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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): April 15, 1998
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-5474 75-2571032
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(State of incorporation) (Commission File No.) (IRS Employer
Identification No.)
13150 COIT ROAD, SUITE 125, DALLAS, TEXAS 75240
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(Address of principal execute offices, including zip code)
(972) 671-1133
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(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS.
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RESTRUCTURE OF OM OPERATING, L.L.C.
Effective April 15, 1998, North American Gaming and Entertainment
Corporation (the "Company") and Donald I. Williams ("Williams") entered into
Amendment No. One (the "Amendment") to the Operating Agreement (the "Operating
Agreement") of OM Operating, L.L.C. ("Operator") to effect a restructuring of
Operator which the Company believes effectively addresses certain preliminary
questions and concerns raised by the Louisiana Gaming Control Board ("Gaming
Control Board") and the Video Gaming Division of the Gaming Enforcement Section
of the Office of State Police within the Department of Public Safety and
Corrections (the "Division") in their review of Operator's application for
renewal of its license to operate video poker casinos. The Company elected to
voluntarily effect the restructure of Operator even though the Gaming Control
Board has not made a final determination whether Operator's existing structure
satisfied the Louisiana residency requirements of the Louisiana Video Draw Poker
Devices Control Law and the Rules and Regulations promulgated thereunder (the
"Louisiana Act"). The Company believed its existing structure satisfied such
residency requirements, but believes the restructure of Operator will make an
even stronger case that Operator satisfies such requirements and will allay any
concerns and questions which the Gaming Control Board or Division may have in
this regard. The Company has submitted to the Division and Gaming Control Board
the Amendment and related documents effecting the restructure of Operator for
their review in connection with their review of Operator's license renewal
request. There can be no assurance that the Gaming Control Board will agree
with the Company's conclusion that Operator, as restructured, complies with the
residency requirements of the Louisiana Act, but the Company believes the Gaming
Control Board will agree with the restructure and with the Company's conclusion.
The Amendment deleted several provisions of, and added several new
provisions to, the Operating Agreement, and certain related transactions were
agreed upon to effect the restructure of Operator. Among these provisions and
transactions are the ones discussed in the following paragraphs.
The Company contributed to Operator the Company's right to a 20% special
gross income allocation and distribution in exchange for 99% of the ownership
interests in Operator, and then immediately and simultaneously assigned 50% of
the ownership interests in Operator to Williams in exchange for a $4,000,000
nonrecourse note (the "Note") payable by Williams to the Company, so that
immediately thereafter Williams owns 51% and the Company owns 49% of the
ownership interests in Operator, the Company no longer has a 20% gross income
allocation and distribution right, and Williams owes the Company $4,000,000
pursuant to the Note. The Note is payable solely from cash flow distributions
made by Operator to Williams from the existing five video poker casinos operated
by Operator (less an amount to allow Williams to pay his federal and state
income taxes on Operator's net taxable income attributable to such casinos), and
is secured by his 51% ownership interest and all cash flow distributions made to
him with respect to the five existing video poker casinos. The principal
balance of the Note is automatically reduced pro-rata (at percentages agreed
upon based on 1997 net operating income of each casino) if Operator loses the
right to operate any of the five existing video poker casinos.
Williams and the Company agreed to appoint George J. Akmon, who is the
Executive Vice President and Chief Financial Officer of the Company, as the
manager of Operator, to replace Williams, the previous manager. The manager is
responsible for all routine, daily operational decisions. Decisions such as
incurring debt, selling or buying devices, entering into additional
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agreements to operate video poker devices, amending existing agreements, and
other material, nonroutine decisions require the approval of 65% of the
ownership interests in Operator. Until the Note is paid in full, the Company has
the right to remove and appoint a new manager with the concurrence of Williams,
and must at the request of Williams remove and replace any manager who fails to
satisfactorily perform his duties. Once the Note has been paid in full, managers
will be elected by the owners of at least 65% of the ownership interests in
Operator.
On April 15, 1998, the Company and Operator entered into a Consulting and
Administrative Agreement (the "Consulting Agreement") pursuant to which the
Company has agreed to provide consulting and administrative services relating to
the daily management of each of Operator's video poker casinos. The Company
will receive a fee of $400,000 per year for rendering such services, reduced by
$50,000 for each existing video poker casino Operator loses the right to
operate, and increased by $50,000 for each new video poker casino operated by
Operator during the term of the Consulting Agreement. The Consulting Agreement
expires on the later of April 15, 2002 or the date the Note is paid in full,
provided the Company has an option to extend the Consulting Agreement for an
additional six years, unless the Note was not paid in full within six years, in
which case the extension is reduced so the maximum term of such extension, when
added to the original term, does not exceed 12 years. The fee payable during
any extension term is to be agreed upon by the Company and Operator (acting at
the direction of Williams), and if they cannot reach agreement, they have agreed
to submit the issue to binding arbitration so that a reasonable fee will be
determined by binding arbitration.
Williams and Operator also entered into an Employment Agreement on April
15, 1998 pursuant to which Williams will receive an annual salary of $250,000,
will be eligible to participate in any employee benefit plans of Operator, will
be furnished the use of a company automobile and will be reimbursed for expenses
incurred on behalf of Operator during the course of his employment. The
Employment Agreement terminates on the later of April 15, 2002 or the date the
Note is paid in full.
The Company agreed to lease to Operator the land and buildings constituting
The Gold Rush Truck Stop. The lease will be effective April 15, 1998 and will
be a triple-net lease pursuant to which Operator will be responsible for
property taxes, insurance and all repairs and maintenance, except for the
foundation, outer walls and roof, for which the Company will be responsible.
The lease will require annual rental payments of $400,000 and will be for a term
commencing April 15, 1998 and expiring April 15, 2008, subject to a five year
renewal option if elected by Williams, on behalf of Operator, at which time the
rent will be adjusted based on the change in the Consumer Price Index. The
Company also granted Williams a right of first refusal to purchase the land and
buildings constituting The Gold Rush Truck Stop, or any portion thereof, if the
Company proposes to sell them to a third party. Williams will have the prior
right to purchase the land and buildings, or such portion thereof, upon the same
terms and conditions and at the same price as offered by such third party.
Pursuant to the Amendment, each of Williams (and certain related parties)
and the Company (and certain affiliates) agreed that all video poker gaming
opportunities within Louisiana that either party desires to pursue must first be
presented to Operator for its review and determination whether it desires to
pursue such opportunity. If Operator elects not to purse the opportunity, then
the presenting party will be free to pursue it for a certain specified period
upon terms and conditions substantially equivalent to those presented to
Operator. Williams is also entitled to receive a finder's fee of $50,000 for
each opportunity brought by him to Operator which is consummated by Operator.
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The Company and Williams terminated the various rights of first refusal and
purchase options which the Company previously had with regard to the 51%
ownership interest of Williams. Pursuant to the Amendment, if either the
Company or Williams fails to maintain the suitability requirements of the
Louisiana Act, his or her ownership interests may be sold to a third party, with
the consent of the other party (which consent may not be unreasonably withheld),
upon such terms and conditions as he or it may negotiate with such third party;
provided, if such sale is not accomplished within specified time periods, the
other party has the right to locate a purchaser (or buy the interest himself or
itself) for a purchase price equal to the allocable share of Operator's net
operating income for the preceding calendar year multiplied by a factor of 2.
As long as the suitability standards are being maintained by each party,
each of Williams and the Company is given the right under the Amendment to sell
his or its ownership interests at any time to any third party with the consent
of the other person, which consent may not be unreasonably withheld. If the
Company is selling its ownership interests, it is also entitled to assign the
Consulting Agreement to the purchaser with the consent of Williams, which
consent may not be unreasonably withheld, if such purchaser has expertise to
perform the services being performed by the Company under the Consulting
Agreement.
RIVER PORT TRUCK STOP - PORT ALLEN, LOUISIANA
As part of the Amendment, the Company and Williams agreed to form a new
limited liability company called River Port Truck Stop, LLC to pursue
development, construction, ownership and operation of the River Port Truck Stop
in Port Allen, Louisiana. Initially, River Port Truck Stop, LLC will be owned
50% by the Company and 50% by Williams, but it is contemplated that additional
equity partners may be admitted so that the ownership interest of each of the
Company and Williams would be reduced pro-rata down to 40% each, with other
equity partners owning 20%. Williams and the Company have agreed to seek
financing to develop the River Port Truck Stop and other equity partners. Upon
obtaining necessary financing, the Company has agreed to cause the existing
lease covering the River Port location to be assigned to River Port Truck Stop,
LLC.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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(c) Exhibits. The following exhibits are being filed herewith:
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10.1 Amendment No. One to Operating Agreement of OM Operating, L.L.C.
dated effective April 15, 1998.*
10.2 Note dated April 15, 1998 in the original principal amount of
$4,000,000 payable to the Company by Williams.*
10.3 Assignment and Security Agreement dated April 15, 1998 between the
Company and Williams.*
10.4 Consulting and Administrative Agreement dated April 15, 1998 between
the Company and Operator.*
10.5 Employment Agreement dated April 15, 1998 between Operator and
Williams.*
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* Filed herewith.
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
April 17, 1998
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
By: /s/ George J. Akmon
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George J. Akmon, Executive
Vice President
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EXHIBIT 10.1
AMENDMENT NO. ONE
TO
OPERATING AGREEMENT
OF
OM OPERATING, L.L.C.
This Amendment No. One ("Amendment") is entered into effective as of April
15, 1998 and amends that certain Operating Agreement of OM Operating, L.L.C.
dated as of July 18, 1994 (the "Agreement") by and between OM Investors, Inc.,
whose Membership Interest is now owned by North American Gaming and
Entertainment Corporation ("NAMGC"), and Donald I. Williams ("Williams"). This
Amendment is executed by NAMGC and Williams for the purposes set forth herein.
Capitalized terms used in this Amendment shall have the same meaning as in the
Agreement, unless the context herein clearly indicates otherwise.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby expressly acknowledged by each of the parties
hereto, the parties hereto acknowledge and agree as follows:
1. NAMGC hereby contributes its 20% gross income allocation set forth in
Section 4.1 in exchange for Williams' agreement that NAMGC owns 99% of the
Membership Interests (herein so called) and Sharing Ratios and Williams owns 1%.
2. Concurrently and simultaneously with the contribution of the 20% gross
income allocation and acquisition of Membership Interests and Sharing Ratios
from the Company aggregating 99% of the Membership Interests and Sharing Ratios
by NAMGC, NAMGC hereby sells, assigns and transfers to Williams 50% of the
Membership Interests and Sharing Ratios owned by NAMGC in consideration of the
execution and delivery by Williams of a $4,000,000 Note (the "Note") payable to
NAMGC and simultaneous pledge by Williams of his Membership Interests and
Sharing Ratios as collateral security for repayment of the Note. Following the
sale, assignment and transfer to Williams, the parties hereto acknowledge and
agree that the Membership Interests and Sharing Ratios in the Company are owned
49% by NAMGC and 51% by Williams, and it is the intent of the parties that the
Capital Accounts of the parties as a result of these transactions shall be in
the ratio of 49% for NAMGC and 51% for Williams for all purposes after the date
of this Amendment, without distributions of cash or other property to either
Member, and the parties hereto agree to take such actions to cause the Capital
Accounts to be consistent therewith. Further, the parties consent to and
acknowledge the pledge by Williams of his Membership Interests and Sharing
Ratios to NAMGC.
3. Section 2.6.3 is hereby amended to read in its entirety as follows:
"2.6.3 Vote Necessary for Decisions. Except as otherwise provided in
the Act, the Articles or the Operating Agreement, all decisions of the
Members shall be made by
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Members owning 65% of the Sharing Ratios."
4. Section 4.1 is hereby deleted and all references in the Agreement to
the 20% gross income allocation are also hereby deleted, including, without
limitation, the references at Sections 4.2 and 4.4.1.
5. Section 4.4 is hereby amended to delete the word "unanimous". Section
4.4 is also hereby amended to add the following paragraph after Subsection
4.4.3:
"Notwithstanding the above provisions of this Section 4.4, the Company
shall distribute, if not already distributed through monthly
distributions, an amount to each Member equal to forty percent (40%)
of the net taxable income of the Company for the preceding taxable
year allocated to each Member, so the Members may use such
distributions to pay their individual taxes on their pro rata share of
said taxable income, with such distribution, or the remainder thereof
after taking into account monthly distributions, to be made within
seventy-five (75) days following the end of the taxable year to which
such distribution relates".
6. Section 4.4.1 is hereby deleted.
7. Section 5.1 is hereby amended by deleting the word "unanimous" and by
adding the following clause and sentence at the end of the first sentence
thereof:
"of the Members; provided, however, that notwithstanding the foregoing
provision or any other provision in this Operating Agreement to the
contrary, for as long as the Note remains unpaid there shall only be
one Manager of the Company and NAMGC shall be entitled to designate
and appoint, and change from time to time, such Manager with the
consent of Williams (which consent shall not be unreasonably withheld)
by delivering written notice to Williams, whereupon Williams shall
have five (5) days to object to such appointment or change by
delivering written notice thereof to NAMGC, and upon any such
objection, NAMGC shall designate a different Manager and deliver
written notice thereof to Williams for his consent; and, provided,
further, that in the event the appointed Manager repeatedly fails to
satisfactorily perform such Manager's duties hereunder, Williams shall
have the right to notify NAMGC who shall appoint a new Manager if the
existing Manager does not cure such failures. NAMGC's designation and
appointment as Manager as of the date of this Amendment is George J.
Akmon, which is hereby approved by Williams. Upon payment in full of
the Note, the Manager designated by NAMGC shall be deemed
automatically removed and the Members shall elect one or more Managers
under Section 5.1."
8. Section 5.2 is hereby amended by deleting the last sentence and
replacing it with the following sentence:
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"Subject to the provisions of Section 5.1, any Manager elected or
appointed by the Members may be removed at any time by a vote of
Members owning 65% of the Sharing Ratios."
9. Section 5.3 is hereby amended by deleting the first sentence.
10. Sections 5.3.1 and 5.3.2 are hereby amended by deleting everything
appearing after the word "Company" in each Section.
11. Section 5.3.3 is hereby amended by deleting words "Managers or".
12. Section 5.3.4 is hereby amended by adding the following clause at the
end of such Section: ", other than Williams under his Employment Agreement
described in Section 8.16 or NAMGC under its Consulting and Administrative
Agreement described in Section 8.17".
13. Sections 5.3.5 and 5.3.6 are hereby amended by deleting the word
"unanimous".
14. Section 5.3.9 is hereby amended to add the following clause at the end
of such Section: "to take such actions as are within his authority otherwise
granted in this Section 5.3".
15. Section 5.3.10 is hereby amended by deleting the word "unanimous" in
both places where it is used and by deleting the clause "or, where authorized
herein, by majority vote of Members".
16. Section 5.4 is hereby amended by deleting the word "unanimous".
17. Section 5.4.1 is hereby amended by deleting the words "five" and
"unanimous".
18. Section 5.4.14 is hereby deleted.
19. Section 5.5 is hereby amended by deleting the words "unanimous vote"
and adding in place thereof the words "vote of Members owning at least 65% of
the Sharing Ratios".
20. Sections 6.3.1 and 6.3.2 are hereby deleted and replaced with the
phrase "Intentionally Omitted."
21. Section 6.3.3 is hereby amended to change "OM's" to "NAMGC's", and by
adding the following clause at the end of such Subsection: ", except
in accordance with Section 6.4, Section 6.5 or Section 6.6."
22. Section 6.3.4 is hereby amended to read in its entirety as follows:
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"6.3.4 Agrees that he shall not have the right to transfer or assign
his Membership Interests or Sharing Ratios, or any portion thereof or
rights therein, to any person unless such person is a Louisiana
resident that satisfies all of the suitability requirements under
applicable Louisiana law necessary for the Company to obtain and hold
all Louisiana gaming licenses necessary for the operation of its video
poker casinos, and except in accordance with Section 6.4, Section 6.5
or Section 6.6."
23. A new Section 6.4 is hereby added:
"6.4 Transfer to Family Members by Williams. Notwithstanding any
provision hereof to the contrary, including Sections 6.1, 6.3.3 and
6.3.4, Williams shall be entitled to transfer all or a portion of his
Membership Interests and Sharing Ratios by inter vivos gift or at
death to (i) his spouse, (ii) his descendants, or (iii) a limited
liability company or family partnership owned 100% by Williams, his
spouse and/or his descendants, provided, (a) such transferee shall
take such Membership Interests and Sharing Ratios fully subject to the
terms and conditions of this Agreement and shall execute a written
instrument acknowledging such fact and agreeing to be bound by all of
the terms and conditions of this Agreement, and (b) such transferee is
a Louisiana resident that satisfies all of the suitability
requirements under applicable Louisiana law necessary for the Company
to obtain and hold all Louisiana gaming licenses necessary for the
operation of its video poker casinos. Upon satisfaction of the
foregoing, such transferee shall be considered a Member hereunder. It
shall not be necessary to obtain the prior consent of NAMGC to any
such allowed transfer, but Williams shall provide prior written notice
of the pending transfer to NAMGC and evidence that all of the
conditions set forth in this Section 6.4 have been satisfied, as a
condition precedent to the valid and effective transfer. Any such
transferee shall take such Membership Interests and Sharing Ratios
fully subject to the Note and any shortfall loans made pursuant to
Section 8.18(c), together with any security interests, pledges and/or
assignments of Cash Flow or collateral related thereto."
24. A new Section 6.5 is hereby added:
"6.5 Buy-Sell Upon Loss of Suitability. NAMGC and Williams (which
shall be binding on his transferees under Section 6.4) hereby agree to
the following buy-sell provisions in the event either of them fails to
meet the suitability requirements under the Louisiana Video Draw Poker
Devices Control Law or other applicable gaming laws (the "Applicable
Laws") necessary for the Company to obtain and hold all Louisiana
gaming licenses necessary for the operation of its video poker
casinos, or, in the case of Williams (or such transferees), Williams
(or such transferees) ceases to be a Louisiana resident:
6.5.1 Williams' Loss of Suitability. In the event Williams (or his
transferees under Section 6.4, as applicable) fails to continue to
meet the suitability requirements under
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Applicable Laws or ceases to be a Louisiana resident, then the
provisions of Section 6.5.3 shall immediately become applicable and
Williams (or such transferee) shall be referred to as the "Nonsuitable
Member" in Section 6.5.3 and NAMGC shall be referred to as the "Other
Member" in Section 6.5.3.
6.5.2 NAMGC's Loss of Suitability. In the event NAMGC fails to
continue to meet the suitability requirements under Applicable Laws,
then the provisions of Section 6.5.3 shall immediately become
applicable and NAMGC shall be referred to in Section 6.5.3 as the
Nonsuitable Member and Williams (or such transferees) shall be
referred to individually and collectively as the Other Member.
6.5.3 Buy-Sell Procedures. Upon the occurrence of the situation
described in Section 6.5.1 or Section 6.5.2, as applicable, so that
this Section 6.5.3 becomes applicable, the Nonsuitable Member shall
have the right to contest, in accordance with applicable
administrative and judicial process, at its or his expense, the
determination by the applicable governmental authority that the
Nonsuitable Member has become unsuitable, or the Nonsuitable Member
may accept such determination. Upon the acceptance of such
determination (without contest, or during the administrative and
judicial process), or at the conclusion of the applicable
administrative and judicial process at which time the determination of
unsuitability was upheld, whichever occurs first, the Nonsuitable
Member shall have thirty (30) days (or such shorter period of time if
required by law or mandated by applicable governmental authorities) to
sell, gift or otherwise transfer such Nonsuitable Member's Membership
Interests and Sharing Ratios to a transferee who meets the suitability
requirements of Applicable Laws, who must also be a Louisiana resident
if Williams (or his transferee) is the Nonsuitable Member, at such
price as may be negotiated between the Nonsuitable Member and the
person or entity to whom the Nonsuitable Member's Membership Interests
and Sharing Ratios will be assigned (the "Assignee"); provided,
however, that the Other Member must give his or its consent to the
transfer to the Assignee and to the Assignee becoming a Member
hereunder, which consent may not be unreasonably withheld; and,
provided, further, that if the Other Member objects and withholds
consent, such Other Member must deliver along with his or its written
objection the specific detailed reasons for objecting to such Assignee
and the reasons why the Other Member believes such reasons satisfy the
requirement that the consent has been withheld in the exercise of
"reasonable" discretion. If the Nonsuitable Member believes that such
reasons do not constitute a "reasonable" objection, the Nonsuitable
Member shall be entitled to object by written notice to the Other
Member giving the reasons therefor, and if the Nonsuitable Member and
Other Member shall not be able to agree within five (5) days whether
the Assignee is acceptable or not acceptable, the Nonsuitable Member
shall not transfer the Membership Interests and Sharing Ratios to such
proposed Assignee, but shall retain all rights and remedies, including
for damages, which he or it may have against Other Member if the
rejection by the Other Member is
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ultimately determined not to have been reasonable. Notwithstanding the
foregoing, if the Other Member has rejected a proposed Assignee, the
Nonsuitable Member shall have the opportunity to present other
proposed Assignees who will be reviewed by the Other Member in
accordance with this Section 6.5.3, until expiration of the thirty
(30) days (or such shorter period of time if required by law or
mandated by applicable governmental authorities).
If the Other Member does not object to the proposed Assignee, or
objects but the Nonsuitable Member and Other Member are able to agree
that such proposed Assignee is acceptable during the five (5) day
period referenced above, the Nonsuitable Member shall be entitled to
transfer his or its Membership Interests and Sharing Ratios to the
proposed Assignee, which transfer must be effective prior to the
expiration of the thirty (30) day period (or shorter period required
by law or dictated by the governmental authorities) referenced in the
preceding paragraph, and upon closing thereof, the Assignee shall take
such Membership Interests and Sharing Ratios fully subject to the
terms and conditions of this Agreement and shall execute a written
instrument acknowledging such fact and agreeing to be bound by all of
the terms and conditions of this Agreement. Upon satisfaction of the
foregoing, the Assignee shall be considered a Member hereunder.
In the event the Nonsuitable Member shall not be able to find a
proposed Assignee, or the Other Member objects to such proposed
Assignee in the exercise of reasonable discretion, or the closing of
the transfer to the Assignee does not take place within the required
time period noted in the preceding paragraph, the Other Member shall
have the right to locate a suitable purchaser of the Nonsuitable
Member's Membership Interests and Sharing Ratios for a period of
ninety (90) days after the expiration of the thirty (30) day period
referenced in the first paragraph of this Section 6.5.3 to locate a
purchaser (including, but not limited to the Other Member, himself or
itself) who meets the suitability requirements under Applicable Law
and the Nonsuitable Member hereby agrees to sell his or its Membership
Interests and Sharing Ratios to such purchaser at a purchase price
equal to two (2) times the Nonsuitable Member's allocable share of the
net operating income of the Company for the preceding calendar year,
with such purchase price to be paid in cash prior to expiration of
said ninety (90) day period.
25. The Agreement is hereby amended by adding new Section 6.6 to read as
follows:
"Right of Members to Sell Membership Interests and Sharing Ratios.
Each Member shall have the absolute right to sell his or its
Membership Interest and Sharing Ratios to any person or entity at such
price and upon such terms and conditions as may be agreed between the
selling Member ("Selling Member") and such person or entity, upon
compliance with the terms and conditions of this Section 6.6. Further,
NAMGC shall have the right to assign the Consulting and Administrative
Agreement
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(referenced in Section 8.17) to such person or entity upon such terms
and conditions as may be negotiated between NAMGC and such purchaser
or entity.
In order for the Selling Member to be able to sell his or its
Membership Interests and Sharing Ratios, and for NAMGC to assign the
Consulting and Administrative Agreement if it is the Selling Member,
the Selling Member must give written notice to the other Member (the
"Other Member") that the Selling Member plans to sell his or its
Membership Interests and Sharing Ratios (and assign the Consulting and
Administrative Agreement, if applicable) to a proposed purchaser (the
"Purchaser") at least thirty (30) days prior to consummation of the
proposed sale. The Other Member shall then be required within fifteen
(15) days following receipt of such notice of proposed sale to consent
to the Purchaser purchasing the Selling Member's Membership Interests
and Sharing Ratios (and the Consulting and Administrative Agreement,
if applicable) and to such Purchaser becoming a Member hereunder,
which consent may not be unreasonably withheld. In the event the Other
Member objects in writing and withholds consent within said fifteen
(15) day period, such Other Member must deliver along with his or its
written objection the specific detailed reasons for objecting to such
Purchaser becoming a Member, and/or such Purchaser becoming an
assignee under and assuming the Consulting and Administrative
Agreement, if applicable, and the reasons why the Other Member
believes such reasons satisfy the requirement that the consent has
been withheld in the exercise of "reasonable" discretion. If the
Selling Member believes that such reasons do not constitute a
"reasonable" objection, the Selling Member shall be entitled to object
by written notice to the Other Member giving the reasons therefor, and
if the Selling Member and Other Member shall not be able to agree
within five (5) days whether the Purchaser is acceptable or not
acceptable as a Member, or as an assignee under the Consulting and
Administrative Agreement, if applicable, the Selling Member (i) shall
not transfer the Membership Interests and Sharing Ratios to such
proposed Purchaser if that was the objection; or (ii) may sell the
Membership Interests and Sharing Ratios to such proposed Purchaser if
the Other Member did not object, but not assign the Consulting and
Administrative Agreement to such proposed Purchaser if that was the
objection; or (iii) may elect not to transfer the Membership Interest
and Sharing Ratios to such proposed Purchaser or assign the Consulting
and Administrative Agreement because said assignment was objected to
by the Other Member; but the Selling Member shall retain all rights
and remedies, including for damages, which he or it may have against
the Other Member if the rejection by the Other Member of either the
transfer of Membership Interests and Sharing Ratios or the assignment
of the Consulting and Administrative Agreement, as applicable, is
ultimately determined not to have been reasonable.
If the Other Member does not object to the proposed Purchaser, or
objects but the Selling Member and Other Member are able to agree that
such proposed Purchaser is acceptable during the five (5) day period
referenced above, the Selling Member
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shall be entitled to transfer his or its Membership Interests and
Sharing Ratios to the proposed Purchaser, and NAMGC shall be entitled
to assign the Consulting and Administrative Agreement to such
Purchaser if allowed under the preceding paragraph, and upon closing
thereof, the Purchaser shall take such Membership Interests and
Sharing Ratios fully subject to the terms and conditions of this
Agreement and shall execute a written instrument acknowledging such
fact and agreeing to be bound by all of the terms and conditions of
this Agreement. Upon satisfaction of the foregoing, the Purchaser
shall be considered a Member hereunder. Further, at such closing,
NAMGC shall assign the Consulting and Administrative Agreement to such
Purchaser who shall assume all of the rights, responsibilities and
duties of NAMGC thereunder, and NAMGC shall be released from any
further responsibilities, duties, obligations or obligations
thereunder.
26. Section 8.2 is hereby amended by deleting the words "OM Investors,
Inc." and substituting in their place the words "North American Gaming and
Entertainment Corporation" and adding the following clause at the end of such
Section: "to satisfy its financial reporting requirements under applicable
securities laws".
27. Section 8.4.1 is hereby amended by substituting the word "shall" for
the word "may" in the first sentence of such Section.
28. Section 8.5 is hereby amended by adding the following clause at the
beginning of such Section: "Subject to the provisions of Section 8.18,".
29. Section 8.6 is hereby amended by adding the word "Manager," before the
word "Member" in the second line of such Section.
30. Section 8.8 is hereby amended by adding the following clause at the
end of the first sentence: "owned by the Company."
31. Section 8.10 is hereby amended by deleting the words "addressed as
shown on the first page hereof" appearing at the end of the first sentence, and
by substituting in their place the following words "addressed to the latest
address of the addressee appearing in the records of the Company".
32. The Agreement is hereby amended by adding new Sections 8.16, 8.17,
8.18 and 8.19 to read as follows:
"8.16 Employment Agreement with Williams. The Company is hereby
authorized to enter into an Employment Agreement with Williams, dated
of even date herewith, pursuant to which the Company will pay to
Williams a salary of $250,000 per year for a term to expire at the
later of expiration of four years or upon payment in full by Williams
of the Note. Thereafter, there shall be no Employment Agreement
between
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the Company and Williams unless NAMGC approves the terms and
conditions thereof, including the salary. As part of the Employment
Agreement dated of even date herewith, Williams shall be reimbursed
for reasonable expenses incurred by him on behalf of the Company or in
furtherance of his obligations under the Employment Agreement."
"8.17 Consulting and Administrative Agreement. The Company is hereby
authorized to enter into the Consulting and Administrative Agreement
with NAMGC dated as of the date of this Amendment."
"8.18 No Acquisition of Operations by Certain Parties.
(a) Each of Williams (and any permitted transferee or assignee
pursuant to Section 6.4, all of such persons or entities being
hereinafter collectively and individually referred to along with
Williams in this Section 8.18 as "Williams") and NAMGC (for itself and
its subsidiaries) agree that they will bring all truck stop video
poker casino opportunities in Louisiana to the Company for evaluation
and pursuit by the Company and neither will, directly or indirectly in
any manner, be involved with or obtain an interest in any other such
opportunity without first bringing it to and offering it to the
Company; and, in this regard, Williams agrees that any such
opportunity pursued by his wife or daughters shall be deemed for all
purposes to be an opportunity that should have been brought by him to
the Company, and Williams, therefore, agrees to bring any such
opportunity to the Company in accordance with this Section; provided,
however, that this prohibition shall not prohibit NAMGC from acting as
manager of a truck stop video poker casino pursuant to a bona fide
management agreement with a third party. When such opportunity is
brought to the Company, the person or entity bringing such opportunity
to the Company (hereinafter, the "Finder") shall set forth in detail
all of the essential terms and conditions relating to the
participation in such opportunity by the Finder which is being made
available to the Company. The Company shall have thirty (30) days to
determine whether to pursue and obtain such opportunity. If NAMGC
decides the Company should pursue and obtain any such opportunity
presented by Williams, then NAMGC's decision shall be binding on the
Company and Williams and no other vote of the Members shall be
required. If Williams decides the Company should pursue and obtain any
such opportunity presented by NAMGC (or any of its subsidiaries), then
Williams' decision shall be binding on the Company and NAMGC and no
other vote of the Members shall be required. Written notice of the
decision to pursue and obtain any presented opportunity shall be
delivered to the Finder within thirty (30) days following the date the
Finder has delivered the description of the opportunity in the detail
required by this Section 8.18 to the non-presenting party and to the
Company. Subject to the other terms and conditions of this Section
8.18, if the Company decides not to pursue and obtain an opportunity
presented by the Finder, the Finder may for the following one hundred
twenty (120) days pursue such
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opportunity upon the same terms and conditions described in the
presentation made to the non-presenting party pursuant to this Section
8.18; provided, if the terms and conditions ultimately vary by 5% or
more either way then the Finder shall be obligated to bring the
opportunity back to the Company for re-consideration and may not
pursue the opportunity himself or itself or with any other participant
until the opportunity has been re-presented to the Company for
consideration pursuant to this Section 8.18 as if it had never been
presented; and, provided, further, if the opportunity is not fully
documented and closed by the Finder within said one hundred twenty
(120) days, then the Finder must again re-present the opportunity to
the Company for re-consideration. All opportunities shall be brought
to the Company in accordance with this Section 8.18 notwithstanding
the fact that one or more opportunities have been brought to the
Company which were not pursued by the Company. The parties hereto
agree that the Port Allen project, the "Houma" project and the
"Goldrush" project have been presented to the Company and the Company
has elected to pursue such opportunities. The parties also acknowledge
that Williams is the Finder for each of these three opportunities.
NAMGC agrees to adopt a policy that officers and key employees cannot
individually pursue truck stop video poker casinos in Louisiana and
NAMGC agrees to vigorously pursue its rights against any officer or
key employee violating such policy so that such opportunities shall be
brought to NAMGC, who in turn shall bring them to the Company in
accordance with this Section 8.18(a). Further, NAMGC agrees to obtain
a written agreement from E.H. Hawes, II whereby he agrees that he will
not pursue any video poker truck stop casinos in Louisiana, and will
bring all such opportunities to NAMGC, for as long as he is an
officer, director or beneficial owner of 5% or more of the outstanding
common stock of NAMGC, so that NAMGC can then bring those
opportunities to the Company in accordance with this Section 8.18(a).
(b) NAMGC and Williams hereby agree that a Finder may not bring to
the Company for its consideration more than ten (10) opportunities
during any calendar year; may not bring to the Company for
consideration more than four (4) opportunities at any one time; and
may not bring to the Company for consideration any opportunity which,
when coupled with the projects already under consideration or
construction, would exceed four (4) opportunities and projects. It is
acknowledged and agreed that this prohibition is to prevent either
party from overloading the other party and the Company with
opportunities so that opportunities cannot be pursued by the Company
because of the magnitude thereof, resulting in the Finder being
allowed to pursue such opportunities. Neither party desires such
result and, therefore, they agree to these prohibitions. As a result
of these prohibitions, neither party will be able to pursue any such
opportunities which they are prohibited from bringing to the Company,
until such opportunities have actually been presented to the Company
in accordance with this Section 8.18. It is further acknowledged and
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agreed that Williams and any of his permitted assignees and
transferees under Section 6.4 shall be considered as one "Finder" for
this purpose, so that as a group they are limited by the number of
opportunities specified in this Section 8.18(b).
(c) The Company, NAMGC and Williams agree that the Company will
attempt to finance each new project with debt, to the extent possible.
If down payments or other equity is required, Williams and NAMGC will
discuss and determine whether the Company has sufficient funds to make
any such down payment or equity payment, or whether the Members will
make additional capital contributions to fund such down payment, or
whether the Company will allow other equity participants to be owners
of such project, upon such terms and conditions as Williams and NAMGC
shall agree. If Williams and NAMGC agree that additional capital
contributions should be made by the Members, to the extent the
"Finder's Fee" (discussed in Section 8.18(f) below) payable to
Williams for such project is not sufficient to fund his share of the
capital contribution, then NAMGC shall loan to Williams any shortfall.
Any such loan to Williams by NAMGC to cover any shortfalls shall bear
interest at 2% over the fluctuating prime rate announced from time to
time in The Wall Street Journal. If capital contributions are
required, they shall be made 51% by Williams and 49% by NAMGC. If
NAMGC loans the amount of any shortfall to Williams, Williams agrees
to pledge and assign to NAMGC all cash flow distributed to Williams by
the Company, not already designated for payment of his taxes or as
payment under the Note, to be applied by NAMGC to repayment in full of
such shortfall loan, and to enter into such security agreements and
other documents determined to be necessary or advisable by NAMGC to
formalize such pledge and assignment of cash flow. Subject to this
assignment and security interest, if any, all operating profits and
cash and other distributions from any new projects, other than the
five existing video poker casinos operated by the Company as of the
date of this Amendment, shall be allocated and distributed 51% to
Williams and 49% to NAMGC, and each such new projects will be
accounted for separately so that operating profit shall mean the gross
revenues attributable to such location after reduction for related
debt service for such location, rental payments for such location,
other expenses directly related to such location, a prorata portion of
the salary paid to Donald I. Williams ("D. Williams"), and the
Finder's Fee paid to D. Williams for such location, but prior to
payments under the Note or NAMGC's Consulting and Administrative
Agreement, other than the $50,000 attributable to such location.
(d) Subject to the limitations described in Section 8.18(b), if the
Company is not able to obtain financing for a project, through debt,
down payments, capital contributions and/or other equity participants
under the provisions of Section 8.18(c) within one hundred twenty
(120) days after electing under Section 8.18(a) to pursue an
opportunity, the Finder shall have the right to pursue such
opportunity as if the opportunity had been rejected initially by the
Company effective as of the expiration of such one hundred twenty
(120) day period, or earlier upon written notice by the
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Company and the non-presenting party that the Company will not be able
to obtain satisfactory financing to pursue the opportunity, provided,
the non-Finder shall have a right of first refusal to participate in
such opportunity upon the same terms and conditions offered by Finder
to one or more third parties, as long as the non-Finder delivers
written notice of its election to so participate to the Finder within
fifteen (15) calendar days after receipt of such terms and conditions
from Finder. Non-Finder shall not be entitled to pursue such
opportunity during the period Finder is pursuing it under this Section
8.18(d), and thereafter may pursue it only if the non-Finder brings
such opportunity first to the Company in accordance with this Section
8.18, whereupon D. Williams shall be entitled to his Finder's Fee if
the Company consummate such opportunity and D. Williams was the
original Finder.
(e) Williams hereby represents and warrants to, and agrees with,
the Company and NAMGC that neither Williams nor any affiliated person
or entity will hire or retain any employee or former employee of the
Company or NAMGC as an employee, consultant or otherwise in any other
capacity with respect to any opportunity pursued by Williams or any
affiliated person or entity.
NAMGC hereby represents and warrants to, and agrees with, the Company
and Williams that neither NAMGC nor any of its subsidiaries or
affiliated entities will hire or retain any employee or former
employee of the Company or Williams as an employee, consultant or
otherwise in any other capacity with respect to any opportunity
pursued by NAMGC or its subsidiaries or affiliated entities.
(f) The Company hereby agrees to pay D. Williams a "Finder's Fee"
(herein so called) of $50,000 for each new truck stop video poker
casino project brought to the Company by D. Williams which is accepted
and constructed by the Company, with such payment to be made upon the
Company obtaining satisfactory financing and receiving funding under
such financing arrangements to commence construction."
"8.19 Port Allen Project. NAMGC and Williams agree to use their
respective best efforts to develop the new location in Port Allen, and
to obtain the necessary financing. Upon obtaining satisfactory
financing, NAMGC will cause the existing lease covering the Port Allen
location to be assigned to River Port Truck Stop, LLC, an entity to be
formed to be owned 50% by NAMGC and 50% by Williams. NAMGC and
Williams each agree that River Port Truck Stop, LLC can issue
additional units to reduce Williams' and NAMGC's interests to no less
than 40% each (such reduction to be pro rata), at the election of
NAMGC. Williams will be paid a Finder's Fee upon the opening of the
truck stop video poker casino at this location. The operations of this
video poker casino will be accounted for separately from the five
existing video poker casinos operated by the Company as of the
Effective Date of this Amendment so that all operating profit (after
related debt service for such location, rental payments for such
location, other expenses directly
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related to such location, a prorata portion of Williams' salary, and
the Finder's Fee paid to D. Williams for such location, but prior to
payments under the Note or NAMGC's Consulting and Administrative
Agreement, other than the $50,000 attributable to such location) will
be allocated and distributed to Williams and NAMGC according to their
membership interests and sharing ratios in River Port Truck Stop,
LLC."
"8.20 License and Lease of The Gold Rush. NAMGC, for itself and Ozdon
Investments, Inc., its wholly owned subsidiary ("Ozdon"), hereby
agrees that the License to Operate Video Poker Casino ("License")
dated December 15, 1995 between Ozdon and the Company shall continue
in full force and effect until the tenth anniversary of the date of
this Amendment; provided, however, such License shall be extended by
NAMGC/Ozdon if the Company elects to extend for an additional five (5)
years the lease described in the following paragraph.
NAMGC/Ozdon also agree to enter into a ten (10) year triple net lease
with the Company, leasing to the Company the land and buildings owned
by NAMGC/Ozdon constituting The Gold Rush Truck Stop, in exchange for
rental payments of $400,000 per year pursuant to which NAMGC/Ozdon
will be responsible for foundation, outer walls and roof and the
Company will be responsible for all other repairs and maintenance.
NAMGC/Ozdon also agree to a five (5) year renewal option of such lease
if elected by Williams, on behalf of the Company, by written notice to
NAMGC/Ozdon at least one hundred eighty (180) days prior to expiration
of the initial ten (10) year term, during which renewal term the rent
will be increased (but not decreased) based on a comparison of the
Consumer Price Index at December 31, 1997 for the area in which The
Gold Rush Truck Stop is located, compared to the Consumer Price Index
for such area as of the last day of the initial ten (10) year term.
NAMGC/Ozdon will also include in the lease a right of first refusal
granted to Williams providing that in the event a sale of the land and
buildings, or any portion thereof, constituting The Gold Rush Truck
Stop is proposed, NAMGC/Ozdon will give to Williams a right of first
refusal to purchase such land and buildings, or any portion thereof,
constituting The Gold Rush Truck Stop on the same terms and conditions
as proposed in the proposed sale. In the event of a proposed sale,
Williams must exercise his right of first refusal by delivering
written notice of his election to NAMGC/Ozdon within fifteen (15) days
after delivery of notice of the proposed sale to Williams and must
enter into a binding agreement to purchase such land and buildings, or
any portion thereof, constituting The Gold Rush Truck Stop upon the
same terms and conditions as the proposed purchaser within fifteen
(15) days thereafter, with closing to occur no later than thirty (30)
days after such contract is entered into. In the event any of these
time deadlines are missed by Williams, NAMGC/Ozdon shall have the
right to sell such land and buildings, or any portion thereof,
constituting The Gold Rush Truck Stop to the proposed purchaser free
and
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clear of any restrictions or right of first refusal held by Williams
as long as such sale to such proposed purchaser is upon the terms and
conditions presented to Williams, or within five percent (5%) either
way and is closed within ninety (90) days thereafter ; but if the
variance is greater than five percent (5%) or the sale is not closed
within ninety (90) days thereafter, then NAMGC/Ozdon must re-present
the proposed purchase to Williams under this paragraph as though it
had never been presented.
The Company is authorized to negotiate and enter into a lease setting
forth the above terms, and such other terms as may be agreeable by
NAMGC and are customary in leases of this kind."
"8.21 Best Efforts to Retain Licenses. NAMGC and Williams agree to
take such actions as is deemed reasonably necessary by NAMGC, Williams
or the Company to aid the Company in retaining or obtaining any
gaming, liquor or other licenses of the Company required to operate in
Louisiana."
"8.22 Right to Inspect Books and Records. Each of the Members and
their representatives shall have the right to inspect and make copies
from all books and records of the Company at any time upon reasonable
notice to the Company".
"8.23 Section 754 Election. At the request of Williams, the Company
will make an election under Section 754 of the Code with regard to his
Membership Interests and Sharing Ratios acquired from NAMGC pursuant
to Section 2 of this Amendment."
33. Section 9.1.4 is hereby deleted.
34. Any references to "OM Investors, Inc." or "OM" which have not been
deleted or modified pursuant to this Amendment shall be deemed to be
automatically amended to refer instead to "North American Gaming and
Entertainment Corporation" or "NAMGC", as applicable.
EXECUTED as of the date and year first above written.
NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
By: /s/ E.H. Hawes, II,
----------------------------------------
Its: President
----------------------------------
/s/ Donald I. Williams
-------------------------------------------
DONALD I. WILLIAMS
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EXHIBIT 10.2
NOTE
$4,000,000.00 April 15, 1998
FOR VALUE RECEIVED, the undersigned, Donald I. Williams (the "Maker"),
hereby promises to pay to North American Gaming and Entertainment Corporation
(the "Payee") the principal amount of Four Million and no/100 Dollars
($4,000,000.00), together with interest at a rate per annum equal to nine
percent (9%). Interest payable under this Note shall be computed on the basis
of a 365-day year and actual days elapsed.
Notwithstanding any provision of this Note to the contrary, in the event OM
Operating, LLC ("Operating") loses the right to participate in the revenues
generated from any of the existing video poker casinos (the "Existing Casinos")
operated by Operating as of the date of this Note (known as The Gold Rush,
King's Lucky Lady, Pelican Palace, Lucky Longhorn and The Diamond Jubilee), then
the outstanding principal balance of this Note shall be reduced by an amount
determined under the following formula. The remaining principal balance will be
reduced by the amount found by multiplying the remaining principal balance by
the following applicable percentage, depending on which Existing Casino was
lost: 38.9% for The Gold Rush; 16.8% for King's Lucky Lady; 18.9% for Pelican
Palace; 22.1% for Lucky Longhorn, and 3.3% for The Diamond Jubilee. The
remaining principal balance will be reduced automatically by such amount and the
payments of principal due hereunder shall be automatically reduced
proportionately.
This Note is a "cash flow" note and is payable only from distributions of
"Cash Flow" (as hereinafter defined) to Maker by Operating generated from the
Existing Casinos, less the amount necessary to pay any federal and state income
tax liability Maker may have for Maker's share of the taxable income of
Operating attributable to the Existing Casinos (net of the amount of interest
accrued or paid on the Note during the corresponding period for which Maker
receives a tax deduction and net of any depreciation expense relating to the
Existing Casinos for the corresponding period for which Maker receives a tax
deduction), as described in this paragraph. Payments under this Note shall be
applied first against accrued interest and then against principal. In the event
Cash Flow is distributable to Maker under the terms of the Operating Agreement
of Operating, as amended from time to time, Maker hereby authorizes and directs
Operating to make payment of such Cash Flow directly to Payee and hereby holds
Operating harmless from any claim for making such payment directly to Payee.
Further, Maker hereby appoints Payee as its attorney-in-fact, which appointment
shall be deemed irrevocable and coupled with an interest, to make demand upon
and receive payment from Operating on behalf of Maker in the amount of such Cash
Flow distributable to Maker. For purposes of this Note, "Cash Flow" means, for
each month, any net cash available to Operating from the operation of the
Existing Casinos, or the sale of any Existing Casinos, after payment of (i) the
operating and other expenses of Operating with respect to the Existing Casinos,
including, without limitation, a proportionate part of the salary of Maker
payable by Operating based on the number of Existing Casinos compared to the
total video poker casinos operated by Operating at such time, (ii) the fees
payable to Payee by Operating under that certain Consulting and
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Administrative Agreement between Operating and Payee dated of even date
herewith, (iii) rental payments attributable to the Existing Casinos, (iv) any
applicable state, local and federal taxes payable by Operating relating to the
Existing Casinos, (v) capital or leasehold improvements with respect to the
Existing Casinos, and (vi) any payment of debts of Operating entered into for
the benefit of one or more of the Existing Casinos. Payee shall deliver to Maker
a report within fifteen days after receipt of any Cash Flow from Operating
reflecting the amount received and the application thereof by Payee.
This Note is secured by and entitled to the benefits of that certain
Assignment and Security Agreement (herein so called) entered into of even date
herewith between Maker and Payee. This note is a limited recourse Note and,
notwithstanding any provision herein to the contrary, Payee shall have recourse
against Maker only to the extent of the Collateral (as defined in the Assignment
and Security Agreement) and shall have no personal recourse against Maker upon
foreclosure by Payee on the Collateral, including any recourse for any
deficiency Payee may experience upon any sale or other disposition of the
Collateral.
Except as otherwise expressly provided herein, Maker and each surety,
endorser, and guarantor of this Note hereby severally waives demand and
presentation for payment, notice of non-payment, protest and notice of protest,
and the diligence of bringing suit against any party hereto and consents that
time of payment may be extended from time to time without notice thereof to him,
her or it.
All amounts payable hereunder by Maker shall be payable to the Payee at the
address set forth below or at such other place as Payee or the holder hereof
may, from time to time, indicate in writing to Maker, and shall be made by Maker
in lawful money of the United States in cash or its equivalent at such place of
payment.
This Note may be prepaid in whole or in part at any time and from time to
time without premium or penalty. Any partial prepayments shall be applied first
to any accrued interest due and payable and then to the outstanding principal
installments in inverse order of maturity.
If any payment required to be made hereunder becomes due and payable on a
non-business day, the maturity thereof shall extend to the next business day and
interest shall be payable at the rate applicable thereto during such extension.
The term "business day" shall mean a calendar day excluding Saturdays, Sundays
or other days on which banks in the State of Texas are required or authorized to
remain closed.
If this Note is placed in the hands of an attorney for collection, Maker
agrees to pay reasonable attorneys' fees and costs and expenses of collection,
including but not limited to court costs.
This Note is given for an actual lending transaction for business purposes
and not for personal, residential or agricultural purposes.
This Note shall be governed by and construed in accordance with the laws of
the State of
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Texas and applicable laws of the United States.
In no contingency or event whatsoever shall the amount paid or agreed to be
paid by Maker, received by Payee, or requested or demanded to be paid by Maker
exceed the maximum amount permitted by applicable law. In the event any such
sums paid to Payee by Maker would exceed the maximum amount permitted by
applicable law, Payee shall automatically apply such excess to the unpaid
principal amount of this Note or, if the amount of such excess exceeds the
unpaid principal amount of this Note, such excess automatically shall be applied
by Payee to the unpaid principal amount of other indebtedness, if any, owed by
Maker to Payee, or if there be no such other indebtedness, such excess shall be
paid to Maker. All sums paid or agreed to be paid by Maker, received by Payee,
or requested or demanded to be paid by Maker which are or hereafter may be
construed to be or in respect of compensation for the use, forbearance, or
detention of money shall, to the extent permitted by applicable law, be
amortized, prorated, spread and allocated throughout the full term of all
indebtedness of Maker to Payee, to the end that the actual rate of interest
hereon shall never exceed the maximum rate of interest permitted from time to
time by applicable law.
EXECUTED as of the date first above written.
Address of Payee: MAKER:
13150 Coit Road
Suite 125
Dallas, Texas 75240 /s/ Donald I. Williams
--------------------------------------
Donald I. Williams
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EXHIBIT 10.3
ASSIGNMENT AND SECURITY AGREEMENT
THIS ASSIGNMENT AND SECURITY AGREEMENT (the "Agreement") is made, executed
and entered into this 15th day of April, 1998, between and among North American
Gaming and Entertainment Corporation ("Secured Party") and Donald I. Williams
("Pledgor").
W I T N E S S E T H:
-------------------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
SECURITY INTEREST
Pledgor hereby creates and grants to the Secured Party a security interest
in the property described in Article II hereof to secure the payment and
performance of the obligations of Pledgor to the Secured Party set forth in
Article III hereof.
ARTICLE II
COLLATERAL
The property in which the security interest is created is all of Pledgor's
right, title and interest in and to an aggregate fifty-one percent (51%)
Membership Interests and Sharing Ratios (collectively, the "Interests") in OM
Operating, LLC (the "Company") represented by Member Certificate No. 2, together
with all distributions of Cash Flow (as hereafter defined) from time to time
paid, payable, distributed or distributable by the Company to Pledgor in respect
of or related to the Interests, together with all proceeds (hereinafter referred
to as the "Collateral").
Pledgor hereby assigns to Secured Party all distributions of "Cash Flow"
(hereafter defined) made or to be made by the Company to Pledgor in respect of
or related to the Interests and authorizes Secured Party to apply any such
amounts received by Secured Party to repayment of the Note (hereafter defined),
first in payment of accrued interest and then as payment of principal. Pledgor
further hereby authorizes and directs the Company to make payment or
distributions directly to Secured Party of such Cash Flow from time to time
paid, payable, distributed or distributable to Pledgor in respect of or related
to the Interests; and Pledgor hereby appoints Secured Party as its attorney-in-
fact, which appointment shall be deemed irrevocable and coupled with an
interest, to make demand upon and receive payment from the Company on behalf of
Pledgor for any such Cash
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Flow. Secured Party is required to apply such distributions of Cash Flow to the
Note upon receipt. Notwithstanding the foregoing, or any other provision of this
Agreement or the Note to the contrary, Secured Party agrees to release and
deliver to Pledgor, out of any Cash Flow distributed to Pledgor by the Company
hereunder or under the Note, an amount equal to the quarterly federal and/or
state income tax liability of Pledgor attributable to Pledgor's prorata share of
the net taxable income of the Company for the preceding calendar quarter
attributable to the "Existing Casinos" (as hereinafter defined), net of the
amount of interest accrued or paid on the Note for the corresponding period for
which Pledgor received a tax deduction and depreciation expense attributable to
the Existing Casinos for the corresponding period for which Pledgor received a
tax deduction, if Pledgor is required to make estimated quarterly payments to
the Internal Revenue Service; and, if not, Secured Party agrees to release and
deliver to Pledgor prior to filing of Pledgor's federal income tax return an
amount of Cash Flow equal to the federal and/or state income tax liability of
Pledgor attributable to Pledgor's prorata share of the net taxable income of the
Company for the preceding taxable year attributable to the Existing Casinos, net
of the amount of interest accrued or paid on the Note for the corresponding
period for which Pledgor received a tax deduction and depreciation expense
attributable to the Existing Casinos for the corresponding period for which
Pledgor received a tax deduction. If quarterly distributions are made, Pledgor
shall deliver a reconciliation to Secured Party at the time of filing of his
federal and/or state income tax return and if the quarterly distributions
exceeded the amount of his income tax liability, Pledgor shall immediately pay
to Pledgor the amount of such excess for payment on the Note. Pledgor shall, as
a condition precedent to any such release and delivery by Secured Party, furnish
to Secured Party such information and documentation reasonably requested by
Secured Party establishing the existence of this federal and/or state income tax
liability attributable to the net taxable income of the Company from the
operations of the Existing Casinos. For purposes of this Agreement, the
"Existing Casinos" shall mean the five existing video poker casinos operated by
the Company as of the date of this Agreement, The Gold Rush, King's Lucky Lady,
Pelican Palace, Lucky Longhorn and The Diamond Jubilee, or whichever of those
Existing Casinos shall be in operation by the Company for the applicable taxable
year to which the federal income tax liability relates. For purposes of this
Agreement, "Cash Flow" shall have the same meaning as in the Note.
ARTICLE III
OBLIGATION SECURED
This Agreement shall secure the payment and performance of the Obligation
of Pledgor to Secured Party. The term "Obligation", as used herein, means:
(i) all principal and interest accruing under that certain Note (herein
so called) executed of even date herewith payable to Secured Party by Pledgor,
including interest, collection and attorneys' fees as therein provided;
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(ii) all loans and advances which Secured Party may hereafter make to
Pledgor but insofar and only insofar as same relate to this Agreement or the
Note payable to Secured Party;
(iii) all indebtedness and liabilities of Pledgor to Secured Party at
any time arising under the terms thereof and all renewals and extensions
thereof, or any part thereof;
(iv) performance and discharge of each and every obligation, covenant and
agreement of Pledgor herein contained; and
(v) any and all renewals or extensions of any of the foregoing debts,
obligations and liabilities or any part thereof.
ARTICLE IV
WARRANTY AND REPRESENTATION OF PLEDGOR
Pledgor represents and warrants that:
(i) Pledgor has full authority and capacity to execute and deliver this
Agreement;
(ii) no financing statement covering the Collateral, or any part thereof,
has been filed with any filing officer;
(iii) no other security agreement covering the Collateral, or any part
thereof, has been made and no security interest, other than the one herein
created, has attached or been perfected in the Collateral or in any part
thereof;
(iv) no dispute, right of setoff, counter-claim or defense exists with
respect to all or any part of the Collateral;
(v) except for matters arising by reason of state or federal securities
laws, there are no restrictions upon the transfer of any of the Collateral;
(vi) Pledgor has the right to transfer the Collateral free of any liens,
claims or encumbrances and without obtaining the consent of any other party
which has not already been obtained, and the transfer of the Collateral will not
result in a default under any agreement to which Pledgor or the Company is a
party; and
(vii) Pledgor is the owner of the Collateral.
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ARTICLE V
COVENANTS AND OBLIGATIONS OF PLEDGOR
Pledgor covenants and agrees to:
(i) deliver to the Secured Party the original member certificate which
represents the Collateral, together with a power of attorney endorsing the
Collateral to Secured Party in the form attached hereto as Exhibit "A";
(ii) from time to time promptly execute and deliver to Secured Party all
such other assignments, certificates, supplemental writings, financing
statements and continuation statements, and do all other acts or things, as
Secured Party may reasonably request in order to more fully evidence and perfect
the security interest herein created;
(iii) promptly furnish Secured Party with any information which Secured
Party may reasonably request concerning the Collateral;
(iv) allow Secured Party to inspect all records of Pledgor relating to the
Collateral, and to make and take away copies of such records;
(v) promptly notify Secured Party of any change in any fact or
circumstance warranted or represented by the Pledgor in this Agreement or in any
other writing furnished by Pledgor to Secured Party in connection with the
Collateral;
(vi) promptly notify Secured Party of any claim, action or proceeding
affecting title to the Collateral, or any part thereof, or the security interest
therein, and at the request of Secured Party, appear in and defend, at Pledgor's
expense, any such action or proceeding; and
(vii) promptly notify Secured Party of any change of address of
Pledgor.
Pledgor further covenants and agrees that, without the prior written
consent of Secured Party, Pledgor will not: (a) sell, assign or transfer any of
Pledgor's rights in the Collateral; or (b) create any other security interest
in, or otherwise encumber, the Collateral, or any part thereof, or permit the
same to be or become subject to any lien, attachment, execution, sequestration,
other legal or equitable process, or any encumbrance or security agreement of
any kind or character.
Should the Collateral, or any part thereof, ever be in any manner converted
by the Company into another type of property or any money or other proceeds ever
be paid or delivered to Pledgor as a result of Pledgor's rights in the
Collateral, then, in any such event, all such property, money and other proceeds
shall become part of the Collateral, shall be held by Pledgor in trust for the
benefit of Secured Party, and Pledgor covenants to forthwith pay or deliver to
Secured Party all of the same
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and, at the same time, if Secured Party deems it necessary and so requests,
Pledgor will properly endorse or assign the same. With respect to any of such
property of a kind requiring an additional security agreement, financing
statement or other writing to perfect a security interest therein in favor of
Secured Party, Pledgor will forthwith execute and deliver to Secured Party
whatever the Secured Party shall reasonably deem necessary or proper for such
purpose. Should any covenant or agreement of Pledgor fail to be performed in
accordance with its terms, Secured Party may, but never shall be obligated to,
perform or attempt to perform such covenant or agreement on behalf of Pledgor
and Pledgor agrees to pay to Secured Party any such amount reasonably expended
by Secured Party in such performance or attempted performance, together with
interest thereon at the rate specified in the Note.
ARTICLE VI
EVENTS OF DEFAULT; RIGHTS OF SECURED PARTY UPON DEFAULT
The term "default", as used herein, means the occurrence of any of the
following events:
(i) the failure of Pledgor to pay (a) any installment of principal or
interest under the Note, which failure continues for thirty (30) calendar days
after notice thereof from Secured Party to Pledgor or (b) any other portion of
the Obligation, which failure continues for thirty (30) calendar days after
notice thereof from Secured Party to Pledgor; provided, however, it shall not be
a default by Pledgor if the Company fails to or is prohibited from timely
distributing to Secured Party the Cash Flow to be made to Pledgor, as provided
herein and in the Note, unless such failure or prohibition is as a result of any
act by Pledgor to prevent or restrict the Company from making timely
distributions to Secured Party, in which case Pledgor shall be deemed to be
immediately in default; or
(ii) the failure of Pledgor to punctually and properly perform any
material covenant or agreement contained herein or in the Note, which failure
continues for thirty (30) calendar days after notice thereof from Secured Party
to Pledgor.
Upon the occurrence of a default, in addition to any and all other rights
and remedies which Secured Party may then have hereunder, or under the Texas
Uniform Commercial Code (the "Code"), or otherwise, Secured Party, at its
option, may:
(i) declare the entire unpaid balance of principal of and all accrued
interest on the Obligation immediately due and payable, without notice, demand,
protest or presentment;
(ii) reduce any claim against Pledgor to judgment and otherwise enforce
collection of the same;
(iii) foreclose or otherwise enforce its security interest in all or
any part of the Collateral
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by any available judicial procedure;
(iv) after notification, if any, as provided for herein, sell or
otherwise dispose of, at such location chosen by Secured Party, all or any part
of the Collateral, and any such sale or other disposition may be as a unit or in
parcels, by public or private proceedings, and for cash or upon credit or
otherwise as Secured Party may reasonably determine, and by way of one or more
contracts (it being agreed that the sale of any part of the Collateral, shall
not exhaust Secured Party's power of sale, but sales may be made from time to
time until all of the Collateral has been sold or until the Obligation has been
paid in full), and at any such sale it shall not be necessary to exhibit the
Collateral;
(v) apply by appropriate judicial proceedings for appointment of a
receiver for the Collateral, or any part thereof, and Pledgor hereby consents to
any such appointment;
(vi) buy the Collateral at any public sale;
(vii) buy the Collateral at any private sale if the Collateral is of a
type customarily sold in a recognized market or is a type which is the subject
of widely distributed standard price quotations; and
(viii) without notice to Pledgor, either have the Collateral registered
in Secured Party's name, or in the name of a nominee, and, with or without such
registration, (a) exercise as to such Collateral all the rights, powers and
remedies of an owner, including the right and power to vote, (b) enter into any
extension, reorganization, merger or consolidation agreement, or any other
agreement in any way relating to or affecting the Collateral, and in connection
therewith may deposit or surrender control of the Collateral and accept other
property in exchange therefor, and (c) demand of the Company to receive any and
all dividends and other distributions payable in respect thereof, regardless of
the medium in which paid and whether they be ordinary or extraordinary, and the
Company, in making payment to Secured Party hereunder, shall be fully protected
in relying on the written statement of Secured Party that he then holds a
security interest which entitles him to receive such payment, and the receipt of
Secured Party for such payment shall be full acquittance therefor to the Company
and the Company shall not be required to see the application of such payment;
provided, however, Secured Party shall have no duty to exercise any of the
foregoing rights, privileges or options and shall not be responsible for any
delay or failure to do so.
Secured Party shall have no duty to fix or preserve the rights against any
other party having an interest in the Collateral, and shall never be liable for
its failure to use diligence to collect any amount payable in respect to the
Collateral, but shall be liable only to account to Pledgor for what Secured
Party may actually collect or receive thereon. Pledgor agrees that the Secured
Party shall have no responsibility for ascertaining any maturities, calls,
conversions, exchanges, offers, tenders or similar matters relating to any of
the Collateral, nor for informing Pledgor with respect to any
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thereof.
Secured Party shall be entitled to apply the proceeds of any sale or other
disposition of the Collateral in the following order: first, to the payment of
all of Secured Party's reasonable expenses, including, without limitation,
attorneys' fees and other legal expenses, incurred in holding and preparing the
Collateral, or any part thereof, for sale or other disposition, in arranging for
such sale or other disposition, and in actually selling the same; and next,
toward payment of the balance of the Obligation in such order and manner as
Secured Party, in its discretion, may deem advisable. Secured Party shall
account to Pledgor for any surplus after making the foregoing application and,
if any Collateral remains unsold, shall return such Collateral to Pledgor. If
the proceeds are not sufficient to pay the Obligation in full, Pledgor shall not
be liable for any deficiency, it being understood that the Note and Obligation
are limited recourse obligations of Pledgor and, notwithstanding any provision
herein to the contrary, Secured Party shall have recourse against Pledgor only
to the extent of the Collateral.
ARTICLE VII
RIGHTS OF PLEDGOR
Unless and until occurrence of an event of "default" as herein defined,
Pledgor shall have all ownership rights in and to the Collateral, including the
right to vote the Interests and the right to receive distributions of cash and
property relative to the Interests, other than distributions of Cash Flow which
are to be applied as payment on the Note as provided herein and in the Note.
Secured Party agrees not to record the transfer of the Interests into its name
pursuant to the Power of Attorney until a default has occurred, at which time
such transfer may be made. If requested by Pledgor, Secured Party shall execute
and deliver to Pledgor such proxies and authorizations as are reasonably
required to confirm the voting rights of Pledgor.
ARTICLE VIII
SECURITIES LAW
The Secured Party is authorized, at any sale, if it deems it desirable so
to do, to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing for their own account, for
investment, and not with a view to distribution or sale of any of the
Collateral.
If any default shall have occurred and if Secured Party determines to
exercise its rights to sell all or any of the Collateral, upon request the
Pledgor shall from time to time furnish to Secured Party all such information as
Secured Party may request in order to determine the number of shares included in
the Collateral which may be sold by Pledgor in exempt transactions under Section
4(1) of the Securities Act of 1933, as amended, and Rule 144 of the Securities
and Exchange Commission thereunder (or any statutory provisions or rules in
effect in lieu thereof), as the same are from time
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to time in effect.
Pledgor recognizes and acknowledges that Secured Party may be unable to
effect a public sale of all or a part of the Collateral (time being of the
essence) and may elect to resort to one or more private sales to purchasers who
will be obligated to agree, among other things, to acquire the Collateral for
their own account, for investment, and not with a view to the distribution or
resale thereof. Pledgor acknowledges that any such private sales may be at
prices and on terms less favorable to Secured Party than those of public sales,
provided such private sales shall be made in a commercially reasonable manner.
ARTICLE IX
NOTIFICATION OF SALE
Reasonable notification of the time and place of any public sale of the
Collateral, or reasonable notification of the time after which any private sale
or other intended disposition of the Collateral is to be made, shall be sent to
Pledgor at the address set forth on the signature page hereof, or at such other
address which Pledgor may give to Secured Party from time to time, and to any
other person entitled under the Code to notice.
ARTICLE X
FINANCING STATEMENT
Secured Party shall have the right at any time to file this Agreement, or a
photographic or other reproduction hereof, as a financing statement, and to
attach to the same a description of all Collateral at the time subject to this
Agreement, but the failure of Secured Party to do so shall not impair the
validity or enforceability of this Agreement.
ARTICLE XI
REMEDIES CUMULATIVE
All rights and remedies of Secured Party hereunder are cumulative of each
other and of every other right or remedy which Secured Party may otherwise have
at law or in equity or under any other contract or other writing for the
enforcement of the security interest herein or the collection of the Obligation,
and the exercise of one or more rights or remedies shall not prejudice or impair
the concurrent or subsequent exercise by Secured Party of other rights or
remedies.
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ARTICLE XII
TRANSFER AND ASSIGNMENT BY SECURED PARTY
The rights, powers and interests held by Secured Party hereunder, together
with the Collateral, may be transferred and assigned by Secured Party, in whole
or in part, at such time and upon such terms as Secured Party may deem advisable
to any person who shall acquire any part of the Obligation, and upon any such
transfer or assignment, the transferee or assignee shall succeed to all the
rights and powers of, and be subject to the duties and obligations of, Secured
Party hereunder to the extent of any such transfer and assignment.
ARTICLE XIII
NO WAIVER OF RIGHTS OR REMEDIES
Should any part of the Obligation be payable in installments, the
acceptance by Secured Party at any time and from time to time of part payment of
the aggregate amount of all installments then matured shall not be deemed to be
a waiver of the default, if any, then existing. No waiver by Secured Party of
any default shall be deemed to be a wavier of any other subsequent default, nor
shall any such waiver by Secured Party be deemed to be a continuing waiver. No
modification or waiver of any provision of this agreement or of any promissory
note or other security agreement, mortgage, deed of trust, assignment or
contract of any kind evidencing or securing payment of the Obligation, or any
part thereof, shall be effective unless the same shall be in writing and signed
by Secured Party. No delay or omission by Secured Party in exercising any right
or power hereunder, or under any other writings executed by Pledgor as security
for or in connection with the Obligation, shall impair any such right or power
or be construed as a waiver thereof or any acquiescence therein, nor shall any
single or partial exercise of any such right or power preclude other or further
exercise thereof, or the exercise of any other right or power of Secured Party
hereunder or under such other writings.
ARTICLE XIV
BINDING EFFECT
This Agreement shall be binding on Pledgor and Pledgor's successors and
assigns and shall inure to the benefit of Secured Party and its successors and
assigns.
ARTICLE XV
LAW GOVERNING; JURISDICTION
All obligations of each Pledgor under this Agreement are performable in
Dallas County, Texas. This Agreement shall be deemed made in Dallas County,
Texas and shall be governed by, and construed in accordance with, the laws of
the State of Texas. Any legal action or proceeding
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with respect to this agreement or the Note and any actions for enforcement of
any judgment in respect thereof may be brought in the courts of the State of
Texas located in Dallas County, Texas or of the United States of America for the
Northern District of Texas, and, by execution and delivery of this Agreement,
Pledgor hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. Pledgor irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to Pledgor at the address set forth opposite its signature
below. Pledger hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement or the Note
brought in the courts referred to above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
Nothing herein shall affect the right of Secured Party or any holder of the Note
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise proceed against Pledgor in any other jurisdiction.
ARTICLE XVI
HEADINGS
All headings set forth in this Agreement are intended for convenience only
and shall not control or affect the meaning, construction or effect of this
Agreement or any of the provisions hereof.
ARTICLE XVII
SEVERABILITY
All agreements and covenants contained herein are severable and in the
event that any of them shall be held to be invalid by any court of competent
jurisdiction, this Agreement shall be interpreted as if such invalid agreements
or covenants were not contained herein.
ARTICLE XVIII
TERMINATION OF SECURITY AGREEMENT
Upon the payment by Pledgor of all principal and accrued interest due
pursuant to the terms of the Note and payment by Pledgor of the remainder of the
Obligation, if any, this Agreement shall terminate. Upon such termination,
Secured Party shall promptly return to Pledgor the member certificate
representing the Collateral, together with the power of attorney executed by
Pledgor in favor of Secured Party.
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ARTICLE XIX
NOTICES
Any notice shall be conclusively deemed to have been received by a party
hereto and to be effective on the day on which delivered to such party at the
address set forth below beside each party's signature hereto (or at such other
address as such party shall specify to the other parties in writing), or if sent
by registered mail, on the third business day after the day on which mailed,
addressed to such party at the same address.
ARTICLE XX
ENTIRE AGREEMENT
This Agreement supersedes any and all other agreements, either oral or in
writing, between the parties hereto with respect to the subject matter hereof
and contains all of the covenants and agreements between the parties with
respect to the subject matter hereof.
ARTICLE XXI
WAIVERS AND AMENDMENTS
No term or condition of this Agreement shall be deemed to have been waived
nor shall there be any estoppel to enforce any provision of this Agreement
except by written instrument of the party charged with such waiver or estoppel.
No amendment or modification of this Agreement shall be deemed effective unless
and until executed in writing by the parties hereto.
ARTICLE XXII
MULTIPLE COUNTERPARTS
This Agreement may be executed in two (2) or more counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute one and the same instrument and any of the parties hereto may execute
this Agreement by signing any such counterpart.
EXECUTED by Pledgor and Secured Party effective the date and year first
above written.
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ADDRESS AND TELECOPY NUMBER PLEDGOR:
FOR NOTICES TO PLEDGOR:
903 East Main /s/ Donald I. Williams
New Roads, Louisiana 70760 --------------------------------------
Fax: (504) 638-4618 Donald I. Williams
ADDRESS AND TELECOPY NUMBER SECURED PARTY:
FOR NOTICES TO SECURED PARTY: NORTH AMERICAN GAMING AND
ENTERTAINMENT CORPORATION
13150 Coit Road
Dallas, Texas 75240 By: /s/ E. H. Hawes, II
Fax: (972) 671-1134 -----------------------------------
Its: President
----------------------------------
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EXHIBIT "A"
TO
ASSIGNMENT AND SECURITY AGREEMENT
POWER OF ATTORNEY
FOR VALUE RECEIVED, DONALD I. WILLIAMS hereby sells, assigns and transfers
unto North American Gaming and Entertainment Corporation the undersigned's
Membership Interest in OM Operating LLC (the "Company") representing 51% of the
aggregate Membership Interests and Sharing Ratios in the Company in the name of
the undersigned on the books of the Company represented by Member Certificate
No.__________ and hereby irrevocably constitutes and appoints North American
Gaming and Entertainment Corporation, attorney to transfer the said Membership
Interests and Sharing Ratios on the books of the Company with full power of
substitution in the premises.
DATED: April __, 1998.
_________________________________
Donald I. Williams
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EXHIBIT 10.4
CONSULTING AND ADMINISTRATIVE AGREEMENT
THIS CONSULTING AND ADMINISTRATIVE AGREEMENT (the "Agreement") is made and
entered into effective as of April 15, 1998 (the "Effective Date"), by and
between North American Gaming and Entertainment Corporation ("Consultant") and
OM Operating, LLC (the "Company").
WHEREAS, the Company presently operates five truck stop video poker casinos
in Louisiana under the terms of various agreements with other parties known as
The Gold Rush, King's Lucky Lady, Pelican Palace, Lucky Longhorn and The Diamond
Jubilee (collectively, the "Casinos"); and
WHEREAS, Consultant provides consulting and administrative services
regarding the management and operation of truck stop video poker casinos and/or
other gaming properties; and
WHEREAS, the Company desires to engage and retain Consultant to provide
consulting and administrative expertise in the management and operation of the
Casinos, and Consultant agrees to provide such consulting and administrative
services, in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
ENGAGEMENT OF CONSULTANT
1.1 APPOINTMENT OF CONSULTANT. Subject to the terms and provisions of
this Agreement, the Company hereby engages, appoints and retains Consultant to
perform the duties set forth in this Agreement for the term set forth in Article
II.
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1.2 ACCEPTANCE. Subject to the terms and provisions of this Agreement,
Consultant hereby accepts such engagement, appointment and retention by the
Company and agrees to perform the duties set forth in this Agreement for the
term set forth in Article II.
1.3 RELATIONSHIP OF PARTIES. This Agreement does not create a
relationship of partnership, corporation, joint venture, association for profit,
or any other relationship among Consultant and the Company, such that Consultant
shall be liable in any manner for the obligations of the Company, or the Company
shall be liable in any manner for the obligations of Consultant. Consultant
shall at all times during the term hereof act as an independent contractor and
none of Consultant's employees, subcontractors, agents or representatives shall
be considered employees, subcontractors, agents or representatives of the
Company. Likewise, none of the employees, subcontractors, agents or
representatives of the Company shall be considered employees, subcontractors,
agents or representatives of Consultant. Consultant shall make provision for
and pay, and hold the Company harmless in respect of, all claims, benefits,
taxes and withholding due in connection with or asserted by the employees,
subcontractors, agents or representatives of Consultant. Likewise, the Company
shall make provision for and pay, and hold Consultant harmless in respect of,
all claims, benefits, taxes and withholding due in connection with or asserted
by the employees, subcontractors, agents or representatives of the Company.
1.4 BASIS FOR ACCEPTANCE BY CONSULTANT. In order to induce Consultant to
enter into this Agreement and to provide the services provided for herein, the
Company represents, warrants and agrees that the overriding premise under which
Consultant has agreed to consult with and advise the Company is that existing
notes payable by the Company to banks and to other parties, as well as ongoing
operating payables and indebtedness, will be timely paid by the Company, all
future tax reports will be timely filed and all payments thereunder will be
timely made by the Company, and the Company will comply with all laws, statutes,
regulations, rules and ordinances applicable to it.
1.5 ADDITION OF CASINOS. In the event the Company obtains the right after
the Effective Date to operate, manage, lease, sublease or otherwise participate
in the revenues generated from a new video poker casino, such casino shall, from
the Effective Date of the Company obtaining such right, be considered a "Casino"
hereunder for all purposes.
ARTICLE II
TERM AND TERMINATION
2.1 TERM. The term of this Agreement shall commence on the Effective Date
and continue until (i) the fourth anniversary of the Effective Date, or (ii)
payment in full of that certain $4,000,000 Note (the "Note") dated of even date
herewith payable to Consultant by Donald I. Williams, whichever occurs last (the
"Initial Term"), unless earlier terminated as provided herein. At the end of the
Initial Term of this Agreement, the Company agrees that Consultant shall have
the option to extend this Agreement for an additional term of the lesser of (a)
six years or (b) the number of years which, when added to the Initial Term,
would total twelve years, and if the Initial Term exceeded twelve years, then
Consultant shall not have the option to extend this Agreement on
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expiration of the Initial Term. In the event Consultant elects to extend this
Agreement for the additional term, all of the terms and conditions of this
Agreement shall continue to apply to such extended term; provided, however, that
the fee payable under Section 5.1 shall be altered to such amount as the parties
may agree among themselves, or if they are not able to agree, then to such
amount determined to be a fair and reasonable fee for the services provided, as
determined by an arbitrator pursuant to binding arbitration conducted in Dallas,
Texas in accordance with the rules of the American Arbitration Association, and
the parties hereto agree to abide by such amount as set by said arbitrator.
2.2 TERMINATION. Notwithstanding anything in this Agreement to the
contrary, this Agreement and the term of Consultant's engagement, appointment
and retention under this Agreement may be terminated under the following
circumstances:
(a) at any time, at the election of Consultant by delivery of written
notice to the Company, if the Company fails to timely make any payment to
Consultant due under the terms of this Agreement;
(b) at any time, at the election of Consultant by delivery of written
notice to the Company, if there is instituted by or against the Company any
proceedings under any federal or state bankruptcy law, or under any other
law for the relief of debtors now or hereafter existing, or a receiver is
appointed for all or substantially all of the assets of the Company;
(c) at any time, at the election of Consultant by delivery of written
notice to the Company, if the Company shall (i) become insolvent, (ii)
generally fail to, or admit in writing its inability to, pay debts as they
become due, (iii) make a general assignment for the benefit of creditors
after the Effective Date, or (iv) apply for, consent to or acquiesce in the
appointment of a trustee, receiver, or other custodian;
(d) at any time, at the election of Consultant by delivery of written
notice to the Company, if a substantial portion of the assets or properties
of the Company shall be seized or taken by order of a governmental or
judicial authority, if any order of attachment, garnishment, or any other
writ shall be issued against the Company or any of its assets, or if any
other lawful creditor's remedy shall be asserted or exercised with respect
thereto;
(e) at the election of the Company, acting through the written
election of Donald I. Williams or his successors or assigns on behalf of
the Company, if Consultant breaches any material provision hereof or
defaults with regard to any material performance hereunder, which breach or
default is not cured within thirty (30) days following written notice of
such breach or default by the Company to Consultant specifically
identifying the alleged breach or default; or
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(f) at the election of the Company, acting through the written
election of Donald I. Williams or his successors or assigns on behalf of
the Company, if a final determination has been made by applicable
governmental authorities in accordance with applicable administrative and
judicial process that Consultant ceases to meet the suitability
requirements, if any, under the Louisiana Video Draw Poker Devices Control
Law or then applicable gaming laws ("Applicable Laws") necessary to serve
Company in the capacity contemplated under this Agreement; subject,
however, to the rights of Consultant to assign this Agreement to a suitable
person, as provided in Section 2.4.
2.3 SETTLING OF ACCOUNT. Upon termination of this Agreement, neither
Consultant nor the Company shall have any further rights or obligations with
respect to the other, except as is reasonably necessary to wind up the affairs
of such parties, pay all sums due, one to the other, and complete the transfer
of records by Consultant to the Company. Except as to any amounts owing to
Consultant for services rendered by Consultant prior to the termination of this
Agreement (including expense reimbursements), Consultant shall not be entitled
to receive any further or additional reimbursement or compensation after such
termination.
2.4 ASSIGNMENT BY CONSULTANT. In the event of a possible termination of
this Agreement pursuant to Section 2.2(f), or the sale by Consultant of all or a
portion of its Membership Interests and Sharing Ratios in the Company in
accordance with Sections 6.5 or 6.6 of the Operating Agreement, as amended, of
the Company (the "Operating Agreement"), Consultant shall be entitled to assign
this Agreement to a person who meets the suitability requirements of Applicable
Laws in the event of a possible termination under Section 2.2(f), or to the
proposed assignee of Consultant's Membership Interests and Sharing Ratios (or an
affiliated entity thereof), as long as such proposed purchaser or affiliate
meets the suitability requirements of Applicable Laws, provided the Company,
acting through the written election of Donald I. Williams or his successors or
assigns on behalf of the Company, shall be required to consent to such
assignment, which consent shall not be unreasonably withheld. In the event of a
proposed assignment pursuant to this Section 2.4, Consultant shall deliver
written notice of proposed assignment to the Company within fifteen (15) days
following the final determination referenced in Section 2.2(f), or written
notice of a proposed purchase under Sections 6.5 or 6.6 of the Operating
Agreement, as amended, and the Company, acting through the written election of
Donald I. Williams or his successors or assigns on behalf of the Company, shall
have fifteen (15) days thereafter to provide its consent or its objection and
refusal to consent if such proposed transfer is pursuant to Section 2.2.(f)
above or Section 6.5 of the Operating Agreement; and if it is pursuant to
Section 6.6 of the Operating Agreement, the procedures set forth therein
relating to this Agreement shall be followed. If the Company objects and
withholds consent to a proposed transfer because of Section 2.2(f) of this
Agreement or Section 6.5 of the Operating Agreement, the Company must deliver
along with its written objection the specific detailed reasons for objecting to
such assignment and the reasons why the Company believes such reasons satisfy
the requirement that the consent has been withheld in the exercise of
"reasonable" discretion. If Consultant believes that such reasons do not
constitute a "reasonable" objection, Consultant shall be entitled to object by
written notice to the Company giving the reasons therefor,
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and if Consultant and the Company shall not be able to agree within five (5)
days whether the proposed assignee is acceptable or not acceptable, Consultant
shall not assign this Agreement to such proposed assignee, but shall retain all
rights and remedies, including for damages, which it may have against the
Company and Donald I. Williams and/or his successors or assigns if the rejection
by the Company, acting through the written election of Donald I. Williams or his
successors or assigns on behalf of the Company, is ultimately determined not to
have been reasonable. Consultant shall have the opportunity to present other
proposed assignees who will be reviewed in accordance with this Section 2.4 if
the determination has been made under Section 2.2(f) or Section 6.5 of the
Operating Agreement, until expiration of the period by which the applicable
governmental authorities have demanded that Consultant either cease to serve as
Consultant or assign this Agreement.
ARTICLE III
CONSULTING AND ADMINISTRATIVE SERVICES OF CONSULTANT
3.1 DUTIES OF CONSULTANT. Consultant agrees that it will devote
sufficient time and personnel to discharge its duties and responsibilities set
forth in this Agreement. Consultant's duties under this Agreement are as
follows:
(a) Payroll and Payables. Consultant shall prepare, or cause to be
prepared, all checks to be drawn on accounts of the Company from time to
time, and shall deliver to the "Designee" of the Company (as defined in
Section 4.1) a list of all such checks, including payee, check number and
dollar amount, and unless Designee has questioned any such check in writing
within three (3) days thereafter, Consultant shall be authorized to execute
and deliver such checks in the name of the Company. Consultant shall have
no liability for any payable of the Company and shall have no liability for
the delivery of any check in accordance with these procedures. Consultant
shall also reconcile bank accounts of the Company and notify the Company if
the funds in such accounts are not sufficient to meet disbursement
requirements.
(b) Receivables Management. Consultant shall consult with the Company
regarding receivables and the timely collection thereof.
(c) Cash Management. The Company agrees to make, or cause to be made,
daily deposits of all receipts in the bank accounts agreed upon between the
Company and Consultant. Further, the Company shall fax to Consultant by
10:00 a.m. each morning a copy of the deposit slips for the preceding day's
deposit of receipts so that Consultant can keep track of receipts. Other
than a reasonable petty cash account at each Casino, the Company shall not
maintain any separate cash accounts or bank accounts other than those for
which Consultant has agreed to monitor. With respect to petty cash
accounts, the Company agrees to cause stubs/receipts to be faxed daily to
Consultant so that Consultant can keep track of the
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payments made therefrom and the requirements to replenish such accounts.
(d) Financial Statements and Systems. Consultant shall recommend
casino level administrative and financial systems and policies to be
adopted by the Company. Consultant shall also prepare monthly income
statements and balance sheets of the Company for delivery to the Company
(with copies sent to Designee) within a reasonable period of time following
the closing of the books for the preceding month.
(e) Purchasing and Distribution. Consultant shall recommend
purchasing and distribution systems and policies for approval by the
Company and assist in the implementation and operation of such systems and
policies.
(f) Negotiations with Creditors. Consultant agrees to consult with
and advise the Company with respect to relationships with existing
creditors in order to obtain better terms. The Company hereby give express
authority to Consultant to talk to all creditors (including banks and other
lenders) on behalf of the Company to negotiate payouts, terms and other
matters to be considered and approved by the Company. The Company also
agrees to cooperate fully with Consultant in its negotiations and
discussions with creditors, including furnishing financial statements and
other information.
(g) Other Policies, Systems and Procedures. Consultant shall
recommend point of sale systems and procedures, hourly training programs
and other personnel systems, systems for goal setting and business plans
and quality visitation report systems, and other management policies and
procedures systems.
(h) Insurance and Injuries. Consultant shall consult with the
Company, and respond to inquiries concerning, injuries, insurance claims
and guest liability incidents. However, Consultant shall have no
responsibility, and takes no responsibility, for recommending and
implementing insurance coverage or programs or safety reviews and similar
matters, which shall remain the sole responsibility and obligation of the
Company.
(i) Manager Training. Consultant shall consult with and recommend to
the Company training programs for managers of the Casinos. Such training
shall include financial and administrative duties and functions, including,
without limitation, daily paper work and financial duties; reading and
working with income statements; food, liquor, labor and operating costs;
and financial management of such manager's Casino.
(j) Manager Compliance with Procedures and Policies. Managers of the
Casinos will be required to comply with all management policies and
procedures recommended by Consultant and adopted by the Company. The
Company
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recognizes and understands that the policies, procedures and advice
recommended by Consultant will only be as effective as the willingness of
the Company to consider and adopt such policies, procedures and advice. In
this regard, Consultant shall recommend to the Company termination of
managers and other employees of the Company, but the decision to terminate
employment will rest solely with the Company. Generally, violation of
policies and procedures should be handled by a "one, two, three policy",
meaning the first instance should result in an attempt to educate; the
second instance should result in discipline; and the third instance should
result in termination. Managers shall be expected to timely report for
their shifts and not have absences; report their daily paperwork and
reports by 11:00 a.m. of each day; be properly attired and act in a
professional manner; attend weekly management meetings; implement and
insure that proper safety and security procedures are followed; perform
proper customer service and employee relations (e.g. on the floor,
interacting with employees and guests during assigned shifts, etc.); not
engage in on the job drinking or use of drugs; not commit any theft; not
commit any violation of cash handling policies (e.g. no borrowing money, no
writing checks for unauthorized purchases, etc.); and not commit any sexual
harassment or any form of discrimination.
(k) Marketing Assistance. Consultant shall recommend for adoption by
the Company, and shall assist in, marketing programs, facility improvement
programs and facility concept refinements.
(l) Availability of Consultant. Consultant agrees to make on-site
visits, as necessary, to the Casinos, and to conduct a quality visitation
report and undertake a complete casino evaluation, with goal setting. In
addition, Consultant shall be available and shall maintain ongoing
telephone contact with the managers of the Casinos.
3.2 NOT RESPONSIBLE FOR DAY-TO-DAY OPERATIONS. Consultant is not
responsible, and does not undertake to be responsible, for the day-to-day
management and operation of the Casinos. Consultant is serving as an
administrative and financial consultant and the ultimate responsibility for the
day-to-day operations of the Casinos continues to reside with the Company, which
is free to accept or reject the advice and recommendations of Consultant.
3.3 EMPLOYEES OF CONSULTANT; EMPLOYEES OF COMPANY. All employees and
personnel working on site at each of the Casinos shall be employees of the
Company and paid by the Company. Consultant's in-house personnel at its
headquarters in Dallas, Texas, including George J. Akmon, shall be employees of
Consultant and paid by Consultant.
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ARTICLE IV
COVENANTS OF THE COMPANY
4.1 DESIGNEE OF THE COMPANY. The Company hereby designates its Members
(acting jointly) as the "Designee" of the Company.
4.2 PROHIBITIONS APPLICABLE TO THE COMPANY. The Company hereby represents
and warrants that the Company shall not, and shall cause its representatives
(including, without limitation, any Designee) not to, (i) incur any debt, other
than routine trade payables, without notifying and consulting with Consultant in
advance; or (ii) write any checks on, or make any withdrawals from, any bank
accounts of the Company without prior written notice to, and approval by,
Consultant due to the fact that Consultant is responsible for reconciling bank
accounts of the Company and monitoring deposits and coordinating disbursements.
Likewise, the Company shall not, and shall cause its representatives (including
any Designee) not to, make any cash disbursements (other than petty cash
disbursements contemplated herein) of any of the funds of the Company without
prior written notice to and approval by Consultant so that Consultant can
effectively advise the Company with regard to cash management. The Company
agrees to make daily deposits of all receipts in the bank accounts agreed upon
between the Company and Consultant. Further, the Company agrees to fax to
Consultant by 10:00 a.m. each morning a copy of the deposit slips for the
preceding day's deposit of receipts so that Consultant can keep track of
receipts.
4.3 NO IMPACT ON OTHER AGREEMENTS WITH CONSULTANT OR ITS AFFILIATES. In
order to induce Consultant to enter into this Agreement and to perform the
services specified herein, the Company hereby acknowledges and agrees that this
Agreement is to be considered separate and apart from any other agreement, note,
document, instrument or arrangement between Consultant or any affiliate of
Consultant and the Company or any affiliate of the Company. The Company shall
have no right of offset under any of such other agreements, documents, notes,
instruments or arrangements for any damage, cost, claim or expense which the
Company might have at any time, or claim to have, against Consultant under this
Agreement. The Company acknowledges and agrees that Consultant would not enter
into this Agreement or perform the services contemplated hereunder, unless the
Company agreed to the provisions of this Section 4.3 in order to clarify the
relationship between this Agreement and the other relationships described in
this Section 4.3. Further, the Company agrees not to take any action, or fail
to take any action, inconsistent with the provisions of this Section 4.3.
Finally, Consultant shall be entitled to the fees and expense reimbursements
provided herein notwithstanding the status of any of the other relationships
referred to in this Section 4.3.
ARTICLE V
FEES AND REIMBURSEMENTS TO CONSULTANT
5.1 ANNUAL FEE; PAYABLE MONTHLY. Consultant shall be paid an annual fee,
as compensation for its services hereunder, equal to $400,000 for the five (5)
Casinos operated by the Company as of the Effective Date, payable in twelve
equal monthly installments, with each payment due on the first day of each month
of the term of this Agreement, with the first such payment due on the first day
of the month following the month in which the Effective Date hereof falls. This
fee
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shall cover all personnel and office expenses of Consultant, except as expressly
noted below. If any of the five (5) Casinos operated by the Company as of the
Effective Date are subsequently lost and no longer operated by the Company, the
annual fee shall be reduced by $50,000 per year (or portion thereof) for each
such lost Casino. Likewise, if the Company operates or manages any new video
poker casinos during the term of this Agreement, Consultant shall receive an
annual fee equal to $50,000 per year (or portion thereof) for each such new
video poker casino and such new casino shall be considered a "Casino" hereunder
for all purposes.
5.2 EXPENSE REIMBURSEMENTS. The Company shall reimburse Consultant for
all reasonable travel expenses during each contract year. "Travel expenses"
shall include air fare, car rental, hotel rental and meals/miscellaneous. The
following amounts shall be conclusively deemed reasonable hereunder, but if
emergency circumstances exist, higher amounts shall also be considered
reasonable: $175 per person for air fare; $125 per week in car rental; $55 per
person for daily hotel rental; and $20 per person for daily meal/miscellaneous
expense. Reimbursable expenses shall be due and payable by the Company upon
invoicing by Consultant. While normal copying, financial administrative and
similar costs will not be billed separately to the Company and will be included
in the office expenses of Consultant referenced in Section 5.1, the Company will
be billed for, and shall be responsible for paying or reimbursing Consultant for
its payment of, long distance phone charges incurred by Consultant in the
discharge of its obligations hereunder, Federal Express charges and similar
charges, and the Company's share of bulk purchases of supplies and materials by
Consultant used by the Company, such as credit card vouchers, guest checks,
manuals, check supplies, etc., provided such expenses are reasonable in amount.
5.3 SPECIFIC PROJECTS. Notwithstanding the foregoing provisions of this
Article V, any expense incurred by Consultant for a specific project, such as
evaluation of a new gaming opportunity, shall be reimbursed to Consultant by the
Company upon invoicing by Consultant; provided, Consultant notified the Company
of the specific project, set forth the estimated costs, and such costs were
approved by the Designee.
5.4 SALES, USE AND SIMILAR TAXES. The Company shall be responsible for
paying any sales, use or similar taxes payable on the fees or expense
reimbursements paid to Consultant hereunder and shall pay such sales, use or
similar taxes upon invoicing by Consultant.
ARTICLE VI
LIMITATION OF LIABILITY; INDEMNIFICATION
6.01 LIMITATION OF LIABILITY. Neither Consultant nor its affiliates nor
any of their respective officers, directors, employees or agents shall be liable
to the Company for any act or omission by such person under this Agreement;
provided, however, that this limitation of liability shall not relieve
Consultant for liability for gross negligence, fraud or willful misconduct.
Under no circumstances whatsoever shall Consultant or any of the foregoing
persons be liable to the Company for any event occurring on-site at any of the
Casinos, except for acts of Consultant's employees or representatives while on-
site.
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6.02 INDEMNIFICATION. The Company hereby agrees to indemnify, defend and
hold harmless Consultant and its affiliates and their respective officers,
directors, employees and agents from and against any and all claims, demands,
losses, liabilities, actions, lawsuits and other proceedings, judgments and
awards, and costs and expenses (including reasonable attorneys' fees) arising
directly or indirectly, in whole or in part, out of any matter related to the
Casinos, the performance of Consultant's services hereunder or the acts or
omissions of Consultant or any of its affiliates or any of Consultant's or any
of its affiliate's, officers, directors, employees or agents with respect to any
of the Casinos, excluding only such of the foregoing as result from the gross
negligence, willful misconduct or fraud of Consultant or its affiliates or their
respective officers, directors, employees or agents, and except for acts of
Consultant's employees or representatives while on-site. Notwithstanding
anything to the contrary contained or implied elsewhere herein, the provisions
of this Article VI shall survive the termination of this Agreement and the
termination of any consulting services relating to any particular Casino.
ARTICLE VII
INSURANCE
The Company shall during the term of this Agreement maintain comprehensive
general liability insurance on each of the Casinos which are consistent with
prudent industry business practices and deemed reasonably sufficient to cover
the risks that may be associated with the ownership and/or operation of a truck
stop video poker casino. Further, the Company shall name Consultant as a co-
insured, shall furnish a copy of each insurance policy to Consultant and shall
give Consultant 30 days' advance written notice of any change in the amount of
such insurance or the company providing such insurance. If the change in amount
or insurer is reasonably deemed by Consultant to materially reduce the
protection to Consultant, Consultant shall have the right to object to such
change and such change shall not be implemented without written approval of
Consultant. Any such objection must be delivered by Consultant to the Company
within 20 days following receipt of the proposed change by Consultant from the
Company.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.01 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered personally or by telex, facsimile transmission (provided confirmation
of delivery is indicated), telegram or overnight delivery service, or 72 hours
after having been mailed by certified or registered mail, return receipt
requested and postage paid, to the recipient. Such notices, requests, demands
and other communications shall be sent to each party at the address indicated
beside such party's name on the signature pages hereof, or to such other address
or addresses as each of the parties may communicate in writing to the others.
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8.02 FURTHER COOPERATION. Each of the parties hereto hereby agree that it
will from time to time, upon the reasonable request of another hereto, take such
further action as the other may reasonably request to carry out the transactions
contemplated by this Agreement.
8.03 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each and all of which shall be deemed for all purposes to be one
agreement.
8.04 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns. Notwithstanding this provision, neither party may assign this
Agreement without the prior written consent of the other party; provided,
however, Consultant shall have the right to assign this Agreement in accordance
with the provisions of Section 2.04.
8.05 ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated herein,
and cannot be amended without the written consent of the parties hereto.
8.06 GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas. Any legal action
or proceeding with respect to this Agreement and any action for enforcement of
any judgment in respect thereof may be brought in the courts of the State of
Texas located in Dallas County, Texas or of the United States of America for the
Northern District of Texas, and, by execution and delivery of this Agreement the
Company hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. The Company irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Company at its address set forth opposite its signature
below. The Company hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to above and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or proceeding brought in
any such court has been brought in an inconvenient forum. Nothing herein shall
affect the right of Consultant to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company in
any other jurisdiction.
8.07 HEADINGS. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
8.08 ATTORNEYS' FEES. In the event this Agreement or the breach thereof
gives rise to any litigation between the parties hereto, the prevailing party in
such litigation shall be entitled to have and recover from the losing party
costs of such litigation, including reasonable attorneys' fees, as may be
determined by the court and judgment for the recovery of such cost, including
attorneys' fees, shall be included in any final judgment or decree entered by
the court where such litigation is brought.
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EXECUTED as of the Effective Date referenced in the first paragraph of this
Agreement.
ADDRESS AND FAX TELEPHONE CONSULTANT:
NUMBER FOR NOTICES: ----------
13150 Coit Road, Suite 125 NORTH AMERICAN GAMING AND
Dallas, Texas 75240 ENTERTAINMENT CORPORATION
Fax No. (972) 671-1134
By: /s/ E. H. Hawes, II
----------------------------------------
Its: President
----------------------------------
THE COMPANY:
OM OPERATING, LLC
13150 Coit Road, Suite 125 NORTH AMERICAN GAMING AND
Dallas, Texas 75240 ENTERTAINMENT CORPORATION,
Fax No. (972) 671-1134 MEMBER
By: /s/ E. H. Hawes, II
----------------------------------------
Its: President
----------------------------------
/s/ Donald I. Williams
-----------------------------------------
903 East Main DONALD I. WILLIAMS, MEMBER
New Roads, Louisiana 70760
Fax No. (504) 638-4618
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated and effective as of the
15th day of April, 1998 (the "Effective Date") is made and entered into by and
between O M OPERATING, L.L.C., a limited liability company organized under the
laws of the State of Louisiana (the "EMPLOYER") and DONALD I. WILLIAMS, in his
individual capacity (the "EMPLOYEE"). EMPLOYER and EMPLOYEE are hereinafter
sometimes collectively referred to as the "Parties" and each singularly as a
"Party."
R E C I T A L S
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WHEREAS, EMPLOYER requires the services and expertise of EMPLOYEE; and
WHEREAS, EMPLOYER wishes to employ and EMPLOYEE wishes to be employed upon
the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises and covenants set
forth herein, EMPLOYER and EMPLOYEE agree as follows:
ARTICLE I
DEFINITIONS
1.01 As used in this Agreement, and unless the context requires a
different meaning, the following terms have the meanings indicated (such
meanings to be equally applicable to both the singular and the plural forms of
the terms defined):
"Affiliate" means an entity which is, directly or indirectly, Controlling,
Controlled by or under common Control with the predicate entity.
"Control" (including the terms "Controlling," "Controlled by" and "under
common Control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of the
predicate entity whether through the ownership of voting securities, by
contract, or otherwise.
"Dollars" means dollars of the United States of America.
"Person" means any natural person, corporation, governmental agency,
association, partnership or other entity.
"Term" has the meaning assigned to it in Article III.
1.02 Other Defined Terms; Use of Defined Terms. The words "hereof,"
"herein," and "hereunder," and words of similar import, when used in this
Agreement,
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shall refer to this Agreement, and Article, Section, Schedule, Annex and like
references are intended to refer to this Agreement unless otherwise specified.
Terms for which meanings are provided in this Agreement shall, unless otherwise
defined or the context otherwise requires, have such meanings when used in each
notice or other communication delivered or given from time to time under or in
connection with this Agreement.
ARTICLE II
DUTIES OF EMPLOYMENT
2.01 Employment. The EMPLOYER is hereby employed by EMPLOYER, and
EMPLOYEE agrees to be so employed by EMPLOYER, to serve for the Term subject to
earlier termination as hereinafter provided.
2.02 EMPLOYEE Duties. EMPLOYEE shall have the authority to seek and
locate additional sites for video poker truck stop operations to be reviewed by
EMPLOYER and shall report to the Manager of EMPLOYER and assist such Manager in
the day-to-day operations of EMPLOYER's business as delegated from time to time
by such Manager; provided, however, that EMPLOYEE shall not be expected to
perform any duties that are not consistent with the historical duties that he
has performed for EMPLOYER. Upon specific request by EMPLOYER with respect to
specific issues, EMPLOYEE shall assist EMPLOYER in attempting to understand the
regulatory requirements and compliance therewith. It is understood that EMPLOYEE
may own his own truck stop locations as permitted under separate agreements
between the EMPLOYER, EMPLOYEE and/or North American Gaming and Entertainment
Corporation ("NAG"). In the event EMPLOYEE or his Affiliates do own truck stop
locations, then EMPLOYEE shall be permitted to spend reasonable time in the
management and operation of those locations, provided it shall not unreasonably
interfere with the performance of his duties under this Agreement. It is
further understood that EMPLOYEE shall not be required to work more than 20
hours per week under this Agreement.
ARTICLE III
TERM AND TERMINATION
3.01 Term. The term of the EMPLOYEE's employment hereunder shall commence
on the Effective Date and terminate on the date of the last to occur of the
following:
(i) April 14, 2002, or (ii) the date that certain promissory note in the
original principal amount of $4,000,000.00 made by EMPLOYEE payable
to North American Gaming and Entertainment Corporation ("NAG"), of
even date herewith, is paid in full.
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3.02 EMPLOYEE's Termination of Agreement. EMPLOYEE may terminate this
Agreement at any time by giving EMPLOYER notice in accordance with Article VI at
least thirty (30) days prior to the date of termination chosen by EMPLOYEE.
3.03 EMPLOYER's Right to Terminate the Agreement for "Cause." The
EMPLOYER, acting through the written election of NAG on behalf of EMPLOYER, may
terminate the EMPLOYEE's employment, effective as described below, for "Cause"
which for purposes of this Agreement means the occurrence of any of the
following:
The EMPLOYEE's act or acts in connection, directly or indirectly, with
the EMPLOYEE's employment duties, of dishonesty, fraud or willful
misconduct, which could have a material and adverse affect on the EMPLOYER
including, without limitation, embezzlement, misappropriation of funds or
property of the EMPLOYER or any of its Affiliates for personal gain, or,
except as permitted under the Operating Agreement of EMPLOYER, securing or
attempting to secure personally any profit in connection with any
transaction entered into on behalf of the EMPLOYER or any of its
Affiliates.
Prior to declaring the EMPLOYEE in default and sending him a notice of
termination under this Section 3.03, EMPLOYER shall give EMPLOYEE written notice
of the allegations and an opportunity to respond to the President of NAG to the
allegations within five (5) days after receipt of the notice. In the event NAG,
acting on behalf of EMPLOYER, is not persuaded by the EMPLOYEE's response not to
terminate the EMPLOYEE, NAG, acting on behalf of EMPLOYER, may then terminate
the EMPLOYEE immediately at any time, without further delay, after five (5) days
following EMPLOYEE's receipt of the original notice, acting through the written
election of NAG on behalf of EMPLOYER, by "second written notice" of same to
EMPLOYEE.
3.04 EMPLOYER's Right to Terminate the Agreement for Reasons Other than for
"Cause." The EMPLOYER, acting through the written election of NAG on behalf of
EMPLOYER, may terminate the EMPLOYEE's employment for the following reasons if
EMPLOYEE fails to cure the alleged default within thirty (30) days after
EMPLOYEE's receipt of the notice of the alleged default:
(a) The continued failure or refusal by EMPLOYEE to substantially
perform his duties with EMPLOYER, after a written demand for substantial
performance is delivered to EMPLOYEE by NAG, acting on behalf of EMPLOYER,
which written demand specifically identifies the manner in which NAG,
acting on behalf of EMPLOYER, believes that EMPLOYEE has not substantially
performed or has refused to substantially perform his duties; or
(b) Any material violation of this Agreement by the EMPLOYEE; or
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(c) (i) A final determination has been made by applicable governmental
authorities in accordance with applicable administrative and judicial
process that EMPLOYEE fails to meet the suitability requirements under the
Louisiana Video Draw Poker Devices Control Law or other applicable gaming
laws necessary to be employed by the EMPLOYER in the capacity contemplated
by this Agreement, or (ii) EMPLOYEE ceases to be a Louisiana resident.
(d) The EMPLOYEE's indictment of, or plea of guilty or nolo contendere
to, a felony involving EMPLOYEE (other than one involving a hunting crime).
Except as permitted under Sections 3.03, 3.04, 3.05 and 3.06, EMPLOYER may not
remove EMPLOYEE from his position or terminate this Agreement.
3.05 EMPLOYER's Right to Terminate Agreement Due to EMPLOYEE's Inability to
Perform Essential Functions of Position. EMPLOYER, acting through the written
election of NAG on behalf of EMPLOYER, may immediately terminate this Agreement
should EMPLOYEE, due to a physical or mental disability or infirmity, for a
period of time in excess of one hundred eighty (180) consecutive days, become
unable to perform, with or without reasonable accommodation, either (i) the
duties and obligations set forth herein or (ii) the essential functions of the
EMPLOYEE's position. In the event EMPLOYEE suffers a disability or infirmity
EMPLOYER shall not terminate EMPLOYEE under Sections 3.03 or 3.04 solely as a
result of absences. During this 180 day period, EMPLOYEE's Basic Compensation
shall be reduced by the amount received by EMPLOYEE under any short-term or
long-term disability policies provided by EMPLOYER and adjusted so that the net
taxable income remains the same.
3.06 EMPLOYER's Right to Terminate the Agreement because of the EMPLOYEE's
Death. In the event that EMPLOYEE dies during the Term, the EMPLOYER shall be
deemed to have terminated the EMPLOYEE under this Section 3.06.
ARTICLE IV
COMPENSATION
4.01 Basic Compensation. EMPLOYER agrees to pay EMPLOYEE for his services
as employee an annual salary as follows for each year during the Term, to be
paid in weekly installments in accordance with the EMPLOYER's normal payroll
practice and on the EMPLOYER's regularly scheduled paydays (hereinafter referred
to as "Basic Compensation"):
$250,000.00.
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NAG, acting on behalf of EMPLOYER and EMPLOYEE shall meet at the end of each
year to discuss raising the Basic Compensation.
4.02 Compensation Following Termination.
(a) In the event EMPLOYEE terminates this Agreement in accordance with
Section 3.02, none of EMPLOYEE's compensation described in this Article accrued
up to the date of termination or previously paid to the EMPLOYEE shall be
affected. However, all Basic Compensation, as well as any other benefits
provided hereunder, shall cease immediately upon the effective date of said
termination.
(b) EMPLOYER may terminate this Agreement for Cause as defined in
Section 3.03, which shall be effective immediately upon EMPLOYEE'S receipt of
the second written notice. All Basic Compensation, as well as any other
benefits provided hereunder, shall cease immediately, as of the effective date
of said termination.
(c) In the event of termination pursuant to Sections 3.05 or 3.06,
EMPLOYEE or his heirs, legatees or personal representative (as applicable) shall
receive Basic Compensation at EMPLOYEE's then current annual salary for the
remainder of the Term (i.e., the Term defined in Section 3.01 (unaffected by
non-permitted and permitted prior terminations) payable at the regular payroll
dates.
(d) In the event of termination pursuant to Section 3.04, EMPLOYEE or
his heirs, legatees or personal representative (as applicable) shall receive
Basic Compensation at EMPLOYEE'S than current annual salary for the remainder of
the Term (i.e., the Term defined in Section 3.01 (unaffected by non-permitted
and permitted prior terminations) payable at the regular payroll dates;
provided, however, that in the event EMPLOYEE is terminated under Section
3.04(c), the Basic Compensation shall be reduced to an annual salary of
$175,000.00 for the remainder of the Term (i.e., the Term defined in Section
3.01 (unaffected by non-permitted and permitted prior terminations). If
EMPLOYEE is terminated under Section 3.04(d) as the result of an indictment that
later results in a conviction or plea of guilty or nolo contendere that would
have rendered EMPLOYEE unsuitable under the Louisiana Video Poker Devices
Control Act or other applicable gaming laws as contemplated under Section
3.04(c), then from the date the conviction or plea of guilty or nolo contendere
becomes final, EMPLOYEE shall be deemed to have been terminated under Section
3.04(c) thereby reducing the amount of the payments to subsequently be made to
EMPLOYEE.
(e) In the event this Agreement is terminated by EMPLOYER in a manner
that is not pursuant to Sections 3.03, 3.04, 3.05 or 3.06, then EMPLOYEE shall
receive Basic Compensation for the remainder of the Term in a lump sum due and
payable withing thirty (30) days after termination. In addition, all other
employee
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benefits shall be continued for the remainder of the Term, to the same
extent being offered to EMPLOYEE prior to termination.
Notwithstanding the foregoing, EMPLOYER shall not be obligated to make
payments to EMPLOYEE if a final determination has been made by applicable
governmental authorities in accordance with applicable administrative and
judicial process that the making of such payments would cause any of the
EMPLOYER's gaming related licenses to be eligible for suspension or revocation
under Louisiana law, but, in this event, EMPLOYEE shall be permitted to assign,
transfer or donate (collectively, "Transfer") his right to receive these
payments to one or more persons whose receipt of such payments would not cause
the EMPLOYER's gaming related licenses to be eligible for suspension or
revocation. In the event that the payments may not be made under this
provision, then such period of nonpayment shall merely constitute a moratorium
on payments. In the event that in the future such payments are permitted as a
result of a Transfer or otherwise, the payments shall resume for the same period
of time that they would have otherwise been paid.
ARTICLE V
BENEFITS
5.01 Benefit Plans. The EMPLOYER agrees to include and enroll the
EMPLOYEE, if the EMPLOYEE is eligible, in benefit plans determined by EMPLOYER
to be appropriate for its employees.
5.02 Vacation. The EMPLOYEE shall be entitled each year to four (4) weeks
vacation, during which time his compensation shall be paid in full. There shall
be no accumulation of vacation benefits from year to year.
5.03 Expenses. The EMPLOYER recognizes that EMPLOYEE will have to
incur certain out-of-pocket expenses, including, but not limited to, travel
expense, entertainment related to his services and the EMPLOYER's business, and
EMPLOYER agrees to reimburse EMPLOYEE for all reasonable expenses necessarily
incurred in the performance of his duties within thirty (30) days after
presentation of a voucher or documentation indicating the amount and business
purposes of any such expenses.
5.04 Automobile. During the Term, EMPLOYER shall provide EMPLOYEE with a
reasonable vehicle (comparable to the vehicle currently furnished to EMPLOYEE)
for use by EMPLOYEE for both personal and business purposes. EMPLOYER shall pay
for all fuel used by EMPLOYEE for this EMPLOYER owned vehicle during the course
of EMPLOYEE performing his duties on behalf of EMPLOYER. EMPLOYER shall furnish
EMPLOYEE with a company Visa card for use in purchasing gasoline for this
vehicle. EMPLOYER shall also allow EMPLOYEE to use the company Visa card to pay
for all maintenance expenses for the vehicle. EMPLOYER shall also pay for all
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automobile insurance on this vehicle which insurance shall be reasonable in
scope and amount and shall name EMPLOYEE as an additional insured.
5.05 Cellular Phone. During the Term, EMPLOYER shall furnish EMPLOYEE
with a cellular phone and shall pay all reasonable expenses incurred by EMPLOYEE
for the use of this phone for business purposes.
ARTICLE VI
NOTICES
All notices, requests, consents, and other communication required or
permitted hereunder shall be in writing and shall be personally delivered,
electronically delivered by facsimile or telex or mailed by using U.S. first-
class, registered or certified mail, return receipt requested, postage prepaid,
to the following addresses or to such other address as the parties hereto may
designate in writing:
EMPLOYER: 13150 Coit Road
Suite 125
Dallas, Texas 75240
Attn: Chief Executive Officer
Telephone: (972) 671-1133
Facsimile: (972) 671-1134
With a copy to: Mr. Michael D. Parsons
GLAST, PHILLIPS & MURRAY (APC)
2200 One Galleria Tower
13355 Noel Road, L.B. 48
Dallas, Texas 75240-6657
Telephone: (972) 419-8311
Facsimile: (972) 419-8329
EMPLOYEE: 903 E. Main Street
New Roads, Louisiana 70760
Attn: Donald I. Williams
Telephone: (504) 638-3398
Facsimile: (504)638-4618
With a copy to: Mr. G. Blane Clark, Jr.
KEAN, MILLER, HAWTHORNE,
D'ARMOND, McCOWAN & JARMAN, L.L.P.
Post Office Box 3513 (70821)
Suite 2200, One American Place
Baton Rouge, Louisiana 70802
Telephone: (504) 382-3414
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Facsimile: (504) 388-9133
All such notices, requests, consents and other communications shall be deemed to
be properly given if delivered personally or, if sent by U.S. Mail, registered
or certified, return receipt requested, three (3) business days after the same
have been deposited in the United States Mail, addressed and postage prepaid as
set forth above or, if sent by Federal Express (or other nationally recognized
overnight carrier), the day after delivery to Federal Express (or other
nationally recognized overnight carrier) or, if sent electronically, upon
verification of receipt.
ARTICLE VII
MISCELLANEOUS
7.01 Reserved.
7.02 Office Location. The Parties agree that EMPLOYER will not require
EMPLOYEE to relocate without the consent of EMPLOYEE. A transfer of EMPLOYEE
without his approval shall constitute a violation of this Agreement by EMPLOYER.
7.03 Assignment. This Agreement and the rights and obligations arising
hereunder shall bind and inure to the benefit of each of the Parties hereto, and
shall also bind and inure to the benefit of EMPLOYEE's heirs and legal
representatives and any successor or successors of EMPLOYER by merger or
consolidation and any assignee of all or substantially all of EMPLOYER's
business and properties; except as to any such successor or assignee of
EMPLOYER, neither this Agreement nor any duties, rights or benefits hereunder
may be assigned by either Party without the express written consent of the other
Party.
7.04 Governing Law and Jurisdiction. This Agreement shall be construed
and enforced in accordance with the internal laws of the State of Louisiana
without regard to its principles of conflicts that may direct the application of
the laws of another jurisdiction. This Agreement shall be deemed made in East
Baton Rouge Parish, Louisiana. Any legal action or proceeding with respect to
this Agreement, and any actions for enforcement of any judgment in respect
thereof may be brought in the courts of the State of Louisiana located in East
Baton Rouge Parish, Louisiana or of the United States of America for the Middle
District of Louisiana, and by execution and delivery of this Agreement, EMPLOYER
hereby accepts for itself and in respect of its property, generally and
conditionally the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. EMPLOYER irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered certified mail,
postage pre-paid, to EMPLOYER at the address set forth in Article VI hereof.
EMPLOYER hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out
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of or in connection with this Agreement brought in the courts referred to above
and hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of
EMPLOYEE to serve process in any other matter permitted by law or to commence
legal proceedings or otherwise proceed against EMPLOYER in any other
jurisdiction.
7.05 Modification. No modification or waiver of any provision hereof
shall be made unless it is in writing and signed by both of the Parties hereto.
7.06 Construction. The negotiating and drafting of this Agreement has
been participated in by each Party hereto, and not by either Party to the
exclusion of the other and, for all purposes, this Agreement shall be deemed to
have been drafted jointly by the Parties with the advice and assistance of
counsel. The language used in this Agreement will be deemed to be the language
chosen by the Parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against either Party. References to
Section, Article and like references are intended to refer to this Agreement,
unless otherwise specified. Any reference to any federal, state, local or
foreign statues or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
7.07 Severability. To the extent that any provision of this Agreement
may be deemed or determined to be invalid or unenforceable for any reasons, such
invalidity or unenforceability shall not impair or affect any other provision,
and this Agreement shall be interpreted as to most fully give effect to its
terms and still be valid and enforceable.
7.08 Administrative Cooperation. Each Party agrees, at the request and
expense of the other party, at any time and from time to time following the
execution hereof, to execute and deliver to the other Party all such further
instruments and to take all further administrative and ministerial actions as
may be reasonably necessary or appropriate in order to carry out the purposes
and intent of this Agreement.
7.09 Headings. The headings throughout this Agreement are inserted for
reference purposes only, and are not to be construed or taken into account in
interpreting the terms and provisions of any Article or Section, nor to be
deemed in any way to qualify, modify or explain the effects of any such term or
provision.
7.10 Scope of Agreement. This Agreement constitutes the entire agreement
between the Parties with respect to the subject matter hereof, superseding all
prior oral and written conversations, negotiations, understandings and
agreements in effect as of the date of this Agreement.
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7.11 No Impact on Other Agreements with EMPLOYEE or His Affiliates. In
order to induce EMPLOYEE to enter into this Agreement and to perform the
services specified herein, EMPLOYER hereby acknowledges and agrees that this
Agreement is to be considered separate and apart from any other agreement, note,
document, instrument or arrangement between EMPLOYEE and EMPLOYER or any
Affiliate of either. EMPLOYER shall have no right of offset under any of such
other agreements, documents, notes, instruments or arrangements for any damage,
cost, claim or expense which EMPLOYER might have at any time, or claim to have,
against EMPLOYEE under this Agreement. EMPLOYER acknowledges and agrees that
EMPLOYEE would not enter into this Agreement or perform the services
contemplated hereunder, unless EMPLOYER agreed to the provisions of this Section
7.11 in order to clarify the relationship between this Agreement and the other
relationships described in this Section 7.11. Further, EMPLOYER agrees not to
take any action, or fail to take any action, inconsistent with the provisions of
this Section 7.11. Finally, EMPLOYER shall be entitled to the fees and expense
reimbursements provided herein notwithstanding the status of any of the other
relationships referred to in this Section 7.11.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
EMPLOYER:
O M OPERATING, L.L.C.
By: /s/ George Akmon
----------------------------------------
George Akmon, Manager
By: North American Gaming and
Entertainment Corporation, as Member
By: /s/ E. H. Hawes, II
-----------------------------------
Printed Name E. H. Hawes, II
----------------------
Title: President
-----------------------------
By: /s/ Donald I. Williams
----------------------------------------
Donald I. Williams, as Member
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EMPLOYEE:
/s/ Donald I. Williams
--------------------------------------------
Donald I. Williams, Individually
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