Exhibit 10.1
EMPLOYMENT
AGREEMENT
AGREEMENT made this 19th day of
October, 2006, by and between MTR Gaming Group, Inc., a Delaware
corporation having its principal office at State Route 2 South,
Chester, West Virginia 26034, together with all of its subsidiaries
whether now existing or hereafter formed or acquired (collectively,
the “Company”), and Edson R. Arneault, One Riverside
Drive, New Cumberland, WV (“Executive”).
WHEREAS, the Executive has been
employed by the Company in the capacity of President, Chief
Executive Officer and Chairman of the Company pursuant to an
Employment Agreement between the Company and the Executive dated
September 1, 2001 as amended by that certain First Amendment
Agreement dated as of December 22, 2004 and by that certain Second
Amendment Employment Agreement dated as of May 4, 2005
(collectively the “Existing Employment Agreement”);
and
WHEREAS, the parties wish to replace
the Existing Employment Agreement by entering into this
Agreement;
Now, therefore, the parties, in
reliance upon the mutual promise and covenants herein contained, do
hereby agree as follows:
1.
Termination of Existing Employment Agreement . Upon
execution and delivery of this Agreement, the Company and Executive
agree that the Existing Employment Agreement as well as any other
prior written or oral agreements with respect to employment shall
terminate effective December 31, 2006 and as of January 1, 2007 be
replaced by this Agreement. Upon the termination of the
Existing Employment Agreement on December 31, 2006 (“EEA
Termination Date”), neither party to the Existing Employment
Agreement or any other prior written or oral agreements with
respect to the employment of the Executive shall have any further
rights or
obligations thereunder, except for
obligations that have accrued but not been paid as of the EEA
Termination Date (which amounts shall be paid into the Rabbi Trust
by May 1, 2007, including but not limited to the amounts owed under
the annual bonus and long term bonus provisions); provided,
however, that this Agreement shall not affect the separate Deferred
Compensation Agreement by and between the Company and Executive
dated as of January 1, 1991, as amended by that certain Amendment
to Deferred Compensation Agreement dated May 4, 2005 (and executed
by the Compensation Committee on May 13, 2005) and a Second
Amendment to Deferred Compensation Agreement dated October 3,
2006.
2.
Term . The Company hereby agrees to employ Executive,
and Executive agrees to serve the Company, in the capacity of
President and Chief Executive Officer of the Company for a two-year
period commencing on January 1, 2007 (the “Employment
Date”) and ending on December 31, 2008 (such period, subject
to earlier termination as provided herein, being referred to as the
“Period of Employment”).
3.
Duties and Services . During the Period of Employment,
Executive agrees to serve the Company as President and Chief
Executive Officer, as well as President, Chief Executive Officer,
and Chairman of Mountaineer Park, Inc, Speakeasy Gaming of Las
Vegas, Inc., Speakeasy Gaming of Reno, Inc., Speakeasy Gaming of
Fremont, Inc., MTR-Harness, Inc., Speakeasy Fremont Street
Experience Operating Company, Jackson Racing, Inc., Presque
Isle Downs, Inc. (it being understood that upon appointment of a
new President and CEO of that entity in accordance with
Pennsylvania gaming law, Executive will serve as Vice President),
as well as Vice President of Scioto Downs, Inc., and in such other
offices and directorships of the Company and of its subsidiaries
and related companies (collectively, “Affiliates”) to
which he may be elected or appointed, and to perform such other
reasonable and appropriate duties as may
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be requested of him by the board of
directors of the Company (the “Board of Director”), in
accordance with the terms herein set forth. In performance of
his duties, Executive shall be subject to the direction of the
Board of Directors. Excluding periods of vacation and sick
leave to which Executive is entitled, Executive shall devote his
full time, energy and skill during regular business hours to the
business and affairs of the Company and its affiliates and to the
promotion of their interests.
4.
Compensation.
(a)
Base Salary. The base salary of the Executive for his
services pursuant to the terms of this Agreement shall be
$1,140,000 per year, effective January 1, 2007, and shall be
payable in equal bi-monthly installments, or on such other terms as
may mutually be agreed upon by the Company and
Executive.
(b)
Annual Bonus. Executive will be entitled to receive a
semi-annual bonus of $50,000. Executive will also be eligible
to receive an annual bonus (“Annual Bonus”) equivalent
to a minimum of 75% of Executive’s Base Salary and up to a
200% of Executive’s base salary. The Company’s
Compensation Committee will make its recommendation regarding the
amount of the Annual Bonus to the Company’s Board of
Directors based on its determination as to the achievement of
budgets and performance criteria established by the Compensation
Committee and approved by the Board of Directors during the first
quarter of the applicable fiscal period which criteria may include,
but shall not be limited to:
(i) actual EBITDA
compared to budgeted EBITDA;
(ii) actual E.P.S. compared to
budgeted E.P.S.;
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(iii) stock price performance;
(iv) revenue performance;
(v) planned expansion as
budgeted;
(vi) budgeted acquisition(s) of a gaming
or racing asset(s);
(vii) passage of legislation
that benefits the Company’s gaming or racing
assets;
(viii) return on equity;
and
(ix) such other criteria
recommended by the Compensation Committee and approved by the Board
of Directors.
The Annual Bonus shall be payable to
Executive on May 1st of the calendar year following the calendar
year then completed, unless deferred under Section 4(c) of this
Agreement.
The budgets and performances
criteria used for the above analysis will be the budget approved by
the Board of Directors for the fiscal period in its first regularly
scheduled Board meeting for each year. The budget approved
will be used as determining factor in setting publicly disclosed
guidance, should the Company determine to issue such
guidance.
The Compensation Committee may
recommend a higher annual bonus to the Company’s Board of
Directors based upon its determination that a higher bonus is
appropriate based upon exceptional performance.
(
c) Deferral of
Non-Deductible Amounts. Notwithstanding any provision to the
contrary contained herein, to the extent Executive’s total
compensation for any calendar year would otherwise exceed the
amount the Company is permitted to deduct as
compensation
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expense for federal income tax
purposes (the “Section 162 Maximum”) pursuant to
Section 162 of the Internal Revenue Code of 1986, as amended (the
“Code”), Executive hereby elects to defer the time for
payment of any amounts above the Section 162 Maximum in a manner
that will not result in compensation exceeding the Section 162
Maximum. In no event, however, shall such an election result
in or be construed as a waiver of the right to such
compensation. Executive’s right to receive such
deferred compensation (and, correspondingly, the Company’s
deferred payment obligation) shall be fully vested and shall be
credited with investment earnings or losses. The rate of
investment earnings or losses on such deferred compensation shall
be equal to the rate of investment earnings or losses of one or
more stocks or mutual funds selected by the Company after
consultation with Executive and identified to Executive as such,
which stocks or mutual funds may be changed from time to time by
the Company after consultation with Executive. While the
Company shall make reasonable efforts to act prudently in the
selection of such stocks or mutual funds taking into account
Executive’s investment preference, the Company shall not be
responsible for the investment performance of any such stock(s)
and/or fund(s).
(d)
Deferred Compensation Trust. In order to facilitate the
payment of the Company’s deferred payment obligation, at the
time that the Company would otherwise make a payment to Executive
but for the Section 162 Maximum, the Company shall deposit an
amount of cash equal to the amount which is being deferred into a
“rabbi trust”, to be known as the Deferred Compensation
Trust (the “Trust”), to be established by the Company
with an independent corporate trustee acceptable to the Company and
Executive. The Trust shall be in substantially the form
attached hereto as Exhibit A. Amount deferred pursuant to
Section 4 (c) and this Section (d), or deferred pursuant to any
prior employment agreements and the earnings
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thereon, shall be paid to the
Executive six months following the Executive’s separation
from service. It is understood and agreed by the parties that
(i) the Trust shall remain subject to the claims of the
Company’s general creditors; (ii) any income tax payable with
respect to the Trust shall be the sole obligation and
responsibility of the Company (and shall not reduce the assets in
the Trust so long as the Trust remains a “grantor
trust” for federal income tax purposes); and (iii) the
establishment of the Trust shall not relieve the Company of its
liability to pay amounts due under this Agreement, except to the
extent that payments are made by the Trust to the Executive or his
estate in accordance with the terms of this Agreement and the
Trust.
(e)
Health Insurance. Executive shall be entitled at his
election, but at the Company’s expense, either to participate
in and receive benefits under policies of health insurance
maintained by the Company for its employees, or reimbursement for
premiums paid by the Executive for comparable health
insurance.
(f)
Benefit and Fringe Benefits. Executive shall receive such
employment fringe benefits and shall be entitled to participate in
other employee benefit plans, including without limitation any
pension plan, profit-sharing plan, savings plan, deferred
compensation plan, stock option plan, and life insurance made
available by the Company now or in the future to its executives as
the Compensation Committee of the Board of Directors may
periodically award in its discretion, based on the
Executive’s performance, subject to and on a basis consistent
with the terms, conditions and overall administration of such
Benefit Plans.
(g)
Expenses. All travel and other expenses incident to the
rending of services by Executive hereunder shall be paid by the
Company. If any such expenses are paid in the first instance
by Executive, the Company shall reimburse him therefore on
presentation of the
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appropriate documentation required
by the Code or Treasury Regulations promulgated thereunder, or
otherwise required under the Company’s policy with respect to
such expenses.
(h)
The Executive home will be used from time to time to promote,
entertain, and as a meeting place for Company business.
Should Executive purchase the home and property during the
Employment Period, the Company will continue to provide personnel
and equipment for the regular maintenance of the Executive’s
home during such Employment Period consistent with the level
provided during the time in which the Company owned the
residence. Executive will compensate the Company $2,000 per
month for such services. Executive will have all other
responsibilities as an owner, including but not limited, making any
major repairs and carrying adequate insurance on the
property.
(i.)
Vacation. Executive shall be entitled to eight (8) weeks paid
vacation annually each calendar year, to be taken at time or times
mutually satisfactory to Executive and the Company. Accrued
vacation time not utilized by Executive due to business commitments
may be carried over the following year (provided, however, that
Executive shall not in any event utilize more than eight weeks of
vacation in any twelve month period) or paid to Executive at the
end of the year as additional compensation at Executive’s
election.
(j)
Working Facilities. The Company shall provide Executive with
an office, secretarial, administra
