CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made and entered into this
15th day of February, 1998, and shall commence on February 15 1998 by and
between Casino Resource Corporation, a Minnesota corporation with its principal
offices at 000 Xxxxxxxxx Xxxxxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxxx, 00000 ("CRC" or
the "Company") and Xxxxxx Xxxxxxx ("Consultant"), an individual residing at 000
Xxxxxxxxx Xxxxx, Xxxxxx, XX 00000.
1. BACKGROUND
The Company is engaged in the business of developing and operating a
gaming enterprise as well as hotel and entertainment businesses.
Consultant has extensive experience in operating CRC businesses;
understands CRC contractual obligations, and was instrumental in development of
ongoing CRC operating businesses up to and including 1998 operating proformas.
NOW, THEREFORE, in consideration of the above premises, and the mutual
covenants, agreements and representations herein made, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, CRC and Consultant, intending to be legally bound, hereby agree as
follows:
1. Term. This Agreement shall be for a two (2) year term renewing for
one-year terms thereafter, if such renewal is mutually agreed upon by
CRC and the Consultant unless Agreement is sooner terminated by written
notice as set out in Paragraph 9, or upon death of Consultant.
2. Services.
(a) During the term of this Agreement, Consultant shall render to
the Company such services of an advisory nature as the Company
reasonably and in good faith requires from time to time so
that the Company may have the benefit of Consultant's
knowledge, expertise, skills and experience. Such services may
include: development, review and implementation of operating
budgets for the Company; provide support on analysis of
prospective business acquisitions; maintain corporation and
subsidiary business records; coordinate all legal activities;
coordinate all insurance of Corporation; support HR of
Corporation, (i.e., workers compensation disputes, workers
compensation claims. And unemployment compensation claims);
review of financial performance of Company audit of same for
accuracy; or other services as may be needed of Consultant by
CRC. (Collectively, the "Consulting Services.")
(b) Consultant shall be available for advice and counsel
to the Officers of the Company and other employees designated
by the Company by telephone, letter, facsimile, or in person,
as may be required by the Company. Consultant shall consider
all directions and instructions given by the Company, but
Consultant
shall independently determine the time and manner of the
performance of her responsibilities and duties hereunder,
provided that Consultant commits to provide an average of
twenty-five hours per week of services to the Company, such
hours to be supported by written documentation. Company shall
pay Consultant all compensation due weekly and upon receipt of
written documented statement.
(c) The Company recognizes the Consultant shall not
devote her full business time to the Consulting Services and
that the Consultant may continue to participate in her
business interests, and other consulting services, other than
as may be prohibited by or contrary to this Agreement.
(d) The Company and Consultant may, in their respective
sole discretion, agree to enter into additional agreements
with each other in connection with other projects not set out
in Paragraph 2a. Other Projects shall be on terms and
conditions which the Company and Consultant mutually agree,
i.e. other Projects may include: Director CRC; Director CRC
Tunisia S.A (Whether these be elected or appointed positions.)
(e) The Company may request and the Consultant agrees to
travel with respect to CRC business opportunities. The
documented costs for said travel will be paid by the Company
as set forth in Paragraph 4.
3. Compensation.
a. As full compensation for all Consulting Services
rendered hereunder, Company agrees to pay Consultant $67.00
per hour. Additionally, Consultant shall be paid $10,000
annually as Director CRC, pre-paid quarterly; and $10,000 US
as Director of CRC Tunisia S.A. and if EBITA for Casino is 6%
of revenue or greater any fiscal year Consultant will be paid
an additional $10,000 US no later than November 30 each year.
It is anticipated Consultant will provide Consulting Services
at a rate which will average no more than 25 hours per week.
If work is available and Consultant is able to provide Company
with additional hours weekly, upon Company's request
Consultant will provide services over 25 hours per week and
will be compensated accordingly.
b. Bonus: CRC shall pay Consultant a one time bonus of
up to $156,000 which shall be earned, upon Board approval, as
follows: $15,000 per month, where Consultant provides services
beginning April 1998 through September 30, 1998, payable the
first of each month, which moneys shall first retire the
Consultant's loan obligation including interest due CRC.
Thereafter, Consultant will earn $66,000 October 1, 1998. In
the event of a Change of Control "COC" (as defined herein), on
termination by CRC or Consultant of this agreement, all
remaining unearned bonus moneys will be paid within 10 days of
COC or termination date as a retirement bonus in consideration
of thirteen years of service. All outstanding bonus money due
Consultant October 1, 1998 will be
(2)
paid, in cash or stock as mutually agreed. Cash and/or stock
bonus will be delivered in full on or before 12/31/99 or upon
COC or termination, whichever event comes first. In order to
determine the shares delivered hereunder the value per share
shall equal the average of the trailing 5 day closing stock
price 10/1/98. Company grants Consultant customary piggy-back
registration rights and demand registration rights with
respect to such shares of stock available in 90 days with
written notice.
c. Provided that this Agreement remains in effect
through April 1, 1999, the parties acknowledge that Consultant
will be vested for her remaining 60,000 options as granted by
CRC Audit Committee April 1997 under shareholders' approved
1997 Employee Stock Option Plan.
4. Reimbursement of Expense and Independent Contractor Benefits. The
Consultant is an independent contractor and as such shall be liable for
her personal office expenses and personal self employment taxes (of any
nature), except that the Company shall reimburse Consultant for all
out-of-pocket pre-approved business travel expenses within five days of
submission of invoice accompanied by receipts.
5. Confidential Information. The Parties hereto acknowledge that in the
course of consulting for Company, Company may provide Consultant with
certain financial and other information concerning its business.
Consultant acknowledges that such information, whether furnished before
or after the date of this Agreement, whether written or oral, together
with any analyses, compilations, studies or other documents prepared by
Company or its agents, representatives, or employees regarding such
information, is the sole property of and is confidential to Company
(hereinafter referred to as "Confidential Information").
6. Limitation on Solicitation by Consultant. Consultant agrees that except
in good faith compliance with her duties hereunder as requested by the
Company, Consultant shall not, without the prior written approval of
the Chairman of the Board:
a. Solicit additional information regarding the Company
or its business from or otherwise contact any employees,
agents, or representatives of Company for a period of one year
from the termination of this Agreement.
b. Contact any customers, visitors, funding sources or
employees of Company or any governmental agencies, as they
concern Company, or any of their respective representatives,
regarding the business of Company, the existence of this
Agreement or the subject matter hereof for a period of one
year following the termination of this Agreement; or
c. During the term of and for a period of three (3)
years following the termination date of this Agreement,
solicit for employment or employ or otherwise contract for the
services of any person who is now employed by Company in an
executive or supervisory position.
(3)
7. Nondisclosure. Consultant agrees to hold the Confidential Information
in strictest confidence and to use the Confidential Information only
for purposes of rendering her services to Company as set forth in
Paragraph 2 above.
8. Exceptions to Nondisclosure. The nondisclosure obligations of
Consultant set forth under Paragraph 7 of this Agreement shall not be
deemed to restrict the use and/or disclosure by Consultant of any
Confidential Information which:
a. Is or becomes publicly known or within the public domain
without the breach of this Agreement by Consultant or persons
permitted to receive such information pursuant to Paragraph 7
or above; or
b. Is disclosed to Consultant by a third person who is not under
an obligation of confidence to Company.
9. Termination. This Consulting Agreement may be cancelled by CEO or
Chairman of the Board upon the expiration of the initial term of this
Agreement, which expiration date is February 2, 2000, provided that the
CEO or Chairman has provided Consultant 90 days prior written notice of
his intent to terminate the Agreement, or as mutually agreed.
Notwithstanding the foregoing, the Company may terminate the
Consultant's Agreement for "Cause" which shall mean (i) Consultant had
theretofore been convicted by any federal, state or local authority
for, or pleaded guilty to, an act constituting a felony, or (ii) a)
Consultant has committed material acts of fraud, material dishonesty or
gross misconduct; or b) has repeatedly and willfully failured or
refused to perform her material duties as delineated herein. If
termination for Cause by Company is pursued pursuant to clause (ii)(b)
of the preceding sentence, it shall be preceded by written notice to
Consultant describing the specific reasons for termination, and
Consultant shall only be terminated if she fails to cure and correct
problems identified during the 30-day period following the date of
written notice.
Agreement will also terminate upon death of Consultant or if Consultant
is unable to perform functions for any consecutive 120 day period due
to illness. This agreement will terminate upon a "Change of Control
Event." (See 9a.) Change of control is defined as:
a. The acquisition by an 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, (a "Person") of beneficial
ownership of 20% or more of either (i) the outstanding shares
of stock of the Company or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled
to vote generally in the election of directors; or
b. Any two or more members of the staggered Board of seven or
more Directors are removed without the expressed approval or
consent of the CEO and Chairman of the Board, or where two or
more members of the Board assume office as a result of either
(4)
an actual or threatened election contest or other actual or
threatened solicitation of proxies; or
c. A hostile reorganization, merger or consolidation which
results from either an actual or threatened election contest
or actual or threatened solicitation of proxies; or
d. A complete liquidation or dissolution of the Company, or the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation; which
liquidation, sale or dissolution occurs as a result of either
actual or threatened solicitation of proxies or consents by or
on behalf of persons other than the incumbent Board.
This Agreement may, at discretion of Consultant be terminated by
Consultant providing written notice to Company upon any Change of
Control Event, which notice will automatically trigger the following
payments:
I. A. Cash payment equal to Consultant's average annual
compensation (calculated over the three years immediately
prior to a Change of Control event, including bonus)
multiplied by 2.9009
B. Such cash payment will be paid in lump sum within 5 days
following termination of this Agreement.
C. Payment described in A shall be "grossed up" to reflect all
of Consultant's income tax liability following receipt of such
payment.
II. Stock: Immediate vesting of all outstanding options which are
held by the Consultant with three year provision maintained
for cash-less exercise
III. Company shall maintain Consultant's health and dental benefits
for a one year term at Consultant's expense.
10. Remedies Cumulative: No Waiver. No remedy conferred upon the Company
and/or Consultant by this Agreement is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and
shall be in addition to any other remedy given hereunder or now or
hereafter existing at law or in equity. No delay or omission by the
Company and/or Consultant in exercising any right, remedy or power
hereunder or existing at law or in equity shall be construed as a
waiver thereof, and any such right, remedy or power may be exercised by
the Company and/or Consultant from time to time and as often as may be
deemed expedient or necessary by the Company and/or Consultant in its
sole discretion.
(5)
11. Enforceability. If any provision of this Agreement shall be invalid or
unenforceable, in whole or in part, then such provision shall be deemed
to be modified or restricted to the extent and in the manner necessary
to render the same valid and enforceable, or shall be deemed excised
from this Agreement, as the case may require, and this Agreement shall
be construed and enforced to the maximum extent permitted by law, as if
such provision has been originally incorporated herein as so modified
or restricted, or as if such provision had not been originally
incorporated herein, as the case may be.
12. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered or
certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth in the first paragraph
of this Agreement. Any party hereto may also give notice, request,
demand, claim or other communication hereunder using any other means
(including personal delivery, expedited courier and messenger service),
but such notice, request, demand, claim, or other communication shall
be deemed to have been duly given only if it is actually received (or
if receipt is refused) by the party for whom it is intended. Any party
hereto may change their address upon written notice.
13. Contents of Agreement: Amendment and Assignment. This Agreement sets
forth the entire understanding between the parties hereto with respect
to the subject matter hereof and supersedes and is instead of all other
prior or contemporaneous, written or oral, arrangements regarding the
same subject matter between the Consultant and the Company. This
Agreement cannot be changed, modified or terminated except upon written
amendment duly executed by the parties hereto. All of the terms and
provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, representatives,
successors and assigns of the parties hereto, including any successor
to the business of the Company (whether by merger, consolidation, sale
of stock or assets or otherwise); except that the duties and
responsibilities of the Consultant hereunder are of a personal nature
and shall be not be assignable in whole or in part by the Consultant.
14. Indemnification. The Company shall indemnify you for Losses if you: (a)
are not indemnified by another organization or employee benefit plan
for the same Losses, or have not otherwise received, or are entitled to
receive, payment under any insurance policy, bylaw or otherwise for the
same Losses; (b) acted in good faith; (c) received no improper personal
benefit; (d) reasonably believed that the conduct was in the best
interest of the Company; and (f) such indemnification is not prohibited
by Section 302A.251, Subd. 4, Minnesota Statues.
(6)
The term "losses," when use in this Agreement, shall mean:
(a) Expenses, including reasonable attorneys' fees and all other
reasonable costs, expenses and obligations, paid or incurred
by you in connection with defending any civil, criminal or
administrative action (an "Action"), including any appeal
thereof;
(b) Judgments against you in connection with or arising out of an
Action;
(c) Civil fines and penalties imposed on you in connection with or
arising out of an Action, including any appeal thereof; or
(d) Reasonable attorneys fees as a part of settlement or judgement
which are imposed on you in connection with or arising out of
an Action, including any appeal thereof.
15. Applicable Law. This Agreement shall be interpreted and construed under
the internal laws of the State of Mississippi without regard to the
conflict of laws provision of any state.
16. Headings. The various headings used in this Agreement are inserted for
convenience only and will not in any way affect the meaning or
construction of this Agreement or any provision hereof.
17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all such
counterparts together will constitute but one agreement.
18. Legal Costs and Expenses. Company shall bear all costs and expenses in
connection with this Agreement, up to and including any and all costs
to litigate including attorney's fees or other costs and expenses for
enforcement of any provision hereof including enforcement related to
the remittance of payments in the event of termination by Consultant
upon a Change of Control Event.
(7)
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this date first written above.
CASINO RESOURCE CORPORATION
By: ________________________________________
Xxxx X. Xxxxxx, Chief Executive Officer
By: ________________________________________
Xxxxxx Xxxxxxx
(8)
2. Exhibit I
Hourly consulting fee was calculated as follows:
$127,500 1997 wages
$ 9,754 .0765 employer's shares
$ 5,000 health insurance cost
These expenditures spread over 48 work weeks (net of DTO) at an average of 45
hours per week equals $67.00 per hour.
---------------
Generally consultant fees for piecework are 20% over wage. This contract gives
CRC the benefit of 1997 rate and does not reflect any increase.
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(9)
Exhibit II
(i) Change of Control Events
The Change of Control Events and Golden Parachutes are from Executive
Compensation Reports published by Harcourt in 1995 and updated this January 1,
1998. The COC Events and Golden Parachutes used in this document are an average
for "other executive" classes (non-CEO.) Change of Control protection has been a
critical issue for executives as the merging and acquisition frenzy continues.
Over 50% of corporations studied have Golden Parachutes in place for one or more
executives. The Change of Control Events within this contract reflect those
corporate trends as set out this January 1998 by ECR as gathered from published
corporate proxy statements. Specifically, the average buy-out trigger is 24.3%
of outstanding voting stock. Average severance multiple is 2.8 with a median of
3.0. Fifty-six percent (56%) of companies provide excise tax gross up under
parachutes, which is up from a 45% average reported in 1995. I have provided
pertinent excerpts from ECR compensation report for your review.
(10)
