EMPLOYMENT AGREEMENT
THE EMPLOYMENT AGREEMENT made and entered into the 16th day
of April, 1996, and effective as of January 1, 1996, by and
between Bally Entertainment Corporation, a Delaware corporation,
("Bally"), Bally Total Fitness Holding Corporation, a Delaware
corporation ("BTFHC") (Bally and BTFHC shall be referred to
together herein as "Employers") and Harold Morgan ("Employee").
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements herein contained, the parties agree as
follows:
1. Employment
(a) Bally hereby employs Employee in the capacity of
Vice President of Human Resources, and BTFHC hereby employs
Employee in the capacity of Senior Vice President of Human
Resources. Employers may employ Employee in such other
capacities of equal status and responsibility as the Chairman of
the Board and Chief Executive Officer of Bally and BTFHC,
respectively, or his designated representative, shall reasonably
determine, and Employee hereby accepts such employment upon the
terms and conditions herein set forth.
(b) During the term of his employment, Employee will
devote his best efforts to his employment and perform such duties
consistent with his capacity as Vice President of Human Resources
and Senior Vice President of Human Resources and such other
capacities as the Chairman of the Board and Chief Executive
Officer of Bally and BTFHC, respectively, shall determine, as are
reasonably assigned to him by Employers. Employee will devote
his entire working time and attention to the business and related
interests of, and will be loyal to, Employers, and Employee
agrees to render service on behalf of Employers and their
subsidiaries or affiliates.
(c) Employee shall not, without prior written consent
of Employers, directly or indirectly, during the term of this
Employment Agreement:
(i) Other than in the performance of duties
naturally inherent to Employers' business and in furtherance
thereof, render services of a business, professional or
commercial nature to any other person or firm, whether for
compensation or otherwise, but this shall not be construed as
preventing the Employee from investing his assets in such form or
manner as will not require any services on the part of the
Employee in the operation of the affairs of the companies in
which such investments are made and which are not in violation of
subparagraph (ii) below or from engaging in charitable
activities so long as such activities do not interfere with the
performance of Employee's duties hereunder;
(ii) Engage in any activity competitive with or
adverse to Employers' business or welfare, whether alone, as a
partner, or as an officer, director, employee or shareholder of
any other corporation, or otherwise, directly or indirectly,
except that the ownership of not more than one percent (1%) of
the stock of any publicly traded corporation shall not be deemed
violative of this subparagraph (ii);
(iii) Be engaged by any entity which conducts
business with or acts as consultant or advisor to either of
Employers, whether alone, as a partner, or as an officer,
director, employee or shareholder, or otherwise, directly or
indirectly, except that ownership of not more than one percent
(1%) of the stock of any publicly traded corporation shall not
be deemed violative of this subparagraph (iii).
2. Term
The term of this Employment Agreement shall begin on
the effective date stated above ("commencement date") and shall
continue for three (3) years from such date and shall continue
thereafter from year-to-year unless terminated by any party in
his or its sole discretion upon sixty (60) days written notice
given prior to the expiration of a term.
3. Compensation
(a) In consideration of the services to be rendered by
the Employee hereunder, Employers agree to pay to the Employee,
and the Employee agrees to accept, as compensation, the sum of
One Hundred Seventy-Five Thousand Dollars ($175,000) (the "Base
Salary") for each twelve month period following the effective
date of this Employment Agreement, which shall be paid on the
regularly recurring pay periods established by Employers. The
Base Salary shall be subject to periodic review by Employers.
(b) It is further understood by the parties that,
pursuant to the policies of Employers, discretionary bonus
payments may be made in addition to the Base Salary above
provided.
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(c) Seventy-five percent (75%) of Base Salary and
total other benefits, including, without limitation, medical,
life and disability insurance and automobile allowance, provided
to Employee shall be paid by BTFHC, and twenty-five percent (25%)
shall be paid by Bally. Discretionary bonuses may be paid by
either or both of Employers. Either Employer may, in its sole
discretion, increase the amount of Base Salary it pays Employee.
Any such increase shall not affect the amount of Base Salary to
be paid by the other Employer. Notwithstanding the foregoing,
any payment(s) due under paragraph 9 shall be paid by Bally or
its successor.
4. Vacation and Other Benefits
Employee shall be entitled to a reasonable vacation
each year of his employment with Employers as well as other
employment benefits, including hospitalization, life insurance,
death and retirement plans, an automobile allowance or the use of
an automobile, and the like, afforded to senior executives of
Employers of comparable status and tenure and consistent with
that afforded under Employers' policies. Each of Employers may
in its sole discretion change such policies. In the event of a
conflict between the policies of Bally and BTFHC on the provision
of any benefit afforded to employees of comparable status and
tenure to Employee, Employee shall be provided with the greater
benefit provided by either Employer.
5. Expenses
Each of Employers shall pay all reasonable expenses
incurred by Employee in the performance of his responsibilities
and duties for and the promotion of that Employer. Employee
shall submit to the appropriate Employer periodic statements of
all expenses so incurred. Subject to such audits as each of the
Employers may deem necessary, Employers shall reimburse Employee
the full amount of any such expenses advanced by Employee
promptly in the ordinary course.
6. Covenants and Confidential Information
(a) Employee agrees that for the applicable period
specified below, he will not, directly or indirectly, do any of
the following:
(i) Own, manage, control, or participate in the
ownership, management, or control of, or be employed or engaged
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by or otherwise affiliated or associated as a consultant,
independent contractor or otherwise, with any other corporation,
partnership, proprietorship, firm, association or other business
entity, or otherwise engage in any business which is engaged in
any manner in, the operation of fitness centers as a significant
part of its business (a "Facility") operates such fitness
center(s) within ten (10) miles of any fitness center owned,
managed or under development to be owned or managed by BTFHC, its
subsidiaries, affiliates and/or its or their successors and
assigns (as conducted on the date Employee ceases to be employed
hereunder); provided, however, that the ownership of not more
than one percent (1%) of the stock of any publicly traded
corporation shall not be deemed a violation of this covenant;
(ii) Induce any person who is an employee,
officer, or agent of either of Employers to terminate said
relationship.
(iii) Employ, assist in employing or otherwise
associate in business with any present, former or future employee
or officer of either of Employers.
(iv) Disclose, divulge, discuss, copy or
otherwise use or suffer to be used in any manner, in competition
with, or contrary to the interests of either of Employers, the
customer lists, inventions, ideas, discoveries, manufacturing
methods, product research or engineering data or other trade
secrets of Employers, it being acknowledged by Employee that all
such information regarding the business of Employers compiled or
obtained by, or furnished to, Employee while he shall have been
employed by or associated with such Employer is confidential
information and the exclusive property of that Employer.
(b) The provisions of subparagraphs 6(a)(i) -
6(a)(iii) shall be operative for three (3) years from the
effective date of this Employment Agreement except as provided in
the following sentence. In the event (y) of a "Change of
Control" the provisions of subparagraphs 6(a)(i)-(iii) with
respect to Bally shall be operative only so long as Employee
remains an employee of Bally and (z) Employee is terminated for
"Cause" (as defined in paragraph 8 hereof), the provisions of
subparagraphs 6(a)(i)-(iii) shall be operative for an additional
year. All other obligations created by the terms of this
paragraph 6 are of a continuing nature and shall remain in full
effect at all times during and beyond Employee's period of
employment.
(c) Employee expressly agrees and understands that the
remedy at law for any breach by him of this paragraph 6 will be
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inadequate and that the damages flowing from such breach are not
readily susceptible to being measured in monetary terms.
Accordingly, it is acknowledged that either or both of Employers,
as the case may be, shall be entitled to immediate injunctive
relief and if the court so permits, may obtain a temporary order
restraining any threatened or further breach. Nothing contained
in this paragraph 6 shall be deemed to limit either of Employers'
remedies at law or in equity for any breach by Employee of the
provisions of this paragraph 6 which may be pursued or availed of
by Employers. Any covenant on Employee's part contained
hereinabove, which may not be specifically enforceable, shall
nevertheless, if breached, give rise to a cause of action for
monetary damages.
(d) Employee has carefully considered the nature and
extent of the restrictions upon him and the rights and remedies
conferred upon Employers under this paragraph 6, and hereby
acknowledges and agrees that the same are reasonable in time and
territory, are designed to eliminate competition which otherwise
would be unfair to Employers, do not stifle the inherent skill
and experience of Employee, would not operate as a bar to
Employee's sole means of support, are fully required to protect
the legitimate interests of Employers and do not confer a benefit
upon Employers disproportionate to the detriment to Employee.
(e) For the purposes of this paragraph 6, the term
"Employer" or "Employers" shall be deemed to include BTFHC, Bally
and their respective subsidiaries and affiliates and the
successors and assigns of them and their respective subsidiaries
and affiliates, involved in the operation or management of
fitness centers or gaming facilities.
(f) The covenants contained in this paragraph 6 shall
be construed to extend to separate counties and adjacent
counties, if applicable, of the states of the United States in
which BTFHC and its subsidiaries, affiliates and its and their
successors and assigns has a Facility, and to the extent that any
such covenant shall be illegal and/or unenforceable with respect
to any one of said counties, said covenants shall not be affected
thereby with respect to each other county, such covenants with
respect to each county being construed as severable and
independent.
7. Illness, Incapacity or Death During Employment
a) If the Employee is unable to perform his services
by reason of illness or incapacity resulting in a failure to
discharge his duties under this Employment Agreement for six (6)
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or more consecutive months, then upon thirty (30) days notice,
Employers may terminate the employment of Employee under this
Employment Agreement and Employee, upon such termination, shall
be paid his Base Salary on a pro-rata basis to the date of
termination through the thirty (30) day notice period.
In the event of such termination, the Employee shall
have the right to the assignment of any and all insurance
policies or health protection plans if said policies and plans
permit assignment out of the group to the individual Employee.
(b) In the event that either of Employers elects to
terminate this Employment Agreement by reason of illness or
incapacity, then Employee shall be entitled to the greater of
long-term disability (LTD) benefits provided to senior officers
by either of Employers but in any event at no less than sixty
percent (60%) of Base Salary as of the date of termination,
without reference to set-off or caps existing in any LTD plan.
(c) In the event of Employee's death, all obligations
of Employers under this Employment Agreement shall terminate
other than the payment of that portion of his Base Salary on a
pro-rata basis accrued to the date of death, plus reimbursement
of all expenses reasonably incurred by Employee in performing his
responsibilities and duties for Employers prior to and including
such date.
8. Termination
(a) The employment of Employee under this Employment
Agreement, and the term hereof, may be terminated by either of
Employers for cause at any time. For purposes hereof, the term
"cause" means:
(i) Employee's fraud, dishonesty, willful
misconduct or gross negligence in the performance of his duties
hereunder, including willful failure to perform such duties as
may properly be assigned him hereunder;
(ii) Employee's material breach of any provision
of this Employment Agreement; or
(iii) Employee's failure to qualify (or having so
qualified being thereafter disqualified) under any suitability or
licensing requirement to which Employee may be subject by reason
of his position with Employers and their parents, affiliates or
subsidiaries, whether under the laws of Nevada or New Jersey.
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(b) Any termination shall not be in limitation of any
other right or remedy Employers may have under this Employment
Agreement or otherwise.
(c) In the event one of Employers terminates the
employment of Employee, other than upon a Change of Control as
described in paragraph 9 below, the other Employer (the
"Nonterminating Employer") shall have the option to continue
under this Employment Agreement as the sole Employer (the
"Option") and assume all of the obligations of both Employers
going forward, including, without limitation, those set forth in
paragraph 3. In order to exercise the Option, the Nonterminating
Employer shall, within seven (7) days from the date of its
receipt of notice of such termination from either the terminating
Employer or Employee, notify both the terminating Employer and
Employee that it elects to exercise the Option. From the date of
such election, the terminating Employer shall have no further
liability hereunder for the termination of Employee or otherwise,
and all of Employee's responsibilities and obligations under this
Employment Agreement shall run to the Nonterminating Employer.
In the event that the Nonterminating Employer does not elect to
exercise the Option, this Employment Agreement shall be
terminated with respect to the Nonterminating Employer with no
further liability, except for the covenants contained in
paragraph 6 that would otherwise survive according to their
terms, and the terminating Employer shall be liable for 100% of
the severance or other compensation or contract damages payable
to Employee upon termination of this Employment Agreement.
9. Optional Termination Upon Change of Control
a) In the event that there is a change in control of
Bally and the successor in control, without cause, terminates
this Employment Agreement, Employee shall be paid in lump sum
twenty-four (24) months Base Salary or an amount equal to his
Base Salary for the balance of the thirty-six (36) month term,
whichever is greater, and the greater of the average of the
bonuses, if any, paid to Employee by Employers for the three (3)
prior years and the bonus, if any, for the prior year. If the
successor in control changes Employee's title or substantially
changes his duties or functions from those which he previously
performed hereunder or requires Employee to perform the majority
of his duties at a location outside of the metropolitan area of
Chicago, Illinois, the successor in control shall be deemed to
have terminated Employee's services without cause.
A "Change in Control" shall mean a change in
control of Bally of a nature that would be required to be
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reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934 (as in
effect on the effective date of this Employment Agreement, the
"Exchange Act"), whether or not Bally is then subject to such
reporting requirement; provided that, without limitation, such a
Change in Control shall be deemed to have occurred if:
(i) any "person" (as defined in subsections
13(d) and 14(d) of the Exchange Act), other than a person with
which Arthur Goldberg is affiliated or of which he is a part, is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), of securities of Bally representing twenty
percent (20%) or more of the combined voting power of Bally's
then outstanding securities;
(ii) during any period of two (2) consecutive
years or less (not including any period prior to the effective
date of this Employment Agreement) there shall cease to be a
majority of the Board of Directors of Bally comprised of
Continuing Directors (as defined below); or
(iii) the stockholders of Bally approve (1) a
merger or consolidation of Bally with any other corporation,
other than a merger or consolidation that would result in the
voting securities of Bally outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity)
at least 80% of the combined voting power of the voting
securities of Bally or such surviving entity outstanding
immediately after such merger or consolidation, or (2) a plan of
complete liquidation of Bally or an agreement for the sale or
disposition by Bally of all or substantially all of its assets.
The term "Continuing Directors" shall mean
individuals who constitute the Board of Directors of Bally as of
the effective date of this Employment Agreement and any new
director(s) whose election by such Board or nomination for
election by Bally's stockholders was approved by a vote of at
least two-thirds of the directors then in office who either were
directors as of the effective date of this Employment Agreement
or whose election or nomination for election was previously so
approved.
(b) If it shall be determined that any payment or
distribution to or for the benefit of Employee pursuant to this
Section 9 ("Severance Payments") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code (the
"Excise Tax"), then Employee shall be entitled to receive from
Employers an additional payment (the "Excise Tax Gross-Up
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Payment") in an amount such that the net amount retained by
Employee, after the calculation and deduction of any Excise Tax
on the Severance Payments and any federal, state and local income
taxes and Excise Tax on the Gross-Up Payment provided for in this
Section 9, shall be equal to the Severance Payments. In
determining this amount, the amount of the Excise Tax Gross-Up
Payment attributable to federal income taxes shall be reduced by
the maximum reduction in federal income taxes that could be
obtained by the deduction of the portion of the Excise Tax Gross-
Up Payment attributable to state and local income taxes.
Finally, the Excise Tax Gross-Up Payment shall be reduced by
income or excise tax withholding payments made by Employers to
any federal, state or local taxing authority with respect to the
Excise Tax Gross-Up Payment that was not deducted from
compensation payable to Employee.
(c) In the event Employee is terminated under this
paragraph 9 upon a Change of Control as described in this
Paragraph 9, BTFHC shall have the option (the "Change of Control
Option") to continue under this Employment Agreement as the Sole
Employer and assume the obligations of both Employers going
forward, including, without limitation, those set forth in
Paragraph 3, other than the obligations described in this
Paragraph 9. In order to exercise the Change of Control Option,
BTFHC shall, within seven (7) days from the date of its receipt
of notice of such termination from either Bally, its successor in
control or Employee, notify Employee that it elects to exercise
the Change of Control Option. From the date of such election,
all of Employee's responsibilities and obligations under this
Employment Agreement shall run to BTFHC. Regardless of whether
BTFHC exercises the Change of Control Option, Bally or its
successor in control shall be liable for and shall make all
payments described in this Paragraph 9, and BTFHC shall have no
liability therefor.
10. Severable Provisions
The provisions of this Employment Agreement are
severable, and if any one or more provisions may be determined to
be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions, and any partially unenforceable provision
to the extent enforceable in any jurisdiction, shall nevertheless
be binding and enforceable.
11. Binding Agreement
The rights and obligations of Employers under this
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Employment Agreement shall inure to the benefit of and shall be
binding upon the respective successors and assigns of Employers.
12. Attorneys' Fees
In the event Employee is required to commence legal
action to enforce the provisions of this Employment Agreement and
Employee prevails in such action, any of the Employers who have
been found not to comply with this Employment Agreement shall pay
Employee's costs and expenses, including reasonable attorneys'
fees, incurred in such action.
13. Notices
Any notice to be given to Employers under the terms of
this Employment Agreement shall be addressed to both Employers at
the address of their respective principal places of business, and
any notice to be given to Employee shall be addressed to him at
his home address last shown on the records of the Employer giving
the notice, or at such other address as the parties may hereafter
designate in writing to the other. Any such notice shall have
been duly given when enclosed in a properly sealed envelope
addressed as aforesaid, postage prepaid, registered or certified,
return receipt requested, and deposited in a post office or
branch post office regularly maintained by the United States
Government. Should one of the Employers give notice to Employee,
it shall provide a copy of such notice to the other Employer.
14. Waiver
Any party's failure to enforce any provision or
provisions of this Employment Agreement shall not in any way be
construed as a waiver of any such provision or provisions as to
any future violations thereof, nor prevent that party thereafter
from enforcing each and every other provision of this Employment
Agreement. The rights granted the parties herein are cumulative
and the waiver by a party of any single remedy shall not
constitute a waiver of such party's right to assert all other
legal remedies available to him or it under the circumstances.
15. Governing Law
This Employment Agreement shall be governed by and
construed and interpreted according to the internal laws of the
State of Illinois without reference to principles of conflict of
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laws.
16. Captions and Paragraph Headings
Captions and paragraph headings used herein are for
convenience only and are not a part of this Employment Agreement
and shall not be used in construing it.
17. Entire Agreement
This Employment Agreement constitutes the entire
agreement between Employers and Employee with respect to the
subject matter hereof and may not be modified or terminated
orally. No modification, termination or attempted waiver of this
Employment Agreement shall be valid unless in writing and signed
by the party against whom the same is sought to be enforced.
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IN WITNESS WHEREOF, the parties hereto have caused this
Employment Agreement to be duly executed as of the day and year
first above written.
BALLY TOTAL FITNESS HOLDING
CORPORATION
ATTEST: By:
"BTFHC"
BALLY ENTERTAINMENT CORPORATION
ATTEST: By:
"Bally"
Harold Morgan
"Employee"
Approved by the Compensation and Stock Option Committee of Bally
Entertainment Corporation on ___________________, 1996.
Secretary, Compensation and Stock
Option Committee -
Bally Entertainment Corporation
Approved by the Compensation and Stock Option Committee of Bally
Total Fitness Holding Corporation on _________________, 1996.
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Secretary, Compensation and Stock
Option Committee - Bally Total
Fitness Holding Corporation
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