such employment will be subject to the terms and conditions to which the Company and Executive at that time will agree.
2. Positions and Authority . Executive shall serve in the position of Chief Financial Officer of the Employer, reporting to the Chief Executive Officer of the Company, or in such other positions as the Parties may agree.
Executive agrees to serve in the position referred to in this Section 2 and to perform diligently and to the best of her abilities the duties and services appertaining to such offices as assigned to her from time to time, as well as such additional duties and services appropriate to such offices that the Parties may agree upon from time to time.
During the Employment Period, Executive shall devote her full business time and efforts to the business and affairs of the Company and its subsidiaries, provided that Executive shall be entitled to serve as a member of the board of directors of a reasonable number of other companies, to serve on civic, charitable, educational, religious, public interest or public service boards, and to manage Executive’s personal and family investments, in each case, to the extent such activities do not materially interfere with the performance of Executive’s duties and responsibilities hereunder and do not conflict with Executive’s obligations under Section 6 . Executive shall not become a director of any for profit entity without first receiving the approval of the Board of Directors of the Company (the “ Board ”), which shall not be unreasonably withheld.
3. Compensation and Benefits .
(a) Sign-On Compensation . In consideration of the commencement of Executive’s employment hereunder the Executive will receive a time-based restricted share award granted effective on the commencement of employment, with a grant date fair market value equal to $400,000, the number of shares to be determined by dividing such amount by the average closing share price of the Company’s common stock as reported on the NASDAQ for the 30 days immediately prior to the Execution Date, with vesting to occur in three equal installments on each of the first three anniversaries of the grant date (the “ Initial Equity ”), subject to Executive’s continued employment through each applicable vesting date. The Initial Equity shall (i) be issued under the National CineMedia, Inc. 2016 Equity Incentive Plan (as amended from time to time, the “ EIP ”) and (ii) be subject to the Company’s standard form of time-based restricted share award agreement under the EIP. The Initial Equity shall be subject to accelerated vesting in the event of Executive’s death, Disability (defined below), an Involuntary Termination (defined below), or a Change in Control (defined below).
(b) Base Salary . As compensation for Executive’s performance of Executive’s duties hereunder, Company shall pay to Executive an initial Base Salary of $400,000 per year, payable in accordance with the normal payroll practices of the Company (but not less frequently than monthly), less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions. The Base Salary shall be reviewed by the Board not less often than annually. The term “ Base Salary ” shall refer to the Base Salary as may be in effect from time to time.
(c) Annual Incentive Compensation . During the Employment Period, Executive shall be eligible to participate in an annual cash bonus program maintained for senior executive officers of the Company (the “ Annual Incentive Program ” or the “ Plan ”), with a minimum target annual bonus equal to 75% of Base Salary (the “ Target Bonus ”) for each year during the Employment Period in which Executive participates in the Annual Incentive Program; provided, however, that any bonus related to calendar year 2016 (i) shall be prorated for the period between the Effective Date and December 31, 2016, and (ii) shall not be less than the full amount of the bonus for the prorated period, as calculated per the terms of the Company’s existing Performance Bonus Plan. The actual amount of the annual bonus earned by and payable to Executive for any year or portion of a year, as applicable, shall be determined upon the satisfaction of goals and objectives established by the Compensation Committee pursuant to the Plan, and shall be subject to such other terms and conditions of the Annual Incentive Program as in effect from time to time, provided that all awards shall be designed in a manner such that the annual bonus will be treated as “qualified performance-based compensation” within the meaning of Section 162(m) of the Internal Revenue Code, as amended (the “ Code ”). Each bonus paid under the Annual Incentive Program shall be paid to Executive no later than March 15th of the calendar year following the calendar year for which the bonus is earned.
(d) Long-Term Incentive Grants . The Company shall provide to Executive, on an annual basis during the Employment Period, the opportunity to receive a long-term incentive award in such amount and pursuant to such terms as may be determined in the sole discretion of the Board, delivered through vehicles and designs that are generally consistent with those awarded to the Company’s other senior executive officers in each year.
(e) Other Benefits.
(i) Savings and Retirement Plans . Except as otherwise limited by applicable law, Executive shall be entitled to participate in all qualified and non-qualified savings and retirement plans applicable generally to other senior executive officers of the Company, in accordance with the terms of the plans, as may be amended from time to time.
(ii) Welfare Benefit Plans . Except as otherwise limited by applicable law, Executive and/or her eligible dependents shall be eligible to participate in and shall receive all benefits under the Company’s welfare benefit plans and programs applicable generally to other senior executive officers of the Company in accordance with the terms of the plans, as may be amended from time to time.
(iii) Business Expenses . Subject to Section 15 , Executive shall be reimbursed for reasonable travel and other expenses incurred in the performance of Executive’s duties on behalf of the Company in a manner consistent with the Company’s policies regarding such reimbursements, as may be in effect from time to time.
(iv) Other Benefits . Executive shall receive such other benefits as are then customarily provided generally to the other senior officers of the Company and of its subsidiaries, as determined from time to time by the Board or the Chief Executive Officer, including, without limitation, paid vacation in accordance with the Company’s practices as in effect from time to time.
4. Termination of Employment .
(a) Executive’s employment under this Agreement shall terminate upon the earliest to occur of: (i) the expiration and non-renewal of the term of this Agreement at the end of the Employment Period, pursuant to Section 1 hereof; (ii) termination due to Disability; (iii) termination of Executive’s employment by the Company for any reason other than termination due to Disability; (iv) Executive’s death; or (v) termination of Executive’s employment by Executive for any reason. Upon the termination of Executive’s employment with the Company for any reason, Executive shall be deemed to have resigned from the Board if a member at such time and all other positions with the Employer or any of its Affiliates (defined below) held by Executive as of the date immediately preceding her termination of employment.
(b) If Executive’s employment ends for any reason, except as otherwise contemplated in this Section 4 , Executive shall cease to have any rights to salary, bonus (if any) or other benefits, other than (i) the earned but unpaid portion of Executive’s Base Salary through the date of termination or resignation, (ii) any annual, long-term, or other incentive award that relates to a completed fiscal year or performance period, as applicable, and is payable (but not yet paid) on or before the date of termination or resignation, which shall be paid in accordance with the terms of such
award, (iii) a lump-sum payment in respect of accrued but unused vacation days at Executive’s per-business-day Base Salary rate, (iv) any unpaid expense or other reimbursements due to Executive, and (v) any other amounts or benefits required to be paid or provided by law or under any plan, program, policy or practice of the Company, provided that Executive shall not be entitled to any payment or benefit under any Company severance plan, or any replacement or successor plan (subsections 4(b)(i)-(v), the “ Accrued Benefits ”). The Accrued Benefits shall be paid as soon as administratively practicable following the date of termination, in accordance with Employer’s policy and applicable law, subject to all required payroll deductions and withholdings.
(c) Termination by Death . In the event that Executive’s employment is terminated by death, then in addition to the Accrued Benefits and subject to Section 15 :
(i) Executive’s beneficiaries shall be entitled to: (x) Executive’s Base Salary, at the rate in effect on the date of Executive’s death, through the end of the month in which her death occurs (excluding any amounts payable as part of the Accrued Benefits), payable on the first payroll date that occurs after the date of Executive’s death, and (y) other benefits (other than the payment of severance) to which Executive would be entitled, that are made available to employees of the Company in general upon termination of employment under similar circumstances in accordance with applicable plans and programs of the Company;
(ii) the Initial Equity shall vest in full, to the extent issued and outstanding but unvested on the date of Executive’s death; and
(iii) if Executive’s spouse and eligible dependents, as applicable, were covered under the Employer’s medical plan or plans immediately prior to the termination of Executive’s employment, and timely elect continued coverage under such medical plan or plans pursuant to COBRA, Employer will pay the applicable premium required for COBRA continuation coverage for Executive’s spouse and eligible dependents, as applicable, until the first anniversary of the date of Executive’s death.
Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive’s death by giving the Company written notice thereof. In the event of Executive’s death or of a judicial determination of her incompetence, reference in this Agreement to Executive shall be deemed to refer to her beneficiary, and if Executive shall not have designated a beneficiary, her estate or legal representative (as the case may be).
(d) Termination due to Disability . In the event that Executive’s employment is terminated by the Employer or Executive due to Executive’s Disability, such termination to be effective 30 days after delivery of written notice thereof, then in addition to the Accrued Benefits and subject to Section 15 and Executive’s continuing compliance with Section 6 of this Agreement:
(i) the Company shall pay Executive an amount equal to 50% of Base Salary, offset by any payments that Executive may receive under the Company’s long-term disability plan and any supplement thereto, whether funded or unfunded, that is adopted or provided by the Company for Executive’s benefit, payable in a lump sum on the first payroll date that occurs after the 55th day following the effective date of her termination;
(ii) the Initial Equity shall vest in full, to the extent issued and outstanding but unvested on the effective date of Executive’s termination; and
(iii) Executive shall be permitted to continue participation in all employee benefit plans or programs as in effect from time to time in which Executive was participating on the effective date of her termination until the date she receives equivalent coverage in benefits, but in no event for a period longer than 12 months, provided that (i) Executive and/or her eligible dependents shall be eligible to participate in continued coverage under Employer’s medical plan or plans for the maximum period required by COBRA or any applicable state continuation coverage law and (ii) in the event that, under the terms of any employee benefit plan or program referred to in this paragraph, Executive may not continue her participation, she shall be paid the after-tax cost that would be incurred by Executive in obtaining such benefit on the lowest available individual basis, of the benefits provided under any plan or program in which she is unable to participate for the period specified in this paragraph. (e) Termination by the Company for
Cause . In the event that Executive’s employment is terminated by the Employer for Cause, Executive will be entitled to the Accrued Benefits.
(f) Involuntary Termination . If Executive’s employment hereunder shall be terminated in a manner constituting an Involuntary Termination, then in addition to the Accrued Benefits and subject to Section 15 and Executive’s continuing compliance with Section 6 of this Agreement:
(i) the Company shall pay Executive the Severance Amount (defined below);
(ii) the Initial Equity shall vest in full, to the extent issued and outstanding but unvested on the date of the Involuntary Termination;
(iii) Until the Executive receives equivalent coverage in benefits, for a period up to twelve months, the Company (or its successor-in-interest) shall pay Executive monthly an amount equal to 100% of the monthly premium paid by the Executive for COBRA coverage elected by Executive (as may be applicable to Executive, Executive’s spouse and dependents) under the Company’s group health and dental plans; and
(iv) Executive shall be entitled to other benefits (other than for the payment of severance) that are made available to employees of the Company in general upon termination of employment under similar circumstances in accordance with applicable severance plans and programs of the Company.
(g) Voluntary Resignation by Executive . Executive may voluntarily terminate her employment with the Company at any time with or without notice and with or without reason. Such voluntary termination by Executive shall include, without limitation, Executive’s decision not to renew this Agreement upon expiration of the Employment Period if the Company offers to renew this Agreement on economic terms and conditions at least equal to this Agreement and for a term at least equal to one year. In the event Executive voluntarily terminates her employment, Executive’s salary shall cease on the termination date and Executive will not be entitled to severance pay, pay in lieu of notice, or any other compensation other than payment of the Accrued Benefits.
(h) No Excise Tax Gross-Up; Possible Reduction in Payments . Executive is not entitled to any gross-up or other payment for golden parachute excise taxes Executive may owe pursuant to Section 4999 of the Code. In the event that any amounts payable pursuant to this Agreement or other payments or benefits otherwise payable to Executive (a) constitute “parachute payments” within the meaning of Section 280G of the Code, and (b) but for this Section 4 would be subject to the excise tax imposed by Section 4999 of the Code, then such amounts payable under this Agreement and under such other plans, programs and agreements shall be either (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the excise tax imposed by Section 4999 of the Code (and any equivalent state or local excise taxes), results in the receipt by Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Any reduction in payments and/or benefits required by this Section 4 shall occur in the following order: (1) reduction of amounts payable under Section 4(b) or other cash payments, beginning with payments scheduled to occur soonest; (2) reduction of vesting acceleration of equity awards (in reverse order of the date of the grant); and (3) reduction of other benefits paid or provided to Executive.
(i) No Mitigation; No Offset . In the event of any termination of employment under this Section 4, Executive shall be under no obligation to seek other employment, and except as provided in Section 4(d)(iii) or Section 4(f)(iii), she shall have no obligation to offset or repay any payments she receives under this Agreement by any payments she receives from a subsequent employer; provided , however , that (without limiting any rights of the Company for any breach of this Agreement under law, equity or otherwise), if Executive violates any provision of Section 6 , any obligation of Employer to make payments to Executive under Section 4 of this Agreement (other than the Accrued Benefits) shall immediately cease.
5. Definitions .
(a) “ Cause ” shall mean the occurrence of any one of the following, as determined by an express resolution of the independent members of the Board:
(i) gross negligence or willful misconduct in the performance of, or Executive’s abuse of alcohol or drugs rendering Executive unable to perform, the material duties and services required for Executive’s position with the Company, which neglect or misconduct, if remediable, remains unremedied for thirty (30) days following written notice of such by the Company to Executive;
(ii) Executive’s conviction or plea of nolo contendere for any crime involving moral turpitude or a felony;
(iii) Executive’s commission of an act of deceit or fraud intended to result in personal and unauthorized enrichment of Executive at the expense of the Company or any of its affiliates; or
(iv) Executive’s willful and material violation of the written policies of the Company or any of its affiliates as in effect from time to time, Executive’s willful breach of a material obligation of Executive to the Company pursuant to Executive’s duties and obligations under the Company’s Bylaws, or Executive’s willful and material breach of a material obligation of Executive to the Company or any of its affiliates pursuant to this Agreement or any award or other agreement between Executive and the Company or any of its affiliates.
No act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Employer; and provided further that no act or omission by the Executive shall constitute Cause hereunder unless the Employer has given detailed written notice thereof to the Executive, and the Executive has failed to remedy such act or omission. By way of clarification, but not limitation, for purposes of this definition of the term Cause, materiality shall be determined relative to this Agreement and Executive’s employment, rather than the financial status of the Company as a whole.
(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)) (a “ Person ”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (x) the then outstanding shares of common stock of the Company (the “ Outstanding Company Common Stock ”) or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Outstanding Company Voting Securities ”); provided , however , that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A) or (B) of paragraph (iv) below, or (E) any acquisition by a Founding Member (as defined in the National CineMedia, LLC Third Amended and Restated Limited Liability Operating Agreement, dated as of February 13, 2007); or
(ii) The acquisition by any Person, other than a Founding Member, of the right to (A) elect or (B) nominate for election or (C) designate for nomination pursuant to a Director Designation Agreement dated February 13, 2007 among the Company and the Founding Members, a majority of the members of the Company’s Board;
(iii) The acquisition by any Person, other than the Company or a Founding Member, of beneficial ownership of more than 50% of the Units of NCM LLC; or
(iv) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or an acquisition of assets of another corporation (a “ Business Combination ”), in each case, unless, following such Business Combination, (A) (x) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either
directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; and (y) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were individuals who, as of the Effective Date, constitute the Board (the “ Incumbent Board ”); provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board or was designated pursuant to a Director Designation Agreement dated February 13, 2007 among the Company and the Founding Members shall be considered as though such individual were a member of the Incumbent Board, at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination or (B) the Founding Members beneficially own, more than 50% of, respectively, the outstanding shares of common stock or voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination; or
(v) Approval by the stockholders o