UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
Amendment No. 1
(Mark One)
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2013
Or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 024993
LAKES ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
Minnesota |
411913991 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S., Employer Identification No.) |
130 Cheshire Lane, Suite 101, Minnetonka, Minnesota 55305
(Address ofprincipal executive offices)
(952) 4499092
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
Name of Each Exchange on Which Registered |
Common Stock, $0.01 par value |
The NASDAQ Stock Market LLC |
|
|
Securities registered pursuant to Section 12(g) of the Act:
None.
(Title of Class)
Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
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 ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation ST (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K. ☑
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See definition of “large accelerated filer, “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act. (Check one):
Large accelerated filer ☐ Accelerated filer ☐ Nonaccelerated filer ☐ Smaller reporting company ☑
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Act). Yes ☐ No ☑
As of March 12, 2014, 26,728,402 shares of the Registrant’s Common Stock were outstanding. Based upon the last sale price of the Common Stock as reported on the NASDAQ Global Market on June 28, 2013 (the last business day of the Registrant’s most recently completed second quarter), the aggregate market value of the Common Stock held by nonaffiliates of the Registrant as of such date was $68.2 million. For purposes of these computations, affiliates of the Registrant are deemed only to be the Registrant’s executive officers and directors.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Explanatory Note: We are filing this Amendment No. 1 on Form 10K/A to our Annual Report on Form 10K for the fiscal year ended December 29, 2013 (the “Report”) for the purpose of including information that was to be incorporated by reference from our definitive proxy statement pursuant to Regulation 14A of the Securities and Exchange Act of 1934. Because we will not file our definitive proxy statement within 120 days of our fiscal year ended December 29, 2013, we are amending and restating in its entirety Part III and supplementing Part IV, Item 15 of the Report. Other than the amendment described above, this Form 10K/A does not modify or update the disclosures in the Report in any way. Accordingly, this Form 10K/A should be read in conjunction with the Report and with our filings with the SEC subsequent to the Report.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
DIRECTORS
Our Board of Directors currently consists of five directors. The biographies of each of the nominees below contains information each director has given us regarding the person’s service as a director, business experience and director positions held currently or at any time during the last five years.
Name and Age of Director |
Principal Occupation, Business Experience For Past Five Years and Directorships of Public Companies |
Director Since | ||
Lyle Berman Age 72 |
Chairman of the Board and Chief Executive Officer of Lakes Entertainment, Inc. since June 1998 and Chairman of the Board of Directors of Grand Casinos, Inc. (the predecessor to Lakes) from October 1991 through December 1998. Mr. Berman has also served as the Executive Chairman of the Board of WPT Enterprises, Inc. (now known as Emerald Oil, Inc.) from its inception in February 2002 until July 2013. Mr. Berman was also Chairman of the Board of PokerTek, Inc. from January 2005 until October 2011 and he remains on the Board. Mr. Berman also served as Chief Executive Officer of Rainforest Café, Inc. from February 1993 until December 2000. |
1998 | ||
Timothy J. Cope Age 62 |
President of Lakes Entertainment, Inc. since May 2003 and Chief Financial Officer, Treasurer, and a director of Lakes Entertainment since June 1998. Mr. Cope served as a director of WPT Enterprises, Inc. (now known as Emerald Oil, Inc.) from March 2002 through May 2009. Mr. Cope served as Secretary of Lakes Entertainment, Inc. from June 1998 through December 2007. Mr. Cope served as an Executive Vice President of Lakes Entertainment, Inc. from June 1998 until May 2003. Mr. Cope held the positions of Executive Vice President, Chief Financial Officer and Director of Grand Casinos, Inc. from 1993 through 1998. |
1998 | ||
Neil I. Sell Age 72 |
Director of Lakes Entertainment, Inc. since June 1998 and director of Grand Casinos, Inc. from October 1991 through December 1998. Since 1968, Mr. Sell has been engaged in the practice of law in Minneapolis, Minnesota with the firm of Maslon Edelman Borman & Brand, LLP. | 1998 | ||
Ray M. Moberg Age 65 |
Director of Lakes Entertainment, Inc. since December 2003. Mr. Moberg retired from Ernst & Young in 2003 after serving for 33 years, including as managing partner of its Reno office from 1987 until his retirement. Mr. Moberg also served as a director of WPT Enterprises, Inc. (now known as Emerald Oil, Inc.) until April 2010. | 2003 | ||
Larry C. Barenbaum Age 67 |
Director of Lakes Entertainment, Inc. since February 2006. Mr. Barenbaum served as Chief Executive Officer of Christopher & Banks Corporation, a publicly held national specialty retailer of women’s apparel, from January 2011 until February 2012. Mr. Barenbaum served on the Christopher & Banks Corporation Board from March 1992 until February 2012. Since November 1991, Mr. Barenbaum has been engaged in investment activities and has provided consulting services to various companies in the specialty retail and services industry. | 2006 | ||
EXECUTIVE OFFICERS
The table below lists the executive officers of the Company as of December 29, 2013:
Name |
Age |
Position(s) with Lakes Entertainment | ||
Lyle Berman |
72 |
See section titled “Directors” above. | ||
Timothy J. Cope |
62 |
See section titled “Directors” above. |
CORPORATE GOVERNANCE
Audit Committee of the Board of Directors
The Board of Directors has established a threemember Audit Committee that consists of Larry C. Barenbaum, Neil I. Sell and Ray M. Moberg, who is the chairperson of the Audit Committee. The Audit Committee operates under an amended and restated written charter adopted by the Board of Directors on April 11, 2011. The primary functions of the Audit Committee are (i) to serve as an independent and objective party to monitor our financial reporting process and internal control system, (ii) to review and appraise the audit efforts of our independent auditors, and (iii) to provide an open avenue of communication among the independent auditors, financial and senior management and the Board of Directors. The charter also requires that the Audit Committee (or designated members of the Audit Committee) review and preapprove the performance of all audit and nonaudit accounting services to be performed by our independent registered public accounting firm (auditors), other than certain de minimus exceptions permitted by Section 202 of the SarbanesOxley Act of 2002.
The Board of Directors has determined that at least one member of the Audit Committee, Mr. Moberg, is an “Audit Committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation SK promulgated under the Securities Exchange Act of 1934, as amended. In addition, each member of the Audit Committee is an “independent director,” as such termis defined in the NASDAQ Stock Market’s listing standards, referred to as Nasdaq listing standards. The Board of Directors has also determined that each of the Audit Committee members is able to read and understand fundamental financial statements and that at least one member of the Audit Committee has past employment experience in finance or accounting.
CODE OF CONDUCT
The Company has adopted a code of ethics that applies to Lakes’ employees, including its principal executive officer and principal financial officer. The Company’s Code of Business Conduct and Ethics is available on our website at www.lakesentertainment.com/investors/governance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on the Section 16(a) forms furnished to us, we believe that all officers, directors and greater than ten percent shareholders met all applicable filing requirements under Section 16(a) during fiscal 2013.
Item 11. Executive Compensation.
EXECUTIVE COMPENSATION
Elements of Compensation
For the fiscal year ended December 29, 2013, referred to as fiscal 2013, the principal components of compensation for our only two named executive officers, Lyle Berman (Chief Executive Officer), and Timothy J. Cope (President) (“Named Executive Officers”), included base salary, annual incentive bonus compensation and long term equity incentives.
Base Salary. The base salaries of Lyle Berman and Timothy J. Cope were established in their respective employment agreements. Their base salaries were not increased in fiscal 2013. We use base salary to recognize the experience, skills, knowledge and responsibilities required of our Named Executive Officers in their roles. The Compensation Committee reviews each Named Executive Officer’s salary and makes adjustments, as appropriate. The Compensation Committee also considers a number of factors including market data taken from the public filings of public companies in the gaming industry, internal review of the executive’s compensation (both individually and relative to other executives), level of the executive’s responsibility, and individual performance of the executive. Consistent with fiscal 2012 base salaries, the base salaries of the Named Executive Officers continued to be the largest portion of the Name Executive Officers’ compensation in fiscal 2013.
We and the Compensation Committee believed that the base salaries of the Named Executive Officers for fiscal 2013 were at acceptable market rates.
Annual Incentive Cash Bonus. Annual incentive cash bonuses are intended to reward individual and Company performance during the year. The annual incentive cash bonuses range is 0% — 80% of the Named Executive Officer’s base salary. The bonuses are determined on a discretionary basis by the Compensation Committee based on the performance of the Company and the Named Executive Officer for the completed fiscal year. The annual incentive cash bonus awards made to Named Executive Officers in March 2014 for performance in fiscal 2013 are reflected in the Summary Compensation Table. The Compensation Committee approved these discretionary annual incentive cash bonuses due to achievement of strategic fiscal 2013 corporate goals. The annual incentive bonus program is reviewed annually by the Compensation Committee to determine whether it is achieving its intended purpose. We and the Compensation Committee believe it achieved its purpose in fiscal 2013.
LongTerm Equity Incentive. The Company traditionally uses stock options and restricted stock units to motivate our Named Executive Officers to increase longterm shareholder value. The Compensation Committee will consider providing other forms of equitybased compensation awards to Named Executive Officers under the 2007 Stock Option and Compensation Plan, referred to as the 2007 Plan, which may be subject to performance goals, rather than just in the form of stock option grants. Grants of equitybased awards to Named Executive Officers under the 2007 Plan are made from time to time at regularly scheduled meetings of the Compensation Committee in line with our past practices. In fiscal 2009, and in addition to the grant of stock options, the Compensation Committee granted restricted stock units to Named Executive Officers, which became fully vested in fiscal 2012. Awards may not necessarily be made each year if the Compensation Committee decides that the Company’s strategic and financial performance does not merit awards or the Compensation Committee believes that the Named Executive Officer has received a sufficient amount of equitybased awards. In anticipation of the expected future requirements under the DoddFrank Act, the option grants since October 2010 include a recoupment or “claw back” provision.
Personal Benefits and Perquisites. Mr. Berman and Mr. Cope have personal benefits and perquisites provided under their respective employment agreements. The Company and the Compensation Committee believe that the benefits and perquisites are reasonable and consistent with the compensation program to better enable the Company to retain superior employees for key positions. These two officers are provided term life insurance and disability coverage by the Company. The value of these benefits and perquisites is set forth in the Summary Compensation Table.
PostTermination Benefits. Mr. Berman and Mr. Cope have posttermination benefits as provided in their respective employment agreements. See “Potential Payments Upon Termination or ChangeIn Control” for a discussion of those benefits. We provided these benefits to Mr. Berman and Mr. Cope as they were included in the compensation package they negotiated as part of their employment agreements.
Summary Compensation Table
The following table sets forth the cash and noncash compensation for the last two fiscal years awarded to or earned by (i) each individual that served as our Chief Executive Officer during fiscal 2013 and (ii) our only other individual who served as an executive officer of the Company during and at the end of fiscal 2013. The Chief Executive Officer and the other executive officer listed below are collectively referred to in this proxy statement as the Named Executive Officers.
Name and Principal Position | Year |
Salary ($) (1) |
Bonus ($) |
Stock ($) |
Option ($) (2) |
All Other ($) |
Total ($) |
|||||||||||||||||||||
Lyle Berman, Chairman of the Board, Chief Executive Officer |
2013 2012 |
500,000 500,000 |
100,000 100,000 |
— |
103,140 — |
83,328(3) 83,328 |
786,468 683,328 |
|||||||||||||||||||||
Timothy J. Cope, President, Chief Financial Officer and |
2013 2012 |
350,000 350,000 |
70,000 70,000 |
— |
103,140 — |
24,500(4) 23,885 |
547,640 443,885 |
|||||||||||||||||||||
Treasurer |
_____________
(1) |
Includes cash compensation deferred at the election of the executive officer under the terms of the Company’s 401(k) Savings Incentive Plan. |
(2) |
Includes full grant date fair value of each award under FASB Accounting Standards Codification Topic 718. The full grant date fair value is the amount the Company will expense over the awards’ vesting period. The amounts do not reflect the actual amounts that may be realized by the executive officers. A discussion of the assumptions used in calculating the stock option award amounts may be found in Note 16 to the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 29, 2013. Fiscal 2013 includes the February 12, 2013 grant of options to purchase 60,000 shares granted to each of Mr. Berman and Mr. Cope. The exercise price of these options is $3.07 per share and the options vest one-third on the first through third anniversaries of the date of grant. |
(3) |
Amount includes payment by the Company of term life and executive disability insurance premiums of approximately $66,328, matching contributions by the Company under the Company’s 401(k) Savings Incentive Plan of $9,800, and travel and expense allowance of $7,200. |
(4) |
Amount includes payment by the Company of term life and executive disability insurance premiums of approximately $7,500, matching contributions by the Company under the Company’s 401(k) Savings Incentive Plan of $9,800, and travel and expense allowance of $7,200. |
Employment Agreements for Chief Executive Officer and President. The Company entered into employment agreements dated as of November 6, 2013 with Lyle Berman and Timothy J. Cope to employ them as Chief Executive Officer and President, respectively. Under the agreements, these Named Executive Officers are required to perform such duties as may be designated by the Company’s Board of Directors from time to time. Each agreement has an initial term of 36 months. The term of each agreement automatically extends for successive two-year periods unless, at least 60 days prior to the end of a term, the Company or the Named Executive Officer gives notice to the other of an election to terminate the agreement at the end of the current term. In addition, the agreement may be terminated (a) upon the death or disability (as defined in the agreement) of the Named Executive Officer; (b) by the Company for cause (as defined in the agreement); (c) by the Company without cause; (d) as a result of a constructive termination (as defined in the agreement); or (e) by the Named Executive Officer at any time upon providing 60 days advance written notice to the Company. Under the terms of the agreements, Mr. Berman and Mr. Cope receive a base salary of $500,000 and $350,000, respectively, or such other amount as may be determined by the Company in its sole discretion, and a monthly travel and expense fee in the amount of $600. They are also entitled to participate in Lakes’ discretionary incentive compensation program and to receive other benefits provided by the Company to senior executives. Each employment agreement also contains customary confidentiality provisions and two-year post-employment non-solicitation covenants. Each employment agreement also contains an arbitration clause. The November 6, 2013 employment agreements replaced the employment agreements originally dated February 15, 2006. The November 6, 2013 employment agreements were amended on March 28, 2014 to (a) remove the Company’s requirement to purchase insurance to fund the payments to Mr. Berman of his base salary for 24 months in the event of a qualifying disability and (b) to provide that the Company is required to purchase insurance to fund only 12 months (as opposed to 24 months as stated in the November 6, 2013 employment agreement) of its obligation to pay Mr. Cope his base salary for 24 months in the event of a qualifying disability.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information relating to equity awards outstanding at the end of fiscal 2013 for each Named Executive Officer.
Option Awards | |||||||||||||
Name |
Number of |
Number of |
Option Exercise |
Option Expiration | |||||||||
Lyle Berman |
30,000 | — | 3.25 |
1/28/2019 | |||||||||
234,809 | — | 3.40 |
9/22/2019 | ||||||||||
14,933 | 3,734 | (1) | 3.40 |
9/22/2019 | |||||||||
80,000 | — | 1.89 |
10/15/2020 | ||||||||||
— | 60,000 | (2) | 3.07 |
2/12/2023 | |||||||||
Timothy J. Cope |
30,000 | — | 3.25 |
1/28/2019 | |||||||||
117,404 | — | 3.40 |
9/22/2019 | ||||||||||
14,933 | 3,734 | (1) | 3.40 |
9/22/2019 | |||||||||
80,000 | — | 1.89 |
10/15/2020 | ||||||||||
— | 60,000 | (2) | 3.07 |
2/12/2023 |
(1) |
This option vests 20% each year, beginning on the first anniversary of the date of grant which was September 22, 2010. For each Named Executive Officer, options to purchase 3,734 shares will vest on September 22, 2014. |
(2) |
This option vests one third each year, beginning on the first anniversary of the date of grant which was February 12, 2014. For each Named Executive Officer, options to purchase 20,000 shares vest on February 12 in 2014, 2015 and 2016. |
Potential Payments Upon Termination or Change-In-Control
The table below describes the potential payments and benefits payable to each of the Named Executive Officers who have employment agreements with the Company upon termination of employment due to disability, by the Company without cause, due to a constructive discharge, due to the Named Executive Officer’s voluntary resignation, by the Company with cause, expiration of the initial or renewal term of the Named Executive Officer’s employment agreement, and involuntary termination within three years following a change-in-control. The amounts shown in the table assume that such termination was effective as of December 29, 2013 and includes all amounts earned through that date and are estimates of the amounts that would be paid out to the Named Executive Officers upon their termination of employment. The actual amounts to be paid out can only be determined at the time a Named Executive Officer in fact terminates employment with the Company.
Named Executive Officer; Termination Event |
Cash |
Continuation of |
Acceleration |
Total |
||||||||||||
Lyle Berman |
||||||||||||||||
— Disability |
1,000,000 | — | 79,615 | 1,079,615 | ||||||||||||
— Involuntary Termination without Cause |
1,200,000 | 15,264 | 79,615 | 1,294,879 | ||||||||||||
— Constructive Discharge |
1,200,000 | 15,264 | 79,615 | 1,294,879 | ||||||||||||
— Voluntary Termination |
— | — | 79,615 | 79,615 | ||||||||||||
— For Cause Termination |
— | — | 79,615 | 79,615 | ||||||||||||
— Expiration of Term |
— | — | 79,615 | 79,615 | ||||||||||||
— Involuntary Termination after Change-in-Control |
1,367,962 | — | 79,615 | 1,447,577 | ||||||||||||
Timothy J. Cope |
||||||||||||||||
— Disability |
700,000 | — | 79,615 | 779,615 | ||||||||||||
— Involuntary Termination without Cause |
840,000 | 32,208 | 79,615 | 951,823 | ||||||||||||
— Constructive Discharge |
840,000 | 32,208 | 79,615 | 951,823 | ||||||||||||
— Voluntary Termination |
— | — | 79,615 | 79,615 | ||||||||||||
— For Cause Termination |
— | — | 79,615 | 79,615 | ||||||||||||
— Expiration of Term |
— | — | 79,615 | 79,615 | ||||||||||||
— Involuntary Termination after Change-in-Control |
935,662 | — | 79,615 | 1,015,277 |
Regular Benefits. The amounts shown in the above table do not include payments and benefits that are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include payment of accrued, but unused vacation pay.
Death. A termination of employment due to death does not entitle the Named Executive Officers to any payments or benefits that are not available to salaried employees generally.
Disability. Each of the employment agreements for Mr. Berman and Mr. Cope provides that if the agreement is terminated due to the executive’s disability, the executive would be entitled to receive an amount equal to 24 months of his then base salary.
Involuntary Termination without Cause or Constructive Discharge. If either Mr. Berman or Mr. Cope is terminated without cause or through constructive discharge, he would be entitled to:
• |
base salary (including any accrued vacation) through the termination date; |
• |
severance benefits equal to the accrued and unpaid base salary for 24 months, or for the period of time remaining in the term of employment, whichever is longer; |
• |
equivalent of bonus or incentive compensation (based upon the average bonus percentage rate for the two fiscal years of the Company preceding such termination) for 24 months, or for the period of time remaining in the term of the employment agreement, whichever is longer; |
• |
all medical and dental insurance benefits during the severance period; and |
• |
all outstanding options to purchase shares of stock in the Company immediately vest and become immediately exercisable for three years after the date on which executive ceases to be employed by the Company. |
Involuntary Termination after Change-in-Control. If the employment of Mr. Berman or Mr. Cope is terminated without cause or due to constructive discharge within three years following a change-in-control, he would be entitled to:
• |
all compensation due and payable to, or accrued for, the benefit of the executive as of the date of termination; |
• |
a lump sum payment equal to two times the executive’s annual compensation, which is defined as the executive’s (i) annual base salary plus annual bonus or incentive compensation computed at par levels, (ii) an amount equal to the annual cost to executive of obtaining annual health care coverage comparable to that currently provided by the Company (grossed-up to compensate executive for the taxable nature of such payment), (iii) an amount equal to any normal matching contributions made by the Company on executive’s behalf in the Company’s 401(k) plan, (iv) annual travel and expense fee allowance, if any, and (v) an amount equal to the annual cost to the executive of obtaining life insurance and insurance coverage for accidental death and disability insurance comparable to that provided by the Company; |
• |
all outstanding options to purchase shares of stock in the Company immediately vest and become immediately exercisable for three years after the date on which executive ceases to be employed by the Company; |
• |
the Company must use its best efforts to convert any then existing life insurance and accidental death and disability insurance policies to individual policies in the name of the executive. |
In exchange for these payments, Mr. Berman and Mr. Cope are subject to non-solicitation covenants covering the Company’s employees, persons or entities that are doing business with the Company, and anyone that is an active prospect to do business with the Company, for a period of two years following termination of employment with the Company.
Stock Option Acceleration and Continuation. Upon the termination of the employment of Mr. Berman or Mr. Cope for any reason, including death, disability, expiration of the initial term, nonrenewal, termination by the Company with or without cause, termination by the executive with notice, due to a constructive discharge or within three years of a change of control, all stock options held by the executive immediately vest and become immediately exercisable by the executive or his legal representative for a period of three years following the date of termination of the executive’s employment.
DIRECTOR COMPENSATION
The following table sets forth the cash and non-cash compensation for fiscal 2013 awarded to or earned by each of our directors who is not also a Named Executive Officer.
Name |
Fees Earned |
Stock |
Option |
All Other |
Total |
|||||||||||||||
Neil I. Sell |
71,000 | — | 25,785 | — | 96,785 | |||||||||||||||
Ray M. Moberg |
81,000 | — | 25,785 | — | 106,785 | |||||||||||||||
Larry C. Barenbaum |
73,000 | — | 25,785 | — | 98,785 |
Options are granted to non-employee directors from time-to-time at the discretion of the Compensation Committee. As of the close of business on April 21, 2014, Mr. Sell, Mr. Moberg and Mr. Barenbaum held options to purchase 36,529 shares, 61,528 shares and 37,412 shares, respectively.
(1) |
We pay an annual fee of $50,000 to each of our directors who is not otherwise employed by us or our subsidiaries, referred to as a non-employee director. We also pay each non-employee director a fee of $1,000 for each meeting of the Board of Directors attended and $1,000 for each committee meeting that the Board of Directors attended. We also pay the Chairman of our Audit Committee an additional annual fee of $10,000 for serving in such capacity. |
(2) |
Includes full grant date fair value of each award under FASB Accounting Standards Codification Topic 718. The full grant date fair value is the amount the Company will expense over the awards’ vesting period. The amounts do not reflect the actual amounts that may be realized by the non-employee directors. A discussion of the assumptions used in calculating the stock option award amounts may be found in Note 16 to the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended December 29, 2013. This amount includes the February 12, 2013 grant of options to each non-employee director to purchase 15,000 shares. The exercise price of these options is $3.07 per share and the options vest one-third on the first through third anniversaries of the date of grant. |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth, as of the close of business on April 21, 2014, certain information regarding the beneficial ownership of our common stock by (i) all persons known by us to be the owner (or deemed to be the owner pursuant to the rules and regulations of the SEC), of record or beneficially, of more than 5% of our outstanding common stock, (ii) each of the directors and nominees for election to the Board of Directors, (iii) each Named Executive Officer, and (iv) all directors and executive officers as a group, in each case based upon beneficial ownership reporting of our common stock as of such date. Except as otherwise indicated, the information is given as of April 21, 2014, the mailing address of each shareholder is 130 Cheshire Lane, Minnetonka, Minnesota 55305, and each shareholder has sole voting and investment power with respect to the shares beneficially owned.
Name |
Shares of Lakes |
Percentage of Common |
||||||
Lyle Berman(1) |
4,787,214 | 17.7 | % | |||||
Timothy J. Cope(2) |
389,979 | 1.4 | ||||||
Larry C. Barenbaum(3) |
31,478 | * | ||||||
Ray M. Moberg(4) |
55,594 | * | ||||||
Neil I. Sell(5) |
2,549,384 | 9.5 | ||||||
All Lakes Entertainment, Inc. Directors and Executive Officers as a Group (5 people including the foregoing)(6) |
7,813,649 | 28.4 |
* |
Less than one percent. |
(1) |
Includes 422,806 shares held by Berman Consulting Corporation, a corporation wholly owned by Mr. Berman, 323,000 shares owned by Mr. Berman through a Berman Consulting Corporation profit sharing plan, 3,661,666 shares owned by Lyle A. Berman Revocable Trust and options to purchase 379,742 shares. |
(2) |
Includes options to purchase 262,337 shares and 10,000 shares owned by Mr. Cope’s spouse. |
(3) |
Includes options to purchase 26,478 shares. |
(4) |
Includes options to purchase 50,594 shares. |
(5) |
Includes an aggregate of 2,510,391 shares held by four irrevocable trusts for the benefit of Lyle Berman’s children with respect to which Mr. Sell has shared voting and dispositive powers as a co-trustee. Mr. Sell has disclaimed beneficial ownership of such shares. Also includes options to purchase 25,595 shares. |
(6) |
Includes shares held by corporations controlled by such officers and directors and shares held by trusts of which such officers and directors are trustees. Also includes options to purchase 744,746 shares. |
(7) |
Shares of our common stock not outstanding but deemed beneficially owned because the respective person or group has the right to acquire them as of April 21, 2014, or within 60 days of such date, are treated as outstanding for purposes of calculating the amount and the percentage of common stock outstanding for such person or group. |
The foregoing footnotes are provided for informational purposes only and each person disclaims beneficial ownership of shares owned by any member of his or her family or held in trust for any other person, including family members.
EQUITY COMPENSATION PLAN INFORMATION
At Lakes’ June 6, 2007 annual shareholders meeting, Lakes’ shareholders approved the 2007 Lakes Stock Option and Compensation Plan (the “2007 Plan”), which authorized a total of 500,000 shares of Lakes’ common stock. In August of 2009, Lakes’ shareholders amended the 2007 Plan to increase the number of shares of Lakes common stock authorized for awards from 500,000 to 2,500,000.
The 2007 Plan is designed to integrate compensation of our executives and employees, including officers and directors with our long-term interests and those of our shareholders and to assist in the retention of executives and other key personnel. The 2007 Plan has been approved by our shareholders. Lakes has a 1998 Stock Option and Compensation Plan (the “1998 plan”), that was approved by our shareholders to grant up to an aggregate 5,000,000 shares of incentive and non-qualified stock options to employees. No additional options will be granted under the 1998 plan.
The following table provides certain information as of December 29, 2013 with respect to our equity compensation plans:
Plan Category |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights |
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column) |
|||||||||
Equity compensation plans approved by shareholders: |
||||||||||||
1998 Employee Plan |
27,000 | $ | 6.43 | - | ||||||||
2007 Plan |
1,569,322 | $ | 2.92 | 526,878 | ||||||||
Total |
1,596,322 | $ | 2.98 | 526,878 |
Item 13. Certain Relationships and Related Transactions, and Director Independence
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sale of Secured Note to Lyle Berman
In March 2013, the Company sold to Lyle Berman, our Chairman and Chief Executive Officer, a $250,000 secured note from an unrelated third party company in exchange for a cash payment of $150,000 from Mr. Berman. The secured note was in default and related to a fiscal 2012 potential business development opportunity that the Company decided not to pursue.
Review and Approval of Related Party Transactions
Policy. The Audit Committee is responsible for reviewing and approving (with the concurrence of a majority of the disinterested members of the Board of Directors) any related party and affiliated party transactions as provided in the Amended and Restated Audit Committee Charter adopted by the Board of Directors of the Company on April 11, 2011. In addition, the rules of The Nasdaq Stock Market provide that all related party transactions must be reviewed for conflicts of interest by the Audit Committee. In accordance with policies adopted by the Audit Committee, the following transactions must be presented to the Audit Committee for its review and approval:
1. Any transaction in which (i) the amount involved exceeds $120,000, (ii) the Company was or is to be a participant (within the meaning of Regulation S-K, Item 404(a)), and (iii) a related person (as defined in Regulation S-K, Item 404(a)) has or will have a direct or indirect material interest (within the meaning of Regulation S-K, Item 404(a)).
2. Any contract or other transaction between the Company and one or more directors of the Company, or between the Company and an organization in or of which one or more directors of the Company are directors, officers, or legal representatives or have a material financial interest within the meaning of Minnesota Statutes, Section 302A.255.
Procedure. In addition to the Company’s Board of Directors complying with the requirements of Minnesota Statutes, Section 302A.255 with respect to any proposed transaction with a potential director’s conflict of interest, all proposed transactions covered by the policy must be approved in advance by a majority of the members of the Audit Committee, along with the concurrence of a majority of the disinterested directors of the Board of Directors. If a proposed transaction covered by the policy involves a member of the Audit Committee, such member may not participate in the Audit Committee’s deliberations concerning, or vote on, such proposed transaction.
Prior to approving any proposed transaction covered by the policy, the following information concerning the proposed transaction will be fully disclosed to the Audit Committee:
1. The names of all parties and participants involved in the proposed transaction, including the relationship of all such parties and participants to the Company and any of its subsidiaries;
2. The basis on which the related person is deemed to be a related person within the meaning of Regulation S-K, Item 404(a), if applicable;
3. The material facts and terms of the proposed transaction.
4. The material facts as to the interest of the related person in the proposed transaction.
5. Any other information that the Audit Committee requests concerning the proposed transaction.
The Audit Committee may require that all or any part of such information be provided to it in writing.
The Audit Committee may approve only those transactions covered by the policy that a majority of the members of the Audit Committee in good faith determine to be (i) fair and reasonable to the Company, (ii) on terms no less favorable than could be obtained by the Company if the proposed transaction did not involve a director or the related person, as the case may be, and (iii) in the best interests of the Company.
DIRECTOR INDEPENDENCE
The following current directors, which constitute a majority of the Board of Directors, are “independent directors” as such term is defined in Nasdaq listing standards: Larry C. Barenbaum, Ray M. Moberg and Neil I. Sell.
Item 14. Principal Accountant Fees and Services
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Audit and Non-Audit Fees
The following table presents fees for professional audit and other services rendered by PBTK during fiscal 2013 and fiscal 2012.
Fees for 2013 |
Fees for 2012 |
|||||||
Audit Fees(1) |
$ | 279,596 | $ | 210,922 | ||||
Audit-Related Fees |
— | — | ||||||
Tax Fees |
— | — | ||||||
All Other Fees |
— | — | ||||||
Total Fees |
$ | 279,596 | $ | 210,922 |
(1) |
Audit fees consist of quarterly reviews and annual audits of the Company’s consolidated financial statements, including annual audit and attestation services required by the State of Maryland for fiscal 2013. This amount also includes the issuance of consents and review of documents filed with the SEC. |
The Audit Committee of the Board of Directors has reviewed the fees billed by PBTK during fiscal year 2013 and, after consideration, has determined that the receipt of these fees by PBTK is compatible with the provision of independent audit services. The Audit Committee discussed these services and fees with PBTK and our management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC, including those designed to implement the Sarbanes-Oxley Act of 2002, as well as by the American Institute of Certified Public Accountants.
Pre-Approval of Audit and Non-Audit Services
As permitted under applicable law, our Audit Committee may pre-approve from time to time certain types of services, including tax services, to be provided by our independent registered public accounting firm. As provided in the charter of the Audit Committee, and in order to maintain control and oversight over the services provided by our independent registered public accounting firm, it is the policy of the Audit Committee to pre-approve all audit and non-audit services to be provided by the independent registered public accounting firm (other than with respect to de minimus exceptions permitted by the Sarbanes-Oxley Act of 2002), and not to engage the independent registered public accounting firm to provide any non-audit services prohibited by law or regulation. For administrative convenience, the Audit Committee may delegate pre-approval authority to Audit Committee members who are also independent members of the Board of Directors, but any decision by such a member on pre-approval must be reported to the full Audit Committee at its next regularly scheduled meeting.
PART IV
ITEM 15. Exhibits and Financial Statement Schedules
(a)(3) Exhibits:
Exhibits |
Description | |
10.1 |
First Amendment to Employment Agreement by and between Lyle A. Berman and Lakes Entertainment, Inc. dated March 28, 2014.* | |
10.2 |
First Amendment to Employment Agreement by and between Timothy J. Cope and Lakes Entertainment, Inc. dated March 28, 2014.* | |
31.1 |
Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act. | |
31.2 |
Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act. | |
* |
Management Compensatory Plan or Arrangement |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
LAKES ENTERTAINMENT, INC. |
|||
Registrant |
|||
By: |
/s/ LYLE BERMAN | ||
Name: Lyle Berman |
|||
Title: Chairman of the Board and |
|||
Chief Executive Officer |
Dated as of April 25, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of April 25, 2014.
Name | Title | |
/s/ Lyle Berman |
Chairman of the Board and Chief Executive Officer (Principal | |
Lyle Berman | Executive Officer) | |
/s/ Timothy J. Cope |
President, Chief Financial Officer and Director (Principal Financial | |
Timothy J. Cope | and Accounting Officer) | |
/s/ Ray M. Moberg |
Director | |
Ray M. Moberg | ||
/s/ Neil I. Sell |
Director | |
Neil I. Sell | ||
/s/ Larry C. Barenbaum |
Director | |
Larry C. Barenbaum |
15
Exhibit 10.1
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (“Amendment”) is entered into this 28 day of March, 2014, by and between Lyle A. Berman, an individual resident of the State of Minnesota (the “Executive”) and Lakes Entertainment, Inc., a Minnesota corporation, including its subsidiaries and affiliates (collectively, “Company”).
RECITALS:
A. |
WHEREAS, Executive and Employer did enter into a certain Employment Agreement dated November 6, 2013 (the “Agreement”) pertaining to Executive’s employment with the Company, a copy of which is attached hereto as Exhibit A. | |
B. |
WHEREAS, the parties desire to amend the Agreement hereby. |
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements of the parties herein contained, the parties hereby agree as follows:
1. |
Section 8(b)(1) shall be amended to read as follows: |
|
2. |
(1) If the Executive suffers any “Disability” (as defined below), this Agreement and Executive’s employment hereunder will automatically terminate. “Disability” means a termination by the Company’s board of directors that the Executive is permanently and totally unable to perform the substantial and material duties of his regular occupation and is not expected to recover for the remainder of his or her life. The Executive must also be under the regular care of a physician that is appropriate for the condition causing the disability. Upon termination for Disability, the Company will provide to Executive an amount equal to 24 months of his then Base Salary. |
2. |
This Amendment shall be expressly limited to the amendment contained herein, all remaining terms of the Agreement shall remain in full force and effect, and this Amendment when read in conjunction with the Agreement shall encompass the complete understanding of the parties. |
IN WITNESS WHEREOF, the parties hereto have executed this agreement effective as of the date first written above.
LYLE A. BERMAN |
LAKES ENTERTAINMENT, INC. | |||
/s/ Lyle A. Berman |
By: |
/s/ Damon Schramm |
||
Its: |
VP – General Counsel |
EXHIBIT A
[November 6, 2013 Employment Agreement]
EMPLOYMENT AGREEMENT
This Agreement (the “Agreement”) is made and entered into as of this 6th day of Nov. 2013 by and between Lyle Berman, an individual resident of the State of Minnesota (the “Executive”) and Lakes Entertainment, Inc., a Minnesota corporation, including its subsidiaries and affiliates (collectively, “Employer” or the “Company”).
RECITALS
WHEREAS, Executive currently is employed at will by the Company.
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company to continue to employ Executive as a member of the senior management team of the Company; and
WHEREAS, the Board and the Executive wish to enter into this Agreement to document the terms of the Executive’s employment with the Company and provide Executive with new and valuable consideration for his services in the form of improved job security in the event Company terminates Executive’s employment without “Cause” (as defined below); and
WHEREAS, the Board wishes to encourage the Executive to continue his employment with the Company and the Board believes that this objective can be best served by providing for a compensation arrangement for the Executive upon the Executive’s termination of employment under certain circumstances in the event of a Change Of Control (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual promises and covenants and the respective undertakings of the Company and Executive set forth below the Company and Executive agree as follows:
AGREEMENT
1. Employment. The Company hereby employs Executive, and Executive accepts such employment and agrees to perform services for the Company, for the period and upon the other terms and conditions set forth in this Agreement.
2. Term. The term of this Agreement and Executive’s employment hereunder will be a period of 36 months commencing on the above-referenced date and expiring 36 months therefrom (the “Term”). The Term will be automatically extended for successive additional two-year periods (“Additional Employment Terms”) unless, at least 60 days prior to the end of the Term or an Additional Employment Term, the Company or the Executive has notified the other in writing that the Agreement will terminate at the end of the then current term. A notice of non-extension by the Company prior to the end of the Term or during any Additional Employment Term will be treated consistent with subsection 8a of this Agreement. A notice of non-extension by the Executive during the Term or any Additional Employment Term will be treated as a termination by the Executive with employment separation benefits as described in subsection 8d of this Agreement.
3. Base Salary. Employer shall pay Executive an annual base salary in the amount of Five Hundred Thousand and No/100 Dollars ($500,000) (“Base Salary”), or such higher amount as may from time-to-time be determined by Employer in its sole discretion. Such salary shall be paid in equal installments in the manner and at the times as other employees of Employer are paid.
4. Incentive Compensation. Executive shall participate in Employer's incentive compensation program from time-to-time established and approved by the Employer's Board of Directors, such participation to be on the same terms and conditions as from time-to-time apply to senior and executive vice presidents of Employer.
5. Benefits. Employer shall provide to Executive such benefits as are provided by Employer to other named executive officers of Employer. Executive shall pay for the portion of the cost of such benefits as is from time-to-time established by Employer as the portion of such cost to be paid by senior and executive vice presidents of Employer.
6. Costs and Expenses. Employer and Executive acknowledge that Executive will incur travel and other expenses while traveling on business for Employer and performing Executive's duties under this Agreement, and that it will be inefficient for both Employer and Executive to provide for Employer to reimburse Executive for such expenses as are not paid directly by Employer.
Accordingly, Employer shall pay to Executive during each calendar month (or portion thereof) a monthly travel and expense fee in the amount of Six Hundred Dollars ($600), which travel and expense fee shall be full and complete payment to Executive for all such expenses. Employer and Executive acknowledge that the actual amount of such expenses incurred by Executive during any given calendar month may be more or less than the amount of such travel and expense fee.
7. Duties. The duties to be performed by Executive shall be designated from time-to-time by the Board and will include responsibility for operating Employer's business.
8. Termination.
a. At the Expiration of the Term.
If the Executive’s employment with the Company terminates at the end of the Term or any Additional Employment Term, the Company will have no further obligation to the Executive under this Agreement, except for accrued and unpaid Base Salary and benefits that the Executive has accrued pursuant to any applicable benefit plans, practices, policies and programs provided by the Company, earned but unused vacation for that calendar year, severance payment and unreimbursed business-related expenses, in accordance with Company policy.
b. Automatic Termination Due to Death or Disability.
(1) If the Executive suffers any “Disability” (as defined below), this Agreement and Executive’s employment hereunder will automatically terminate. “Disability” means the inability of the Executive to perform the essential functions of his position, with or without reasonable accommodation, because of physical or mental illness or incapacity, for a period of time ending when the Company must replace Executive to avoid an undue hardship on the Company’s business and operations. The Company will obtain disability insurance that upon termination for Disability, will provide to Executive an amount equal to 24 months of his then Base Salary.
(2) This Agreement will automatically terminate on the date of Executive’s death.
c. Termination Without Cause or Constructive Termination.
The provisions of this section 8c shall apply following any termination of Executive which is either (i) without “Cause” (as defined below); or (ii) a “Constructive Termination” (as defined below) notwithstanding any provision otherwise in any stock option agreement between the Company and the Executive which provides for the grant to Executive of the right to purchase shares of stock of the Company. In the event that Executive’s employment is terminated, at any time, and such termination is either (i) without Cause; or (ii) a Constructive Termination:
(1) Severance Payment.
Executive shall be entitled to receive his Base Salary (including any accrued vacation) through his termination date and shall also be entitled to receive severance benefits equal to his accrued and unpaid Base Salary, plus the equivalent of bonus or incentive compensation (based upon the average bonus percentage rate for the two (2) fiscal years of the Company preceding such termination) for twenty-four (24) months, or for the period of time remaining in the Term, whichever is longer (the “Severance Period”), payable in a lump sum payment; and
(2) Benefits.
During the Severance Period, Executive and his dependents shall continue to be entitled to all medical and dental insurance benefits of the type that they received immediately prior to the date of such termination (or, in the event their participation in a plan pursuant to which any such benefits are provided is barred by the terms of such plan, benefits which are not less favorable to them than the benefits under such plan), except to the extent essentially equivalent and no less favorable benefits are provided to them by a subsequent employer; provided, that Executive and his dependents shall continue to bear the same portion of the cost of such benefits, if any, as they bore immediately prior to the date of such termination. Upon conclusion of the Severance Period, Executive may elect to continue his coverage at his expense as permitted by the federal COBRA law and applicable Minnesota state law.
(3) Waiver of Claims.
The Company’s obligations to provide severance benefits in sections 8c(1) and 8c(2) above, and section 8(b)(1), are conditioned on Executive signing a general release of legal claims and covenant not to sue in form and content satisfactory to the Company.
(4) Compliance with Code Section 409A.
Company and Executive hereby agree to cooperate in good faith in preparing and executing any written amendments to this Agreement (such as restrictions on the timing of severance pay or deferred compensation payments) that are reasonably necessary to timely comply with Code Section 409A, to the extent that any compensation, severance pay or other benefits payable to Executive under this Agreement are deemed to constitute a nonqualified deferred compensation plan under Code Section 409A.
d. Termination by the Executive.
The Executive may terminate this Agreement and his employment hereunder at any time during the Term (or during any Additional Employment Term), by providing the Company written notice of his intent to terminate at least sixty (60) days prior to the effective date of his termination. During this sixty-day period, the Executive must execute his duties and responsibilities in accordance with the terms of this Agreement. If Executive resigns, other than in a Constructive Termination, he will not be entitled to any severance pay, or other compensation or benefits, except accrued and unpaid Base Salary and benefits that the Executive accrued prior to the effective date of his termination pursuant to any applicable benefit plan, earned but unused vacation for that calendar year, and payment for unreimbursed business-related expenses in accordance with Company policy.
e. Termination by the Company for Cause.
The Company will have the right to immediately terminate this Agreement and Executive’s employment hereunder for “Cause” (as defined below). In the event of such termination for Cause, the Executive will only be entitled to payment for accrued and unpaid Base Salary and benefits that the Executive accrued prior to the effective date of his termination pursuant to any applicable benefit plan, earned but unused vacation for that calendar year, and payment for unreimbursed business-related expenses in accordance with Company policy.
f. Stock Options.
If, and only if, Executive’s employment is terminated under this Section 8, all outstanding options to purchase shares of stock in the Company shall immediately vest and become immediately exercisable and Executive or Executive’s legal representative shall have until the date which is three (3) years after the date on which Executive ceases to be employed by the Company to exercise Executive’s right to purchase shares of stock of the Company under any such option agreements (whether entered into before or after the date of this Agreement).
9. Termination Following a Change Of Control.
a. Severance Payment. In the event that Executive’s employment is terminated within three (3) years following a Change Of Control (as hereinafter defined) and such termination is either (i) Without Cause; or (ii) is a Constructive Termination, Executive shall receive, in addition to all compensation due and payable to or accrued for the benefit of Executive as of the date of termination, a lump sum payment, within five (5) days equal to two (2) times Executive’s Annual Compensation (as hereinafter defined) (the “Severance Payment”); and all outstanding options to purchase shares of stock in the Company shall immediately vest and become immediately exercisable and, Executive or Executive’s legal representative shall have until the date which is three (3) years after the date on which Executive ceases to be employed by the Company to exercise Executive’s right to purchase shares of stock of the Company under any such option agreements (whether entered into before or after the date of this Agreement). Employer shall also use its best efforts to convert any then existing life insurance and accidental death and disability insurance policies to individual policies in the name of the Executive. The provisions of this section 9a shall apply following any Change Of Control (as defined below) notwithstanding any provision otherwise in any stock option agreement between the Company and the Executive which provides for the grant to Executive of the right to purchase shares of stock of the Company.
b. Following a Change of Control and for a period of not less than three years after the effective date of the resignation or termination of the Executive, the Executive shall be entitled to indemnification and, to the extent available on commercially reasonable terms, insurance coverage therefor, with respect to the various liabilities as to which the Executive has been customarily indemnified prior to the Change of Control. In the event of any discrepancies between the provisions of this paragraph and the terms of any Company insurance policy covering executive or any indemnification contract by and between the Company and Executive, such insurance policy or indemnification contract shall control.
10. Certain Definitions.
a. Annual Compensation. For the purposes of this Agreement, Annual Compensation shall mean Executive’s annual base salary plus annual bonus or incentive compensation (computed at par levels), an amount equal to the annual cost to Executive of obtaining annual health care coverage comparable to that currently provided by Employer (grossed-up to compensate Executive for the taxable nature of such payment), an amount equal to any normal matching contributions made by Employer on Executive’s behalf in Employer’s 401(k) plan annual travel and expense fee amount, if any, and an amount equal to the annual cost to Executive of obtaining life insurance and insurance coverage for accidental death and disability insurance comparable to that provided by Employer.
b. Change of Control.
i. For the purposes of this Agreement, a “Change of Control” shall mean:
(1) The acquisition by any person, entity or "group", within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for this purpose, (A) The Company, (B) any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company or (C) Lyle Berman or the four irrevocable trusts for the benefit of Mr. Berman’s children) of beneficial ownership, (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or
(2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14 a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or
(3) Approval by the shareholders of the Company of (A) a reorganization, merger or consolidation, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power of the reorganized, merged or consolidated company's then outstanding voting securities entitled to vote generally in the election of directors of the reorganized, merged or consolidated company, or (B) a liquidation or dissolution of the Company or (C) the sale of all or substantially all of the assets of the Company
c. Cause.
i. For the purposes of this Agreement, “Cause” shall mean termination of the Executive by the Company for any of the following reasons:
(1) the commission of a felony;
(2) the theft or embezzlement of property of Employer or the commission of any similar act involving moral turpitude;
(3) the failure of Executive to substantially perform his material duties and responsibilities under this Agreement for any reason other than the Executive’s death or Disability, which failure if, in the opinion of the Company such failure is curable, is not cured within thirty (30) days after written notice of such failure from the Board specifying such failure;
(4) the Executive’s material violation of a significant Company policy; which violation the Executive fails to cure within 30 days after written notice of such violation from the Company specifying such failure; or which violation the Company, in its opinion, deems noncurable; or
(5) the revocation of any gaming license issued by any governmental entity to Executive as a result of any act or omission by the Executive.
d. Constructive Termination.
i. For the purposes of this Agreement, “Constructive Termination” shall mean:
(1) a material, adverse change of Executive’s responsibilities, authority, status, position, offices, titles, duties or reporting requirements (including directorships);
(2) an adverse change in Executive’s annual compensation or benefits;
(3) a requirement to relocate in excess of fifty (50) miles from Executive’s then current place of employment without Executive’s consent; or
(4) the breach by the Company of any material provision of this Agreement or failure to fulfill any other contractual duties owed to the Executive.
For the purposes of this definition, Executive’s responsibilities, authority, status, position, offices, titles, duties and reporting requirements are to be determined as of the date of this Agreement. For purposes of this section, all determinations of Constructive Termination shall be made in good faith by Executive and shall be conclusive.
ii. Notwithstanding the provisions of subsection (i) above, no termination by the Executive will constitute a Constructive Termination unless the Executive shall have provided written notice to the Company of his intention to so terminate this Agreement, which notice sets forth in reasonable detail the conduct that the Executive believes to be the basis for the Constructive Termination, and the Company will thereafter have failed to correct such conduct (or commence action to correct such conduct and diligently pursue such correction to completion) within 30 days following the Company’s receipt of such notice.
11. Confidentiality.
Except to the extent required by law, Executive shall keep confidential and shall not, without the Company’s prior, express written consent, disclose to any third party, other than as reasonably necessary or appropriate in connection with Executive’s performance of his duties under this Agreement or any employment agreement, if any, the Company’s “Confidential Information.” “Confidential Information” means any information that Executive learns or develops during the course of employment that derives independent economic value from being not generally known or readily ascertainable by other persons who could obtain economic value from its disclosure or use, or any information that Company reasonably believes to be Confidential Information. It includes, but is not limited to, trade secrets, customer lists, financial information, business plans and may relate to such matters as research and development, operations, site selection/analysis processes, management systems and techniques, costs modeling or sales and marketing.
The provisions of this section 11 shall remain in effect after the expiration or termination of this Agreement and Executive’s employment hereunder.
12. Agreement Not to Compete.
a. In consideration of the improved job security and other benefits of this Agreement, Executive hereby agrees not to, without the prior written consent of the Company’s Board, directly or indirectly engage in any of the following actions on or before the date that is two years after the date on which Executive’s employment by the Company is terminated for any reason:
i. Solicit, on Executive’s own behalf or for any entity that is in competition with the Company, any person or entity, including for example Indian tribes, that is doing business with the Company or is an active prospect to do business with the Company for the purpose of diverting Company’s business or active business opportunities in competition with Company; or
ii. Solicit for employment, endeavor to entice away from the Company or otherwise interfere with the Company’s relationship with any person who is employed by or otherwise engaged to perform services for the Company, whether for Executive’s own account or for the account of any other individual, partnership, firm or corporation or other business entity.
If the scope of Executive’s agreement under this section 12 is determined by any court of competent jurisdiction to be too broad to permit the enforcement of all of the provisions of this section 12 to their fullest extent, then the provisions of this section 12 shall be construed (and each of the parties hereto hereby confirm its intent is that such provisions be so construed) to be enforceable to the fullest extent permitted by applicable law. To the maximum extent permitted by applicable law, Executive hereby consents to the judicial modification of the provisions of this section 12 in any proceeding brought to enforce such provisions in such a manner that renders such provisions enforceable to the maximum extent permitted by applicable law.
b. The provisions of this section 12 shall remain in full force and effect during any severance period after the expiration or termination of this Agreement and Executive’s employment hereunder.
13. Acknowledgments; Irreparable Harm.
Executive agrees that the restrictions on competition, solicitation and disclosure in this Agreement are fair, reasonable and necessary for the protection of the interests of the Company. Executive further agrees that a breach of any of the covenants set forth in sections 11 and 12 of this Agreement will result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law, and Executive further agrees that in the event of a breach, the Company will be entitled to an immediate restraining order and injunction to prevent such violation or continued violation, without having to prove damages, in addition to any other remedies to which the Company may be entitled to at law or in equity.
14. Notification to Subsequent Employers.
Executive grants the Company the right to notify any future employer or prospective employer of Executive concerning the existence of and terms of this Agreement and grants the Company the right to provide a copy of this Agreement to any such subsequent employer or prospective employer.
15. Full Settlement.
The Company’s obligations to make the payments provided for in this Agreement and otherwise to perform it obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. Executive will not be obligated to seek other employment, and except as provided in section 8c(4) above, take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. Employer agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive regarding the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the rate published from time to time in The Wall Street Journal as the prime rate of interest, plus two percent (2%).
16. Resolution of Disputes.
Any controversy, claim or dispute arising out of or relating to this Agreement or the breach of this Agreement, other than such a matter arising from a violation or threatened violation of sections 11 and 12, shall be settled by arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, and a judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The award rendered in any arbitration proceeding under this section will be final and binding. Any demand for arbitration must be made and filed within 60 days of the date the requesting party knew or reasonably should have known of the event giving rise to the controversy or claim. Any claim or controversy not submitted to arbitration in accordance with this section will be considered waived, and therefore, no arbitration panel or court will have the power to rule or make any award on such claims or controversy. Any such arbitration will be conducted in the Minneapolis, MN metropolitan area. .Both Company and Executive recognize that each would give up any right to a jury trial, but believe the benefits of arbitration significantly out-weigh any disadvantage. Both further believe arbitration is likely to be both less expensive and less time-consuming than litigation of any dispute there might be.
If there shall be any dispute between the Company and the Executive (i) in the event of any termination of Executive’s employment by the Company, whether such termination was with or without Cause, or (ii) in the event of a Constructive Termination of employment by the Company, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction, the Company shall pay, and provide all benefits to Executive and/or Executive’s family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to section 8 or section 9 hereof, as the case may be, as though such termination were by the Company without Cause or was a Constructive Termination by the Company; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this section except upon receipt of an undertaking by or on behalf of Executive to repay all such amounts to which Executive is ultimately adjudged by such court not to be entitled.
17. Withholding.
The Company may withhold from any amounts payable under this Agreement the minimum Federal, state and local taxes as shall be required to be withheld pursuant to any applicable law, statute or regulation.
18. Successors and Assigns.
This Agreement is binding upon, and shall inure to the benefit of the Company and the Executive, and all successors and assigns of the Company. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs and personal representatives. The Company will require any successor (whether direct or indirect, by purchase, merger or consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement, prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to any severance benefits payable pursuant to sections 8 and 9 hereof.
19. Miscellaneous.
a. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Minnesota, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.
b. All notices and other communications under this Agreement shall be in writing and shall be given by hand to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
Lyle Berman
Lakes Entertainment, Inc.
130 Cheshire Lane
Minnetonka, MN 55305-1062
IF TO THE COMPANY:
Lakes Entertainment, Inc.
Attn: Damon Schramm, General Counsel
130 Cheshire Lane
Minnetonka, MN 55305
or to such other address as either party furnishes to the other in writing in accordance with this paragraph (b) of section 19. Notices and communications shall be effective when actually received by the addressee.
c. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with the law.
d. Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.
e. The Executive's or the Company's failure to insist upon strict compliance with any provision of, or to assert any right under, this Agreement shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Agreement.
f. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.
20. Entire Agreement.
This Agreement constitutes the entire agreement between the parties, supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof, including but not limited to that certain employment agreement dated February 21, 2000 and may not be modified or terminated orally. No modification, termination or attempted waiver of this Agreement shall be valid unless in writing and signed by the party against whom the same is sought to be enforced.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and pursuant to the due authorization of its Board, the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first written above.
LAKES ENTERTAINMENT, INC.: |
EXECUTIVE: | ||||
By: |
/s/ Timothy Cope |
By: |
/s/ Lyle Berman | ||
Lyle Berman | |||||
Its: |
President / CFO |
Its: |
Exhibit 10.2
FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (“Amendment”) is entered into this 28 day of March, 2014, by and between Timothy J. Cope, an individual resident of the State of Minnesota (the “Executive”) and Lakes Entertainment, Inc., a Minnesota corporation, including its subsidiaries and affiliates (collectively, “Company”).
RECITALS:
A. |
WHEREAS, Executive and Employer did enter into a certain Employment Agreement dated November 6, 2013 (the “Agreement”) pertaining to Executive’s employment with the Company, a copy of which is attached hereto as Exhibit A. | |
B. |
WHEREAS, the parties desire to amend the Agreement hereby. |
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements of the parties herein contained, the parties hereby agree as follows:
1. |
Section 8(b)(1) shall be amended to read as follows: |
|
2. |
(1) If the Executive suffers any “Disability” (as defined below), this Agreement and Executive’s employment hereunder will automatically terminate. “Disability” means the Executive is permanently and totally unable to perform the substantial and material duties of his regular occupation and is not expected to recover for the remainder of his or her life. The Executive must also be under the regular care of a physician that is appropriate for the condition causing the disability. The Company will (1) obtain disability insurance that upon termination for Disability, will provide to Executive an amount equal to 12 months of his then Base Salary; and (2) provide an additional amount equal to 12 months of Executive’s then base salary, both of which will be payable upon termination for Disability. |
2. |
This Amendment shall be expressly limited to the amendment contained herein, all remaining terms of the Agreement shall remain in full force and effect, and this Amendment when read in conjunction with the Agreement shall encompass the complete understanding of the parties. |
IN WITNESS WHEREOF, the parties hereto have executed this agreement effective as of the date first written above.
TIMOTHY J. COPE |
LAKES ENTERTAINMENT, INC. | |||
/s/ Timothy Cope |
By: |
/s/ Damon Schramm |
||
Its: |
VP – General Counsel |
EXHIBIT A
[November 6, 2013 Employment Agreement]
EMPLOYMENT AGREEMENT
This Agreement (the “Agreement”) is made and entered into as of this 6th day of November 2013 by and between Timothy J. Cope, an individual resident of the State of Minnesota (the “Executive”) and Lakes Entertainment, Inc., a Minnesota corporation, including its subsidiaries and affiliates (collectively, “Employer” or the “Company”).
RECITALS
WHEREAS, Executive currently is employed at will by the Company.
WHEREAS, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company to continue to employ Executive as a member of the senior management team of the Company; and
WHEREAS, the Board and the Executive wish to enter into this Agreement to document the terms of the Executive’s employment with the Company and provide Executive with new and valuable consideration for his services in the form of improved job security in the event Company terminates Executive’s employment without “Cause” (as defined below); and
WHEREAS, the Board wishes to encourage the Executive to continue his employment with the Company and the Board believes that this objective can be best served by providing for a compensation arrangement for the Executive upon the Executive’s termination of employment under certain circumstances in the event of a Change Of Control (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual promises and covenants and the respective undertakings of the Company and Executive set forth below the Company and Executive agree as follows:
AGREEMENT
1. Employment. The Company hereby employs Executive, and Executive accepts such employment and agrees to perform services for the Company, for the period and upon the other terms and conditions set forth in this Agreement.
2. Term. The term of this Agreement and Executive’s employment hereunder will be a period of 36 months commencing on the above-referenced date and expiring 36 months therefrom (the “Term”). The Term will be automatically extended for successive additional two-year periods (“Additional Employment Terms”) unless, at least 60 days prior to the end of the Term or an Additional Employment Term, the Company or the Executive has notified the other in writing that the Agreement will terminate at the end of the then current term. A notice of non-extension by the Company prior to the end of the Term or during any Additional Employment Term will be treated consistent with subsection 8a of this Agreement. A notice of non-extension by the Executive during the Term or any Additional Employment Term will be treated as a termination by the Executive with employment separation benefits as described in subsection 8d of this Agreement.
3. Base Salary. Employer shall pay Executive an annual base salary in the amount of Three Hundred Fifty Thousand and No/100 Dollars ($350,000) (“Base Salary”), or such higher amount as may from time-to-time be determined by Employer in its sole discretion. Such salary shall be paid in equal installments in the manner and at the times as other employees of Employer are paid.
4. Incentive Compensation. Executive shall participate in Employer's incentive compensation program from time-to-time established and approved by the Employer's Board of Directors, such participation to be on the same terms and conditions as from time-to-time apply to senior and executive vice presidents of Employer.
5. Benefits. Employer shall provide to Executive such benefits as are provided by Employer to other named executive officers of Employer. Executive shall pay for the portion of the cost of such benefits as is from time-to-time established by Employer as the portion of such cost to be paid by senior and executive vice presidents of Employer.
6. Costs and Expenses. Employer and Executive acknowledge that Executive will incur travel and other expenses while traveling on business for Employer and performing Executive's duties under this Agreement, and that it will be inefficient for both Employer and Executive to provide for Employer to reimburse Executive for such expenses as are not paid directly by Employer.
Accordingly, Employer shall pay to Executive during each calendar month (or portion thereof) a monthly travel and expense fee in the amount of Six Hundred Dollars ($600), which travel and expense fee shall be full and complete payment to Executive for all such expenses. Employer and Executive acknowledge that the actual amount of such expenses incurred by Executive during any given calendar month may be more or less than the amount of such travel and expense fee.
7. Duties. The duties to be performed by Executive shall be designated from time-to-time by the Board and will include responsibility for operating Employer's business.
8. Termination.
a. At the Expiration of the Term.
If the Executive’s employment with the Company terminates at the end of the Term or any Additional Employment Term, the Company will have no further obligation to the Executive under this Agreement, except for accrued and unpaid Base Salary and benefits that the Executive has accrued pursuant to any applicable benefit plans, practices, policies and programs provided by the Company, earned but unused vacation for that calendar year, severance payment and unreimbursed business-related expenses, in accordance with Company policy.
b. Automatic Termination Due to Death or Disability.
(1) If the Executive suffers any “Disability” (as defined below), this Agreement and Executive’s employment hereunder will automatically terminate. “Disability” means the inability of the Executive to perform the essential functions of his position, with or without reasonable accommodation, because of physical or mental illness or incapacity, for a period of time ending when the Company must replace Executive to avoid an undue hardship on the Company’s business and operations. The Company will obtain disability insurance that upon termination for Disability, will provide to Executive an amount equal to 24 months of his then Base Salary.
(2) This Agreement will automatically terminate on the date of Executive’s death.
c. Termination Without Cause or Constructive Termination.
The provisions of this section 8c shall apply following any termination of Executive which is either (i) without “Cause” (as defined below); or (ii) a “Constructive Termination” (as defined below) notwithstanding any provision otherwise in any stock option agreement between the Company and the Executive which provides for the grant to Executive of the right to purchase shares of stock of the Company. In the event that Executive’s employment is terminated, at any time, and such termination is either (i) without Cause; or (ii) a Constructive Termination:
(1) Severance Payment.
Executive shall be entitled to receive his Base Salary (including any accrued vacation) through his termination date and shall also be entitled to receive severance benefits equal to his accrued and unpaid Base Salary, plus the equivalent of bonus or incentive compensation (based upon the average bonus percentage rate for the two (2) fiscal years of the Company preceding such termination) for twenty-four (24) months, or for the period of time remaining in the Term, whichever is longer (the “Severance Period”), payable in a lump sum payment; and
(2) Benefits.
During the Severance Period, Executive and his dependents shall continue to be entitled to all medical and dental insurance benefits of the type that they received immediately prior to the date of such termination (or, in the event their participation in a plan pursuant to which any such benefits are provided is barred by the terms of such plan, benefits which are not less favorable to them than the benefits under such plan), except to the extent essentially equivalent and no less favorable benefits are provided to them by a subsequent employer; provided, that Executive and his dependents shall continue to bear the same portion of the cost of such benefits, if any, as they bore immediately prior to the date of such termination. Upon conclusion of the Severance Period, Executive may elect to continue his coverage at his expense as permitted by the federal COBRA law and applicable Minnesota state law.
(3) Waiver of Claims.
The Company’s obligations to provide severance benefits in sections 8c(1) and 8c(2) above, and section 8(b)(1), are conditioned on Executive signing a general release of legal claims and covenant not to sue in form and content satisfactory to the Company.
(4) Compliance with Code Section 409A.
Company and Executive hereby agree to cooperate in good faith in preparing and executing any written amendments to this Agreement (such as restrictions on the timing of severance pay or deferred compensation payments) that are reasonably necessary to timely comply with Code Section 409A, to the extent that any compensation, severance pay or other benefits payable to Executive under this Agreement are deemed to constitute a nonqualified deferred compensation plan under Code Section 409A.
d. Termination by the Executive.
The Executive may terminate this Agreement and his employment hereunder at any time during the Term (or during any Additional Employment Term), by providing the Company written notice of his intent to terminate at least sixty (60) days prior to the effective date of his termination. During this sixty-day period, the Executive must execute his duties and responsibilities in accordance with the terms of this Agreement. If Executive resigns, other than in a Constructive Termination, he will not be entitled to any severance pay, or other compensation or benefits, except accrued and unpaid Base Salary and benefits that the Executive accrued prior to the effective date of his termination pursuant to any applicable benefit plan, earned but unused vacation for that calendar year, and payment for unreimbursed business-related expenses in accordance with Company policy.
e. Termination by the Company for Cause.
The Company will have the right to immediately terminate this Agreement and Executive’s employment hereunder for “Cause” (as defined below). In the event of such termination for Cause, the Executive will only be entitled to payment for accrued and unpaid Base Salary and benefits that the Executive accrued prior to the effective date of his termination pursuant to any applicable benefit plan, earned but unused vacation for that calendar year, and payment for unreimbursed business-related expenses in accordance with Company policy.
f. Stock Options.
If, and only if, Executive’s employment is terminated under this Section 8, all outstanding options to purchase shares of stock in the Company shall immediately vest and become immediately exercisable and Executive or Executive’s legal representative shall have until the date which is three (3) years after the date on which Executive ceases to be employed by the Company to exercise Executive’s right to purchase shares of stock of the Company under any such option agreements (whether entered into before or after the date of this Agreement).
9. Termination Following a Change Of Control.
a. Severance Payment. In the event that Executive’s employment is terminated within three (3) years following a Change Of Control (as hereinafter defined) and such termination is either (i) Without Cause; or (ii) is a Constructive Termination, Executive shall receive, in addition to all compensation due and payable to or accrued for the benefit of Executive as of the date of termination, a lump sum payment, within five (5) days equal to two (2) times Executive’s Annual Compensation (as hereinafter defined) (the “Severance Payment”); and all outstanding options to purchase shares of stock in the Company shall immediately vest and become immediately exercisable and, Executive or Executive’s legal representative shall have until the date which is three (3) years after the date on which Executive ceases to be employed by the Company to exercise Executive’s right to purchase shares of stock of the Company under any such option agreements (whether entered into before or after the date of this Agreement). Employer shall also use its best efforts to convert any then existing life insurance and accidental death and disability insurance policies to individual policies in the name of the Executive. The provisions of this section 9a shall apply following any Change Of Control (as defined below) notwithstanding any provision otherwise in any stock option agreement between the Company and the Executive which provides for the grant to Executive of the right to purchase shares of stock of the Company.
b. Following a Change of Control and for a period of not less than three years after the effective date of the resignation or termination of the Executive, the Executive shall be entitled to indemnification and, to the extent available on commercially reasonable terms, insurance coverage therefor, with respect to the various liabilities as to which the Executive has been customarily indemnified prior to the Change of Control. In the event of any discrepancies between the provisions of this paragraph and the terms of any Company insurance policy covering executive or any indemnification contract by and between the Company and Executive, such insurance policy or indemnification contract shall control.
10. Certain Definitions.
a. Annual Compensation. For the purposes of this Agreement, Annual Compensation shall mean Executive’s annual base salary plus annual bonus or incentive compensation (computed at par levels), an amount equal to the annual cost to Executive of obtaining annual health care coverage comparable to that currently provided by Employer (grossed-up to compensate Executive for the taxable nature of such payment), an amount equal to any normal matching contributions made by Employer on Executive’s behalf in Employer’s 401(k) plan annual travel and expense fee amount, if any, and an amount equal to the annual cost to Executive of obtaining life insurance and insurance coverage for accidental death and disability insurance comparable to that provided by Employer.
b. Change of Control.
i. For the purposes of this Agreement, a “Change of Control” shall mean:
(1) The acquisition by any person, entity or "group", within the meaning of Section 13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for this purpose, (A) The Company, (B) any employee benefit plan of the Company or its subsidiaries which acquires beneficial ownership of voting securities of the Company or (C) Lyle Berman or the four irrevocable trusts for the benefit of Mr. Berman’s children) of beneficial ownership, (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either the then outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally in the election of directors; or
(2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14 a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or
(3) Approval by the shareholders of the Company of (A) a reorganization, merger or consolidation, in each case, with respect to which persons who were the shareholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power of the reorganized, merged or consolidated company's then outstanding voting securities entitled to vote generally in the election of directors of the reorganized, merged or consolidated company, or (B) a liquidation or dissolution of the Company or (C) the sale of all or substantially all of the assets of the Company
c. Cause.
i. For the purposes of this Agreement, “Cause” shall mean termination of the Executive by the Company for any of the following reasons:
(1) the commission of a felony;
(2) the theft or embezzlement of property of Employer or the commission of any similar act involving moral turpitude;
(3) the failure of Executive to substantially perform his material duties and responsibilities under this Agreement for any reason other than the Executive’s death or Disability, which failure if, in the opinion of the Company such failure is curable, is not cured within thirty (30) days after written notice of such failure from the Board specifying such failure;
(4) the Executive’s material violation of a significant Company policy; which violation the Executive fails to cure within 30 days after written notice of such violation from the Company specifying such failure; or which violation the Company, in its opinion, deems noncurable; or
(5) the revocation of any gaming license issued by any governmental entity to Executive as a result of any act or omission by the Executive.
d. Constructive Termination.
i. For the purposes of this Agreement, “Constructive Termination” shall mean:
(1) a material, adverse change of Executive’s responsibilities, authority, status, position, offices, titles, duties or reporting requirements (including directorships);
(2) an adverse change in Executive’s annual compensation or benefits;
(3) a requirement to relocate in excess of fifty (50) miles from Executive’s then current place of employment without Executive’s consent; or
(4) the breach by the Company of any material provision of this Agreement or failure to fulfill any other contractual duties owed to the Executive.
For the purposes of this definition, Executive’s responsibilities, authority, status, position, offices, titles, duties and reporting requirements are to be determined as of the date of this Agreement. For purposes of this section, all determinations of Constructive Termination shall be made in good faith by Executive and shall be conclusive.
ii. Notwithstanding the provisions of subsection (i) above, no termination by the Executive will constitute a Constructive Termination unless the Executive shall have provided written notice to the Company of his intention to so terminate this Agreement, which notice sets forth in reasonable detail the conduct that the Executive believes to be the basis for the Constructive Termination, and the Company will thereafter have failed to correct such conduct (or commence action to correct such conduct and diligently pursue such correction to completion) within 30 days following the Company’s receipt of such notice.
11. Confidentiality.
Except to the extent required by law, Executive shall keep confidential and shall not, without the Company’s prior, express written consent, disclose to any third party, other than as reasonably necessary or appropriate in connection with Executive’s performance of his duties under this Agreement or any employment agreement, if any, the Company’s “Confidential Information.” “Confidential Information” means any information that Executive learns or develops during the course of employment that derives independent economic value from being not generally known or readily ascertainable by other persons who could obtain economic value from its disclosure or use, or any information that Company reasonably believes to be Confidential Information. It includes, but is not limited to, trade secrets, customer lists, financial information, business plans and may relate to such matters as research and development, operations, site selection/analysis processes, management systems and techniques, costs modeling or sales and marketing.
The provisions of this section 11 shall remain in effect after the expiration or termination of this Agreement and Executive’s employment hereunder.
12. Agreement Not to Compete.
a. In consideration of the improved job security and other benefits of this Agreement, Executive hereby agrees not to, without the prior written consent of the Company’s Board, directly or indirectly engage in any of the following actions on or before the date that is two years after the date on which Executive’s employment by the Company is terminated for any reason:
i. Solicit, on Executive’s own behalf or for any entity that is in competition with the Company, any person or entity, including for example Indian tribes, that is doing business with the Company or is an active prospect to do business with the Company for the purpose of diverting Company’s business or active business opportunities in competition with Company; or
ii. Solicit for employment, endeavor to entice away from the Company or otherwise interfere with the Company’s relationship with any person who is employed by or otherwise engaged to perform services for the Company, whether for Executive’s own account or for the account of any other individual, partnership, firm or corporation or other business entity.
If the scope of Executive’s agreement under this section 12 is determined by any court of competent jurisdiction to be too broad to permit the enforcement of all of the provisions of this section 12 to their fullest extent, then the provisions of this section 12 shall be construed (and each of the parties hereto hereby confirm its intent is that such provisions be so construed) to be enforceable to the fullest extent permitted by applicable law. To the maximum extent permitted by applicable law, Executive hereby consents to the judicial modification of the provisions of this section 12 in any proceeding brought to enforce such provisions in such a manner that renders such provisions enforceable to the maximum extent permitted by applicable law.
b. The provisions of this section 12 shall remain in full force and effect during any severance period after the expiration or termination of this Agreement and Executive’s employment hereunder.
13. Acknowledgments; Irreparable Harm.
Executive agrees that the restrictions on competition, solicitation and disclosure in this Agreement are fair, reasonable and necessary for the protection of the interests of the Company. Executive further agrees that a breach of any of the covenants set forth in sections 11 and 12 of this Agreement will result in irreparable injury and damage to the Company for which the Company would have no adequate remedy at law, and Executive further agrees that in the event of a breach, the Company will be entitled to an immediate restraining order and injunction to prevent such violation or continued violation, without having to prove damages, in addition to any other remedies to which the Company may be entitled to at law or in equity.
14. Notification to Subsequent Employers.
Executive grants the Company the right to notify any future employer or prospective employer of Executive concerning the existence of and terms of this Agreement and grants the Company the right to provide a copy of this Agreement to any such subsequent employer or prospective employer.
15. Full Settlement.
The Company’s obligations to make the payments provided for in this Agreement and otherwise to perform it obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. Executive will not be obligated to seek other employment, and except as provided in section 8c(4) above, take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. Employer agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive regarding the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the rate published from time to time in The Wall Street Journal as the prime rate of interest, plus two percent (2%).
16. Resolution of Disputes.
Any controversy, claim or dispute arising out of or relating to this Agreement or the breach of this Agreement, other than such a matter arising from a violation or threatened violation of sections 11 and 12, shall be settled by arbitration in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association, and a judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The award rendered in any arbitration proceeding under this section will be final and binding. Any demand for arbitration must be made and filed within 60 days of the date the requesting party knew or reasonably should have known of the event giving rise to the controversy or claim. Any claim or controversy not submitted to arbitration in accordance with this section will be considered waived, and therefore, no arbitration panel or court will have the power to rule or make any award on such claims or controversy. Any such arbitration will be conducted in the Minneapolis, MN metropolitan area. .Both Company and Executive recognize that each would give up any right to a jury trial, but believe the benefits of arbitration significantly out-weigh any disadvantage. Both further believe arbitration is likely to be both less expensive and less time-consuming than litigation of any dispute there might be.
If there shall be any dispute between the Company and the Executive (i) in the event of any termination of Executive’s employment by the Company, whether such termination was with or without Cause, or (ii) in the event of a Constructive Termination of employment by the Company, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction, the Company shall pay, and provide all benefits to Executive and/or Executive’s family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to section 8 or section 9 hereof, as the case may be, as though such termination were by the Company without Cause or was a Constructive Termination by the Company; provided, however, that the Company shall not be required to pay any disputed amounts pursuant to this section except upon receipt of an undertaking by or on behalf of Executive to repay all such amounts to which Executive is ultimately adjudged by such court not to be entitled.
17. Withholding.
The Company may withhold from any amounts payable under this Agreement the minimum Federal, state and local taxes as shall be required to be withheld pursuant to any applicable law, statute or regulation.
18. Successors and Assigns.
This Agreement is binding upon, and shall inure to the benefit of the Company and the Executive, and all successors and assigns of the Company. This Agreement shall be binding upon and inure to the benefit of the Executive and his heirs and personal representatives. The Company will require any successor (whether direct or indirect, by purchase, merger or consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement, prior to the effectiveness of any such succession shall be a material breach of this Agreement and shall entitle the Executive to any severance benefits payable pursuant to sections 8 and 9 hereof.
19. Miscellaneous.
a. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Minnesota, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.
b. All notices and other communications under this Agreement shall be in writing and shall be given by hand to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
IF TO THE EXECUTIVE:
Timothy J. Cope
Lakes Entertainment, Inc.
130 Cheshire Lane
Minnetonka, MN 55305-1062
IF TO THE COMPANY:
Lakes Entertainment, Inc.
Attn: Damon Schramm, General Counsel
130 Cheshire Lane
Minnetonka, MN 55305
or to such other address as either party furnishes to the other in writing in accordance with this paragraph (b) of section 19. Notices and communications shall be effective when actually received by the addressee.
c. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision of this Agreement shall be held invalid or unenforceable in part, the remaining portion of such provision, together with all other provisions of this Agreement, shall remain valid and enforceable and continue in full force and effect to the fullest extent consistent with the law.
d. Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.
e. The Executive's or the Company's failure to insist upon strict compliance with any provision of, or to assert any right under, this Agreement shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Agreement.
f. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instrument.
20. Entire Agreement.
This Agreement constitutes the entire agreement between the parties, supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof, including but not limited to that certain employment agreement dated February 21, 2000 and may not be modified or terminated orally. No modification, termination or attempted waiver of this Agreement shall be valid unless in writing and signed by the party against whom the same is sought to be enforced.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and pursuant to the due authorization of its Board, the Company has caused this Agreement to be executed in its name and on its behalf, all as of the day and year first written above.
LAKES ENTERTAINMENT, INC.: |
EXECUTIVE: | ||||
By: |
/s/ Lyle Berman |
By: |
/s/ Timothy Cope | ||
Timothy J. Cope | |||||
Its: |
CEO |
Exhibit 31.1
CERTIFICATIONS
I, Lyle Berman, certify that:
1. I have reviewed this 10-K/A of Lakes Entertainment, Inc.; and
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
By: |
/s/ Lyle Berman |
||
Lyle Berman |
|||
Chief Executive Officer |
April 25, 2014
Exhibit 31.2
CERTIFICATIONS
I, Timothy J. Cope, certify that:
1. I have reviewed this 10-K/A of Lakes Entertainment, Inc.; and
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report.
By: |
/s/ Timothy J. Cope |
||
Timothy J. Cope |
|||
President and Chief Financial Officer |
April 25, 2014