Exhibit 99.1
LETTER OF UNDERSTANDING
This Letter of Understanding among Caesars Entertainment, Inc. (the
"Company"), Xxxxxx'x Entertainment, Inc. ("Xxxxxx'x") and Xxxxxxx X. Xxxx (the
"Executive" and, together with the Company and Xxxxxx'x, the "Parties") is
entered into as of October 6, 2004. The Parties acknowledge that the Executive
is party to an Employment Agreement with the Company, dated November 19, 2002
(the "Employment Agreement"), and a Change of Control Agreement with the
Company, dated November 1, 2001 (the "Change of Control Agreement"). Except as
otherwise defined herein, any capitalized terms used herein shall have the
meaning ascribed to such term in the Employment Agreement.
The Parties desire to set forth their understanding regarding the
severance payments and benefits to which the Executive shall be entitled if,
during the Employment Period and on or following consummation of the merger
contemplated by the Merger Agreement by and among the Company, Xxxxxx'x
Operating Company, Inc. and Xxxxxx'x, dated as of July 14, 2004, (i) the
Executive terminates his employment for Good Reason or (ii) the Company
terminates his employment other than for death, Disability or Cause (a
termination described in clause (i) or (ii) above being referred to as a
"Qualifying Termination").
The Parties hereby agree as follows:
1. Upon a Qualifying Termination, the Executive shall not be entitled
to receive any payments or benefits under the Change of Control Agreement.
2. Upon a Qualifying Termination, the Executive shall be entitled to
receive from the Company or its successor:
(a) in full satisfaction of the Executive's rights to
severance payable pursuant to the first sentence of the third
paragraph of Section 5(a) of the Employment Agreement, a lump-sum cash
payment equal to the sum of (1) the product of 2.99 times the
Executive's current Annual Base Salary plus (2) the product of 2.99
times the greater of the Executive's annual bonus in respect of fiscal
year 2003 or fiscal year 2004, such lump-sum payment to be made not
later than 30 days following the date of the Qualifying Termination;
provided, that such payment shall be conditioned upon the Executive's
(i) execution and non-revocation of the Release, (ii) compliance with
Section 8(a) of the Employment Agreement and (iii) compliance with
Paragraph 3 below;
(b) a lump-sum cash payment in respect of all Accrued
Obligations, such lump-sum payment to be made not later than 30 days
following the date of the Qualifying Termination;
(c) payment in respect of brokerage commissions, transfer
taxes and closing costs incurred in selling the Executive's current
Las Vegas, Nevada residence, and, if the Executive is unable to sell
such property within 90 days of placing it on the market, payment
equal to its appraised fair market value (as determined in accordance
with the Company's normal policy for senior level executives) but
which in no event shall be at a price less than the Executive's
documented cost for such residence including all renovations and
improvements;
(d) continued benefits referred to in the fourth sentence of
the third paragraph of Section 5(a) of the Employment Agreement;
(e) lifetime benefits for himself and his family, as
described in Section 5(d) of the Employment Agreement;
(f) the indemnification benefits and insurance coverage set
forth in Section 10(h) of the Employment Agreement for a period of not
less than three years following the date of the Qualifying
Termination;
(g) if necessary, payments pursuant to Section 10(c) of the
Employment Agreement; and
(h) a fully vested and nonforfeitable Supplemental Benefit,
as described in Section 3(j) of the Employment Agreement.
3. In lieu of the restrictions set forth in Section 8(b) of the
Employment Agreement, for a period of one year following the date of the
Qualifying Termination, except as set forth in the immediately succeeding
sentence, the Executive shall not be associated with Ameristar Casinos, Inc.,
Argosy Gaming Company, Pinnacle Entertainment, Inc., Penn National Gaming,
Inc., or Isle of Capri Casinos, Inc., LLC or any affiliate of the foregoing
companies, or any company that in the future operates any of the assets of the
foregoing companies (the "Restricted Competitors"). Notwithstanding the
foregoing, the Executive may (i) own up to 1% of the stock of any Restricted
Competitor that is a publicly-traded corporation; (ii) serve on the board of
directors of any Restricted Competitor; or (iii) serve as a part-time
consultant to any Restricted Competitor. The Executive shall not be restricted
from associating with any entity that is not a Restricted Competitor.
4. Except as set forth in Paragraph 5 below, nothing herein shall be
construed as effecting or limiting in any way the compensation or benefits to
which the Executive may become entitled under the Employment Agreement upon the
occurrence of a Change of Control or any compensation or benefits to which he
may become entitled under the Employment Agreement in connection with any
termination of his employment that does not constitute a Qualifying
Termination.
5. All outstanding equity awards held by the Executive immediately
prior to a Change of Control shall vest, become exercisable and/or become free
of restrictions upon such Change of Control; provided, however, that
notwithstanding anything to the contrary in the Employment Agreement, for
purposes of applying this Paragraph 5 to the stock options and restricted stock
units granted to the Executive on September 23, 2004 (the "2004 Grant"), the
"Change of Control" definition in the Change of Control Agreement shall apply.
In all other respects, the 2004 Grant shall be governed by the Employment
Agreement and applicable award agreements.
IN WITNESS WHEREOF, the Parties have duly executed this Letter of
Understanding effective as of the date first referred to above.
Caesars Entertainment, Inc.
By: /s/ Xxxxxx X. Xxxx
-------------------------------------
Name: Xxxxx Xxxx
Title: Exec. V.P. Human Resources &
Admin., Authorized Signator
for Caesars Entertainment
Xxxxxx'x Entertainment, Inc.
By: /s/ Xxxxx Xxxxx
-------------------------------------
Name: Xxxxx Xxxxx
Title: Sr. Vice President Human Resources
Xxxxxx'x Entertainment, Inc.
XXXXXXX X. XXXX
/s/ Xxxxxxx X. Xxxx
----------------------------------------
