EMPLOYMENT AGREEMENT
AGREEMENT made as of the _____ day of _____, 1997 by and between
WHG RESORTS & CASINOS INC., a Delaware corporation (the "Company"), with its
principal place of business at c/o El San Juan Hotel & Casino, 6063 East Isla
Verde Avenue, Carolina, Puerto Rico 00979 and LOUIS J. NICASTRO ("Executive")
residing at Cleft Road, Mill Neck, New York 11765.
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into an
employment agreement on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. DUTIES.
1.1. The Company hereby employs Executive as an
executive of the Company to perform services as Chairman of the Board and Chief
Executive Officer and the duties associated therewith, subject to the control
and direction of the Company's Board of Directors. Except with the consent of
Executive, the principal place from which he shall perform his duties shall not
be located elsewhere than in New York City, New York or its environs.
1.2. Executive hereby accepts such employment.
Throughout the period of his employment by the Company, and subject to his
obligations as a Director and Chairman of the Board of WMS Industries Inc.
("WMS") and as a Director of Midway Games Inc. ("Midway"), Executive will devote
his full time, attention, knowledge and skills, faithfully, diligently and to
the best of his judgment and ability, to the performance of his duties under
Section 1.1 hereof and in furtherance of the business of the Company and will
observe and carry out such rules, regulations, policies, directions and
restrictions as the Company shall from time to time establish. Executive shall
at all times conduct himself in a manner so as to remain eligible to perform his
duties under the laws of the Commonwealth of Puerto Rico, including laws, rules
and regulations relating to gambling. Executive will do such traveling as may be
reasonably required of him in the performance of his duties hereunder. At the
Company's request, Executive shall serve as an officer or director of the
Company or any affiliate of the Company without additional compensation except
that Executive shall be entitled to receive directors fees for service as a
director of Williams Hospitality Group Inc. ("WHGI") and other subsidiaries of
the Company on the same basis as other directors of WHGI and such other
subsidiaries.
1.3. Executive shall not, without the written approval
of a majority of the Company's Board of Directors first had and obtained in each
instance, directly or indirectly, accept employment or compensation from or
perform services of any nature for, any business enterprise other than the
Company or any affiliate of the Company. The foregoing shall not preclude
Executive's participation in non-profit organizations and/or associations
related to the tourism and hotel industries that will directly or indirectly
benefit the Company or from serving as a Director and Chairman of the Board of
WMS and a Director of Midway and receiving compensation therefor.
2. TERM OF EMPLOYMENT. Executive shall be employed under this
agreement for an initial term of five years commencing April 21, 1997 and ending
April 20, 2002.
3. BASE SALARY AND BONUS.
3.1. As base compensation for the performance by
Executive of his obligations under Section 1 hereof, the Company shall pay
Executive a base salary at the rate of not less than $400,000 per year, payable
in accordance with the Company's customary payroll practices for senior
executives.
3.2. Commencing with the fiscal year of the Company
beginning July 1, 1997 and each fiscal year thereafter during the term of this
Agreement, Executive shall be paid a bonus in an amount equal to two percent
(2%) of the Company's "adjusted pre-tax income." The term "adjusted pre-tax
income" means the "Income (loss) before tax provision, minority interests in
income and extraordinary items" of the Company as reported on its audited
consolidated statements of operations with respect to the applicable fiscal
year, adjusted for minority interests in income (loss) on a pre-tax basis, but
modified to eliminate the effect of (A) any adjustment for taxes, penalties or
interest payable with respect to any fiscal year beginning before July 1, 1997
and (B) the accrual for bonus payable pursuant to this Section 3.2, all such
modifications to be determined by the Board of Directors in accordance with
generally accepted accounting principles. The amount of the bonus, if any, to
which Executive becomes entitled pursuant to this Section 3.2 shall be paid
within fifteen (15) days after the Company releases its audited financial
statements for the applicable fiscal year. With respect to the fiscal year of
the Company during which Executive's employment hereunder terminates for any
reason, Executive shall be entitled to a pro-rata bonus based upon the number of
days in such fiscal year during which Executive was employed by the Company. If
requested by Executive, the Company shall make quarterly interest free advances
against the bonus in amounts mutually agreeable to the Company and Executive.
4. ADDITIONAL BENEFITS. In addition to his base salary,
Executive shall be entitled to the following benefits:
4.1. Executive shall be entitled to participate in
bonus and incentive plans, including stock option plans, generally available to
senior executives of the Company which may
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be in effect from time to time during the period of his employment hereunder.
The Company shall be under no obligation to institute or continue the existence
of any such plans.
4.2. Executive shall be entitled to participate, to the
extent he is eligible under the terms and conditions thereof, in any health and
life insurance plans generally available to the executives of the Company which
may be in effect from time to time during the period of his employment
hereunder. The Company shall be under no obligation to institute or continue the
existence of any such plans.
4.3. The Company shall reimburse Executive for
reasonable and necessary expenses incurred by him in connection with the
business of the Company, including, but not limited to, such items as
entertainment, travel and lodging, gifts and similar items as shall be deemed
necessary and commensurate with his position as Chairman of the Board and Chief
Executive Officer in accordance with the reimbursement policy followed by the
Company with respect to its executives. Executive will present receipts or
vouchers for any requested reimbursements in accordance with the Company's
policies.
4.4. Executive shall be entitled to paid vacation each
year during the period of his employment hereunder in accordance with the
Company's customary practices, such vacations to be taken at times mutually
agreeable to Executive and the Board of Directors of the Company.
5. RESTRICTED ACTIVITIES.
5.1. During the period of his employment hereunder and
a further period of one year following the effective date of termination of such
employment, Executive shall not directly or indirectly, own, manage, operate,
invest in or otherwise participate in or be connected with, in any manner,
whether as an officer, director, employee, partner, investor or otherwise any
entity which is engaged in the same or any similar business as the Company.
Nothing herein contained shall be deemed to prohibit Executive from passively
investing his funds in securities of a company if the securities of such company
are listed for trading on a national stock exchange or traded in the
over-the-counter market and Executive's holdings therein represent less than
five (5%) percent of the total number of shares or principal amount of other
securities of such company outstanding or from serving as a Director or Chairman
of the Board of WMS or as a Director of Midway.
5.2. During the period of his employment hereunder and
for a further period of one year following the effective date of termination of
such employment, Executive shall not, for himself or on behalf of any other
person, partnership, corporation or entity, directly or indirectly, (i) call on
any customer or client of the Company or any hotel or other facility owned or
managed by the Company for the purpose of soliciting, diverting or taking away
any customer or client from the Company or such hotel or other facility or (ii)
induce, influence or seek to induce or influence any person who has been engaged
as an employee, representative, agent, independent contractor or otherwise by
the Company or any hotel or other
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facility managed by the Company, to terminate his or her relationship with the
Company or such hotel or other facility.
5.3. Executive acknowledges that the provisions of this
Section 5 are reasonable and necessary for the protection of the Company and
that each provision, and the period or periods of time, and types and scope of
restrictions on the activities specified herein, are and are intended to be,
divisible. In the event that any provision of this Section 5, including any
sentence, clause or part hereof, shall be deemed contrary to law or invalid or
unenforceable in any respect by a court of competent jurisdiction, the remaining
provisions shall not be affected, but shall, subject to the discretion of such
court, remain in full force and effect and any invalid and unenforceable
provisions shall be deemed, without further action on the part of the parties
hereto, modified, amended and limited to the extent necessary to render the same
valid and enforceable.
5.4. In the event of a breach or threatened breach by
either the Company or Executive of any obligations under this Agreement, the
parties hereto acknowledge that the Company or Executive, as the case may be,
will not have an adequate remedy at law, and shall be entitled to such equitable
and injunctive relief as may be available to restrain violations of the
provisions of this Agreement. Nothing in this Section 5.4 shall be construed as
prohibiting the parties hereto from pursuing any other remedies available for
such breach or threatened breach, including the recovery of damages for such
breach or threatened breach.
6. TERMINATION BENEFITS.
6.1. If (A) the Company terminates Executive's
employment in violation of this Agreement or otherwise breaches its obligations
to Executive under this Agreement; (B) the Company is deemed to terminate
Executive's employment in violation of this Agreement, as provided in Section
6.3, and Executive gives the written notice to the Company provided for in such
Section; or (C) at any time during the term of this Agreement individuals who
presently constitute the Board of Directors of the Company, or who have been
recommended for election to the Board by two-thirds of the Board consisting of
individuals who are either presently on the Board or such recommended successors
(such present directors or recommended directors being hereafter referred to as
"Acceptable Directors"), cease for any reason to constitute at least a majority
of such Board, and Executive gives the written notice to the Company provided
for in Section 6.4 hereof; then, upon the happening of any such events, (i) the
Company shall pay to Executive within fifteen (15) days after such termination
or breach (as severance pay and liquidated damages, in lieu of any other rights
or remedies which might otherwise be available to him under this Agreement, and
without mitigation of any kind or amount, whether or not Executive shall seek or
accept other employment), a lump sum payment equal in amount to the aggregate
base salary which would have been payable to Executive pursuant to Section 3.1
of this Agreement during the remaining term hereof (for purposes of this Section
6.1, the rate of Executive's base salary shall be deemed to be Executive's base
salary at the highest annual rate in effect during the one-year period
immediately preceding termination or breach); (ii) the aggregate bonus which
would have been payable to Executive pursuant to Section 3.2 hereof
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during the remaining term of this Agreement, assuming adjusted pre-tax income of
the Company during the remaining term hereof is earned at the highest level
achieved in either of the last two full fiscal years prior to such termination;
and (iii) Executive shall have the right, exercisable within thirty (30) days
after such termination or breach to sell to the Company any or all options held
by Executive to purchase the Company common stock and options to purchase the
securities of any other company at least 20% of the voting securities of which
are owned by the Company ("Related Company") at a price per share equal to the
amount by which (a) the average closing price of the Company common stock or the
securities of such Related Company, as the case may be, on the New York Stock
Exchange (or other applicable trading market if not listed on the New York Stock
Exchange) during the thirty-day period immediately preceding the date on which
he notifies the Company of his election to sell such options plus the fair
market value per share of other securities or assets which Executive would be
entitled to receive upon exercise of such options exceeds (b) the option
exercise price for each such share. All options not yet fully exercisable shall
be deemed fully exercisable for purposes of the foregoing computation. Such
payments shall be made by the Company within fifteen (15) days after Executive
has notified the Company of the exercise of his right to sell such options and
shall not require any further authorization or approval of the Board of
Directors of the Company. Each of the payments provide for in this Section 6.1
shall be paid in full, without discount to present value. In addition to the
foregoing, the obligations of the Company to pay for the benefits provided in
Section 4 hereof shall remain in full force and effect.
6.2. If it shall be determined that any amount payable
by the Company under this Section to or for the benefit of Executive (a "Base
Payment") would be subject to the excise tax (the "Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), then
Executive shall be entitled to receive an additional payment (the "Gross-Up
Payment") in an amount such that the net amount retained by Executive, after the
calculation and deduction of any Excise Tax on the Base Payment and any federal,
state and local income taxes and Excise Tax on the Gross-Up Payment, shall be
equal to the Base Payment. In determining this amount, the amount of the
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 Gross-Up Payment attributable to state and local
income taxes. Finally, the Gross-Up Payment shall be reduced by income or Excise
Tax withholding payments made by the Company to any federal, state or local
taxing authority with respect to the Gross-Up Payment that was not deducted from
compensation payable to Executive. All determinations required to be made under
this Section 6.2, including whether and when a Gross-Up Payment is required, the
amount of such Gross-Up Payment, and the assumptions to be utilized in arriving
at such determination, except as specified above, shall be made by the Company's
independent auditors (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and Executive within fifteen (15)
business days after the receipt of notice from Executive that there should be a
Gross-Up Payment. The determination of tax liability made by the Accounting Firm
shall be subject to review by Executive's tax advisor, and, if Executive's tax
advisor does not agree with the determination reached by the Accounting Firm,
then the Accounting Firm and Executive's tax advisor shall jointly designate a
nationally recognized public accounting firm, which shall make the
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determination. All fees and expenses of the accountants and tax advisors
retained by either Executive or the Company shall be borne by the Company. Any
Gross-Up Payment shall be paid by the Company to Executive within five (5) days
after the receipt of the determination. Any determination by a jointly
designated public accounting firm shall be binding upon the Company and
Executive.
6.3. The Company shall be deemed to have terminated
Executive's employment in violation of this Agreement for all purposes
hereunder, if, among other things, without his prior written consent,
6.3.1. Executive is placed in any position of
lesser stature than that of Chairman of the Board and Chief Executive Officer of
the Company; is assigned duties inconsistent with such position or duties which,
if performed, would result in a significant change in the nature or scope of
powers, authority, functions or duties inherent in such position on the date
hereof; is assigned performance requirements or working conditions which are at
variance with the performance requirements and working conditions in effect on
the date hereof; or is accorded treatment on a general basis which is in
derogation of his status as Chairman of the Board and Chief Executive Officer;
6.3.2. Executive ceases to serve as a member
of the Board of Directors of the Company;
6.3.3. The Company discontinues or reduces
(from the highest level in effect during the term of this Agreement) the amount
of base salary payable to Executive pursuant to this Agreement; or
6.3.4. The Company discontinues or reduces
(from the level in effect on the date hereof) the perquisites or fringe benefits
inherent in Executive's position on the date hereof;
and Executive gives written notice of his election to deem such act to
constitute termination, in which event termination pursuant to this Section 6.3,
shall be deemed to have occurred upon the date of the giving of such notice.
6.4. In the event of a change in the constitution of
the Board of Directors of the Company such that it does not include a majority
of Acceptable Directors as provided in clause (C) of Section 6.1 hereof, and in
the further event that at any time thereafter, Executive gives written notice of
the election to terminate this Agreement, termination pursuant to this Section 6
shall be deemed to have occurred upon the date of the giving of such notice.
7. ENTIRE AGREEMENT. This agreement supersedes any prior
agreement or understanding with respect to the subject matter hereof and
constitutes the entire agreement of the parties hereto. No amendment or
modification hereof shall be valid or binding unless made in writing and signed
by the party against whom enforcement thereof is sought.
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8. NOTICES. Any notice required, permitted or desired to be
given pursuant to any of the provisions of this agreement shall be deemed to
have been sufficiently given or served for all purposes if delivered in person
or sent by certified mail, return receipt requested, postage and fees prepaid,
or sent by responsible overnight delivery service or transmitted by telephone
facsimile to either of the parties at such party's address set forth below, or
to such other address as such party may specify from time to time by notice to
the other given in accordance with the provisions hereof:
If to the Company:
WHG Resorts & Casinos Inc.
6063 East Isla Verde Avenue
Carolina, Puerto Rico 00979
Attention: President
If to Executive:
Louis J. Nicastro
Cleft Road
Mill Neck, New York 11765
The date of the giving of any notice sent by mail shall be the date two days
after the posting of the mail.
9. NO ASSIGNMENT. Neither this agreement nor the right to
receive any payments hereunder may be assigned by Executive. Neither this
agreement nor the right to Executive's services hereunder may be assigned by the
Company. This agreement shall be binding upon and shall inure to the benefit of
Executive, his heirs, executors and administrators and the Company, its
successors and assigns.
10. NO WAIVER. No course of dealing nor any delay on the part of
the Company or Executive in exercising any rights hereunder shall operate as a
waiver of any such rights hereunder shall operate as a waiver of any such
rights. No waiver of any default or breach of this agreement shall be deemed a
continuing waiver or a waiver of any other breach or default.
11. GOVERNING LAW. This agreement shall be governed, interpreted
and construed in accordance with the laws of the State of New York applicable to
agreements entered into and to be performed entirely therein.
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IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be duly executed on the day and year first above written.
WHG RESORTS & CASINOS INC.
By:
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Brian R. Gamache, President
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LOUIS J. NICASTRO
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