1
EXHIBIT 10.35
1.
2
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the 1st day of October, 1995 by and
between Horseshoe Gaming Inc., a Nevada corporation ("Employer" or "Company")
and Xx. Xxxxxx X. Xxxxxxx ("Employee"), and is made with reference to the
following recitals of fact:
RECITALS
WHEREAS, Employer is the Manager of Horseshoe Gaming, LLC., a Delaware
limited liability company (the "LLC"), whose subsidiaries and affiliates have
developed and are currently operating casino facilities in Tunica County,
Mississippi and in Bossier City, Louisiana, and intends to develop numerous
other casino facilities in emerging gaming jurisdictions;
WHEREAS, Employee has extensive experience in the gaming industry, and
based upon his knowledge, experience and skill is capable of performing each and
all of the duties and responsibilities to be assigned to Employee pursuant to
the terms of this Agreement; and
WHEREAS, Employer wishes to hire and employ Employee, and Employee desires
to accept such employment pursuant to the terms of this Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and in consideration of the mutual
covenants, promises and agreements herein contained, the parties hereto agree as
follows:
AGREEMENT
1. Definitions. All capitalized words referenced or used in this Agreement
and not specifically defined herein shall have the meaning set forth on Exhibit
"A", attached hereto and made a part hereof.
2. Term. This Agreement shall become effective and Employee's term of
employment with Employer shall commence, for all purposes, on October 1, 1995
(the "Commencement Date") and shall terminate on July 31, 1998, unless
terminated sooner by
2.
3
Employer or Employee pursuant to the terms set forth herein.
3. Position to be Held by Employee. Employee is hereby employed and hired
by Employer to serve and act as the Chief Financial Officer of Employer and the
LLC and shall perform each and all of the duties and shall have all of the
responsibilities described herein. Employee shall at all times report directly
to and take directives from the Chief Executive officer ("CEO") of the Company,
which presently is Xx. Xxxx X. Xxxxxx. Employee shall not be reassigned to a
different position, relocated to a different city (other than the city in which
the company's headquarters are located) or assigned significantly different
responsibilities from those set forth herein, without the reasonable concurrence
and agreement of Employee.
4. Duties and Responsibilities.
A. General Duties. In his capacity as Chief Financial Officer of the
Company and the LLC Employee shall have responsibility for overseeing the
financial activities and affairs of the Company and the LLC in a manner so as to
maximize, to the best of his ability, the profitability of the Company and the
LLC, for and on behalf of Employer in accordance with applicable laws and
regulations. The authority of Employee to bind Employer and the LLC shall be as
broad or as limited as may be determined from time to time by the Board of
Directors of the Company. Within salary and policy guidelines established by the
CEO and/or the Board and with the reasonable concurrence of the CEO, Employee
shall have the authority to hire and fire employees of the Company who are
assigned to perform financial duties and functions and who are under the direct
or indirect supervision of Employee.
B. Specific Duties. Employee shall be responsible for the supervision
and direction of all of the day-to-day financial activities of the Company and
the LLC, including, without limitation, banking relationships, relationships
with other lenders, relationships with the Company's and the LLC`s independent
certified public accountants, relationships with the Company's and the LLC's
investment bankers and other stock analysts and investment advisors, cash
management, overseeing preparation of the Company's and the LLC`s (and their
respective subsidiaries and affiliates) tax returns and other financial
reporting requirements, establishment of policy and oversight of financial
officers at property level and other similar functions typically performed by a
Chief Financial Officer of a major casino and hotel company. In all instances,
Employee shall coordinate with and oversee all department heads charged with
direct responsibility for the various facets of the Company's and the LLC's
financial affairs as described above so
3.
4
as to assure that all such employees are performing their respective assignments
and such departments are being run in a thorough, competent and professional
manner.
C. Fiduciary Duty. In every instance, Employee shall carry out his
various duties and responsibilities in a fiduciary capacity on behalf of
Employer, in an effort to maximize the profitability of the Company and the LLC.
In no event whatsoever shall Employee enter into any commitments or obligations,
written or verbal, or take any other action or omit to take any action, the
result of which would be to create a conflict of interest between Employer or
the LLC and Employee, or the result of which would benefit Employee, or any
person associated with or affiliated with Employee to the detriment of Employer
or the LLC.
D. All Time Effort. Employee acknowledges and agrees that the duties and
responsibilities to be discharged by Employee require a full time effort on the
part of Employee, and accordingly, Employee agrees to devote his full time
effort and resources for and on behalf of Employer and the LLC, and agrees that
he will not, during the term hereof, enter into any other business activities or
ventures, other than those which are passive in nature and which will not
require the active participation of Employee.
E. Directives from CEO. In all instances, Employee agrees to carry out
all of his duties and responsibilities as set forth herein pursuant to the
guidance, reasonable and lawful directives and instructions of the CEO of the
Company, Xx. Xxxx X. Xxxxxx, or his successor, and agrees that at all times his
authority shall be subordinate to such CEO. Any decisions as to which there is a
disagreement between Employee and the CEO, the wishes and directives of the CEO
shall prevail in all instances, and Employee shall carry out all reasonable and
lawful directives from the CEO to the best of his ability.
F. Additional Future Responsibilities of Employee. Employer understands
that Employee has significant experience in site selection and governmental
relations in various emerging gaming markets. Accordingly, Employee agrees to be
available, as requested by Employer, and as his other duties and
responsibilities may permit, to assist Employer in pursing and obtaining the
right to develop new gaming facilities in various emerging gaming markets
throughout the United States and in other countries throughout the world and to
assist in the opening of any to-be-developed casinos and hotels facilities owned
by subsidiaries or affiliates of the LLC (individually, a "Facility" and
collectively, the "Facilities") in a manner so as to maximize the profitability
of each Facility, for and on behalf
4.
5
of the Company and the LLC in accordance with applicable laws and regulations.
5. Compensation. As compensation for the services to be rendered by
Employee pursuant to the terms of this Agreement, Employee shall be entitled to
receive the following:
(a) a base salary of Three Hundred and Fifty Thousand Dollars ($350,000)
per year (the "Base Compensation"), payable semi-monthly; plus
(b) Subject to the provisions of Section 11 hereof, an ownership
interest of 500,489 Units in the LLC ("the Ownership Interest"). Such Ownership
Interest shall entitle Employee to receive an interest in the Net Profits
generated by the LLC, in accordance with the Limited Liability Agreement of the
LLC to which Employee is a party, including those Net Profits generated as a
result of the LLC's Ownership Interest in the Bossier City, Louisiana and
Tunica, Mississippi casinos presently in operation as well as all other future
operating subsidiaries to be owned in whole or in part by the LLC.
The Ownership Interest in the Units granted hereunder to Employee
shall include for all purposes hereunder and under the terms of the Operating
Agreement for the LLC, a right to distributions based upon a share of Net
Profits after the date of grant of the Ownership Interests(the "Grant Date"),
including appreciation in the assets of the LLC over their fair market value as
of the Grant Date, but not including a share of the then capital of the LLC,
including any appreciation in assets of the LLC up to the Grant Date."
6. Fringe Benefits. Employee shall be entitled to participate in such
health and pension plans as Employer shall adopt for all of the executives of
the Company: it being understood and agreed that the only pension plan that
Employer anticipates adopting at this time is a Section 401(k) form of
retirement plan. In addition, it is understood and agreed that the Base
Compensation to be received by Employee is to be all-inclusive of other typical
fringe benefits provided to executives in a similar position as Employee;
provided, however, that Employee shall be entitled to the following benefits at
no cost to Employee and/or entitled to reimbursement for all reasonable
out-of-pocket expenses incurred in connection with the following:
(a) to the extent Employer establishes a bonus plan or plans offering
cash, stock options, stock grants or other equity ownership in the LLC, Employee
shall be eligible for inclusion in such plan(s) on a fair and equitable basis in
comparison to other participants in such plan(s) and on a basis
5.
6
generally consistent with industry standards and practices. Employee understands
that the grant of any such cash or stock bonus, however, shall be in the sole
discretion of the Board of Directors of Horseshoe Gaming, Inc.
(b) if the CEO determines that Employee should establish his office at
the Company headquarters in Las Vegas, Nevada, the reasonable expense of moving
his family and his personal belongings to Las Vegas, Nevada, plus reimbursement
for any real estate commission paid by Employee to a licensed broker on the sale
of Employee's principal residence in Memphis, Tennessee, and the closing costs
associated with the acquisition by Employee of a new principal residence in Las
Vegas, Nevada, provided that such reimbursement in the aggregate shall not
exceed Fifty Thousand Dollars ($50,000);
(c) if the CEO determines that Employee should establish his office at
the Company headquarters in Las Vegas, Nevada, reasonable rental housing
expenses, air transportation expenses and other similar expense incurred by
Employee and/or Employee's spouse, for a period not to exceed sixty (60) days
during Employee's relocation to Las Vegas, Nevada;
(d) on an on-going basis, all reasonable entertainment, traveling and
other similar expenses incurred in the performance of his duties and
responsibilities as Chief Financial Officer, such expenses to be subject to
budgets established for such purpose;
(e) participation in Employer's health coverage plan for Employee and
all members of his immediate family, with such policy to be on terms and
conditions typically provided by major gaming companies, and subject to the
maximum benefit limitations typically included in such plans. Such insurance
coverage shall include insurance for disability in an amount and upon terms to
be reasonably agreed upon and determined by Employer and Employee within sixty
(60) days from and after the date hereof. Employer and Employee agree that
Employer shall be obligated to continue the payment of Employee's base salary
during any short term disability, i.e. one continuing for a period of 180 days
or less, provided that such payments and obligation shall be reduced by the
amount of any disability insurance payments employee is entitled to receive
during such period of time;
(f) paid vacation of three (3) weeks per year; provided that Employee
may not accumulate more than four (4) weeks of vacation, regardless of the
amount of vacation actually taken by Employee during the course of his
employment; and
6.
7
(g) reimbursement for the cost of maintaining an existing $500,000 term
life insurance policy, insuring the life of Employee, provided that Employee
remains insurable at the rate generally established by major life insurance
companies for people who smoke, but are otherwise in good health and the same
age as Employee; provided, however, that if Employee is in a higher risk
category, said policy shall nevertheless continue to be made available to
Employee, but Employer will only be obligated to pay that portion of the premium
payable by a person who smokes, but is otherwise in good health, and all
premiums in excess of such standard premium shall be paid by Employee.
In addition to the foregoing, Employer and LLC agree to make available
and provide to Employee within ten (10) days after request by Employee, a
personal loan on the following terms and conditions:
Amount: Up to $200,000
Interest Rate: 10% per annum
Maturity: July 31, 1998
Security: pledge of Employee's Ownership
Interest in the LLC
7. Gaming License. Employer and Employee understand that it may be
necessary for Employee to apply for and obtain, and maintain in full force and
effect at all times, a gaming license in various jurisdictions in which
subsidiaries or affiliates of the LLC are conducting gaming operations for
persons serving in a similar capacity as Employee. Accordingly, Employee agrees,
promptly after the date hereof, to make application for any and all of such
required gaming licenses, to fully cooperate in the investigation or
investigations to be conducted in connection therewith, and otherwise use his
best efforts to obtain such gaming licenses in a timely fashion. Employer agrees
to fully cooperate with Employee in such regard and provide all necessary
information required in connection therewith, and to pay for all costs
associated with Employee obtaining such gaming licenses, including application
fees, investigation fees, or any other similar expenses such as attorneys' fees,
reasonably approved by Employer and incurred in connection therewith. In the
event that Employee should fail to obtain any such license, due to his lack of
suitability or failure to submit information in a timely manner, then this
Agreement may be immediately terminated by Employer, in which event Employee
shall have no right to any further compensation hereunder and the divestiture
provisions set forth in Section 11 hereof shall become effective. During the
course of his employment, Employee agrees to fully comply with all requirements
of applicable Gaming Authorities and Governmental Authorities.
7.
8
8. Termination.
A. Termination For Cause. Employee may be terminated by Employer for
"cause" in which event the provisions of Section 8A(i) through (iv) below shall
apply.
For purposes of this Agreement "cause" is herein defined as one or
more of the following events:
a) the failure of Employee to initially obtain a gaming license or
the revocation, or suspension for a period in excess of ninety (90) days, of any
of Employee's gaming licenses due to an act or omission of Employee, which was
not caused by Employer or any of its representatives;
b) failure or refusal by Employee to observe or perform any of the
material provisions of this Agreement or any other written agreement with
Employer, or to perform in a reasonably satisfactory manner all of the material
duties required of Employee under this Agreement or any other written agreement
with Employer;
c) commission of fraud, misappropriation, embezzlement or other acts
of dishonesty, alcoholism, drug addiction or dependency or conviction for any
crime punishable as a felony or a gross misdemeanor involving dishonesty or
moral turpitude, or the commission of any act or acts which have a material
adverse effect upon Employee's ability to perform the duties which are assumed
or assigned to him pursuant to this Agreement, or which actions or occurrences
are materially adverse to the interests of Employer;
d) refusal or failure to comply with the reasonable and lawful
directives of and/or procedures established by the CEO, Xxxx X. Xxxxxx, or his
successor, or the Board of Directors; or
e) the death of Employee or the "long-term" mental or physical
disability of Employee to such a degree that Employee, in the reasonable
judgment of responsible physicians retained by Employer, is unable to carry out
all of his obligations, duties and responsibilities set forth herein. For
purposes of this Agreement, "long-term" shall be defined as exceeding a period
of one hundred and eighty (180) days.
Termination of Employee's employment for cause under Subsections 8A(c) or
(e) above shall be effective upon notice. Termination of Employee's employment
for cause under Subsections 8A(a), (b) or (d) above shall be effective upon
thirty (30) days prior written notice to Employee; provided that prior to the
giving of such notice of termination, Employer shall
8.
9
notify Employee that a factual basis for termination for cause exists,
specifying such basis.
Upon any termination of Employee's employment with Employer, the following
shall apply:
i) Employee shall be paid his Base Compensation through the effective
date of such termination;
ii) Employee shall be entitled to retain his Fully Vested Ownership
Interest in Employer (as hereinafter defined in Section 11);
iii) The covenant not to compete and confidentiality agreement set
forth in Sections 9 and 10 hereinbelow shall apply in the manner and to the
extent set forth herein; and
iv) The put/call option described in Section 12 hereinbelow shall become
effective for all purposes.
B. Termination Without Cause. This Agreement may be terminated at any
time by Employer, upon thirty (30) days prior written notice to Employee, at the
will of Employer and without good cause as described in Section 8A above. In the
event of any such termination without cause, the following shall apply;
i) Employee shall be paid his Base Compensation through the effective
date of such termination;
ii) Employee shall be entitled to retain that portion of his Ownership
Interest in the LLC which, upon the effective date of such termination, is fully
vested plus Employee shall be entitled to be vested in an additional 125,122.25
Units in the LLC, as of the effective date of such termination by Employer
(subject to the maximum Ownership Interest of 500,489 Units set forth in Section
5(b) above);
iii) The covenant not to compete and confidentiality agreement set forth
in Section 9 and 10 hereinbelow shall apply in the manner and to the extent set
forth herein; and
iv) The put/call option described in Section 12 hereinbelow shall become
effective for all purposes.
C. Additional Benefit. Upon the termination of Employee for whatever
reason, Employee shall also be paid the following amounts (the "Severance
Benefits");
9.
10
a) if such termination is with cause (i) $300,000, if Employee is
terminated on or before July 20, 1996; (ii) $683,461, if Employee is terminated
on or before July 20, 1997; (iii) $1,025,192, if Employee is terminated on or
before July 30, 1998 and (iv) $1,366,923, if Employee is terminated after July
30, 1998, or
b) if such termination is without cause, (i) $683,461, if Employee is
terminated on or before July 20, 1996; (ii) $1,025,192, if Employee is
terminated on or before July 20, 1997; and (iii) $1,366,923, if Employee is
terminated after July 20, 1997.
Notwithstanding the foregoing, within ninety (90) days of the occurrence
of a Xxxxxx Disposition Event (defined in Section 11 below), unless Employee has
been previously paid a Severance Benefit, Employee shall be paid $1,366,923 and
Employee shall have no further right to receive a Severance Benefit.
9. Covenant Not to Compete.
A. Covenant. Upon any resignation by Employee or termination of the
employment of Employee with cause, Employee agrees that for a period not to
exceed one year from and after the date of such termination he will not serve in
any capacity, whether as an officer, director, employee or consultant, to any
other casino company which is either (i) competing directly against the LLC, the
Company or any of their subsidiaries or affiliates at the time of such
termination; or (ii) in any "RFP" process or any other similar competitive
process in which a limited number of gaming licenses are available for issuance
to one or more gaming companies selected out a group of competing companies,
such as the competitive licensing process which one of the LLC's subsidiaries is
presently engaged in Xxxxxxxx County, Indiana. Employer and Employee agree that
such covenant not to compete has been given by Employee to Employer and the LLC
for full and adequate consideration, including, without limitation, Employee's
Ownership Interest described in Section 5(b) hereinabove, and that such covenant
not to compete will expire on the earlier to occur of: (i) one year; or (ii) the
date upon which the competitive licensing process was completed and a specific
company was selected for award of such license.
B. Modification. In the event that any court of competent jurisdiction
determines that the term or the business or geographic scope of the covenant
contained in Subsection 9A above is impermissible due to the extent thereof,
said covenant shall be modified to reduce its term, business scope or geographic
scope, as the case may be, to the extent necessary to make such covenant valid,
and said covenant shall be enforced as modified.
10.
11
C. Injunctive Relief. Employee understands and agrees that it would be
difficult or impossible to ascertain the measure of damages to Employer and/or
the LLC resulting from any breach of this covenant not to compete and that
injury to Employer and/or the LLC from any such breach may be irreparable, and
that money damages therefor may be an inadequate remedy. Accordingly, in the
event of a breach or threatened breach by Employee of the provisions of this
Section 9, Employer and/or the LLC shall be entitled to seek and obtain, in
addition to monetary damages, injunctive relief against Employee, in a court of
competent jurisdiction, restraining Employee from engaging in such competitive
situation with Employer and/or the LLC.
10. Disclosure of Confidential Information.
A. Definition of Confidential Information. For purposes of this
Agreement, "Confidential Information" means any information that is not
generally known to the public that relates to the existing or reasonably
foreseeable business of Employer and/or the LLC which has been expressly or
implicitly protected by Employer and/or the LLC or which, from all of the
circumstances, Employee knows or has reason to know that Employer and/or the LLC
intend or expect the secrecy of such information to be maintained. Confidential
Information includes, but is not limited to, information contained in or
relating to the customer lists, account lists, price lists, product designs,
marketing plans or proposals, customer information, merchandising, selling,
accounting, finances, knowhow, trademarks, trade names, trade practices, trade
secrets and other proprietary information of Employer and/or the LLC.
B. Employee Shall Not Disclose Confidential Information. Employee will
not, during the term of Employee's employment and for two (2) years following
the termination of Employee's employment with Employer, use, show, display,
release, discuss, communicate, divulge or otherwise disclose Confidential
Information to any unauthorized person, firm, corporation, association or other
entity for any reason or purpose whatsoever, without the prior written consent
or authorization of Employer. Nothing contained herein shall be interpreted or
construed as restraining or preventing Employee from using Confidential
Information in the proper conduct of services to be rendered by Employee on
behalf of Employer and/or the LLC pursuant to this Agreement.
C. Scope. Employee's covenant in Subsection 10B above to not disclose
Confidential Information shall not apply to information which, at the time of
such disclosure, may be obtained from sources outside of Employer, or from its
agents, lawyers or accountants, so long as those sources did not receive
11.
12
the information in an improper manner or against the wishes of Employer.
D. Title. All documents and other tangible or intangible property
(including business opportunities which Employer and/or the LLC is pursuing)
relating in any way to the business of Employer and/or the LLC which are
conceived or generated by Employee or come into Employee's Possession during the
employment period shall be and remain the exclusive property of Employer and/or
the LLC, and Employee agrees to return immediately to Employer and/or the LLC,
upon their request, all such documents and tangible and intangible property,
including, but not limited to, all records, manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, data, tables, magnetic
tapes, computer disks, calculations or copies thereof, which are the property of
Employer and/or the LLC and which relate in anyway to the business, customers,
products, practices or techniques of Employer and/or the LLC, as well as all
other property of Employer and/or the LLC, including but not limited to, all
documents which in whole or in part contain any Confidential Information of
Employer and/or the LLC which in any of these cases are in Employee's possession
or under Employee's control.
E. Compelled Disclosure. In the event a third party seeks to compel
disclosure of Confidential Information by Employee by judicial or administrative
process, Employee shall promptly notify Employer of such occurrence and furnish
to Employer a copy of the demand, summons, subpoena or other process served upon
Employee to compel such disclosure, and will permit Employer to assume, at its
expense, but with Employee's cooperation, defense of such disclosure demand. In
the event that Employer refuses to contest such a third party disclosure demand
under judicial or administrative process, or a final judicial judgment is issued
compelling disclosure of Confidential Information by the Employee, Employee
shall be entitled to disclose such information in compliance with the terms of
such administrative or judicial process or order.
F. Injunctive Relief. Employee understands and agrees that the
disclosure, use or usurpation of Confidential Information would cause
significant economic detriment to the business of Employer and/or the LLC which
may be irreparable and for which monetary damages may be an inadequate remedy.
Accordingly, Employee understands and agrees that Employer and/or the LLC shall
be entitled to seek and obtain, in addition to monetary damages, injunctive
relief against Employee, in a court of competent jurisdiction, restraining
Employee from the disclosure, use or usurpation in any manner of any
Confidential Information.
12.
13
11. Possible Divestiture of Ownership Interest in LLC. Employee's Ownership
Interest in the LLC, being 500,489 Units, which Employee is entitled to receive
in accordance with the terms of this Agreement shall be conveyed in its entirety
to and held by Employee on October 1, 1995, subject to the approval of
applicable Gaming Authorities and compliance with Governmental Requirements. A
portion of the Ownership Interest of Employee shall, nevertheless, be subject to
divestiture based upon the following terms and conditions:
(a) Twenty-five percent (25%) of such Ownership Interest shall not be
subject to divestiture and shall be deemed fully vested for all purposes upon
execution of this Agreement; provided that the remaining seventy-five percent
(75%) shall be subject to possible divestiture and shall only become fully
vested based upon the following provisions;
(b) Subject to the provisions of Section 8B above, seventy-five percent
(75%) of such Ownership Interest of Employee in the LLC shall be subject to
divestiture in the event that Employee is terminated or voluntarily resigns
prior to July 20, 1996;
(c) Subject to the provisions of Section 8B above, fifty percent (50%)
of such Ownership Interest of Employee in the LLC shall be subject to
divestiture in the event that Employee is terminated or voluntarily resigns
prior to July 20, 1997; and
(d) Subject to the provisions of Section 8B above, the final twenty-five
percent (25%) of such Ownership Interest of Employee in the LLC shall be subject
to divestiture in the event that Employee is terminated or voluntarily resigns
prior to the scheduled termination date of this Agreement set forth in Section 2
above. The Ownership Interest of Employee in the LLC which is not subject to
divestiture pursuant to the provisions set forth above is referred to herein as
the "Fully Vested Ownership Interest".
Such divestiture of Employee's Partnership Interest in Employer shall be
automatic upon the occurrence of the event giving rise to such divestiture, and
shall not require the consent, acknowledgement or concurrence of Employee. Upon
any such event causing divestiture of all or a portion of Employee's Ownership
Interest in the LLC, the LLC shall send a written notice to Employee specifying
the amount of Ownership Interest that has been divested and the reason for such
divestiture. Employee agrees to execute any and all documents reasonably
requested by counsel for the LLC to evidence such divestiture. Such divestiture
shall be made without payment of any type whatsoever to Employee, and shall be
effective for all purposes
13.
14
from the date of the event giving rise to such divestiture. In no event shall
such divestiture be deemed a "forfeiture", but rather the possibility of such
divestiture is part of the bargained for consideration to Employer in entering
into this Agreement; it being clearly understood and agreed that Employee's
performance of services in a manner satisfactory to Employer for the entire term
of this Agreement is the consideration to be provided by Employee to Employer
for the Ownership Interest to be conveyed to Employee pursuant to this
Agreement.
Notwithstanding the provisions of Sections 11(b), (c) and (d) hereof, in
the event Xxxx X. Xxxxxx (including any entities through which Xxxx X. Xxxxxx
holds his ownership interest in the LLC, family members of Xxxx X. Xxxxxx and/or
trusts established for the benefit of his heirs) transfers controlling interest
in the LLC to a third party in a transaction other than a public offering (a
"Xxxxxx Disposition Event"), the entire Ownership Interest of Employee shall
immediately become a Fully Vested Ownership Interest and no longer subject to
divestiture.
12. Put/Call Option Upon Termination. In the event of the termination of
Employee's employment with Employer, for whatever reason, and with or without
cause, then the LLC shall have the right to purchase the Fully Vested Ownership
Interest of Employee at the fair market value of such Ownership Interest as
determined pursuant to the terms of this Agreement (the "Call Option"). In a
similar fashion, Employee shall have an option to require the LLC to purchase
back his Fully Vested Ownership Interest in the LLC at the fair market value of
such Ownership Interest as determined pursuant to the terms of this Agreement
(the "Put Option"). The LLC or Employee, as the case may be, may exercise their
respective options provided for in this Section 12, by tendering written notice
to the other party of its exercise of such option within ninety (90) days after
the date of the termination of this Agreement.
In the event that either option described herein should he exercised by
Employee or the LLC, then Employee and the LLC agree to promptly convene and
attempt in good faith to determine the fair market value of the Ownership
Interest to be purchased by the LLC from Employee. Such fair market value of the
Fully Vested Ownership Interest shall take into account that such Interest has
an interest only in future profits and asset appreciation, and not capital, all
as provided in Section 5(b) hereof. In the event that the LLC and Employee 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,
14.
15
designating the name of an 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 upon the fair market value of the
Ownership Interest to be purchased by the LLC. If unable to agree, then each
appraiser shall within thirty (30) days thereafter prepare his own independent
appraisal report and such reports shall be submitted to the LLC and Employee.
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 LLC's acquisition of
Employee's Fully Vested Ownership Interest.
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 Employee's Ownership Interest shall be submitted to arbitration in
accordance with the provisions of Section 17 hereinbelow, and in such
arbitration, each of the appraisers shall be entitled to submit their appraisal
report and testify on behalf of the LLC or Employee. The arbitration panel,
after hearing all evidence desired to be submitted by the LLC and Employee,
shall determine said fair market value, and such decision by said arbitration
panel shall be binding upon the LLC and Employee.
The purchase price to be paid by the LLC as determined by agreement or
appraisal as described herein, shall be paid in cash to Employee upon Employee's
transfer to the LLC of his Fully Vested Ownership Interest in the LLC.
The LLC and Employee agree that any 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
closely held partnerships or corporations. In the event that the LLC is a
publicly traded company at the time of termination, then the provisions of this
Section 12 shall be inapplicable, and accordingly, the Put and Call Option
described herein shall terminate for all purposes.
16.
16
In the event that the LLC exercises its Call Option, then the LLC agrees to
pay for all of the reasonable expenses incurred in connection with such
appraisal process, including the cost associated with the appraiser selected by
Employee, provided that the amount charged by such appraiser is a fair and
reasonable fee. In the event that Employee exercises its Put Option, then the
LLC shall bear the cost of its appraiser, Employee shall bear the cost of its
appraiser and the LLC and Employee shall each bear one-half (1/2) of the cost of
the third appraiser.
13. Distributions: Public Offering. Employee shall become an equity owner
in the LLC subject to all rights, conditions and other provisions of any
shareholder's agreement which shall apply equitably to and govern the
relationship among all of the equity owners of the company. Accordingly,
Employee shall be entitled to receive distributions from the LLC with respect to
Employee's Ownership Interest in the same manner and at the same time as other
shareholders of the LLC are entitled to do so under the terms of any
shareholder's agreement among the equity owners of the LLC or the terms of any
credit agreement or other financing to which the LLC, or any of its subsidiaries
is a party. The LLC and Employee understand and agree that one of the credit
agreements currently in effect restricts the equity owners of the LLC from
receiving distributions in an amount in excess of that intended to be sufficient
to discharge federal and state income taxes that may be levied against the
income allocated to each of such equity owners pursuant to the provisions of
applicable law.
In addition, in the event that the LLC is at some point in the future
involved in a public offering, which public offering involves all or
substantially all of the gaming interests or ventures owned or controlled by
Xxxx X. Xxxxxx, then in such event, Employee agrees that the valuation to be
placed upon the LLC shall be that which is determined in good faith by the
investment banking firm acting as the lead underwriter in such public offering,
and based upon such firm's fair market appraisal of the value of the LLC in
comparison to the other assets to be included in such public offering. In such
event, Employee shall receive an amount of stock in such public offering equal
to the percentage that the value of the Employee's Ownership Interest (as
determined taking into account that such Interest has an interest only in future
profits and asset appreciation, and not capital, all as provided in Section 5(b)
hereof) bears to the value of the LLC (subject to dilution as a result of such
offering) times the amount determined by dividing the value of the LLC, as
determined by such independent appraisal, by the value of all assets (including
the LLC) included in and cash raised in such public offering. By way of
16.
17
example, if Employee's Ownership Interest was valued at one-half of one percent
(.5%) of the LLC's value and the cumulative value of the LLC was $400,000,000
and the value of the other assets included in the public offering, including
cash raised, was $200,000,000, then the ownership or stock interest of Employee
in the public company after the public offering would be equal to one-third of
one percent (.333%) (subject to dilution as a result of such offering).
In the event that the LLC should become a publicly traded company at any
time during the term of this Agreement, then that portion of the stock of the
LLC that Employee is entitled to receive, but which is still not fully vested
and thus subject to the divestiture pursuant to the terms of this Agreement,
shall be escrowed in the custody of the LLC and shall not be released to
Employee until such time as such stock becomes free from potential divestiture.
Accordingly, during the time that such stock is escrowed with the LLC, Employee
shall not margin, pledge, sell, transfer or otherwise attempt to encumber or
dispose of such stock, except to the LLC. At the time that such stock is no
longer subject to divestiture, then it shall be immediately released by the LLC
to Employee.
14. Representations and Warranties. Employer as the following relate to
Employer, and the LLC, as the following relate to the LLC, hereby represent and
warrant to Employee as follows:
(a) The LLC is a limited liability company, duly organized and validly
existing under the laws of the State of Delaware; Employer is a Nevada
corporation, duly organized and validly existing under the laws of the State of
Nevada.
(b) This Agreement, when executed by Xxxx X. Xxxxxx, as President and
CEO of the Company, will constitute a legal, valid and binding agreement on the
part of Employer and the LLC, having been duly authorized by all requisite
corporate and company resolutions or authorizations; and
(c) This Agreement, when executed by Employer and the LLC, will not
conflict with, violate the terms of or create a default under any other
agreement, contract or other obligation Employer and/or the LLC is a party to or
by which Employer or the LLC is bound.
Employee hereby represents and warrants to Employer and the LLC as follows:
(i) this Agreement, when executed by Employee, will not conflict with,
violate the terms of or create a default under Employee's present employment
arrangements and/or
17.
18
agreement, whether oral or written;
(ii) Employee has never been denied a gaming application by any Gaming
Authority and Employee currently knows of no reason why Employee would not be
qualified to receive a gaming license from any jurisdiction in which the or any
of its affiliates or subsidiaries conducts gaming operations; and
(iii) Employee is unaware of any mental, physical or emotional
condition, including, without limitation, substance or alcohol abuse problems,
which currently affects Employee, and which might result in Employee's being
unable to carry out all of his duties, obligations and responsibilities set
forth herein.
Employer, the LLC and Employee understand and agree that each 15 entering
into this Agreement in strict reliance upon the representations and warranties
set forth herein, and that a breach of any of said representations and
warranties by either of the parties hereto would constitute a default hereunder.
15. Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter set forth herein, and
supersedes any and all previous oral or written agreements, understandings or
discussions between the parties hereto with respect to the subject matter set
forth herein.
16. All Amendments in Writing. This Agreement may not be amended orally,
but only pursuant to a written instrument executed by Employer, the LLC and
Employee.
17. Arbitration. In the event of any dispute or controversy between
Employer and/or the LLC or Employee with respect to any of the matters set forth
herein, then Employer, the LLC and Employee agree to submit such dispute or
controversy 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, the prevailing party shall be
entitled, in addition to any award made in such proceeding, to recover all of
its costs and expenses incurred in connection therewith, including, without
limitation, attorneys' fees.
18. Governing Laws. This agreement shall be governed and construed in
accordance with the laws of the State of Nevada.
19. Notices. Any notice required or permitted to be given in connection
with this Agreement shall be given by either: (a) depositing the same in the
United States Mail, postage prepaid, registered or certified, return receipt
requested; or
18.
19
(b) by depositing it with a recognized overnight courier service
for delivery the following day to the other party; or (c) by facsimile
transmission, provided the other party acknowledges receipt of such
transmission.
All such notices shall be deemed received us of the date of acknowledgment
of receipt by the other party. All such notices shall be addressed to the
parties at the following addresses, or to such other address as may be provided
from time to time by one party to the other:
If to Employer: Horseshoe Gaming, Inc.
000 X. Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxx X. Xxxxxx
If to Employee: Xx. Xxxxxx X. Xxxxxxx
0000 Xxx Xxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
If to the LLC: Horseshoe Gaming, LLC
000 X. Xxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxx X. Xxxxxx
20. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors,
administrators and assigns. Notwithstanding the foregoing, Employee understands
and agrees that the nature of this Agreement is a personal services agreement,
and that Employer is entering into this Agreement based upon the specific
services to be rendered personally by Employee hereunder; and accordingly,
Employee shall not assign, transfer or delegate in any manner any of his duties,
responsibilities or obligations hereunder.
21. Waiver. No waiver of any term, condition or covenant of this Agreement
by a party shall be deemed to be a waiver of any subsequent breaches of the same
or other terms, covenants or conditions hereof by such party.
22. Construction. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective or valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first above written.
19.
20
"EMPLOYER" HORSESHOE GAMING, INC.,
a Nevada Corporation
By: Xxxx X. Xxxxxx
-------------------------
Xxxx X. Xxxxxx, President
"EMPLOYEE" \s\ Xxxxxx X. Xxxxxxx
--------------------------
Xxxxxx X. Xxxxxxx
0000 Xxx Xxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
AGREED AND ACCEPTED as of the
1st day of October, 1995
HORSESHOE GAMING, LLC., a
Delaware Limited Liability Company
By: HORSESHOE GAMING, INC.,
a Nevada Corporation
Manager
By: \S\ Xxxx X. Xxxxxx
-------------------------
Xxxx X. Xxxxxx, President
20.
21
EXHIBIT A
DEFINITIONS
All capitalized terms referenced or used in this Agreement and not
specifically defined therein shall have the meaning set forth below in this
Exhibit A, which is attached to and made a part of this Agreement for all
purposes.
Gaming Authorities. The term "Gaming Authorities" or "Authority" shall mean
all agencies, authorities and instrumentalities of any state, nation or other
governmental entity or any subdivision thereof, regulating gaming or related
activities in the United States or any State.
Governmental Authority. The term "Governmental Authority" means the
Government of the United States, and any other state, county or political
subdivision in which the any of the Company's casino facilities are located, and
any court or political subdivision, agency, commission, board or instrumentality
or officer thereof, whether federal, state or local, having or exercising
jurisdiction over Employer or any of the Company's gaming facilities, including,
without limitation, any Gaming Authority.
Governmental Requirements. The term "Governmental Requirements" means all
laws and agreements with any Governmental Authority that are applicable to the
acquisition, development, construction and/or operation of any of the Company's
gaming facilities including, without limitation, all required permits, approvals
and any rules, guidelines or restrictions created or imposed by Governmental
Authorities (including, without limitation, any Gaming Authority).
Net Profits. The term "Net Profits" shall have the same meaning as the term
"Profits" has in the Limited Liability Company Agreement of the LLC.
21.
