EMPLOYMENT
AGREEMENT dated as of January 1, 2007 (this
“Agreement”), between American Casino &
Entertainment Properties LLC (the “Company”), having an
address at 2000 Las Vegas Boulevard South, Las Vegas, Nevada 89104,
and Mr. Richard P. Brown (“Employee”), having an
address at 1795 Mezza Court, Henderson, Nevada 89012.
Upon the terms
and conditions hereinafter set forth, the Company hereby agrees to
employ Employee and Employee hereby agrees to become employed by
the Company. During the Term of Employment (as hereinafter
defined), Employee shall be employed in the position of President
and Chief Executive Officer of the Company and shall also serve in
other positions of affiliates of the Company as may be designated
(the “Designated Affiliates”) from time to time by the
board of directors of the Company (the “Board”),
provided that such Designated Affiliates are engaged in businesses
relating to gaming, casino or resort operation or development
(collectively, the “Gaming Business”). Employee shall
perform such duties as are specified from time to time by the
Company, the Board and the Designated Affiliates. Employee shall
serve in such capacities at the pleasure of the Board. Employee
shall report to and be under the supervision of the Company’s
Board. Employee will also meet and work with executives of American
Property Investors, Inc. (“API”) and members of the
board of directors of API.
During the Term
of Employment, Employee shall devote all of his professional
attention, on a full time basis, to the business and affairs of the
Company and the Designated Affiliates, shall use his best efforts
to advance the best interest of the Company and the Designated
Affiliates and shall comply with all of the policies of the Company
and the Designated Affiliates, including, without limitation, such
policies with respect to legal compliance, conflicts of interest,
confidentiality and business ethics as are from time to time in
effect.
Except as
specifically provided herein, during the Term of Employment,
Employee shall not, without the prior written consent of the
Company, directly or indirectly (i) render services to, or
otherwise act in a business or professional capacity on behalf of
or for the benefit of, any other Person (as hereinafter defined) as
an employee, advisor, independent contractor, agent, consultant,
representative or otherwise, whether or not compensated,
(ii) plan, negotiate or have discussions with any Person
regarding, or otherwise attempt to secure, future employment with
any Person other than the Company or (iii) plan, take any
actions in furtherance of, or otherwise devote any time to, any
future business opportunity (except as otherwise provided in this
Agreement), whether sponsored by Employee or any other Person (the
“Exclusivity Obligation”). However, nothing contained
herein shall restrict Employee from being involved in the business
of horse racing/breeding of thoroughbred horses (“Other
Activity”), provided that (a) Employee devotes his full
professional attention to the business affairs of the Company, its
subsidiaries and of any affiliated entities to which the Company
has made his services available, (b) the Other Activity does
not interfere with, and Employee is otherwise in compliance with,
Employee’s professional duties and
responsibilities
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hereunder, and
(c) Employee otherwise cooperates with the Company in
connection with any information regarding the Other Activity that
may be requested or required by any licensing or other regulatory
authorities.
The employment
period shall commence as of January 1, 2007 and shall continue
through the period (the “Term of Employment”) ending on
December 31, 2008 (the “Expiration Date”), unless
earlier terminated as set forth in this Agreement.
For all
services to be performed by Employee under this Agreement, during
the Term of Employment, Employee shall be compensated in the
following manner:
The Company
will pay Employee a salary (the “Base Salary”) at an
annual rate of $625,000. The Base Salary shall be payable in
accordance with the normal payroll practice of the Company (but no
less frequently than bi-weekly).
During the Term
of Employment, Employee shall be eligible to receive an annual
bonus, as determined in the sole discretion of the Board (the
“Bonus Compensation”). The Bonus Compensation, if any,
shall be computed based upon the following formula of performance
targets (“Targets”):
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(i)
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2007 bonus is conditioned on
ACEP’s four current properties having aggregate Net Revenues
of not less than $451.0 million and aggregate EBITDA of not
less than $106.0 million, in each case for the fiscal year
ended December 31, 2007; 1
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a.
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If
(1) both of the following are satisfied: (x) such
aggregate 2007 EBITDA equals or exceeds $106.0 million by up
to 7.5%; and (y) such aggregate 2007 Net Revenues equal or
exceed $451.0 million by up to 7.5%, then (2) the maximum
2007 bonus shall be $93,750.
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b.
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If
(1) both of the following are satisfied: (x) such
aggregate 2007 EBITDA exceeds $106.0 million by 7.5% (but less
than 15%); and (y) such aggregate 2007 Net Revenues
exceed $451.0 million by 7.5% (but less than 15%), then
(2) the maximum 2007 bonus shall be $187,500.00;
and
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1
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Employee and
the Company acknowledge and agree that these Targets are based upon
the Net Revenues and EBITDA forecasted in the 2007 budget submitted
by the Company’s management to API.
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c.
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If
(1) both of the following are satisfied: (x) such
aggregate 2007 EBITDA exceeds $106.0 million by 15%;
and (y) such aggregate 2007 Net Revenues exceed
$451.0 million by 15%, then (2) the maximum 2007 bonus
shall be $312,500.00;
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(ii)
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Targets for 2008 Net Revenues and
EBITDA and amount of 2008 bonus shall be determined by the
Company in January 2008.
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All
calculations and determinations of any of the foregoing matters
(including the amount of Bonus Compensation, or any component
thereof, including but not limited to EBITDA or Net Revenues or the
achievement of any Target) will be made by the Company in its
reasonable discretion and will be final and binding on Employee,
and provided further will be adjusted by the Company to exclude the
impact, as it may determine, of extraordinary accounting
items.
The allocation
of the Bonus Compensation shall be deemed earned and to become due
on (i) December 31, 2007, with respect to 2007 Targets,
provided that Employee is employed in good standing as of such
date, and provided further that the Bonus Compensation with respect
to the 2007 Targets shall not be payable by the Company until
February 28, 2008, and (ii) December 31, 2008, with
respect to 2008 Targets, provided that Employee is employed in good
standing as of such date, and provided further that the Bonus
Compensation with respect to the 2008 Targets shall not be payable
by the Company until February 28, 2009.
All amounts
paid by the Company to Employee under or pursuant to this
Agreement, including, without limitation, the Base Salary and any
Bonus Compensation, or any other compensation or benefits, whether
in cash or in kind, shall be subject to normal withholding and
deductions imposed by any one or more local, state or federal
governments.
(i) In the
event that the Company enters into a binding contract for a Change
of Control transaction during the Term of Employment and Employee
is employed in good standing as of such date, then, if Employee has
complied with the requirements of clause (ii) below and
Employee: (x) has not been terminated for Cause or resigned prior
to the Closing Date; or (y) if the Election (as defined in
clause (ii) below) has occurred, Employee has not been
terminated for Cause or resigned prior to the expiration of the
Transition Period, then Employee shall be paid a lump-sum bonus of
$1,000,000 (the “Change of Control Payment”), subject
to and in accordance with Section 5(b) below.
(ii) Employee
acknowledges and agrees that, in the event of a Change of Control
as a result of: (x) an acquisition of the equity of the
Company or its direct or indirect parent (whether by sale of equity
interests, merger or otherwise), then this Agreement will remain
the obligation of the Company (or its successor) and
Employee’s obligations hereunder will
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remain in full
force and effect; or (y) a transfer of assets of the Company
or its subsidiaries and in connection therewith this Agreement is
assigned by the Company, then this Agreement will become the
obligation of the assignee and Employee’s obligations
hereunder will (as such) remain in full force and effect. If, prior
to the Closing Date, the Company so elects (the
“Election”) by giving written notice thereof to
Employee, then Employee shall provide, on a full time basis and in
a professional manner, during the Transition Period, such services
to the Company, the acquiring Person in such Change of Control
transaction (the “Acquiring Person”) and their
respective designees as are necessary in all respects to permit a
smooth, professional transition of management (which may include,
without limitation, continuing to provide the services specified in
this Agreement or such other executive services as may be specified
from time to time by the Company, the Acquiring Person or their
respective designees).
(iii) It is
understood and agreed that: (aa) if Employee becomes, directly
or indirectly, an employee of the Acquiring Person, then all of
Employee’s salary, benefits and other compensation shall be
paid by the Acquiring Person; and (bb) if Employee has entered
into a new employment agreement with the Acquiring Person then the
term “Cause” shall be deemed for purposes of the
foregoing provision to have the meaning given such term in such new
employment agreement.
This Agreement
shall terminate (subject to Section 10(f) below) and the Term of
Employment shall end, on the first to occur of (each a
“Termination Event”):
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(a)
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The
Expiration Date;
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(b)
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The
death of Employee or the total or partial disability that, in the
judgment of the Company, renders Employee, with or without
reasonable accommodation, unable to perform his essential job
functions for the Company for a period of at least 90 consecutive
business days;
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(c)
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The
discharge of Employee by the Company with or without Cause (as
hereinafter defined);
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(d)
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The
resignation of Employee (and without limiting the effect of such
resignation, Employee agrees to provide the Company with not less
than 30 days prior written notice of his resignation);
or
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(e)
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Upon the later of: (x) a Change
of Control; or (y) if the Election has been delivered to
Employee, then upon the expiration of the Transition
Period.
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The Company may
discharge Employee at any time, for any reason or no reason, with
or without Cause, in which event Employee shall be entitled only to
such payments as are set forth in Section 5 below. As used herein,
“Cause” is defined as Employee’s:
(i) failure to (x)
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perform the
duties assigned to him or (y) comply with the instructions
given to him; (ii) personal misconduct or insubordination;
(iii) impairment due to alcohol or substance abuse;
(iv) conviction of a crime or being charged with a felony;
(v) violation of a federal or state securities law or
regulation; (vi) commission of an act of moral turpitude or
dishonesty relating to the performance of his duties hereunder;
(vii) failure to comply with any of the terms of this
Agreement; (viii) breach of the Exclusivity Obligation or any of
his obligations set forth in Section 6 or Section 7
below; (ix) any revocation or suspension by any state or local
authority of Employee’s required license(s) to serve in his
position(s) with the Company; or (x) any act or failure to act
by Employee which causes any gaming or other regulatory authority
having jurisdiction over the Company, the Designated Affiliates or
any of their affiliates to seek any redress or remedy against
Employee, the Company, any Designated Affiliate or any of their
affiliates. In the case of clauses (i) and (vii) above,
the Company will give Employee a written notice of the alleged
“Cause” and a 20-day period to cure prior to
termination, to the extent that the Company, in its sole
discretion, determines such conduct is curable.
In the event of
termination of Employee’s employment hereunder, all rights of
Employee under this Agreement, including all rights to
compensation, shall end and Employee shall only be entitled to be
paid the amounts set forth in this Section 5 below.
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(a)
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In
the event that the Term of Employment ends (i) for the reason
set forth in Section 4(a) above (i.e., Expiration Date), or
(ii) for any of the reasons set forth in Section 4(b) above
(i.e. death or disability), or (iii) for the reason set forth
in Section 4(d) above (i.e. resignation), or (iv) due to the
discharge of Employee by the Company for Cause, then, in lieu of
any other payments of any kind (including, without limitation, any
Severance Payment or Change of Control Payment), Employee shall be
entitled to receive, within fifteen (15) days following the
date on which the Termination Event in question occurred (the
“Clause (a) Termination Date”) any amounts of:
(A) Base Salary due and unpaid to Employee from the Company as
of the Clause (a) Termination Date; and (B) Bonus
Compensation earned, vested, due and unpaid to Employee from the
Company as of the Clause (a) Termination Date (as determined
below, and not on a pro rata basis); and (C) any compensation
due to Employee in respect of any accrued vacation days that were
not taken by Employee prior to the Clause (a) Termination
Date.
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(b)
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In
the event that the Term of Employment ends for the reason set forth
in Section 4(e) above (i.e., Change of Control), then, in lieu of
any other payments of any kind (including, without limitation, any
Severance Payment), Employee shall be entitled to receive:
(A) within fifteen (15) days following the date on which
the Termination Event in question occurred (the “Clause
(b) Termination Date”), any amounts of (1) Base
Salary due and unpaid to Employee from the Company as of the Clause
(b) Termination Date, and (2) Bonus Compensation earned,
vested, due and unpaid to Employee from the Company as of the
Clause (b) Termination Date
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(as
determined below, and not on a pro rata basis); and (C) any
compensation due to Employee in respect of any accrued vacation
days that were not taken by Employee prior to the Clause
(b) Termination Date; and (B) sixty (60) days
following the Closing Date (if Employee has complied with the
requirements of clause (ii) of Section 3(d) above), the Change
of Control Payment, payment of which shall be conditioned upon
Employee’s execution of an Employee Severance and Release
Agreement in a form similar to that shown in Exhibit A of this
Agreement; provided that the Change of Control Payment shall
not be payable to Employee if either of the following events
has occurred: (1) if the Company has delivered the Election to
Employee, but Employee has been terminated for Cause or resigns
prior to the expiration of the Transition Period; or (2) if
Employee has been terminated for Cause or resigns prior to the
Closing Date.
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(c)
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In
the event that the Term of Employment ends due to the discharge of
Employee by the Company without Cause (which the Company is free to
do at any time in its sole and absolute discretion) then, in lieu
of any other payments of any kind (including, without limitation,
any Change of Control Payment), Employee shall be entitled to
receive, within fifteen (15) days following the date on which the
Termination Event in question occurred (the “Clause (c)
Termination Date”): (A) any amounts of Base Salary due
and unpaid to Employee from the Company as of the Clause
(c) Termination Date; (B) any amounts of Bonus
Compensation earned, vested, due and unpaid to Employee from the
Company as of the Clause (c) Termination Date (as determined
below, and not on a pro rata basis); (C) any compensation due
to Employee in respect of any accrued vacation days that were not
taken by Employee prior to the Clause (c) Termination Date; and
(D) a lumpsum payment in the amount equal to one year’s
then current Base Salary (the “Severance Payment”),
payment of which shall be conditioned upon Employee’s
execution of an Employee Severance and Release Agreement in a form
similar to that shown in Exhibit A of this Agreement.
Notwithstanding the foregoing, if all of the following occur, then
Employee shall be entitled to receive, within fifteen
(15) days following the Closing Date, an additional payment
equal to the difference between $1,000,000 and the Severance
Payment that was previously paid to Employee: (i) Employee is
employed in good standing with the Company through and including
the date that the Company enters into a binding contract for a
Change of Control transaction (the “Execution Date”);
and (ii) Employee is terminated without Cause either
(1) after the Execution Date but prior to the Closing Date, or
(2) after the Election is made but prior to the end of the
Transition Period; and (iii) Employee has complied with clause
(ii) of Section 3(d) from the beginning of a sale or auction
process that is reasonably likely to lead to a Change of Control
(the “Sale Process”) through the date of termination of
Employee’s employment; and (iv) the Closing Date occurs
on or prior to December 31, 2008; and (v) the party with
whom the Company engages in a Change of Control transaction is a
party with respect to which the Employee was actively involved in
the negotiation of the Sale Process prior to the date of
termination of Employee’s employment; provided further that
the Employee shall execute and deliver a “bring
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down”
release as a condition for the receipt of such payment.
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