EMPLOYMENT AGREEMENT
AGREEMENT made this 1st day of February, 1999, by and between MTR Gaming
Group, Inc., a Delaware corporation having its principal office at Xxxxx Xxxxx 0
Xxxxx, Xxxxxxx, Xxxx Xxxxxxxx 00000, together with all of its subsidiaries
whether now existing or hereafter formed or acquired (collectively, the
"Company"), and Xxxxx X. Xxxxxxxx, 0000 Xxxxxxxx Xxx Xxxxxxxxx, Xxxxx Xxxxxx,
Xxxxxxxx 00000 ("Executive").
WHEREAS, the Executive has been employed by the Company in the capacity of
President pursuant to an Employment Agreement between the Company and the
Executive dated March 1, 1997 (the "March 1 Agreement"); and
WHEREAS, the Executive has since March 1, 1997 assumed significant
additional duties and responsibilities due to the expansion of the Company's
facilities in West Virginia, the expansion of the Company's operation to two
additional locations in Nevada, and the Company's pursuit of other gaming and
entertainment opportunities; and
WHEREAS, the Company continues to explore additional expansion
opportunities both to its existing facilities and to new venues; and
WHEREAS, under the guidance and direction of the Executive, the Company has
improved its performance and profitability; and
WHEREAS, the parties wish to replace the March 1 Agreement by entering into
an agreement reflecting the present status of the Executive's employment
relationship to the Company;
Now, Therefore, the parties, in reliance upon the mutual promises and
covenants herein contained, do hereby agree as follows:
1. TERMINATION OF MARCH 1 AGREEMENT. Upon execution and delivery of this
Agreement, the March 1 Agreement as well as any other prior written or oral
agreements with respect to employment shall terminate and be replaced by this
Agreement, upon which event neither party to the March 1 Agreement or any other
prior written or oral agreements with resect to employment shall have any
further rights or obligations thereunder, except for obligations that have
accrued but not been paid as of the date hereof.
2. TERM. The Company hereby agrees to employ Executive, and Executive
agrees to serve the Company, in the capacity of President, Chief Executive
Officer and Chairman of the Company for a five year period commencing on
February 1, 1999, (the "Employment Date") and ending on January 31, 2004 (such
period, subject to earlier termination as provided herein, being referred to as
the "Period of Employment").
3. DUTIES AND SERVICES. During the Period of Employment, Executive
agrees to serve the Company as President, Chief Executive Officer, and Chairman,
as well as President, Chief Executive Officer, and Chairman of Mountaineer Park,
Inc., Speakeasy Gaming of Las Vegas, Inc., Speakeasy Gaming of Reno, Inc. and in
such other offices and directorships of the Company and of its subsidiaries and
related companies (collectively, "Affiliates") to which he may be elected or
appointed, and to perform such other reasonable and appropriate duties as may be
requested of him by the board of directors of the Company (the "Board of
Directors"), in accordance with the terms herein set forth. In performance of
his duties, Executive shall be subject to the direction of the Board of
Directors. Excluding periods of vacation and sick leave to which Executive is
entitled, Executive shall devote his full time, energy and skill during regular
business hours to the business and affairs of the Company and its affiliates and
to the promotion of their interests.
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4. COMPENSATION.
(a) BASE SALARY. The base salary of the Executive for his services
pursuant to the terms of this Agreement shall be $450,000 per year, payable in
equal bi-monthly installments, or on such other terms as may mutually be agreed
upon by the Company and Executive. Executive's base salary shall be subject to
an automatic cost-of-living increase of five percent (5%) on each anniversary of
this Agreement, and shall be subject to periodic increase by the Compensation
Committee of the Board of Directors in its discretion.
(b) BONUS. Executive shall be entitled to semi-annual cash bonuses
in the amount of $50,000.00 and other benefits, such as stock or stock option
awards, as the Compensation Committee of the Board of Directors may periodically
award in its discretion based on the Executive's performance.
(c) PERFORMANCE BONUS. For each of calendar year 1999, 2000, 2001,
2002 and 2003, unless Executive's employment shall have been terminated for
Cause (as defined in Section 5(d) hereof), Executive shall be entitled to a cash
payment equal to 1% of the gross operating revenue of the Company to the extent
such operating revenue exceeded the operating revenue of the Company for the
fiscal year ended December 31, 1998; provided, however, that Executive shall not
be entitled to any payment pursuant to this Section 4 (c) in the following
events: (i) for any fiscal year in which the Company's earnings before interest,
taxes, depreciation and amortization ("EBITDA") is not greater than or equal to
the Company's EBITDA for fiscal year 1998; or (ii) if the payment of such
performance bonus would constitute a breach of the Company's contract with its
lender (unless such lender consents to the payment). For purposes of this
Agreement, gross operating revenue and EBITDA shall be determined by the
Company's independent auditors. Any amount due under this Section 4(c) shall be
payable upon the completion of the Company's audit
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for such year. The provisions of this Section 4(c) shall survive the termination
of this Agreement, unless the Agreement is terminated for Cause or Executive
voluntarily relinquishes his duties hereunder.
(d) HEALTH INSURANCE. Executive shall be entitled at his election
but at the Company's expense, either to participate in and receive benefits
under policies of health insurance maintained by the Company for its employees
or reimbursement for premiums paid by the Executive for comparable health
insurance.
(e) BENEFIT PLANS AND FRINGE BENEFITS. Executive shall receive such
employment fringe benefits and shall be entitled to participate in other
employee benefit plans, including without limitation any pension plan,
profit-sharing plan, savings plan, deferred compensation plan, stock option
plan, life insurance made available by the Company now or in the future to
its executives as the Compensation Committee of the Board of Directors may
periodically award in its discretion based on the Executive's performance,
subject to and on a basis consistent with the terms, conditions and overall
administration of such Benefit Plans. Specifically, and without limitation,
the Company will provide Executive a deferred compensation plan substantially
upon the terms and conditions set forth in the November 2, 1998 proposal made
by Xxxx X. Xxxxx & Associates attached hereto.
(f) EXPENSES. All travel and other expenses incident to the
rendering of services by Executive hereunder shall be paid by the Company. If
any such expenses are paid in the first instance by Executive, the Company shall
reimburse him therefor on presentation of the appropriate documentation required
by the Internal Revenue Code of 1986, as amended (the "Code"), or Treasury
Regulations promulgated thereunder, or otherwise required under the Company's
policy with respect to such expenses. The Company recognizes that pursuant to a
prior employment
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agreement, the Executive maintains his principal office for the Company at 0000
Xxxxxxxxxx Xxxxx Xxxxx, Xxx, Xxxxxxxx and will frequently be required to travel
outside that area.
(g) LIVING/OFFICE QUARTERS. Executive shall be entitled, at the
Company's expense, to lease living and/or office quarters for himself and the
Company in the State of Nevada and, if necessary, in any other state or
jurisdiction in which the Company commences business operations after February
1, 1999 or in any other state or jurisdiction in which the Company is pursuing
substantial business opportunities such that Executive is required, as a
practical matter, to spend a substantial portion of his time in such
jurisdiction. The expense incurred for living and/or office quarters shall be
reasonable and shall be paid directly by the Company, or at Executive's
election, reimbursed by the Company; PROVIDED, HOWEVER, that the aggregate
amount of such expense shall not exceed $120,000 per year.
(h) VACATION. Executive shall be entitled to four (4) weeks paid
vacation to be taken at time or times mutually satisfactory to Executive and the
Company. Accrued vacation time not utilized by Executive due to business
commitments may be carried over to the following year (provided, however, that
Executive shall not in any event utilize more than six weeks of vacation in any
twelve month period) or paid to Executive at the end of the year as additional
compensation at Executive's election.
(i) WORKING FACILITIES. The Company shall provide Executive with an
office, secretarial, administrative and other assistance, and such other
facilities and services as shall be suitable to his position and appropriate for
the performance of his duties. All such Working Facilities shall be provided at
the Company's corporate headquarters as well as on an as needed basis in any
other jurisdiction in which the Company is conducting or pursuing substantial
business.
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5. EARLY TERMINATION.
(a) Notwithstanding the provisions of Section 2 hereof, Executive may
be discharged by the Company for Cause (as defined in Section 5(d) hereof), in
which event the Period of Employment hereunder shall cease and terminate and the
Company shall have no further obligations or duties under this Agreement, except
for obligations accrued under Section 4 at the date of termination. In
addition, the Period of Employment shall cease and terminate upon the earliest
to occur of the following events: (i) the death of Executive or (ii) at the
election of the Board of Directors (subject to the Americans With Disabilities
Act), the inability of Executive by reason of physical or mental disability to
continue the proper performance of his duties hereunder for a period of 180
consecutive days. Upon termination of the Period of Employment pursuant to the
preceding sentence, the Company shall continue to pay to Executive or his
estate, as the case may be, the entire compensation otherwise payable to him
under Section 4(a) hereof for two years and under Section 4(c) hereof through
fiscal year 2003.
(b) In the event Executive is discharged by the Company other than
for Cause (as defined in Section 5(d) hereof) or other than pursuant to Section
5(a) hereof by reason of physical or mental disability, Executive shall have no
further obligations or duties under this Agreement; provided, however, that
Executive shall continue to be bound by the provisions of Section 6 hereof if
the Company performs its obligations under this Section 5(b). In the event of
termination of the Period of Employment pursuant to the preceding sentence, the
Company shall continue to pay Executive the entire compensation otherwise
payable to him under the provisions of Section 4 hereof for the otherwise
remaining Period of Employment without any duty on the part of Executive to
mitigate such payments; provided, however, that if Executive should die prior to
the
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end of such period, the provisions of Section 5(a) hereof shall be applicable as
though Executive's employment hereunder had not been so terminated.
(c) Notwithstanding Section 5(b) hereof, in the event that following
a Change in Control (as defined in Section 5(f) hereof) Executive is discharged
by the Company other than for Cause (as defined in Section 5(d) hereof) or other
than pursuant to Section 5(a) hereof by reason of physical or mental disability,
or Executive terminates employment with the Company for Good Reason (as defined
in Section 5(e) hereof), Executive shall have no further obligations or duties
under this Agreement; provided, however, that Executive shall continue to be
bound by the provisions of Section 6 hereof if the Company performs its
obligations under this Section 5(c). In the event of termination of the Period
of Employment pursuant to the preceding sentence, the Company shall, in addition
to paying the obligations accrued under Section 4 at the date of termination,
(i) pay Executive, within 30 days of such termination, a cash severance payment,
with no duty by Executive to mitigate such payment, in an amount equal to three
times the annual base salary payable to Executive under Section 4(a) on the day
before such termination; and (ii) pay on Executive's behalf the next five annual
premium payments for Executive's deferred compensation plan referred to in
Section 4(e) above.
(d) For purposes of this Section 5, the term "Cause" shall mean (i)
conviction of a felony, (ii) embezzlement or misappropriation of funds or
property of the Company or any of its Affiliates, (iii) Executive's consistent
refusal to substantially perform, or willful misconduct in the substantial
performance of, his duties and obligations hereunder; or (iv) Executive's
engaging in activity that the Board of Directors determines in its reasonable
judgment could result in the suspension or revocation of any video lottery,
parimutuel, or other gaming license or permit held by the Company or any of its
subsidiaries.
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(e) For purposes of this Section 5, the term "Good Reason" shall mean
(i) the assignment to Executive of any duties or responsibilities which in the
reasonable judgment of Executive are inconsistent in any respect with
Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
3, or any other action by the Company which in the reasonable judgment of
Executive results in a substantial diminishment in such position, authority,
duties or responsibilities (provided, however, that the assignment of tasks or
responsibilities previously performed by Executive to Executive's subordinates
shall not constitute Good Reason); (ii) the Company's requiring relocation of
Executive, without his prior written consent, to a place of employment other
than Ada, Michigan, Chester, West Xxxxxxxx, or Las Vegas or Reno, Nevada, except
for travel reasonably required in the performance of Executive's
responsibilities (it being understood that the Company's obligation to provide
Working Facilities only at its corporate headquarters shall not constitute
relocation for purposes of determining Good Reason); or (iii) the Company's
failure to substantially comply with the provisions of Section 4 of this
Agreement.
(f) For purpose of this Section 5, the term "Change in Control" shall
mean: (i) a change in control of a nature that would be required to be reported
(by persons other than Xxxxxxxxx LLC or its affiliates) in response to Item 6(e)
of Schedule 14A, as in effect on the date hereof, under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); (ii) any person, including a
"group" as such term used in Section 13(d)(3) of the Exchange Act, becoming the
beneficial owner, directly or indirectly, of 20% or more of the combined voting
power of the Company's outstanding voting securities other than a person who was
an officer or director of the Company on the date of this Agreement; or (iii)
individuals who, as of the date hereof, constitute
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the Board of Directors ceasing for any reason to constitute at least a majority
of the Board of Directors.
(g) Upon the termination of the Executive's Period of Employment
pursuant to Section 2 or Section 5 hereof, the Executive shall have the right to
purchase from the Company for a price equal to the then-depreciated book value
(i) the furnishings in the Executive's office at the Company's headquarters as
well as in any living quarters/office contemplated by Section 4(g) hereof; and
(ii) any passenger automobiles owned by the Company and generally used by the
Executive.
6. CONFIDENTIALITY AND NON-COMPETITION:
(a) The Company and Executive acknowledge that the services to be
performed by Executive under this Agreement are unique and extraordinary and, as
a result of such employment, Executive will be in possession of confidential
information and trade secrets (collectively, "Confidential Material") relating
to the business practices of the Company and its affiliates. Executive agrees
that he will not, directly or indirectly, (i) disclose to any other person or
entity either during or after his employment by the Company or (ii) use, except
during his employment by the Company in the business and for the benefit of the
Company or any of its affiliates, any Confidential Material acquired by
Executive during his employment by the Company, without the prior written
consent of the Company or otherwise than as required by law or any rule or
regulation of any federal or state authority. Upon termination of his
employment with the Company for any reason, Executive agrees to return to the
Company all tangible manifestations of Confidential Materials and all copies
thereof. All programs, ideas, strategies approaches, practices or inventions
created, developed, obtained or conceived of by Executive prior to or during the
term hereof by reason of his engagement by the Company, shall be owned by and
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belong exclusively to the Company, provided that they are related in any manner
to its business or that of any of its Affiliates. Executive shall (i) promptly
disclose all such programs, ideas, strategies, approaches, practices, inventions
or business opportunities to the Company, and (ii) execute and deliver to the
Company, without additional compensation, such instruments as the Company may
require from time to time to evidence its ownership of any such items.
(b) Executive agrees that during the term hereof, and for a period of
two years from the termination of Executive's employment if for Cause (as
defined in Section 5(d)), he will not become a stockholder, director, officer,
employee or agent of or consultant to any corporation (other than an Affiliate),
or member of or consultant to any partnership or other entity, or engage in any
business as a sole proprietor or act as a consultant to any such entity, or
otherwise engage, directly or indirectly, in any enterprise, in each case which
competes with any business or activity engaged in, or known by Executive to be
contemplated to be engaged in, by the Company or any of its Affiliates within
ninety miles of any location in which the company or any Affiliate does business
or in which Executive has knowledge that the Company or any of its Affiliates
contemplates doing business; provided, however, that competition shall not
include the ownership (solely as an investor and without any other participation
in or contact with the management of the business) of less than five percent
(5%) of the outstanding shares of stock of any corporation engaged in any such
business, which shares are regularly traded on a national securities exchange or
in an over-the-counter market, and provided, further, that Executive shall be
permitted to engage in the oil and gas exploration business (as the Company
intends to divest its oil and gas operations). Executive agrees that during the
non-compete period referred to in this Section 6, neither Executive nor any
person or enterprise controlled by Executive will solicit for employment any
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person employed by the Company or any of its Affiliates at, or at any time
within three months prior to, the time of the solicitation.
(c) Executive agrees that the remedy at law for any breach by him of
this Section 6 will be inadequate and that the Company shall be entitled to
injunctive relief.
7. GENERAL. This Agreement is further governed by the following
provisions:
(a) NOTICES. Any notice or other communication required or permitted
to be given hereunder shall be made in writing and shall be delivered in person,
by facsimile transmission or mailed by prepaid registered or certified mail,
return receipt requested, addressed to the parties at the address stated above
or to such other address as either party shall have furnished in writing in
accordance with this Section. Such notices or communications shall be effective
upon delivery if delivered in person or by facsimile and either upon actual
receipt or three (3) days after mailing, whichever is earlier, if delivered by
mail.
(b) PARTIES IN INTEREST. This Agreement shall be binding upon and
inure to the benefit of Executive, and it shall be binding upon and inure to the
benefit of the Company and any corporation succeeding to all or substantially
all of the business and assets of the Company by merger, consolidation, purchase
of assets or otherwise.
(c) ARBITRATION. Any disputes arising under the terms of this
Agreement shall be settled by binding arbitration between the parties in Xxxxxxx
County, West Virginia in a proceeding held under the rules of the American
Arbitration Association. In such proceeding, each party shall choose one
arbitrator and the two so chosen shall choose a third arbitrator. The vote of
two of the arbitrators shall be sufficient to determine an award.
(d) ENTIRE AGREEMENT. The March 1 Agreement having been cancelled as
of the date of this Agreement, this Agreement supersedes any and all other
agreements, either oral or in
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writing, between the parties hereto with respect to the employment of Executive
by the Company and contains all of the covenants and agreements between the
parties with respect to such employment in any manner whatsoever. Any
modification of this Agreement will be effective only if it is in writing signed
by the party to be charged.
(e) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
the choice of law or conflicts of law rules and laws of such jurisdiction.
(f) SEVERABILITY. In the event that any term or condition contained
in this Agreement shall for any reason be held by a court of competent
jurisdiction to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other term or
condition of this Agreement, but this Agreement shall be construed as if such
invalid or illegal or unenforceable term or condition had never been contained
herein.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MTR GAMING GROUP, INC.
/s/ XXXXX X. XXXXXXXX /s/ XXXXXX X. XXXXX
----------------------------- -------------------------------------
Xxxxx X. Xxxxxxxx Xxxxxx X. Xxxxx, Assistant Secretary,
Chairman of the Compensation
Committee
/s/ XXXXXX X. XXXXX
-------------------------------------
Xxxxxx X. Xxxxx, Assistant Secretary,
Member of the Compensation
Committee
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/s/ XXXXX X. XXXXXXXX
-------------------------------------
Xxxxx X. Xxxxxxxx, President and
Chief Executive Officer
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