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EXHIBIT 10.28
HORSESHOE GAMING, L.L.C.
UNIT OPTION AGREEMENT
THIS UNIT OPTION AGREEMENT (this "Agreement") is entered into as of
February 1, 1997 by and between Horseshoe Gaming, L.L.C. (the "Company") and
Xxxxx Xxxxxx ("Optionee") pursuant to the Company's 1997 Unit Option Plan (the
"Plan"). All capitalized terms not otherwise defined herein shall have the
meaning set forth in the Plan.
RECITALS
A. The Company considers it desirable to give Optionee an incentive to
advance the Company's interest through the opportunity to acquire an equity
interest and thus participate in the Company's growth, development and financial
success.
B. The Company has determined to grant Optionee the right to purchase
Units pursuant to the terms and conditions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants hereinafter set
forth, the parties agree as follows:
1. Option; Number of Units. The Company hereby grants to Optionee the
right (the "Option") to purchase up to 126,245 Units (the "Units") at a price of
$3.47 per Unit (the "Purchase Price"). The Option and the right to purchase all
or any portion of the Units are subject to the terms and conditions stated in
this Agreement and in the Plan, including, without limitation, the provisions of
Sections 4, 10, 13 (b), and 14 of the Plan and Sections 3 and 4 hereof. Upon
exercise of the Option, Optionee shall become a member of the Company, with the
rights and benefits, and subject to the terms and conditions, set forth in the
Company's Limited Liability Company Agreement and the Company's Limited
Liability Company Agreement shall (if necessary) be amended to so provide. The
Optionee agrees to comply with, and be subject to, the provisions of the
Company's Limited Liability Company Agreement and to do all acts required
thereunder.
2. Vesting. The Option shall vest in three (3) equal annual
installments of 33 1/3% of the Units covered by the Option on each of the first
through third anniversaries of the date of Optionee's employment with the
Company pursuant to the Employment Agreement between the Company and Optionee
dated March 1, 1996. Notwithstanding the foregoing, in the event Xxxx
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X. Xxxxxx (including any entities through which Xxxx X. Xxxxxx holds his
ownership interest in the Company), family members of Xxxx X. Xxxxxx and/or
trusts established for the benefit of his heirs transfer controlling interest in
the Company to a third party in a transaction other than a public offering, the
Option shall immediately become fully vested.
3. Term of Option. Except for the rights conferred upon the Company
pursuant to Section 7 below, the Option, and Optionee's right to exercise the
Option, shall terminate when the first of the following occurs:
(a) termination pursuant to Section 13 (b) or Section 14 of
the Plan;
(b) the expiration of ten (10) years from the date hereof; or
(c) ninety (90) days after the date of termination of
Optionee's (i) employment or (ii) consulting relationship, as
applicable, with the Company and all of the Subsidiaries and
Related Entities, unless such termination results from
Optionee's death or disability (within the meaning of Section
105 (d) (4) of the Internal Revenue Code of 1986, as amended)
or Optionee dies within ninety (90) days after the date of
termination of Optionee's employment or consulting
relationship with the Company and all of the Subsidiaries and
Related Entities, in which case this Agreement and the Option
shall terminate 180 days after the date of termination of
Optionee's employment or consulting relationship with the
Company and all of the Subsidiaries and Related Entities.
4. Termination of Employment. The termination for any reason of
Optionee's employment or consulting relationship with the Company and all of the
Subsidiaries and Related Entities shall not accelerate the vesting of the Option
or affect the number of Units with respect to which the Option may be exercised;
provided, however, that the Option may only be exercised with respect to that
number of Units which could have been purchased under the Option had the Option
been exercised by Optionee on the date of such termination and shall in all
events be subject to Section 3 hereof.
5. Death of Optionee; No Assignment. The rights of Optionee under this
Agreement may not be assigned or transferred except by will, by the laws of
descent or distribution or inter vivos to a trust for the benefit of Optionee or
Optionee and Optionee's spouse and may be exercised during the lifetime of
Optionee only by such Optionee; provided, however, that in the event of
disability (within the meaning of Section 105 (d) (4) of the Internal Revenue
Code of 1986, as amended) of Optionee, a designee of Optionee (or the Optionee's
legal representative if Optionee has not designated anyone) may exercise the
Option on behalf of Optionee (provided the Option would have been exercisable by
Optionee) until the right to exercise the Option expires pursuant to Section 3
hereof. Any attempt to sell, pledge, assign, hypothecate, transfer or otherwise
dispose of the Option in contravention of this Agreement or the Plan shall be
void and shall have no effect. If Optionee should die while Optionee is engaged
in an employment or consulting relationship with the Company and/or any
Subsidiary or Related Entity, and provided Optionee's rights hereunder shall
have vested, in whole or in part, pursuant to Section 2 hereof,
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Optionee's, designee, legal representative, or legatee, the successor trustee of
Optionee's inter vivos trust or the person who acquired the right to exercise
the Option by reason of the death of Optionee (individually, a "Successor")
shall succeed to Optionee's rights under this Agreement. After the death of
Optionee, only a Successor may exercise the Option.
6. Exercise of Option. On or after the vesting of all or any portion of
the Option in accordance with Section 2 hereof and until termination of the
Option in accordance with Section3 hereof, the Option may be exercised by
Optionee (or such other person specified in Section 5 hereof) to the extend
exercisable as determined under Section 2 hereof, upon delivery of the following
to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this
Agreement and states the number of Units to be purchased;
(b) a check, cash or an combination thereof in the amount of
the aggregate Purchase Price (or payment of the aggregate
Purchase Price in such other form of lawful consideration as
the Committee may approve from time to time under the
provisions of Section 7 of the Plan); Unless Optionee has
simultaneously, with such exercise of the Option, also
exercised his "put" right set forth in Section 13 hereinbelow,
in which case no consideration need be paid by Optionee, but
the exercise price shall be deducted from the proceeds to be
received by the Optionee upon determination of Fair Market
Value through agreement or completion of the appraisal process
set forth herein;
(c) unless the "put" right has been exercised by Optionee, a
written representation and undertaking, if requested by the
Company pursuant to Section 8 (b) hereof, in such form and
substance as the Company may require, setting forth the
investment intent of Optionee, or a Successor, as the case may
be, and such other agreements, representations and
undertakings as described in the Plan; and
(d) unless the "put right has been exercised by Optionee, such
further acts as may be necessary to admit Optionee as a member
of the Company, including becoming a party to the Company's
Limited Liability Company Agreement, as then in effect. .
7. Representations and Warranties of Optionee.
(a) Optionee represents and warrants that the Option is being
acquired by Optionee for Optionee's personal account, for
investment purposes only, and not with a view to the
distribution, resale or other disposition thereof.
(b) Optionee acknowledges that the Company may issue Units
upon the exercise of the Option without registering or
qualifying such securities under federal or state securities
laws on the basis of certain exemptions from such registration
or qualification requirements. Accordingly, Optionee agrees
that Optionee's exercise of the Option may be expressly
conditioned upon Optionee's
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delivery to the Company of such representations and
undertakings as the Company may reasonable require in order to
secure the availability of such exemptions, including a
representation that Optionee is acquiring the Units for
investment and not with a present intention of selling or
otherwise disposing of such Units. Optionee acknowledges that,
because Units received upon exercise of an Option may be
unregistered, Optionee may be required to hold the Units
indefinitely unless they are subsequently registered for
resale under the Act or an exemption from such registration is
available.
(c) Optionee acknowledges that the Company's obligation to
issue the Units upon exercise of the Option is expressly
conditioned upon the compliance by the Company with any
registration or other qualification obligations with respect
to such Units under any state and/or federal law or rulings
and regulations of any government regulatory body, including
without limitation, any and all applicable gaming regulatory
authorities of the states in which the Company's Subsidiaries
operate or intend to operate, and/or the filing by Optionee of
any background applications required by such gaming
authorities.
(d) Optionee acknowledges receipt of this Agreement granting
the Option, and the Plan, and understands that all rights and
liabilities connected with the Option are set forth herein and
in the Plan, including without limitation, the Company's right
to repurchase from Optionee all Units acquired upon exercise
of the Option as provided in Section 13 hereof and in Section
20 of the Plan.
(e) Optionee acknowledges receipt of a copy of the Company's
Limited Liability Company Agreement, as in effect on the dates
hereof and understands that any Unit acquired by exercise of
the Option will be subject to the provisions of the Company's
Limited Liability Company Agreement applicable to all of the
Company's members, as in effect from time to time.
8. No Rights As a Member. Optionee shall have no rights as a member in
connection with the Units covered by the Option until the date (the "Exercise
Date") an entry evidencing such ownership is made in the appropriate records of
the Company. Except as may be provided under Section 10 of the Plan, the Company
will make no adjustment for dividends (ordinary or extraordinary, whether in
cash, securities, or other property) or distributions or other rights for which
the record date is prior to the Exercise Date.
9. This Agreement Subject to Plan. This Agreement is made under the
provisions of the Plan and shall be interpreted in a manner consistent with it.
To the extent that any provision in this Agreement is inconsistent with the
Plan, the provisions of the Plan shall control. A copy of the Plan is available
to Optionee at the Company's principal executive offices upon request and
without charge. The good faith interpretation of the Committee of any provision
of the Plan, the Option or this Agreement, and any determination with respect
thereto or hereto by the Committee, shall be final, conclusive and binding on
all parties.
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10. Restrictive Legends. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Units issued
upon exercise of the Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Units as the Company, or its
counsel, may reasonably deem necessary; provided, however, that any such legend
or legends shall be removed when no longer applicable.
11. Notices. All notices, requests and other communications hereunder
shall be in writing and, if given by telegram, telecopy or telex, shall be
deemed to have been validly served, given or delivered when sent, if given by
personal delivery, shall be deemed to have been validly served, given or
delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mails, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the following
addresses (or such other address(es) as a party may designate for itself by like
notice):
If to the Company:
Horseshoe Gaming, L.L.C.
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
If to Optionee:
Xxxxx Xxxxxx
0000 Xxxxxx Xxxxx, #000
Xxxx Xxxx, XX 00000
12. Not an Employment Agreement. Nothing contained in this Agreement
shall confer, intend to confer or imply any rights to an employment relationship
or rights to a continued employment relationship with the Company and/or any
Subsidiary or Related Entity in favor of Optionee or limit the ability of the
Company and/or any Subsidiary or Related Entity to terminate, with or without
cause, in its sole and absolute discretion, its employment relationship with
Optionee, subject to the terms of any written employment agreement to which
Optionee is a party.
13. Put/Call Option Upon Termination. In the event of the termination
of Optionee's employment with Company, for whatever reason, then the Company
shall have the right to purchase (the "Call right") the Units of Optionee,
acquired pursuant to the terms of this Agreement, at the Fair Market Value of
such Units as determined pursuant to the terms of this Agreement (the "Purchase
Price"). In a similar fashion, Optionee shall have a right to require the
Company to purchase back his Units in the Company (the Put right") at the
Purchase Price. The Company or the Optionee, as the case may be, may exercise
their respective rights provided for in this Section 13 by tendering written
notice to the other party of its exercise of such right within thirty (30) days
after the termination of Optionee's employment an/or consulting relationship
with the Company. In the event that either right described herein should be
exercised by the Optionee or the Company, then the Optionee and the Company
agree to
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promptly convene and attempt in good faith to determine the Fair Market Value of
the Units to be purchased by the Company from Optionee. In the event that the
Company and the Optionee are unable to agree upon such Fair Market Value, then
the parties hereto agree to submit such matter to an independent appraisal to be
conducted in Las Vegas, Nevada in accordance with the terms set forth below.
Either party may initiate such appraisal process by delivery of written notice
to the other party to such effect, designating the name of a appraiser that is
to represent it in such appraisal process. Thereafter, within ten (10) days of
receipt of such notice the other party shall designate an appraiser to represent
it in such process. Within ten (10) days after designation of the second
appraiser, the two appraisers shall convene and agree upon a third appraiser. In
the event that said two appraisers are unable to agree upon a third appraiser,
then the third appraiser shall be selected by lottery, with each appraiser to
submit the name of another reputable appraiser, and with the appraiser whose
name is drawn in such lottery being designated for all purposes as the third
appraiser.
Within ten (10) days after selection of the third appraiser, the three
appraisers shall convene and attempt to agree on the Fair market Value of the
Units to be purchased by the Company. If unable to agree, then each appraiser
shall, within thirty (30) days thereafter, prepare his own independent appraisal
report and such report shall be submitted to the Company and the Optionee.
Provided that the Middle appraisal is within ten percent (10%) of either the
high or low appraisal, then the middle appraisal (the highest and lowest
appraisals being disregarded) shall be deemed to be the Fair Market Value and
thus the valuation to be used for purposes of the Company's acquisition of
Optionee's Units.
In the event that the middle appraisal is not within ten percent (10%) of either
the high or low appraisal, then the determination of the Fair Market Value of
Optionee's Units shall be submitted to binding arbitration, to be conducted in
Las Vegas, Nevada pursuant to the then prevailing rules and regulations of the
American Arbitration Association. In such arbitration, each of the appraisers
shall be entitled to submit their appraisal report and testify on behalf of the
Company or the Optionee. The arbitration panel, after hearing all evidence
desired to be submitted by the Company and the Optionee, shall determine said
Fair Market Value and such decision by said arbitration panel shall be binding
upon the Company and the Optionee. The cost of the arbitration shall be borne
equally by the Company and the Optionee.
The Purchase Price to be paid by the Company, as determined by agreement or
appraisal as described herein, shall be paid in three (3) equal annual principal
installments, with the first payment being due within ten (10) days after
determination of or agreement as to Fair market Value, the second payment shall
be due and payable one (1) year thereafter, and the third payment shall be due
and payable two (2) years thereafter; provided, however, that if the Purchase
Price is less than $750,000 then the entire Purchase Price shall be paid to
Optionee in one lump sum within ten (10) days after determination or agreement
as to Fair Market Value.
Notwithstanding the foregoing , in the event that any of the Company's loan
agreements prohibit payment of the Purchase Price to be made over the period set
forth above, then the Optionee agrees that the Purchase Price shall be paid in
equal principal installments over the time period permitted by such loan
agreements, but in no event in excess of five (5) years, with such principal
payments to be made on an annual basis. In addition, such obligation
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shall bear interest at the prime rate of interest, as quoted from time by the
largest commercial bank, in terms of assets, in the State of Nevada, and accrued
but unpaid interest shall be due and payable together with each annual principal
installment.
The Company and the Optionee agree that all persons chosen to represent them as
appraisers shall be qualified and competent MAI appraisers or a Certified public
Accountant with one of the "Big Six" accounting firms experienced in valuing
similar types of partnerships or corporations.
The Company shall bear the cost of its appraiser, the Optionee shall bear the
cost of its appraiser, and the Company and the Optionee shall each bear on-half
(1/2) of the cost of the third appraiser.
14. Governing Law. This Agreement shall be construed under and governed
by the laws of the State of Delaware without regard to the conflict of law
provisions thereof.
15. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and both of which together shall be deemed
one Agreement.
IN WITNESS WHEREOF, the Company and Optionee have executed this
Agreement as of the date first above written.
HORSESHOE GAMING, L.L.C.
By:
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OPTIONEE
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XXXXX XXXXXX
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