Exhibit 10.16
EMPLOYMENT
AGREEMENT
THIS AGREEMENT, made as of
January 28, 2008, and amended on March 13, 2009, between
Harrah’s Entertainment, Inc., with offices at One Caesars
Palace Drive, Las Vegas, Nevada (the “ Company
”), and Gary W. Loveman (“ Executive
”).
The Company and Executive agree as
follows:
1. Introductory Statement .
The Company desires to secure the services of Executive as Chief
Executive Officer and President effective on the Closing Date of
the merger (the “ Effective Date ”) between
Hamlet Merger Inc. and Harrah’s Entertainment, Inc. (the
“ Merger ”), as defined in the agreement and
plan of merger (the “ Merger Agreement ”) dated
December 19, 2006, by and among Hamlet Holdings LLC, Hamlet
Merger, Inc., and Harrah’s Entertainment, Inc., and Executive
is willing to execute this Agreement with respect to his
employment. This Agreement supersedes the employment agreement
between the Company and Executive dated September 4, 2002, as
amended on October 31, 2005 (the “ Prior Employment
Agreement ”) and the Severance Agreement between the
Company and Executive dated January 1, 2003 (the “
Severance Agreement ”).
The Company hereby agrees to employ
Executive, and Executive hereby agrees to be employed by the
Company, subject to the terms and conditions of this Agreement, for
a period beginning on the Effective Date and ending on the fifth
anniversary thereof (the “ Initial Term ”);
provided that, on the fifth anniversary and each anniversary of the
Effective Date thereafter, the employment period shall be extended
by one year unless at least sixty (60) days prior to such
anniversary, the Company or Executive delivers a written notice (a
“ Notice of Non-Renewal ”) to the other party
that the employment period shall not be so extended (the Initial
Term as from time to time extended or renewed, the “
Employment Term ”).
2. Agreement of Employment .
Effective as of the Effective Date, the Company agrees to, and
hereby does, employ Executive, and Executive agrees to, and hereby
does accept, continued employment by the Company, in a full-time
capacity as Chief Executive Officer and President pursuant to the
provisions of this Agreement and of the bylaws of the Company, and
subject to the control of the Board of Directors (the “
Board ”). It is understood that Executive’s
positions as Chief Executive Officer and President are subject to
his yearly re-election to these positions by the Board. During the
Employment Term, for so long as Executive remains Chief Executive
Officer and President of the Company, the Company shall use its
best efforts to cause the Board to appoint Executive as a member of
the Board or cause Executive to be nominated for election to the
Board by the shareholders of the Company, if applicable. (See
Section 8 herein for Executive’s rights if such
re-election as Chief Executive Officer and President or appointment
or election as a member of the Board does not occur during the term
of this Agreement).
3. Executive’s
Obligations . During the period of his service under this
Agreement, Executive shall devote substantially all of his time and
energy during business hours, faithfully and to the best of his
ability, to the supervision and conduct of the business and affairs
of the Company and to the furtherance of its interests, and to such
other duties as directed by the Board. (Executive may serve on the
board of directors of other companies with Board approval
(which
will not be unreasonably withheld), and may
participate in civic and charitable endeavors of his choosing, in
each case if such service or participation does not individually or
in the aggregate substantially interfere with his primary duties or
create a conflict of interest.)
4. Compensation .
4.1 Base Salary . As
compensation for all services performed by Executive under and
during the Employment Term, the Company shall pay to Executive a
base salary at the rate of $2,000,000.00 per year, in equal
bi-weekly installments in accordance with its customary payroll
practices. The Compensation Committee of the Board (or any
successor committee responsible for setting compensation levels for
executives, the “ Committee ”) shall, in good
faith, review the salary of Executive, on an annual basis, with a
view to consideration of appropriate merit increases (but not
decreases) in such salary. Such base salary, as may be increased
from time to time, is hereafter referred to as the “ Base
Salary ”; provided that “Base Salary” shall
mean the greater of (i) your then current base salary and
(ii) $2,000,000 for purposes of Section 6.3 (Life
Insurance), Section 8.2(b) (severance) and Section 11(d)
(Disability). All payments will be subject to Executive’s
chosen benefit deductions and the deductions of payroll taxes and
similar assessments as required by law.
4.2 Bonus . Executive will
participate in the Company’s annual incentive bonus
program(s) applicable to Executive’s position, in accordance
with the terms of such program(s), shall have the opportunity to
earn an annual bonus thereunder based on the achievement of
performance objectives determined by the Board after consultation
with Executive and shall include a minimum target bonus of at least
1.5 times Executive’s annual Base Salary.
4.3 Aircraft . The Company
shall provide Executive with the use of the Company’s
aircraft or charter aircraft for security purposes for himself and
his family for business and personal travel (with standard charges
for family members and for non-Company business usage consistent
with past practice), including travel between Boston, Massachusetts
and Las Vegas, Nevada or reimburse Executive for first class travel
or charter aircraft travel expenses. The Company also will provide
Executive, if he so chooses, with security arrangements at his
residences in such a manner and at such levels as reasonably
requested by Executive.
4.4 Accommodations . The
Company shall make available accommodations for the exclusive use
of Executive at one of the Company’s properties in Las Vegas,
Nevada, while Executive is in Las Vegas performing his normal
duties. The parties recognize that the cost associated with
providing Executive accommodations in Las Vegas may, under the
governing tax laws, be deemed to be additional income to Executive.
The Company agrees that should it be determined that the cost
associated with providing Executive such accommodations amounts to
additional income to Executive, the Company will (a) reimburse
Executive for any additional tax Executive is required to pay; and
(b) pay any additional taxes and costs incurred by Executive
associated with such tax reimbursements. All reimbursements
hereunder will be made no later than the end of Executive’s
taxable year next following Executive’s taxable year in which
the taxes (and any income or other related taxes or interest or
penalties thereon) on such accommodations are remitted to the
United States Internal Revenue Service or any other applicable
taxing authority.
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If Executive dies or resigns
pursuant to this Agreement or pursuant to any other agreement
between the Company and Executive providing for such resignation
during the period of this Agreement, service for any part of the
month in which any such event occurs shall be considered service
for the entire month.
5. Equity Award . (a) As
soon as reasonably practicable following the Effective Date and in
no event later than fifteen business days following the Effective
Date, the Company will grant Executive options (the “
Options ”) to purchase shares of non-voting common
stock of the Company (the “ Option Shares ”) at
an exercise price per Option Share equal to $100.00 per share. The
specific terms and conditions governing all aspects of the Options
shall be provided in separate grant agreements and any relevant
plan documents (collectively, the “ New Option Plan
”). The Options shall be comprised of the following two
tranches: (i) twenty percent (20%) of the Options (the
“ Time Based Options ”) will vest and become
exercisable in equal annual installments of twenty percent
(20%) over a five-year period, subject to Executive’s
continued employment with the Company through the applicable
vesting date and (ii) eighty percent (80%) of the Options
(the “ Performance Based Options ”) will vest
and become exercisable only upon the achievement by the Company of
certain performance targets in accordance with the New Option
Plan.
(b) The New Option Plan shall
represent a minimum of 8.64% of the fully-diluted shares of
non-voting common stock of the Company immediately after
consummation of the Merger, with 5.4% in the form of Time Based
Options and 3.24% in the form of Performance Based Options,
provided, that, such percentages may be increased on a one time
basis in the good faith discretion of the Company to reflect the
dividend rate on the Company’s non-voting preferred stock,
consistent with the methodology for such adjustments previously
provided to the Executive. Executive shall be granted in accordance
with the foregoing provisions a number of Time Based Options equal
to 20% of the total number of Time Based Options and a number of
Performance Based Options equal to 39.23% of the total number of
Performance Based Options. As a condition to Executive’s
receipt of the Options pursuant to this Section 5, Executive
shall execute an acknowledgment in form and substance reasonably
acceptable to the Company that the Company has satisfied its
obligations pursuant to this Section 5.
(c) Executive has been permitted, on
a tax-free basis, to rollover existing Company stock outstanding
prior to the Effective Date into shares of non-voting common stock
and non-voting preferred stock of the Company following the
Effective Date on the same basis and subject the same terms and
conditions as other investors, including, without limitation, the
Sponsors (as defined in the Management Investor Rights Agreement,
dated as of January 28, 2008 among the Company, Employee and
the other parties specified therein (the “ MIRA
”). Executive has entered into a rollover option agreement
that provides for the conversion of options to purchase shares of
the Company prior to the Effective Date into Options exercisable
with respect to Option Shares following the Effective Date with
such conversion preserving the intrinsic “spread value”
of the converted option.
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(d) Executive shall execute the MIRA
and such other related agreements that are in forms reasonably
acceptable to Executive and the Company (such agreements, together
with the rollover option agreement, option grant and stock
incentive plan, the “ Equity Agreements
”).
6. Benefits . During the
Employment Term, except as otherwise provided herein, Executive
shall be entitled to participate in any and all incentive
compensation and bonus arrangements maintained by the Company for
its senior officers and to receive benefits and perquisites at
least as favorable to Executive as those presently provided to
Executive by the Company, and as may be enhanced for all senior
officers.
6.1 Health Insurance .
Executive will receive the regular group health plan coverage(s)
provided to senior officers, which coverage(s) may be subject to
generally applicable changes during the Employment Term, provided
that such changes are generally applicable to senior officers.
Executive will be required to contribute to the cost of the basic
plan in the same manner as other senior officers. Executive will
receive coverage under no less favorable a health plan than other
senior officers.
6.2 Long Term Disability
Benefits . Executive will be eligible to receive long term
disability coverage paid by the Company as follows: group plan
providing $180,000 annual maximum benefit and a supplemental plan
with an additional $60,000 annual maximum benefit. Executive will
also receive, subject to Executive being able to comply with the
medical and physical eligibility requirement of the policy
(insurability) chosen by the Company, an individual long term
disability policy with a $180,000 annual maximum benefit and an
individual long term disability excess policy with an additional
$540,000 annual maximum benefit, both fully paid by the Company
during the term of this Agreement.
6.3 Life Insurance .
Executive will receive life insurance paid by the Company with a
death benefit equal to at least three (3) times his then
current Base Salary.
6.4 Retirement Plan .
Executive will also be eligible during the Employment Term to
participate in the Company’s 401(k) Plan, as may be modified
or changed, as well as its Executive Supplemental Savings Plan, as
may be modified or changed from time to time, in the same manner as
other senior officers of the Company.
6.5 Financial Counseling .
During the Employment Term, Executive will also receive Fifty
Thousand Dollars ($50,000.00) per year for financial counseling.
Any unused portion of the yearly financial counseling stipend will
not carry over to the following year.
6.6 Vacation . Executive will
receive five (5) weeks of paid vacation per calendar year of
the Agreement.
6.7 280G Gross-Up . In the
event that any payments or benefits paid or provided to Executive
in connection with the Merger will be subject to the tax (the
“ Excise Ta x”) imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the “
Code ”), the Company will provide Executive with the
additional payments set forth on Exhibit A no later than the
end of Executive’s taxable year in which the Excise Tax is
required to be paid by Executive.
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6.8 Reimbursement of Expenses
. The Company shall pay or will reimburse Executive for reasonable
business expenses incurred in the performance of Executive’s
duties hereunder in accordance with Company policy.
6.9 D&O Insurance . The
Company shall provide Executive with Director’s and
Officer’s indemnification insurance coverage in amount and
scope that is customary for a company of the Company’s size
and nature.
6.10 Reimbursements; In-Kind
Benefits To the extent that any amount eligible for
reimbursement or any in-kind benefit provided under this Agreement
is deferred compensation subject to the requirements of
Section 409A of the Code, the following rules shall
apply:
(a) Payment of such reimbursements
shall be made no later than the end of Executive’s taxable
year following the taxable year in which the expense is
incurred;
(b) All such amounts eligible for
reimbursement or any in-kind benefit provided under this Agreement
in one taxable year shall not affect the amount eligible for
reimbursement or in-kind benefits to be provided in any other
taxable year; and
(c) The right to any such
reimbursement or in-kind benefit hereunder shall not be subject to
liquidation or exchange for any other benefit.
The parties intend that all
reimbursements or in-kind benefits provided for hereunder will be
made in a manner that makes such reimbursements and in-kind
benefits consistent with or exempt from Section 409A of the
Code.
7. Termination from
Employment . After the date of Executive’s termination
from employment at any time, and for any reason or for no reason
(including termination or resignation prior to the end of the
Initial Term, if that should occur), Executive will be entitled to
participate for his lifetime (the “ Life Coverage
Period ”) in the Company’s group health insurance
plans applicable to senior officers, including family coverage as
applicable (medical, dental and vision coverage). Executive’s
group health insurance benefits after any termination of employment
will not be less than those offered to the then-current senior
officers of the Company, and Executive will be entitled to any
later enhancements in such benefits (for the avoidance of doubt,
any such amendment that adversely and disproportionately impacts
inactive employees shall be null and void as to Executive).
However, during the Life Coverage Period Executive shall pay twenty
percent (20%) of the then applicable premium for current
employees (revised annually) on an after-tax basis each quarter,
and the Company shall pay eighty percent (80%) of said premium
on an after-tax basis, which contribution will be imputed income to
Executive to the extent required by the applicable provisions of
the Code. As soon after the end of Executive’s full-time
active employment status and after Executive becomes eligible for
Medicare coverage, the Company’s group health insurance plan
shall become secondary to Medicare. For the avoidance of doubt, the
amount of health insurance benefits paid to Executive under this
Section 7 shall be subject to the provisions of
Section 6.10 herein.
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8. Termination Without Cause or
Resignation for Good Reason .
8.1 The Board reserves the right to
terminate the Employment Term and Executive from his then current
position without Cause at any time upon at least thirty
(30) days prior written notice. The failure of the Board to
elect Executive as Chief Executive Officer during the annual
election of officers shall also be deemed termination without Cause
for purposes of this Agreement unless, before the election, the
Board has sent written notice initiating termination for Cause as
provided in Section 13.1 hereof, and Executive is thereafter
terminated for Cause. Executive reserves the right to terminate the
Employment Term and resign his position for Good Reason (as defined
in Section 13.2 herein) by giving the Company thirty
(30) days written notice which states the basis for such Good
Reason.
8.2 Upon Executive’s
termination without Cause or resignation from his position for Good
Reason as described in Section 8.1 above:
(a) The Company shall pay Executive,
within thirty (30) days following his termination of
employment, Executive’s accrued but unused vacation,
unreimbursed business expenses and Base Salary through the date of
termination (to the extent not theretofore paid) (the “
Accrued Benefits ”);
(b) Subject to Executive executing
and not revoking the release attached hereto as Exhibit B ,
the Company will pay Executive in approximately equal installments
during the twenty-four (24) month period following such
termination (the “ Severance Period ”), a cash
severance payment in an amount equal to two (2) multiplied by
the sum of (i) his Base Salary and (ii) target bonus as
in effect on the date of termination (the “ Severance
Payment ”). If applicable, Executive will be entitled to
receive the benefits set forth on Exhibit C hereto during
the Severance Period. The installments of the Severance Payment
will be paid to Executive in accordance with the Company’s
customary payroll practices, and will commence on the first payroll
date following the termination of Executive’s employment;
provided, that, if, as of the date of termination, Executive is a
“specified employee” as defined in subsection
(a)(2)(B)(i) of Section 409A of the Code (“ Specified
Employee ”), such payments will not commence until the
first business day after the date that is six months following
Executive’s “separation from service” within the
meaning of subsection (a)(2)(A)(i) of Section 409A of the Code
(the “ Delayed Payment Date ”) and, on the
Delayed Payment Date, the Company will pay to Executive a lump sum
equal to all amounts that would have been paid during the period of
the delay if the delay were not required plus interest on such
amount at a rate equal to the short-term applicable federal rate
then in effect, and will thereafter continue to make payments in
installments in accordance with this
Section 8.2(b);
(c) The Company will pay Executive
in cash, at the time of such termination an amount equal to his
target bonus for the year pro rated based on the number of days in
the applicable bonus period preceding the date of Executive’s
termination of employment; provided , however , that
if, as of the date of termination pursuant to this
Section 8.2, Executive is a Specified Employee, such amount
shall be paid on the Delayed Payment Date (plus interest on such
amount from the date of termination through the date of payment at
a rate equal to the short-term applicable federal rate then in
effect).
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(d) Executive’s Escrow
Agreement (if then in force) and Indemnification Agreement will
continue in force (subject to amendment or termination in
accordance with their terms); and
(e) Executive’s Stock Options
and Option Shares will be treated in accordance with the terms of
the Equity Agreements.
Except as otherwise provided in this
Agreement, and except for any vested benefits under any tax
qualified pension plans of the Company and vested deferred
compensation under any applicable deferred compensation plans, and
continuation of health insurance benefits on the terms and to the
extent required by Section 4980B of the Code and
Section 601 of the Employee Retirement Income Security Act of
1974, as amended (which provisions are commonly known as “
COBRA ”), neither the Company nor Executive shall have
any additional obligations under this Agreement.
9. Termination for Cause or
Resignation Without Good Reason .
9.1 The Board will have the right to
terminate the Employment Term and Executive’s employment with
the Company at any time from his then-current positions for Cause
(as defined in Section 13.1 herein). Executive shall resign
from the Board promptly after the Company’s request, in the
event Executive is so terminated or Executive resigns with or
without Good Reason. A resignation by Executive without Good Reason
shall not be a breach of this Agreement.
If the Employment Term and
Executive’s employment is terminated for Cause, or if he
resigns his position without Good Reason, then:
(a) Executive’s employment shall be deemed terminated on
the date of such termination or resignation; (b) he shall be
entitled to receive all Accrued Benefits from the Company within
thirty (30) days following such termination; (c) his
rights with respect to his Stock Options and Option Shares will be
as set forth in the Equity Agreements; (d) his Indemnification
Agreement will continue in force; (e) the Escrow Agreement, if
then in force, will continue in force, unless such agreement is
thereafter amended or terminated pursuant to its terms; and
(f) he will be entitled to the lifetime group insurance
benefits described in Section 7 above, except that any future
amendments to such benefits shall apply to him in the same manner
as such amendments apply to active senior officers (for the
avoidance of doubt, any such amendment that adversely and
disproportionately impacts inactive employees shall be null and
void). Except as otherwise provided in this Agreement, and except
for any vested benefits under any tax qualified pension plans of
the Company and vested deferred compensation under any applicable
deferred compensation plans, and continuation of health insurance
benefits on the terms and to the extent required by COBRA, neither
the Company nor Executive shall have any additional obligations
under this Agreement.
10. Death . In the event the
Employment Term and Executive’s employment is terminated due
to his death, his right to receive his Base Salary and benefits
under this Agreement will terminate (except with respect to Accrued
Benefits), and his estate and beneficiary(ies) will receive the
benefits they are entitled to receive under the terms of the
Company’s benefit plans and programs by reason of a
participant’s death during active employment.
Executive’s estate shall be entitled to receive (a) all
Accrued Benefits from the
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Company within thirty (30) days following
such termination and (b) Executive’s surviving family
and spouse will be entitled to payment for the cost of twelve
(12) months of COBRA coverage, or if longer, continuation of
coverage under any applicable law. Executive’s Stock Options
and Option Shares will be treated in accordance with the terms of
the Equity Agreements. The Escrow Agreement, if then in force, will
continue in force (subject to its amendment or termination in
accordance with its terms) for the benefit of Executive’s
beneficiaries until his deferred compensation a
