EMPLOYMENT AND NON-COMPETE AGREEMENT DOVER MOTORSPORTS, INC. AND JEROME T. MIRAGLIA
Exhibit 10.5
EMPLOYMENT AND NON-COMPETE AGREEMENT
DOVER MOTORSPORTS, INC.
AND
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
THIS AGREEMENT, is by and between Dover Motorsports, Inc. (the “Company”) and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the “Executive”) and is effective as of this 16th day of June, 2004 (the “Effective Date”).
W I T N E S S E T H:
WHEREAS, the Executive is currently employed by the Company or an affiliate thereof in an executive position; and
WHEREAS, the Executive has, in the course of his employment, developed relationships with employees and customers of the Company, and learned valuable and sensitive information concerning the Company’s operations, policies and procedures; and
WHEREAS, the Executive has, in the course of his employment, been exposed to valuable and sensitive Company reports, files, memoranda, records, software, and other property; and
WHEREAS, the Company recognizes that the solicitation of its employees and customers, and the use or disclosure of the policies, procedures, information, documents, and property of the Company would be damaging to the Company’s interests; and
WHEREAS, the Company has determined that it is in the best interests of the Company to protect its interests through the use of Employment and Non-Compete Agreements; and
WHEREAS, the Company has determined that it is in the best interests of the Company and its shareholders for the Company to agree to provide benefits under the circumstances described below to the Executive and other executives who agree to such an agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:
Section 1
Definitions
“Announcement” shall mean a press release issued by the Company announcing the signing of an agreement whereby the Company will be acquired by or merge with any other entity or a tender offer for the shares of the Company stock will be initiated.
“Board” shall mean the Board of Directors of the Company or the ultimate corporate parent entity which owns the Company if the Company is not public.
“Cause” shall mean a unanimous determination by the Board that the Executive has been convicted of a felony, has embezzled from, or committed fraud against, the Company which embezzlement or fraud has a material adverse financial impact on the Company or gross insubordination which has continued after written notice of such from the Board which determination is upheld by a final, non-appealable arbitration award pursuant to Section 6.
“Change in Control” shall mean the earlier to occur of (a) ten (10) days following the closing of a tender offer for the Company’s stock following the Announcement or (b) the closing of a merger or similar transaction (“Transaction”) of the Company and any other entity; provided, however, a Transaction the result of which is the shareholders of the Company’s voting securities immediately prior to the Transaction own, directly or indirectly in substantially the same proportion, at least 60% of the voting securities of the survivor of such Transaction immediately following such Transaction shall not be a Change in Control.
“Change in Control Fee” shall mean $200, 000.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Company Information” shall mean (i) confidential information including, without limitation, information received from third parties under confidential conditions, (ii) information subject to the Company’s and its affiliates’ attorney-client or work-product privilege; and (iii) other technical, business, legal or financial information (including, without limitation, customer lists), the use or disclosure of which might reasonably be construed to be contrary to the Company’s and its affiliates’ interests.
“Date of Termination” shall mean the date on which the Executive’s employment is terminated.
“Employment Period” shall mean the period of time during the Extension Period the Executive is an employee of the Company.
“Extension Period” shall mean the 24 month period following the Change in Control.
“Good Reason” shall mean a (i) reduction in title, responsibilities, administrative support or support services, (ii) relocation of Executive’s office, (iii) travel at a level that exceeds the travel requirements before the Change in Control, (iv) any breach by the Company of its obligations hereunder, (v) any breach by the purchaser under a merger or acquisition agreement pursuant to which the Change in Control takes place relating to employee benefits or directors’ and officers’ insurance or indemnification provisions, or (vi) any reason whatsoever two months after the Change in Control.
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“Monthly Amount” shall be an amount equal to one-twelfth of the sum of (a) the Executive’s then current annual base salary (excluding any incentive or bonus), and (b) the amount of any cash bonus awarded to the Executive for the then most recently concluded fiscal year of the Company.
“Non-Compete Monthly Amount” shall mean the portion of the Monthly Amount which is paid in consideration of the Executive’s agreement to the restrictions and other provisions of Section 7, with the remainder of the Monthly Amount and other benefits under this Agreement paid after the Employment Period to be treated as severance. Executive’s Non-Compete Monthly Amount shall be calculated by multiplying the Monthly Amount by fifty percent.
“Retirement Plan” shall mean the Company’s qualified defined benefit retirement plan(s) in which the Executive participates.
“SERP” shall mean any and all supplemental retirement plans in which the Executive participates (including, but not limited to, any benefit restoration plan(s) maintained by the Company from time to time).
Section 2
Term of Agreement
This Agreement shall be effective as of the Effective Date but shall automatically terminate if no Announcement occurs within two (2) years of the Effective Date or if the Executive’s employment is terminated prior to an Announcement. Renewal of this Agreement for successive two (2) year terms shall require approval of the Company’s Compensation and Stock Incentive Committee.
Section 3
Benefits
(a) On the date of a Change in Control, the Company shall pay to the Executive in cash the Change in Control Fee.
(b) During the Extension Period, the Company shall pay to the Executive the Monthly Amount, payable on the first day of each month, prorated for partial months.
(c) If the Executive’s employment is terminated during the Extension Period, then,
(i) within five business days after the Date of Termination, the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) in cash all accrued but unpaid salary, earned but unpaid bonuses, and accrued but unused vacation in accordance with Company policies;
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(ii) the Company shall pay to the Executive (or if the Executive dies, to the estate of the Executive) the Monthly Amount on the first day of each month during the remainder of the Extension Period;
(iii) the Company shall pay to the Executive (or if the Executive dies, to his beneficiary, if any, under the Retirement Plan) a lump sum amount equal to the value of the monthly benefit under (x) the Retirement Plan and (y) the SERP, that the Executive or his beneficiary, if any, under the Retirement Plan would have received (1) for payments of the Monthly Amount had Executive been an employee while receiving such payments, and (2) for payment of the Change of Control Fee had such amount been treated as a normal bonus for pension accrual purposes (giving credit for all purposes, including, but not limited to, accrual of benefits, vesting, age and years of service and making the determination without regard to compensation or benefit limitations prescribed by federal law or regulation), which payment shall be paid within 10 days of the Date of Termination and calculated by Buck Consultants (or such other consultant as may be agreed upon) using the actuarial assumptions under the Retirement Plan and the discount rate which would be utilized for purposes of funding a Plan termination;
(iv) on the Date of Termination the Company shall transfer title and ownership to the Executive of his laptop computer, if any, without any payment by the Executive to the Company.
(d) During the Extension Period (whether or not during the Employment Period) the Executive shall be entitled to the following additional benefits:
(i) The Executive and, as applicable, the Executive’s covered dependents shall be entitled to all health, welfare, and fringe benefits provided by the Company to its key employees generally or to the Executive on an individual or group basis (including, but not limited to, any life, accident, health, hospitalization or long-term disability insurance, maintained from time to time by the Company), whether maintained pursuant to a plan, policy or other arrangement (written or unwritten), as if the Executive were still employed during such period, at the same level of benefits and at the same dollar cost to the Executive as is available generally to comparable employees of the Company (but in no instances shall such benefits be at a level less than as in effect on the date of the Change in Control). If the Company reasonably determines that the coverage required under this Section would cause a welfare plan sponsored by the Company to violate any provision of the Code prohibiting discrimination in favor of highly compensated employees or key employees, or if any benefits described in this Section cannot be provided (or the Company determines that it does not wish to provide such benefits) pursuant to the appropriate plan or program maintained for employees of the Company, the Company shall provide such benefits outside such plan or program at no additional cost (on an after tax basis) to the Executive or, if the parties shall so agree, the Company will pay to the Executive the cash equivalent thereof. The health benefits provided in accordance with this Section shall be secondary to any comparable benefits provided by another employer if and only if the Executive chooses to be covered by such other employee plan.
(ii) Executive shall receive continued payment of professional and organizational dues and fees as in effect prior the Change in Control.
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(e) (i) If all, or any portion, of the payments and benefits provided under this Agreement, if any, either alone or together with other payments and benefits which the Executive receives or is entitled to receive from the Company, would constitute an excess “parachute payment” within the meaning of Section 280G of the Code (whether or not under an existing plan, arrangement, or other agreement) (each such parachute payment, a “Parachute Payment”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code, then, in addition to any other benefits to which the Executive is entitled under this Agreement or otherwise, the Executive shall be paid an amount in cash equal to the sum of the excise taxes payable by the Executive by reason of receiving Parachute Payments plus the amount necessary to place the Executive in the same after-tax position (taking into account any and all applicable federal, state and local excise, income or other taxes at the highest possible applicable rates on such Parachute Payments (including, without limitation, any payments under this Section) as if no excise taxes had been imposed with respect to Parachute Payments (the “Parachute Gross-Up”). Any Parachute Gross-Up otherwise required by this Section shall not be made later than the time of the corresponding payment or benefit hereunder giving rise to the underlying Section 4999 excise tax, even if the payment of the excise tax is not required under the Code until a later time.
(ii) Subject to the provisions of Section 3(d) and except as may otherwise be agreed to by the Company and the Executive, the amount or amounts (if any) payable under this Section 3 shall be as conclusively determined by the KPMG LLP, or such other firm as mutually agreed to by the Company and the Executive (“Independent Tax Counsel”), whose determination or determinations shall be final and binding on all parties. The Executive shall agree to utilize such determination or determinations, as applicable, in filing all of the Executive’s tax returns with respect to the excise tax imposed by Section 4999 of the Code, if any. If such Independent Tax Counsel fails or refuses to make the required determinations for any reason, then such determinations shall be made by a comparable firm or group of national reputation to which the parties reasonably mutually agreed. All fees and expenses of the Independent Tax Counsel or its replacement shall be paid by the Company.
(iii) As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Independent Tax Counsel hereunder, it is possible that Parachute Gross-Up payments, if any, which will not have been made by the Company, should have been made, together with any interest, penalties or taxes of any kind thereon, consistent with the calculations required to be made hereunder (an “Underpayment”). The Company shall pay all such Underpayments to or for the benefit of the Executive. The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment within ten (10) business days after the Executive is informed in writing of such claim. The Company shall notify the Executive within ten (10) business days of receipt of the Executive notice that the Company (x) will pay the Underpayment and do so on or before the date due, or (y) that it desires to contest such claim. The Executive will cooperate with the Company in any such contest; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Furthermore, the Company’s control of the
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contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled, at Executive’s expense, to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
(iv) References herein to Code sections shall apply to comparable Code sections in the event of any amendment to the Code.
(v) The foregoing provisions of this subsection (f) shall similarly apply to any benefit provided elsewhere in this Agreement where it is expressly provided that the benefit is to be provided on an after tax basis.
(f) In the event of the Executive’s termination of employment under this Agreement, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment.
In the event that Executive’s employment is terminated by the Company for Cause (and Executive was not capable of voluntarily terminating for Good Reason at or prior to such time) or if Executive voluntarily terminates without Good Reason, the Company shall remain obligated to pay the Non-Compete Monthly Amount but shall not be obligated to pay the balance of the Monthly Amount. Executive is free to terminate his employment for Good Reason.
Section 4
Employment
Following a Change in Control, the Executive will, except as provided below, continue as an employee during the Extension Period. During the Employment Period:
(i) The Executive shall perform services consistent with his past practices,
(ii) The Executive shall not be required to relocate or travel in excess of past practices,
(iii) The Executive shall enjoy the same office, administrative support and support services as he enjoyed prior to the Change in Control.
(iv) The Executive shall not be required to devote more time to Company business than he did prior to the Change in Control and may continue director or officer positions with other private or public entities that do not violate Section 7.
(v) The Executive’s expenses shall be reimbursed consistent with past practices, and
(vi) The Executive shall receive at least the same vacation as he currently enjoys, but not less than four weeks paid vacation.
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No breach or alleged breach of this Section 4 shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owing to the Executive under this Agreement.
Section 5
Source of Payments
All payments provided for in this Agreement shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Executive or his dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments.
Section 6
Litigation Expenses and Arbitration
In addition to the Company’s other obligations under this Agreement, the Company shall pay all legal fees and expenses incurred in a legal proceeding (including arbitration) by the Executive in seeking to obtain or enforce any right or benefit provided by this Agreement (including, without limitation, any rights to a tax gross-up). Such payments are to be made within five days after the Executive’s request for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require; provided, however, that if the Executive institutes a proceeding and the judge or other decision-maker presiding over the proceeding affirmatively finds that the Executive has failed to prevail substantially, he shall pay his own costs and expenses (and, if applicable, return any amounts theretofore paid on his behalf under this Section 6.
All disputes with respect to the subject matter of this Agreement and the enforcement of rights hereunder shall be submitted to binding arbitration in accordance with the rules of the American Arbitration Association (the “AAA”). Each party hereto shall designate one arbitrator (who need not be impartial) within fifteen (15) days after notice of the dispute. The two arbitrators so designated shall endeavor to designate promptly a third, neutral arbitrator. If the two arbitrators have not designated the third arbitrator by the fifteenth (15th) day following the designation of the second arbitrator, or if a second arbitrator has not been designated by the (15th) day following the designation of the first, either Party may request the AAA to designate the remaining arbitrator(s). The third arbitrator shall take an oath of neutrality. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evidence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. The arbitrators shall have the power to render equitable relief as may be available in accordance with applicable law. Unless otherwise agreed by the parties, any such arbitration shall take place in such City within the United States as Executive may designate, and shall be conducted in accordance with the Rules of the AAA. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. The arbitrators’ award may be confirmed in, and judgment upon the award entered by, any federal or state court having jurisdiction over the parties.
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Section 7
Restrictive Covenants
(a) Within a reasonable period of time following his termination of employment, the Executive shall return to the Company all Company Information, reports, files, memoranda, records, credit cards, cardkey passes, door and file keys, computer access codes, and other property which the Executive has received, prepared, or helped to prepare in connection with his employment with the Company, except as provided in Section 3. The Executive acknowledges that in the course of employment with the Company, he has acquired Company Information and that such Company Information has been disclosed to him in confidence and for the Company’s use only. The Executive agrees that, during the Extension Period, he (i) will keep such Company Information confidential at all times, (ii) will not disclose or communicate Company Information to any third party, and (iii) will not make use of Company Information on his own behalf or on behalf of any third party. The Executive further acknowledges and agrees that the Company’s remedy in the form of monetary damages for any breach by him of any of the provisions of this Section may be inadequate and that, in addition to any monetary damages for such breach, the Company shall be entitled to institute and maintain any appropriate proceeding or proceedings, including an action for specific performance and/or injunction.
(b) Executive agrees not to, during the Extension Period, within the Territory, directly or indirectly, individually or on behalf of persons not now parties to this Agreement, or as a director, officer, principal, agent, executive, or in any other capacity or relationship, engage in the motorsports business (except as a passive investor holding not more than 3% of the equity of such business), or aid or endeavor to assist any business or legal entity, that is in the motorsports business and that competes with the Company anywhere in the Territory. The Territory shall consist of the entire State of Delaware and a 100-mile radius around the Company’s facilities in Dover, Delaware, Nashville, Tennessee, Madison, Illinois, Memphis, Tennessee, Long Beach, California, and any other facilities which may be acquired or developed by the Company prior to the Change of Control. The Company and Executive acknowledge the reasonableness of this covenant not to compete and the reasonableness of the geographic area and duration of time which are a part of said covenant.
(c) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit the trade or patronage of any of the customers of the Company, regardless of the location of such customers of the Company with respect to any services, products, or other matters in which the Company is active.
(d) Unless waived in writing by the Company, Executive further agrees that he will not, directly or indirectly, during the Extension Period, solicit or attempt to entice away from the Company any director, agent or employee of the Company.
(e) Executive acknowledges that the Company has no adequate remedy at law and would be irreparably harmed if Executive breaches or threatens to breach any of the provisions of this Section and, therefore, agrees that the Company shall be entitled to injunctive relief to prevent any such breach or threatened breach thereof and to specific performance of the terms of this Section (in addition to any other legal or equitable remedy the Company may have, including if so determined by arbitration, that the Company is not obligated to pay to the Executive (or the
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Executive is required to repay to the Company) a portion or all of the Non-Compete Monthly Amount; provided, however, in all instances the Company shall continue to pay to Executive the Non-Compete Monthly Amount unless and until all appeals have been exhausted or the time for such has expired). Executive further agrees that Executive shall not, in any equity proceeding relating to the enforcement of this Section, raise the defense that the Company has an adequate remedy at law. Nothing in this Agreement shall be construed as prohibiting the Company from pursuing any other remedies at law or in equity that it may have under and in respect of this Agreement or any other agreement.
(f) The Executive agrees to pay to the Company any outstanding amounts owed to the Company; provided, however, that no breach or alleged breach of this subsection (f) or any other provision of this Section shall constitute grounds for, or otherwise entitle, the Company to offset payments otherwise owed to the Executive under this Agreement.
Section 8
Severability
If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the fullest extent consistent with law continue in full force and effect.
Section 9
Amendment, Termination, or Modification
Except as provided below, this Agreement may not be terminated, modified or amended other than by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.
Section 10
Consolidation, Merger, or Sale of Assets; Assignability
The Company shall require (a) any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company and (b) the parent entity owning or controlling such successor expressly to assume and agree to perform under the terms of this Agreement in the same manner and to the same extent that the Company and its affiliates would be required to perform it if no such succession had taken place (provided that such a requirement to perform which arises by operation of law shall be deemed to satisfy the requirements for such an express assumption and agreement). Except as provided herein, the Executive’s rights hereunder shall not be assignable.
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Section 11
Tax Withholding
The Company may withhold from any payments made under this Agreement all federal, state or other taxes as shall be required pursuant to any law or governmental regulation or ruling.
Section 12
Entire Understanding
This Agreement contains the entire understanding between the Company and the Executive with respect to the subject matter hereof and supersedes any prior agreement between the Company and the Executive regarding non-compete provisions, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Executive of any kind elsewhere provided and not expressly dealt with in this Agreement.
Section 13
Binding Agreement
This Agreement shall be binding upon, and shall inure to the benefit of, the Executive and the Company and their respective permitted successors and assigns.
Section 14
Employment Status
Nothing herein contained shall be deemed to create an employment agreement between the Company and the Executive providing for the employment of the Executive by the Company for any fixed period of time prior to a Change in Control. The Executive’s employment with the Company is terminable at will by the Company or Executive and each shall have the right to terminate Executive’s employment with the Company at any time, with or without Cause, subject to the Company’s obligation to provide any benefits required hereunder. There are no other agreements or understandings between the Company and the Executive which guarantee continued employment to the Executive or guarantee any level of compensation, including incentive or bonus payments, to the Executive.
Section 15
No Attachment
Except as required by law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to effect any such action shall be null, void and of no effect.
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Section 16
Notices
All notices, requests, demands and other communications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class as follows:
(a) to the Company, at its Dover, Delaware address
(b) to the Executive, at the address maintained by the Company for the Executive for payroll purposes;
or to such address as either party shall have previously specified in writing to the other.
Section 17
Revocation and Executive Acknowledgments
The Executive acknowledges that he has read and understands the provisions of this Agreement. The Executive further acknowledges that he has been given an opportunity for his legal counsel to review this Agreement and that the provisions of this Agreement are reasonable and that he has received a copy of this Agreement.
Section 18
Headings of No Effect
The section headings contained in this Agreement are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement.
Section 19
Applicable Law
This Agreement and its validity, interpretation, performance, and enforcement shall be governed by the laws of the State of Delaware.
Section 20
Counterparts
This Agreement may be executed in two or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company through its officer duly authorized, and the Executive both intending to be legally bound have duly executed and delivered this Agreement, to be effective as of the Effective Date.
| Dover Motorsports, Inc. |
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| Its |
| EXECUTIVE |
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