EMPLOYMENT AGREEMENT
THIS AGREEMENT is dated, made, entered into on June 3, 1997, and is
effective as of the 25th day of June, 1996, by and between Casino Magic Corp.,
a Minnesota corporation (the "Company"), and Kenneth N. Schultz (the
"Employee").
RECITALS
WHEREAS, the Company is desirous of retaining the full-time services of
the
Employee;
WHEREAS, Employee commenced his employment with the Company on June 25,
1996;
WHEREAS, the Employee and the Company are each willing to enter into this
employment agreement (the "Agreement"), all on the terms and subject to the
conditions herein contained; and
WHEREAS, Employee is desirous of receiving stock grants and options to
purchase common stock in the Company under the Company's Incentive Stock
Option Plan, which options and grants require the approval of the Company's
Board of Directors and the Stock Option Committee, respectively; and
WHEREAS, this Agreement is intended to supersede and take the place of
all prior
agreements and understandings concerning employment;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
agreements
hereinafter set forth, the parties agree as follows:
1. Employment of the Employee; Term.
(a) The Company agrees to and hereby does employ the Employee, and
the
Employee accepts such employment and agrees to discharge faithfully,
diligently and to
the best of Employee's abilities, the responsibilities of such employment on
the terms and
subject to the conditions herein provided.
(b) The initial term of Employee's employment hereunder shall
terminate on December 31, 1998 ("Initial Expiration Date"), unless terminated
earlier as provided in Section 4.
(c) Notwithstanding the foregoing, following the Initial Expiration Date,
Employee's employment shall thereafter continue on an at will basis on the
terms and conditions contained in this Agreement; provided, however, that all
obligations of the Company and the rights of the Employee under Subsection
4(a) will terminate.
2. Duties of the Employee. During the term of Employee's employment with
the
Company hereunder, the Employee shall:
(a) Devote substantially all of Employee's business time and
attention necessary to carry out the, duties of Employee's employment
hereunder, applying Employee's best effort and skill for the benefit of the
Company.
(b) Act as Vice President of Construction for the Company and perform such
services and such duties and responsibilities as are assigned to Employee by
the President, consistent with such office, all in accordance with the terms
of this Agreement, the Articles of Incorporation and By-Laws of the Company.
(c) Report directly to the President of the Company.
3. Compensation. As compensation and in consideration for the performance
of services by the Employee and Employee's observance of all of the provisions
of this Agreement, the Company agrees to pay or provide, and Employee agrees
to accept, the following:
(a) Salary. During the term of Employee's employment, the Company shall
pay to the Employee, at least semimonthly, a base salary at an initial annual
rate of
$200,000, provided that the annual rate of his salary shall be $170,000
effective beginning June 1, 1997 through December 31, 1997. The Employee's
base salary may be reviewed from time to time, but at least annually for
increases as determined by the
Company.
(b) Benefits. During the term of Employee's employment, the Employee
shall be entitled to paid time off based upon the Company's policies in effect
from time to time, consistent with that provided to employees having duties,
authority and status equal to that of Employee. In addition, during the term
of Employee's employment, the Employee shall be entitled to medical and
hospitalization insurance or reimbursement, consistent with that provided to
other salaried employees of the Company, or as may be established in a written
policy by the Board of Directors. The Company confirms that Employee has
satisfied any eligibility period requirement.
(c) Business. The Company shall reimburse the Employee for business
expenses reasonably incurred by the Employee in connection with the
performance of Employee's duties hereunder, upon the presentation by Employee
of receipts and itemized accounts of such expenditures in accordance with the
rules and regulations of the Internal Revenue Code. Such expenditures shall
be subject at all times to the prior approval of the President of the Company
or his designee. Except for expenses previously approved by such officer or
his designee, the Board of Directors of the Company may take such action as
may be necessary to enforce the repayment to the Company by the Employee of
any amounts reimbursed upon finding that such reimbursement was not made
primarily for the purpose of advancing the legitimate interests of the
Company. In lieu of direct payment by the Employee, the Company, by action of
its Board of Directors, may withhold such disallowed amounts from future
(d) Moving Allowance. Subject to submission of invoices and Company
approval, the Company will reimburse Employee for the reasonable expenses
incurred in moving his household goods to the Gulf Coast area.
(e) Bonus. In addition to the foregoing, Employee's shall be entitled
to participate in any executive bonus pool established by the Company.
(f) Employment Bonus and Lump Sum Relocation Payment. Upon
commencement of employment, Employee is to be paid the sum of $82,500
4. Termination of Agreement.
(a) Termination With Cause. The Company may terminate Employee's
term of employment under this Agreement for "good cause" upon notice of such
termination to the Employee. For purposes of this Agreement, "good cause"
shall mean Employee's (i) failure or refusal to observe or perform any of the
material provisions of this Agreement or any other written agreement with the
Company, or to substantially perform any of the material duties required of
Employee under this Agreement or any other written agreement with the Company,
or (ii) commission of fraud, misappropriation, embezzlement or other acts of
dishonesty, alcoholism, drug addiction or dependency, or conviction for any
crime punishable as a felony or as a gross misdemeanor involving moral
turpitude, which actions have a material adverse effect upon the Employee's
ability to perform the duties which are assumed or assigned under Section 2
hereof, or which actions or occurrences are materially adverse to the
interests of the Company, or (iii) unreasonable refusal or failure to
faithfully perform the duties and responsibilities of Employee's employment
hereunder or to comply with the directions of the President, his designee or
the Board of Directors. Termination of Employee's employment for good cause
under Subsection 4(a)(ii) above shall be effective upon notice. Termination
of Employee's employment for good cause under Subsections 4(a)(i) or 4(a)(iii)
shall be effective upon fourteen days' prior notice provided that prior to the
giving of such notice of termination, the Company shall notify Employee that a
factual basis for termination for good cause exists, specifying such basis.
(b) Termination With Notice. After the Initial Expiration Date,
Employee's term of employment under this Agreement may be terminated by either
party for any reason upon not less than 30 days' prior written notice.
(c) Termination upon Death of Employee. This Agreement shall automatically
terminate in the event of the Employee's death.
(d) Termination If Employee Not Found Suitable by Mississippi Gaming
Commission and Related Matters. Employee's position with the Company may
require a finding of suitability by the Mississippi Gaming Commission or other
state gaming commission, as the case may be. The Company will pay all
investigative fees and costs associated with the Mississippi Gaming Commission
or other state gaming commission suitability determinations. If the Employee
is found not suitable by the Mississippi Gaming Commission or other gaming
commission, as the case may be, Employee's employment with the Company shall
thereafter immediately terminate and this Agreement shall be deemed null and
void.
(e) Termination Obligations. In the event of a termination of the
Employee's term of employment in accordance with Section 4, the Company shall
have no further obligation to the Employee under this Agreement, and Employee
shall only be entitled to payment by the Company for all compensation accrued
under this Agreement to such date of termination. However, such termination
of the Employee's employment shall not terminate or extinguish the Employee's
obligations under Section 5 or 6 hereof (unless otherwise provided therein) or
Employee's obligation or liability to pay to the Company any amounts owed to
the Company by the Employee, including, but not limited to, any amounts
misappropriated or obtained by the Employee, without prejudice to any other
rights or remedies of the Company at law or in equity. Notwithstanding the
foregoing, in the event that the Employee's term of employment is terminated
by the Company other than for "good cause" as provided under Subsection 4(a)
prior to the Initial Expiration Date, the Company shall continue to pay to
Employee, at least semimonthly, Employee's base salary (based on the
annualized monthly base salary then being paid to Employee as of the date of
termination), through the Initial Expiration Date. Employee and the Company
acknowledge and agree that no part of any incentive compensation that is based
on the Company's financial performance for a fiscal year, if any, is payable
if Employee's employment is terminated for any reason prior to the expiration
of such fiscal year.
(f) Severance Allowance. In the event Employee's term of employment
is terminated by the Company pursuant to Subsections 4(b) or 4(d), Employee
will be entitled to receive a severance allowance in an amount equal to six
months' base salary, (based on the annualized monthly base salary which is the
greater of $200,000 or the amount then being paid to Employee as of the date
of termination) to be paid out over the six months following Employee's date
of termination in at least semimonthly installments. No severance allowance
will be payable to Employee in any other circumstance, including if the
Employee voluntarily resigns or otherwise terminates employment pursuant to
Subsection 4(b).
(g) Options and Grants. Notwithstanding any provision in this
Agreement to the contrary, should the current President of the Company be
replaced or terminated prior to the Initial Expiration Date, any stock options
or grants given to Employee pursuant to an executed agreement between the
Company and Employee shall promptly vest if, prior to the Initial Expiration
Date:
(i) Employee is also replaced or terminated;
(ii) The duties of Employee with the Company or compensation from the
Company changes from that specified in this Agreement in any material respect;
or
(iii) Within ninety (90) days after the president is replaced, Employee
makes a reasonable good faith determination that due solely to specified
action or inaction of such replacement, he cannot effectively discharge the
duties delineated herein, and as a result terminates his employment with the
Company. To be effective, such determination by Employee must be provided to
the Company in a writing which sets forth the factual basis of such action or
inaction by the replacement President.
5. Disclosure of Confidential Information.
(a) Definition of Confidential Information. For purposes of this
Agreement, "Confidential Information" means any information that is not
generally known to the public that relates to the existing or reasonably
foreseeable business of the Company which has been expressly or implicitly
protected by the Company or which, from all of the circumstances, the Employee
knows or has reason to know that the Company intends or expects the secrecy of
such information to be maintained. Confidential Information includes, but is
not limited to, information contained in or relating to the customer lists,
account lists, price lists, product designs, marketing plans or proposals,
customer information, merchandising, selling, accounting, finances, know how,
trademarks ' trade names, trade practices, trade secrets and other proprietary
information of the Company.
(b) Employee Shall Not Disclose Confidential Information. The
Employee will not, during the term of Employee's employment or following the
termination of Employee's employment with the Company, use, show, display,
release, discuss, communicate, divulge or otherwise disclose Confidential
Information to any person, firm, corporation, association, or other entity for
any reason or purpose whatsoever, without the prior written consent or
authorization of the Company.
(c) Scope. Employee's covenant in Subsection 5(b) to not disclose
Confidential Information shall not apply to information which, at the time of
such disclosure, may be obtained from sources outside of the Company, its
agents, lawyers or accountants, so long as those sources did not receive the
information directly or indirectly as the result of Employee's action.
(d) Title. All documents or other tangible or intangible property
relating in any way to the business of the Company which are conceived or
generated by Employee or come into Employee's possession during the employment
period shall be and remain the exclusive property of the Company, and Employee
agrees to return all such documents, and tangible and intangible property,
including, but not limited to, all records, manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, data, tables,
magnetic tapes, computer disks, calculations or copies thereof, which are the
property of the Company or which relate in any way to the business, customers,
products, practices or techniques of the Company, and all other property of
the Company, including, but not limited to, all documents which in whole or in
part
contain any Confidential Information of the Company which in any of these
cases are in Employee's possession or under Employee's control, to the Company
upon the termination of Employee's employment with the Company, or at such
earlier time as the Company may request him to do so.
(e) Compelled Disclosure. In the event a third party seeks to compel
disclosure of Confidential Information by the Employee by judicial or
administrative process, the Employee shall promptly notify the Board of
Directors of the Company of such occurrence and furnish to such Board of
Directors a copy of the demand, summons, subpoena or other process served upon
the Employee to compel such disclosure, and will permit the Company to assume,
at its expense, but with the Employee's cooperation, defense of such
disclosure demand. In the event that the Company refuses to contest such a
third party disclosure demand under judicial or administrative process, or a
final judicial order is issued compelling disclosure of Confidential
Information by the Employee, the Employee shall be entitled to disclose such
information in compliance with the terms of such administrative or judicial
process or order.
6. Non-Competition.
(a) Restriction. Commencing on the date hereof and for so long as
Employee continues to receive compensation under this Agreement (salary or
severance), whether voluntarily or involuntarily and whether or not for good
cause, Employee shall not, without the prior written consent of the Company,
directly or indirectly, engage in, or assist any other person to engage in,
any activity, whether as a proprietor, partner, joint venturer, principal,
employer, officer, agent, employee, consultant or beneficial or record owner
(other than as an investor owning less than a 2 % interest in an entity whose
securities are regularly traded in a public market), and whether or not for
compensation, that is competitive in any respect with the business of the
Company within the states of Louisiana or Mississippi, or within a 150 mile
radius of any gaming casino owned, operated or under development by the
Company. For purposes of this Agreement, the "business of the Company" shall
be any business in which the Company is engaged at the time of Employee's
termination of employment or in which the Company was engaged within six
months prior to such termination, including, but not limited to, a business
involved in or related to gambling casinos or gaming establishments.
(b) Modification. In the event that any court of competent
jurisdiction determines that the term, the business scope or geographic scope
of the covenants contained in Subsection 6(a) is impermissible due to the
extent thereof, said covenant shall be modified to reduce its terms, business
scope or geographic scope, as the case may be, to the extent necessary to make
said covenant valid, and said covenant shall be enforced as modified.
(c) Non-Compete Consideration. As additional consideration for the
Employee's observance of the non-compete covenant set forth in Subsection
6(a), the Company has granted to Employee incentive stock options to purchase
shares of the Company's common stock.
7. Breach of Restrictive Covenants.
(a) It is agreed that it would be difficult or impossible to
ascertain the measure of damages to the Company resulting from any breach of
Sections 5, and that injury to the Company from any such breach may be
irremediable. In the event of a breach or threatened breach by the Employee
of the provisions of Section 5, the Company shall be entitled to specific
performance of Section 5 and may seek a temporary or permanent injunction to
enjoin the Employee from breaching Section 5, in addition to any other rights
or remedies that the Company may have available under applicable law for such
breach or threatened breach, including the recovery of damages. In the event
of a breach of Section 6, damages shall be limited to the discontinuance of
any and all compensation, including but not necessarily limited to salary and
severance, otherwise payable to Employee under this Agreement.
(b) Survival of Restrictive Covenant. The provisions of Sections 5 and 6
of
this Agreement shall survive the expiration of the term of Employee's
employment hereunder, and shall be binding upon the Employee following the
termination of Employee's employment by the Company.
8. Affiliate. The term "Company" when used in Sections 5, 6 and 7 of
this Agreement shall mean in addition to the Company, any affiliate of the
Company. The terms affiliate" or "affiliates" when used in this Agreement
shall mean any corporation that controls the Company, or is controlled by the
Company, or is under common control with the Company.
9. Entire Agreement Modification. This Agreement constitutes the
full and complete understanding and agreement of the parties with respect to
the employment of the Employee by the Company, and supersedes any prior
understanding or agreement between the parties relating thereto. No
amendment, waiver or modification of any provision of this Agreement shall be
binding unless made in writing and signed by the parties hereto.
10. Assignment. The rights and benefits of the Company and its
permitted assigns
under this Agreement shall be fully assignable and transferable to any other
entity:
(a) which is an affiliate of the Company; or
(b) which is not an affiliate and with which the Company has merged
or consolidated, or to which it may have sold substantially all its assets in
a transaction in which it hasassumed the liabilities of the Company under this
Agreement; and in the event of any such assignment or transfer, all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
or against the successors and assigns of the Company. This Agreement is a
personal service contract and shall not be assignable by the Employee, but all
obligations and agreements of the Employee hereunder shall be binding upon and
enforceable against the Employee and Employee's personal representatives,
heirs, legatees and devisees.
Notices. To be effective, all notices, consents or other communications
required or permitted hereunder shall be in writing. A written notice or
other communication shall be deemed to have been given hereunder (i) if
delivered by hand, when the notifying party delivers such notice or other
communication to all other parties to this Agreement, (ii) if delivered by
telecopier or overnight delivery service, on the first business day following
the date such notice or other communication is transmitted by telecopier or
timely delivered to the overnight courier, or (iii) if delivered by mail, on
the third business day following the date such notice or other communication
is deposited in the U.S. mail by certified or registered mail addressed to the
other party. Mailed or telecopied communications shall be directed as follows
unless written notice of a change of address or telecopier number has been
given in writing in accordance with this Section:
If to Company: Casino Magic Corp.
Attn: Robert Callaway
711 Casino Magic Drive
Bay Saint Louis, MS 39520
Telecopier No. (601) 467-7998
If to Employee: Kenneth N. Schultz
9032 Greymonte Circle
Gulfport, MS 39503
12. Waiver. No waiver of any term, condition or covenant of this
Agreement by a party shall be deemed to be a waiver of any subsequent breaches
of the same or other terms, covenants or conditions hereof by such party,
13. Counterparts. This Agreement may be executed in counterparts, each
of which
shall be deemed to be an original, and all such counterparts shall constitute
one instrument.
14. Construction. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective or valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
15. Applicable Law. This Agreement shall be governed by, and
construed in
accordance with, the laws of the State of Mississippi.
16. Attorneys Fees. In the event a judgment is entered against any
party hereto in a court of competent jurisdiction based upon a breach of the
terms of this Agreement, the prevailing party shall be entitled to receive, as
part of any award, the amount of reasonable attorney's fees and expenses
incurred by the prevailing party in such action. A party shall be deemed to
have prevailed if the judgment entered (without including attorney's fees and
expenses) is more favorable to that party than any offer of settlement made to
that party within twenty days after the services of the complaint in such
action.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first
above written.
CASINO MAGIC CORP. EMPLOYEE
By: By:
James E. Ernst Kenneth N. Schultz