EXHIBIT 10.6
MANAGEMENT CONTRACT AND CONTRIBUTION AGREEMENT
This MANAGEMENT CONTRACT AND CONTRIBUTION AGREEMENT ("AGREEMENT") is
entered into as of the 4th day of March, 2002, by and between WORLD POKER TOUR,
LLC, a Delaware limited liability company (the "COMPANY"), and XXXXXX XXXXXXXX,
an individual resident of the State of California ("XXXXXXXX").
RECITALS
X. Xxxxxxxx intends to enter into a joint venture with Lakes
Poker Tour, LLC, a Minnesota limited liability company and a wholly-owned
subsidiary of Lakes Gaming, Inc., pursuant to the terms of the Company's
proposed Limited Liability Company Agreement.
X. Xxxxxxxx desires to provide certain services to the Company in
exchange for 15,000 units of membership interest in the Company and certain
management fees.
X. Xxxxxxxx and the Company desire to set forth their agreement
regarding Xxxxxxxx'x contribution of services to the Company, which shall be
deemed in part a capital contribution and in part services provided in exchange
for a management fee.
AGREEMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1. SERVICES. Xxxxxxxx agrees to act as Chief Executive Officer (also
known as Chief Manager) of the Company during the term of this Agreement.
Subject to any future organizational changes that may be made in the discretion
of the Board of Governors, all employees of the Company shall report to the
Chief Executive Officer. Xxxxxxxx shall devote full business time and best
efforts to the performance of his duties as an executive manager for the Company
and will be in charge of all day to day operating decisions of the Company.
2. MANAGEMENT FEE. The Company shall pay to Xxxxxxxx a management fee
in the amount of Two Hundred Thousand and no/100 Dollars ($200,000.00) per
annum, payable in equal monthly payments of Sixteen Thousand Six Hundred
Sixty-Six and 66/100 Dollars ($16,666.66) (the "MANAGEMENT FEE"). The parties
agree that the Management Fee shall be deemed a guaranteed payment to a partner
pursuant to regulations promulgated under the Internal Revenue Code of 1986, as
amended. The parties agree that Xxxxxxxx shall be paid the Management Fee from
and after February 25, 2002 notwithstanding that this agreement is dated as of
March 4, 2002.
3. BONUSES. In addition to the Management Fee, Xxxxxxxx shall be
entitled to a bonus in the event the Company achieves revenues at least equal to
the threshold set forth below on or before the annual Season End (as defined
below) as follows:
SEASON ONE
REVENUES BONUS
-------------- -------
(A) $2,112,000 $25,000
(B) $3,568,000 $50,000
SEASON TWO
REVENUES BONUS
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$5,028,000 $50,000
Bonus (B) above is an alternative to, and not in addition to, Bonus A. Season
One revenues shall be measured from the Season Beginning (as defined below) of
the Company's first annual season through the first Season End. Season Two
revenues shall be measured from the Season Beginning of the Company's second
annual season through the second Season End. As used herein, "SEASON BEGINNING"
shall mean the date the first dollars are billed from the first broadcast of the
first poker tournament of the season. "SEASON END" shall mean the date the last
dollars are billed and collected from the second broadcast of the last poker
tournament of the season. Such bonus shall be paid by the Company to Xxxxxxxx
promptly upon achievement of the revenue threshold and collection of the
revenues with respect thereto.
In addition to the bonuses set forth above, the Company's Compensation
Committee may, in its sole discretion, distribute to Xxxxxxxx additional
bonus(es) pursuant to the terms of the Company's Limited Liability Company
Agreement attached hereto as EXHIBIT A (the "LLC AGREEMENT").
4. BENEFITS. Xxxxxxxx shall be entitled to receive or participate in
any additional "fringe" benefits generally provided to the Company's managers,
including but not limited to insurance programs and any pension and
profit-sharing plans (the "BENEFITS"). In the event Xxxxxxxx is ineligible to
participate in the Company's health insurance program, the Company will
reimburse Xxxxxxxx up to the amount it would have paid on Xxxxxxxx'x behalf had
he been eligible to participate in such health insurance program. It is
acknowledged that the Company shall have the right, in its sole discretion, to
terminate any such plans or benefits or modify their nature and extent from time
to time. The Company shall reimburse Xxxxxxxx for all reasonable budgeted
business expenses.
5. UNITS OF MEMBERSHIP INTEREST.
A. UNIT GRANT. Upon Xxxxxxxx'x execution and delivery of the
LLC Agreement, the Company shall record in its required records under
Delaware law that Xxxxxxxx is entitled to Fifteen Thousand (15,000)
Units of membership interest in the Company ("XXXXXXXX'X UNITS"),
subject to the vesting and forfeiture provisions set forth below and
the terms of the LLC Agreement. Three
Thousand Seven Hundred Fifty (3,750) of Xxxxxxxx'x Units shall vest on
each of February 25, 2003, February 25, 2004 and February 25, 2005;
provided, however, that in the event (i) this Agreement is terminated
without Cause (as defined in Section 6 hereof), (ii) this Agreement is
not renewed pursuant to Section 8 hereof on terms at least as favorable
to Xxxxxxxx as the terms of this Agreement, or (iii) there is a Change
of Control (as defined below), then all non-vested Xxxxxxxx'x Units
shall vest immediately. This Agreement shall constitute a contribution
agreement as defined in the LLC Agreement and the Delaware Limited
Liability Company Act. "Change of Control" shall mean (i) any "Person"
or "Persons" (as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Act")) (other than the Company,
any present owner, any employee benefit plan of the Company, any
employee stock ownership plan or similar plan, or Xxxx Xxxxxx, any of
his Family members, or any trust or entity controlled by or having as a
beneficiary, Xxxx Xxxxxx or any of his Family members) becomes a
beneficial owner of membership interests of the Company representing
50% or more of the voting power of all of the Company's then
outstanding membership interests; or a transaction is consummated
pursuant to which the sale of all, or substantially all, of the assets
of the Company or the liquidation or dissolution of the Company is
effected; (ii) any "Person" or "Persons" (other than Xxxx Xxxxxx, any
of his Family members, or any trust or entity controlled by or having
as a beneficiary, Xxxx Xxxxxx or any of his Family members) becomes a
beneficial owner of units or membership interests of Lakes Poker Tour,
LLC representing 50% or more of the voting power of all of Lakes Poker
Tour, LLC then outstanding units or membership interests; or the
members of Lakes Poker Tour, LLC approve the sale of all, or
substantially all, of the assets of Lakes Poker Tour, LLC or the
liquidation or dissolution of Lakes Poker Tour, LLC and such
transaction is consummated; or (iii) the merger, consolidation or
reorganization of the Company or Lakes Poker Tour, LLC with any other
entity other than an entity in which Xxxx Xxxxxx, any of his Family
members, or any trust or entity controlled by or having as a
beneficiary, Xxxx Xxxxxx or any of his Family members. For purposes of
this Section, beneficial ownership by a person or group of persons
shall be determined in accordance with Regulation 13D (or similar
successor regulation) promulgated by the Securities and Exchange
Commission pursuant to the 1934 Act. "Family" means an individual, his
or her spouse, his or her Direct Lineal Descendants and his or her
direct ancestors. For purposes of this Agreement "direct ancestors"
means parents, grandparents, great grandparents and so on, by natural
birth or legal adoption including any illegitimate child (if
acknowledged by the child's parent). "Direct Lineal Descendants" means
children, grandchildren, great grandchildren and so on, by natural
birth or legal adoption including any illegitimate child (if
acknowledged by the child's parent) and any of the direct lineal
descendants of any of the foregoing.
B. FORFEITURE. All non-vested Xxxxxxxx'x Units shall be
immediately forfeited (i) in the event that this Agreement is
terminated for Cause; or (ii) had such non-vested Xxxxxxxx'x Units been
vested, such Units would have been
subject to sale pursuant to Section 5.5 of the LLC Agreement. All
vested Xxxxxxxx'x Units that have vested due to the termination of this
Agreement without Cause or non-renewal of this Agreement shall also be
subject to sale pursuant to Section 7 hereof or Section 5.5 of the LLC
Agreement.
C. PROFITS INTEREST. Xxxxxxxx agrees that Xxxxxxxx'x Units
shall represent a profits interest in the Company and that he will not
share pro rata in the proceeds of any dissolution of the Company until
Lakes Poker Tour, LLC has recovered the amount of its original capital
contribution to the Company. Xxxxxxxx specifically agrees to the terms
of Section 16.2 of the LLC Agreement.
6. TERMINATION. Unless earlier terminated as provided below, this
Agreement shall terminate on February 25, 2004 (the "SECOND ANNIVERSARY"). The
Company shall have the right to terminate this Agreement at any time with or
without Cause (as defined below) upon written notice to Xxxxxxxx. If the Company
terminates this Agreement without Cause, however, it shall be obligated to pay
to Xxxxxxxx any unpaid portion of the Management Fee, payable in equal monthly
installments as set forth above (without any duty to mitigate), and to provide
the Benefits to Xxxxxxxx until the Second Anniversary. As used herein, "Cause"
shall mean (i) gross negligence of Xxxxxxxx, (ii) willful and continued failure
by Xxxxxxxx to substantially perform his duties as reasonably assigned, (iii)
indictment of Xxxxxxxx for a criminal offense relating to theft or embezzlement
from the Company, which charges are not dismissed, or of which Xxxxxxxx is not
acquitted, within one (1) year; or (iv) indictment of Xxxxxxxx for any felony
offense, which charges are not dismissed, or of which Xxxxxxxx is not acquitted,
within six (6) months. In the event Xxxxxxxx is indicted with a criminal offense
as set forth in clause (iii) or (iv) above, the Company shall have the right to
suspend Xxxxxxxx (without pay, benefits and vesting) from active participation
in the management of the Company pending resolution of such charges.
7. NON-SOLICITATION / TRADE SECRETS.
A. DEFINITIONS. As hereinafter used in this Agreement, the
following terms shall have the following meanings:
(i) The term "BUSINESS" shall mean any business which is
involved in any respect with the televising of or internet broadcasting
of the game of poker.
(ii) The term "CONFIDENTIAL INFORMATION" means information
developed by Xxxxxxxx as a result of his consulting, work or services
with, for, on behalf of or in conjunction with the Company, including
processes and products, know-how, formulas, product ideas, inventions,
trade secrets, patents, patent applications, systems, products,
programs and techniques and any secret, proprietary or confidential
information, knowledge or data of the Company. All information
disclosed to Xxxxxxxx, or to which Xxxxxxxx obtains access, whether
originated by Xxxxxxxx or others, which is treated by the Company as
Confidential Information, or which Xxxxxxxx has reasonable basis to
believe is
Confidential Information, will be presumed to be Confidential
Information. The term Confidential Information will not apply to any
information which (i) Xxxxxxxx can establish by documentation was known
to him prior to receipt by him from the Company; (ii) is lawfully
disclosed to Xxxxxxxx by a third party not deriving the same from the
Company; or (iii) is presently in the public domain or becomes a part
of the public domain through no fault of Xxxxxxxx.
(iii) "INVENTIONS" means discoveries, improvements,
inventions, ideas and works of authorship (whether patentable or
copyrightable) conceived or made by Xxxxxxxx, either solely or jointly
with others, relating to any consultation, work or services performed
by Xxxxxxxx with, for, or on behalf of or in conjunction with the
Company or based on or derived from Confidential Information.
(iv) "RESTRICTED PERIOD" means the period commencing on
the date hereof and ending on the earliest to occur of (A) one year
after Xxxxxxxx separates from the Company for any reason, (B) three
months after the Early Termination Date (as defined in the Loan
Agreement), or (C) the time the Company ceases to continue to conduct
the Business; provided that, if Xxxxxxxx violates the covenants
contained in this Section 7, the Restricted Period shall be extended
for an added period equal to the duration of the period of such
violation.
(v) "TRADE SECRET" means information, including a
formula, pattern, compilation, program, device, method, technique or
process that (a) derives independent economic value, actual or
potential, from not being generally known to the public or to other
persons who can obtain economic value from its disclosure or use; or
(b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
B. INVENTIONS. With respect to Inventions (irrespective of
whether such Inventions are made on particular days during which Xxxxxxxx
consults, works, or renders any service with, for, or to the Company), Xxxxxxxx
agrees that any Invention shall be the sole and exclusive property of the
Company and further agrees:
(i) to promptly and fully inform the Company in writing
of such Inventions;
(ii) to assign to the Company all of his rights to such
Inventions, and to applications for patents and/or copyright
registrations and to patents and/or copyright registrations granted
upon such Inventions in the United States or in any foreign country;
and
(iii) to acknowledge and promptly deliver to the Company
(without charge to the Company but at the expense of the Company) such
written instruments and do such other acts as may be necessary, in the
opinion of the
Company, to obtain and maintain patents and/or copyright registrations
and to vest the entire right and title thereto in the Company.
In the event the Company reasonably believes Xxxxxxxx is in violation of this
Section 7B, the Company shall give Xxxxxxxx fifteen (15) days prior written
notice of such violation and if Xxxxxxxx has not demonstrated to the Company's
satisfaction that it has cured such violation within such fifteen (15) day
period, the Company may treat such violation as a breach of this Agreement.
C. NON-SOLICITATION. During the Restricted Period, Xxxxxxxx will
not, without the Company's prior written consent (which may be withheld with or
without reason), directly or indirectly for himself or on behalf of any other
person or entity (except the Company): (i) recruit, solicit or hire as employee,
consultant, independent contractor or in any other capacity whatsoever; (ii)
enter into any other business relationship (including, without limitation, as
partners, joint venturers, guarantors, business associates, investors,
financiers, owners of a corporation or other business organization, entity or
enterprise) with; or (iii) request, induce, advise or encourage a termination of
employment by, any employee of the Business during the term hereof. In the event
the Company reasonably believes Xxxxxxxx is in violation of this Section 7C, the
Company shall give Xxxxxxxx fifteen (15) days prior written notice of such
violation and if Xxxxxxxx has not demonstrated to the Company's satisfaction
that it has cured such violation within such fifteen (15) day period, the
Company may treat such violation as a breach of this Agreement.
D. CONFIDENTIAL INFORMATION. Except as required by Xxxxxxxx'x
employment by the Company, Xxxxxxxx will hold any Confidential Information in
the strictest of confidence and never use, disclose or publish any Confidential
Information without the prior written express permission of the Company.
Xxxxxxxx agrees to maintain control over any Confidential Information obtained
and restrict access thereto to those of Xxxxxxxx'x fellow employees, agents or
other associated parties who have a need to use such Confidential Information
for the intended purpose. Xxxxxxxx agrees to advise and inform any party to whom
Xxxxxxxx has provided access to the Confidential Information of its confidential
nature and Xxxxxxxx agrees to ensure that such associated parties be bound by
the terms and obligations of a confidentiality agreement in form and substance
approved by the Company, if requested to do so by the Company's Board of
Governors.
E. TRADE SECRETS. Xxxxxxxx shall not directly or indirectly use
or disclose any Trade Secrets to or for the benefit of anyone other than the
Company.
F. REMEDIES. Because the breach or anticipated breach of the
restrictive covenants set forth in this Section 7 would result in immediate and
irreparable harm and injury to the Company, for which it will not have an
adequate remedy at law, the Company will be entitled to relief in equity to
enjoin temporarily and/or permanently such breach or anticipated breach and to
seek any and all other legal and equitable remedies to which the Company may be
entitled. If the Company is made or shall
become a party to any litigation, commenced by or against Xxxxxxxx involving the
enforcement of this Agreement, then the nonprevailing party in such litigation
shall pay and be solely responsible for any and all costs incurred by the
prevailing party in connection with such litigation, including the costs, fees,
and reasonable expenses of any and all attorney's fees. In addition to the
foregoing, in the event it is finally determined by a court of competent
jurisdiction that Xxxxxxxx breaches Section 7C hereof, all vested Xxxxxxxx'x
Units shall be immediately forfeited.
8. EXTENSION OF TERM. At least six (6) months prior to the Second
Anniversary, the parties hereto shall engage in commercially reasonable best
efforts to negotiate an extension of this Agreement for an additional two-year
period.
9. SURVIVAL. Sections 5, 6, and 7 hereof shall survive the termination
of this Agreement.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Minnesota, without regard to the conflict of laws provisions thereof,
except that the Delaware Limited Liability Company Act shall govern this
Agreement where applicable. Any and all actions or proceedings seeking to
enforce any provision of, or based upon any right arising out of, this Agreement
may only be brought against a party in the district courts of the State of
Minnesota (sitting at Minneapolis, Minnesota) or in the United States District
Court sitting in Minneapolis, Minnesota, and each of the parties consents to the
exclusive jurisdiction of such courts (and the appropriate appellate courts) in
any such action or proceeding and waives any objection to venue therein.
11. COUNTERPART FAXES. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which, taken
together, shall constitute one document. Faxed signatures shall be deemed
originals.
IN WITNESS WHEREOF, the undersigned have set their hands hereto as of
the date first set forth above.
COMPANY: XXXXXXXX:
WORLD POKER TOUR, LLC
By: /s/ Xxxxxxx Xxxx /s/ Xxxxxx Xxxxxxxx
---------------- ---------------------------
Its: Chief Financial Manager Xxxxxx Xxxxxxxx
