SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1995
------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5440
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AZTAR CORPORATION
- ---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 86-0636534
- ----------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2390 East Camelback Road, Suite 400, Phoenix, Arizona 85016
- --------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 381-4100
----------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
----- -----
At October 26, 1995, the registrant had outstanding 38,252,782 shares
of its common stock, $.01 par value.
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Page
----
Consolidated Balance Sheets at September 28, 1995 and
December 29, 1994 3
Consolidated Statements of Operations for the quarters and
nine months ended September 28, 1995 and September 29, 1994 5
Consolidated Statements of Cash Flows for the nine months
ended September 28, 1995 and September 29, 1994 7
Consolidated Statements of Shareholders' Equity for the
nine months ended September 28, 1995 and September 29, 1994 9
Notes to Consolidated Financial Statements 10
2
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
---------------------------------------
(in thousands, except share data)
September 28, December 29,
1995 1994
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 48,942 $ 43,861
Short-term investments -- 8,250
Accounts receivable, net 21,358 17,391
Refundable income taxes -- 723
Inventories 6,198 5,693
Prepaid expenses 8,550 9,992
Deferred income taxes 6,975 7,894
---------- ----------
Total current assets 92,023 93,804
Investments in and advances to
unconsolidated partnership 11,748 12,627
Other investments 21,675 24,928
Property and equipment:
Buildings and equipment, net 665,432 635,678
Land 90,447 81,795
Construction in progress 58,124 37,965
Leased under capital leases, net 667 852
---------- ----------
814,670 756,290
Deferred charges and other assets 33,026 27,710
---------- ----------
$ 973,142 $ 915,359
========== ==========
The accompanying notes are an integral part of these financial statements.
3
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AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (continued)
---------------------------------------
(in thousands, except share data)
September 28, December 29,
1995 1994
------------- ------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accruals $ 47,471 $ 40,083
Accrued payroll and employee benefits 18,665 15,467
Accrued interest payable 26,007 13,847
Income taxes payable 2,981 2,608
Current portion of long-term debt 542 666
---------- ----------
Total current liabilities 95,666 72,671
Long-term debt 455,145 430,212
Other long-term liabilities 22,117 21,986
Deferred income taxes 23,212 24,411
Contingencies and commitments
Series B ESOP convertible preferred stock
(redemption value $6,069 and $4,900) 5,278 4,711
Shareholders' equity:
Common stock, $.01 par value (38,250,401
and 37,459,228 shares outstanding) 422 414
Paid-in capital 352,174 347,284
Retained earnings 37,143 30,555
Less: Treasury stock (17,027) (16,885)
Unearned compensation (988) --
---------- ----------
Total shareholders' equity 371,724 361,368
---------- ----------
$ 973,142 $ 915,359
========== ==========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the periods ended September 28, 1995 and September 29, 1994
---------------------------------------------------------------
(in thousands, except per share data)
Third Quarter Nine Months
------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Revenues
Casino $127,382 $121,410 $358,229 $338,490
Rooms 10,596 10,932 30,745 31,898
Food and beverage 12,516 10,604 35,623 32,490
Other 4,441 3,901 11,296 10,282
-------- -------- -------- --------
154,935 146,847 435,893 413,160
Costs and expenses
Casino 58,677 54,595 168,997 155,603
Rooms 6,727 6,899 18,915 19,529
Food and beverage 11,834 9,888 33,287 29,647
Other 2,856 2,351 7,060 5,890
Marketing 15,296 12,248 40,240 33,663
General and administrative 11,675 12,173 35,939 35,475
Utilities 4,598 4,119 10,565 10,609
Repairs and maintenance 5,148 5,394 15,108 14,825
Provision for doubtful accounts 955 324 2,636 1,963
Property taxes and insurance 5,186 4,619 14,701 12,979
Rent 2,757 2,475 8,396 7,190
Depreciation and amortization 10,181 9,419 28,863 27,800
Preopening costs 51 -- 2,637 --
-------- -------- -------- --------
135,941 124,504 387,344 355,173
-------- -------- -------- --------
Operating income 18,994 22,343 48,549 57,987
Interest income 820 645 2,537 1,771
Interest expense (12,687) (11,816) (37,641) (35,398)
-------- -------- -------- --------
Income before other items and
income taxes 7,127 11,172 13,445 24,360
Equity in unconsolidated
partnership's loss (1,220) (1,051) (3,869) (2,979)
-------- -------- -------- --------
Income before income taxes 5,907 10,121 9,576 21,381
Income taxes (1,333) (2,554) (2,517) (2,680)
-------- -------- -------- --------
Net income $ 4,574 $ 7,567 $ 7,059 $ 18,701
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)(continued)
For the periods ended September 28, 1995 and September 29, 1994
-------------------------------------------------------
(in thousands, except per share data)
Third Quarter Nine Months
------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Net income per common and
common equivalent share $ .11 $ .19 $ .17 $ .48
Net income per common share
assuming full dilution $ .11 $ .19 $ .16 $ .46
Weighted average common shares
applicable to:
Net income per common and
common equivalent share 39,209 38,225 38,971 38,224
Net income per common share
assuming full dilution 40,202 39,283 40,038 39,284
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the periods ended September 28, 1995 and September 29, 1994
---------------------------------------------------------------
(in thousands)
Nine Months
---------------------
1995 1994
Cash Flows from Operating Activities --------- ---------
Net income $ 7,059 $ 18,701
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 31,529 29,688
Provision for losses on accounts receivable 2,636 1,963
Loss on reinvestment obligation -- 824
Rent expense (493) 741
Distribution in excess of equity in income
of partnership 879 933
Deferred income taxes (280) (3,186)
Change in assets and liabilities:
(Increase) decrease in accounts receivable (6,603) (2,462)
(Increase) decrease in refundable income taxes 723 2,062
(Increase) decrease in inventories and
prepaid expenses 685 493
Increase (decrease) in accounts payable,
accrued expenses and income taxes payable 23,779 1,328
Other items, net 968 1,354
--------- ---------
Net cash provided by (used in) operating activities 60,882 52,439
--------- ---------
Cash Flows from Investing Activities
Payments received on notes receivable 1,009 965
Reduction in other investments 8,602 --
(Increase)decrease in invested funds 8,250 (8,250)
Purchases of property and equipment (86,863) (36,268)
Additions to other long-term assets (12,256) (4,709)
--------- ---------
Net cash provided by (used in) investing activities (81,258) (48,262)
--------- ---------
Cash Flows from Financing Activities
Proceeds from issuance of long-term debt 35,000 16,000
Proceeds from issuance of common stock 1,945 --
Principal payments on long-term debt (10,443) (28,371)
Debt issuance costs (80) (604)
Preferred stock dividend (754) (773)
Redemption of preferred stock (211) (181)
--------- ---------
Net cash provided by (used in) financing activities 25,457 (13,929)
--------- ---------
Net increase (decrease) in cash and cash equivalents 5,081 (9,752)
Cash and cash equivalents at beginning of period 43,861 39,551
--------- ---------
Cash and cash equivalents at end of period $ 48,942 $ 29,799
========= =========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)(continued)
For the periods ended September 28, 1995 and September 29, 1994
---------------------------------------------------------------
(in thousands)
Nine Months
-------------------
1995 1994
-------- --------
Supplemental Cash Flow Disclosures
Summary of non-cash investing and financing activities:
Capital lease obligations incurred for property
and equipment $ 41 $ 70
Tax benefit from stock options and preferred stock
dividend 858 627
Issuance of restricted stock 2,194 --
Forfeiture of restricted stock 142 --
Cash flow during the period for the following:
Interest paid, net of amount capitalized $ 23,880 $ 33,675
Income taxes paid 843 2,052
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (unaudited)
For the periods ended September 28, 1995 and September 29, 1994
---------------------------------------------------------------
(in thousands, except number of shares)
Nine Months
---------------------
1995 1994
---------- ---------
Common stock:
Beginning balance $ 414 $ 414
Stock options exercised for 492,827 shares
in 1995 5 --
Issuance of 292,000 shares of restricted stock
in 1995 3 --
-------- --------
Ending balance 422 414
-------- --------
Paid-in capital:
Beginning balance 347,284 346,965
Stock options exercised 1,940 --
Tax benefit from stock options exercised 759 --
Issuance of restricted stock 2,191 --
-------- --------
Ending balance 352,174 346,965
-------- --------
Retained earnings:
Beginning balance 30,555 16,559
Reduction in income tax valuation allowance -- 520
Preferred stock dividend, net of income tax
benefit of $99 and $107 (471) (480)
Net income 7,059 18,701
-------- --------
Ending balance 37,143 35,300
-------- --------
Treasury stock:
Beginning balance (16,885) (16,885)
Forfeiture of 18,000 shares of restricted stock
in 1995 (142) --
-------- --------
Ending balance (17,027) (16,885)
-------- --------
Unearned compensation:
Beginning balance -- (65)
Issuance of restricted stock (2,194) --
Amortization 1,064 53
Forfeiture of restricted stock 142 --
-------- --------
Ending balance (988) (12)
-------- --------
$371,724 $365,782
======== ========
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Note 1: General
- ----------------
The consolidated financial statements reflect all adjustments, such adjust-
ments being normal recurring accruals, which are necessary, in the opinion of
management, for the fair presentation of the results of the interim periods;
interim results, however, may not be indicative of the results for the full
year.
The notes to the interim consolidated financial statements are presented to
enhance the understanding of the financial statements and do not necessarily
represent complete disclosures required by generally accepted accounting
principles. The interest that was capitalized during the quarter and nine
months ended 1995 was $1,313,000 and $3,664,000, respectively; and $523,000
and $1,790,000 for the quarter and nine months ended 1994. Capitalized
preopening costs, included in deferred charges and other assets, were
$1,716,000 and $817,000 at September 28, 1995 and December 29, 1994,
respectively. For additional information regarding significant accounting
policies, long-term debt, lease obligations, and other matters applicable to
the Company, reference should be made to the Company's Annual Report to
Shareholders for the year ended December 29, 1994.
Certain reclassifications have been made in the 1994 Consolidated Statements
of Operations and the Consolidated Statement of Cash Flows in order to be
comparable with the 1995 presentation.
Note 2: Investments in and Advances to Unconsolidated Partnership
- -----------------------------------------------------------------
Following are summarized operating results for the Company's unconsolidated
partnership, accounted for using the equity method for the periods ended
September 28, 1995 and September 29, 1994 (in thousands):
Third Quarter Nine Months
--------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Revenues $ 4,197 $ 3,824 $ 12,971 $ 11,081
Operating expenses (683) (684) (2,059) (2,065)
-------- -------- -------- --------
Operating income 3,514 3,140 10,912 9,016
Interest expense (1,482) (1,145) (4,856) (3,073)
-------- -------- -------- --------
Net income $ 2,032 $ 1,995 $ 6,056 $ 5,943
======== ======== ======== ========
Note 3: Other Long-term Liabilities
- -------------------------------------
At September 28, 1995 and December 29, 1994, other long-term liabilities
consisted of (in thousands):
1995 1994
-------- --------
Accrued rent expense $ 12,399 $ 13,043
Deferred compensation and retirement plans 9,564 8,789
Deferred income 154 154
-------- --------
$ 22,117 $ 21,986
======== ========
10
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 4: Income Taxes
- ----------------------
The Company is responsible, with certain exceptions, for the taxes of Ramada
through December 20, 1989. The Internal Revenue Service has completed its
examination of the years 1986 and 1987. Ramada has signed a partial
agreement for those two years and has filed a petition with the U.S. Tax
Court for two remaining issues. The Internal Revenue Service is examining
the income tax returns for the years 1988 through 1993. The New Jersey
Division of Taxation is examining the income tax returns for the years 1983
through 1989. Management believes that adequate provision for income taxes
and interest has been made in the financial statements.
Gross deferred tax assets are reduced by a valuation allowance. The
December 29, 1994 and December 30, 1993 valuation allowances were reduced
during the 1995 and 1994 periods, which caused a decrease in income tax
expense of $3,125,000 and $3,622,000 in the 1995 third quarter and nine-month
periods, respectively; and $1,884,000 and $5,858,000 in the 1994 third
quarter and nine-month periods, respectively. In addition, $520,000 that was
included in the December 30, 1993 valuation allowance was allocated to
shareholders' equity during the 1994 third quarter.
The Company's effective income tax rate before the valuation allowance
reductions is higher in the 1995 periods compared to the 1994 periods due to
the increasing effect of non-deductible expenses at lower levels of taxable
income and the shift in the mix of taxable income between New Jersey, which
has an income tax, and Nevada, which does not have an income tax.
Note 5: Net Income Per Share
- -----------------------------
Net income per common and common equivalent share is computed based on the
weighted average number of common shares outstanding after consideration of
the dilutive effect of restricted stock and stock options. Net income per
common share, assuming full dilution, is computed based on the weighted
average number of common shares outstanding after consideration of the
dilutive effect of restricted stock, stock options and the assumed conversion
of the preferred stock at the stated rate. Net income for both computations
is adjusted for dividends on the preferred stock.
Note 6: Contingencies and Commitments
- --------------------------------------
In connection with the Company's commitment, subject to the granting of a
riverboat gaming license, to make certain payments to the City of Evansville,
Indiana as well as other civic and charitable institutions, the Company
obtained a letter of credit for $13,450,000. The Company has pledged
$8,250,000 of cash equivalents at September 28, 1995 and its short-term
investments at December 29, 1994, as collateral for this letter of credit.
The Company agreed to indemnify Ramada against all monetary judgments in
lawsuits pending against Ramada and its subsidiaries as of the conclusion of
the restructuring of Ramada (the "Restructuring") on December 20, 1989, as
well as all related attorneys' fees and expenses not paid at that time,
11
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (continued)
Note 6: Contingencies and Commitments (continued)
- --------------------------------------------------
except for any judgments, fees or expenses accrued on the hotel business
balance sheet and except for any unaccrued and unreserved aggregate amount up
to $5,000,000 of judgments, fees or expenses related exclusively to the hotel
business. Aztar is entitled to the benefit of any crossclaims or
counterclaims related to such lawsuits and of any insurance proceeds
received. In addition, the Company agreed to indemnify Ramada for various
lease guarantees made by Ramada relating to the restaurant business conducted
through its Marie Callender Pie Shops, Inc. subsidiary. In connection with
these matters, the Company has an accrued liability of $3,951,000 and
$3,963,000 at September 28, 1995 and December 29, 1994, respectively.
The Company is a party to various other claims, legal actions and complaints
arising in the ordinary course of business or asserted by way of defense or
counterclaim in actions filed by the Company. Management believes that its
defenses are substantial in each of these matters and that the Company's
legal posture can be successfully defended without material adverse effect on
its consolidated financial statements.
The Company had commitments for the purchase of property and equipment of
approximately $104,000,000 at September 28, 1995.
12
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis
Financial Condition
On September 11, 1995, Aztar signed an agreement to manage a project to
develop and operate a riverboat casino in Michigan City, Indiana. The
Company would own 9.9 percent of the project, which is an $82 million venture
proposed by Michigan City Casino & Lodge, a limited partnership comprised
primarily of investors from the Michigan City business and professional
community. The partnership filed an application for a riverboat casino
operator's license on September 8, 1995, with the Indiana Gaming Commission.
The project would include a casino riverboat, an entertainment pavilion for
pre-boarding passengers, a hotel, parking facilities, and other amenities at
a site on Michigan City Harbor on Lake Michigan.
On July 14, 1995, Aztar received authorization from the U.S. Army Corps of
Engineers to begin construction of docking facilities for the Company's
riverboat gaming facility planned to be licensed in the Evansville, Indiana
market. State permits and approvals have been obtained and construction of
the docking and temporary facilities commenced on July 31, 1995. The
temporary facilities will include surface parking and a 13,000-square-foot
climate-controlled pavilion. Barring unanticipated delays, operations are
projected to commence in December 1995 utilizing these facilities. The
hotel, pavilion, permanent parking facilities, and other amenities are under
construction and scheduled for completion within a year of the commencement
of gaming operations. The "City of Evansville" casino riverboat arrived in
Evansville on its maiden voyage on November 2, 1995. The Company's
expenditures for property and equipment on this project for the year to date
through September 28, 1995 were approximately $23 million.
On April 26, 1995, the Missouri Gaming Commission granted Aztar a riverboat
gaming license to operate Casino Aztar Caruthersville, the Company's
riverboat casino development in Caruthersville, Missouri. The casino began
operations on April 28, 1995, using temporary facilities for ticketing and
passenger waiting. The pavilion and other permanent facilities were opened
on July 20, 1995. The Company's expenditures for property and equipment on
this project for the year to date through September 28, 1995 were
approximately $28 million.
The Company's expansion of TropWorld in Atlantic City, New Jersey, consisting
primarily of a 628-room hotel tower, with additional restaurant and support
facilities in the existing operation, is under construction and scheduled to
be completed by June 1996. The Company's expenditures for property and
equipment on this project for the year to date through September 28, 1995
were approximately $20 million.
During the first quarter of 1995, the Company repaid $10 million under the
reducing revolving credit facility and then borrowed $30 million during the
second quarter of 1995 and $5 million during the third quarter of 1995 under
this facility, leaving an outstanding balance of $75 million at September 28,
1995.
At September 28, 1995, the Company had commitments of approximately $104
million for the purchase of property and equipment.
13
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Results of Operations
Nine Months Ended September 28, 1995 Compared to Nine Months Ended
September 29, 1994
The Company's consolidated revenues for the 1995 nine-month period were
$435.9 million, a 6% increase over $413.2 million for the 1994 nine-month
period as higher total revenues at TropWorld and added revenues from the
Company's riverboat casino in Caruthersville, Missouri more than offset
decreases in total revenues at Tropicana. Casino Aztar Caruthersville began
operations on April 28, 1995. Consolidated casino revenue was $19.7 million
higher in the 1995 versus 1994 nine-month period primarily because an
increase in casino revenue at TropWorld and added casino revenue from Casino
Aztar Caruthersville more than offset a decrease in casino revenue at
Tropicana. Consolidated operating income for the nine months of 1995 was
$51.2 million before the effects of a $2.6 million writeoff of preopening
costs in connection with Casino Aztar Caruthersville compared to $58.0
million consolidated operating income for the nine months of 1994. Excluding
the writeoff of preopening costs, the decline in consolidated operating
income reflected lower operating results at Tropicana and Ramada Express that
were not fully offset by an increase in operating income at TropWorld.
Consolidated marketing costs were 20% higher in the 1995 versus 1994 nine-
month period primarily reflecting an increase in the number of special events
offered at TropWorld combined with added marketing costs attributable to
Casino Aztar Caruthersville.
The Company's equity in unconsolidated partnership's loss was $0.9 million or
30% higher in the 1995 versus 1994 nine-month period as a result of higher
interest expense incurred by the partnership. The increase in interest
expense was a result of higher interest rates.
For a discussion of income taxes, refer to "Note 4: Income Taxes".
TROPWORLD Total revenues at TropWorld were $258.5 million in the 1995 nine-
month period compared to $243.2 million in last year's nine-month period, a
6% increase primarily as a result of higher casino revenue. The increase in
casino revenue was caused, in large part, by a strong market growth rate of
11% in the Atlantic City market during the 1995 nine-month period. Casino
revenues were reduced in the 1994 nine-month period due to severe weather
conditions in the East during January and February. In addition, casino
revenue was higher in the 1995 versus 1994 nine-month period as a result of
an increase in coin redemptions and an increase in the use of complimentary
food and beverage and rooms as a means of promoting casino activity.
TropWorld had operating income of $50.7 million in the nine months of 1995,
up 18% from $42.9 million in last year's nine-month period. The increase in
operating income reflected the higher casino revenue, partially offset by a
$5.9 million or 6% increase in casino costs that was primarily attributable
to the increased coin redemptions and complimentaries. Marketing costs were
17% higher in the 1995 versus 1994 nine-month period due primarily to an
increase in the number of special events offered at the property. Operating
income is after rent expense of $1.1 million in both periods and depreciation
and amortization expense of $16.6 million in the nine months of 1995 compared
to $17.0 million in the nine months of 1994.
14
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
TROPICANA At Tropicana, total revenues were $105.3 million in the 1995 nine-
month period, a decrease of 3% from $108.4 million in last year's nine-month
period. Casino revenue declined by $3.8 million primarily as a result of
weak conditions in the Las Vegas market during this year's nine-month period
combined with lower table games revenue in the 1995 versus 1994 nine-month
period.
Tropicana had an operating loss of $0.6 million for the nine months of 1995
compared to operating income of $9.3 million for the nine months of 1994.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was $6.9 million in the 1995 nine-month period compared to $5.8
million in the 1994 nine-month period, a 20% increase attributable to a
higher interest component of rent payments made to the Company's
unconsolidated partnership. Depreciation and amortization expense was $5.5
million in the 1995 nine-month period compared to $4.8 million in the 1994
nine-month period.
RAMADA EXPRESS At Ramada Express, total revenues were $61.8 million in the
1995 nine-month period, up slightly from $61.6 million in last year's nine-
month period. Operating income was $10.0 million in this year's nine-month
period, a decrease from $13.1 million in last year's nine-month period.
Operating income is after rent and depreciation and amortization expenses.
Rent expense was $0.1 million in both periods. Depreciation and amortization
was $5.4 million in the 1995 nine-month period compared to $5.7 million in
the 1994 nine-month period.
CASINO AZTAR CARUTHERSVILLE Casino Aztar Caruthersville, which opened on
April 28, 1995, added $10.3 million to total consolidated revenues in the
nine months of 1995. Before the effects of a $2.6 million writeoff of
preopening costs, Casino Aztar Caruthersville had an operating loss of $1.1
million. Depreciation and amortization expense was $1.2 million.
Quarter Ended September 28, 1995 Compared to Quarter Ended September 29, 1994
The Company's consolidated revenues for the 1995 third quarter were $154.9
million compared to $146.8 million for the 1994 third quarter, a 6% increase
primarily reflecting higher total revenues at TropWorld and Ramada Express
and added revenues from Casino Aztar Caruthersville. A $6.0 million increase
in consolidated casino revenue in the 1995 versus 1994 third quarter was
primarily attributable to added casino revenue from Casino Aztar
Caruthersville. Consolidated food and beverage revenue was $1.9 million or
18% higher in the 1995 versus 1994 third quarter, with a substantial portion
of the increase coming from Tropicana. The increase in food and beverage
revenue at Tropicana was due to a higher volume of customers in the 1995
third quarter, which was primarily attributable to renovation of existing
facilities during 1995. Consolidated operating income was $19.0 million for
the 1995 third quarter compared to $22.3 million for the 1994 third quarter,
a 15% decline, reflecting lower operating results from Tropicana and Ramada
Express combined with an operating loss at Casino Aztar Caruthersville that
more than offset improved operating results from TropWorld. Consolidated
marketing costs were 25% higher in the 1995 versus 1994 third quarter,
primarily due to added marketing costs attributable to Casino Aztar
Caruthersville combined with an increase in the number of special events
offered at TropWorld.
15
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
For a discussion of income taxes, refer to "Note 4: Income Taxes".
TROPWORLD TropWorld had total revenues of $92.5 million in the third quarter
of 1995, up slightly from $91.4 million in the third quarter of 1994.
TropWorld's 1995 third quarter results reflected summer capacity constraints
that will be alleviated with the addition of a 628-room guest tower and
related facilities under construction and scheduled to open by June 1996.
TropWorld had operating income of $20.7 million in the 1995 third quarter, up
5% from $19.7 million in the 1994 third quarter. Marketing costs were 14%
higher due primarily to an increase in the number of special events offered
at the property during the third quarter of 1995. Operating income is after
rent and depreciation and amortization expenses. Rent expense was $0.4
million in the 1995 third quarter compared to $0.3 million in the 1994 third
quarter. Depreciation and amortization expense was $5.5 million in the 1995
third quarter compared to $5.6 million in the 1994 third quarter.
TROPICANA At Tropicana, total revenues were $35.8 million in the third
quarter of 1995 compared to $36.1 million in the third quarter of last year,
a slight decrease as 17% higher food and beverage revenue was more than
offset by a decline in casino revenue. The increase in food and beverage
revenue at Tropicana was due to a higher volume of customers in the 1995
third quarter, which was primarily attributable to renovation of existing
facilities during 1995.
Tropicana had an operating loss of $0.9 million for the 1995 third quarter
compared to operating income of $2.4 million for the 1994 third quarter.
Food and beverage costs were 20% higher in the 1995 versus 1994 third quarter
due to the higher volume of customers in the 1995 third quarter. Operating
income is after rent and depreciation and amortization expenses. Rent
expense was $2.3 million in the 1995 third quarter compared to $2.0 million
in the 1994 third quarter. Depreciation and amortization expense was $2.0
million in the 1995 third quarter compared to $1.8 million in the 1994 third
quarter.
RAMADA EXPRESS Total revenues at Ramada Express were $19.9 million in the
third quarter of 1995 compared to $19.3 million in the 1994 third quarter.
Operating income was $2.2 million in the 1995 third quarter compared to $2.8
million in last year's third quarter. Operating income is after rent and
depreciation and amortization expenses. Rent expense was insignificant in
both periods. Depreciation and amortization was $1.8 million in the 1995
third quarter compared to $1.9 million in the 1994 third quarter.
CASINO AZTAR CARUTHERSVILLE Casino Aztar Caruthersville, which opened on
April 28, 1995, added $6.7 million to total consolidated revenues for the
1995 third quarter. Casino Aztar Caruthersville had an operating loss of
$1.0 million which included depreciation and amortization expense of $0.8
million.
16
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
(a) In connection with Case No. CV-S-94-1126-LDG(RJJ), as reported under
Part I, Item 3 of the Company's Form 10-K for the year ended December
29, 1994, the plaintiffs, as reported under Item 1 of the Company's Form
10-Q for the quarter ended March 30, 1995, have filed a motion asking
the Court to hold a case management and scheduling conference and to
permit discovery to resume. The Company (and all other defendants) have
opposed this motion, and have suggested to the Court that consideration
of the pending motions would be the more effective means of handling the
case, since the granting of the motion to dismiss would end the case and
obviate the need for scheduling or management of the case. No argument
date has been set.
(b) The Company and more than 40 other major casino operators, as well as
various manufacturers and distributors of video poker and electronic
slot machines, have been named as defendants in an action filed in the
United States District Court for the District of Nevada entitled Larry
Schreier, On Behalf of Himself and All Others Similarly Situated v.
Caesars World, Inc., et al., Case No. CV-S-95-00923-DWH(RJJ)(the
"Schreier Case"), filed on September 26, 1995. The Schreier Case is
identical to Case No. CV-S-94-1126-LDG(RJJ) (the "Consolidated Case") in
all material respects, except that the named plaintiff purports to
represent a class of persons somewhat smaller than the class in the
Consolidated Case; to wit: (i) all persons who are members of "slot
clubs" and played electronic slot machines; and (ii) all persons who
have played in video poker tournaments. The plaintiffs in the Schreier
Case are represented by the same lawyers who represent the plaintiffs in
the Consolidated Case.
(c) Aztar and numerous other major casino operators, were named as
defendants in an action filed in late August 1995 in the United States
District Court for the District of New Jersey, Camden Division, entitled
Thomas Hyland (Plaintiff) v. Griffin Investigations, et al., Case No.
95cv2236(JEI). The Plaintiff seeks certification of the case as a class
action, and claims generally that the treatment of card counters by the
defendants is in violation of the Sherman Act, the Fair Credit Reporting
Act and other laws. Plaintiff did not specify the amount of damages he
is seeking. On November 1, 1995, the company moved to dismiss the
complaint and therefore has not yet filed an answer.
17
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Page No.
----------
10.1 Severance agreement, dated July 17, 1995, by and between
Aztar Corporation and Paul E. Rubeli. *
10.2 Severance agreement, dated July 17, 1995, by and between
Aztar Corporation and Robert M. Haddock. *
10.3 Severance agreement, dated July 18, 1995, by and between
Aztar Corporation and Nelson W. Armstrong, Jr. *
10.4 Severance agreement, dated July 24, 1995, by and between
Aztar Corporation and Meridith P. Sipek. *
10.5 Severance agreement, dated July 25, 1995, by and between
Aztar Corporation and Joe Cole. *
10.6 Severance agreement, dated July 17, 1995, by and between
Aztar Corporation and Neil A. Ciarfalia. *
11. Statement Regarding Computation of Per Share Earnings. *
27. Financial Data Schedule. *
* See exhibit index at page E-1 of this report for
a listing of exhibits filed with this report.
All other exhibits have been omitted because the
information is either not required or not applicable.
(b) The Company did not file any report on Form 8-K during
the quarter ended September 28, 1995.
18
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AZTAR CORPORATION
------------------------------
(Registrant)
Date November 8, 1995 By ROBERT M. HADDOCK
-------------------------- ---------------------------
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
19
<PAGE>
AZTAR CORPORATION AND SUBSIDIARIES
Exhibit Index
- -------------
10.1 Severance agreement, dated July 17, 1995, by and between
Aztar Corporation and Paul E. Rubeli.
10.2 Severance agreement, dated July 17, 1995, by and between
Aztar Corporation and Robert M. Haddock.
10.3 Severance agreement, dated July 18, 1995, by and between
Aztar Corporation and Nelson W. Armstrong, Jr.
10.4 Severance agreement, dated July 24, 1995, by and between
Aztar Corporation and Meridith P. Sipek.
10.5 Severance agreement, dated July 25, 1995, by and between
Aztar Corporation and Joe Cole.
10.6 Severance agreement, dated July 17, 1995, by and between
Aztar Corporation and Neil A. Ciarfalia.
11. Statement Regarding Computation of Per Share Earnings.
27. Financial Data Schedule.
E-1
<PAGE>
Exhibit 10.1
AZTAR CORPORATION
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
July 6, 1995
Mr. Paul E. Rubeli
Chairman of the Board, President and
Chief Executive Officer
Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Dear Mr. Rubeli:
Aztar Corporation (the "Corporation") is the successor to
Ramada Inc. ("Ramada") and was incorporated as part of a restructuring
of Ramada (the "Restructuring") in June 1989. Pursuant to the
Restructuring, (i) Ramada sold its hotel and restaurant businesses; (ii) the
Corporation was formed to operate Ramada's gaming business; and (iii)
Ramada's shareholders received, among other things, stock of the
Corporation so that they retained their interest in Ramada's gaming
business. The Corporation has, as part of the Restructuring, assumed
certain assets and liabilities related to Ramada's gaming business,
including Ramada's obligations under that certain letter agreement, dated
May 14, 1981 between you and Ramada, as amended, and that certain
letter agreement, dated September 1, 1987 between you and Ramada, as
amended (collectively the "Prior Severance Agreements").
The Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key
management personnel. The Corporation's Board of Directors (the
"Board") recognizes that uncertainty and questions regarding certain of
your severance benefits could result in your departure or distraction
which could be detrimental to the Corporation and its stockholders.
Therefore, the Board has decided to reinforce and encourage the
continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without
distraction arising from uncertainty in their severance benefits.
In order to induce you to remain in its employ, the
Corporation desires to amend and restate the Prior Severance Agreements
in their entirety and hereby agrees that after this letter agreement (this
"Severance Agreement") has been fully executed, in the event of a
Qualifying Termination (as defined in Section 2), you shall receive the
severance benefits set forth in this Severance Agreement. Upon the full
execution of this Severance Agreement, the Prior Severance Agreements
shall terminate and be of no further effect.
1. Term of Severance Agreement. This Severance
Agreement shall commence on July 6, 1995 (the "Effective Date") and shall
continue in effect through the December 31, 2002 (the "Term"); provided,
however, that (i) commencing on January 1, 1996, and each January 1
thereafter, the Term shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the
Corporation shall have given notice that the Term shall not be extended,
and (ii) the Corporation's obligations under Section 7 shall survive the
expiration of the Term. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the Term extend beyond
the end of the calendar month in which your 65th birthday occurs.
2. Eligibility for Benefits. None of the Benefits set
forth in Section 7 shall be payable under this Severance Agreement unless
and until a Qualifying Termination (as defined below) occurs. As used in
this Severance Agreement, the term "Qualifying Termination" means the
termination of your employment with the Corporation that is either (i) by
the Corporation Without Cause (as defined in Section 3), or (ii) by you for
Good Reason (as defined in Section 4).
3. Without Cause. For purposes of this Severance
Agreement, a termination by the Corporation "Without Cause" shall mean
any termination by the Corporation of your employment other than (i) a
termination by the Corporation for Cause (as defined in Section 3.1), (ii) a
termination because of your Disability (as defined in Section 3.2), or (iii)
a termination due because of your death or retirement.
3.1 For purposes of this Severance Agreement, a
termination for "Cause" shall occur if and when the Corporation
terminates your employment due to (i) your willful and continued failure
to substantially perform your duties with the Corporation (other than any
such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after your issuance of a
Notice of Termination (as defined in Section 5.1) for Good Reason) after
the Board delivers to you a written demand for substantial performance,
which demand specifically identifies the manner in which the Board
believes that you has not substantially performed your duties, (ii) your
willful participation in conduct that is demonstrably and materially
injurious to the Corporation, monetarily or otherwise, or (iii) there being
substantial evidence that you are guilty of a crime classified as a felony
(or the equivalent thereof) under applicable law, or that you have been
convicted of such a crime. For purposes of this Section 3.2, no act, or
failure to act, by you shall be deemed "willful" unless you take, or fail to
take, such action not in good faith. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until a
copy of a resolution of the Board has been delivered to you. Such
resolution shall be duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding
that in the Board's good faith opinion you were guilty of conduct set
forth above in this Section 3.1 and specifying the particulars thereof in
reasonable detail.
3.2 For purposes of this Severance Agreement, a
termination due to your "Disability" shall occur if, as a result of your
incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for
six (6) consecutive months, and within thirty (30) days after written
Notice of Termination is given you shall not have returned to the
full-time performance of your duties.
4. Good Reason. For purposes of this Severance
Agreement, a termination by you for "Good Reason" shall mean any
termination by you of your employment with the Corporation that follows
the occurrence, without your express written consent, of any of the
circumstances set forth below unless, in the case of Sections 4.1, 4.5, 4.6,
4.7, 4.8 or 4.9, such circumstances are fully corrected prior to the Date of
Termination (as defined in Section 5.2) specified in the Notice of
Termination given in respect thereof.
4.1 The Corporation's assignment to you of any
duties that are inconsistent with your position with the Corporation, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
as of the Effective Date.
4.2 The Corporation's reduction of your base
salary as such base salary may have been increased from time to time,
except for across-the-board salary reductions similarly affecting all
management personnel of the Corporation and all management personnel
of any Person (as defined below) that controls the Corporation. For
purposes of this Severance Agreement, the term "Person" is used as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that unless this
Severance Agreement provides to the contrary, the term shall not include
the Corporation, any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation.
4.3 The relocation of the Corporation's offices
at which you are principally employed as of the Effective Date to
a location more than 25 miles from such location or the Corporation's
requiring you to be based anywhere other than the Corporation's offices
at such location, except for required travel on the Corporation's business
to an extent substantially consistent with your business travel obligations
as of the Effective Date.
4.4 The Corporation's failure to pay you any
portion of your current compensation or to pay you any portion of an
installment of deferred compensation to which you are entitled under any
of the Corporation's deferred compensation programs within seven (7)
days of the date such compensation is due.
4.5 The Corporation's failure to continue in
effect any material compensation or benefit plan in which you participate
as of the Effective Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such
plan, or the Corporation's failure to continue your participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed as of the
Effective Date.
4.6 The Corporation's failure to continue
to provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, health and
accident, or disability plans in which you were participating as of the
Effective Date, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Corporation to provide you with the number of paid
vacation days to which you are entitled on the basis of years of service
with the Corporation in accordance with the Corporation's normal
vacation policy in effect as of the Effective Date.
4.7 The Corporation's failure to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Severance Agreement, as contemplated in Section 12.6.
4.8 Any purported termination of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 5.1 hereof (and, if applicable, the
requirements of Section 3.1 hereof), which purported termination shall not
be effective for purposes of this Severance Agreement.
4.9 If, after you have given written notice of
objection, you continue to be subject to harassing or denigrating treatment
that is inconsistent with your position with the Corporation.
Your right to terminate your employment pursuant to this Section 4 shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason
hereunder.
5. Notice of Termination; Date of Termination.
5.1 Any purported termination of your
employment (other than termination due to death) by you or by the
Corporation shall be communicated by written Notice of Termination (as
defined below) to the other party hereto in accordance with Section 12.7.
For purposes of this Severance Agreement, "Notice of Termination" shall
mean a notice that indicates the specific reason for termination and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.
5.2 For purposes of this Severance Agreement,
"Date of Termination" shall mean (i) if your employment is terminated
due to your death, the date of your death; and (b) otherwise, the date
specified in the Notice of Termination (which, in the case of a
termination for Cause or Disability shall not be less than thirty (30) days
from the date the Notice of Termination is given, and in the case of a
termination for Good Reason shall not be less than fifteen (15) nor more
than sixty (60) days from the date the Notice of Termination is given).
Notwithstanding anything to the contrary contained in this Section 5.2, if
within fifteen (15) days after any Notice of Termination (with respect to
a termination for Cause, Disability or Good Reason) is given the party re-
ceiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual
written agreement of the parties, or as set forth in Section 10; provided,
however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence.
6. Compensation after Termination for Cause or other
than for Good Reason and during Disability.
6.1 If your employment is terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full base salary, when due, through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are then
entitled under any of the Corporation's compensation plans at the time
such payments are due, and the Corporation shall have no further
obligations to you under this Severance Agreement or any other
agreement.
6.2 During any period during which you fail to
perform your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under the Corpora-
tion's disability plan or program or other similar plan during such period,
until you employment is terminated for Disability (as provided in Section
3.2). Thereafter, or in the event your employment is terminated by reason
of your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
7. Compensation After Qualifying Termination.
7.1 If a Qualifying Termination occurs, then you
shall be entitled to the benefits provided below:
i) the Corporation shall pay your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 7.2, plus all other amounts to which you are
entitled under any of the Corporation's compensation plans at the
time such payments are due;
ii) in lieu of any further salary or other pay-
ments to you under any agreement for periods subsequent to the
Date of Termination, the Corporation shall pay as severance pay to
you, at the time specified in Section 7.2, a lump sum severance
payment (together with the payments provided in Sections 7.1(iii)
and 7.1(iv) below, the "Severance Payments") equal to 200% of your
base salary as in effect as of the Date of Termination and 200% of
the average of the annual bonuses awarded to you pursuant to the
Corporation's performance bonus plan (the "Bonus Plan"), or
any successor bonus plan thereto, with respect to the three (3)
fiscal years (or your total years of employment with the
Corporation, if less than three (3)) preceding the Date of
Termination;
iii) notwithstanding any provisions of the
Corporation's stock option and incentive plans, or other similar
plans, the restricted period with respect to any restricted
stock granted to you thereunder shall lapse and such shares shall be
distributed to you at the time specified in Section 7.2;
iv) in lieu of shares of common stock of the
Corporation ("Common Shares") issuable upon exercise of
outstanding options ("Options"), if any, granted to you under any
of the Corporation's stock option plans, incentive plans or other
similar plans, (which Options shall be cancelled upon the making
of the payment referred to below), the Corporation shall pay to
you, at the time specified in Section 7.2, an amount in cash equal to
the product of (a) the excess of, in the case of an "incentive stock
option" (as defined in section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) granted after the date hereof, the
closing price of Common Shares as reported on the New York Stock
Exchange on or nearest the Date of Termination (or, if not listed
on such exchange, on a nationally recognized exchange or
quotation system on which trading volume in the Common Shares
is highest) and, in the case of all other Options, the higher of such
closing price or the highest per share price for Common Shares
actually paid in connection with any merger, reorganization or
other acquisition of all or substantially all of the Corporation's
common stock, over the per share option price of each Option held
by you (whether or not then fully exercisable), and (b) the number
of Common Shares covered by each such Option;
v) the Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Severance Agreement
or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
vi) for a twenty-four (24) month period after
such termination, the Corporation shall arrange to provide you
with life, disability, accident and group health insurance benefits
substantially similar to those that you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this Section 7.1(vi) shall be reduced to the
extent you actually receive comparable benefits during the -
twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Corporation.
7.2 The payments provided for in Sections 7.1(i),
shall be made not later than the fifth day following the Date of
Termination. The payments provided for in Sections 7.1(ii), 7.1(iii) and
7.1(iv), shall be made not later than the thirtieth day following the Date
of Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall
pay to you on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments ex-
ceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the fifth day
after demand by the Corporation (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
7.3 You shall not be required to mitigate the
amount of any payment provided for in this Section 7 by seeking other
employment or otherwise nor, except as provided in Section 7.1(vi) hereof,
shall the amount of any payment or benefit provided for by this Section 7
be reduced by any compensation you earn as the result of employment by
another employer, by any income from self employment, by retirement
benefits, by offset against any amount claimed to be owed by you to the
Corporation, or otherwise.
8. Designated Beneficiary. In the event of your death
while amounts remain payable to you under this Severance Agreement,
such payments (other than the right to continuation of welfare benefits)
shall thereafter be made to such person or persons as you may specifically
designate (successively or contingently) to receive payments under this
Severance Agreement following your death by filing a written beneficiary
designation with the Corporation during your lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Corporation
and may be amended from time to time or may be revoked by you
pursuant to written instruments filed with the Corporation during your
lifetime. Beneficiaries you designate may be any natural or legal person
or persons, including a fiduciary, such as a trustee or a trust or the legal
representative of an estate. Unless otherwise provided by the beneficiary
designation you file, if all of the persons so designated die before you or
there is an occurrence of a contingency not contemplated in such
beneficiary designation, then the amounts payable under this Severance
Agreement shall be paid to your estate.
9. Taxes. All payments to be made to you under this
Severance Agreement shall be subject to any applicable withholding of
federal, state and local income and employment taxes.
10. Arbitration; Dispute Resolution.
10.1 Arbitration Procedure. Any disagreement,
dispute, controversy or claim arising out of or relating to this Severance
Agreement or the interpretation of this Severance Agreement or any
arrangements relating to this Severance Agreement or contemplated in
this Severance Agreement or the breach, termination or invalidity thereof
shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in this Severance
Agreement) in Phoenix, Arizona. The arbitral tribunal shall consist of
one arbitrator. In making any decision, the arbitrator shall apply and
follow the substantive law of Arizona without reference to the conflicts
of law provisions thereof. The parties to the arbitration jointly shall
directly appoint such arbitrator within thirty (30) days of initiation of
arbitration. If the parties fail to appoint such arbitrator as provided
above, such arbitrator shall be appointed by the AAA as provided in the
Arbitration Rules. You and the Corporation each agree that the arbitral
award may be enforced against the parties to the arbitration proceeding
or their assets wherever they may be found and that a judgment upon the
arbitral award may be entered in any court having jurisdiction thereof.
The Corporation shall pay all fees and expenses of the Arbitrator
regardless of the result and shall provide all witnesses and evidence you
reasonably require to present your case. The Corporation shall pay to you
all reasonable arbitration expenses and legal fees incurred in seeking to
obtain or enforce any right or benefit provided by this Severance
Agreement (whether or not you are successful in obtaining or enforcing
such right or benefit). Such payments shall be made within five (5) days
after your request for payment accompanied with such evidence of fees
and expenses incurred as the Corporation may reasonably require.
10.2 Compensation During Dispute. Your
compensation during any disagreement, dispute, controversy or claim
arising out of or relating to this Severance Agreement or the
interpretation of this Severance Agreement shall be as set forth below.
(i) If a purported termination by you for
Good Reason occurs or is deemed to occur and during the Term,
and such termination is disputed in accordance with Sections 5.2
and 10 of this Severance Agreement, the Corporation shall
continue to pay you the full compensation in effect when the
notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this Section
10. Amounts paid under this Section 10.2(i) are in addition to all
other amounts due under this Severance Agreement and shall not
be offset against or reduce any other amounts due under this
Severance Agreement. You agree to remain in the employ of the
Corporation during the resolution of the dispute and to continue to
provide services unless your employment is terminated earlier by
Disability, death or retirement, or by action of the Corporation. If
the dispute is resolved by a determination that you did not have
Good Reason, this Severance Agreement, in accordance with its
terms, shall continue to apply to the circumstances of your
employment by the Corporation and any termination thereof.
(ii) If there is a termination by the
Corporation followed by a dispute as to whether you are entitled to
the payments and other benefits provided under this Severance
Agreement, then, during the period of that dispute the Corporation
shall pay you fifty percent (50%) of the amount specified in
Sections 7.1(i) and 7.1(ii), and the Corporation shall provide you
with the other benefits provided in Section 7.1, if, but only if, you
agree in writing that if the dispute is resolved against you, you
shall promptly refund to the Corporation all payments you
received under Sections 7.1(i) and 7.1(ii) of this Severance
Agreement plus interest at the rate provided in section 1274(d) of
the Code, compounded quarterly. If the dispute is resolved in your
favor, promptly after resolution of the dispute the Corporation
shall pay you the sum that was withheld during the period of the
dispute plus interest at the rate provided in section 1274(d) of the
Code, compounded quarterly.
11. No Offset - No Mitigation. you shall not be required to
mitigate damages under this Severance Agreement by seeking other
employment or otherwise. Except as provided in Section 7.1(vi), no
amount of any payment or benefit provided for in this Severance
Agreement shall be reduced by any compensation you earn as the result of
employment by another employer, by any income from self employment,
by retirement benefits, by offset against any amount claimed to be owed
by you to the Corporation, or otherwise.
12. General. This Severance Agreement shall also be
subject to the following Provisions:
12.1 You represent and warrant that you have the
authorization, power and right to deliver, execute, and fully perform your
obligations under this Severance Agreement in accordance with its terms.
The Corporation represents and warrants that it has the authorization,
power and right to deliver, execute, and fully perform its obligations
under this Severance Agreement in accordance with its terms.
12.2 This Severance Agreement contains a complete
statement of all the arrangements between you and the Corporation with
respect to the subject matter hereof, this Severance Agreement supersedes
all prior and existing negotiations and agreements (including, without
limitation, the Prior Severance Agreements) between the you and the
Corporation concerning the benefits to which you are entitled upon your
termination for Good Reason, for Cause or Without Cause, and this
Severance Agreement can only be changed or modified pursuant to a
written instrument duly executed by each of you and the Corporation.
12.3 If any provision of this Severance Agreement
or any portion thereof is declared invalid, illegal, or incapable of being
enforced by any court of competent jurisdiction, the remainder of such
provisions and all of the remaining provisions of this Severance
Agreement shall continue in full force and effect.
12.4 This Severance Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Arizona (without reference to the conflicts of laws provisions thereof),
except to the extent governed by federal law.
12.5 The Corporation may assign this Severance
Agreement to any direct or indirect subsidiary or parent of the
Corporation or joint venture in which the Corporation has an interest and
this Severance Agreement shall be binding upon and inure to the benefit
of such successors and assigns. Except as specifically provided herein,
you may not sell, transfer, assign, or pledge any of your rights or interests
pursuant to this Severance Agreement without the express prior written
consent of the Corporation, which consent may be given or withheld in
the Corporation's sole and absolute discretion.
12.6 The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or other-
wise) to all or substantially all of its business and/or assets to expressly
assume and agree to perform this Severance Agreement in the same
manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Severance
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms to which you would be entitled
hereunder if you were to terminate your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of
Termination. As used in this Severance Agreement, "Corporation" shall
mean the Corporation as previously defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Severance Agreement by operation of law, or otherwise.
12.7 For the purpose of this Severance Agreement,
notices and all other communications provided for in this Severance
Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed (if to you) to
the address set forth below under your signature (or if to the Corporation)
to the Corporation's principal corporate offices and directed to the
attention of the Board with a copy to the Corporation's Secretary, or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
12.8 Section captions and headings in this Severance
Agreement are included herein for convenience of reference only and
shall not constitute a part of this Severance Agreement for any other
purpose.
12.9 Failure to insist upon strict compliance with
any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
12.10 This Severance Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of
this letter, which shall then constitute our agreement on this subject.
Sincerely,
AZTAR CORPORATION
By ROBERT M. HADDOCK
Robert M. Haddock
Executive Vice President and
Chief Financial Officer
Agreed to this 17 day
of July 1995.
PAUL E. RUBELI
Paul E. Rubeli
Address: Paul E. Rubeli
Chairman of the Board, President and
Chief Executive Officer
c/o Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Exhibit 10.2
AZTAR CORPORATION
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
July 6, 1995
Mr. Robert M. Haddock
Executive Vice President and
Chief Financial Officer
Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Dear Mr. Haddock:
Aztar Corporation (the "Corporation") is the successor to
Ramada Inc. ("Ramada") and was incorporated as part of a restructuring
of Ramada (the "Restructuring") in June 1989. Pursuant to the
Restructuring, (i) Ramada sold its hotel and restaurant businesses; (ii) the
Corporation was formed to operate Ramada's gaming business; and (iii)
Ramada's shareholders received, among other things, stock of the
Corporation so that they retained their interest in Ramada's gaming
business. The Corporation has, as part of the Restructuring, assumed
certain assets and liabilities related to Ramada's gaming business,
including Ramada's obligations under that certain letter agreement, dated
October 30, 1985 between you and Ramada, as amended, and that certain
letter agreement, dated September 1, 1987 between you and Ramada, as
amended (collectively the "Prior Severance Agreements").
The Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key
management personnel. The Corporation's Board of Directors (the
"Board") recognizes that uncertainty and questions regarding certain of
your severance benefits could result in your departure or distraction
which could be detrimental to the Corporation and its stockholders.
Therefore, the Board has decided to reinforce and encourage the
continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without
distraction arising from uncertainty in their severance benefits.
In order to induce you to remain in its employ, the
Corporation desires to amend and restate the Prior Severance Agreements
in their entirety and hereby agrees that after this letter agreement (this
"Severance Agreement") has been fully executed, in the event of a
Qualifying Termination (as defined in Section 2), you shall receive the
severance benefits set forth in this Severance Agreement. Upon the full
execution of this Severance Agreement, the Prior Severance Agreements
shall terminate and be of no further effect.
1. Term of Severance Agreement. This Severance
Agreement shall commence on July 6, 1995 (the "Effective Date") and shall
continue in effect through the December 31, 2002 (the "Term"); provided,
however, that (i) commencing on January 1, 1996, and each January 1
thereafter, the Term shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the
Corporation shall have given notice that the Term shall not be extended,
and (ii) the Corporation's obligations under Section 7 shall survive the
expiration of the Term. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the Term extend beyond
the end of the calendar month in which your 65th birthday occurs.
2. Eligibility for Benefits. None of the Benefits set
forth in Section 7 shall be payable under this Severance Agreement unless
and until a Qualifying Termination (as defined below) occurs. As used in
this Severance Agreement, the term "Qualifying Termination" means the
termination of your employment with the Corporation that is either (i) by
the Corporation Without Cause (as defined in Section 3), or (ii) by you for
Good Reason (as defined in Section 4).
3. Without Cause. For purposes of this Severance
Agreement, a termination by the Corporation "Without Cause" shall mean
any termination by the Corporation of your employment other than (i) a
termination by the Corporation for Cause (as defined in Section 3.1), (ii) a
termination because of your Disability (as defined in Section 3.2), or (iii)
a termination due because of your death or retirement.
3.1 For purposes of this Severance Agreement, a
termination for "Cause" shall occur if and when the Corporation
terminates your employment due to (i) your willful and continued failure
to substantially perform your duties with the Corporation (other than any
such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after your issuance of a
Notice of Termination (as defined in Section 5.1) for Good Reason) after
the Board delivers to you a written demand for substantial performance,
which demand specifically identifies the manner in which the Board
believes that you has not substantially performed your duties, (ii) your
willful participation in conduct that is demonstrably and materially
injurious to the Corporation, monetarily or otherwise, or (iii) there being
substantial evidence that you are guilty of a crime classified as a felony
(or the equivalent thereof) under applicable law, or that you have been
convicted of such a crime. For purposes of this Section 3.2, no act, or
failure to act, by you shall be deemed "willful" unless you take, or fail to
take, such action not in good faith. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until a
copy of a resolution of the Board has been delivered to you. Such
resolution shall be duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding
that in the Board's good faith opinion you were guilty of conduct set
forth above in this Section 3.1 and specifying the particulars thereof in
reasonable detail.
3.2 For purposes of this Severance Agreement, a
termination due to your "Disability" shall occur if, as a result of your
incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for
six (6) consecutive months, and within thirty (30) days after written
Notice of Termination is given you shall not have returned to the
full-time performance of your duties.
4. Good Reason. For purposes of this Severance
Agreement, a termination by you for "Good Reason" shall mean any
termination by you of your employment with the Corporation that follows
the occurrence, without your express written consent, of any of the
circumstances set forth below unless, in the case of Sections 4.1, 4.5, 4.6,
4.7, 4.8 or 4.9, such circumstances are fully corrected prior to the Date of
Termination (as defined in Section 5.2) specified in the Notice of
Termination given in respect thereof.
4.1 The Corporation's assignment to you of any
duties that are inconsistent with your position with the Corporation, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
as of the Effective Date.
4.2 The Corporation's reduction of your base
salary as such base salary may have been increased from time to time,
except for across-the-board salary reductions similarly affecting all
management personnel of the Corporation and all management personnel
of any Person (as defined below) that controls the Corporation. For
purposes of this Severance Agreement, the term "Person" is used as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that unless this
Severance Agreement provides to the contrary, the term shall not include
the Corporation, any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation.
4.3 The relocation of the Corporation's offices
at which you are principally employed as of the Effective Date to
a location more than 25 miles from such location or the Corporation's
requiring you to be based anywhere other than the Corporation's offices
at such location, except for required travel on the Corporation's business
to an extent substantially consistent with your business travel obligations
as of the Effective Date.
4.4 The Corporation's failure to pay you any
portion of your current compensation or to pay you any portion of an
installment of deferred compensation to which you are entitled under any
of the Corporation's deferred compensation programs within seven (7)
days of the date such compensation is due.
4.5 The Corporation's failure to continue in
effect any material compensation or benefit plan in which you participate
as of the Effective Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such
plan, or the Corporation's failure to continue your participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed as of the
Effective Date.
4.6 The Corporation's failure to continue
to provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, health and
accident, or disability plans in which you were participating as of the
Effective Date, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Corporation to provide you with the number of paid
vacation days to which you are entitled on the basis of years of service
with the Corporation in accordance with the Corporation's normal
vacation policy in effect as of the Effective Date.
4.7 The Corporation's failure to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Severance Agreement, as contemplated in Section 12.6.
4.8 Any purported termination of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 5.1 hereof (and, if applicable, the
requirements of Section 3.1 hereof), which purported termination shall not
be effective for purposes of this Severance Agreement.
4.9 If, after you have given written notice of
objection, you continue to be subject to harassing or denigrating treatment
that is inconsistent with your position with the Corporation.
Your right to terminate your employment pursuant to this Section 4 shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason
hereunder.
5. Notice of Termination; Date of Termination.
5.1 Any purported termination of your
employment (other than termination due to death) by you or by the
Corporation shall be communicated by written Notice of Termination (as
defined below) to the other party hereto in accordance with Section 12.7.
For purposes of this Severance Agreement, "Notice of Termination" shall
mean a notice that indicates the specific reason for termination and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.
5.2 For purposes of this Severance Agreement,
"Date of Termination" shall mean (i) if your employment is terminated
due to your death, the date of your death; and (b) otherwise, the date
specified in the Notice of Termination (which, in the case of a
termination for Cause or Disability shall not be less than thirty (30) days
from the date the Notice of Termination is given, and in the case of a
termination for Good Reason shall not be less than fifteen (15) nor more
than sixty (60) days from the date the Notice of Termination is given).
Notwithstanding anything to the contrary contained in this Section 5.2, if
within fifteen (15) days after any Notice of Termination (with respect to
a termination for Cause, Disability or Good Reason) is given the party re-
ceiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual
written agreement of the parties, or as set forth in Section 10; provided,
however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence.
6. Compensation after Termination for Cause or other
than for Good Reason and during Disability.
6.1 If your employment is terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full base salary, when due, through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are then
entitled under any of the Corporation's compensation plans at the time
such payments are due, and the Corporation shall have no further
obligations to you under this Severance Agreement or any other
agreement.
6.2 During any period during which you fail to
perform your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under the Corpora-
tion's disability plan or program or other similar plan during such period,
until you employment is terminated for Disability (as provided in Section
3.2). Thereafter, or in the event your employment is terminated by reason
of your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
7. Compensation After Qualifying Termination.
7.1 If a Qualifying Termination occurs, then you
shall be entitled to the benefits provided below:
i) the Corporation shall pay your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 7.2, plus all other amounts to which you are
entitled under any of the Corporation's compensation plans at the
time such payments are due;
ii) in lieu of any further salary or other pay-
ments to you under any agreement for periods subsequent to the
Date of Termination, the Corporation shall pay as severance pay to
you, at the time specified in Section 7.2, a lump sum severance
payment (together with the payments provided in Sections 7.1(iii)
and 7.1(iv) below, the "Severance Payments") equal to 200% of your
base salary as in effect as of the Date of Termination and 200% of
the average of the annual bonuses awarded to you pursuant to the
Corporation's performance bonus plan (the "Bonus Plan"), or
any successor bonus plan thereto, with respect to the three (3)
fiscal years (or your total years of employment with the
Corporation, if less than three (3)) preceding the Date of
Termination;
iii) notwithstanding any provisions of the
Corporation's stock option and incentive plans, or other similar
plans, the restricted period with respect to any restricted
stock granted to you thereunder shall lapse and such shares shall be
distributed to you at the time specified in Section 7.2;
iv) in lieu of shares of common stock of the
Corporation ("Common Shares") issuable upon exercise of
outstanding options ("Options"), if any, granted to you under any
of the Corporation's stock option plans, incentive plans or other
similar plans, (which Options shall be cancelled upon the making
of the payment referred to below), the Corporation shall pay to
you, at the time specified in Section 7.2, an amount in cash equal to
the product of (a) the excess of, in the case of an "incentive stock
option" (as defined in section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) granted after the date hereof, the
closing price of Common Shares as reported on the New York Stock
Exchange on or nearest the Date of Termination (or, if not listed
on such exchange, on a nationally recognized exchange or
quotation system on which trading volume in the Common Shares
is highest) and, in the case of all other Options, the higher of such
closing price or the highest per share price for Common Shares
actually paid in connection with any merger, reorganization or
other acquisition of all or substantially all of the Corporation's
common stock, over the per share option price of each Option held
by you (whether or not then fully exercisable), and (b) the number
of Common Shares covered by each such Option;
v) the Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Severance Agreement
or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
vi) for a twenty-four (24) month period after
such termination, the Corporation shall arrange to provide you
with life, disability, accident and group health insurance benefits
substantially similar to those that you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this Section 7.1(vi) shall be reduced to the
extent you actually receive comparable benefits during the -
twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Corporation.
7.2 The payments provided for in Sections 7.1(i),
shall be made not later than the fifth day following the Date of
Termination. The payments provided for in Sections 7.1(ii), 7.1(iii) and
7.1(iv), shall be made not later than the thirtieth day following the Date
of Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall
pay to you on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments ex-
ceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the fifth day
after demand by the Corporation (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
7.3 You shall not be required to mitigate the
amount of any payment provided for in this Section 7 by seeking other
employment or otherwise nor, except as provided in Section 7.1(vi) hereof,
shall the amount of any payment or benefit provided for by this Section 7
be reduced by any compensation you earn as the result of employment by
another employer, by any income from self employment, by retirement
benefits, by offset against any amount claimed to be owed by you to the
Corporation, or otherwise.
8. Designated Beneficiary. In the event of your death
while amounts remain payable to you under this Severance Agreement,
such payments (other than the right to continuation of welfare benefits)
shall thereafter be made to such person or persons as you may specifically
designate (successively or contingently) to receive payments under this
Severance Agreement following your death by filing a written beneficiary
designation with the Corporation during your lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Corporation
and may be amended from time to time or may be revoked by you
pursuant to written instruments filed with the Corporation during your
lifetime. Beneficiaries you designate may be any natural or legal person
or persons, including a fiduciary, such as a trustee or a trust or the legal
representative of an estate. Unless otherwise provided by the beneficiary
designation you file, if all of the persons so designated die before you or
there is an occurrence of a contingency not contemplated in such
beneficiary designation, then the amounts payable under this Severance
Agreement shall be paid to your estate.
9. Taxes. All payments to be made to you under this
Severance Agreement shall be subject to any applicable withholding of
federal, state and local income and employment taxes.
10. Arbitration; Dispute Resolution.
10.1 Arbitration Procedure. Any disagreement,
dispute, controversy or claim arising out of or relating to this Severance
Agreement or the interpretation of this Severance Agreement or any
arrangements relating to this Severance Agreement or contemplated in
this Severance Agreement or the breach, termination or invalidity thereof
shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in this Severance
Agreement) in Phoenix, Arizona. The arbitral tribunal shall consist of
one arbitrator. In making any decision, the arbitrator shall apply and
follow the substantive law of Arizona without reference to the conflicts
of law provisions thereof. The parties to the arbitration jointly shall
directly appoint such arbitrator within thirty (30) days of initiation of
arbitration. If the parties fail to appoint such arbitrator as provided
above, such arbitrator shall be appointed by the AAA as provided in the
Arbitration Rules. You and the Corporation each agree that the arbitral
award may be enforced against the parties to the arbitration proceeding
or their assets wherever they may be found and that a judgment upon the
arbitral award may be entered in any court having jurisdiction thereof.
The Corporation shall pay all fees and expenses of the Arbitrator
regardless of the result and shall provide all witnesses and evidence you
reasonably require to present your case. The Corporation shall pay to you
all reasonable arbitration expenses and legal fees incurred in seeking to
obtain or enforce any right or benefit provided by this Severance
Agreement (whether or not you are successful in obtaining or enforcing
such right or benefit). Such payments shall be made within five (5) days
after your request for payment accompanied with such evidence of fees
and expenses incurred as the Corporation may reasonably require.
10.2 Compensation During Dispute. Your
compensation during any disagreement, dispute, controversy or claim
arising out of or relating to this Severance Agreement or the
interpretation of this Severance Agreement shall be as set forth below.
(i) If a purported termination by you for
Good Reason occurs or is deemed to occur and during the Term,
and such termination is disputed in accordance with Sections 5.2
and 10 of this Severance Agreement, the Corporation shall
continue to pay you the full compensation in effect when the
notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this Section
10. Amounts paid under this Section 10.2(i) are in addition to all
other amounts due under this Severance Agreement and shall not
be offset against or reduce any other amounts due under this
Severance Agreement. You agree to remain in the employ of the
Corporation during the resolution of the dispute and to continue to
provide services unless your employment is terminated earlier by
Disability, death or retirement, or by action of the Corporation. If
the dispute is resolved by a determination that you did not have
Good Reason, this Severance Agreement, in accordance with its
terms, shall continue to apply to the circumstances of your
employment by the Corporation and any termination thereof.
(ii) If there is a termination by the
Corporation followed by a dispute as to whether you are entitled to
the payments and other benefits provided under this Severance
Agreement, then, during the period of that dispute the Corporation
shall pay you fifty percent (50%) of the amount specified in
Sections 7.1(i) and 7.1(ii), and the Corporation shall provide you
with the other benefits provided in Section 7.1, if, but only if, you
agree in writing that if the dispute is resolved against you, you
shall promptly refund to the Corporation all payments you
received under Sections 7.1(i) and 7.1(ii) of this Severance
Agreement plus interest at the rate provided in section 1274(d) of
the Code, compounded quarterly. If the dispute is resolved in your
favor, promptly after resolution of the dispute the Corporation
shall pay you the sum that was withheld during the period of the
dispute plus interest at the rate provided in section 1274(d) of the
Code, compounded quarterly.
11. No Offset - No Mitigation. you shall not be required to
mitigate damages under this Severance Agreement by seeking other
employment or otherwise. Except as provided in Section 7.1(vi), no
amount of any payment or benefit provided for in this Severance
Agreement shall be reduced by any compensation you earn as the result of
employment by another employer, by any income from self employment,
by retirement benefits, by offset against any amount claimed to be owed
by you to the Corporation, or otherwise.
12. General. This Severance Agreement shall also be
subject to the following Provisions:
12.1 You represent and warrant that you have the
authorization, power and right to deliver, execute, and fully perform your
obligations under this Severance Agreement in accordance with its terms.
The Corporation represents and warrants that it has the authorization,
power and right to deliver, execute, and fully perform its obligations
under this Severance Agreement in accordance with its terms.
12.2 This Severance Agreement contains a complete
statement of all the arrangements between you and the Corporation with
respect to the subject matter hereof, this Severance Agreement supersedes
all prior and existing negotiations and agreements (including, without
limitation, the Prior Severance Agreements) between the you and the
Corporation concerning the benefits to which you are entitled upon your
termination for Good Reason, for Cause or Without Cause, and this
Severance Agreement can only be changed or modified pursuant to a
written instrument duly executed by each of you and the Corporation.
12.3 If any provision of this Severance Agreement
or any portion thereof is declared invalid, illegal, or incapable of being
enforced by any court of competent jurisdiction, the remainder of such
provisions and all of the remaining provisions of this Severance
Agreement shall continue in full force and effect.
12.4 This Severance Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Arizona (without reference to the conflicts of laws provisions thereof),
except to the extent governed by federal law.
12.5 The Corporation may assign this Severance
Agreement to any direct or indirect subsidiary or parent of the
Corporation or joint venture in which the Corporation has an interest and
this Severance Agreement shall be binding upon and inure to the benefit
of such successors and assigns. Except as specifically provided herein,
you may not sell, transfer, assign, or pledge any of your rights or interests
pursuant to this Severance Agreement without the express prior written
consent of the Corporation, which consent may be given or withheld in
the Corporation's sole and absolute discretion.
12.6 The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or other-
wise) to all or substantially all of its business and/or assets to expressly
assume and agree to perform this Severance Agreement in the same
manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Severance
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms to which you would be entitled
hereunder if you were to terminate your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of
Termination. As used in this Severance Agreement, "Corporation" shall
mean the Corporation as previously defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Severance Agreement by operation of law, or otherwise.
12.7 For the purpose of this Severance Agreement,
notices and all other communications provided for in this Severance
Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed (if to you) to
the address set forth below under your signature (or if to the Corporation)
to the Corporation's principal corporate offices and directed to the
attention of the Board with a copy to the Corporation's Secretary, or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
12.8 Section captions and headings in this Severance
Agreement are included herein for convenience of reference only and
shall not constitute a part of this Severance Agreement for any other
purpose.
12.9 Failure to insist upon strict compliance with
any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
12.10 This Severance Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of
this letter, which shall then constitute our agreement on this subject.
Sincerely,
AZTAR CORPORATION
By PAUL E. RUBELI
Paul E. Rubeli
Chairman of the Board,
President and
Chief Executive Officer
Agreed to this 17 day
of July 1995.
ROBERT M. HADDOCK
Robert M. Haddock
Address: Robert M. Haddock
Executive Vice President and
Chief Financial Officer
c/o Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Exhibit 10.3
AZTAR CORPORATION
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
July 6, 1995
Mr. Nelson W. Armstrong, Jr.
Vice President, Administration and
Secretary
Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Dear Mr. Armstrong:
Aztar Corporation (the "Corporation") is the successor to
Ramada Inc. ("Ramada") and was incorporated as part of a restructuring
of Ramada (the "Restructuring") in June 1989. Pursuant to the
Restructuring, (i) Ramada sold its hotel and restaurant businesses; (ii) the
Corporation was formed to operate Ramada's gaming business; and (iii)
Ramada's shareholders received, among other things, stock of the
Corporation so that they retained their interest in Ramada's gaming
business. The Corporation has, as part of the Restructuring, assumed
certain assets and liabilities related to Ramada's gaming business,
including Ramada's obligations under that certain letter agreement, dated
September 1, 1987 between you and Ramada, as amended (the "Prior
Severance Agreement").
The Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key
management personnel. The Corporation's Board of Directors (the
"Board") recognizes that uncertainty and questions regarding certain of
your severance benefits could result in your departure or distraction
which could be detrimental to the Corporation and its stockholders.
Therefore, the Board has decided to reinforce and encourage the
continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without
distraction arising from uncertainty in their severance benefits.
In order to induce you to remain in its employ, the
Corporation desires to amend and restate the Prior Severance Agreement
in their entirety and hereby agrees that after this letter agreement (this
"Severance Agreement") has been fully executed, in the event of a
Qualifying Termination (as defined in Section 2), you shall receive the
severance benefits set forth in this Severance Agreement. Upon the full
execution of this Severance Agreement, the Prior Severance Agreement
shall terminate and be of no further effect.
1. Term of Severance Agreement. This Severance
Agreement shall commence on July 6, 1995 (the "Effective Date") and shall
continue in effect through the December 31, 2002 (the "Term"); provided,
however, that (i) commencing on January 1, 1996, and each January 1
thereafter, the Term shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the
Corporation shall have given notice that the Term shall not be extended,
and (ii) the Corporation's obligations under Section 7 shall survive the
expiration of the Term. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the Term extend beyond
the end of the calendar month in which your 65th birthday occurs.
2. Eligibility for Benefits. None of the Benefits set
forth in Section 7 shall be payable under this Severance Agreement unless
and until a Qualifying Termination (as defined below) occurs. As used in
this Severance Agreement, the term "Qualifying Termination" means the
termination of your employment with the Corporation that is either (i) by
the Corporation Without Cause (as defined in Section 3), or (ii) by you for
Good Reason (as defined in Section 4).
3. Without Cause. For purposes of this Severance
Agreement, a termination by the Corporation "Without Cause" shall mean
any termination by the Corporation of your employment other than (i) a
termination by the Corporation for Cause (as defined in Section 3.1), (ii) a
termination because of your Disability (as defined in Section 3.2), or (iii)
a termination due because of your death or retirement.
3.1 For purposes of this Severance Agreement, a
termination for "Cause" shall occur if and when the Corporation
terminates your employment due to (i) your willful and continued failure
to substantially perform your duties with the Corporation (other than any
such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after your issuance of a
Notice of Termination (as defined in Section 5.1) for Good Reason) after
the Board delivers to you a written demand for substantial performance,
which demand specifically identifies the manner in which the Board
believes that you has not substantially performed your duties, (ii) your
willful participation in conduct that is demonstrably and materially
injurious to the Corporation, monetarily or otherwise, or (iii) there being
substantial evidence that you are guilty of a crime classified as a felony
(or the equivalent thereof) under applicable law, or that you have been
convicted of such a crime. For purposes of this Section 3.2, no act, or
failure to act, by you shall be deemed "willful" unless you take, or fail to
take, such action not in good faith. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until a
copy of a resolution of the Board has been delivered to you. Such
resolution shall be duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding
that in the Board's good faith opinion you were guilty of conduct set
forth above in this Section 3.1 and specifying the particulars thereof in
reasonable detail.
3.2 For purposes of this Severance Agreement, a
termination due to your "Disability" shall occur if, as a result of your
incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for
six (6) consecutive months, and within thirty (30) days after written
Notice of Termination is given you shall not have returned to the
full-time performance of your duties.
4. Good Reason. For purposes of this Severance
Agreement, a termination by you for "Good Reason" shall mean any
termination by you of your employment with the Corporation that follows
the occurrence, without your express written consent, of any of the
circumstances set forth below unless, in the case of Sections 4.1, 4.5, 4.6,
4.7, 4.8 or 4.9, such circumstances are fully corrected prior to the Date of
Termination (as defined in Section 5.2) specified in the Notice of
Termination given in respect thereof.
4.1 The Corporation's assignment to you of any
duties that are inconsistent with your position with the Corporation, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
as of the Effective Date.
4.2 The Corporation's reduction of your base
salary as such base salary may have been increased from time to time,
except for across-the-board salary reductions similarly affecting all
management personnel of the Corporation and all management personnel
of any Person (as defined below) that controls the Corporation. For
purposes of this Severance Agreement, the term "Person" is used as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that unless this
Severance Agreement provides to the contrary, the term shall not include
the Corporation, any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation.
4.3 The relocation of the Corporation's offices
at which you are principally employed as of the Effective Date to
a location more than 25 miles from such location or the Corporation's
requiring you to be based anywhere other than the Corporation's offices
at such location, except for required travel on the Corporation's business
to an extent substantially consistent with your business travel obligations
as of the Effective Date.
4.4 The Corporation's failure to pay you any
portion of your current compensation or to pay you any portion of an
installment of deferred compensation to which you are entitled under any
of the Corporation's deferred compensation programs within seven (7)
days of the date such compensation is due.
4.5 The Corporation's failure to continue in
effect any material compensation or benefit plan in which you participate
as of the Effective Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such
plan, or the Corporation's failure to continue your participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed as of the
Effective Date.
4.6 The Corporation's failure to continue
to provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, health and
accident, or disability plans in which you were participating as of the
Effective Date, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Corporation to provide you with the number of paid
vacation days to which you are entitled on the basis of years of service
with the Corporation in accordance with the Corporation's normal
vacation policy in effect as of the Effective Date.
4.7 The Corporation's failure to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Severance Agreement, as contemplated in Section 12.6.
4.8 Any purported termination of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 5.1 hereof (and, if applicable, the
requirements of Section 3.1 hereof), which purported termination shall not
be effective for purposes of this Severance Agreement.
4.9 If, after you have given written notice of
objection, you continue to be subject to harassing or denigrating treatment
that is inconsistent with your position with the Corporation.
Your right to terminate your employment pursuant to this Section 4 shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason
hereunder.
5. Notice of Termination; Date of Termination.
5.1 Any purported termination of your
employment (other than termination due to death) by you or by the
Corporation shall be communicated by written Notice of Termination (as
defined below) to the other party hereto in accordance with Section 12.7.
For purposes of this Severance Agreement, "Notice of Termination" shall
mean a notice that indicates the specific reason for termination and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.
5.2 For purposes of this Severance Agreement,
"Date of Termination" shall mean (i) if your employment is terminated
due to your death, the date of your death; and (b) otherwise, the date
specified in the Notice of Termination (which, in the case of a
termination for Cause or Disability shall not be less than thirty (30) days
from the date the Notice of Termination is given, and in the case of a
termination for Good Reason shall not be less than fifteen (15) nor more
than sixty (60) days from the date the Notice of Termination is given).
Notwithstanding anything to the contrary contained in this Section 5.2, if
within fifteen (15) days after any Notice of Termination (with respect to
a termination for Cause, Disability or Good Reason) is given the party re-
ceiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual
written agreement of the parties, or as set forth in Section 10; provided,
however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence.
6. Compensation after Termination for Cause or other
than for Good Reason and during Disability.
6.1 If your employment is terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full base salary, when due, through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are then
entitled under any of the Corporation's compensation plans at the time
such payments are due, and the Corporation shall have no further
obligations to you under this Severance Agreement or any other
agreement.
6.2 During any period during which you fail to
perform your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under the Corpora-
tion's disability plan or program or other similar plan during such period,
until you employment is terminated for Disability (as provided in Section
3.2). Thereafter, or in the event your employment is terminated by reason
of your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
7. Compensation After Qualifying Termination.
7.1 If a Qualifying Termination occurs, then you
shall be entitled to the benefits provided below:
i) the Corporation shall pay your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 7.2, plus all other amounts to which you are
entitled under any of the Corporation's compensation plans at the
time such payments are due;
ii) in lieu of any further salary or other pay-
ments to you under any agreement for periods subsequent to the
Date of Termination, the Corporation shall pay as severance pay to
you, at the time specified in Section 7.2, a lump sum severance
payment (together with the payments provided in Sections 7.1(iii)
and 7.1(iv) below, the "Severance Payments") equal to 100% of your
base salary as in effect as of the Date of Termination and 100% of
the average of the annual bonuses awarded to you pursuant to the
Corporation's performance bonus plan (the "Bonus Plan"), or
any successor bonus plan thereto, with respect to the three (3)
fiscal years (or your total years of employment with the
Corporation, if less than three (3)) preceding the Date of
Termination;
iii) notwithstanding any provisions of the
Corporation's stock option and incentive plans, or other similar
plans, the restricted period with respect to any restricted
stock granted to you thereunder shall lapse and such shares shall be
distributed to you at the time specified in Section 7.2;
iv) in lieu of shares of common stock of the
Corporation ("Common Shares") issuable upon exercise of
outstanding options ("Options"), if any, granted to you under any
of the Corporation's stock option plans, incentive plans or other
similar plans, (which Options shall be cancelled upon the making
of the payment referred to below), the Corporation shall pay to
you, at the time specified in Section 7.2, an amount in cash equal to
the product of (a) the excess of, in the case of an "incentive stock
option" (as defined in section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) granted after the date hereof, the
closing price of Common Shares as reported on the New York Stock
Exchange on or nearest the Date of Termination (or, if not listed
on such exchange, on a nationally recognized exchange or
quotation system on which trading volume in the Common Shares
is highest) and, in the case of all other Options, the higher of such
closing price or the highest per share price for Common Shares
actually paid in connection with any merger, reorganization or
other acquisition of all or substantially all of the Corporation's
common stock, over the per share option price of each Option held
by you (whether or not then fully exercisable), and (b) the number
of Common Shares covered by each such Option;
v) the Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Severance Agreement
or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
vi) for a twenty-four (24) month period after
such termination, the Corporation shall arrange to provide you
with life, disability, accident and group health insurance benefits
substantially similar to those that you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this Section 7.1(vi) shall be reduced to the
extent you actually receive comparable benefits during the -
twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Corporation.
7.2 The payments provided for in Sections 7.1(i),
shall be made not later than the fifth day following the Date of
Termination. The payments provided for in Sections 7.1(ii), 7.1(iii) and
7.1(iv), shall be made not later than the thirtieth day following the Date
of Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall
pay to you on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments ex-
ceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the fifth day
after demand by the Corporation (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
7.3 You shall not be required to mitigate the
amount of any payment provided for in this Section 7 by seeking other
employment or otherwise nor, except as provided in Section 7.1(vi) hereof,
shall the amount of any payment or benefit provided for by this Section 7
be reduced by any compensation you earn as the result of employment by
another employer, by any income from self employment, by retirement
benefits, by offset against any amount claimed to be owed by you to the
Corporation, or otherwise.
7.4 Notwithstanding anything to the contrary
contained in this Agreement, if by reason of section 280G of the Code any
payment or benefit received or to be received by you in connection with
the termination of your employment (whether payable pursuant to the
terms of this Agreement ("Contract Payments") or any other plan,
arrangements or agreement with the Corporation or an Affiliate (as
defined below) (collectively with the Contract Payments, "Total Pay-
ments") would not be deductible (in whole or part) by the Corporation, an
Affiliate or other person making such payment or providing such benefit,
then the Severance Payments shall be reduced (to zero if necessary) and,
if Severance Payments are reduced to zero, other Contract Payments shall
be reduced (to zero if necessary) and, if Contract Payments are reduced to
zero, other Total Payments shall be reduced (to zero if necessary) until no
portion of the Total Payments is not deductible by reason of section 280G
of the Code. For purposes of this limitation, (a) no portion of the Total
Payments the receipt or enjoyment of which you shall have effectively
waived in writing prior to the date of payment of the Severance Payments
shall be taken into account; (b) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the
Corporation's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of section 280G(b)(2)
of the Code (without regard to subsection (A)(ii) thereof); (c) the
Severance Payments (and, thereafter, other Contract Payments and other
Total Payments) shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (i) and (ii) of
Section 7.1) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of section 280G(b)(4) of the
Code, in the opinion of the tax counsel referred to in clause (b), and
(d) the value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Corporation's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of this Section 7.4, the term
"Affiliate" means the Corporation's successors or any Person or
corporation affiliated (or which shall become affiliated) with the Corpo-
ration within the meaning of section 1504 of the Code.
8. Designated Beneficiary. In the event of your death
while amounts remain payable to you under this Severance Agreement,
such payments (other than the right to continuation of welfare benefits)
shall thereafter be made to such person or persons as you may specifically
designate (successively or contingently) to receive payments under this
Severance Agreement following your death by filing a written beneficiary
designation with the Corporation during your lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Corporation
and may be amended from time to time or may be revoked by you
pursuant to written instruments filed with the Corporation during your
lifetime. Beneficiaries you designate may be any natural or legal person
or persons, including a fiduciary, such as a trustee or a trust or the legal
representative of an estate. Unless otherwise provided by the beneficiary
designation you file, if all of the persons so designated die before you or
there is an occurrence of a contingency not contemplated in such
beneficiary designation, then the amounts payable under this Severance
Agreement shall be paid to your estate.
9. Taxes. All payments to be made to you under this
Severance Agreement shall be subject to any applicable withholding of
federal, state and local income and employment taxes.
10. Arbitration; Dispute Resolution.
10.1 Arbitration Procedure. Any disagreement,
dispute, controversy or claim arising out of or relating to this Severance
Agreement or the interpretation of this Severance Agreement or any
arrangements relating to this Severance Agreement or contemplated in
this Severance Agreement or the breach, termination or invalidity thereof
shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in this Severance
Agreement) in Phoenix, Arizona. The arbitral tribunal shall consist of
one arbitrator. In making any decision, the arbitrator shall apply and
follow the substantive law of Arizona without reference to the conflicts
of law provisions thereof. The parties to the arbitration jointly shall
directly appoint such arbitrator within thirty (30) days of initiation of
arbitration. If the parties fail to appoint such arbitrator as provided
above, such arbitrator shall be appointed by the AAA as provided in the
Arbitration Rules. You and the Corporation each agree that the arbitral
award may be enforced against the parties to the arbitration proceeding
or their assets wherever they may be found and that a judgment upon the
arbitral award may be entered in any court having jurisdiction thereof.
The Corporation shall pay all fees and expenses of the Arbitrator
regardless of the result and shall provide all witnesses and evidence you
reasonably require to present your case. The Corporation shall pay to you
all reasonable arbitration expenses and legal fees incurred in seeking to
obtain or enforce any right or benefit provided by this Severance
Agreement (whether or not you are successful in obtaining or enforcing
such right or benefit). Such payments shall be made within five (5) days
after your request for payment accompanied with such evidence of fees
and expenses incurred as the Corporation may reasonably require.
10.2 Compensation During Dispute. Your
compensation during any disagreement, dispute, controversy or claim
arising out of or relating to this Severance Agreement or the
interpretation of this Severance Agreement shall be as set forth below.
(i) If a purported termination by you for
Good Reason occurs or is deemed to occur and during the Term,
and such termination is disputed in accordance with Sections 5.2
and 10 of this Severance Agreement, the Corporation shall
continue to pay you the full compensation in effect when the
notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this Section
10. Amounts paid under this Section 10.2(i) are in addition to all
other amounts due under this Severance Agreement and shall not
be offset against or reduce any other amounts due under this
Severance Agreement. You agree to remain in the employ of the
Corporation during the resolution of the dispute and to continue to
provide services unless your employment is terminated earlier by
Disability, death or retirement, or by action of the Corporation. If
the dispute is resolved by a determination that you did not have
Good Reason, this Severance Agreement, in accordance with its
terms, shall continue to apply to the circumstances of your
employment by the Corporation and any termination thereof.
(ii) If there is a termination by the
Corporation followed by a dispute as to whether you are entitled to
the payments and other benefits provided under this Severance
Agreement, then, during the period of that dispute the Corporation
shall pay you fifty percent (50%) of the amount specified in
Sections 7.1(i) and 7.1(ii), and the Corporation shall provide you
with the other benefits provided in Section 7.1, if, but only if, you
agree in writing that if the dispute is resolved against you, you
shall promptly refund to the Corporation all payments you
received under Sections 7.1(i) and 7.1(ii) of this Severance
Agreement plus interest at the rate provided in section 1274(d) of
the Code, compounded quarterly. If the dispute is resolved in your
favor, promptly after resolution of the dispute the Corporation
shall pay you the sum that was withheld during the period of the
dispute plus interest at the rate provided in section 1274(d) of the
Code, compounded quarterly.
11. No Offset - No Mitigation. you shall not be required to
mitigate damages under this Severance Agreement by seeking other
employment or otherwise. Except as provided in Section 7.1(vi), no
amount of any payment or benefit provided for in this Severance
Agreement shall be reduced by any compensation you earn as the result of
employment by another employer, by any income from self employment,
by retirement benefits, by offset against any amount claimed to be owed
by you to the Corporation, or otherwise.
12. General. This Severance Agreement shall also be
subject to the following Provisions:
12.1 You represent and warrant that you have the
authorization, power and right to deliver, execute, and fully perform your
obligations under this Severance Agreement in accordance with its terms.
The Corporation represents and warrants that it has the authorization,
power and right to deliver, execute, and fully perform its obligations
under this Severance Agreement in accordance with its terms.
12.2 This Severance Agreement contains a complete
statement of all the arrangements between you and the Corporation with
respect to the subject matter hereof, this Severance Agreement supersedes
all prior and existing negotiations and agreements (including, without
limitation, the Prior Severance Agreement) between the you and the
Corporation concerning the benefits to which you are entitled upon your
termination for Good Reason, for Cause or Without Cause, and this
Severance Agreement can only be changed or modified pursuant to a
written instrument duly executed by each of you and the Corporation.
12.3 If any provision of this Severance Agreement
or any portion thereof is declared invalid, illegal, or incapable of being
enforced by any court of competent jurisdiction, the remainder of such
provisions and all of the remaining provisions of this Severance
Agreement shall continue in full force and effect.
12.4 This Severance Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Arizona (without reference to the conflicts of laws provisions thereof),
except to the extent governed by federal law.
12.5 The Corporation may assign this Severance
Agreement to any direct or indirect subsidiary or parent of the
Corporation or joint venture in which the Corporation has an interest and
this Severance Agreement shall be binding upon and inure to the benefit
of such successors and assigns. Except as specifically provided herein,
you may not sell, transfer, assign, or pledge any of your rights or interests
pursuant to this Severance Agreement without the express prior written
consent of the Corporation, which consent may be given or withheld in
the Corporation's sole and absolute discretion.
12.6 The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or other-
wise) to all or substantially all of its business and/or assets to expressly
assume and agree to perform this Severance Agreement in the same
manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Severance
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms to which you would be entitled
hereunder if you were to terminate your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of
Termination. As used in this Severance Agreement, "Corporation" shall
mean the Corporation as previously defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Severance Agreement by operation of law, or otherwise.
12.7 For the purpose of this Severance Agreement,
notices and all other communications provided for in this Severance
Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed (if to you) to
the address set forth below under your signature (or if to the Corporation)
to the Corporation's principal corporate offices and directed to the
attention of the Board with a copy to the Corporation's Secretary, or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
12.8 Section captions and headings in this Severance
Agreement are included herein for convenience of reference only and
shall not constitute a part of this Severance Agreement for any other
purpose.
12.9 Failure to insist upon strict compliance with
any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
12.10 This Severance Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of
this letter, which shall then constitute our agreement on this subject.
Sincerely,
AZTAR CORPORATION
By PAUL E. RUBELI
Paul E. Rubeli
Chairman of the Board,
President and
Chief Executive Officer
Agreed to this 18th day
of July 1995.
NELSON W. ARMSTRONG, JR.
Nelson W. Armstrong, Jr.
Address: ___________________
Vice President, Administration and
Secretary
c/o Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Exhibit 10.4
AZTAR CORPORATION
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
July 6, 1995
Mr. Meridith P. Sipek
Controller
Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Dear Mr. Sipek:
Aztar Corporation (the "Corporation") is the successor to
Ramada Inc. ("Ramada") and was incorporated as part of a restructuring
of Ramada (the "Restructuring") in June 1989. Pursuant to the
Restructuring, (i) Ramada sold its hotel and restaurant businesses; (ii) the
Corporation was formed to operate Ramada's gaming business; and (iii)
Ramada's shareholders received, among other things, stock of the
Corporation so that they retained their interest in Ramada's gaming
business. The Corporation has, as part of the Restructuring, assumed
certain assets and liabilities related to Ramada's gaming business,
including Ramada's obligations under that certain letter agreement, dated
March 9, 1988 between you and Ramada, as amended (the "Prior Severance
Agreement").
The Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key
management personnel. The Corporation's Board of Directors (the
"Board") recognizes that uncertainty and questions regarding certain of
your severance benefits could result in your departure or distraction
which could be detrimental to the Corporation and its stockholders.
Therefore, the Board has decided to reinforce and encourage the
continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without
distraction arising from uncertainty in their severance benefits.
In order to induce you to remain in its employ, the
Corporation desires to amend and restate the Prior Severance Agreement
in their entirety and hereby agrees that after this letter agreement (this
"Severance Agreement") has been fully executed, in the event of a
Qualifying Termination (as defined in Section 2), you shall receive the
severance benefits set forth in this Severance Agreement. Upon the full
execution of this Severance Agreement, the Prior Severance Agreement
shall terminate and be of no further effect.
1. Term of Severance Agreement. This Severance
Agreement shall commence on July 6, 1995 (the "Effective Date") and shall
continue in effect through the December 31, 2002 (the "Term"); provided,
however, that (i) commencing on January 1, 1996, and each January 1
thereafter, the Term shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the
Corporation shall have given notice that the Term shall not be extended,
and (ii) the Corporation's obligations under Section 7 shall survive the
expiration of the Term. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the Term extend beyond
the end of the calendar month in which your 65th birthday occurs.
2. Eligibility for Benefits. None of the Benefits set
forth in Section 7 shall be payable under this Severance Agreement unless
and until a Qualifying Termination (as defined below) occurs. As used in
this Severance Agreement, the term "Qualifying Termination" means the
termination of your employment with the Corporation that is either (i) by
the Corporation Without Cause (as defined in Section 3), or (ii) by you for
Good Reason (as defined in Section 4).
3. Without Cause. For purposes of this Severance
Agreement, a termination by the Corporation "Without Cause" shall mean
any termination by the Corporation of your employment other than (i) a
termination by the Corporation for Cause (as defined in Section 3.1), (ii) a
termination because of your Disability (as defined in Section 3.2), or (iii)
a termination due because of your death or retirement.
3.1 For purposes of this Severance Agreement, a
termination for "Cause" shall occur if and when the Corporation
terminates your employment due to (i) your willful and continued failure
to substantially perform your duties with the Corporation (other than any
such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after your issuance of a
Notice of Termination (as defined in Section 5.1) for Good Reason) after
the Board delivers to you a written demand for substantial performance,
which demand specifically identifies the manner in which the Board
believes that you has not substantially performed your duties, (ii) your
willful participation in conduct that is demonstrably and materially
injurious to the Corporation, monetarily or otherwise, or (iii) there being
substantial evidence that you are guilty of a crime classified as a felony
(or the equivalent thereof) under applicable law, or that you have been
convicted of such a crime. For purposes of this Section 3.2, no act, or
failure to act, by you shall be deemed "willful" unless you take, or fail to
take, such action not in good faith. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until a
copy of a resolution of the Board has been delivered to you. Such
resolution shall be duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding
that in the Board's good faith opinion you were guilty of conduct set
forth above in this Section 3.1 and specifying the particulars thereof in
reasonable detail.
3.2 For purposes of this Severance Agreement, a
termination due to your "Disability" shall occur if, as a result of your
incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for
six (6) consecutive months, and within thirty (30) days after written
Notice of Termination is given you shall not have returned to the
full-time performance of your duties.
4. Good Reason. For purposes of this Severance
Agreement, a termination by you for "Good Reason" shall mean any
termination by you of your employment with the Corporation that follows
the occurrence, without your express written consent, of any of the
circumstances set forth below unless, in the case of Sections 4.1, 4.5, 4.6,
4.7, 4.8 or 4.9, such circumstances are fully corrected prior to the Date of
Termination (as defined in Section 5.2) specified in the Notice of
Termination given in respect thereof.
4.1 The Corporation's assignment to you of any
duties that are inconsistent with your position with the Corporation, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
as of the Effective Date.
4.2 The Corporation's reduction of your base
salary as such base salary may have been increased from time to time,
except for across-the-board salary reductions similarly affecting all
management personnel of the Corporation and all management personnel
of any Person (as defined below) that controls the Corporation. For
purposes of this Severance Agreement, the term "Person" is used as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that unless this
Severance Agreement provides to the contrary, the term shall not include
the Corporation, any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation.
4.3 The relocation of the Corporation's offices
at which you are principally employed as of the Effective Date to
a location more than 25 miles from such location or the Corporation's
requiring you to be based anywhere other than the Corporation's offices
at such location, except for required travel on the Corporation's business
to an extent substantially consistent with your business travel obligations
as of the Effective Date.
4.4 The Corporation's failure to pay you any
portion of your current compensation or to pay you any portion of an
installment of deferred compensation to which you are entitled under any
of the Corporation's deferred compensation programs within seven (7)
days of the date such compensation is due.
4.5 The Corporation's failure to continue in
effect any material compensation or benefit plan in which you participate
as of the Effective Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such
plan, or the Corporation's failure to continue your participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed as of the
Effective Date.
4.6 The Corporation's failure to continue
to provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, health and
accident, or disability plans in which you were participating as of the
Effective Date, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Corporation to provide you with the number of paid
vacation days to which you are entitled on the basis of years of service
with the Corporation in accordance with the Corporation's normal
vacation policy in effect as of the Effective Date.
4.7 The Corporation's failure to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Severance Agreement, as contemplated in Section 12.6.
4.8 Any purported termination of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 5.1 hereof (and, if applicable, the
requirements of Section 3.1 hereof), which purported termination shall not
be effective for purposes of this Severance Agreement.
4.9 If, after you have given written notice of
objection, you continue to be subject to harassing or denigrating treatment
that is inconsistent with your position with the Corporation.
Your right to terminate your employment pursuant to this Section 4 shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason
hereunder.
5. Notice of Termination; Date of Termination.
5.1 Any purported termination of your
employment (other than termination due to death) by you or by the
Corporation shall be communicated by written Notice of Termination (as
defined below) to the other party hereto in accordance with Section 12.7.
For purposes of this Severance Agreement, "Notice of Termination" shall
mean a notice that indicates the specific reason for termination and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.
5.2 For purposes of this Severance Agreement,
"Date of Termination" shall mean (i) if your employment is terminated
due to your death, the date of your death; and (b) otherwise, the date
specified in the Notice of Termination (which, in the case of a
termination for Cause or Disability shall not be less than thirty (30) days
from the date the Notice of Termination is given, and in the case of a
termination for Good Reason shall not be less than fifteen (15) nor more
than sixty (60) days from the date the Notice of Termination is given).
Notwithstanding anything to the contrary contained in this Section 5.2, if
within fifteen (15) days after any Notice of Termination (with respect to
a termination for Cause, Disability or Good Reason) is given the party re-
ceiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual
written agreement of the parties, or as set forth in Section 10; provided,
however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence.
6. Compensation after Termination for Cause or other
than for Good Reason and during Disability.
6.1 If your employment is terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full base salary, when due, through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are then
entitled under any of the Corporation's compensation plans at the time
such payments are due, and the Corporation shall have no further
obligations to you under this Severance Agreement or any other
agreement.
6.2 During any period during which you fail to
perform your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under the Corpora-
tion's disability plan or program or other similar plan during such period,
until you employment is terminated for Disability (as provided in Section
3.2). Thereafter, or in the event your employment is terminated by reason
of your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
7. Compensation After Qualifying Termination.
7.1 If a Qualifying Termination occurs, then you
shall be entitled to the benefits provided below:
i) the Corporation shall pay your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 7.2, plus all other amounts to which you are
entitled under any of the Corporation's compensation plans at the
time such payments are due;
ii) in lieu of any further salary or other pay-
ments to you under any agreement for periods subsequent to the
Date of Termination, the Corporation shall pay as severance pay to
you, at the time specified in Section 7.2, a lump sum severance
payment (together with the payments provided in Sections 7.1(iii)
and 7.1(iv) below, the "Severance Payments") equal to 100% of your
base salary as in effect as of the Date of Termination and 100% of
the average of the annual bonuses awarded to you pursuant to the
Corporation's performance bonus plan (the "Bonus Plan"), or
any successor bonus plan thereto, with respect to the three (3)
fiscal years (or your total years of employment with the
Corporation, if less than three (3)) preceding the Date of
Termination;
iii) notwithstanding any provisions of the
Corporation's stock option and incentive plans, or other similar
plans, the restricted period with respect to any restricted
stock granted to you thereunder shall lapse and such shares shall be
distributed to you at the time specified in Section 7.2;
iv) in lieu of shares of common stock of the
Corporation ("Common Shares") issuable upon exercise of
outstanding options ("Options"), if any, granted to you under any
of the Corporation's stock option plans, incentive plans or other
similar plans, (which Options shall be cancelled upon the making
of the payment referred to below), the Corporation shall pay to
you, at the time specified in Section 7.2, an amount in cash equal to
the product of (a) the excess of, in the case of an "incentive stock
option" (as defined in section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) granted after the date hereof, the
closing price of Common Shares as reported on the New York Stock
Exchange on or nearest the Date of Termination (or, if not listed
on such exchange, on a nationally recognized exchange or
quotation system on which trading volume in the Common Shares
is highest) and, in the case of all other Options, the higher of such
closing price or the highest per share price for Common Shares
actually paid in connection with any merger, reorganization or
other acquisition of all or substantially all of the Corporation's
common stock, over the per share option price of each Option held
by you (whether or not then fully exercisable), and (b) the number
of Common Shares covered by each such Option;
v) the Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Severance Agreement
or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
vi) for a twenty-four (24) month period after
such termination, the Corporation shall arrange to provide you
with life, disability, accident and group health insurance benefits
substantially similar to those that you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this Section 7.1(vi) shall be reduced to the
extent you actually receive comparable benefits during the -
twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Corporation.
7.2 The payments provided for in Sections 7.1(i),
shall be made not later than the fifth day following the Date of
Termination. The payments provided for in Sections 7.1(ii), 7.1(iii) and
7.1(iv), shall be made not later than the thirtieth day following the Date
of Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall
pay to you on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments ex-
ceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the fifth day
after demand by the Corporation (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
7.3 You shall not be required to mitigate the
amount of any payment provided for in this Section 7 by seeking other
employment or otherwise nor, except as provided in Section 7.1(vi) hereof,
shall the amount of any payment or benefit provided for by this Section 7
be reduced by any compensation you earn as the result of employment by
another employer, by any income from self employment, by retirement
benefits, by offset against any amount claimed to be owed by you to the
Corporation, or otherwise.
7.4 Notwithstanding anything to the contrary
contained in this Agreement, if by reason of section 280G of the Code any
payment or benefit received or to be received by you in connection with
the termination of your employment (whether payable pursuant to the
terms of this Agreement ("Contract Payments") or any other plan,
arrangements or agreement with the Corporation or an Affiliate (as
defined below) (collectively with the Contract Payments, "Total Pay-
ments") would not be deductible (in whole or part) by the Corporation, an
Affiliate or other person making such payment or providing such benefit,
then the Severance Payments shall be reduced (to zero if necessary) and,
if Severance Payments are reduced to zero, other Contract Payments shall
be reduced (to zero if necessary) and, if Contract Payments are reduced to
zero, other Total Payments shall be reduced (to zero if necessary) until no
portion of the Total Payments is not deductible by reason of section 280G
of the Code. For purposes of this limitation, (a) no portion of the Total
Payments the receipt or enjoyment of which you shall have effectively
waived in writing prior to the date of payment of the Severance Payments
shall be taken into account; (b) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the
Corporation's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of section 280G(b)(2)
of the Code (without regard to subsection (A)(ii) thereof); (c) the
Severance Payments (and, thereafter, other Contract Payments and other
Total Payments) shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (i) and (ii) of
Section 7.1) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of section 280G(b)(4) of the
Code, in the opinion of the tax counsel referred to in clause (b), and
(d) the value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Corporation's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of this Section 7.4, the term
"Affiliate" means the Corporation's successors or any Person or
corporation affiliated (or which shall become affiliated) with the Corpo-
ration within the meaning of section 1504 of the Code.
8. Designated Beneficiary. In the event of your death
while amounts remain payable to you under this Severance Agreement,
such payments (other than the right to continuation of welfare benefits)
shall thereafter be made to such person or persons as you may specifically
designate (successively or contingently) to receive payments under this
Severance Agreement following your death by filing a written beneficiary
designation with the Corporation during your lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Corporation
and may be amended from time to time or may be revoked by you
pursuant to written instruments filed with the Corporation during your
lifetime. Beneficiaries you designate may be any natural or legal person
or persons, including a fiduciary, such as a trustee or a trust or the legal
representative of an estate. Unless otherwise provided by the beneficiary
designation you file, if all of the persons so designated die before you or
there is an occurrence of a contingency not contemplated in such
beneficiary designation, then the amounts payable under this Severance
Agreement shall be paid to your estate.
9. Taxes. All payments to be made to you under this
Severance Agreement shall be subject to any applicable withholding of
federal, state and local income and employment taxes.
10. Arbitration; Dispute Resolution.
10.1 Arbitration Procedure. Any disagreement,
dispute, controversy or claim arising out of or relating to this Severance
Agreement or the interpretation of this Severance Agreement or any
arrangements relating to this Severance Agreement or contemplated in
this Severance Agreement or the breach, termination or invalidity thereof
shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in this Severance
Agreement) in Phoenix, Arizona. The arbitral tribunal shall consist of
one arbitrator. In making any decision, the arbitrator shall apply and
follow the substantive law of Arizona without reference to the conflicts
of law provisions thereof. The parties to the arbitration jointly shall
directly appoint such arbitrator within thirty (30) days of initiation of
arbitration. If the parties fail to appoint such arbitrator as provided
above, such arbitrator shall be appointed by the AAA as provided in the
Arbitration Rules. You and the Corporation each agree that the arbitral
award may be enforced against the parties to the arbitration proceeding
or their assets wherever they may be found and that a judgment upon the
arbitral award may be entered in any court having jurisdiction thereof.
The Corporation shall pay all fees and expenses of the Arbitrator
regardless of the result and shall provide all witnesses and evidence you
reasonably require to present your case. The Corporation shall pay to you
all reasonable arbitration expenses and legal fees incurred in seeking to
obtain or enforce any right or benefit provided by this Severance
Agreement (whether or not you are successful in obtaining or enforcing
such right or benefit). Such payments shall be made within five (5) days
after your request for payment accompanied with such evidence of fees
and expenses incurred as the Corporation may reasonably require.
10.2 Compensation During Dispute. Your
compensation during any disagreement, dispute, controversy or claim
arising out of or relating to this Severance Agreement or the
interpretation of this Severance Agreement shall be as set forth below.
(i) If a purported termination by you for
Good Reason occurs or is deemed to occur and during the Term,
and such termination is disputed in accordance with Sections 5.2
and 10 of this Severance Agreement, the Corporation shall
continue to pay you the full compensation in effect when the
notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this Section
10. Amounts paid under this Section 10.2(i) are in addition to all
other amounts due under this Severance Agreement and shall not
be offset against or reduce any other amounts due under this
Severance Agreement. You agree to remain in the employ of the
Corporation during the resolution of the dispute and to continue to
provide services unless your employment is terminated earlier by
Disability, death or retirement, or by action of the Corporation. If
the dispute is resolved by a determination that you did not have
Good Reason, this Severance Agreement, in accordance with its
terms, shall continue to apply to the circumstances of your
employment by the Corporation and any termination thereof.
(ii) If there is a termination by the
Corporation followed by a dispute as to whether you are entitled to
the payments and other benefits provided under this Severance
Agreement, then, during the period of that dispute the Corporation
shall pay you fifty percent (50%) of the amount specified in
Sections 7.1(i) and 7.1(ii), and the Corporation shall provide you
with the other benefits provided in Section 7.1, if, but only if, you
agree in writing that if the dispute is resolved against you, you
shall promptly refund to the Corporation all payments you
received under Sections 7.1(i) and 7.1(ii) of this Severance
Agreement plus interest at the rate provided in section 1274(d) of
the Code, compounded quarterly. If the dispute is resolved in your
favor, promptly after resolution of the dispute the Corporation
shall pay you the sum that was withheld during the period of the
dispute plus interest at the rate provided in section 1274(d) of the
Code, compounded quarterly.
11. No Offset - No Mitigation. you shall not be required to
mitigate damages under this Severance Agreement by seeking other
employment or otherwise. Except as provided in Section 7.1(vi), no
amount of any payment or benefit provided for in this Severance
Agreement shall be reduced by any compensation you earn as the result of
employment by another employer, by any income from self employment,
by retirement benefits, by offset against any amount claimed to be owed
by you to the Corporation, or otherwise.
12. General. This Severance Agreement shall also be
subject to the following Provisions:
12.1 You represent and warrant that you have the
authorization, power and right to deliver, execute, and fully perform your
obligations under this Severance Agreement in accordance with its terms.
The Corporation represents and warrants that it has the authorization,
power and right to deliver, execute, and fully perform its obligations
under this Severance Agreement in accordance with its terms.
12.2 This Severance Agreement contains a complete
statement of all the arrangements between you and the Corporation with
respect to the subject matter hereof, this Severance Agreement supersedes
all prior and existing negotiations and agreements (including, without
limitation, the Prior Severance Agreement) between the you and the
Corporation concerning the benefits to which you are entitled upon your
termination for Good Reason, for Cause or Without Cause, and this
Severance Agreement can only be changed or modified pursuant to a
written instrument duly executed by each of you and the Corporation.
12.3 If any provision of this Severance Agreement
or any portion thereof is declared invalid, illegal, or incapable of being
enforced by any court of competent jurisdiction, the remainder of such
provisions and all of the remaining provisions of this Severance
Agreement shall continue in full force and effect.
12.4 This Severance Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Arizona (without reference to the conflicts of laws provisions thereof),
except to the extent governed by federal law.
12.5 The Corporation may assign this Severance
Agreement to any direct or indirect subsidiary or parent of the
Corporation or joint venture in which the Corporation has an interest and
this Severance Agreement shall be binding upon and inure to the benefit
of such successors and assigns. Except as specifically provided herein,
you may not sell, transfer, assign, or pledge any of your rights or interests
pursuant to this Severance Agreement without the express prior written
consent of the Corporation, which consent may be given or withheld in
the Corporation's sole and absolute discretion.
12.6 The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or other-
wise) to all or substantially all of its business and/or assets to expressly
assume and agree to perform this Severance Agreement in the same
manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Severance
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms to which you would be entitled
hereunder if you were to terminate your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of
Termination. As used in this Severance Agreement, "Corporation" shall
mean the Corporation as previously defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Severance Agreement by operation of law, or otherwise.
12.7 For the purpose of this Severance Agreement,
notices and all other communications provided for in this Severance
Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed (if to you) to
the address set forth below under your signature (or if to the Corporation)
to the Corporation's principal corporate offices and directed to the
attention of the Board with a copy to the Corporation's Secretary, or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
12.8 Section captions and headings in this Severance
Agreement are included herein for convenience of reference only and
shall not constitute a part of this Severance Agreement for any other
purpose.
12.9 Failure to insist upon strict compliance with
any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
12.10 This Severance Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of
this letter, which shall then constitute our agreement on this subject.
Sincerely,
AZTAR CORPORATION
By PAUL E. RUBELI
Paul E. Rubeli
Chairman of the Board,
President and
Chief Executive Officer
Agreed to this 24th day
of July 1995.
MERIDITH P. SIPEK
Meridith P. Sipek
Address: Mr. Meridith P. Sipek
Controller
c/o Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Exhibit 10.5
AZTAR CORPORATION
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
July 6, 1995
Mr. Joe Cole
Vice President, Corporate Communications
Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Dear Mr. Cole:
Aztar Corporation (the "Corporation") is the successor to
Ramada Inc. ("Ramada") and was incorporated as part of a restructuring
of Ramada (the "Restructuring") in June 1989. Pursuant to the
Restructuring, (i) Ramada sold its hotel and restaurant businesses; (ii) the
Corporation was formed to operate Ramada's gaming business; and (iii)
Ramada's shareholders received, among other things, stock of the
Corporation so that they retained their interest in Ramada's gaming
business. The Corporation has, as part of the Restructuring, assumed
certain assets and liabilities related to Ramada's gaming business,
including Ramada's obligations under that certain letter agreement, dated
October 20, 1988 between you and Ramada, as amended (the "Prior
Severance Agreement").
The Corporation considers it essential to the best interests
of its stockholders to foster the continuous employment of key
management personnel. The Corporation's Board of Directors (the
"Board") recognizes that uncertainty and questions regarding certain of
your severance benefits could result in your departure or distraction
which could be detrimental to the Corporation and its stockholders.
Therefore, the Board has decided to reinforce and encourage the
continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without
distraction arising from uncertainty in their severance benefits.
In order to induce you to remain in its employ, the
Corporation desires to amend and restate the Prior Severance Agreement
in their entirety and hereby agrees that after this letter agreement (this
"Severance Agreement") has been fully executed, in the event of a
Qualifying Termination (as defined in Section 2), you shall receive the
severance benefits set forth in this Severance Agreement. Upon the full
execution of this Severance Agreement, the Prior Severance Agreement
shall terminate and be of no further effect.
1. Term of Severance Agreement. This Severance
Agreement shall commence on July 6, 1995 (the "Effective Date") and shall
continue in effect through the December 31, 2002 (the "Term"); provided,
however, that (i) commencing on January 1, 1996, and each January 1
thereafter, the Term shall automatically be extended for one additional
year unless, not later than September 30 of the preceding year, the
Corporation shall have given notice that the Term shall not be extended,
and (ii) the Corporation's obligations under Section 7 shall survive the
expiration of the Term. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall the Term extend beyond
the end of the calendar month in which your 65th birthday occurs.
2. Eligibility for Benefits. None of the Benefits set
forth in Section 7 shall be payable under this Severance Agreement unless
and until a Qualifying Termination (as defined below) occurs. As used in
this Severance Agreement, the term "Qualifying Termination" means the
termination of your employment with the Corporation that is either (i) by
the Corporation Without Cause (as defined in Section 3), or (ii) by you for
Good Reason (as defined in Section 4).
3. Without Cause. For purposes of this Severance
Agreement, a termination by the Corporation "Without Cause" shall mean
any termination by the Corporation of your employment other than (i) a
termination by the Corporation for Cause (as defined in Section 3.1), (ii) a
termination because of your Disability (as defined in Section 3.2), or (iii)
a termination due because of your death or retirement.
3.1 For purposes of this Severance Agreement, a
termination for "Cause" shall occur if and when the Corporation
terminates your employment due to (i) your willful and continued failure
to substantially perform your duties with the Corporation (other than any
such failure resulting from your incapacity due to physical or mental
illness or any such actual or anticipated failure after your issuance of a
Notice of Termination (as defined in Section 5.1) for Good Reason) after
the Board delivers to you a written demand for substantial performance,
which demand specifically identifies the manner in which the Board
believes that you has not substantially performed your duties, (ii) your
willful participation in conduct that is demonstrably and materially
injurious to the Corporation, monetarily or otherwise, or (iii) there being
substantial evidence that you are guilty of a crime classified as a felony
(or the equivalent thereof) under applicable law, or that you have been
convicted of such a crime. For purposes of this Section 3.2, no act, or
failure to act, by you shall be deemed "willful" unless you take, or fail to
take, such action not in good faith. Notwithstanding the foregoing, you
shall not be deemed to have been terminated for Cause unless and until a
copy of a resolution of the Board has been delivered to you. Such
resolution shall be duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding
that in the Board's good faith opinion you were guilty of conduct set
forth above in this Section 3.1 and specifying the particulars thereof in
reasonable detail.
3.2 For purposes of this Severance Agreement, a
termination due to your "Disability" shall occur if, as a result of your
incapacity due to physical or mental illness, you shall have been absent
from the full-time performance of your duties with the Corporation for
six (6) consecutive months, and within thirty (30) days after written
Notice of Termination is given you shall not have returned to the
full-time performance of your duties.
4. Good Reason. For purposes of this Severance
Agreement, a termination by you for "Good Reason" shall mean any
termination by you of your employment with the Corporation that follows
the occurrence, without your express written consent, of any of the
circumstances set forth below unless, in the case of Sections 4.1, 4.5, 4.6,
4.7, 4.8 or 4.9, such circumstances are fully corrected prior to the Date of
Termination (as defined in Section 5.2) specified in the Notice of
Termination given in respect thereof.
4.1 The Corporation's assignment to you of any
duties that are inconsistent with your position with the Corporation, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
as of the Effective Date.
4.2 The Corporation's reduction of your base
salary as such base salary may have been increased from time to time,
except for across-the-board salary reductions similarly affecting all
management personnel of the Corporation and all management personnel
of any Person (as defined below) that controls the Corporation. For
purposes of this Severance Agreement, the term "Person" is used as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided, however, that unless this
Severance Agreement provides to the contrary, the term shall not include
the Corporation, any trustee or other fiduciary holding securities under
an employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation.
4.3 The relocation of the Corporation's offices
at which you are principally employed as of the Effective Date to
a location more than 25 miles from such location or the Corporation's
requiring you to be based anywhere other than the Corporation's offices
at such location, except for required travel on the Corporation's business
to an extent substantially consistent with your business travel obligations
as of the Effective Date.
4.4 The Corporation's failure to pay you any
portion of your current compensation or to pay you any portion of an
installment of deferred compensation to which you are entitled under any
of the Corporation's deferred compensation programs within seven (7)
days of the date such compensation is due.
4.5 The Corporation's failure to continue in
effect any material compensation or benefit plan in which you participate
as of the Effective Date, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such
plan, or the Corporation's failure to continue your participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as existed as of the
Effective Date.
4.6 The Corporation's failure to continue
to provide you with benefits substantially similar to those enjoyed by you
under any of the Corporation's life insurance, medical, health and
accident, or disability plans in which you were participating as of the
Effective Date, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits, or the
failure by the Corporation to provide you with the number of paid
vacation days to which you are entitled on the basis of years of service
with the Corporation in accordance with the Corporation's normal
vacation policy in effect as of the Effective Date.
4.7 The Corporation's failure to obtain a
satisfactory agreement from any successor to assume and agree to perform
this Severance Agreement, as contemplated in Section 12.6.
4.8 Any purported termination of your
employment that is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 5.1 hereof (and, if applicable, the
requirements of Section 3.1 hereof), which purported termination shall not
be effective for purposes of this Severance Agreement.
4.9 If, after you have given written notice of
objection, you continue to be subject to harassing or denigrating treatment
that is inconsistent with your position with the Corporation.
Your right to terminate your employment pursuant to this Section 4 shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason
hereunder.
5. Notice of Termination; Date of Termination.
5.1 Any purported termination of your
employment (other than termination due to death) by you or by the
Corporation shall be communicated by written Notice of Termination (as
defined below) to the other party hereto in accordance with Section 12.7.
For purposes of this Severance Agreement, "Notice of Termination" shall
mean a notice that indicates the specific reason for termination and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination.
5.2 For purposes of this Severance Agreement,
"Date of Termination" shall mean (i) if your employment is terminated
due to your death, the date of your death; and (b) otherwise, the date
specified in the Notice of Termination (which, in the case of a
termination for Cause or Disability shall not be less than thirty (30) days
from the date the Notice of Termination is given, and in the case of a
termination for Good Reason shall not be less than fifteen (15) nor more
than sixty (60) days from the date the Notice of Termination is given).
Notwithstanding anything to the contrary contained in this Section 5.2, if
within fifteen (15) days after any Notice of Termination (with respect to
a termination for Cause, Disability or Good Reason) is given the party re-
ceiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be
the date on which the dispute is finally determined, either by mutual
written agreement of the parties, or as set forth in Section 10; provided,
however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence.
6. Compensation after Termination for Cause or other
than for Good Reason and during Disability.
6.1 If your employment is terminated by the
Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full base salary, when due, through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are then
entitled under any of the Corporation's compensation plans at the time
such payments are due, and the Corporation shall have no further
obligations to you under this Severance Agreement or any other
agreement.
6.2 During any period during which you fail to
perform your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under the Corpora-
tion's disability plan or program or other similar plan during such period,
until you employment is terminated for Disability (as provided in Section
3.2). Thereafter, or in the event your employment is terminated by reason
of your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
7. Compensation After Qualifying Termination.
7.1 If a Qualifying Termination occurs, then you
shall be entitled to the benefits provided below:
i) the Corporation shall pay your full base
salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, at the time
specified in Section 7.2, plus all other amounts to which you are
entitled under any of the Corporation's compensation plans at the
time such payments are due;
ii) in lieu of any further salary or other pay-
ments to you under any agreement for periods subsequent to the
Date of Termination, the Corporation shall pay as severance pay to
you, at the time specified in Section 7.2, a lump sum severance
payment (together with the payments provided in Sections 7.1(iii)
and 7.1(iv) below, the "Severance Payments") equal to 100% of your
base salary as in effect as of the Date of Termination and 100% of
the average of the annual bonuses awarded to you pursuant to the
Corporation's performance bonus plan (the "Bonus Plan"), or
any successor bonus plan thereto, with respect to the three (3)
fiscal years (or your total years of employment with the
Corporation, if less than three (3)) preceding the Date of
Termination;
iii) notwithstanding any provisions of the
Corporation's stock option and incentive plans, or other similar
plans, the restricted period with respect to any restricted
stock granted to you thereunder shall lapse and such shares shall be
distributed to you at the time specified in Section 7.2;
iv) in lieu of shares of common stock of the
Corporation ("Common Shares") issuable upon exercise of
outstanding options ("Options"), if any, granted to you under any
of the Corporation's stock option plans, incentive plans or other
similar plans, (which Options shall be cancelled upon the making
of the payment referred to below), the Corporation shall pay to
you, at the time specified in Section 7.2, an amount in cash equal to
the product of (a) the excess of, in the case of an "incentive stock
option" (as defined in section 422 of the Internal Revenue Code of
1986, as amended (the "Code")) granted after the date hereof, the
closing price of Common Shares as reported on the New York Stock
Exchange on or nearest the Date of Termination (or, if not listed
on such exchange, on a nationally recognized exchange or
quotation system on which trading volume in the Common Shares
is highest) and, in the case of all other Options, the higher of such
closing price or the highest per share price for Common Shares
actually paid in connection with any merger, reorganization or
other acquisition of all or substantially all of the Corporation's
common stock, over the per share option price of each Option held
by you (whether or not then fully exercisable), and (b) the number
of Common Shares covered by each such Option;
v) the Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Severance Agreement
or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder); and
vi) for a twenty-four (24) month period after
such termination, the Corporation shall arrange to provide you
with life, disability, accident and group health insurance benefits
substantially similar to those that you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this Section 7.1(vi) shall be reduced to the
extent you actually receive comparable benefits during the -
twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Corporation.
7.2 The payments provided for in Sections 7.1(i),
shall be made not later than the fifth day following the Date of
Termination. The payments provided for in Sections 7.1(ii), 7.1(iii) and
7.1(iv), shall be made not later than the thirtieth day following the Date
of Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall
pay to you on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments ex-
ceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the fifth day
after demand by the Corporation (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
7.3 You shall not be required to mitigate the
amount of any payment provided for in this Section 7 by seeking other
employment or otherwise nor, except as provided in Section 7.1(vi) hereof,
shall the amount of any payment or benefit provided for by this Section 7
be reduced by any compensation you earn as the result of employment by
another employer, by any income from self employment, by retirement
benefits, by offset against any amount claimed to be owed by you to the
Corporation, or otherwise.
7.4 Notwithstanding anything to the contrary
contained in this Agreement, if by reason of section 280G of the Code any
payment or benefit received or to be received by you in connection with
the termination of your employment (whether payable pursuant to the
terms of this Agreement ("Contract Payments") or any other plan,
arrangements or agreement with the Corporation or an Affiliate (as
defined below) (collectively with the Contract Payments, "Total Pay-
ments") would not be deductible (in whole or part) by the Corporation, an
Affiliate or other person making such payment or providing such benefit,
then the Severance Payments shall be reduced (to zero if necessary) and,
if Severance Payments are reduced to zero, other Contract Payments shall
be reduced (to zero if necessary) and, if Contract Payments are reduced to
zero, other Total Payments shall be reduced (to zero if necessary) until no
portion of the Total Payments is not deductible by reason of section 280G
of the Code. For purposes of this limitation, (a) no portion of the Total
Payments the receipt or enjoyment of which you shall have effectively
waived in writing prior to the date of payment of the Severance Payments
shall be taken into account; (b) no portion of the Total Payments shall be
taken into account which in the opinion of tax counsel selected by the
Corporation's independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning of section 280G(b)(2)
of the Code (without regard to subsection (A)(ii) thereof); (c) the
Severance Payments (and, thereafter, other Contract Payments and other
Total Payments) shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (i) and (ii) of
Section 7.1) in their entirety constitute reasonable compensation for
services actually rendered within the meaning of section 280G(b)(4) of the
Code, in the opinion of the tax counsel referred to in clause (b), and
(d) the value of any noncash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Corporation's
independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of this Section 7.4, the term
"Affiliate" means the Corporation's successors or any Person or
corporation affiliated (or which shall become affiliated) with the Corpo-
ration within the meaning of section 1504 of the Code.
8. Designated Beneficiary. In the event of your death
while amounts remain payable to you under this Severance Agreement,
such payments (other than the right to continuation of welfare benefits)
shall thereafter be made to such person or persons as you may specifically
designate (successively or contingently) to receive payments under this
Severance Agreement following your death by filing a written beneficiary
designation with the Corporation during your lifetime. Such beneficiary
designation shall be in such form as may be prescribed by the Corporation
and may be amended from time to time or may be revoked by you
pursuant to written instruments filed with the Corporation during your
lifetime. Beneficiaries you designate may be any natural or legal person
or persons, including a fiduciary, such as a trustee or a trust or the legal
representative of an estate. Unless otherwise provided by the beneficiary
designation you file, if all of the persons so designated die before you or
there is an occurrence of a contingency not contemplated in such
beneficiary designation, then the amounts payable under this Severance
Agreement shall be paid to your estate.
9. Taxes. All payments to be made to you under this
Severance Agreement shall be subject to any applicable withholding of
federal, state and local income and employment taxes.
10. Arbitration; Dispute Resolution.
10.1 Arbitration Procedure. Any disagreement,
dispute, controversy or claim arising out of or relating to this Severance
Agreement or the interpretation of this Severance Agreement or any
arrangements relating to this Severance Agreement or contemplated in
this Severance Agreement or the breach, termination or invalidity thereof
shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in this Severance
Agreement) in Phoenix, Arizona. The arbitral tribunal shall consist of
one arbitrator. In making any decision, the arbitrator shall apply and
follow the substantive law of Arizona without reference to the conflicts
of law provisions thereof. The parties to the arbitration jointly shall
directly appoint such arbitrator within thirty (30) days of initiation of
arbitration. If the parties fail to appoint such arbitrator as provided
above, such arbitrator shall be appointed by the AAA as provided in the
Arbitration Rules. You and the Corporation each agree that the arbitral
award may be enforced against the parties to the arbitration proceeding
or their assets wherever they may be found and that a judgment upon the
arbitral award may be entered in any court having jurisdiction thereof.
The Corporation shall pay all fees and expenses of the Arbitrator
regardless of the result and shall provide all witnesses and evidence you
reasonably require to present your case. The Corporation shall pay to you
all reasonable arbitration expenses and legal fees incurred in seeking to
obtain or enforce any right or benefit provided by this Severance
Agreement (whether or not you are successful in obtaining or enforcing
such right or benefit). Such payments shall be made within five (5) days
after your request for payment accompanied with such evidence of fees
and expenses incurred as the Corporation may reasonably require.
10.2 Compensation During Dispute. Your
compensation during any disagreement, dispute, controversy or claim
arising out of or relating to this Severance Agreement or the
interpretation of this Severance Agreement shall be as set forth below.
(i) If a purported termination by you for
Good Reason occurs or is deemed to occur and during the Term,
and such termination is disputed in accordance with Sections 5.2
and 10 of this Severance Agreement, the Corporation shall
continue to pay you the full compensation in effect when the
notice giving rise to the dispute was given (including, but not
limited to, base salary) and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given,
until the dispute is finally resolved in accordance with this Section
10. Amounts paid under this Section 10.2(i) are in addition to all
other amounts due under this Severance Agreement and shall not
be offset against or reduce any other amounts due under this
Severance Agreement. You agree to remain in the employ of the
Corporation during the resolution of the dispute and to continue to
provide services unless your employment is terminated earlier by
Disability, death or retirement, or by action of the Corporation. If
the dispute is resolved by a determination that you did not have
Good Reason, this Severance Agreement, in accordance with its
terms, shall continue to apply to the circumstances of your
employment by the Corporation and any termination thereof.
(ii) If there is a termination by the
Corporation followed by a dispute as to whether you are entitled to
the payments and other benefits provided under this Severance
Agreement, then, during the period of that dispute the Corporation
shall pay you fifty percent (50%) of the amount specified in
Sections 7.1(i) and 7.1(ii), and the Corporation shall provide you
with the other benefits provided in Section 7.1, if, but only if, you
agree in writing that if the dispute is resolved against you, you
shall promptly refund to the Corporation all payments you
received under Sections 7.1(i) and 7.1(ii) of this Severance
Agreement plus interest at the rate provided in section 1274(d) of
the Code, compounded quarterly. If the dispute is resolved in your
favor, promptly after resolution of the dispute the Corporation
shall pay you the sum that was withheld during the period of the
dispute plus interest at the rate provided in section 1274(d) of the
Code, compounded quarterly.
11. No Offset - No Mitigation. you shall not be required to
mitigate damages under this Severance Agreement by seeking other
employment or otherwise. Except as provided in Section 7.1(vi), no
amount of any payment or benefit provided for in this Severance
Agreement shall be reduced by any compensation you earn as the result of
employment by another employer, by any income from self employment,
by retirement benefits, by offset against any amount claimed to be owed
by you to the Corporation, or otherwise.
12. General. This Severance Agreement shall also be
subject to the following Provisions:
12.1 You represent and warrant that you have the
authorization, power and right to deliver, execute, and fully perform your
obligations under this Severance Agreement in accordance with its terms.
The Corporation represents and warrants that it has the authorization,
power and right to deliver, execute, and fully perform its obligations
under this Severance Agreement in accordance with its terms.
12.2 This Severance Agreement contains a complete
statement of all the arrangements between you and the Corporation with
respect to the subject matter hereof, this Severance Agreement supersedes
all prior and existing negotiations and agreements (including, without
limitation, the Prior Severance Agreement) between the you and the
Corporation concerning the benefits to which you are entitled upon your
termination for Good Reason, for Cause or Without Cause, and this
Severance Agreement can only be changed or modified pursuant to a
written instrument duly executed by each of you and the Corporation.
12.3 If any provision of this Severance Agreement
or any portion thereof is declared invalid, illegal, or incapable of being
enforced by any court of competent jurisdiction, the remainder of such
provisions and all of the remaining provisions of this Severance
Agreement shall continue in full force and effect.
12.4 This Severance Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Arizona (without reference to the conflicts of laws provisions thereof),
except to the extent governed by federal law.
12.5 The Corporation may assign this Severance
Agreement to any direct or indirect subsidiary or parent of the
Corporation or joint venture in which the Corporation has an interest and
this Severance Agreement shall be binding upon and inure to the benefit
of such successors and assigns. Except as specifically provided herein,
you may not sell, transfer, assign, or pledge any of your rights or interests
pursuant to this Severance Agreement without the express prior written
consent of the Corporation, which consent may be given or withheld in
the Corporation's sole and absolute discretion.
12.6 The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or other-
wise) to all or substantially all of its business and/or assets to expressly
assume and agree to perform this Severance Agreement in the same
manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Severance
Agreement and shall entitle you to compensation from the Corporation in
the same amount and on the same terms to which you would be entitled
hereunder if you were to terminate your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of
Termination. As used in this Severance Agreement, "Corporation" shall
mean the Corporation as previously defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Severance Agreement by operation of law, or otherwise.
12.7 For the purpose of this Severance Agreement,
notices and all other communications provided for in this Severance
Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or registered
mail, return receipt requested, postage prepaid, addressed (if to you) to
the address set forth below under your signature (or if to the Corporation)
to the Corporation's principal corporate offices and directed to the
attention of the Board with a copy to the Corporation's Secretary, or to
such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
12.8 Section captions and headings in this Severance
Agreement are included herein for convenience of reference only and
shall not constitute a part of this Severance Agreement for any other
purpose.
12.9 Failure to insist upon strict compliance with
any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
12.10 This Severance Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of
this letter, which shall then constitute our agreement on this subject.
Sincerely,
AZTAR CORPORATION
By PAUL E. RUBELI
Paul E. Rubeli
Chairman of the Board,
President and
Chief Executive Officer
Agreed to this 25th day
of July 1995.
JOE COLE
Joe Cole
Address: Joe Cole
Vice President, Corporate Communications
c/o Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Exhibit 10.6
AZTAR CORPORATION
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
July 6, 1995
Mr. Neil A. Ciarfalia
Treasurer
Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Dear Mr. Ciarfalia:
Aztar Corporation (the "Corporation") considers it essential
to the best interests of its stockholders to foster the continuous
employment of key management personnel. In connection with this, the
Corporation's Board of Directors (the "Board") recognizes that, as is the
case with many publicly held corporations, the possibility of a change in
control of the Corporation may exist and that such possibility, and that
such uncertainty and questions that it may raise among management,
could result in the departure or distraction of management personnel to
the detriment of the Corporation and its stockholders.
The Board has decided to reinforce and encourage the
continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without
distraction arising from the possibility of a change in control of the
Corporation.
In order to induce you to remain in its employ, the
Corporation hereby agrees that after this letter agreement (this
"Agreement") has been fully executed, you shall receive the severance
benefits set forth in this Agreement in the event your employment with
the Corporation is terminated under the circumstances described below
subsequent to a "Change in Control" (as defined in Section 2). Upon the
full execution of this Agreement, any prior agreements between you and
the Corporation that relate to the subject matter of this Agreement,
whether written or oral, shall terminate and be of no further effect
1. Term of Agreement. This Agreement shall
commence on July 6, 1995 and shall continue in effect through December
31, 1999; provided, however, that commencing on January 1, 2000, and each
January 1 thereafter, the term of this Agreement shall automatically be
extended for one additional year unless, not later than September 30 of
the preceding year, the Corporation shall have given notice that it does
not wish to extend this Agreement; provided, further, that if a Change in -
Control occurs during the original or extended term of this Agreement,
this Agreement shall continue in effect for a period of not less than
twenty-four (24) months beyond the month in which such Change in
Control occurred. Notwithstanding anything to the contrary contained in
this Agreement, in no event shall the term of this Agreement extend
beyond the end of the calendar month in which your 65th birthday occurs.
2. Change in Control No benefits shall be payable
under Section 4(iii) unless there has been a Change in Control. For
purposes of this Agreement, a Change in Control shall be deemed to occur
if:
(i) any Person (as defined below) is or becomes the
Beneficial Owner (as defined below), directly or indirectly, of securities
of the Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities. For purposes of
this Agreement, (A) the term "Person" is used as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); provided, however, that unless this
Agreement provides to the contrary, the term shall not include the
Corporation, any trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation, or any corporation owned,
directly or indirectly, by the stockholders of the Corporation in
substantially the same proportions as their ownership of stock of the
Corporation, and (B) the term "Beneficial Owner" shall have the meaning
given to such term in Rule 13d-3 under the Exchange Act;
(ii) during any period of two consecutive
years (not including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board, and
any new director (other than a director designated by a person who has
entered into an agreement with the Corporation to effect a transaction
described in Sections 2(i)(iii), or (iv)) whose election by the Board or
nomination for election by the Corporation's stockholders was approved
by a vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved (hereinafter
referred to as "Continuing Directors"), cease for any reason to constitute
at least a majority thereof;
(iii) the stockholders of the Corporation approve
a merger or consolidation of the Corporation with any other corporation
(or other entity), other than a merger or consolidation which would result
in the voting securities of the Corporation outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than
66-2/3% of the combined voting power of the voting securities of the
Corporation or such surviving entity outstanding immediately after such
merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Corporation
(or similar transaction) in which no Person acquires more than 25% of the
combined voting power of the Corporation's then outstanding securities
shall not constitute a Change in Control;
(iv) the stockholders of the Corporation approve a plan
of complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets; or
(v) any Person is or becomes the Beneficial Owner of
securities of the Corporation representing ten percent (10%) or more of
the combined voting power of the Corporation's then outstanding
securities and (A) the identity of the Chief Executive Officer of the
Corporation is changed during the period beginning sixty (60) days before
the attainment of the ten percent (10%) beneficial ownership and ending
two (2) years thereafter, or (B) individuals constituting at least one-third
(1/3) of the members of the Board at the beginning of such period shall
leave the Board during the period beginning sixty (60) days before the
attainment of the ten percent (10%) beneficial ownership and ending two
(2) years thereafter.
3. Termination Following Change in Control.
(i) General. If any of the events described in Section 2
constituting a Change in Control shall have occurred, you shall be entitled
to the benefits provided in Section 4(iii) upon the subsequent termination
of your employment during the term of this Agreement, unless such
termination is (a) because of your death, Disability (as defined in Section
3(ii)) or retirement, (b) by the Corporation for Cause, or (c) by you other
than for Good Reason. In the event your employment with the
Corporation is terminated for any reason and subsequently a Change in
Control occurs, you shall not be entitled to any benefits hereunder.
(ii) Disability. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Corporation for six (6) consecutive
months, and within thirty (30) days after written Notice of Termination
(as defined in Section 3(v)) is given you shall not have returned to the
full-time performance of your duties, your employment may be
terminated for "Disability."
(iii) Cause. Termination by the Corporation of your
employment for "Cause" shall mean termination (a) upon your willful and
continued failure to substantially perform your duties with the
Corporation (other than any such failure resulting from your incapacity
due to physical or mental illness or any such actual or anticipated failure
after your issuance of a Notice of Termination for Good Reason (as
defined in Section 3(iv)), after a written demand for substantial
performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not sub-
stantially performed your duties, (b) upon your willful participation in
conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise, or (c) upon there being substantial
evidence that you are guilty of a crime classified as a felony (or the
equivalent thereof) under applicable law, or that you have been convicted
of such a crime. For purposes of this Section 3(iii), no act, or failure to
act, on your part shall be deemed "willful" unless done, or omitted to be
done, by you not in good faith. Notwithstanding the foregoing, you shall
not be deemed terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the
Board at a meeting of the Board (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the Board's good faith opinion you were guilty of
conduct set forth above in this Section 3(iii) and specifying the
particulars thereof in reasonable detail.
(iv) Good Reason. You shall be entitled to terminate
your employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express written consent, the
occurrence after a Change in Control of any of the following cir-
cumstances unless, in the case of Sections 3(iv)(a), (e), (f), (g), (h) or (i),
such circumstances are fully corrected prior to the Date of Termination
(as defined in Section 3(vi)) specified in the Notice of Termination (as
defined in Section 3(v)) given in respect thereof:
(a) the assignment to you of any duties
inconsistent with the position in the Corporation that you held
immediately prior to the Change in Control, or a significant
adverse alteration in the nature or status of your responsibilities or
the conditions of your employment from those in effect
immediately prior to such Change in Control;
(b) the Corporation's reduction of your annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all management personnel of the
Corporation and all management personnel of any Person in
control of the Corporation;
(c) the relocation of the Corporation's offices
at which you are principally employed immediately prior
to the date of the Change in Control to a location more than 25
miles from such location or the Corporation's requiring you to be
based anywhere other than the Corporation's offices at such
location except for required travel on the Corporation's business to
an extent substantially consistent with your present business travel
obligations;
(d) the Corporation's failure to pay to you any
portion of your current compensation or to pay to you any portion
of an installment of deferred compensation under any deferred
compensation program of the Corporation within seven (7) days of
the date such compensation is due;
(e) the Corporation's failure to continue in effect
any material compensation or benefit plan in which you
participate immediately prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
Corporation's failure to continue your participation therein (or in
such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants, as
existed at the time of the Change in Control;
(f) the Corporation's failure to continue
to provide you with benefits substantially similar to those enjoyed
by you under any of the Corporation's life insurance, medical,
health and accident, or disability plans in which you were
participating at the time of the Change in Control, the taking of
any action by the Corporation which would directly or indirectly
materially reduce any of such benefits, or the failure by the
Corporation to provide you with the number of paid vacation days
to which you are entitled on the basis of years of service with the
Corporation in accordance with the Corporation's normal vacation
policy in effect at the time of the Change in Control;
(g) the Corporation's failure to obtain a
satisfactory agreement from any successor to assume and agree to
perform this Agreement, as contemplated in Section 5;
(h) any purported termination of your
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 3(v) hereof
(and, if applicable, the requirements of Section 3(iii) hereof),
which purported termination shall not be effective for purposes of
this Agreement; or
(i) the continuation or repetition, after written
notice of objection from you, of harassing or denigrating treatment
of you inconsistent with your position with the Corporation.
Your right to terminate your employment pursuant to this Section 3(iv)
shall not be affected by your incapacity due to physical or mental illness.
Your continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason
hereunder.
(v) Notice of Termination. Any purported termination
of your employment by the Corporation or by you (other than termination
due to death which shall terminate your employment automatically)
shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 6. "Notice of Termination" shall
mean a notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(vi) Date of Termination, Etc. "Date of Termination"
shall mean (a) if your employment is terminated due to your death, the
date of your death; (b) if your employment is terminated for Disability
thirty (30) days after Notice of Termination is given (provided that you
shall not have returned to the full-time performance of your duties during
such thirty (30)-day period), and (c) if your employment is terminated
pursuant to Section 3(iii) or Section 3(iv) or for any other reason (other
than death or Disability), the date specified in the Notice of Termination
(which, in the case of a termination for Cause shall not be less than thirty
(30) days from the date such Notice of Termination is given, and in the
case of a termination for Good Reason shall not be less than fifteen (15)
nor more than sixty (60) days from the date such Notice of Termination is
given). Notwithstanding anything to the contrary contained in this
Section 3(iv), if within fifteen (15) days after any Notice of Termination
is given (with respect to a termination for Cause, Disability, or Good
Reason), the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined,
either by mutual written agreement of the parties, or as set forth in
Section 10; provided, however, that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
4. Compensation Upon Termination or During
Disability. You shall be entitled to the benefits described below during a
period of disability, or upon termination of your employment, as the case
may be, provided that such period or termination occurs during the term
of this Agreement. The benefits to which you are entitled, subject to the
terms and conditions of this Agreement, are:
(i) During any period during which you fail to
perform your full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any such
period, together with all compensation payable to you under the Corpora-
tion's disability plan or program or other similar plan during such period,
until this Agreement is terminated pursuant to Section 3(ii) hereof.
Thereafter, or in the event your employment is terminated by reason of
your death, your benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then in effect in
accordance with the terms of such programs.
(ii) If your employment shall be terminated by
the Corporation for Cause or by you other than for Good Reason, the
Corporation shall pay you your full base salary, when due, through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled
under any compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further obligations
to you under this Agreement.
(iii) If, following a Change in Control, your
employment by the Corporation shall be terminated by you for Good
Reason or by the Corporation other than for Cause or Disability, then you
shall be entitled to the benefits provided below:
(a) the Corporation shall pay to you your full
base salary, when due, through the Date of Termination at the rate
in effect at the time Notice of Termination is given, at the time
specified in Section 4(v), plus all other amounts to which you are
entitled under any compensation plan of the Corporation at the
time such payments are due;
(b) in lieu of any further salary or other pay-
ments to you under any agreement for periods subsequent to the
Date of Termination, the Corporation shall pay as severance pay to
you, at the time specified in Section 4(v), a lump sum severance
payment (together with the payments provided in Sections 4(iii)(c)
and (d) below, the "Severance Payments") equal to 100% of your
annual salary as in effect as of the Date of Termination or
immediately prior to the Change in Control, whichever is greater,
and 100% of the average of the annual bonuses awarded to you
pursuant to the Corporation's bonus plan for executive officers, or
any successor bonus plan thereto, with respect to the three (3)
fiscal years (or your total years of employment with the
Corporation, if less than three (3)) preceding the Date of
Termination;
(c) notwithstanding any provisions of the
Corporation's stock option and incentive plans, or other similar
plans, the restricted period with respect to any restricted
stock granted to you thereunder shall lapse and such shares shall be
distributed to you at the time specified in Section 4(v);
(d) in lieu of shares of common stock of the
Corporation ("Common Shares") issuable upon exercise of
outstanding options ("Options"), if any, granted to you under any
of the Corporation's stock option plans, incentive plans or other
similar plans, (which Options shall be cancelled upon the making
of the payment referred to below), the Corporation shall pay to
you, at the time specified in Section 4(v), an amount in cash equal
to the product of (A) the excess of, in the case of an "incentive
stock option" (as defined in section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) granted after the date
hereof, the closing price of Common Shares as reported on the New
York Stock Exchange on or nearest the Date of Termination (or, if
not listed on such exchange, on a nationally recognized exchange
or quotation system on which trading volume in the Common
Shares is highest) and, in the case of all other Options, the higher
of such closing price or the highest per share price for Common
Shares actually paid in connection with any Change in Control,
over the per share option price of each Option held by you
(whether or not then fully exercisable), and (B) the number
of Common Shares covered by each such Option;
(e) the Corporation shall pay to you all legal fees
and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting
or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided by this Agreement (as set
forth in Section 10 of this Agreement) or in connection with any
tax audit or proceeding to the extent attributable to the application
of section 4999 of the Code, to any payment or benefit provided
hereunder); and
(f) for a twenty-four (24) month period after
such termination, the Corporation shall arrange to provide you
with life, disability, accident and group health insurance benefits
substantially similar to those that you were receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable
by you pursuant to this Section 4(iii)(f) shall be reduced to the
extent comparable benefits are actually received by you during the
twenty-four (24) month period following your termination, and
any such benefits actually received by you shall be reported to the
Corporation.
(iv) If by reason of section 280G of the Code any
payment or benefit received or to be received by you in connection with a
Change in Control or the termination of your employment (whether
payable pursuant to the terms of this Agreement ("Contract Payments") or
any other plan, arrangements or agreement with the Corporation or an
Affiliate (as defined below) (collectively with the Contract Payments,
"Total Payments") would not be deductible (in whole or part) by the
Corporation, an Affiliate or other person making such payment or
providing such benefit, then the Severance Payments shall be reduced (to
zero if necessary) and, if Severance Payments are reduced to zero, other
Contract Payments shall be reduced (to zero if necessary) and, if Contract
Payments are reduced to zero, other Total Payments shall be reduced (to
zero if necessary) until no portion of the Total Payments is not deductible
by reason of section 280G of the Code. For purposes of this limitation, (a)
no portion of the Total Payments the receipt or enjoyment of which you
shall have effectively waived in writing prior to the date of payment of
the Severance Payments shall be taken into account; (b) no portion of the
Total Payments shall be taken into account which in the opinion of tax
counsel selected by the Corporation's independent auditors and acceptable
to you does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code (without regard to subsection (A)(ii)
thereof); (c) the Severance Payments (and, thereafter, other Contract
Payments and other Total Payments) shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in
clauses (a) and (b) of Section 4(ii)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning of section
280G(b)(4) of the Code, in the opinion of the tax counsel referred to in
clause (b), and (d) the value of any noncash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by
the Corporation's independent auditors in accordance with the principles
of sections 280G(d)(3) and (4) of the Code. For purposes of this Section
4(iv), the term "Affiliate" means the Corporation's successors, any Person
whose actions result in a Change in Control or any corporation affiliated
(or which, as a result of the completion of the transactions causing a
Change in Control shall become affiliated) with the Corporation within
the meaning of section 1504 of the Code.
(v) The payments provided for in Section 4(iii)(a)
shall be made not later than the fifth day following the Date of
Termination. The payments provided for in Sections 4(iii)(b), (c) and (d)
shall be made not later than the thirtieth day following the Date of
Termination; provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Corporation shall
pay to you on such day an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the Date of
Termination. In the event that the amount of the estimated payments ex-
ceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Corporation to you, payable on the fifth day
after demand by the Corporation (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
(vi) You shall not be required to mitigate the
amount of any payment provided for in this Section 4 by seeking other
employment or otherwise nor, except as provided in Section 4(iii)(f), shall
the amount of any payment or benefit provided for in this Section 4 be
reduced by any compensation earned by you as the result of employment
by another employer or self-employment, by retirement benefits, by offset
against any amount claimed to be owed by you to the Corporation, or
otherwise.
5. Successors; Binding Agreement. (i) The Corporation
shall require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Corporation to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that
the Corporation would be required to perform it if no such succession had
taken place. Failure of the Corporation to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to terminate your
employment receive compensation from the Corporation in the same
amount and on the same terms to which you would be entitled hereunder
if you terminate your employment for Good Reason following a Change
in Control, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the
Date of Termination. Where the context requires,"Corporation" shall mean
the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit
of and be enforceable by you and your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If you should die while any amount would still be payable to
you hereunder had you continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to your devisee, legatee or other designee or, if there is no
such designee, to your estate.
6. Notice. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth
on the first page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board with a copy to
the Secretary of the Corporation, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement
may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by you and such officer as
may be specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of or
compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Arizona without
regard to its conflicts of law principles. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or
local law. The obligations of the Corporation under Section 4 shall
survive the expiration of the term of this Agreement. The section
headings contained in this Agreement are for convenience only, and shall
not affect the interpretation of this Agreement. All payments made to
you under this Agreement shall be subject to any applicable withholding
of federal, state and local income and employment taxes.
8. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
10. Arbitration; Dispute Resolution.
(i) Arbitration Procedure. Any disagreement,
dispute, controversy or claim arising out of or relating to this Agreement
or the interpretation of this Agreement or any arrangements relating to
this Agreement or contemplated in this Agreement or the breach,
termination or invalidity thereof shall be settled by arbitration in
accordance with the Commercial Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association (the "AAA") (except as
otherwise provided in this Agreement) in Phoenix, Arizona. The arbitral
tribunal shall consist of one arbitrator. In making any decision, the
arbitrator shall apply and follow the substantive law of Arizona without
reference to the conflicts of law provisions thereof. The parties to the
arbitration jointly shall directly appoint such arbitrator within thirty (30)
days of initiation of arbitration. If the parties fail to appoint such
arbitrator as provided above, such arbitrator shall be appointed by the
AAA as provided in the Arbitration Rules. You and the Corporation each
agree that the arbitral award may be enforced against the parties to the
arbitration proceeding or their assets wherever they may be found and
that a judgment upon the arbitral award may be entered in any court
having jurisdiction thereof. The Corporation shall pay all fees and
expenses of the Arbitrator regardless of the result and shall provide all
witnesses and evidence you reasonably require to present your case. The
Corporation shall pay to you all reasonable arbitration expenses and legal
fees incurred by you in seeking to obtain or enforce any right or benefit
provided by this Agreement (whether or not you are successful in
obtaining or enforcing such right or benefit). Such payments shall be
made within five (5) days after the your request for payment
accompanied with such evidence of fees and expenses incurred as the
Corporation reasonably may require.
(ii) Compensation During Dispute. Your
compensation during any disagreement, dispute, controversy or claim
arising out of or relating to this Agreement or the interpretation of this
Agreement shall be as follows:
(a) If a purported termination by you for Good
Reason occurs or is deemed to occur following a Change in Control
and during the term of this Agreement, and such termination is
disputed in accordance with Sections 3(vi) and 10(i) of this
Agreement, the Corporation shall continue to pay you the full
compensation in effect when the notice giving rise to the dispute
was given (including, but not limited to, salary) and continue you
as a participant in all compensation, benefit and insurance plans in
which you were participating when the notice giving rise to the
dispute was given, until the dispute is finally resolved in
accordance with Section 10(i). Amounts paid under this Section
10(ii)(a) are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other
amounts due under this Agreement. You agree to remain in the
employ of the Corporation during the resolution of the dispute and
to continue to provide services unless your employment is
terminated earlier by death, Disability or retirement, or by action
of the Corporation. If the dispute is resolved by a determination
that you did not have Good Reason, this Agreement, in accordance
with its terms, shall continue to apply to the circumstances of the
your employment by the Corporation and any termination thereof.
(b) If there is a termination by the Corporation
followed by a dispute as to whether you are entitled to the
payments and other benefits provided under this Agreement, then,
during the period of that dispute the Corporation shall pay you
fifty percent (50%) of the amount specified in Sections 4(iii)(a)
and 4(iii)(b) hereof, and the Corporation shall provide you with
the other benefits provided in Section 4(iii) of this Agreement, if,
but only if, you agree in writing that if the dispute is resolved
against you, you shall promptly refund to the Corporation all
payments you receive under Sections 4(iii)(a) and 4(iii)(b) of this
Agreement plus interest at the rate provided in Section 1274(d) of
the Code, compounded quarterly. If the dispute is resolved in your
favor, promptly after resolution of the dispute the Corporation
shall pay you the sum that was withheld during the period of the
dispute plus interest at the rate provided in Section 1274(d) of the
Code, compounded quarterly.
11. Entire Agreement. This Agreement sets forth
the entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party
hereto; and any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and cancelled.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of
this letter, which shall then constitute our agreement on this subject.
Sincerely,
AZTAR CORPORATION
By PAUL E. RUBELI
Paul E. Rubeli
Chairman of the Board,
President and
Chief Executive Officer
Agreed to this 17th day
of July 1995.
NEIL CIARFALIA
Neil A. Ciarfalia
Address: Treasurer
Aztar Corporation
2390 East Camelback Road, Suite 400
Phoenix, Arizona 85016
Exhibit 11
AZTAR CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
For the periods ended September 28, 1995 and September 29, 1994
---------------------------------------------------------------
(in thousands, except per share data)
Third Quarter Nine Months
------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Net income $ 4,574 $ 7,567 $ 7,059 $ 18,701
Deduct: preferred stock dividend
(net of income taxes credited to
retained earnings) (159) (169) (471) (480)
--------- --------- -------- --------
Net income applicable to computation $ 4,415 $ 7,398 $ 6,588 $ 18,221
======== ======== ======== ========
Weighted average common shares
assuming no dilution 38,159 37,375 37,944 37,370
Common equivalent shares
Additional shares applicable to
restricted stock based on the
market close price at the end
of the period -- -- -- --
Additional shares applicable to
stock options based on the
weighted average market price 1,050 850 1,027 854
-------- -------- -------- --------
Weighted average common shares
applicable to net income per
common and common equivalent share 39,209 38,225 38,971 38,224
Additional shares applicable to
stock options based on the market
close price at the end of the period 1 38 66 34
Conversion of preferred stock at
the stated rate 992 1,020 1,001 1,026
-------- -------- -------- --------
Weighted average common shares
assuming full dilution 40,202 39,283 40,038 39,284
======== ======== ======== ========
Net income per common and common
equivalent share $ .11 $ .19 $ .17 $ .48
Net income per common share assuming
full dilution $ .11 $ .19 $ .16 $ .46
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at September 28, 1995 and the Consolidated Statement
of Operations for the year-to-date period ended September 28, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1995
<PERIOD-END> SEP-28-1995
<CASH> 48,942
<SECURITIES> 0
<RECEIVABLES> 31,899
<ALLOWANCES> 10,541
<INVENTORY> 6,198
<CURRENT-ASSETS> 92,023
<PP&E> 1,021,111
<DEPRECIATION> 206,441
<TOTAL-ASSETS> 973,142
<CURRENT-LIABILITIES> 95,666
<BONDS> 455,145
<COMMON> 422
5,278
0
<OTHER-SE> 371,302
<TOTAL-LIABILITY-AND-EQUITY> 973,142
<SALES> 35,623
<TOTAL-REVENUES> 435,893
<CGS> 33,287
<TOTAL-COSTS> 228,259
<OTHER-EXPENSES> 25,673
<LOSS-PROVISION> 2,636
<INTEREST-EXPENSE> 37,641
<INCOME-PRETAX> 13,445
<INCOME-TAX> 2,517
<INCOME-CONTINUING> 7,059
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,059
<EPS-PRIMARY> .17
<EPS-DILUTED> .16
</TABLE>
