Exhibit 10.4
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT (the
“Agreement”) is entered into on this 31st day of
December, 2008 (the “Commencement Date”) by and between
Penn National Gaming, Inc., a Pennsylvania corporation (the
“Company”), and William J. Clifford, an individual
residing in Pennsylvania (“Executive”).
WHEREAS, Executive and Company are
party to that certain Employment Agreement dated June 10, 2005
(the “Existing Agreement”).
WHEREAS, the parties wish to replace
the Existing Agreement with the terms set forth below in this
Agreement, which are intended to be in compliance with the
requirements of Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”, see also
Section 21 hereof).
NOW, THEREFORE, the parties hereto,
intending to be legally bound, hereby agree as follows:
1.
Employment
. The Company hereby agrees to
employ Executive and Executive hereby accepts such employment, in
accordance with the terms, conditions and provisions hereinafter
set forth.
1.1.
Duties and
Responsibilities .
Executive shall serve as Senior Vice President and Chief Financial
Officer of the Company. Executive shall perform all duties
and accept all responsibilities incident to such position as may be
reasonably assigned to him by the Chief Executive Officer and the
Board of Directors of the Company (the “Board”).
Executive’s principal place of employment shall be in
Wyomissing, Pennsylvania.
1.2.
Term . The term of this Agreement shall begin on the
date hereof and shall terminate at the close of business on
June 10, 2011 (the “Initial Term”), unless earlier
terminated in accordance with Section 3 hereof. The term
of this Agreement may be renewed for additional periods (each, a
“Renewal Term” and, together with the Initial Term, the
“Employment Term”) only upon the execution of a written
renewal by the parties hereto. Notwithstanding the foregoing
to the contrary, Sections 5 through 21 shall survive any
termination of the Employment Term until the expiration of any
applicable time periods set forth in Sections 5, 6 and 7
1.3.
Extent of Service
. Executive agrees to use
Executive’s best efforts to carry out Executive’s
duties and responsibilities and, consistent with the other
provisions of this Agreement, to devote substantially all of
Executive’s business time, attention and energy
thereto. The foregoing shall not be construed as preventing
Executive from serving on the board of philanthropic organizations,
or providing oversight with respect to his personal investments, so
long as such service does not materially interfere with
Executive’s duties hereunder.
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2.
Compensation
. For all services rendered by
Executive to the Company, the Company shall compensate Executive as
set forth below.
2.1.
Base Salary
. The Company shall pay
Executive a base salary (“Base Salary”), commencing on
the Commencement Date, at the annual rate of at least Seven Hundred
Twenty Eight Thousand Dollars ($728,000), payable in installments
at such times as the Company customarily pays its other senior
executives (“Peer Executives”). Executive’s
performance and Base Salary shall be reviewed annually. Any
increase in Base Salary or other compensation shall be made at the
discretion of the Board or the compensation committee of the Board
(the “Compensation Committee”).
2.2.
Cash Bonuses
. Executive shall participate
in the Company’s annual incentive compensation plan
applicable to Peer Executives. Each annual bonus award earned
in a fiscal year shall be paid pursuant to the terms of the annual
incentive plan document (if any) by March 15 of the
immediately following fiscal year, unless the written bonus plan
provides for a different payment date or unless Executive shall
elect to defer the receipt of such bonus award pursuant to an
arrangement that meets the requirements of
Section 409A.
2.3.
Equity Compensation
. The Company may grant to
Executive options or other equity compensation pursuant to, and
subject to the terms and conditions of, the then current equity
compensation plan of Penn National Gaming, Inc. The
Compensation Committee shall set the amount and terms of such
options or other equity compensation.
2.4.
Other Benefits
. Executive shall be entitled
to participate in all other employee benefit plans and programs,
including, without limitation, health, vacation, retirement,
deferred compensation or SERP, made available to other Peer
Executives, as such plans and programs may be in effect from time
to time and subject to the eligibility requirements of the each
plan. Nothing in this Agreement shall prevent the Company
from amending or terminating any retirement, welfare or other
employee benefit plans or programs from time to time, as the
Company deems appropriate.
2.5.
Vacation, Sick Leave and
Holidays .
Executive shall be entitled in each calendar year to four
(4) weeks of paid vacation time. Each vacation shall be
taken by Executive at such time or times as agreed upon by the
Company and Executive, and any portion of Executive’s
allowable vacation time not used during the calendar year shall be
subject to the Company’s payroll policies regarding carryover
vacation. Executive shall be entitled to holiday and sick
leave in accordance with the Company’s holiday and other pay
for time not worked policies.
2.6.
Reimbursement of
Expenses .
Executive shall be provided with reimbursement of reasonable
expenses related to Executive’s employment by the Company on
a basis no less favorable than that authorized from time to time
for Peer Executives. Such reimbursements shall be made in
such manner and at such times as provided in the reimbursement
policies applicable to Peer Executives.
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3.
Termination
. Executive’s employment
may be terminated prior to the end of the Employment Term in
accordance with, and subject to the terms and conditions, set forth
below.
3.1.
Termination by the
Company .
(a)
Without Cause
. The Company may terminate
Executive’s employment at any time without Cause (as such
term is defined in subsection (b) below) upon delivery of
written notice to Executive, which notice shall set forth the
effective date of such termination.
(b)
With Cause
. The Company may terminate
Executive’s employment at any time for Cause effective
immediately upon delivery of written notice to Executive. As
used herein, the term “Cause” shall mean:
(i)
Executive shall have been convicted
of a felony or any misdemeanor involving allegations of fraud,
theft, perjury or conspiracy;
(ii)
Executive is found disqualified or
not suitable to hold a casino or other gaming license by a
governmental gaming authority in any jurisdiction where Executive
is required to be found qualified, suitable or licensed;
(iii)
Executive materially breaches any
material Company policy or any material term hereof, including,
without limitation, Sections 4 through 7 and, in each case, fails
to cure such breach within 15 days after receipt of written notice
thereof; or
(iv)
Executive misappropriates corporate
funds as determined in good faith by the Board.
3.2.
Termination by the
Executive .
Executive may voluntarily terminate employment for any reason
effective upon 60 days’ prior written notice to the Company,
unless the Company waives such notice requirement (in which case
the Company shall notify Executive in writing as to the effective
date of termination).
3.3.
Termination for Death or
Disability . In the
event of the death or total disability of Executive,
Executive’s employment shall terminate effective as of the
date of Executive’s death or disability. The term
“disability” shall have the definition set forth in the
Company’s Long Term Disability Insurance Policy in effect at
the time of such determination.
3.4.
Payments Due Upon
Termination .
(a)
Already Accrued Base Salary and
Expense . Upon any
termination of employment during the Employment Term, Executive
shall be entitled to receive any amounts due for Base Salary
accrued but unpaid through the effective date of termination, and
such amounts shall be paid in accordance with the Company’s
then current payroll system for Peer Executives. Any expenses
incurred but not reimbursed through the effective date of
termination shall be paid at such time and in such manner as
provided under the Company’s expense reimbursement policy
applicable to Peer Executives.
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(b)
Severance Pay and
Benefits . Subject
to the conditions in subsection (c) hereof, if
Executive’s employment is terminated under
Section 3.1(a) or Section 3.3 or if Executive
delivers a written notice of resignation within 30 days after the
expiration of the Employment Term, the Company does not offer to
renew the Employment Term during such 30-day period on terms no
less favorable in the aggregate to the Executive than those
contained herein and Executive thereupon terminates his employment
at the end of such 30-day period, then Executive will be entitled
to receive, and the Company will provide Executive with, the
following severance pay and benefits (in addition to any amounts
payable under subsection (a) hereof); provided, for purposes
of Section 409A, each payment (whether an installment or lump
sum) of severance pay under this subsection (b) shall be
considered a separate payment:
(i)
Amount of
Post-Employment Base Salary and Bonus . The Company shall pay
to Executive an amount equal to the product of (A) the sum of
(1) Executive’s monthly Base Salary at the highest rate
in effect during the 24-month period immediately preceding the date
of Executive’s termination of employment (the
“Termination Date”), and (2) Executive’s
monthly bonus value (determined by dividing by 12 the highest
amount of annual cash bonus compensation paid to Executive in
respect of either the first or second full calendar year
immediately preceding the Termination Date; and (B) the
greater of (1) the number of full and partial months remaining
in the Employment Term as of the Termination Date, and (2) 24
(with the period described in clause (B) hereof being referred
to as the “Severance Period”).
(ii)
Payment of Post-Employment Base
Salary and Bonus .
The amount described in subsection (b)(i) shall be paid to
Executive in cash in two lump-sum payments as follows: (A) 75%
of such amount shall be paid within 15 days after the Termination
Date but no later than March 15 of the calendar year following
the year in which this payment vests; and (B) the remaining
25% of such amount shall be paid in a lump sum by March 15 of
the calendar year following the calendar year in which this payment
vests.
(iii)
Continued Medical Benefits
Coverage . During
the Severance Period, the Company shall provide Executive, and, if
any, Executive’s spouse and dependents with medical benefits
coverage substantially similar to the coverage in effect on the
effective date of termination. After the Severance Period,
Executive and his dependents will have the opportunity under the
provisions of the Consolidated Omnibus Budget Reconciliation Act of
1986 (“COBRA”) to elect COBRA continuation
coverage. If elected in a timely manner, COBRA coverage
generally will commence as of the first day of the next calendar
month after the end of the Severance Period and will end on the
last day of the 18 th
month thereafter (unless an
earlier end date or an extension is required under
COBRA).
(iv)
Vesting of Stock
Options . All
options granted to Executive that would have vested during the
Severance Period shall vest as of the Termination Date, provided,
however, that any such options may not be exercised during the
Severance Period until the same time(s) as such options would
have vested had Executive continued to be employed through the
Severance Period. Any options that would not have vested
during the Severance Period shall terminate on the Termination
Date.
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(c)
Release Agreement
. Executive’s
entitlement to any severance pay and benefit subsidies under
Section 3(b) is conditioned upon Executive’s first
entering into a release agreement in substantially the form
attached hereto as Exhibit “A”; provided, such
release agreement shall be delivered to Executive within 7 days
after the Termination Date. Any payment of severance pay or
benefit subsidies due under subsection (b) hereof shall be
delayed until after the expiration of the 7-day revocation period
required for an effective age-based release, and any amount
otherwise due under said subsection (b) before the end of such
revocation period shall be paid upon the day after the end of such
period in a single lump-sum payment, but not later than
March 15 of the calendar year following the calendar year in
which the Termination Date occurs.
(d)
No Other Payments or
Benefits. Except
as otherwise provided in this Section 3.4, Section 8 or
Section 9, no other payments or benefits shall be due under
this Agreement to Executive
3.5.
Notice of Termination
. Any termination of
Executive’s employment shall be communicated by a written
notice of termination delivered within the time period specified in
this Section 3. The notice of termination shall
(i) indicate the specific termination provision in this
Agreement relied upon, (ii) briefly summarize the facts and
circumstances deemed to provide a basis for a termination of
employment and the applicable provision hereof, and
(iii) specify the termination date in accordance with the
requirements of this Agreement.
4.
No Conflicts of
Interest .
Executive agrees that throughout the period of Executive’s
employment hereunder or otherwise, Executive will not perform any
activities or services, or accept other employment that would
materially interfere with or present a conflict of interest
concerning Executive’s employment with the Company.
Executive agrees and acknowledges that Executive’s employment
by the Company is conditioned upon Executive adhering to and
complying with the business practices and requirements of ethical
conduct set forth in writing from time to time by the Company in
its employee manual or similar publication. Executive
represents and warrants that no other contract, agreement or
understanding to which Executive is a party or may be subject will
be violated by the execution of this Agreement by
Executive.
5.
Confidentiality
. Executive recognizes and
acknowledges that Executive will have access to certain
confidential information of the Company and that such information
constitutes valuable, special and unique property of the Company
(including, but not limited to, information such as business
strategies, identity of acquisition or growth targets, marketing
plans, customer lists, and other business related information for
the Company’s customers). Executive agrees that
Executive will not, for any reason or purpose whatsoever, during or
after the term of employment, disclose any of such confidential
information to any party, and that Executive will keep inviolate
and secret all confidential information or knowledge which
Executive has access to by virtue of Executive’s employment
with the Company, except as otherwise may be necessary in the
ordinary course of performing Executive’s duties with the
Company.
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6.
Non-Competition
.
(a)
As used herein, the term
“Restriction Period” shall mean a period equal to:
(i) the remainder of the Employment Term in effect on the
effective date of termination if Executive resigns other than for
Good Reason, or (ii) the Severance Period if Executive’s
employment is terminated for one of the events specified in
Section 3.4(b). In the event the Executive is terminated
by the Company for one of the events specified in
Section 3.4(b), during the Severance Period Executive may
elect to terminate the Restriction Period at any time by delivering
written notice to the Company that Executive has made such election
and that, in consideration therefore, is forfeiting the right to
receive any payment or the right to receive any future payments
under Section 3.4(b) or an equivalent amount under
Section 8; provided however, if Executive elects to reduce the
geographic limitation of this non-competition provision, and
Executive has already received payment pursuant to
Section 3.4(b) or an equivalent amount under
Section 8, Executive shall reimburse the Company for that
portion of the severance payments already received by Executive
which relates to the number of days left in the Severance
Period. For clarity, regardless of whether Executive shall
receive payments pursuant to Section 3.4(b) or
Section 8 of this Agreement in order to reduce the Restriction
Period, Executive shall only be required to forfeit or re-pay the
amounts that Executive would have received pursuant to
Section 3.4(b). In that case, Executive may nevertheless
receive payments and/or need not reimburse the Company for any
amounts paid to Executive pursuant to Section 8 which are in
excess of the payments and benefits that Executive would have been
entitled to receive under Section 3.4(b). If Executive
terminates his employment for good Reason, then Executive shall not
be subject to the provisions of this Section 6.
(b)
During Executive’s employment
by the Company and for the duration of the Restriction Period
thereafter, Executive shall not, except with the prior written
consent of the Company, directly or indirectly, own, manage,
operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as
an officer, director, employee, partner, principal, agent,
representative, consultant or otherwise with, or use or permit
Executive’s name to be used in connection with, any business
or enterprise which owns or operates, or is actively seeking to own
or operate, a gaming or pari-mutuel located within North
America.
(c)
The foregoing restrictions shall not
be construed to prohibit Executive’s ownership of less than
5% of any class of securities of any corporation which is engaged
in any of the foregoing businesses and has a class of securities
registered pursuant to the Securities Exchange Act of 1934,
provided that such ownership represents a passive investment and
that neither Executive nor any group of persons including Executive
in any way, either directly or indirectly, manages or exercises
control of any such corporation, guarantees any of its financial
obligations, otherwise takes any part in its business, other than
exercising Executive’s rights as a shareholder, or seeks to
do any of the foregoing.
(d)
Executive acknowledges that the
covenants contained in Sections 5 through 7 hereof are reasonable
and necessary to protect the legitimate interests of the Company
and its affiliates and, in particular, that the duration and
geographic scope of such covenants are reasonable given the nature
of this Agreement and the position that Executive will hold
within
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the Company. Executive further
agrees to disclose the existence and terms of such covenants to any
employer that Executive works for during the Restriction
Period.
7.
Non-Solicitation
. During Executive’s
employment by the Company and for a period equal to the greater of
the Restriction Period or one year after the effective date of
termination, Executive will not, except with the prior written
consent of the Company, (i) directly or indirectly, solicit or
hire, or encourage the solicitation or hiring of, any person who
is, or was within a six month period prior to such solicitation or
hiring, an executive or management employee of the Company or any
of its affiliates for any position as an employee, independent
contractor
