Exhibit 10.27
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into this 2nd day of February, 1999,
by and between HARVEYS CASINO RESORTS, a Nevada corporation, hereinafter
referred to as "HARVEYS" and/or "EMPLOYER," and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, hereinafter
referred to as "EMPLOYEE," as follows:
W I T N E S S E T H:
WHEREAS, EMPLOYEE has previously served as an employee of HARVEYS
pursuant to that certain employment agreement, dated December 1, 1995, as
amended (the "Prior Agreement"); and
WHEREAS, HARVEYS and Harveys Acquisition Corporation, a Nevada
corporation ("ACQ CORP"), have entered into an Agreement and Plan of Merger
dated as of February 1, 1998 (the "Merger Agreement"), whereby ACQ CORP will be
merged with and into HARVEYS (the "Merger"); and
WHEREAS, in connection with the Merger Agreement, HARVEYS and EMPLOYEE,
together with other members of HARVEYS management, have entered into a
Memorandum of Understanding, dated February 1, 1998 (the "MOU"), which sets
forth, among other things, certain terms regarding EMPLOYEE'S employment with
HARVEYS following consummation of the Merger, including the execution of a new
employment agreement to replace the Prior Agreement; and
WHEREAS, following consummation of the Merger, HARVEYS desires to
continue to secure the benefits of EMPLOYEE'S background, knowledge, experience,
ability, expertise and industry to promote and maintain HARVEYS' stability,
growth, viability and profitability; and
WHEREAS, subject to consummation of the Merger, HARVEYS desires to
continue to engage the services of EMPLOYEE, who is desirous of continued
employment by HARVEYS, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, together with other good and valuable consideration
the receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:
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I.
DEFINITIONS
1.01 EMPLOYEE shall at all times mean ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
1.02 EMPLOYER shall at all times mean HARVEYS CASINO RESORTS, a Nevada
corporation, and its Successors in Interest together with its subsidiaries.
1.03 HARVEYS shall at all times mean HARVEYS CASINO RESORTS, a Nevada
corporation, and its Successor in Interest together with its subsidiaries.
1.04 Successor in Interest shall mean any entity which is the successor
or assign of HARVEYS, at law or at equity, and shall include without limitation,
any entity into which HARVEYS is merged or consolidated, and any entity to which
all or substantially all of the assets or businesses of HARVEYS is transferred.
II.
NATURE OF EMPLOYMENT AND DUTIES OF EMPLOYEE
2.01 Subject to and effective upon the consummation of the Merger,
EMPLOYEE shall continue to serve HARVEYS as President and Chief Executive
Officer of HARVEYS. EMPLOYEE shall at all times be subject to, observe and carry
out such rules, regulations, policies, directions, and restrictions as HARVEYS
Board of Directors (the "Board") may from time to time establish for senior
executive officers of the EMPLOYER.
2.02 Subject to the supervision and control of the Board, EMPLOYEE
shall do and perform all services and acts necessary or advisable to fulfill the
duties and responsibilities of his position and shall render such services on
the terms set forth herein. Without limiting the generality of the foregoing,
EMPLOYEE shall be responsible for developing, directing and implementing the
operation of the business and the Company's policies and plans as determined by
the Board of Directors. In addition, EMPLOYEE shall have such other executive
and managerial powers and duties with respect to HARVEYS and its subsidiaries
that are consistent with the offices of President and Chief Executive Officer
and as may reasonably be assigned to him by the Board, including without
limitation serving on the Board of Directors of any subsidiary of HARVEYS.
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2.03 EMPLOYEE has reviewed and concurs with his responsibilities and
duties as set forth in Section 2.02 above.
2.04 During the Term (as defined below), EMPLOYEE shall devote
substantially all of his productive time, ability and attention to the business
of EMPLOYER. In addition, EMPLOYEE shall not directly or indirectly render any
service of a business, commercial or professional nature, to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of the Board, PROVIDED, that, subject to the provisions of Article X
hereof, EMPLOYEE shall not be precluded from involvement in charitable or civic
activities or his personal financial investments provided the same do not
materially interfere with his time or attention to the business of EMPLOYER, and
PROVIDED, further, that EMPLOYEE shall not serve as a director of any other
for-profit business that is not an affiliate of EMPLOYER.
2.05 EMPLOYEE agrees that he shall at all times (i) to the best of his
ability and experience conscientiously perform all of the duties and obligations
of his position with the EMPLOYER, (ii) use his best efforts to do and perform
all services, acts, or things necessary or advisable to assist in the management
and conduct of the business and otherwise advance the interests of EMPLOYER and
(iii) diligently and in the highest good faith carry out the lawful directives
of the Board, PROVIDED, that EMPLOYEE shall not be obligated to perform his
duties hereunder outside the Stateline, Nevada area, except for business trips
and directors meetings outside said area which arise and result from the normal
conduct of the business of HARVEYS.
2.06 EMPLOYEE shall continue to serve as a member of the Board (though
not as Chairman) following the closing of the Merger. In addition, during the
Term, EMPLOYEE shall be nominated for election to the Board of Directors at each
meeting of stockholders at which directors are to be elected, and EMPLOYER shall
use its best efforts to provide for EMPLOYEE's election to the Board of
Directors at each such meeting. Notwithstanding the foregoing provisions of this
Section 2.06, EMPLOYEE agrees to promptly resign his position on the Board and
become a non-voting observer on the Board (with rights equivalent to those of an
employee director other than voting rights) if, and for so long as (absent such
resignation) members of the Board who are also employees of Colony Capital, Inc.
or its affiliates (other than
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EMPLOYER or any of its subsidiaries) would not otherwise constitute at least a
majority of the members of the Board. During such period as EMPLOYEE shall by
reason of such circumstances be a non-voting observer on the Board, EMPLOYER
shall diligently use commercially reasonable, good faith efforts (subject to
applicable gaming approvals, licensing requirements and other regulatory
determinations) to attempt to cause one or more additional employees of Colony
Capital, Inc. or its affiliates (other than EMPLOYER or any of its subsidiaries)
to be appointed to the Board, such that EMPLOYEE may resume his position as a
voting member of the Board consistent with the provisions of the immediately
preceding sentence. EMPLOYEE also agrees that effective upon notice being
provided of his termination of employment with EMPLOYER, he shall immediately
resign from his position as a non-voting observer or member of the Board, as
applicable.
III.
TERM AND GENERAL CONDITIONS OF EMPLOYMENT
3.01 Subject to and effective upon consummation of the Merger, EMPLOYER
hereby employs the EMPLOYEE, and EMPLOYEE hereby agrees to be employed by
HARVEYS for a period of five (5) years commencing on the date of consummation of
the Merger (the "Effective Date") and terminating on the fifth anniversary of
the Effective Date (as the same may be extended as set forth below, the "Term"),
unless extended by mutual written agreement of the parties; PROVIDED, that the
period of employment shall automatically be extended for successive one (1) year
periods if neither party has provided six (6) months prior written notice to the
other of its intention to have this Agreement lapse at the expiration of the
Term; and PROVIDED FURTHER, that the Term shall be subject to earlier
termination in accordance with Articles IV, V and VI below.
3.02 Notwithstanding anything to the contrary herein, in the event of
any termination of EMPLOYEE's employment for any or no reason, EMPLOYEE and
EMPLOYER shall
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nevertheless continue to be bound by the terms and conditions set forth in
Articles IX through XII, in Section 13.08 and, to the extent provided therein,
Section 13.09 below.
3.03 Upon consummation of the Merger, the Prior Agreement shall be
cancelled and terminated without further obligation of EMPLOYER.
3.04 If the Merger Agreement shall be terminated prior to consummation
of the Merger, EMPLOYEE shall continue his employment with HARVEYS pursuant to
the terms of the Prior Agreement, which in such case shall remain in full force
and effect.
3.05 EMPLOYEE hereby acknowledges and agrees that his rights as set
forth herein to receive severance and other compensation and benefits hereunder
shall supersede and replace in its entirety any severance or other benefits that
might otherwise be payable pursuant to HARVEYS Change of Control Plan as in
effect as of the date hereof or as the same may be amended from time to time or
under any other severance plan, policy, agreement or arrangement in effect
immediately prior to the Effective Date. EMPLOYEE further acknowledges that as
of the Effective Date, EMPLOYEE shall no longer be a participant in or have any
rights under the Change of Control Plan (or under any such other severance plan,
policy, agreement or arrangement in effect immediately prior to the Effective
Date), regardless of the reasons or circumstances of his termination of
employment. EMPLOYEE further acknowledges that as of the Effective Date EMPLOYEE
shall no longer be a participant in or have any rights under the Company's Long
Term Incentive Plan or Supplemental Executive Retirement Plan.
IV.
TERMINATION OF EMPLOYMENT WITHOUT CAUSE
4.01 EMPLOYEE'S employment may be terminated at any time by HARVEYS,
with or without "Cause" (as defined in Section 6.01 below), at any time and for
any or no reason. Any such termination without Cause shall be effective only
upon thirty (30) days' prior written notice to EMPLOYEE (such effective date,
for purposes of this Article IV, the "Termination Date").
4.02 If EMPLOYEE'S termination by EMPLOYER shall be without Cause,
EMPLOYEE shall be entitled to the following benefits:
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(a) Except as provided below, EMPLOYEE shall be entitled to
receive on the Termination Date a lump sum payment in an amount equal to the
product of (x) the Applicable Multiplier (as defined below) and (y) the sum of
his then Base Salary and then Annual Target Bonus (each as defined below).
(i) "Applicable Multiplier" shall mean the
lesser of (A) 2.0 and (B) a fraction, the denominator of which is 12,
and the numerator of which shall be the number of full plus partial
(calculated by the day) months remaining in the Term following the
Termination Date, which numerator shall be increased by the number of
full plus partial (calculated by the day) months during any Post-Term
Restriction Period (as defined below and further described in Annex E)
if an election to have such Post-Term Restriction Period apply to
EMPLOYEE is made by EMPLOYER pursuant to Section 10.01.
(ii) For purposes of this Section 4.02(a),
EMPLOYEE'S annual target bonus under the Annual Bonus Plan (as defined
in Section 7.02 below) for each fiscal year during the Term shall be
deemed to be 70 percent of EMPLOYEE'S Base Salary as in effect as of
the date the relevant business plan targets for such fiscal year are
established by the Board.
(iii) For purposes of this Agreement, the
"Post- Term Restriction Period" shall mean that period, if any,
following expiration of the Term during which EMPLOYEE would be subject
to the restrictions of Section 10.01 as determined under the first
paragraph of Section 10.01, without regard to any limitation of such
period by reason of Section 10.01(a). The Post-Term Restriction Period
is further described in Annex E hereto.
(iv) Notwithstanding the foregoing, in the
event that EMPLOYEE'S Termination Date shall be less than one year
prior to the expiration of the Term and the Applicable Multiplier
(determined as above by including any applicable Post-Term Restriction
Period) shall be less than 1.0, EMPLOYEE shall not be entitled to
receive the lump sum payment determined
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under the first sentence of this Section 4.02(a), but shall instead be
entitled to receive (A) on the Termination Date a lump sum payment in
an amount equal to the product of (x) the Applicable Multiplier and (y)
his then Base Salary and (B) as applicable, a bonus as determined under
Annex E hereto.
(b) EMPLOYEE shall be entitled to continuation of his Benefits
(as defined below) for that number of months immediately following the
Termination Date equal to the product of (A) the Applicable Multiplier and (B)
12 (such number of months, the "Severance Period"), PROVIDED, that in the event
that during such period, pursuant to applicable law or the terms of the
applicable plan, any Benefits may not be provided pursuant to the terms of the
specific plan referenced herein, EMPLOYER shall provide substantially equivalent
benefits by alternate means.
(c) Subject to the provisions of the Award Agreement (as
defined in Section 7.03 below), EMPLOYEE shall vest as of the Termination Date
in that portion of the Stock Award and Stock Option grants (each as defined
below) that would otherwise have vested had EMPLOYEE remained in HARVEYS employ
for the duration of the Severance Period.
Except as set forth in this Section 4.02 and Section 13.08,
all other rights of EMPLOYEE (and, except as provided in Sections 4.02 and 3.02
above and Section 13.08, all obligations of the EMPLOYER) hereunder shall
terminate as of the Termination Date.
4.03 If during the term hereof EMPLOYEE'S employment shall terminate by
reason of his death or Disability (as defined below), he or his estate, as
applicable, shall be entitled to (i) all amounts of Base Salary and Benefits
accrued but unpaid through the date of such termination (which shall be the date
of death or the 45th day after the date EMPLOYER provides EMPLOYEE notice of
termination for Disability) and (ii) any death and/or disability benefits that
may be due EMPLOYEE under any benefit plans in effect from time to time.
"Disability" shall mean any physical or mental disability that prevents EMPLOYEE
from performing one or more of the essential functions of his position for a
period of not less than six (6) months in any continuous 12-month period. Except
as set forth in this Section 4.03 and Section 13.08, all other rights of
EMPLOYEE (and, except as provided in this Section 4.03 and Section 3.02 above
and
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Section 13.08, all obligations of the EMPLOYER) hereunder shall terminate as of
the date of such termination of employment.
V.
TERMINATION OF EMPLOYMENT AT EMPLOYEE'S REQUEST
5.01 EMPLOYEE may, at EMPLOYEE'S sole option and right, terminate his
employment with EMPLOYER at any time, with or without Good Reason (as defined
below). Any such termination shall be effective only upon thirty (30) days'
prior written notice to HARVEYS.
(a) In the event of such termination of employment without
Good Reason, EMPLOYEE shall be entitled to receive all amounts of Base Salary
and Benefits accrued but unpaid through the date of such termination.
(b) In the event of such termination of employment with Good
Reason, EMPLOYEE shall be entitled to receive the benefits set forth in Sections
4.02(a)-(c) as if EMPLOYEE'S employment had been terminated by EMPLOYER without
Cause, with the "Termination Date" as used in such sections being the effective
date of termination pursuant to this Section 5.01.
For purposes of this Section 5.01, EMPLOYEE shall have "Good
Reason" to terminate his employment hereunder if (i) EMPLOYER shall, without
EMPLOYEE'S written consent, willfully and materially breach its obligations
under this Agreement, (ii) EMPLOYEE provides EMPLOYER written notice pursuant
hereto stating with specificity the respects in which EMPLOYEE believes EMPLOYER
to have willfully and materially breached its obligations under this Agreement
and (iii) within thirty (30) days following the date of such notice EMPLOYER
shall not have cured such breach. Except as set forth in this Section 5.01 (and,
as incorporated hereinabove by reference, Section 4.02) and Section 13.08, all
other rights of EMPLOYEE (and, except as provided in Section 3.02 above and
Section 13.08, all obligations of the EMPLOYER) hereunder shall terminate as of
the date of such termination of employment.
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VI.
TERMINATION OF EMPLOYMENT FOR CAUSE
6.01 EMPLOYER may at any time, at its election, by written notice to
EMPLOYEE stating with specificity the reason for the termination, terminate
EMPLOYEE'S employment for "Cause," which shall be defined as EMPLOYEE'S:
(a) Gross negligence or willful malfeasance in the performance
of his duties under this Agreement;
(b) Failure to obtain or retain any permits, licenses, or
approvals which may be required by any state or local authorities in order to
permit the EMPLOYEE to continue his employment as contemplated by this
Agreement;
(c) Conviction of any felony or conviction of a crime
involving moral turpitude;
(d) Dishonesty with respect to EMPLOYER (including, without
limitation, fraud) resulting in a breach of duty to EMPLOYER involving
EMPLOYEE'S personal gain or profit;
(e) Engaging in any activity that is in violation of the
provisions of Article X of this Agreement, which shall not be cured following
ten days' written notice and a demand to cure such violation; or
(f) Use or imparting of any confidential or proprietary
information of EMPLOYER or any subsidiary or affiliate in violation of any
confidentiality or proprietary agreement to which EMPLOYEE is a party, including
without limitation the provisions of Article IX of this Agreement; PROVIDED,
that in the event such notice is provided pursuant to Section 6.01(b), EMPLOYEE
shall have a period of thirty (30) days following the date of such notice in
which to cure such failure, and if EMPLOYEE shall cure such failure within such
period, EMPLOYEE's employment hereunder shall be reinstated without prejudice.
6.02 Upon the provision of such notice (or, in the case of such notice
pursuant to Section 6.01(b), upon expiration of the applicable cure period
without cure), EMPLOYEE'S employment shall immediately cease and terminate for
Cause. In the event of such termination
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of employment, EMPLOYEE shall be entitled to receive all amounts of Base Salary
and benefits accrued but unpaid through the date of such termination. Except as
set forth in this Section 6.02 and Section 13.08, all other rights of EMPLOYEE
(and, except as provided in Section 3.02 above and Section 13.08, all
obligations of the EMPLOYER) hereunder shall terminate as of the date of such
termination of employment.
VII.
COMPENSATION OF EMPLOYEE
7.01 Base Salary - EMPLOYEE shall receive an annual base salary ("Base
Salary") of Five Hundred Twenty Thousand Dollars ($520,000), payable in at least
monthly installments, less all applicable Federal, state and local taxes, Social
Security and any other government mandated deductions. EMPLOYEE'S Base Salary
shall be reviewed by the Board no less frequently than annually relative to
specified performance-based criteria to be determined by the Board.
7.02 Annual Bonus - Following the Effective Time, EMPLOYEE shall be
eligible to participate in EMPLOYER'S Management Incentive Plan ("MIP") or, at
the election of EMPLOYER, in a new or equivalent annual bonus plan established
by EMPLOYER having a similar structure to the MIP providing for payment of an
annual bonus (the "Annual Bonus Plan"), but in either case with thresholds and
triggering events for payment based on the achievement of HARVEYS annual budget
and other business plan targets to be determined by the Board following the
Effective Date. EMPLOYEE's maximum annual bonus under the Annual Bonus Plan
shall not be less than $360,000. Notwithstanding the foregoing, the following
provisions shall apply with respect to EMPLOYEE'S participation in the Annual
Bonus Plan with respect to fiscal 1999:
(a) On the date hereof, EMPLOYER shall pay to EMPLOYEE a lump
sum amount in cash equal to 25% of EMPLOYEE'S maximum bonus under the Annual
Bonus Plan for fiscal 1999, which lump sum amount EMPLOYER and EMPLOYEE
acknowledge and agree to be $130,000 (the "Advance"). EMPLOYEE hereby
acknowledges receipt of the Advance.
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(b) Following the end of fiscal 1999, the Board shall
determine EMPLOYEE'S bonus under the Annual Bonus Plan in the ordinary course
using the financial targets established by the Board prior to the date hereof,
without regard to the Advance (the "Overall 1999 Bonus Entitlement"). On the
date bonuses under the Annual Bonus Plan are paid generally to employees with
respect to fiscal 1999, EMPLOYEE shall be entitled to receive an annual bonus
payment equal to the excess, if any, of (i) EMPLOYEE'S Overall 1999 Bonus
Entitlement over (ii) the amount of the Advance. In the event the Advance shall
be greater than the Overall 1999 Bonus Entitlement, EMPLOYEE shall have no
obligation to repay any portion of the Advance to EMPLOYER, and no portion of
the Advance shall be offset against amounts otherwise payable to EMPLOYEE under
the Annual Bonus Plan with respect to subsequent fiscal years. However, in the
event EMPLOYEE'S employment is terminated by EMPLOYER without Cause or by
EMPLOYEE for Good Reason prior to December 31, 1999, the amount of the Advance
shall be offset dollar-for-dollar against amounts otherwise payable to EMPLOYEE
under Section 4.02(a).
7.03 Stock Grants and Stock Option - On the Effective Date, EMPLOYEE
shall receive (i) a restricted Stock Award consisting of 270 shares of the Class
A common stock, par value $.01 per share, of HARVEYS ("Class A Common Stock")
and 27,000 shares of the Class B common stock, par value $.01 per share, of
HARVEYS ("Class B Common Stock") and (ii) a Stock Option to purchase 360
additional shares of Class A Common Stock and 36,000 additional shares of Class
B Common Stock, each at a price of $20.06 per share; PROVIDED, that the Stock
Award and Stock Option shall each be subject in all respects to the terms of
HARVEYS 1999 Omnibus Incentive Plan, a copy of which is attached hereto as Annex
A (the "Omnibus Plan"), the individual stock option and restricted stock award
agreement to be entered into thereunder evidencing the Stock Award and Stock
Option, a copy of which is attached hereto as Annex B (the "Award Agreement"),
and that certain Stockholders Agreement among HARVEYS, Colony HCR Voteco, LLC, a
Nevada limited liability company, Colony Investors III, L.P., a Delaware limited
partnership, and the security holders of the Company (including EMPLOYEE) as
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identified from time to time on Schedule A thereto, a copy of which is attached
hereto as Annex C.
VIII.
BENEFITS AND PERQUISITES
During the Term, EMPLOYEE shall be entitled to the benefits and
perquisites as set forth in this Article VIII (collectively, "Benefits")
8.01 HARVEYS 401(k) Plan - During the employment term the EMPLOYEE
shall be allowed to participate in HARVEYS 401(k) Plan, or shall be provided
with benefits that are substantially identical to the benefits provided under
such plan as of the date hereof.
8.02 Vacation - EMPLOYEE shall be entitled to five weeks of paid
vacation per year. EMPLOYEE shall be afforded the usual holidays as EMPLOYER may
from time to time recognize.
8.03 Complimentary Privileges - EMPLOYEE shall be entitled such Level I
complimentary privileges as are afforded generally to senior executives of the
EMPLOYER from time to time pursuant to policies adopted by the Board of
Directors..
8.04 EMPLOYER shall provide EMPLOYEE with an automobile in accordance
with the Class I category of EMPLOYER'S Standard Automobile Policy and
Procedures, as from time to time amended.
8.05 Disability - EMPLOYEE shall also be entitled to short term
disability coverage and long term disability coverage under plans as in effect
from time to time as implemented by EMPLOYER.
8.06 Medical, Vision and Dental Insurance - EMPLOYER shall provide
medical, vision and dental benefits to EMPLOYEE, his spouse and dependents in
accordance with EMPLOYER'S Class One coverage under the Executive Medical Plan,
as amended from time to time.
8.07 Deferred Compensation Program - EMPLOYEE shall be allowed to
participate in the Deferred Compensation Program as is in effect from time to
time.
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8.08 Life Insurance - (a) During the Term. EMPLOYER shall furnish
EMPLOYEE with Group Term Life Insurance and Accidental Death/Dismemberment
Insurance, in each case subject to the terms of such plans as in effect from
time to time. (b) Convertible Term Life Insurance - During the Term, EMPLOYER
shall furnish EMPLOYEE with a Convertible Term Life Insurance Policy in the face
amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000), PROVIDED, that EMPLOYEE
continues to be an insurable risk. Upon termination of EMPLOYEE's employment
under any circumstances, EMPLOYEE shall have the right to have such policy
assigned to him, PROVIDED, that EMPLOYEE agrees to bear all costs and expenses
of such assignment and of maintaining such policy following the date of such
termination of employment (and that he shall not have the benefit of EMPLOYER'S
group life insurance rates with respect thereto), and to hold harmless and
indemnify the Company with respect thereto. If such policy is not so assigned to
EMPLOYEE, EMPLOYEE'S rights thereunder shall expire as of the effective date of
his termination of employment with EMPLOYER.
8.09 Additional Employee Benefit Plans - EMPLOYEE shall be entitled to
participate in all additional employee benefits plans which may, in the future,
be made generally available to EMPLOYER'S most senior management employees,
PROVIDED, that separate employee benefits plans may be adopted for lower-ranking
management employees as to which EMPLOYER may determine EMPLOYEE ineligible for
participation, and PROVIDED, FURTHER, that EMPLOYEE shall not be entitled to
participate in (i) EMPLOYER'S Supplemental Executive Retirement Plan or any
other supplemental retirement plan or arrangement, (ii) EMPLOYER's Long Term
Incentive Plan or (iii) any severance plan, policy or arrangement of EMPLOYER.
This Section 8.09 shall not be construed to affect EMPLOYEE'S entitlement to
severance or bonus amounts as provided in this Agreement or hereafter.
8.10 Reimbursement of Expenses - EMPLOYER shall reimburse EMPLOYEE for
any expenses reasonably and necessarily incurred by him in furtherance of his
duties hereunder, including, travel, meals, and accommodations, upon submission
by him of vouchers or receipts
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and in compliance with such rules and policies relating thereto as EMPLOYER may
from time to time adopt.
IX.
PROTECTION OF CONFIDENTIAL INFORMATION
EMPLOYEE acknowledges that during the course of his employment with the
EMPLOYER, its subsidiaries and affiliates, he has been and will be exposed to
documents and other information regarding the confidential affairs of the
EMPLOYER, its subsidiaries and affiliates, including without limitation
information about their past, present and future financial condition, the
markets for their products, key personnel, past, present or future actual or
threatened litigation, trade secrets, current and prospective customer lists,
operational methods, acquisition plans (including without limitation potential
acquisition targets), financing sources, prospects, plans for future development
and other business affairs and information about the EMPLOYER and its
subsidiaries and affiliates not readily available to the public (the
"Confidential Information"). EMPLOYEE further acknowledges that the services to
be performed under this Agreement are of a special, unique, unusual,
extraordinary and intellectual character. In recognition of the foregoing, the
EMPLOYEE covenants and agrees as follows:
9.01 At no time shall EMPLOYEE ever divulge, disclose, or otherwise use
any Confidential Information, unless and until such information is readily
available in the public domain by reason other than EMPLOYEE's unauthorized
disclosure or use thereof, unless such disclosure or use is made in good faith
and solely in furtherance of EMPLOYEE's duties hereunder or expressly authorized
by the Board in writing in advance of such disclosure or use.
9.02 Upon the termination of EMPLOYEE'S employment at any time and for
any or no reason, or at any other time the Board may so direct, EMPLOYEE shall
promptly deliver to the EMPLOYER's offices in Stateline, Nevada all of the
property and equipment of the EMPLOYER and its subsidiaries (including any
automobiles, cell phones, pagers, credit cards, personal computers, etc.) and
any and all documents, records, and files, including any notes, memoranda,
customer lists, reports or any and all other documents, including any copies
thereof, whether in hard copy form or on a computer disk or hard drive, which
relate to the EMPLOYER,
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its subsidiaries, affiliates, successors or assigns, and/or their respective
past and present officers, directors, employees or consultants (collectively,
the "Employer Property, Records and Files"); it being expressly understood that,
upon termination of EMPLOYEE'S employment, EMPLOYEE shall not be authorized to
retain any of the Employer Property, Records and Files, except to the extent
expressly so authorized in writing by the Board.
X.
NONCOMPETITION AND OTHER MATTERS
10.01 During the Term and for the one year period following the date of
termination of EMPLOYEE'S employment at any time and for any or no reason
(PROVIDED, that such period shall be six months in the event Executive's
employment terminates upon expiration of the Term), EMPLOYEE shall not at any
time in any city, town, county, parish, other municipality in any state of the
United States or Native American territory (the names of each such city, town,
county, parish, other municipality or Native American territory, including,
without limitation, the name of each county in the State of Nevada being
expressly incorporated by reference herein), or any other place in the world,
where the EMPLOYER, or its subsidiaries, affiliates, successors, or assigns,
engages in owning, operating, managing and/or developing land-based or riverboat
casinos or hotels associated or materially competitive with casinos, or any
other business engaged in from time to time by the EMPLOYER or its subsidiaries,
affiliates, successors or assigns in which EMPLOYEE has had significant
authority and responsibility (the "Business"), directly or indirectly, (i)
engage in a competing business for EMPLOYEE'S own account; (ii) enter the employ
of, or render any consulting services to, any entity that competes with the
EMPLOYER, or its subsidiaries, affiliates, successors, or assigns, in the
Business; or (iii) become interested in any such entity in any capacity,
including, without limitation, as an individual, partner, shareholder, officer,
director, principal, agent, trustee or consultant; PROVIDED, HOWEVER, EMPLOYEE
may (A) own, directly or indirectly, solely as a passive investment, securities
of any entity traded on any national securities exchange or market if EMPLOYEE
is not a controlling person of, or a member of a group which controls, such
entity and does not, directly or indirectly, own 5% or more of any class of
securities of such entity and (B) subject to
- 15 -
the first sentence of Section 2.04 above, make passive investments in
hospitality enterprises not materially competitive with gaming and/or
enterprises which are principally bar/restaurant enterprises containing no more
than 50 gaming positions, PROVIDED, that such investments shall not materially
interfere with the performance of EMPLOYEE'S duties hereunder.
(a) Notwithstanding the foregoing, if (i) EMPLOYEE'S
employment is terminated by EMPLOYER other than for Cause or by EMPLOYEE for
Good Reason and (ii) the effective date of such termination as determined
hereunder occurs within the one year period prior to the expiration date of the
Term, the restrictions set forth in this Section 10.01 shall expire upon
expiration of the Term unless EMPLOYER provides written notice to EMPLOYEE not
later than two days after such effective date that it wishes the restrictions of
this Section 10.01 to apply during the Post-Term Restriction Period (as defined
in Section 4.02 above) and pays EMPLOYEE the severance compensation provided for
under Section 4.02(a) and provides the benefits provided for under Section
4.02(b).
(b) If EMPLOYEE'S employment is terminated for any other
reason or under any other circumstances, the provisions of this Section 10.01
shall be effective without regard to Section 10.01(a).
10.02 During the Term and for the two year period immediately following
the date of termination of EMPLOYEE'S employment at any time and for any or no
reason, EMPLOYEE shall not at any time, directly or indirectly, solicit or
induce any officer, director, employee, agent or consultant of the EMPLOYER or
any of its successors, assigns, subsidiaries or, to the best of EMPLOYEE'S
knowledge, affiliates, to terminate his, her or its employment or other
relationship with the EMPLOYER or its successors, assigns, subsidiaries or, to
the best of EMPLOYEE'S knowledge, affiliates, for the purpose of associating
with any competitor of the EMPLOYER or its successors, assigns, subsidiaries or,
to the best of EMPLOYEE'S knowledge, affiliates, or otherwise encourage any such
person or entity to leave or sever his, her or its employment or other
relationship with the EMPLOYER or its successors, assigns, subsidiaries or, to
the best of EMPLOYEE'S knowledge, affiliates, for any other reason.
- 16 -
10.03 During the Term and for the two year period immediately following
the date of termination of EMPLOYEE'S employment at any time and for any or no
reason, EMPLOYEE shall not at any time, directly or indirectly, solicit or
induce (i) any customers or clients of EMPLOYER or its successors, assigns,
subsidiaries or, to the best of EMPLOYEE'S knowledge, affiliates, or (ii) any
vendors, suppliers or consultants then under contract to the EMPLOYER or its
successors, assigns, subsidiaries or, to the best of EMPLOYEE'S knowledge,
affiliates, to terminate his, her or its relationship with the EMPLOYER or its
successors, assigns, subsidiaries or, to the best of EMPLOYEE'S knowledge,
affiliates, for the purpose of associating with any competitor of the EMPLOYER
or its successors, assigns, subsidiaries or, to the best of EMPLOYEE'S
knowledge, affiliates, or otherwise encourage such customers or clients, or
vendors, suppliers or consultants then under contract, to terminate his, her or
its relationship with the EMPLOYER or its successors, assigns, subsidiaries or,
to the best of EMPLOYEE'S knowledge, affiliates, for any other reason.
XI.
RIGHTS AND REMEDIES UPON BREACH
If EMPLOYEE breaches any of the provisions of Articles IX or X above
(the "Restrictive Covenants"), the EMPLOYER and its subsidiaries, affiliates,
successors or assigns shall have the rights and remedies set forth below in this
Article XI, each of which shall be independent of the others and severally
enforceable, and each of which shall be in addition to, and not in lieu of, any
other rights or remedies available to the EMPLOYER or its subsidiaries,
affiliates, successors or assigns at law or in equity.
11.01 The right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction by injunctive
decree or otherwise, it being agreed that any breach of the Restrictive
Covenants would cause irreparable injury to the EMPLOYER or its subsidiaries,
affiliates, successors or assigns and that money damages would not provide an
adequate remedy to the EMPLOYER or its subsidiaries, affiliates, successors or
assigns.
11.02 EMPLOYEE acknowledges and agrees that the Restrictive Covenants
are reasonable and valid in geographic and temporal scope and in all other
respects. If any court
- 17 -
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full force and effect without regard to
the invalid portions.
11.03 If any court determines that any of the Restrictive Covenants, or
any part thereof, is unenforceable because of the duration or scope of such
provision, such court shall have the power to reduce the duration or scope of
such provision, as the case may be (it being the intent of the parties that any
such reduction be limited to the minimum extent necessary to render such
provision enforceable), and, in its reduced form, such provision shall then be
enforceable.
11.04 EMPLOYEE intends to and hereby confers jurisdiction to enforce
the Restrictive Covenants upon the courts of any jurisdiction within the
geographic scope of such covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants unenforceable by reason of the
breadth of such scope or otherwise, it is the intention of EMPLOYEE that such
determination not bar or in any way affect the right of the EMPLOYER or its
subsidiaries, affiliates, successors or assigns to the relief provided herein in
the courts of any other jurisdiction within the geographic scope of such
covenants, as to breaches of such covenants in such other respective
jurisdictions, such covenants as they relate to each jurisdiction being, for
this purpose, severable into diverse and independent covenants.
XII.
ARBITRATION
Except as necessary for the EMPLOYER and its subsidiaries, affiliates,
successors or assigns or EMPLOYEE to specifically enforce or enjoin a breach of
this Agreement (to the extent such remedies are otherwise available), the
parties agree that any and all disputes that may arise in connection with,
arising out of or relating to this Agreement, or any dispute that relates in any
way, in whole or in part, to EMPLOYEE'S employment with the EMPLOYER or any
subsidiary, the termination of that employment or any other dispute by and
between the parties or their subsidiaries, affiliates, successors or assigns,
shall be submitted to binding arbitration in Las Vegas, Nevada according to the
National Employment Dispute Resolution Rules and procedures of the American
Arbitration Association. The parties agree that the prevailing party in any such
- 18 -
dispute shall be entitled to reasonable attorneys' fees, costs, and necessary
disbursements in addition to any other relief to which he or it may be entitled.
This arbitration obligation extends to any and all claims that may arise by and
between the parties or their subsidiaries, affiliates, successors or assigns,
and expressly extends to, without limitation, claims or causes of action for
wrongful termination, impairment of ability to compete in the open labor market,
breach of an express or implied contract, breach of the covenant of good faith
and fair dealing, breach of fiduciary duty, fraud, misrepresentation,
defamation, slander, infliction of emotional distress, disability, loss of
future earnings, and claims under the Nevada constitution, the United States
Constitution, and applicable state and federal fair employment laws, federal and
state equal employment opportunity laws, and federal and state labor statutes
and regulations, including, but not limited to, the Civil Rights Act of 1964, as
amended, the Fair Labor Standards Act, as amended, the Americans With
Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as
amended, the Employee Retirement Income Security Act of 1974, as amended, the
Age Discrimination in Employment Act of 1967, as amended, and any other state or
federal law.
XIII.
MISCELLANEOUS
13.01 If any action to specifically enforce or enjoin a breach of this
Agreement is necessary, the prevailing party shall be entitled to reasonable
attorneys' fees, costs, and necessary disbursements in addition to any other
relief to which he or it may be entitled.
13.02 This Agreement shall be construed and governed by the laws of the
State of Nevada, without giving effect to conflicts of laws principles thereof
which might refer such interpretations to the laws of a different state or
jurisdiction.
13.03 This Agreement, and all of the terms and conditions hereof, shall
bind the EMPLOYER and its successors and assigns and shall bind the EMPLOYEE and
his heirs, executors and administrators. No transfer or assignment of this
Agreement shall release EMPLOYER from any obligation to EMPLOYEE hereunder.
Neither this Agreement, nor any of EMPLOYER'S rights or obligations hereunder,
may be assigned or otherwise subject to hypothecation by EMPLOYEE. EMPLOYER may
assign the rights and obligations of
- 19 -
EMPLOYER hereunder, in whole or in part, to any of EMPLOYER'S subsidiaries,
affiliates or parent corporations, or to any other successor or assign in
connection with the sale of all or substantially all of HARVEYS' assets or stock
or in connection with any merger, acquisition and/or reorganization.
13.04 Notices - All notices and other communications under this
Agreement shall be in writing and shall be given by first class mail, certified
or registered with return receipt requested, or by a nationally recognized
overnight delivery service to the respective parties named below:
EMPLOYEE:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, Harrison, Harvey, Branzburg & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
EMPLOYER:
HARVEYS CASINO RESORTS
Attn: Corporate Secretary
Highway 50 and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Colony Capital, Inc.
Suite 1200
1999 Avenue of the Stars
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
AND TO:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
Suite 3400
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▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
13.05 Nothing contained in this Agreement shall be construed to require
the commencement of any act contrary to law, and when there is any conflict
between any provision of this Agreement and any statute, law, ordinance, or
regulation, contrary to which the parties have no legal right to contract, then
the latter shall prevail; but in such an event, the provisions of this Agreement
so affected shall be curtailed and limited only to the extent necessary to bring
it within the legal requirements.
13.06 The several rights and remedies provided for in this Agreement
shall be construed as being cumulative, and no one of them shall be deemed to be
exclusive of the others or of any right or remedy allowed by law. No waiver by
EMPLOYER or EMPLOYEE of any failure by EMPLOYEE or EMPLOYER, respectively, to
keep or perform any provision of this Agreement shall be deemed to be a waiver
of any preceding or succeeding breach of the same or other provision.
13.07 This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the employment of
the EMPLOYEE by the EMPLOYER (including, without limitation, the Prior
Agreement, Harveys Change in Control Plan and, insofar as it relates to the
subject matter hereof, but except as provided in Section 13.08, the MOU) and,
together with all other plans, agreements and other documents specifically
referenced herein, contains all of the covenants, conditions and agreements
between the parties with respect to such employment. Annex F hereto sets forth a
list of payments to EMPLOYEE pursuant to the MOU, and EMPLOYEE hereby
acknowledges receipt of all such payments. Each party to this Agreement
acknowledges that no representations, inducements, promises or other agreements,
oral or otherwise, have been made by any party, or anyone acting on behalf of
any party, which are not embodied herein, and that no other agreement, statement
or promise not contained in this Agreement shall be valid or binding. Any
addendum to or modification of this Agreement shall be effective only if it is
in writing and signed by the parties to be charged.
- 21 -
13.08 To the extent applicable, EMPLOYEE shall be entitled to receive a
gross-up payment with respect to payments made hereunder (including under
agreements referenced herein) and under the MOU to account for the payment of
Internal Revenue Code Section 4999 excise taxes as well as taxes imposed on such
gross up payments, as determined pursuant to the procedures set forth in Annex
D, PROVIDED, that EMPLOYEE shall reasonably cooperate with EMPLOYER in
structuring such payments and taking such other actions to limit the extent to
which such payments may be subject to such excise tax, provided that such
restructuring does not cause EMPLOYEE to suffer additional costs or other
adverse consequences. Notwithstanding anything contained to the contrary
contained herein, the provisions of this Section 13.08 and Annex D hereto shall
survive the expiration or termination of this Agreement for any or no reason.
13.09 If EMPLOYEE'S employment with the Company is terminated by the
Company without Cause either (i) as a result of a Change in Control (as defined
in the Award Agreement) or (ii) within the 12 month period immediately preceding
a Change in Control (or such longer period, not to exceed 18 months prior to
such Change in Control, during which significant discussions or other material
action regarding such Change in Control occurred) at the request, directly or
indirectly, of a third party who has taken steps reasonably calculated to effect
a Change in Control or otherwise in connection with, or in anticipation of a
Change in Control, EMPLOYEE shall be entitled to receive, at the effective date
of such termination (or, if payable in respect of clause (ii), within ten
business days following such Change in Control), a lump sum payout at maximum of
the bonus otherwise payable to EMPLOYEE with respect to the then current fiscal
year under the Annual Bonus Plan, such amount pro rated through the effective
date of such termination of employment. The amount provided for in the
immediately preceding sentence shall also be paid if EMPLOYEE'S employment with
the Company is terminated for Good Reason if the grounds constituting Good
Reason occur as the result of a Change in Control or within the stated time
frame at the request, directly or indirectly, of such a third party or otherwise
in connection with, or in anticipation of a Change in Control. If (x) no payment
is made pursuant to either of the two immediately preceding sentences, (y)
following a Change in
- 22 -
Control and prior to the effective date of termination of EMPLOYEE'S employment
the Annual Bonus Plan is terminated or amendments are made that materially
adversely affect EMPLOYEE and (z) EMPLOYEE'S employment is not terminated prior
to the end of the fiscal year in which such termination or amendments occur,
then, in lieu of any other amounts payable to EMPLOYEE under the Annual Bonus
Plan with respect to such fiscal year, EMPLOYEE shall receive a lump sum payout
at maximum within sixty (60) days following the termination of the Annual Bonus
Plan or the fiscal year during which any such material amendments were made. The
provisions of this Section 13.09 shall survive the expiration of the Term, but
only to the extent necessary to determine whether a Change in Control occurs
within the 12 to 18 month period described in clause (ii) of the first sentence
of this Section 13.09.
13.10 The section headings contained herein are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
13.11 Unless expressly provided herein or therein, the expiration of
the Term shall not alter or affect any rights or obligations of EMPLOYER or
EMPLOYEE under any other agreement or plan including, without limitation, the
Award Agreement, the Omnibus Plan, the Deferred Compensation Agreement, of even
date herewith, between EMPLOYER and EMPLOYEE, and, to the extent provided under
Section 7.02 above, the Annual Bonus Plan.
- 23 -
13.12 This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original
but all such counterparts together shall constitute one and the same instrument.
DATED this 2nd day of February, 1999.
EMPLOYEE:
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
EMPLOYER:
HARVEYS CASINO RESORTS
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Its: Chief Financial Officer
- 24 -
ANNEX A: 1999 OMNIBUS STOCK
INCENTIVE PLAN
See Exhibit 10.33, 1999 Omnibus Stock Incentive Plan.
ANNEX B: STOCK OPTION AND RESTRICTED
STOCK AGREEMENT
See Exhibit 10.43, Stock Option and Restricted Stock Agreement dated as
of February 2, 1999 by and between Harveys Casino Resorts and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇.
ANNEX C: STOCKHOLDERS AGREEMENT
See Exhibit 10.34, Stockholders Agreement entered into as of February 2,
1999 by and among Harveys Casino Resorts, Colony HCR Voteco LLC, Colony
Investors III, L.P. and the securityholders of the Company as identified
from time to time on Schedule A thereto.
ANNEX D
DETERMINATION OF GROSS-UP PAYMENT
In the event that any payment or benefit received or to be received by
Executive or paid by the Company on behalf of Executive under this Agreement,
the MOU or under any other plan, arrangement or agreement with the Company or
any person whose actions result in a change in control of the Company or any
person affiliated with the Company or such person (collectively, the "Total
Payments") will be subject to the excise tax (the "Excise Tax") imposed by
section 4999 (or any successor provision) of the Internal Revenue Code of 1986,
as amended (the "Code"), the Company shall pay to Executive an additional amount
(the "Gross-Up Payment") such that the net amount retained or to be retained by
Executive, after deduction of any Excise Tax on the Total Payments and on any
federal, state and local income, excise and/or other taxes (including the Excise
Taxes) upon the Gross-Up Payment provided for hereunder, shall be equal to the
Total Payments.
For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax, (i) the Total
Payments shall be treated as "parachute payments" within the meaning of section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors (x) the Total Payments (in whole or in part) do not constitute
parachute payments, including by reason of Section 280G(b)(4)(A) of the Code, or
(y) such excess parachute payments (in whole or in part) (1) represent
reasonable compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in
Section 280G(b)(3) of the Code) allocable to such reasonable compensation, or
(2) are otherwise not subject to the Excise Tax, and (ii) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income and other taxes at the highest
applicable marginal rate of taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income and other taxes at the highest
applicable marginal rate of taxation in the state and locality of Executive's
residence for income tax purposes on the date the Gross-Up Payment is to be
made, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes and any other taxes. (For
purposes of the immediately preceding sentence, if Executive shall be subject to
income taxation in more than one state, the marginal rate of taxation for each
such state shall be taken into account proportionately based on the extent to
which the Total Payments are treated under applicable law as having been earned
in or otherwise having a relevant nexus with such state for income tax
purposes.) In the event that the Excise Tax is subsequently determined to be
less than the amount originally taken into account hereunder, Executive shall
repay to the Company, within ten (10) business days of Executive's receipt of
notice that the amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and other taxes imposed on the Gross-Up Payment being
repaid by Executive to the extent that such repayment results in an actual
reduction in Excise Tax and/or a federal, state or local income tax deduction)
plus interest on the amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code (provided, however, that if all or any portion of the
amount of any repayment made to Executive by any governmental entity shall be
made at a higher rate of interest than that provided under section 1274(b)(2)(B)
of the Code (the "Higher Interest Rate Amount"), Executive shall also repay to
the Company interest on the Higher Interest Rate Amount at a rate equal to the
excess of such higher rate of interest over the rate provided under section
1274(b)(2)(B) of the Code). In the event that the Excise Tax is determined to
exceed the amount originally taken into account hereunder (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions to tax
payable by Executive with respect to such excess) within ten (10) business days
of the Company's receipt of notice that the amount of such excess is finally
determined. The parties agree that such excess will be considered to have been
finally determined at the conclusion of Internal Revenue Service administrative
appellate proceedings, unless the parties mutually agree to pay or settle such
amount earlier, or agree to pursue an appeal further. Executive and the Company
shall each reasonably cooperate with the other in connection with any
administrative or judicial proceedings concerning the existence or amount of
liability for Excise Tax with respect to the Total Payments.
The Gross-Up Payment payable pursuant hereto shall be payable (or, as
applicable, withheld), in whole or in part as applicable, on the earlier of (i)
the date the Company is required to withhold the Excise Tax pursuant
2
to section 4999 of the Code or (ii) the date Executive is required to pay the
Excise Tax.
Executive shall notify the Company of any audit or review by the
Internal Revenue Service of Executive's federal income tax return for the year
in which a payment under this Agreement is made within twenty (20) business days
of Executive's receipt of such audit or review. In addition, Executive shall
also notify the Company of the final resolution of such audit or review within
twenty (20) days of such resolution.
3
Annex E: Example of the Post-Term Restriction Period and Severance Payments
Applicable in Certain Instances in the Event of Termination by
EMPLOYER without Cause or by EMPLOYEE for Good Reason
Suppose that the Term is scheduled expire on February 2, 2004,
and that notice has been provided pursuant to Section 3.01 that there will be no
automatic extension of the Term. Suppose, further, that EMPLOYEE'S employment is
terminated on November 2, 2003, I.E., less than one year prior to the expiration
of the Term. Under Section 4.02(a), on these facts, the amount of EMPLOYEE'S
severance will depend on whether EMPLOYER elects to have the non-competition
restrictions of Section 10.01 apply during the Post-Term Restriction Period.
The length of the Post-Term Restriction Period is measured by
determining the length of time following the scheduled expiration date of the
Term (I.E., February 2, 2004) during which the twelve-month post-termination
non-competition period as set forth in the first paragraph of Section 10.01
would apply if EMPLOYER makes an election so that the provisions of Section
10.01(a), which would otherwise cut off the non-competition period as of the end
of the Term, will not apply. Since EMPLOYEE'S Termination Date, November 2,
2003, is 3 months prior to the scheduled expiration date of the Term, the
Post-Term Restriction Period is (12 minus 3) or 9 months.
SCENARIO A: THE POST-TERM RESTRICTION PERIOD APPLIES
If EMPLOYER elects pursuant to Section 10.01(a) to have the
non-competition period extend through the end of the Post-Term Restriction
Period, EMPLOYEE'S severance is determined under Section 4.02(a), without regard
to Section 4.02(a)(iii). Accordingly, EMPLOYEE'S severance would be equal to the
product of (x) the Applicable Multiplier, which would be (3 + 9) divided by 12,
or 1.0, and (y) the sum of EMPLOYEE'S Base Salary and Annual Bonus as of the
Termination Date. EMPLOYEE would be subject to the restrictions of the first
paragraph of Section 10.01 until November 2, 2004.
SCENARIO B: THE POST-TERM RESTRICTION PERIOD DOES NOT APPLY
If EMPLOYER does not elect to have the non-competition period
extend through the end of the Post-Term Restriction Period, EMPLOYEE'S severance
would be determined under Section 4.02(a)(iii). The first part of EMPLOYEE'S
severance would be equal to the product of (x) the Applicable Multiplier, which
would be 3 divided by 12 (or 0.25), and (y) EMPLOYEE'S Base Salary as of the
Termination Date.
The second or bonus portion of EMPLOYEE'S severance would be
determined by the Board following the end of the 2003 fiscal year. The Board
would determine the amount of the Annual Bonus EMPLOYEE would have been entitled
to receive under the Annual Bonus Plan as if EMPLOYEE had remained employed
through the end of the 2003 fiscal year, based on HARVEYS (and, as applicable,
EMPLOYEE'S) actual performance (without proration) during the 2003 fiscal year,
as compared with the bonus targets previously established for such year.
EMPLOYER would then be required to pay such bonus amount to EMPLOYEE at the time
bonuses under the Annual Bonus Plan were paid to participants in the plan
generally. Under this
arrangement, all other things being equal, EMPLOYEE would receive the same bonus
whether his employment was terminated on June 1, 2003, November 2, 2003 or
January 4, 2004.
However, to avoid unjust enrichment, if EMPLOYEE'S employment
were to be terminated following the date on which bonuses were determined and
paid for fiscal 2003 (say that the bonuses were paid on January 10, 2004 and
EMPLOYEE'S employment was terminated on January 15, 2004), EMPLOYEE would not be
entitled to receive any severance amount in respect of bonus, but would receive
as severance only Base Salary for the 18 day period between January 15, 2004 and
February 2, 2004.
Similar determinations would apply if the Term were
automatically extended for one or more years beyond the fifth anniversary of the
Effective Date, assuming that EMPLOYEE'S employment was terminated within the
one-year period prior to the scheduled expiration of the Term, as so extended.
It is agreed for purposes of Scenario B under this Annex E that bonuses for the
last full fiscal year of the Term will be determined no later than January 31 in
the year in which the Term expires.
ANNEX F: SCHEDULE OF PAYMENTS UNDER THE MOU
NATURE OF PAYMENT AMOUNT
---------------------------------------------------------------------------------------------------
Payment in consideration of termination of right to participate in Long $965,373.00
Term Incentive Plan
---------------------------------------------------------------------------------------------------
Prior payment under Management Incentive Plan in respect of fiscal 1998 $448,800.00
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Payment in partial consideration of termination of right to participate in $699,717.50
Supplemental Executive Retirement Plan
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Advance under Management Incentive Plan in respect of fiscal 1999 $130,000.00
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Total: $2,243,890.50